-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M3Kx3NEJT0WmQyW7eO+ivjgqDQ32IsgvJX0qWqvhQClcB8UlCnNOpBx4542J/PiF zeRYf7Ch+b5FmpBPcYLYVw== 0000003333-01-500004.txt : 20010421 0000003333-01-500004.hdr.sgml : 20010421 ACCESSION NUMBER: 0000003333-01-500004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 20010201 FILED AS OF DATE: 20010419 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALBERTSONS INC /DE/ CENTRAL INDEX KEY: 0000003333 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 820184434 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-06187 FILM NUMBER: 1605952 BUSINESS ADDRESS: STREET 1: 250 PARKCENTER BLVD STREET 2: P O BOX 20 CITY: BOISE STATE: ID ZIP: 83726 BUSINESS PHONE: 2083956200 MAIL ADDRESS: STREET 1: 250 PARKCENTER BLVD STREET 2: P O BOX 20 CITY: BOISE STATE: ID ZIP: 83726 10-K 1 abs10k2000.txt 10-K FOR FISCAL YEAR ENDED FEBRUARY 1, 2001 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 01, 2001 Commission file number 1-6187 ALBERTSON'S, INC. ------------------------------------------------------ (Exact name of Registrant as specified in its Charter) Delaware 82-0184434 - ------------------------- -------------------------------- (State of Incorporation) (Employer Identification Number) 250 Parkcenter Boulevard, P.O. Box 20, Boise, Idaho 83726 (208) 395-6200 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of each exchange Title of each class on which registered - ------------------------------------------ ----------------------- Common Stock, $1.00 par value, 405,328,687 New York Stock Exchange shares outstanding on March 19, 2001 Pacific Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (17 CFR section 405) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (x) The aggregate market value of the voting stock held by nonaffiliates of the Registrant, computed by reference to the price at which the stock was sold as of the close of business on March 19, 2001: $10,555,407,824. Documents Incorporated by Reference Listed hereunder are the documents, any portions of which are incorporated by reference, and the Parts of this Form 10-K into which such portions are incorporated: 1. The Registrant's Annual Report to Stockholders for the fiscal year ended February 1, 2001, portions of which are incorporated by reference into Part I, Part II and Part IV of this Form 10-K; and 2. The Registrant's definitive proxy statement for use in connection with the Annual Meeting of Stockholders to be held on June 14, 2001,(the "Proxy Statement") to be filed within 120 days after the Registrant's fiscal year ended February 1, 2001, portions of which are incorporated by reference into Part III of this Form 10-K. 1 ALBERTSON'S, INC. FORM 10-K TABLE OF CONTENTS
Item Page PART I Cautionary Statement 3 1. Business 3 2. Properties 5 3. Legal Proceedings 8 4. Submission of Matters to a Vote of Security Holders 8 PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters 9 6. Selected Financial Data 9 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 7A. Quantitative and Qualitative Disclosures about Market Risk 9 8. Financial Statements and Supplementary Data 9 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 9 PART III 10. Directors and Executive Officers of the Registrant 10 11. Executive Compensation 12 12. Security Ownership of Certain Beneficial Owners and Management 12 13. Certain Relationships and Related Transactions 12 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 13
2 PART I Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private Securities Litigation Reform Act of 1995 From time to time, information provided by the Company, including written or oral statements made by its representatives, may contain forward-looking information as defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as integration of the operations of acquired or merged companies, expansion and growth of the Company's business, future capital expenditures and the Company's business strategy, contain forward-looking information. In reviewing such information it should be kept in mind that actual results may differ materially from those projected or suggested in such forward-looking information. This forward-looking information is based on various factors and was derived using numerous assumptions. Many of these factors have previously been identified in filings or statements made by or on behalf of the Company. Important assumptions and other important factors that could cause actual results to differ materially from those set forth in the forward-looking information include changes in the general economy, changes in consumer spending, competitive factors and other factors affecting the Company's business in or beyond the Company's control. These factors include changes in the rate of inflation, changes in state or federal legislation or regulation, adverse determinations with respect to litigation or other claims (including environmental matters), labor negotiations, the cost and stability of power sources, the Company's ability to recruit and develop employees, its ability to develop new stores or complete remodels as rapidly as planned, its ability to implement new technology successfully, stability of product costs and the Company's ability to integrate the operations of acquired or merged companies. Other factors and assumptions not identified above could also cause the actual results to differ materially from those set forth in the forward-looking information. The Company does not undertake to update forward-looking information contained herein or elsewhere to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking information. Item 1. Business The Registrant, Albertson's, Inc. ("Albertson's" or the "Company"), is incorporated under the laws of the State of Delaware and is the successor to a business founded by J. A. Albertson in 1939. On June 23, 1999, Albertson's, Inc. ("Albertson's" or the "Company") and American Stores Company ("ASC") consummated a merger with the issuance of 177 million shares of Albertson's common stock (the "Merger"). The Merger constituted a tax-free reorganization and has been accounted for as a pooling of interests for accounting and financial reporting purposes. The pooling of interests method of accounting is intended to present, as a single interest, two or more common stockholders' interests that were previously independent; accordingly, these consolidated financial statements restate the historical financial statements as though the companies had always been combined. The restated consolidated financial statements are adjusted to conform accounting policies and financial statement presentations. In connection with the Merger, the Company entered into agreements with the Attorneys General of California, Nevada and New Mexico and the Federal Trade Commission, under which the Company was required to divest 145 stores, to enable the Merger to proceed under applicable antitrust, competition and trade regulation law. The divested stores had sales of $2.3 billion in fiscal 1998. Subsequent growth comparisons were affected by these divestitures. 3 The Company is one of the largest retail food and drug chains in the United States. As of February 1, 2001, the Company operated 2,512 stores in 36 Northeastern, Western, Midwestern and Southern states. These stores consist of 1,362 combination food-drug stores, 807 stand-alone drugstores, 315 conventional supermarkets and 28 warehouse stores. Retail operations are supported by 19 major Company distribution centers. The Company's distribution centers provide product exclusively to the Company's retail stores. The Company is organized, based on geographic boundaries, into 19 divisions. The division staff is responsible for day-to-day operations and for executing marketing and merchandising programs. This structure allows the division level employees, who are closest to the customer, to implement strategies tailored to each of the Company's unique neighborhoods. The Company's combination food-drug stores are super grocery/drugstores under one roof and range in size from 35,000 to 107,000 square feet. Most of these stores offer prescription drugs and an expanded section of cosmetics and general merchandise in addition to specialty departments such as service seafood and meat, bakery, lobby/video, service delicatessen, liquor and floral. Many also offer meal centers, party supply centers, coffee bars, in-store banks, dry cleaning, photo processing and destination categories for beverages, snacks, pet care products, paper products and baby care merchandise. All shopping areas are served by a common set of checkstands. The Company's stand-alone drugstores average 18,400 square feet. These stores offer convenient shopping and prescription pickup as well as a wide assortment of general merchandise, health and beauty care products, over-the-counter medication, greeting cards and photo processing. The Company's new drugstores are typically located on corners and many offer a drive-thru pharmacy. The Company's conventional supermarkets range in size from 8,000 to 35,000 square feet. These stores offer a full selection in the basic departments of grocery, meat, produce, dairy and limited general merchandise. Many locations have a pharmacy, in-store bakery and service delicatessen. The Company's warehouse stores are operated primarily under the names "Max Foods" and "Super Saver" and offer shoppers the opportunity to save by purchasing in quantity. These no-frills stores range in size from 17,000 to 70,000 square feet and offer significant savings with special emphasis on discounted meat and produce. Albertsons.com began serving online customers in the Dallas/Fort Worth, Texas market in 1998. In November 1999 the Company began testing an original concept in the Seattle/Bellevue, Washington area by combining a gourmet store with a fulfillment center, offering over 16,000 items. This new concept led to the launch, in June 2000, of a convenient pick-up service at 36 Albertson's stores in the Puget Sound area. The Company is continuing to refine this program and will use stores throughout the greater Seattle area to fill orders. The Company has found that by using technology, a limited number of orders per store can be selected and serve both the Company's traditional and cyber customers without the need for a separate fulfillment area. Savon.com, our online drugstore, serves the Company's customers nationwide. On December 7, 2000, Savon.com opened the "doors" to a nationwide online pharmacy service. The site offers a full range of sundry items, new and refill prescriptions and consumer health information. The Web site allows customers across the country the freedom to have new or refilled prescriptions ready for pickup at any local Albertson's food or drug store, or have their prescriptions mailed to their doorsteps. 4 All of the Company's stores carry a broad range of national brands and offer private label brand products in many merchandise categories. The Company's stores provide consumer information such as: nutritional signing in the meat and produce departments, freshness code dating, unit pricing, meal ideas and food information pamphlets. The Company also offers a choice of recyclable paper or plastic bags and collection bins for plastic bag recycling. As of February 1, 2001, the Company operated 150 fuel centers, in 21 states, which are generally located in the parking lot of stores. These centers feature three to six fuel pumps and a small building, ranging in size from a pay-only kiosk to a convenience store, featuring such items as candy, soft drinks and snack foods. The Company's operations are within a single operating segment, the retail sale of food and drug merchandise. The Company's stores operate under the names of Albertson's, Acme Markets, Jewel Food Stores, Seessel's, Super Saver, Max Foods, Osco Drug and Sav-On Drugs. The Company's business is highly competitive. Competition is based primarily on price, product quality and variety, service and location. There is direct competition from many local, regional and national supermarket chains, supercenters, club stores, specialty retailers such as pet centers and toy stores and large-scale drug and pharmaceutical retailers. Increasing competition also exists from convenience stores, prepared food retailers, liquor and video stores, film developing outlets and Internet and mail-order retailers. The Company is subject to effects of seasonality. Sales are higher in the Company's fourth quarter than other quarters due to the holiday season and the increase in cold and flu occurrences. The Company has been able to efficiently supply its stores with merchandise through its distribution centers, outside suppliers or directly from manufacturers in an effort to obtain merchandise at the lowest possible cost. The Company believes that it is not dependent on any one supplier, and considers its relations with its suppliers to be satisfactory. The Company services all of its retail stores from Company distribution centers. As of February 1, 2001, the Company employed approximately 235,000 people, many of whom are covered by collective bargaining agreements. The Company considers its present relations with employees to be good. Item 2. Properties The Company has actively pursued an expansion program of adding new retail stores, enlarging and remodeling existing stores and replacing smaller stores. During the past ten years, the Company has built or acquired 1,248 stores and approximately 87% of the Company's current retail square footage has been opened or remodeled during this period. The Company continues to follow the policy of closing stores that are obsolete or lack satisfactory profit potential. Albertson's stores are located in 36 Northeastern, Western, Midwestern and Southern areas of the United States. The table on the following page is a summary of the stores by state and classification as of February 1, 2001: 5
Combination Conventional Warehouse Stand-Alone Food-Drug Stores Stores Stores Drugstores TOTAL - ----------------------------------------------------------------------------------------------------------------- Arizona 46 82 128 Arkansas 2 1 3 California 295 164 15 290 764 Colorado 47 7 54 Delaware 8 7 15 Florida 111 111 Idaho 30 7 2 39 Illinois 155 16 94 265 Indiana 6 48 54 Iowa 4 29 33 Kansas 5 30 35 Louisiana 31 31 Maine 1 1 Maryland 2 9 11 Massachusetts 59 59 Michigan 1 1 Minnesota 1 1 Mississippi 8 8 Missouri 9 34 43 Montana 17 16 10 43 Nebraska 12 15 27 Nevada 38 5 43 86 New Hampshire 20 20 New Jersey 30 36 66 New Mexico 22 1 1 5 29 North Dakota 2 6 8 Oklahoma 28 28 Oregon 41 10 51 Pennsylvania 38 25 63 South Dakota 1 2 3 Tennessee 22 1 23 Texas 216 5 221 Utah 43 3 46 Washington 71 13 84 Wisconsin 12 34 46 Wyoming 10 2 12 ---------------------------------------------------------------------------------------- Total 1,362 315 28 807 2,512 ======================================================================================== Retail Square Footage by Store Type (000's) 73,575 8,410 1,297 14,848 98,130 ========================================================================================
The Company has expanded and improved its distribution facilities when opportunities exist to improve service to the retail stores and generate an adequate return on investment. During 2000 approximately 79% of the merchandise purchased for resale in Company retail stores was received from Company distribution centers. Albertson's distribution system consists of 19 major Company centers located strategically throughout the Company's operating markets. The table on the following page is a summary of the Company's distribution facilities as of February 1, 2001: 6 Major Distribution Facilities
Frozen Meat & Ice Cream Health High Volume General Square Grocery Food Liquor Produce Deli Plant & Beauty Health & Beauty Merch. Pharmaceuticals Footage ------- ------ ------ ------- ------ --------- -------- --------------- ------- --------------- --------- Lancaster, PA X X X X X 1,366,000 Melrose Park, IL X X X X 1,344,000 Brea, CA X X X 1,231,000 La Habra, CA X X X X 1,184,000 Fort Worth, TX X X X X 1,100,000 Irvine, CA X X 996,000 Plant City, FL X X X X X X 979,000 Elk Grove, IL X X X 933,000 Vacaville, CA X 854,000 Portland, OR X X X X 790,000 Tulsa, OK X X X X 748,000 Houston, TX X X X X 747,000 Phoenix, AZ X X X X X X 687,000 Salt Lake City, UT X X X X 680,000 San Leandro, CA X X X 453,000 Ponca City, OK X X X 422,000 Sacramento, CA X X X X X 421,000 Denver, CO X X X X 372,000 Boise, ID X X 238,000 Other Distribution Facilities Las Vegas, NV X 30,000 Indianapolis, IN X 22,000 Boise, ID X 11,000 --------------- TOTAL SQUARE FOOTAGE - All Distribution Facilities 15,608,000 ===============
7 The Company currently finances most retail store and distribution facilities internally, thus retaining ownership of its land and buildings. The Company's future expansion plans are expected to be financed primarily from cash provided by operating activities. The Company has and will continue to finance a portion of its new stores through lease transactions when it does not have the opportunity to own the property. As of February 1, 2001, the Company held title to the land and buildings of 40% of the Company's stores and held title to the buildings on leased land of an additional 7% of the Company's stores. The Company also holds title to the land and buildings of most of its administrative offices and distribution facilities. Item 3. Legal Proceedings The information required under this item is included under the caption "Legal Proceedings" on page 50 of the Company's 2000 Annual Report to Stockholders. This information is incorporated herein by this reference thereto. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted during the fourth quarter of 2000 to a vote of security holders through the solicitation of proxies or otherwise. 8 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters The principal markets in which the Company's common stock is traded and the related security holder matters are set forth under the caption "Company Stock Information" on page 60 of the Company's 2000 Annual Report to Stockholders. This information is incorporated herein by this reference thereto. The market value of the Company's common stock at the close of business on March 19, 2001, was $27.97 per share. There were approximately 32,000 stockholders of record on March 19, 2001. Item 6. Selected Financial Data Selected financial data of the Company for the fiscal years 1996 through 2000 is included under the caption "Five-Year Summary of Selected Financial Data" on page 54 of the Company's 2000 Annual Report to Stockholders. This information is incorporated herein by this reference thereto. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required under this item is included on pages 21 to 28 of the Company's 2000 Annual Report to Stockholders. This information is incorporated herein by this reference thereto. Item 7A. Quantitative and Qualitative Disclosures about Market Risk The information required under this item is included under the caption "Quantitative and Qualitative Disclosures about Market Risk" on pages 27 and 28 of the Company's 2000 Annual Report to Stockholders. This information is incorporated herein by this reference thereto. Item 8. Financial Statements and Supplementary Data The Company's consolidated financial statements and related notes thereto, together with the Independent Auditors' Reports and the selected quarterly financial data of the Company are presented on pages 29 to 53 and page 55 of the Company's 2000 Annual Report to Stockholders and are incorporated herein by this reference thereto. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There have been no reports on Form 8-K filed within 24 months prior to the date of the most recent financial statements reporting a change of accountants or reporting disagreements on any matter of accounting principle, practice, financial statement disclosure or auditing scope or procedure. 9 PART III Item 10. Directors and Executive Officers of the Registrant Directors The information regarding directors and nominees for directors of the Company is presented under the heading "Election of Directors" in the Company's definitive proxy statement for use in connection with the 2001 Annual Meeting of Stockholders (the "Proxy Statement") to be filed within 120 days after the Company's fiscal year ended February 1, 2001, and is incorporated herein by this reference thereto. Executive and Reporting Officers
Age Date First Appointed as of as an Executive or Name 3/19/01 Position Reporting Officer ---- ----------- -------- ------------------- Gary G. Michael 60 Chairman of the Board and Chief Executive 12/02/74 Officer Michael F. Reuling 54 Vice Chairman of the Company 12/30/79 Peter L. Lynch 49 President and Chief Operating Officer 06/23/99 Robert K. Banks 51 Executive Vice President, Development 06/20/00 Thomas E. Brother 59 Executive Vice President, Distribution 07/30/89 Robert C. Butler 52 Executive Vice President, Operations 03/21/00 Romeo R. Cefalo 51 Executive Vice President, Operations 03/21/00 Wayne A. Denningham 39 Executive Vice President, Operations 03/21/00 A. Craig Olson 49 Executive Vice President and Chief Financial 12/22/86 Officer Thomas R. Saldin 54 Executive Vice President and General Counsel 12/26/83 Lawrence A. Stablein 43 Executive Vice President, Marketing and 10/30/00 Merchandising Patrick S. Steele 51 Executive Vice President, Information 06/10/90 Systems and Technology Kevin H. Tripp 46 Executive Vice President, Drug and General 12/11/00 Merchandise Steven D. Young 52 Executive Vice President, Human Resources 12/02/91 Richard J. Navarro 48 Senior Vice President and Controller 12/22/86
10 Gary G. Michael has served as Chairman of the Board and Chief Executive Officer since 1991. Peter L. Lynch became President and Chief Operating Officer on March 21, 2000. Previously he served as Executive Vice President, Operations from June 23, 1999; Executive Vice President and General Manager of the Acme Division of American Stores Company from 1998 and Senior Vice President, Store Operations of the Jewel-Osco Division of American Stores Company from December 1995. Michael F. Reuling became Vice Chairman of the Company on June 23, 1999. Previously he served as Executive Vice President, Development from January 1999 and as Executive Vice President, Store Development since 1986. Robert K. Banks was promoted to Executive Vice President, Development on June 20, 2000. Previously he served as Senior Vice President, Real Estate from January 31, 1999; Group Vice President, Real Estate from December 2, 1996 and Vice President, Real Estate from December 24, 1990. Thomas E. Brother was promoted to Executive Vice President, Distribution on January 29, 1999. Previously he served as Senior Vice President, Distribution from 1991. Robert C. Butler was promoted to Executive Vice President, Operations on March 21, 2000. Previously he served as Senior Vice President, Merchandising from June 23, 1999 and Vice President, Southern California Division from 1996. Romeo R. Cefalo was promoted to Executive Vice President, Operations on March 21, 2000. Previously he served as President, Southern California Region from June 23, 1999; Executive Vice President and General Manager of the Lucky South Division of American Stores Company from 1997 and Senior Vice President and General Manager of the same division from 1995. Wayne A. Denningham was promoted to Executive Vice President, Operations on January 14, 2001. Previously he served as Executive Vice President, Merchandising from March 21, 2000; President, Intermountain Region from June 23, 1999; Vice President, Florida Division from 1998; Vice President, Rocky Mountain Division from 1997 and Division Manager of the same division from 1996. A. Craig Olson was promoted to Executive Vice President and Chief Financial Officer on January 29, 1999. Previously he served as Senior Vice President, Finance and Chief Financial Officer from 1991. Thomas R. Saldin was promoted to Executive Vice President and General Counsel on January 29, 1999. Previously he served as Executive Vice President, Administration and General Counsel from 1991. Lawrence A. Stablein was promoted to Executive Vice President, Marketing and Merchandising on October 30, 2000. Previously he served as Senior Vice President, Marketing for Jewel-Osco from February 7, 1997 and Senior Vice President of Marketing and Formats in American Stores Properties, Inc. group in Salt Lake City from October 20, 1995. Patrick S. Steele was promoted to Executive Vice President, Information Systems and Technology on January 29, 1999. Previously he served as Senior Vice President, Information Systems and Technology from 1993. Kevin H. Tripp was promoted to Executive Vice President, Drug and General Merchandise on December 11, 2000. Previously he served as President, Drug Region from June 1999; Executive Vice President and General Manager, American Drug Stores from November 1997 and Senior Vice President, Pharmacy Sales and Operations from January 1995. Steven D. Young was promoted to Executive Vice President, Human Resources on January 29, 1999. Previously he served as Senior Vice President, Human Resources from 1993. Richard J. Navarro was promoted to Senior Vice President and Controller on January 29, 1999. Previously he served as Group Vice President and Controller from 1993. 11 Item 11. Executive Compensation Information concerning executive compensation is presented under the headings "Summary Compensation Table," "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values," "Option Grants In Last Fiscal Year," and "Retirement Benefits" in the Proxy Statement. This information is incorporated herein by this reference thereto. Item 12. Security Ownership of Certain Beneficial Owners and Management Information with respect to security ownership of certain beneficial owners and management is set forth under the heading "Voting Securities and Principal Holders Thereof" in the Proxy Statement. This information is incorporated herein by this reference thereto. Item 13. Certain Relationships and Related Transactions Information concerning related transactions is presented under the heading "Certain Transactions" in the Proxy Statement. This information is incorporated herein by this reference thereto. 12 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)1 Financial Statements: The Independent Auditors' Reports, together with the Consolidated Financial Statements and the related notes thereto, are listed below and are incorporated herein by this reference thereto from pages 29 to 53 of the Company's Annual Report to Stockholders for the year ended February 1, 2001: Consolidated Earnings - years ended February 1, 2001; February 3, 2000; January 28, 1999. Consolidated Balance Sheets -- February 1, 2001; February 3, 2000. Consolidated Cash Flows - years ended February 1, 2001; February 3, 2000; January 28, 1999. Consolidated Stockholders' Equity -- years ended February 1, 2001; February 3, 2000; January 28, 1999. Notes to Consolidated Financial Statements. Independent Auditors' Reports. Quarterly Financial Data: Quarterly Financial Data for the years ended February 1, 2001, and February 3, 2000, is set forth on page 55 of the Annual Report to Stockholders for the year ended February 1, 2001, and is incorporated herein by this reference thereto. (a)2 Schedules: All schedules are omitted because they are not required or because the required information is included in the consolidated financial statements or notes thereto. (a)3 Exhibits: A list of the exhibits required to be filed as part of this report is set forth in the Index to Exhibits on page 16 hereof. (b) The following reports on Form 8-K were filed during the quarter ended February 1, 2001: Current report on Form 8-K dated January 30, 2001, reporting the issuance of $700,000,000 aggregate principal amount of 7.5% senior notes due 2011. For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the Company hereby undertakes as follows, which undertaking shall be incorporated by reference into the Company's Registration Statements on Form S-8 Nos. 2-80776, 33-2139, 33-7901, 33-15062, 33-43635, 33-62799, 33-59803, 333-82157, 333-82161 and 333-87773. 13 Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the Act) may be permitted to directors, officers and controlling persons of the Company, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Albertson's, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALBERTSON'S, INC. By /S/ GARY G. MICHAEL -------------------------------- Gary G. Michael (Chairman of the Board and Chief Executive Officer) Date: April 19, 2001 14 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of April 19, 2001. GARY G. MICHAEL A. CRAIG OLSON - ------------------------------------------------------ ---------------------------------------------------- Gary G. Michael A. Craig Olson (Chairman of the Board and (Executive Vice President Chief Executive Officer and and Chief Financial Officer) Director) RICHARD J. NAVARRO A. GARY AMES - ------------------------------------------------------ ---------------------------------------------------- Richard J. Navarro A. Gary Ames (Senior Vice President (Director) and Controller) CECIL D. ANDRUS PAMELA G. BAILEY - ------------------------------------------------------ ---------------------------------------------------- Cecil D. Andrus Pamela G. Bailey (Director) (Director) TERESA BECK HENRY I. BRYANT - ------------------------------------------------------ ---------------------------------------------------- Teresa Beck Henry I. Bryant (Director) (Director) PAUL I. CORDDRY JOHN B. FERY - ------------------------------------------------------ ---------------------------------------------------- Paul I. Corddry John B. Fery (Director) (Director) FERNANDO R. GUMUCIO CLARK A. JOHNSON - ------------------------------------------------------ ---------------------------------------------------- Fernando R. Gumucio Clark A. Johnson (Director) (Director) CHARLES D. LEIN VICTOR L. LUND - ------------------------------------------------------ ---------------------------------------------------- Charles D. Lein Victor L. Lund (Director) (Director) BEATRIZ RIVERA J.B. SCOTT - ------------------------------------------------------ ---------------------------------------------------- Beatriz Rivera J.B. Scott (Director) (Director) ARTHUR K. SMITH THOMAS L. STEVENS, JR - ------------------------------------------------------ ---------------------------------------------------- Arthur K. Smith Thomas L. Stevens, Jr. (Director) (Director) WILL M. STOREY STEVEN D. SYMMS - ------------------------------------------------------ ---------------------------------------------------- Will M. Storey Steven D. Symms (Director) (Director) THOMAS J. WILFORD - ------------------------------------------------------ Thomas J. Wilford (Director)
15 Index to Exhibits Filed with the Annual Report on Form 10-K for the Year Ended February 1, 2001 Number Description 3.1 Restated Certificate of Incorporation (as amended) is incorporated herein by reference to Exhibit 3.1 of Form 10-Q for the quarter ended April 30, 1998. 3.1.1 Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock is incorporated herein by reference to Exhibit 3.1.1 of Form 10-K for the year ended January 30, 1997. 3.1.2 Amendment to Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock is incorporated herein by reference to Exhibit 3.1.2 of Form 10-K for the year ended January 28, 1999. 3.2 By-Laws dated March 15, 2001. 4.1 Stockholder Rights Plan Agreement is incorporated herein by reference to Exhibit 1 of Form 8-A Registration Statement filed with the Commission on March 4, 1997. 4.1.1 Amendment No. One to Stockholder Rights Plan Agreement (dated August 2, 1998) is incorporated herein by reference to Exhibit 1 of Amendment to Form 8-A Registration Statement filed with the Commission on August 6, 1998. 4.1.2 Amendment No. Two to Stockholder Rights Plan Agreement (dated March 16, 1999) is incorporated herein by reference to Exhibit 1 of Amendment to Form 8-A Registration Statement filed with the Commission on March 25, 1999. 4.2 Indenture, dated as of May 1, 1992, between Albertson's, Inc. and Morgan Guaranty Trust Company of New York as Trustee is incorporated herein by reference to Exhibit 4.1 of Form S-3 Registration Statement 333-41793 filed with the Commission on December 9, 1997.(1) 4.3 Senior Indenture dated May 1, 1995, between American Stores Company and the First National Bank of Chicago, as Trustee, is incorporated herein by reference to Exhibit 4.1 of Form 10-Q filed by American Stores Company (Commission File Number 1-5392) on June 12, 1995.(1) 9 Inapplicable 10.1 J. A. and Kathryn Albertson Foundation Inc. Stock Agreement (dated May 21, 1997) is incorporated herein by reference to Exhibit 10.1 of Form 10-Q for the quarter ended May 1, 1997.* 10.1.1 Waiver regarding Alscott Limited Partnership #1 Stock Agreement (dated May 21, 1997) is incorporated herein by reference to Exhibit 10.1.1 of Form 10-Q for the quarter ended May 1, 1997.* 16 Number Description 10.1.2 Waiver regarding Kathryn Albertson Stock Agreement (dated May 21, 1997) is incorporated herein by reference to Exhibit 10.1.2 of Form 10-Q for the quarter ended May 1, 1997.* 10.2 Severance Agreement between the Company and Gary G. Michael dated December 22, 2000.* 10.3 Form of Award of Deferred Stock Units.* 10.5 Form of Beneficiary Agreement for Key Executive Life Insurance is incorporated herein by reference to Exhibit 10.5.1 of Form 10-K for the year ended January 30, 1986.* 10.6 Executive Deferred Compensation Plan (amended and restated February 1, 1989) is incorporated herein by reference to Exhibit 10.6 of Form 10-K for the year ended February 2, 1989.* 10.6.1 Amendment to Executive Deferred Compensation Plan (dated December 4, 1989) is incorporated herein by reference to Exhibit 10.6.1 of Form 10-Q for the quarter ended November 2, 1989.* 10.6.2 Amendment to Executive Deferred Compensation Plan (dated December 15, 1998) is incorporated herein by reference to Exhibit 10.6.2 of Form 10-K for the year ended February 3, 2000.* 10.6.3 Amendment to Executive Deferred Compensation Plan (dated March 15, 2001).* 10.7 Senior Operations Executive Officer Bonus Plan is incorporated herein by reference to Exhibit 10.7 of Form 10-K for the year ended January 30, 1997.* 10.8 Form of Consulting Agreement with Special Advisors to the Board of Directors dated as of March 15, 2001.* 10.9 Description of Bonus Incentive Plans (amended December 3, 1984)is incorporated herein by reference to Exhibit 10.9 of Form 10-K for the year ended January 31, 1985.* 10.10 2000 Deferred Compensation Plan (dated January 1, 2000) is incorporated by reference to Exhibit 10.10 of Form 10-K for the year ended February 3, 2000.* 10.11 1982 Incentive Stock Option Plan (amended March 4, 1991) is incorporated herein by reference to Exhibit 10.11 of Form 10-K for the year ended January 31, 1991. Exhibit 10.11 expired by its terms in 1992. Notwithstanding such expiration, certain agreements for the options granted under these option plans remain outstanding.* 10.12 Form of 1982 Incentive Stock Option Agreement (amended November 30, 1987) is incorporated herein by reference to Exhibit 10.12 of Form 10-Q for the quarter ended October 29, 1987.* 17 Number Description 10.12.1 Form of 1982 Incentive Stock Option Agreement (used in connection with certain options granted pursuant to the 1982 Incentive Stock Option Plan on or after September 5, 1989) is incorporated herein by reference to Exhibit 10.12.1 of Form 10-Q for the quarter ended August 3, 1989.* 10.13 Executive Pension Makeup Plan (amended and restated February 1, 1989) is incorporated herein by reference to Exhibit 10.13 of Form 10-K for the year ended February 2, 1989.* 10.13.1 First Amendment to Executive Pension Makeup Plan (dated June 8, 1989) is incorporated herein by reference to Exhibit 10.13.1 of Form 10-Q for the quarter ended May 4, 1989.* 10.13.2 Second Amendment to Executive Pension Makeup Plan (dated January 12, 1990) is incorporated herein by reference to Exhibit 10.13.2 of Form 10-K for the year ended February 1, 1990.* 10.13.3 Third Amendment to Executive Pension Makeup Plan (dated January 31, 1990) is incorporated herein by reference to Exhibit 10.13.3 of Form 10-Q for the quarter ended August 2, 1990.* 10.13.4 Fourth Amendment to Executive Pension Makeup Plan (effective January 1, 1995) is incorporated herein by reference to Exhibit 10.13.4 of Form 10-K for the year ended February 2, 1995.* 10.13.5 Amendment to Executive Pension Makeup Plan (retroactive to January 1, 1990) is incorporated herein by reference to Exhibit 10.13.5 of Form 10-K for the year ended February 1, 1996.* 10.13.6 Amendment to Executive Pension Makeup Plan (retroactive to October 1, 1999) is incorporated herein by reference to Exhibit 10.13.6 of Form 10-K for the year ended February 3, 2000.* 10.14 Executive ASRE Makeup Plan (dated September 26, 1999) is incorporated herein by reference to Exhibit 10.14 of Form 10-K for the year ended February 3, 2000.* 10.15 Senior Executive Deferred Compensation Plan (amended and restated February 1, 1989) is incorporated herein by reference to Exhibit 10.15 of Form 10-K for the year ended February 2, 1989.* 10.15.1 Amendment to Senior Executive Deferred Compensation Plan (dated December 4, 1989) is incorporated herein by reference to Exhibit 10.15.1 of Form 10-Q for quarter ended November 2, 1989.* 10.15.2 Amendment to Senior Executive Deferred Compensation Plan (dated December 15, 1998) is incorporated herein by reference to Exhibit 10.7.1 of Form 10-K for the year ended February 3, 2000.* 18 Number Description 10.16 1986 Nonqualified Stock Option Plan (amended March 4, 1991) is incorporated herein by reference to Exhibit 10.16 of Form 10-K for the year ended January 31, 1991. Exhibit 10.16 expired by its terms in 1996. Notwithstanding such expiration, certain agreements for the options granted under these option plans remain outstanding.* 10.17 Form of 1986 Nonqualified Stock Option Plan Stock Option Agreement (amended November 30, 1987) is incorporated herein by reference to Exhibit 10.17 of Form 10-Q for the quarter ended October 29, 1987.* 10.18 Executive Pension Makeup Trust (dated February 1, 1989) is incorporated herein by reference to Exhibit 10.18 of Form 10-K for the year ended February 2, 1989.* 10.18.1 Amendment to Executive Pension Makeup Trust (dated July 24, 1998) is incorporated herein by reference to Exhibit 10.18.1 of Form 10-K for the year ended February 3, 2000.* 10.18.2 Amendment to Executive Pension Makeup Trust (dated December 1, 1998) is incorporated herein by reference to Exhibit 10.18.1 of Form 10-Q for quarter ended October 29, 1998.* 10.18.3 Amendment to Executive Pension Makeup Trust (dated December 1, 1999) is incorporated herein by reference to Exhibit 10.18.3 of Form 10-K for year ended February 3, 2000.* 10.18.4 Amendment to Executive Pension Makeup Trust (dated March 31, 2000).* 10.19 Executive Deferred Compensation Trust (dated February 1, 1989) is incorporated herein by reference to Exhibit 10.19 of Form 10-K for year ended February 2, 1989.* 10.19.1 Amendment to Executive Deferred Compensation Trust (dated July 24, 1998) is incorporated herein by reference to Exhibit 10.19.1 of Form 10-K for year ended February 3, 2000.* 10.19.2 Amendment to Executive Deferred Compensation Trust (dated December 1, 1998) is incorporated herein by reference to Exhibit 10.19.1 of Form 10-Q for quarter ended October 29, 1998.* 10.19.3 Amendment to Executive Deferred Compensation Trust (dated December 1, 1999) is incorporated herein by reference to Exhibit 10.19.3 of Form 10-K for year ended February 3, 2000.* 10.19.4 Amendment to Executive Deferred Compensation Trust (dated March 31, 2000).* 19 Number Description 10.20 1990 Deferred Compensation Plan is incorporated herein by reference to Exhibit 10.20 of Form 10-K for year ended January 31, 1991.* 10.20.1 Amendment to 1990 Deferred Compensation Plan (dated April 12, 1994) is incorporated herein by reference to Exhibit 10.20.1 of Form 10-Q for the quarter ended August 4, 1994.* 10.20.2 Amendment to 1990 Deferred Compensation Plan (dated November 5, 1997) is incorporated herein by reference to Exhibit 10.20.2 of Form 10-K for the year ended January 29, 1998.* 10.20.3 Amendment to 1990 Deferred Compensation Plan (dated November 1, 1998) is incorporated herein by reference to Exhibit 10.20.3 of Form 10-Q for the quarter ended October 29, 1998.* 10.21 Non-Employee Directors' Deferred Compensation Plan is incorporated herein by reference to Exhibit 10.21 of Form 10-K for the year ended January 31, 1991.* 10.21.1 Amendment to Non-Employee Directors' Deferred Compensation Plan (dated December 15, 1998) is incorporated herein by reference to Exhibit 10.21.1 of Form 10-K for year ended February 3, 2000.* 10.21.2 Amendment to Non-Employee Directors' Deferred Compensation Plan (dated March 15, 2001).* 10.22 1990 Deferred Compensation Trust (dated November 20, 1990) is incorporated herein by reference to Exhibit 10.22 of Form 10-K for year ended January 31, 1991.* 10.22.1 Amendment to 1990 Deferred Compensation Trust (dated July 24, 1998) is incorporated herein by reference to Exhibit 10.22.1 of Form 10-K for year ended February 3, 2000.* 10.22.2 Amendment to 1990 Deferred Compensation Trust (dated December 1, 1998) is incorporated herein by reference to Exhibit 10.22.1 of Form 10-Q for quarter ended October 29, 1998.* 10.22.3 Amendment to 1990 Deferred Compensation Trust (dated December 1, 1999) is incorporated herein by reference to Exhibit 10.22.3 of Form 10-K for year ended February 3, 2000.* 10.22.4 Amendment to 1990 Deferred Compensation Trust (dated March 31, 2000).* 20 Number Description 10.23 2000 Deferred Compensation Trust (dated January 1, 2000) is incorporated herein by reference to Exhibit 10.23 of Form 10-K for year ended February 3, 2000.* 10.23.1 Amendment to the 2000 Deferred Compensation Trust (dated March 31, 2000).* 10.24 1995 Stock-Based Incentive Plan (dated May 26, 1995) is incorporated herein by reference to Exhibit 10.24 of Form 10-Q for the quarter ended May 4, 1995.* 10.24.1 Form of 1995 Stock-Based Incentive Plan Stock Option Agreement (dated December 4, 1995) is incorporated herein by reference to Exhibit 10.24.1 of Form 10-K for the year ended February 1, 1996.* 10.25 1995 Stock Option Plan for Non-Employee Directors (dated May 26, 1995) is incorporated herein by reference to Exhibit 10.25 of Form 10-Q for the quarter ended May 4, 1995.* 10.25.1 Form of 1995 Stock Option Plan for Non-Employee Directors Agreement (dated May 30, 1995) is incorporated herein by reference to Exhibit 10.25.1 of Form 10-Q for the quarter ended May 4, 1995.* 10.25.2 Amendment to 1995 Stock Option Plan for Non-Employee Directors (dated March 15, 2001).* 10.26 Amended and Restated 1995 Stock-Based Incentive Plan (dated November 12, 1998) is incorporated herein by reference to Exhibit 10.26 of Form 10-Q for the quarter ended October 29, 1998.* 10.26.1 Amendment to Amended and Restated 1995 Stock-Based Incentive Plan (dated March 15, 2001).* 10.27 Termination and Consulting Agreement by and among American Stores Company, Albertson's, Inc. and Victor L. Lund is incorporated herein by reference to Exhibit 10.27 of Form 10-K for the year ended January 28, 1999.* 10.28 Credit Agreement (5-year) (dated March 22, 2000) is incorporated herein by reference to Exhibit 10.28 of Form 10-K for the year ended February 3, 2000. 10.28.1 Amendment to Credit Agreement (5-year) (dated March 15, 2001). 10.29 Amended and Restated Credit Agreement (364-day) (dated March 15, 2001). 10.30 American Stores Company Supplemental Executive Retirement Plan 1998 Restatement is incorporated herein by reference to Exhibit 4.1 of Form S-8 filed by American Stores Company (Commission File Number 1-5392) on July 13, 1998.* 10.30.1 Amendment to American Stores Company Supplemental Executive Retirement Plan 1998 Restatement, dated as of September 15, 1998, is incorporated herein by reference to Exhibit 10.4 of Form 10-Q filed by American Stores Company (Commission File Number 1-5392) on December 11, 1998.* 21 Number Description 10.31 American Stores Company 1997 Stock Option and Stock Award Plan is incorporated herein by reference to Exhibit B of the 1997 Proxy Statement filed by American Stores Company (Commission File Number 1-5392) on May 2, 1997.* 10.31.1 Amendment to American Stores Company 1997 Stock Option and Stock Award Plan, dated as of October 8, 1998, is incorporated herein by reference to Exhibit 10.1 of Form 10-Q filed by American Stores Company (Commission File Number 1-5392) on December 11, 1998.* 10.31.2 Amendment to American Stores Company 1997 Stock Plan for Non-Employee Directors (dated March 15, 2001).* 10.32 American Stores Company 1997A Stock Option and Stock Award Plan, dated as of March 27, 1997, is incorporated herein by reference to Exhibit 4.11 of the S-8 Registration Statement (Registration No. 333-82157) filed by Albertson's, Inc. on July 2, 1999.* 10.33 American Stores Company 1997 Stock Plan for Non-Employee Directors is incorporated herein by reference to Exhibit C of the 1997 Proxy Statement filed by American Stores Company (Commission File Number 1-5392) on May 2, 1997.* 10.34 American Stores Company Amended and Restated 1989 Stock Option and Stock Award Plan is incorporated herein by reference to Exhibit 4.13 of the S-8 Registration Statement (Registration No. 333-82157) filed by Albertson's, Inc. on July 2, 1999.* 10.35 American Stores Company Amended and Restated 1985 Stock Option and Stock Award Plan is incorporated herein by reference to Exhibit 4.14 of the S-8 Registration Statement (Registration No. 333-82157) filed by Albertson's, Inc. on July 2, 1999.* 11 Inapplicable 12 Inapplicable 13 Exhibit 13 consists of pages 21 to 55 and page 60 of Albertson's, Inc. 2000 Annual Report to Stockholders which are numbered as pages 1 to 36 of Exhibit 13. Such report, except to the extent incorporated herein by reference, has been sent to and furnished for the information of the Securities and Exchange Commission only and is not to be deemed filed as part of this Annual Report on Form 10-K. The references to the pages incorporated by reference are to the printed Annual Report. The references to the pages of Exhibit 13 are as follows: Item 3-page 30; Item 5-page 36; Item 6-page 34; Item 7-pages 1 through 8; Item 7A-pages 7 and 8; and Items 8 and 14-pages 9 through 33 and page 35. 16 Inapplicable 18 Inapplicable 22 Number Description 21 Subsidiaries of the Registrant 22 Inapplicable 23 Independent Auditors' Consent - Deloitte & Touche LLP 23.1 Independent Auditors' Consent - Ernst & Young LLP 24 Inapplicable * Identifies management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto. (1) In reliance upon Item 601(b)(4)(iii)(A) of Regulation S-K, various other instruments defining the rights of holders of long-term debt of the Registrant and its subsidiaries are not being filed herewith, because the total amount of securities authorized under each such instrument does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant hereby agrees to furnish a copy of any such instrument to the Commission upon request. 23 EX-3.(II) 2 abs10k2000exhibit3-2.txt BY-LAWS DATED MARCH 15 2001 Exhibit 3.2 ALBERTSON'S, INC. BY-LAWS Amended March 15, 2001 TABLE OF CONTENTS Page ARTICLE I Section 1.1 Registered Office.......................................... 1 Section 1.2 Other Offices.............................................. 1 ARTICLE II MEETINGS OF THE STOCKHOLDERS Section 2.1 Place of Meetings.......................................... 1 Section 2.2 Annual Meetings............................................ 1 Section 2.3 Notice of Annual Meeting................................... 1 Section 2.4 List of Stockholders Entitled to Vote...................... 1 Section 2.5 Special Meetings........................................... 2 Section 2.6 Notice of Special Meeting.................................. 2 Section 2.7 Quorum..................................................... 2 Section 2.8 Voting..................................................... 2 Section 2.9 Proxies.................................................... 3 Section 2.10 Nature of Business at Meetings of Stockholders............. 3 A Limitation........................................ 3 B. Notice Requirement................................ 3 C. Timeliness of Notice.............................. 4 D. Form of Notice.................................... 4 E. Business Brought Improperly....................... 4 Section 2.11 Stock Ledger............................................... 4 Section 2.12 Record Date in General..................................... 4 Section 2.13 Record Date for Stockholder Action by Written Consent...... 5 Section 2.14 Inspectors of Election..................................... 5 ARTICLE III DIRECTORS Section 3.1 Number and Election of Directors........................... 6 Section 3.2 Nomination of Directors.................................... 6 A. Limitation........................................ 6 B. Notice Requirement................................ 6 C. Timeliness of Notice.............................. 7 D. Form of Notice.................................... 7 E. Defective Nomination.............................. 7 Section 3.3 Vacancies.................................................. 7 Section 3.4 Resignations and Removals of Directors..................... 8 Section 3.5 Duties and Powers.......................................... 8 Section 3.6 Indemnification............................................ 8 i A. Power to Indemnify in Actions, Suits or Proceedings Other than those by or in the Right of the Corporation.......................... 8 B. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation....................................... 9 C. Authorization of Indemnification.................. 9 D. Good Faith Defined................................ 9 E. Indemnification by a Court........................ 10 F. Expenses Payable in Advance....................... 10 G. Nonexclusivity of Indemnification and Advancement of Expenses....................................... 10 H. Insurance......................................... 10 I. Certain Definitions............................... 11 J. Survival of Indemnification and Advancement of Expenses.......................................... 11 K. Limitation on Indemnification..................... 11 L. Indemnification of Employees and Agents........... 11 Section 3.7 Retirement Age............................................. 12 Section 3.8 Meetings................................................... 12 Section 3.9 Quorum..................................................... 12 Section 3.10 Actions of Board........................................... 12 Section 3.11 Meetings by Means of Conference Telephone.................. 12 Section 3.12 Committees................................................. 12 Section 3.13 Compensation............................................... 13 Section 3.14 Interested Directors....................................... 13 ARTICLE IV NOTICES Section 4.1 Notices.................................................... 13 Section 4.2 Waiver of Notice........................................... 14 ARTICLE V OFFICERS Section 5.1 Officers Chosen by the Board............................... 14 Section 5.2 Officers Chosen by the Chief Executive Officer............. 14 Section 5.3 Qualification.............................................. 14 Section 5.4 Voting Securities Owned by the Corporation................. 15 Section 5.5 Chairman of the Board...................................... 15 Section 5.6 Chief Operating Officer.................................... 15 Section 5.7 Vice Chairman of the Corporation........................... 15 Section 5.8 President.................................................. 15 Section 5.9 Chief Executive Officer.................................... 15 Section 5.10 Vice Presidents............................................ 16 Section 5.11 Secretary.................................................. 16 Section 5.12 Assistant Secretaries...................................... 16 Section 5.13 Treasurer.................................................. 16 Section 5.14 Assistant Treasurers....................................... 17 ii ARTICLE VI STOCK Section 6.1 Form of Certificates....................................... 17 Section 6.2 Signatures................................................. 17 Section 6.3 Lost, Destroyed, Stolen or Mutilated Certificates.......... 17 Section 6.4 Transfers.................................................. 18 Section 6.5 Transfer and Registry Agents............................... 18 Section 6.6 Registered Stockholders.................................... 18 ARTICLE VII GENERAL PROVISIONS Section 7.1 Dividends.................................................. 18 Section 7.2 Disbursements.............................................. 18 Section 7.3 Fiscal Year................................................ 18 Section 7.4 Corporate Seal............................................. 19 Section 7.5 Election Not to Be Subject to Idaho Business Combination Law........................................................ 19 Section 7.6 Election Not to Be Subject to Idaho Control Share Acquisition Law............................................ 19 Section 7.7 Entire Board of Directors.................................. 19 ARTICLE VIII AMENDMENTS Section 8.1 Amendments................................................. 19 iii ALBERTSON'S, INC. BY-LAWS ARTICLE I OFFICES Section 1.1 Registered Office. The registered office of Albertson's, Inc. (the "Corporation") shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 1.2 Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF THE STOCKHOLDERS Section 2.1 Place of Meetings. All meetings of the stockholders for the election of directors shall be held in the City of Boise, State of Idaho, at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of the stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2.2 Annual Meetings. Annual meetings of stockholders shall be held on the fourth Friday of May, if not a legal holiday and, if a legal holiday, then on the next day following that is not a legal holiday, at 10:00 o'clock A.M., or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which the stockholders shall elect by written ballot a Board of Directors, and transact such other business as may be properly brought before the meeting. Section 2.3 Notice of Annual Meeting. Written notice of the annual meeting, stating the place, date and hour of the meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 2.4 List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Corporation shall prepare and make, or shall cause to be prepared and made, at least ten days before every meeting of stockholders a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose 1 germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present; provided, however, the failure to do so shall not offset the validity of any meeting. Section 2.5 Special Meetings. Unless otherwise prescribed by statute or by the certificate of incorporation of the Corporation, as amended and restated from time to time or by one or more certificates of designation filed on behalf of the Corporation pursuant to Section 151(f) of the Delaware General Corporation Law (such certificate of incorporation and such certificate or certificates of designation being collectively referred to herein as the "Certificate of Incorporation"), special meetings of the stockholders, for any purpose or purposes, may be called only by the chairman of the Board of Directors or by the vice chairman or president of the Corporation and shall be called by the chairman or vice chairman of the Board of Directors or by the vice chairman, president or secretary of the Corporation at the request in writing of a majority of the Board of Directors. Such request shall state the purpose or purposes of the proposed meeting. At a special meeting of the stockholders, only such business shall be conducted as shall be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors. Section 2.6 Notice of Special Meeting. Written notice of a special meeting, stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 2.7 Quorum. The holders of a majority of the shares of common stock of the Corporation (the "Common Stock") issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by law or by the Certificate of Incorporation. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting not less than ten nor more than sixty days before the date of the meeting. Section 2.8 Voting. Each holder of Common Stock shall be entitled to cast one vote for each share of Common Stock standing in his or her name on the books of the Corporation, and each holder of preferred stock shall be entitled to cast such number of votes as is provided in the Certificate of Incorporation or Certificate of Designation relating to such preferred stock, voting separately from or together with the holders of Common Stock as provided in the Certificate 2 of Incorporation or Certificate of Designation relating to such preferred stock. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his or her discretion, may require that any votes cast at such meeting shall be cast by written ballot. Section 2.9 Proxies. Any stockholder entitled to vote may do so in person or by his or her proxy appointed by an instrument in writing subscribed by such stockholder or by his or her attorney thereunto authorized, delivered to the secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three years from its date, unless said proxy provides for a longer period. Without limiting the manner in which a stockholder may authorize another person or persons to act for him or her as proxy, either of the following shall constitute a valid means by which a stockholder may grant such authority: (a) a stockholder may execute a writing authorizing another person or persons to act for him or her as proxy. Execution may be accomplished by the stockholder or his or her authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature; or (b) a stockholder may authorize another person or persons to act for him or her as proxy by transmitting or authorizing the transmission of a telegram or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission; provided, however, that any such telegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram or other electronic transmission was authorized by the stockholder. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. Section 2.10 Nature of Business at Meetings of Stockholders. A. Limitation. Except as otherwise provided by law or the Certificate of Incorporation, no business may be transacted at an annual meeting of stockholders, other than business that is (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any holder of Common Stock (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.10 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 2.10. B. Notice Requirement. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof to the secretary of the Corporation in accordance with subsection C of this Section 2.10 in proper written form in accordance with subsection D of this Section 2.10. 3 C. Timeliness of Notice. (1) To be timely, a stockholder's notice to the secretary of the Corporation of business to be brought before a meeting of stockholders in accordance with Rule 14a-8 promulgated pursuant to the Securities and Exchange Act of 1934 must be delivered to or mailed and received at the principal executive offices of the Corporation in accordance with the deadline specified in subsection (e) of that rule. (2) To be timely, a stockholder's notice to the secretary of the Corporation of business to be brought before an annual meeting other than in accordance with Rule 14a-8 promulgated pursuant to the Securities and Exchange Act of 1934 must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that an annual meeting is called for a date that is not within 30 days before or after such anniversary date, in order to be timely, notice by the stockholder must be so received not later than the close of business on the tenth day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever occurs first. D. Form of Notice. To be in proper written form, a stockholder's notice to the secretary of the Corporation of business to be brought before an annual meeting must set forth as to each matter such stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and record address of such stockholder, (c) the class or series and number of shares of stock of the Corporation that are owned beneficially or of record by such stockholder, (d) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest such stockholder has in such business and (e) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. E. Business Brought Improperly. No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 2.10; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 2.10 shall be deemed to preclude discussion by any stockholder of any such business. If the chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, such chairman shall declare to the meeting that the business was not properly brought before the meeting, and such business shall not be transacted. Section 2.11 Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled (a) to examine the stock ledger, the list required by Section 2.4 of these by-laws or the books of the Corporation or (b) to vote in person or by proxy at any meeting of stockholders. Section 2.12 Record Date in General. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to 4 exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action (other than an action to be taken by written consent without a meeting), the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date: (a) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall not be more than sixty nor less than ten days before the date of such meeting; and (b) in the case of any other action (other than an action to be taken by written consent without a meeting), shall not be more than sixty days prior to such other action. If no record date is fixed: (a) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (b) the record date for determining stockholders for any other purpose (other than an action to be taken by written consent without a meeting) shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 2.13 Record Date for Stockholder Action by Written Consent. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the secretary of the Corporation, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of stockholders meetings are recorded, to the attention of the secretary of the Corporation. Delivery shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action. No consent to corporate action in writing without a meeting shall be effective unless delivered to the Corporation within sixty days following the record date relating thereto fixed pursuant to this Section 2.13. Section 2.14 Inspectors of Election. In advance of any meeting of stockholders, the Board of Directors by resolution or the chairman of the Board of Directors or the vice chairman, president or secretary of the Corporation shall appoint one or more inspectors of election to act at the meeting and make 5 a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is present, ready and willing to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by law, inspectors may be officers, employees or agents of the Corporation. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector shall have the duties prescribed by law, shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by law. ARTICLE III DIRECTORS Section 3.1 Number and Election of Directors. The number of directors which shall constitute the whole Board shall be not less than three nor more than twenty-one. Within the limits above specified, the number of directors shall be determined by resolution of the Board or by the vote at the annual meeting of the holders of at least three-fourths of the outstanding shares of stock then entitled to vote in elections of directors. The Board shall be divided into three classes. Any increase or decrease in the number of directors shall be apportioned among the classes so as to make all classes as nearly equal in number as possible. No decrease in the authorized number of directors shall shorten the term of any incumbent director. At each annual meeting the successors to the class of directors whose term is then expiring shall be elected to hold office for a term of three years and until their respective successors are elected. Directors need not be stockholders. The chairman of the Board of Directors shall be an officer of the Corporation, and the vice chairman of the Board of Directors need not be an officer of the Corporation. The vice chairman of the Board of Directors shall be chosen by the Board of Directors and shall, in the absence of the chairman of the Board of Directors, preside at meetings of the Board of Directors. Section 3.2 Nomination of Directors. A. Limitation. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any holder of Common Stock (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 3.2 and on the record date for the determination of stockholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 3.2. B. Notice Requirement. In addition to any other applicable requirements, for a nomination of a director to be made by a stockholder, such stockholder must have given timely notice thereof to the secretary of the Corporation in accordance with subsection C of this Section 3.2 in proper written form in accordance with subsection D of this Section 3.2. 6 C. Timeliness of Notice. To be timely, a stockholder's notice to the secretary of the Corporation of a nomination of a director must be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting not less than 90 days nor more than 120 days prior to the first anniversary of the date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty days before or after such anniversary, in order to be timely, notice by the stockholder must be so received not later than the close of business on the tenth day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever occurs first; and (b) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever occurs first. D. Form of Notice. To be in proper written form, a stockholder's notice to the secretary of the Corporation of a nomination of a director must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of stock of the Corporation that are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice (i) the name and record address of such stockholder, (ii) the class or series and number of shares of stock of the Corporation that are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. E. Defective Nomination. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3.2. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman shall declare to the meeting that the nomination was defective, and such defective nomination shall be disregarded. Section 3.3 Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director so chosen shall hold office until the 7 next election of the class for which such director has been chosen, and until his or her successor has been elected, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If at the time of filling any vacancy or any newly created directorship the directors then in office shall constitute less than a majority of the entire Board of Directors (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. Section 3.4 Resignations and Removals of Directors. Any director of the Corporation may resign at any time, by giving written notice to the chairman of the Board of Directors, or to the vice chairman, president or secretary of the Corporation. Such resignation shall take effect at the time therein specified or, if no time is specified, immediately; and, unless otherwise specified in such notice, the acceptance of such resignation shall not be necessary to make it effective. Except as otherwise required by law and subject to the rights, if any, of the holders of shares of preferred stock then outstanding, any director or the entire Board of Directors may be removed from office at any time, but only for cause, and only by the affirmative vote of the holders of at least a majority in voting power of the issued and outstanding stock of the Corporation entitled to vote in the election of directors. As used in this Section 3.4, the term "cause" shall mean (a) conviction of a crime involving moral turpitude, (b) administrative agency determination of conduct involving moral turpitude or (c) a determination in good faith, by a majority in voting power of the issued and outstanding stock of the Corporation entitled to vote in the election of directors after a hearing before at minimum such a majority in voting power, of conduct involving moral turpitude materially adverse to the interests of the Corporation. Section 3.5 Duties and Powers. The business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these by-laws directed or required to be exercised or done by the stockholders. Section 3.6 Indemnification. A. Power to Indemnify in Actions, Suits or Proceedings Other than Those by or in the Right of the Corporation. Subject to subsection C of this Section 3.6, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director or officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, such person had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that such person did not 8 act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. B. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to subsection C of this Section 3.6, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. C. Authorization of Indemnification. Any indemnification under this Section 3.6 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in subsection A or subsection B of this Section 3.6, as the case may be. Such determination shall be made (a) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (b) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (c) by the stockholders. To the extent, however, that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case. D. Good Faith Defined. For purposes of any determination under subsection C of this Section 3.6, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his or her conduct was unlawful, if such person's action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term "another enterprise" as used in this subsection D shall mean any other corporation or any partnership, joint venture, trust, 9 employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this subsection D shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in subsection A or subsection B of this Section 3.6, as the case may be. E. Indemnification by a Court. Notwithstanding any contrary determination in the specific case under subsection C of this Section 3.6, and notwithstanding the absence of any determination thereunder, any director or officer may apply to the Court of Chancery of the State of Delaware or any other court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under subsection A and subsection B of this Section 3.6. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standards of conduct set forth in subsection A or subsection B of this Section 3.6, as the case may be. Neither a contrary determination in the specific case under subsection C of this Section 3.6 nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this subsection E shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application. F. Expenses Payable in Advance. Expenses incurred by a director or officer in defending or investigating a threatened or pending action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Section 3.6. G. Nonexclusivity of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by or granted pursuant to this Section 3.6 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation or any by-law, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in subsection A and subsection B of this Section 3.6 shall be made to the fullest extent permitted by law. The provisions of this Section 3.6 shall not be deemed to preclude the indemnification of any person who is not specified in subsection A or subsection B of this Section 3.6 but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware (the "GCL"), or otherwise. H. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or 10 is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Section 3.6. I. Certain Definitions. For purposes of this Section 3.6, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger that, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Section 3.6 with respect to the resulting or surviving corporation as such person would have stood with respect to such constituent corporation if its separate existence had continued. For purposes of this Section 3.6, references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Section 3.6. J. Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 3.6 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. K. Limitation on Indemnification. Notwithstanding anything contained in this Section 3.6 to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by subsection E hereof), the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) or advance expenses in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation. L. Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Section 3.6 to directors and officers of the Corporation. 11 Section 3.7 Retirement Age. No director after having attained the age of 70 years shall be allowed to run for re-election or reappointment to the Board of Directors. Section 3.8 Meetings. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board of Directors may be held at such time and at such place as may be from time to time determined by the Board of Directors and, unless required by resolution of the Board of Directors, without notice. Special meetings of the Board of Directors may be called by the chairman of the Board of Directors, by the vice chairman or president of the Corporation or by a majority of the directors then in office. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight hours before the date of the meeting, by telephone, facsimile, telegram or other electronic means on twenty-four hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Section 3.9 Quorum. Except as may be otherwise required by law, the Certificate of Incorporation or these by-laws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the vote of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting of the time and place of the adjourned meeting, until a quorum shall be present. Section 3.10 Actions of Board. Unless otherwise restricted by the Certificate of Incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 3.11 Meetings by Means of Conference Telephone. Unless otherwise provided by the Certificate of Incorporation or these by-laws, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.11 shall constitute presence in person at such meeting. Section 3.12 Committees. The Board of Directors may designate one or more committees, each committee to consist of two or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in one or more resolutions adopted by of the 12 Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the GCL to be submitted to stockholders for approval or (ii) adopting, amending or repealing any by-law of the Corporation. Each committee shall keep regular minutes and report to the Board of Directors when required. Section 3.13 Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors and/or a stated salary, or such other emoluments as the Board of Directors shall from time to time determine. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 3.14 Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because such person's or their votes are counted for such purpose if (a) the material facts as to such person's or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) the material facts as to such person's or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee that authorizes the contract or transaction. ARTICLE IV NOTICES Section 4.1 Notices. Whenever written notice is required by law, the Certificate of Incorporation or these by-laws to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at such person's address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when 13 the same shall be deposited in the United States mail. Written notice may also be given personally or by telegram, facsimile or other electronic means. Section 4.2 Waiver of Notice. Whenever any notice is required by law, the Certificate of Incorporation or these by-laws to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting, present by person or represented by proxy, shall constitute a waiver of notice of such meeting, except where the person attends the meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of stockholders, directors or members of a committee of directors need be specified in any written waiver of notice except to the extent required by law, the Certificate of Incorporation or these by-laws. ARTICLE V OFFICERS Section 5.1 Officers Chosen by the Board. The following officers of the Corporation shall be chosen by the Board of Directors at its meeting held either the day before or the day of each annual meeting of stockholders: a chairman of the Board of Directors (who must be a director) and a president of the Corporation. The Board of Directors shall designate the chairman of the Board of Directors, the chief executive officer and the president of the Corporation. A vice chairman of the Corporation may be chosen by the Board of Directors at its meeting held either the day before or the day of each annual meeting of stockholders. The Board of Directors may also choose such other officers as it deems necessary or appropriate. The officers of the Corporation chosen by the Board of Directors shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Any officer chosen or appointed by the Board of Directors may be removed from office at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any of such offices shall be filled by the Board of Directors. The salaries of the officers of the Corporation chosen by the Board of Directors shall be fixed by the Board of Directors. Section 5.2 Officers Chosen by the Chief Executive Officer. The chief executive officer may appoint any vice presidents (including executive vice presidents, senior vice presidents and group vice presidents), the secretary, any assistant secretaries, the treasurer, any assistant treasurers, presidents and other officers of subsidiary corporations and such other officers and agents as he or she may deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the chief executive officer, who may remove any such officers from office at any time. Section 5.3 Qualification. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or 14 these By-laws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the chairman of the Board of Directors, need such officers be directors of the Corporation. Section 5.4 Voting Securities Owned by the Corporation. Instruments relating to securities owned by the Corporation, including powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the chairman of the Board of Directors or by the vice chairman or president of the Corporation, and any such officers may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities that the Corporation, as the owner thereof, might have exercised and possessed if present. The Board of Directors may from time to time confer, by resolution, like powers upon any other person or persons. Section 5.5 Chairman of the Board. The chairman of the Board of Directors shall preside at all meetings of the Board of Directors and shall possess the power to sign on behalf of the Corporation all certificates, contracts and other instruments the execution of which may be authorized by the Board of Directors. The chairman of the Board of Directors shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these by-laws or by the Board of Directors. Section 5.6 Chief Operating Officer. The chief operating officer shall possess the power to sign on behalf of the Corporation all certificates, contracts and other instruments the execution of which may be authorized by the Board of Directors. The chief operating officer shall have responsibility for the operations of the Corporation as authorized by the Board of Directors and shall perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these by-laws or by the Board of Directors. Section 5.7 Vice Chairman of the Corporation. The vice chairman of the Corporation shall possess the power to sign on behalf of the Corporation all certificates, contracts and other instruments the execution of which may be authorized by the Board of Directors and shall perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these by-laws or by the Board of Directors. Section 5.8 President. The president shall possess the power to sign on behalf of the Corporation all certificates, contracts and other instruments the execution of which may be authorized by the Board of Directors and shall perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these by-laws or by the Board of Directors. Section 5.9 Chief Executive Officer. The chief executive officer shall possess the power to sign on behalf of the Corporation all certificates, contracts and other instruments the execution of which may be authorized by the Board of Directors. The chief executive officer shall preside at, or shall designate such other officer of the Corporation to preside at, meetings of 15 stockholders. The chief executive officer shall have general and active management of the business affairs of the Corporation, including the right to appoint such officers as provided for in Section 5.2 of these by-laws, and shall see that all orders and resolutions of the Board of Directors are carried into effect. The chief executive officer shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these by-laws or by the Board of Directors. Section 5.10 Vice Presidents. Each executive vice president, senior vice president or group vice president designated by the Board of Directors shall be vested with all powers and shall perform all the duties of the president in the absence or the disability of the president. Each vice president shall be vested with such powers and shall perform such duties granted or imposed upon him or her by the Board of Directors or by the chief executive officer at the time of his or her appointment to office or as from time to time may be assigned to him or her by these by-laws, by the chief executive officer or by the Board of Directors. Section 5.11 Secretary. The secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings thereat in a book or books to be kept for that purpose and shall perform like duties for the standing committees when requested. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the chief executive officer, under whose supervision the secretary shall be. If the secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no assistant secretary, then either the Board of Directors or the chief executive officer may choose another officer to cause such notice to be given. The secretary shall have custody of the corporate seal of the Corporation, and the secretary or any assistant secretary, if there be one, shall have authority to affix the same to any instrument requiring it and, when so affixed, it may be attested by the signature of the secretary or by the signature of any such assistant secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. The secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. Section 5.12 Assistant Secretaries. Assistant secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the chief executive officer or the secretary, and in the absence of the secretary or in the event of his or her disability or refusal to act, shall perform the duties of the secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the secretary. Section 5.13 Treasurer. The treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by or at the direction of the Board of Directors. The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the chief executive officer and the Board of 16 Directors at its regular meetings, or when the Board of Directors so requires, an account of all of his or her transactions as treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of treasurer and for the restoration to the Corporation, in case of the treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the treasurer's possession or under control of the treasurer belonging to the Corporation. Section 5.14 Assistant Treasurers. Assistant treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the chief executive officer or the treasurer, and in the absence of the treasurer or in the event of the treasurer's disability or refusal to act, shall perform the duties of the treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the treasurer. If required by the Board of Directors, an assistant treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of assistant treasurer and for the restoration to the Corporation, in case of the assistant treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the assistant treasurer's possession or under control of the assistant treasurer belonging to the Corporation. ARTICLE VI STOCK Section 6.1 Form of Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed in the name of the Corporation, by (a) the chairman of the Board of Directors or the vice chairman, the president or an executive vice president of the Corporation and (b) the treasurer or an assistant treasurer or the secretary or an assistant secretary of the Corporation certifying the number of shares of stock of the Corporation owned by such holder. Section 6.2 Signatures. Where a certificate is countersigned (a) by a transfer agent other than the Corporation or its employee or (b) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 6.3 Lost, Destroyed, Stolen or Mutilated Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed 17 certificate or certificates, or such person's legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 6.4 Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these by-laws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by such person's attorney lawfully constituted in writing and upon the surrender of the certificate therefor, properly endorsed for transfer and payment of all necessary transfer taxes; provided, however, that such surrender and endorsement or payment of taxes shall not be required in any case in which the officers of the Corporation shall determine to waive such requirement. Every certificate exchanged, returned or surrendered to the Corporation shall be marked "Canceled," with the date of cancellation, by the secretary or assistant secretary of the Corporation or the transfer agent thereof. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred. Section 6.5 Transfer and Registry Agents. The Corporation may from time to time maintain one or more transfer offices or agencies and registry offices or agencies at such place or places as may be determined from time to time by the Board of Directors. Section 6.6 Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner a person registered on it books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. ARTICLE VII GENERAL PROVISIONS Section 7.1 Dividends. Subject to the requirements of the GCL and the provisions of the Certificate of Incorporation, dividends upon the stock of the Corporation may be declared by the Board of Directors at any regular or special meeting of the Board of Directors, and may be paid in cash, in property or in shares of the Corporation's stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, may deem proper as a reserve or reserves for any purpose, and the Board of Directors may modify or abolish any such reserve. Section 7.2 Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 7.3 Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. 18 Section 7.4 Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or fixed or reproduced or otherwise. Section 7.5 Election Not to Be Subject to Idaho Business Combination Law. The Corporation expressly elects not to be subject to the provisions of the Idaho Business Combination Law, codified as Chapter 17 of Title 30 of the Idaho Code. Section 7.6 Election Not to Be Subject to Idaho Control Share Acquisition Law. The Corporation expressly elects not to be subject to the provisions of the Idaho Control Share Acquisition Law, codified as Chapter 16 of Title 30 of the Idaho Code. Section 7.7 Entire Board of Directors. As used in these by-laws, the term "entire Board of Directors" means the total number of directors that the Corporation would have if there were no vacancies. ARTICLE VIII AMENDMENTS Section 8.1 Amendments. These by-laws may be altered, amended or repealed, in whole or in part, or new by-laws may be adopted by the Board of Directors or by the stockholders as provided in the Certificate of Incorporation. I, Kaye L. O'Riordan, do hereby certify that the foregoing are the By-Laws of the Corporation as of March 15, 2001. /S/ Kaye L. O'Riordan -------------------------------------- Kaye L. O'Riordan Vice President and Corporate Secretary 19 EX-10 3 abs10k2000exhibit10-2.txt SEVERANCE AGREEMENT Exhibit 10.2 December 22, 2000 Gary G. Michael Albertson's, Inc. 250 E. Parkcenter Blvd. Boise, Idaho 83706 Dear Gary: This will confirm your retirement from the positions of Chairman of the Board and Chief Executive Officer of Albertson's, Inc. (the "Company") and sets forth our mutual understanding of the terms of your severance agreement and general release. This agreement will become effective on the eighth (8th) day after the date of its execution by you (the "Effective Date"). 1. Your employment as Chairman of the Board and Chief Executive Officer of the Company will end on the Termination Date. (As used herein, the term "Termination Date" shall mean (i) the date the Company asks you to resign, or (ii) the close of business on the date of the Company's Annual Meeting of Stockholders in 2001, or (iii) June 30, 2001, or (iv) your death, whichever date shall first occur. 2. Conditioned upon your agreement to the terms set forth herein, the Company agrees to pay to you within 10 days after the Termination Date a lump sum, in cash, equal to $3,000,000 less any legally required payroll tax withholdings and deductions ("Termination Pay"). In the event of your death, the Termination Pay will be paid to your surviving spouse, or in the event of her death, to your estate. 3. Notwithstanding anything to the contrary contained in this agreement but conditioned upon your agreement to the terms set forth herein, you shall be entitled to the compensation, benefits and perquisites listed below during the period from the Effective Date until the Retirement Date. (As used herein, the term "Retirement Date" shall mean the close of business on the date of the Company's Annual Meeting of Stockholders in 2001 or June 30, 2001, whichever shall first occur.) Gary G. Michael December 22, 2000 Page 2 (a) To receive salary at the rate in effect on the Effective Date from the Effective Date until the Retirement Date (whether or not the Termination Date occurs prior to the Retirement Date) in accordance with practices and policies in effect on the Effective Date; (b) To receive any bonus earned for fiscal year 2000 under the terms of the Company's fiscal year 2000 Officer's Bonus Program (but not for any period thereafter), payable in accordance with the terms of such Program; (c) To participate in the Company's medical, dental, and life insurance plans; (d) To be eligible to defer salary under the 2000 Deferred Compensation Plan; (e) To be treated in the same manner as officers of the Company with regard to the Company automobile policy, subject to any changes in the existing policy; (f) To receive benefits in accordance with the terms and provisions of the Company's qualified and non-qualified retirement plans accrued with respect to your service through the Retirement Date; (g) In the event of your death prior to the payment of all monies and benefits to which you are entitled under this agreement, any remaining payments and/or benefits, including a lump-sum payment of your salary through the Retirement Date, will be paid to your surviving spouse, or in the event of her death, to your estate; and (h) If the Company asks you to resign, you will be classified as a special employee of the Company from the date you resign through the Retirement Date. As a special employee, you will continue to receive your salary at the rate in effect on the Effective Date Gary G. Michael December 22, 2000 Page 3 until the Retirement Date and accrue vesting service as if you were a regular full-time employee. 4. Within 10 days of the Termination Date you shall return to the Company all of the Company's personal property, including without limitation all computers, books, records, documents, videos, cards, keys, credit cards issued to you, and all other such personal property of every nature and kind. 5. It is agreed and understood that nothing in this agreement shall be construed as an admission of liability by the Company or you; rather we are resolving any and all matters and disputes regarding your employment and separation from the Company. 6. You agree that you shall not publish or cause to be published any public or private statement disparaging the Company or its present or former officers, directors or employees. The Company agrees not to make any public or private statements disparaging you. 7. You shall cooperate with the Company, its affiliates, and each of their respective attorneys or other legal representatives (collectively, the "Company attorneys") in connection with any claim, litigation, or judicial or arbitral proceeding which is now pending or may hereinafter be brought against the Company and/or its affiliates by any third party, including your appearance as a witness at depositions or trials, without necessity of a subpoena, in order to state truthfully your knowledge of matters at issue. The Company shall promptly reimburse you for your actual and reasonable travel or other expenses that you may incur in cooperating with the Company in this Paragraph 7. You shall provide such other cooperation as the Company may reasonably request to assist the Company in the administration of its business, it being expressly agreed that requests for such cooperation which do not require more than four (4) hours of your time in any 30-day period are reasonable. You further agree that you will immediately forward to the Company's Chief Executive Officer any business information related to the Company that inadvertently has Gary G. Michael December 22, 2000 Page 4 been directed to you. The Company agrees that it will immediately forward to you any mail addressed to you at the Company's offices which does not relate to the Company's business or affairs. 8. Without the express prior written consent of the Company, you shall never disclose, communicate, divulge, furnish, make accessible to any person, firm, partnership, corporation or other entity, or use for your own benefit or purposes, any information of a confidential or proprietary nature obtained from or pertaining to the Company, its assets or business, including information concerning the Company's current or future proposed business plans, processes, operational methods, customer lists, trade secrets, suppliers, employees' personnel files and compensation, financial affairs or marketing strategies. 9. Without the express prior written consent of the Company, you shall not, at any time during the two-year period immediately following the Termination Date, directly or indirectly, own, manage, control or participate in the ownership, management or control of, or be related or otherwise affiliated in any manner with, any business identical or similar to that engaged in by the Company on the Termination Date in any Metropolitan Statistical Area ("MSA") in which such business is carried on at the Termination Date; provided, however, that the forgoing shall not prohibit you from owning as a passive investment 5% or less of the equity of any publicly-traded entity. During the two-year period immediately following the Termination Date, you shall not, directly or indirectly, solicit for employment or hire any employee of the Company or any subsidiary of the Company without the prior express written consent of the Company. 10. You agree that during the period commencing on the date you execute this agreement and ending on the fifth (5th) anniversary of the Retirement Date, you will not, directly or indirectly: (a) Make, or in any way participate in any Solicitation of Proxies to vote, solicit any consent or communicate with or seek to advise or influence any person or entity with respect to the voting of Gary G. Michael December 22, 2000 Page 5 any Common Stock or become a Participant in any Election Contest with respect to the Company; (b) Solicit, seek to effect, negotiate with or provide any information to any other party with respect to, or make any statement or proposal, whether written or oral, to the Board of Directors of the Company or any director or officer of the Company or otherwise make any public announcement or proposal whatsoever with respect to, any form of business combination transaction involving the Company, including, without limitation, a merger, exchange offer or liquidation of the Company's assets, or any restructuring, recapitalization or similar transaction with respect to the Company; or (c) Otherwise act to seek to control, disrupt or influence the management, policies or affairs, of the Company, or instigate or encourage any third party to take any action described in this Paragraph 10. Defined terms used in this Paragraph 10 shall have the following meanings: "Common Stock" shall mean the common stock of the Company, par value $1.00 per share; "Election Contest" shall have the meaning ascribed to it in Rule 14a-11 under the 1934 Act; "1934 Act" shall mean the Securities Exchange Act of 1934, as amended; "Participant" shall have the meaning ascribed to it in Rule 14a-11 under the 1934 Act; "Proxy" shall have the meaning ascribed to it in Rule 14a-1 under the 1934 Act; "Solicitation" shall have the meaning ascribed to it in Rule 14a-1 under the 1934 Act. 11. In consideration of the payment made pursuant to Paragraph 2 above and the Company's other covenants and agreements contained herein: (a) You do hereby knowingly and voluntarily, fully and finally release and forever discharge the Company, including its related or affiliated companies, partnerships, subsidiaries or other Gary G. Michael December 22, 2000 Page 6 business entities, and its and their present and former respective officers, directors, shareholders, members, owners, agents, consultants, employees, representatives, insurers, successors and assigns (hereinafter referred to collectively as the "Released Parties"), from any and all claims, charges, complaints, liens, demands, causes of action, obligations, damages and liabilities, known or unknown, suspected or unsuspected that you had, now have, or may hereafter claim to have against the Released Parties, arising out of or relating in any way to your employment with or separation from the Company or otherwise relating to any of the Released Parties from the beginning of time through the date you sign this agreement. This release specifically extends to, without limitation, claims or causes of action under any local, state and federal laws governing employment relations, including but not limited to federal equal employment opportunity laws and federal and state labor statutes and regulations, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, and the Employee Retirement Income Security Act of 1974, all as amended from time to time. With respect to the Released Parties, you expressly waive all rights afforded by any provision under Idaho law which generally provides that a general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. Notwithstanding any such forgoing provision or comparable provision, you understand and agree that this agreement is intended to include all claims, if any, which you may have and which you do not now know or suspect to exist in your favor against the Released Parties and that this release extinguishes those claims. (b) Notwithstanding anything to the contrary contained in this agreement, you are not releasing any of your rights to the following: Gary G. Michael December 22, 2000 Page 7 (i) To indemnification as an officer or director pursuant to Section 145 of the Delaware General Corporation Law; (ii) To exercise and obtain, in accordance with the terms of such options, any and all the benefits appurtenant to the options to purchase the Company's common stock held by you on the Effective Date and listed on Exhibit A hereto; (iii)To continuation coverage, at the Company's expense, as provided under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and any other continuation coverage as provided under applicable state law; or (iv) Any of your rights to enforce this agreement. (c) You acknowledge that the Company has advised you that you may consult, at the Company's expense, with an attorney of your choosing prior to signing this agreement and that you have been given at least twenty-one days during which to review and consider the provisions of this agreement before signing, although you may sign and return it sooner if you so desire. You further acknowledge that you have been advised by the Company that you have the right to revoke this agreement for a period of seven days after signing it and that this agreement shall not become effective or enforceable until such seven-day revocation period has expired. You acknowledge and agree that if you wish to revoke this agreement, you must do so in writing, and that such revocation must be signed by you and received by Steven D. Young, Executive Vice President, Human Resources at Albertson's Inc., 250 E. Parkcenter, Blvd., Boise, Idaho 83706 no later than 5:00 p.m. Pacific Standard Time on the seventh day after you have signed this agreement. You acknowledge and agree that, in the Gary G. Michael December 22, 2000 Page 8 event that you revoke this agreement, you shall have no right to receive the payment described in Paragraph 2 above. 12. You represent and agree that neither you nor anyone acting on your behalf has assigned or transferred, or attempted to assign or transfer, to any person or entity, any of the claims you are releasing in this agreement. 13. All controversies, claims, or disputes arising out of or related to this agreement, or to any prior or subsequent oral promises or assurances relating to this agreement, shall be settled by a binding arbitration in Boise, Idaho under the rules of the American Arbitration Association then in effect in the State of Idaho, as the sole and exclusive remedy of either party, and judgment upon such award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction. 14. Any notices or other communications permitted or required hereunder shall be in writing and shall be deemed conclusively to have been given upon personal delivery at, two (2) business days following the date of mailing by first class, registered or certified mail, postage prepaid, and return receipt requested to: To you: Mr. Gary G. Michael 2010 Silvercreek Lane Boise, Idaho 83606 To the Company: Albertson's, Inc. 250 E. Parkcenter Blvd. Boise, Idaho 83706 Attn: General Counsel 15. If any provision of this agreement shall be determined under applicable law to be overly broad in duration, geographical coverage, substantive scope, or otherwise, such provision shall be deemed narrowed to the broadest term permitted by applicable law and shall be enforced as so narrowed. If any provision of this agreement nevertheless shall be unlawful, void, or unenforceable, it shall be Gary G. Michael December 22, 2000 Page 9 deemed severable from and shall in no way affect the validity or enforceability of the remaining provisions of this agreement. This agreement will survive the performance of the specific arrangements herein. This agreement is binding on and shall inure to the benefit of the Company and you and each of our respective heirs, executors, administrators, successors and assigns. 16. This agreement and Exhibit A provide the entire agreement relating to the matters set forth herein between us and supercedes any and all other agreements, understandings, negotiations, or discussions, either oral or writing, express or implied, between us. We each acknowledge that no representations, inducements, promises, agreements or warranties, oral or otherwise, have been made by us, or anyone acting on our behalf, which are not embodied in this agreement, and that we have not executed this agreement in reliance on any such representation, inducement, promise, agreement or warranty, and that no such representation, inducement, promise, agreement or warranty not contained in this agreement, including, but not limited to, any purported supplements, modifications, waivers or terminations of this agreement, shall be valid or binding, unless executed in writing by both you and the Company. 17. This agreement is made and entered into in the State of Idaho and shall in all respects be interpreted, enforced and governed under the laws of said state without respect to its conflicts of laws principles. 18. This agreement may be executed in one or more counterparts, or duplicates of originals, all of which, taken together, shall constitute one and the same instrument. Gary G. Michael December 22, 2000 Page 10 If this statement of the Company's understanding conforms to your understanding, please execute and return the enclosed copy of this letter to me no later than December 31, 2000. Very truly yours, ALBERTSON'S, INC. /s/ Michael F. Reuling ----------------------- Michael F. Reuling Vice Chairman of the Company By signing this letter, I acknowledge that I have had the opportunity to seek the advice of an attorney in connection with the negotiation and execution of this agreement; that I have read this agreement and understand its terms; that I have had sufficient time within which to consider the provisions of this agreement, and that I entered into this agreement freely, voluntarily, and without coercion. Agreed and accepted this 22nd day of December, 2000 in Boise, Idaho. /s/ Gary G. Michael --------------- Gary G. Michael EXHIBIT A A list of Gary G. Michael's options to purchase the common stock of Albertson's Inc. held by him on the date of his execution of this agreement is set forth below:
Date Granted Number of Shares Price per Share - ------------ ---------------- --------------- 12/04/95 50,000 $31.8750 12/01/97 100,000 $45.6875 06/24/99 390,721 $51.1875 12/06/99 550,820 $30.5000 12/06/00 645,534 $21.6875
EX-10 4 abs10k2000exhibit10-3.txt AWARD OF DEFERRED STOCK UNITS Exhibit 10.3 January 9, 2001 Award of Deferred Stock Units Pursuant to Section 10 of the Albertson's, Inc. Amended and Restated 1995 Stock-Based Incentive Plan (the "Plan"), ____________________ (Name)(the "Participant"), ___________________ (Title), of Albertson's, Inc. (the "Company") is hereby awarded units representing __________ (Units) shares of the common stock, $1.00 par value, of Albertson's, Inc. (the "Deferred Stock Units") upon the terms and conditions set forth below on December 6, 2000. 1. Each Deferred Stock Unit represents a hypothetical share of the Company's common stock, $1.00 par value (the "Stock"), and will at all times be equal in value to a share of Stock. The Deferred Stock Units will be credited to the Participant in an account established for the Participant, and an amount equal to the amount of the quarterly dividend on the equivalent amount of Stock will be paid quarterly to the Participant. 2. The Deferred Stock Units will be converted into shares of Stock and three quarters (3/4) of such Stock will be transferred to the Participant on December 5, 2003 (the "Vesting Date"), provided that the Participant is still employed by the Company on that date as an officer of the Company. The remaining one quarter (1/4) of such Stock will be transferred to the Participant on the Vesting Date, provided that the condition set forth in the previous sentence have been met and the closing price of the Company's Stock on the New York Stock Exchange (the "Market Price") is at least 133% of the Market Price on the date of the grant of the Deferred Stock Units for a period of at least twenty consecutive trading days during the three year vesting period. 3. The Deferred Stock Units are not assignable or transferable by the Participant (voluntarily or by operation of law) prior to the lapse of the restrictions set forth in Section 2 above. 4. (a) The Participant may elect to defer receipt of the Stock to a future time not more than fifteen years from the Vesting Date and may elect to receive the Stock in a lump sum or annual installments, provided that the Participant has delivered a written election to the Company at least six months prior to the Vesting Date. (b) If the Participant is a "covered employee" as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, on the Vesting Date, then the receipt of the Stock will be automatically deferred to the extent that the Participant's total compensation covered by Section 162(m) for fiscal year 2003 would exceed $1 million and will continue to be deferred in like manner until the Participant is no longer a "covered employee" or until the Participant has elected to receive the stock as described in subsection (a) above, whichever date is later. (c) If the Participant becomes a "covered employee" as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, during the deferral period that the Participant has elected under subsection (a) above, then the receipt of the Stock during that fiscal year will be automatically deferred to the extent that the Participant's total compensation covered by Section 162(m) for that fiscal year would exceed $1 million and will continue to be deferred in like manner until the Participant is no longer a "covered employee" or until the Participant has elected to receive the stock as described in subsection (a) above, whichever is later. 1 (d) Receipt of any Stock by a "covered employee" will take place only in December or January of the applicable fiscal year so that the total amount of compensation covered by Section 162(m) for that fiscal year can be calculated. 5. In consideration of the grant of this award of Deferred Stock Units, the Participant agrees during the term of this agreement and for a period of one year from the Vesting Date not to become employed by another company in the food and/or drug business that competes against the Company. 6. The terms of the Plan with regard to change of control (Section 13 of the Plan) will apply to this award. 7. The Participant will not have any rights as a stockholder with respect to any shares of Stock issueable pursuant to the Deferred Stock Units until the date on which a stock certificate (or certificates) representing such Stock is issued. 8. The number of shares of Stock issueable pursuant to the Deferred Stock Units are subject to equitable adjustment as provided in Section 14 of the Plan. 9. Notices hereunder will be mailed or delivered to the Company at the Corporate Secretary's Department, Albertson's, Inc., P.O. Box 20, Boise, Idaho 83726 and will be mailed or delivered to the Participant at the Participant's address set forth in the payroll records of the Company, or in either case at such other address as one party may subsequently furnish to the other party in writing. 10. This award will not confer upon the Participant any right with respect to continuance of employment by the Company, nor will it interfere in any way with any right of the Company to terminate the Participant's employment at any time. 11. The laws of the State of Delaware will govern this award and all matters related hereto. 12. This award is subject to the terms of the Plan, and the Participant is being delivered a copy of the Plan with this award agreement. 13. The Participant will pay to the Company, on demand, any taxes the Company reasonably determines it is required to withhold under applicable tax laws with respect to the Deferred Stock Units or the issuance of Stock pursuant to this award. The tax withholding obligation may be satisfied by the Participant instructing the Company to withhold shares of stock otherwise issueable pursuant to this award in order to satisfy the minimum tax withholding amount permissible under the method that results in the least amount withheld. 14. This agreement may be executed in two or more counterparts, each of which will be an original but all of which together will represent one and the same agreement. 15. This agreement cannot be changed or terminated orally. The agreement and the Plan contain the entire agreement between the parties relating to the subject matter hereof. ALBERTSON'S, INC. PARTICIPANT By: ______________________________ Its: Chairman of the Board Name: and Chief Executive Officer 2 EX-10 5 abs10k2000exhibit10-63.txt AMENDMENT TO EXECUTIVE DEFERRED COMPENSATION PLAN Exhibit 10.6.3 AMENDMENT TO THE ALBERTSON'S, INC. EXECUTIVE DEFERRED COMPENSATION PLAN This Amendment is made by Albertson's, Inc., a Delaware corporation (the "Corporation"). RECITALS: A. The Corporation established the Albertson's, Inc. Executive Deferred Compensation Plan effective December 5, 1983, as amended and restated, effective as of February 1, 1989, and as further amended, December 15, 1998 (the "Plan"); B. The Corporation, pursuant to Section 8.01 of the Plan, retained the right to amend the Plan and Section 8.01 provides that the Plan may be amended by the Corporation so long as such amendments are non-monetary in their effect and do not materially alter plan benefits; and C. The Board of Directors of the Corporation has determined that it is advisable to amend the Plan in the manner hereinafter set forth and that such amendments are non-monetary in their effect and do not materially alter plan benefits. AMENDMENT The Plan is amended, as of March 15, 2001, in the following respects: 1. The Preamble is amended and restated to read, in its entirety, as follows: "The Albertson's, Inc. Executive Deferred Compensation Plan, as amended and restated in its entirety (hereinafter referred to as the "Plan"), has been established to provide the funds for retirement or death for key management employees, members of the Board of Directors, persons designated as Special Advisors and the beneficiaries of Special Advisors, directors, key management employees of Albertson's, Inc. (hereinafter referred to as the "Employer"). It is intended that the Plan will aid in retaining and attracting persons of exceptional ability by providing such persons with a means to supplement their standard of living at retirement." 2. The definition of Outside Director as set forth in the Definitions under Article I shall be amended and restated in its entirety to read as follows: "`Outside Director' shall mean a member of the Board who is not otherwise an employee of the Employer or a Special Advisor to the Board." 3. The following definition shall be inserted as a separate definition under Article I: "`Special Advisor' means an individual designated as such by the Board." 4. The following sentence shall be inserted at the end of Section 6.01: "Notwithstanding anything to the contrary herein, service as a Special Advisor to the Board shall be treated as service as an Outside Director for all purposes and no termination of service shall be deemed to occur, and no distribution of benefits shall occur, in the event an Outside Director is designated as a Special Advisor in connection with an Outside Director's termination of directorship." IN WITNESS WHEREOF, this Amendment to the Plan has been duly executed by the undersigned as of March 15, 2001. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin --------------------- Name: Thomas R. Saldin Title: Executive Vice President and General Counsel 2 EX-10 6 abs10k2000exhibit10-8.txt CONSULTING AGREEMENT Exhibit 10.8 CONSULTING AGREEMENT CONSULTING AGREEMENT (the "Agreement"), dated as of March 15, 2001, between Albertson's, Inc., a Delaware corporation (the "Company"), and ____________________ (the "Advisor"). Advisor has determined to tender his resignation to the Board of Directors of the Company (the "Board") effective upon the adjournment of the Company's 2001 Annual Meeting (the "Resignation Date"). Notwithstanding such resignation, the Board desires that the Company and its stockholders shall continue to benefit from the experience and ability of the Advisor as a consultant to the Company, and the Advisor is willing to commit himself to serve as a Special Advisor to the Board, on the terms and conditions herein provided. Accordingly, in consideration of the premises and the respective covenants and agreements of the parties herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. RETAINER. The Company hereby retains the Advisor, effective as of the Resignation Date, and the Advisor hereby agrees to become a Special Advisor to the Board for the Term provided in Section 3 to render the consulting services described in Section 2. 2. DUTIES. 2.1 Assignment of Duties. During the Term, as defined in Section 3 of this Agreement, the Advisor shall be available to the Company to provide such consulting and other services as may reasonably be required of him by the Board. 2.2 Availability. The Advisor agrees to devote to the Company such time as shall be necessary for the effective conduct of his duties hereunder. Advisor shall be permitted to engage in outside business and other interests that do not conflict with such duties. Advisor shall not be required to provide services to the Company in excess of ten hours per month. 3. TERM. The term of the Advisor's retainer under this Agreement (the "Term") shall commence on the Resignation Date (also called the "Effective Date") and shall expire on the second anniversary of the Effective Date unless sooner terminated pursuant to Section 5 of this Agreement. 1 4. COMPENSATION. 4.1 Cash Portion of Consulting Fee. The Company shall pay the Advisor a cash fee at the rate of $40,000 per annum during the Term (the "Consulting Fee"). The Consulting Fee shall be payable at the same time, in the same manner, and following the same procedures as apply to directors' fees paid to non-employee directors of the Company. All such payments shall be subject to deduction and withholding (if any) authorized or required by applicable law. 4.2 Equity Portion of Consulting Fee. Advisor shall be awarded $60,000 of Company common stock annually during the Term pursuant to the Company's 1995 Stock-Based Incentive Plan. Advisor may choose to receive such awards in the form of Company common stock, deferred Company stock equivalents or options to purchase Company common stock. Awards in the form of stock options shall be at a ratio of four (4) stock option shares to one (1) share of Company common stock that may otherwise be awarded pursuant to this Section 4.2. Equity compensation awarded pursuant to this Section 4.2 shall be made at the same time, in the same manner, and following the same procedures as apply to equity awards made to non-employee directors of the Company. The compensation provided for in Section 4.1 and 4.2 hereof is referred to herein as the "Consulting Fee." 4.3 No Offset Effect. Any other compensation received by the Advisor for services performed for the Company or its affiliates shall not operate as an offset to the compensation due pursuant to Section 4.1 or Section 4.2 of this Agreement. 4.4 Expense Reimbursement. The Company shall reimburse the Advisor for all reasonable out-of-pocket expenses related to travel, entertainment and miscellaneous expense incurred in carrying out his duties under this Agreement. Reimbursement shall only be made against an itemized list of such expenditures signed by the Advisor in such form as required by the Company and consistent with the Company's policy. 5. TERMINATION. 5.1 Termination Upon Death or Disability. In the event of the Advisor's death or total disability (defined as the Advisor's inability to perform his duties under this Agreement for three (3) consecutive fiscal quarters) during the Term, this Agreement shall terminate on the date of such death or disability; provided that, such termination shall not relieve the Company of its 2 obligations to make the payments as described in Section 4 hereof accrued through the date of such termination. 5.2 Termination for Cause; Voluntary Termination Prior to Term-End. The Company may terminate this Agreement for "Cause" at any time and without notice. The Company shall have "Cause" to terminate this Agreement if (a) Advisor breaches any provision of this Agreement or (b) Advisor engages in conduct which is injurious to the Company as determined by the Board. If the Advisor is terminated by the Company for Cause or if the Advisor voluntarily terminates his services prior to the end of the Term (other than due to the Advisor's death or disability) then the Advisor shall be paid only the Consulting Fee accrued through the date of such termination and the Advisor will forfeit all right to receive any other payments from the Company unless previously earned but unpaid and any other compensation to which he would otherwise be entitled. 5.3 Termination by the Company other than for Cause. If the Advisor is terminated by the Company other than for Cause prior to the end of the Term, then the Advisor shall be entitled to payment of the total amount of the Consulting Fee which would have been paid hereunder if his services were not so terminated by the Company (less any amount of the Consulting Fee already paid). 6. CONFIDENTIALITY. 6.1 Confidentiality of Trade Secrets or Proprietary Information. Advisor acknowledges that, during Advisor's service with the Company, Advisor has had access to proprietary information, trade secrets, and confidential material of the Company and its affiliates, successors and assigns, including, without limitation, information concerning the Company's operations, policies and procedures, present and future business plans, financial information, budgets and projections, methods of doing business, and marketing, research and development activities and strategies ("Confidential Information"). Advisor agrees, without limitation in time or until the Confidential Information shall become public other than by Advisor's unauthorized disclosure, to maintain the confidentiality of the Confidential Information and refrain from divulging, disclosing, or otherwise using the Confidential Information to the detriment of the Company or its affiliates, successors or assigns, or for any other purpose or no purpose. 6.2 Enforceability of Provisions/Remedies. Advisor agrees that any breach of the covenants contained in this Section 6 would irreparably injure the Company. Accordingly, the Company may, in addition to pursuing any other remedies they may have in law or in equity, obtain an injunction against Advisor 3 from any court having jurisdiction over the matter, restraining any further violation of this Section 6 by Advisor. 7. INDEMNIFICATION. The Company agrees to indemnify, protect, defend and hold the Advisor and his estate, heirs, and personal representatives, harmless from and against any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), and all losses, liabilities, damages and expenses, including reasonable attorney's fees incurred by counsel reasonably designated or approved by him, in connection with this Agreement or his services hereunder, provided that any consulting services giving rise to such indemnification shall have been performed by the Advisor in good faith and, to the best of his or her knowledge, in a lawful manner. 8. OTHER PROVISIONS. 8.1 Independent Contractor Status. Advisor hereby acknowledges that Advisor's services to the Company during the Term of this Agreement will be as an independent contractor and not as an employee and even if Advisor is subsequently determined to have been an employee during such Term, he waives any rights he might have to benefits of any type whatsoever, from and after the Effective Date, except as specifically provided for herein. 8.2 Notices. Any notice required or permitted to be given hereunder shall be in writing and shall be effective three (3) business days after it is properly sent by registered or certified mail to the following addresses or twenty-four (24) hours if sent via facsimile: If to the Company: Albertson's, Inc. 250 Parkcenter Blvd. Boise, ID 83706 Attn: Corporate Secretary If to Advisor, the address set forth on the signature page to this Agreement. Either party to this Agreement may use such other address as either party may from time to time designate by notice. 8.3 Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto. 4 8.4 Waivers and Amendments. This Agreement may be amended, superseded, cancelled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege. Each of the sections contained in this Agreement shall be enforceable, independently of every other section in this Agreement, and the invalidity or enforceability of any section shall not invalidate or render nonenforceable any other section contained herein. If any section or provision in a section is found invalid or unenforceable, it is the intent of the parties that a court of competent jurisdiction shall reform the section or provisions to produce its nearest enforceable economic equivalent. 8.5 Governing Law. The validity, interpretation, construction and performance of this agreement shall in all respects be governed by the laws of Delaware, without reference to principles of conflict of law. 8.6 Assignment. The services to be rendered by the Advisor hereunder are personal in nature and, thus, the obligations of the Advisor under this Agreement may not be assigned to any other party. 8.7 Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original but all such counterparts together shall constitute one and the same instrument. Each counterpart may consist of two copies hereof each signed by one of the parties hereto. 8.8 Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement. 5 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ALBERTSON'S, INC. By:_______________________________ Thomas R. Saldin Executive Vice President and General Counsel Advisor ------------------------------- 6 EX-10 7 abs10k2000exhibit10-184.txt AMENDMENT TO EXECUTIVE PENSION MAKEUP TRUST Exhibit 10.18.4 AMENDMENT to the ALBERTSON'S, INC. EXECUTIVE PENSION MAKEUP TRUST This Amendment is made by Albertson's, Inc., a Delaware Corporation (the "Corporation" or the "Employer"). RECITALS: A. The Corporation has established the Albertson's, Inc. Executive Pension Makeup Trust, pursuant to a Trust Agreement dated February 1, 1989 (the "Trust Agreement"); B. The Corporation, pursuant to Section 6.01 of the Trust Agreement, retains the right to amend the Trust Agreement with the express written consent of the Majority Participants on the date of such amendment; C. The Corporation hereby certifies that such express written consent of the Majority Participants to the amendments set forth herein has been obtained; D. Management Compensation Group, Northwest, LLC, a Delaware limited liability company and the Recordkeeper as that term is defined in the Trust Agreement has certified that the amount or time for payment of any benefit under the Trust Agreement to any Participant or beneficiary of a deceased Participant will not be reduced or adversely affected by the amendments set forth herein; and E. The Corporation has determined that it is advisable to amend the Trust Agreement in the manner hereinafter set forth. 1 AMENDMENT The Trust Agreement is hereby amended as follows: 1. The definition of the term "Change in Control" contained in Article I of the Trust Agreement is hereby amended (i) by replacing the date "February 1, 1989" with the date "March 15, 2000" and by replacing the date "February 2, 1989" with the date "March 16, 2000," (ii) by adding at the end thereof the following sentence: "Notwithstanding the foregoing, the occurrence of any of the foregoing events or transactions shall not be deemed to be a Change in Control, if prior to consummation of such event or transaction the Board of Directors adopts by vote of a majority of the directors then in office (including a majority of the Continuing Directors with respect to such event or transaction) a resolution to the effect that a Change in Control for the purpose of this Trust shall not be deemed to have occurred upon consummation of such event or transaction." 2. Article I of the Trust Agreement is amended by adding thereto immediately after the definition of the term "Code" the following language: "Continuing Director" shall mean, with respect to a particular event, transaction or circumstance, a person who was a member of the Board of Directors on March 15, 2000, and any successor to such member who was recommended to succeed such member by a majority of the directors then in office who either were members of the Board of Directors on March 15, 2000, or whose succession was previously so recommended, provided that no person shall be deemed to be a Continuing Director with respect to a particular event, transaction or circumstance if such person is an "affiliate" or "associate" (as such terms are defined in the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder) of any person (other than the Employer) who engaged in such event, transaction or circumstance. 2 3. The definition of the term "Potential Change in Control" set forth in Article I of the Trust Agreement shall be amended (i) by replacing the date "February 1, 1989" with the date "March 15, 2000" and by replacing the date "February 2, 1989" with the date "March 16, 2000," (ii) by deleting in its entirety clause (c) of such definition and inserting in its place the following language: "(c) filing or the requirement for filing with the Securities and Exchange Commission by any "person" or "group" (as those terms are used in Section 13(d) of the Exchange Act) of (i) an initial Schedule 13G reflecting ownership of 10% or more of any class of Voting Securities outstanding on the date of such filing, (ii) an initial Schedule 13D, (iii) any amendment to a Schedule 13D reflecting an increase in ownership of any class of Voting Securities equal to or greater than 1% of the amount of such class of Voting Securities outstanding on the date of such filing or (iv) any amendment to a Schedule 13G reflecting ownership of 10% or more of any class of Voting Securities outstanding on the date of such filing and an increase in ownership of such class of Voting Securities equal to or greater than 2% of the amount of such class of Voting Securities outstanding on the date of such filing," and (iii) by deleting from such definition the words "the Board of Directors adopts a resolution to the effect that a Potential Change in Control for the purposes of this Trust shall not be deemed to have occurred (but only if at least a two-thirds majority of the members of the Board of Directors at the time of adoption of such resolution were members immediately prior to such event or circumstances)" and inserting in their place the following words: "the Board of Directors by vote of a majority of the directors then in office (including a majority of the Continuing Directors with respect 3 to such event, transaction or circumstance) adopts a resolution to the effect that a Potential Change in Control for the purpose of this Trust shall not be deemed to have occurred as a result of such event, transaction or circumstance." Each of the foregoing amendments shall be deemed to be effective as of the date of the creation of the Trust, with the intention that (i) all such amendments shall relate back to such date and shall be retroactively effective, (ii) the Trust Agreement shall be construed as if such amendments had been included in the document as originally executed and (iii) if, but only to the extent that, any amendment to the Trust Agreement heretofore effected (a "prior amendment") is inconsistent with the amendments set forth above, such prior amendment shall be ineffective and of no force or effect but shall otherwise be valid and of full force and effect. IN WITNESS WHEREOF, this instrument has been duly executed by the undersigned and has been delivered by facsimile to the Trustee (as that term is defined in the Trust Agreement) of the Trust on this 31st day of March, 2000. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin ------------------------ Thomas R. Saldin Executive Vice President and General Counsel 4 EX-10 8 abs10k2000exhibit10-194.txt AMENDMENT TO EXECUTIVE DEFERRED COMPENSATION TRUST Exhibit 10.19.4 AMENDMENT to the ALBERTSON'S, INC. EXECUTIVE DEFERRED COMPENSATION TRUST This Amendment is made by Albertson's, Inc., a Delaware Corporation (the "Corporation" or the "Employer"). RECITALS: A. The Corporation has established the Albertson's, Inc. Executive Deferred Compensation Trust, pursuant to a Trust Agreement effective February 1, 1989 (the "Trust Agreement"); B. The Corporation, pursuant to Section 6.01 of the Trust Agreement, retains the right to amend the Trust Agreement with the express written consent of the Majority Participants on the date of such amendment; C. The Corporation hereby certifies that such express written consent of the Majority Participants to the amendments set forth herein has been obtained; D. Management Compensation Group, Northwest, LLC, a Delaware limited liability company and the Recordkeeper as that term is defined in the Trust Agreement has certified that the amount or time for payment of any benefit under the Trust Agreement to any Participant or beneficiary of a deceased Participant will not be reduced or adversely affected by the amendments set forth herein; and E. The Corporation has determined that it is advisable to amend the Trust Agreement in the manner hereinafter set forth. 1 AMENDMENT The Trust Agreement is hereby amended as follows: 1. The definition of the term "Change in Control" contained in Article I of the Trust Agreement is hereby amended (i) by replacing the date "February 1, 1989" with the date "March 15, 2000" and by replacing the date "February 2, 1989" with the date "March 16, 2000," (ii) by adding at the end thereof the following sentence: "Notwithstanding the foregoing, the occurrence of any of the foregoing events or transactions shall not be deemed to be a Change in Control, if prior to consummation of such event or transaction the Board of Directors adopts by vote of a majority of the directors then in office (including a majority of the Continuing Directors with respect to such event or transaction) a resolution to the effect that a Change in Control for the purpose of this Trust shall not be deemed to have occurred upon consummation of such event or transaction." Notwithstanding the foregoing, for purposes of the Albertson's, Inc. Senior Executive Deferred Compensation Plan and the Albertson's, Inc. Executive Deferred Compensation Plan, each originally adopted on December 5, 1983 (collectively the "Plans"), the amendments in this paragraph 1 to the definition of "Change in Control" shall not apply. The definition of "Change in Control" in the Trust Agreement in effect immediately before this Amendment, which definition is incorporated by reference into the Plans, shall continue to apply to the Plans. 2. Article I of the Trust Agreement is amended by adding thereto immediately after the definition of the term "Code" the following language: "Continuing Director" shall mean, with respect to a particular event, transaction or circumstance, a person who was a member of the Board of Directors on March 15, 2000, and any successor to such member who was recommended to succeed such member by a majority of the directors then in office who either were members of the Board of Directors on 2 March 15, 2000, or whose succession was previously so recommended, provided that no person shall be deemed to be a Continuing Director with respect to a particular event, transaction or circumstance if such person is an "affiliate" or "associate" (as such terms are defined in the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder) of any person (other than the Employer) who engaged in such event, transaction or circumstance. 3. The definition of the term "Potential Change in Control" set forth in Article I of the Trust Agreement shall be amended (i) by replacing the date "February 1, 1989" with the date "March 15, 2000" and by replacing the date "February 2, 1989" with the date "March 16, 2000," (ii) by deleting in its entirety clause (c) of such definition and inserting in its place the following language: "(c) filing or the requirement for filing with the Securities and Exchange Commission by any "person" or "group" (as those terms are used in Section 13(d) of the Exchange Act) of (i) an initial Schedule 13G reflecting ownership of 10% or more of any class of Voting Securities outstanding on the date of such filing, (ii) an initial Schedule 13D, (iii) any amendment to a Schedule 13D reflecting an increase in ownership of any class of Voting Securities equal to or greater than 1% of the amount of such class of Voting Securities outstanding on the date of such filing or (iv) any amendment to a Schedule 13G reflecting ownership of 10% or more of any class of Voting Securities outstanding on the date of such filing and an increase in ownership of such class of Voting Securities equal to or greater than 2% of the amount of such class of Voting Securities outstanding on the date of such filing," and (iii) by deleting from such definition the words "the Board of Directors adopts a resolution to the effect that a Potential Change in Control for 3 the purposes of this Trust shall not be deemed to have occurred (but only if at least a two-thirds majority of the members of the Board of Directors at the time of adoption of such resolution were members immediately prior to such event or circumstances)" and inserting in their place the following words: "the Board of Directors by vote of a majority of the directors then in office (including a majority of the Continuing Directors with respect to such event, transaction or circumstance) adopts a resolution to the effect that a Potential Change in Control for the purpose of this Trust shall not be deemed to have occurred as a result of such event, transaction or circumstance." Each of the foregoing amendments shall be deemed to be effective as of the date of the creation of the Trust, with the intention that (i) all such amendments shall relate back to such date and shall be retroactively effective, (ii) the Trust Agreement shall be construed as if such amendments had been included in the document as originally executed and (iii) if, but only to the extent that, any amendment to the Trust Agreement heretofore effected (a "prior amendment") is inconsistent with the amendments set forth above, such prior amendment shall be ineffective and of no force or effect but shall otherwise be valid and of full force and effect. IN WITNESS WHEREOF, this instrument has been duly executed by the undersigned and has been delivered by facsimile to the Trustee (as that term is defined in the Trust Agreement) of the Trust on this 31st day of March, 2000. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin ------------------------ Thomas R. Saldin Executive Vice President and General Counsel 4 EX-10 9 abs10k2000exhibit10-212.txt AMENDMENT TO DEFERRED COMPENSATION PLAN Exhibit 10.21.2 AMENDMENT TO THE ALBERTSON'S, INC. NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN This Amendment is made by Albertson's, Inc., a Delaware corporation (the "Corporation"). RECITALS: A. The Corporation established the Albertson's, Inc. Non-Employee Directors' Deferred Compensation Plan effective January 1, 1990, as amended December 15, 1998 (the "Plan"); B. The Corporation, pursuant to Section 10.1 of the Plan, retained the right to amend the Plan; and Section 10.1 provides that the Plan may be amended so long as such amendments do not decrease the benefits or rights of any Participant theretofore accrued. C. The Board of Directors of the Corporation has determined that it is advisable to amend the Plan in the manner hereinafter set forth and that such amendments do not decrease the benefits of any Participant theretofore accrued. AMENDMENT The Plan is amended, as of March 15, 2001, in the following respects: 1. The Preamble is amended and restated to read, in its entirety, as follows: "This Plan is an unfunded deferred compensation agreement for non-employee directors and persons designated as Special Advisors to the Board, and all rights hereunder shall be governed by and construed in accordance with the laws of Idaho. The Plan is implemented with the intention that it will aid in retaining and attracting non-employee directors and Special Advisors of exceptional ability by providing such directors and Special Advisors with a means to supplement their income at retirement. For purposes of this Plan, service as a Special Advisor shall be treated in the same manner as service as a Director." 2. Section 1.9 of the Plan is amended and restated to read, in its entirety, as follows: "`Director' means a member of the Board or a Special Advisor to the Board." 3. The following shall be inserted in the Plan as a new Section 1.20 and corresponding changes to the numbering of the remaining provisions of Article I shall be made to reflect this new insertion: "`Special Advisor' means an individual designated as such by the Board." 4. The following sentence shall be inserted at the end of Section 6.3: "Notwithstanding anything to the contrary herein, service as a Special Advisor to the Board shall be treated as service as a Director for all purposes and no termination of service shall be deemed to occur, and no distribution of benefits shall occur, in the event a Director is designated as a Special Advisor in connection with a Director's termination of directorship." IN WITNESS WHEREOF, this Amendment to the Plan has been duly executed by the undersigned as of March 15, 2001. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin ------------------------ Name: Thomas R. Saldin Title: Executive Vice President and General Counsel 2 EX-10 10 abs10k2000exhibit10-224.txt AMENDMENT TO DEFERRED COMPENSATION TRUST Exhibit 10.22.4 AMENDMENT to the ALBERTSON'S, INC. 1990 DEFERRED COMPENSATION TRUST This Amendment is made by Albertson's, Inc., a Delaware Corporation (the "Corporation" or the "Employer"). RECITALS: A. The Corporation has established the Albertson's, Inc. 1990 Deferred Compensation Trust, pursuant to a Trust Agreement effective November 20, 1990 (the "Trust Agreement"); B. The Corporation, pursuant to Section 6.01 of the Trust Agreement, retains the right to amend the Trust Agreement with the express written consent of the Majority Participants on the date of such amendment; C. The Corporation hereby certifies that such express written consent of the Majority Participants to the amendments set forth herein has been obtained; D. Management Compensation Group, Northwest, LLC, a Delaware limited liability company and the Recordkeeper as that term is defined in the Trust Agreement has certified that the amount or time for payment of any benefit under the Trust Agreement to any Participant or beneficiary of a deceased Participant will not be reduced or adversely affected by the amendments set forth herein; and E. The Corporation has determined that it is advisable to amend the Trust Agreement in the manner hereinafter set forth. 1 AMENDMENT The Trust Agreement is hereby amended as follows: 1. The definition of the term "Change in Control" contained in Article I of the Trust Agreement is hereby amended (i) by replacing the date "January 1, 1990" with the date "March 15, 2000" and by replacing the date "January 2, 1990" with the date "March 16, 2000," (ii) by adding at the end thereof the following sentence: "Notwithstanding the foregoing, the occurrence of any of the foregoing events or transactions shall not be deemed to be a Change in Control, if prior to consummation of such event or transaction the Board of Directors adopts by vote of a majority of the directors then in office (including a majority of the Continuing Directors with respect to such event or transaction) a resolution to the effect that a Change in Control for the purpose of this Trust shall not be deemed to have occurred upon consummation of such event or transaction." The amendments in this paragraph 1 to the definition of "Change in Control" shall not be deemed to amend the definition of "Change in Control" contained in Section 1.5 of the Albertson's, Inc. 1990 Deferred Compensation Plan effective January 1, 1990, as amended. 2. Article I of the Trust Agreement is amended by adding thereto immediately after the definition of the term "Code" the following language: "Continuing Director" shall mean, with respect to a particular event, transaction or circumstance, a person who was a member of the Board of Directors on March 15, 2000, and any successor to such member who was recommended to succeed such member by a majority of the directors then in office who either were members of the Board of Directors on March 15, 2000, or whose succession was previously so recommended, provided that no person shall be deemed to be a Continuing Director 2 with respect to a particular event, transaction or circumstance if such person is an "affiliate" or "associate" (as such terms are defined in the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder) of any person (other than the Employer) who engaged in such event, transaction or circumstance. 3. The definition of the term "Potential Change in Control" set forth in Article I of the Trust Agreement shall be amended (i) by replacing the date "January 1, 1990" with the date "March 15, 2000" and by replacing the date "January 2, 1990" with the date "March 16, 2000," (ii) by deleting in its entirety clause (c) of such definition and inserting in its place the following language: "(c) filing or the requirement for filing with the Securities and Exchange Commission by any "person" or "group" (as those terms are used in Section 13(d) of the Exchange Act) of (i) an initial Schedule 13G reflecting ownership of 10% or more of any class of Voting Securities outstanding on the date of such filing, (ii) an initial Schedule 13D, (iii) any amendment to a Schedule 13D reflecting an increase in ownership of any class of Voting Securities equal to or greater than 1% of the amount of such class of Voting Securities outstanding on the date of such filing or (iv) any amendment to a Schedule 13G reflecting ownership of 10% or more of any class of Voting Securities outstanding on the date of such filing and an increase in ownership of such class of Voting Securities equal to or greater than 2% of the amount of such class of Voting Securities outstanding on the date of such filing," and 3 (iii) by deleting from such definition the words "the Board of Directors adopts a resolution to the effect that a Potential Change in Control for the purposes of this Trust shall not be deemed to have occurred (but only if at least a two-thirds majority of the members of the Board of Directors at the time of adoption of such resolution were members immediately prior to such event or circumstances)" and inserting in their place the following words: "the Board of Directors by vote of a majority of the directors then in office (including a majority of the Continuing Directors with respect to such event, transaction or circumstance) adopts a resolution to the effect that a Potential Change in Control for the purpose of this Trust shall not be deemed to have occurred as a result of such event, transaction or circumstance." Each of the foregoing amendments shall be deemed to be effective as of the date of the creation of the Trust, with the intention that (i) all such amendments shall relate back to such date and shall be retroactively effective, (ii) the Trust Agreement shall be construed as if such amendments had been included in the document as originally executed and (iii) if, but only to the extent that, any amendment to the Trust Agreement heretofore effected (a "prior amendment") is inconsistent with the amendments set forth above, such prior amendment shall be ineffective and of no force or effect but shall otherwise be valid and of full force and effect. IN WITNESS WHEREOF, this instrument has been duly executed by the undersigned and has been delivered by facsimile to the Trustee (as that term is defined in the Trust Agreement) of the Trust on this 31st day of March, 2000. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin -------------------------- Thomas R. Saldin Executive Vice President and General Counsel 4 EX-10 11 abs10k2000exhibit10-231.txt AMENDMENT TO DEFERRED COMPENSATION TRUST Exhibit 10.23.1 AMENDMENT to the ALBERTSON'S, INC. 2000 DEFERRED COMPENSATION TRUST This Amendment is made by Albertson's, Inc., a Delaware Corporation (the "Corporation" or the "Employer"). RECITALS: A. The Corporation has established the Albertson's, Inc. 2000 Deferred Compensation Trust, pursuant to a Trust Agreement dated December 15, 1999 (the "Trust Agreement"); B. The Corporation, pursuant to Section 6.01 of the Trust Agreement, retains the right to amend the Trust Agreement; C. The Corporation hereby certifies to the Trustee under the Trust Agreement that the Trust has not become irrevocable; D. Management Compensation Group, Northwest, LLC, a Delaware limited liability company and the Recordkeeper as that term is defined in the Trust Agreement has certified that the amount or time for payment of any benefit under the Trust Agreement to any Participant or beneficiary of a deceased Participant will not be reduced or adversely affected by the amendments set forth herein; and E. The Corporation has determined that it is advisable to amend the Trust Agreement in the manner hereinafter set forth. 1 AMENDMENT The Trust Agreement is hereby amended as follows: 1. The definition of the term "Change in Control" contained in Article I of the Trust Agreement is hereby amended (i) by replacing the date "January 1, 2000" with the date "March 15, 2000" and by replacing the date "January 2, 2000" with the date "March 16, 2000" (ii) by replacing the last sentence thereof with the following sentence: "Notwithstanding the foregoing, the occurrence of any of the foregoing events or transactions shall not be deemed to be a Change in Control, if prior to consummation of such event or transaction the Board of Directors adopts by vote of a majority of the directors then in office (including a majority of the Continuing Directors with respect to such event or transaction) a resolution to the effect that a Change in Control for the purpose of this Trust shall not be deemed to have occurred upon consummation of such event or transaction." 2. Article I of the Trust Agreement is amended by adding thereto immediately after the definition of the term "Code" the following language: "Continuing Director" shall mean, with respect to a particular event, transaction or circumstance, a person who was a member of the Board of Directors on March 15, 2000, and any successor to such member who was recommended to succeed such member by a majority of the directors then in office who either were members of the Board of Directors on March 15, 2000, or whose succession was previously so recommended, provided that no person shall be deemed to be a Continuing Director with respect to a particular event, transaction or circumstance if such person is an "affiliate" or "associate" (as such terms are defined in the 2 Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder) of any person (other than the Employer) who engaged in such event, transaction or circumstance. 3. The definition of the term "Potential Change in Control" set forth in Article I of the Trust Agreement shall be amended (i) by replacing the date "January 1, 2000" with the date "March 15, 2000" and by replacing the date "January 2, 2000" with the date "March 16, 2000" (ii) by deleting in its entirety clause (c) of such definition and inserting in its place the following language: "(c) filing or the requirement for filing with the Securities and Exchange Commission by any "person" or "group" (as those terms are used in Section 13(d) of the Exchange Act) of (i) an initial Schedule 13G reflecting ownership of 10% or more of any class of Voting Securities outstanding on the date of such filing, (ii) an initial Schedule 13D, (iii) any amendment to a Schedule 13D reflecting an increase in ownership of any class of Voting Securities equal to or greater than 1% of the amount of such class of Voting Securities outstanding on the date of such filing or (iv) any amendment to a Schedule 13G reflecting ownership of 10% or more of any class of Voting Securities outstanding on the date of such filing and an increase in ownership of such class of Voting Securities equal to or greater than 2% of the amount of such class of Voting Securities outstanding on the date of such filing," and (iii) by deleting from such definition the words "the Board of Directors adopts a resolution to the effect that a Potential Change In Control for the purpose of this Trust shall not be deemed to have occurred (but only if at least a two-thirds majority of the members of the Board of Directors at the time of adoption of such resolution were members immediately prior to such event or circumstances)" and inserting in their place the following words: 3 "the Board of Directors by vote of a majority of the directors then in office (including a majority of the Continuing Directors with respect to such event, transaction or circumstance) adopts a resolution to the effect that a Potential Change in Control for the purpose of this Trust shall not be deemed to have occurred as a result of such event, transaction or circumstance." Each of the foregoing amendments shall be deemed to be effective as of the date of the creation of the Trust, with the intention that (i) all such amendments shall relate back to such date and shall be retroactively effective, (ii) the Trust Agreement shall be construed as if such amendments had been included in the document as originally executed and (iii) if, but only to the extent that, any amendment to the Trust Agreement heretofore effected (a "prior amendment") is inconsistent with the amendments set forth above, such prior amendment shall be ineffective and of no force or effect but shall otherwise be valid and of full force and effect. IN WITNESS WHEREOF, this instrument has been duly executed by the undersigned and has been delivered by facsimile to the Trustee (as that term is defined in the Trust Agreement) of the Trust on this 31st day of March, 2000. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin ------------------------ Thomas R. Saldin Executive Vice President and General Counsel 4 EX-10 12 abs10k2000exhibit10-252.txt AMENDMENT TO STOCK OPTION PLAN Exhibit 10.25.2 AMENDMENT TO THE ALBERTSON'S, INC. 1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS This Amendment is made by Albertson's, Inc., a Delaware corporation (the "Corporation"). RECITALS: A. The Board of Directors of the Corporation (the "Board"), pursuant to Section 6 of the Plan, may amend the Plan, but no amendment shall be made that would impair the rights of a participant under any award theretofore granted without such participant's consent; and B. The Board has determined that it is advisable to amend the Plan and the options heretofore granted in the manner hereinafter set forth and that such amendments do not impair the rights of a participant under any award theretofore granted without such participant's consent. AMENDMENT The Plan is amended, as of March 15, 2001, in the following respects: 1. The following shall be inserted in the Plan as a new Section 1(j) and corresponding changes to the numbering of the remaining provisions of Section 1 shall be made to reflect this new insertion: "`Special Advisor' means an individual designated as such by the Board." 2. The following shall be inserted in the Plan as a new Section 1(m): "All references in the Plan to a `non-employee member of the Board' shall be deemed to include and apply to a Special Advisor." 3. The following shall be inserted in the at the end of Section 5(b)(iii): "Notwithstanding anything to the contrary herein, an Optionee shall not be deemed to have resigned or been removed from the Board of Directors if such Optionee is designated as a Special Advisor in connection with the termination of such Optionee's status as a member of the Board of Directors." 4. The following shall be inserted in the at the end of Section 2 of each option agreement under the Plan: "Notwithstanding anything to the contrary herein, the Optionee shall not be deemed to have resigned or been removed from the Board of Directors if the Optionee is designated as a Special Advisor in connection with the termination of the Optionee's status as a member of the Board of Directors." IN WITNESS WHEREOF, this Amendment to the Plan has been duly executed by the undersigned as of March 15, 2001. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin --------------------- Name: Thomas R. Saldin Title: Executive Vice President and General Counsel 2 EX-10 13 abs10k2000exhibit10-261.txt AMENDMENT TO STOCK BASED INCENTIVE PLAN Exhibit 10.26.1 AMENDMENT TO THE ALBERTSON'S, INC. AMENDED AND RESTATED 1995 STOCK-BASED INCENTIVE PLAN This Amendment is made by Albertson's, Inc., a Delaware corporation (the "Corporation"). RECITALS: A. The Corporation established the Albertson's, Inc. Amended and Restated 1995 Stock-Based Incentive Plan effective April 5, 1995, as amended and restated, effective August 31, 1998 (the "Plan"); B. The Board of Directors of the Corporation (the "Board"), pursuant to Section 18 of the Plan, may amend the Plan, but no amendment shall be made that would impair the rights of a participant under any award theretofore granted without such participant's consent; and C. The Board has determined that it is advisable to amend the Plan in the manner hereinafter set forth and that such amendments do not impair the rights of a participant under any award theretofore granted without such participant's consent. AMENDMENT The Plan is amended, as of March 15, 2001, in the following respects: 1. Section 2(n) of the Plan is amended and restated to read, in its entirety, as follows: "`Eligible Director' means a director of the Company who is not an employee of the Company or any Subsidiary or a Special Advisor to the Board." 2. The following shall be inserted in the Plan as a new Section 2(bb) and corresponding changes to the numbering of the remaining provisions of Section 2 shall be made to reflect this new insertion: "`Special Advisor' means an individual designated as such by the Board." 3. The following sentence shall be inserted in the Plan as a new Section 7.C.3.(g): "Notwithstanding anything to the contrary herein, service as a Special Advisor to the Board shall be treated as service as an Eligible Director for all purposes and no termination of service shall be deemed to occur in the event an Eligible Director is designated as a Special Advisor in connection with a Director's termination of directorship." IN WITNESS WHEREOF, this Amendment to the Plan has been duly executed by the undersigned as of March 15, 2001. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin --------------------- Name: Thomas R. Saldin Title: Executive Vice President and General Counsel 2 EX-10 14 abs10k2000exhibit10-281.txt AMENDMENT TO CREDIT AGREEMENT 5 YEAR Exhibit 10.28.1 [EXECUTION COPY] AMENDMENT AGREEMENT This AMENDMENT AGREEMENT (this "Agreement") is entered into as of March 15, 2001 by and among Albertson's, Inc., a Delaware corporation (the "Company"), the several financial institutions party to this Agreement (individually, a "Bank" and, collectively, the "Banks"), and Bank of America, N.A., as Swingline Bank and as administrative agent for itself, the Designated Bidders and the Banks (in such capacity, the "Agent"). WHEREAS, the Company, the Banks party thereto and the Agent entered into a Credit Agreement dated as of March 22, 2000 (as in effect as of the date of this Agreement, the "Credit Agreement") providing for a multiyear revolving credit facility; and WHEREAS, the parties hereto desire to amend the Credit Agreement as set forth herein, subject to the terms and conditions of this Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. Definitions; References; Interpretation. (a) Unless otherwise specifically defined herein, each term used herein (including in the Recitals hereof) which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. (b) Each reference to "this Agreement", "hereof", "hereunder", "herein" and "hereby" and each other similar reference contained in the Credit Agreement, and each reference to "the Credit Agreement" and each other similar reference in the other Loan Documents, shall from and after the Effective Date (as defined in subsection 2) refer to the Credit Agreement as amended hereby. (c) The rules of interpretation set forth in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. 2. Amendments to Credit Agreement. Subject to the terms and conditions hereof, the Credit Agreement is amended as follows, effective as of the date of satis- faction of the conditions set forth in Section 4 (the "Effective Date"): (a) Amendments to Article I of the Credit Agreement. The term "364-Day Credit Agreement" defined in the Credit Agreement shall mean the Amended and Restated Credit Agreement dated as of the date hereof, among the Company, BofA as agent, and the other financial institutions party thereto, providing for a 364 day revolving credit facility. (b) Amendment to Annex I of the Credit Agreement. Annex I of the Credit Agreement is replaced in its entirety by Annex I (Amended) attached to this Agreement. (c) Amendment to Schedule 10.02 of the Credit Agreement. Schedule 10.02 of the Credit Agreement is replaced in its entirety by Schedule 10.02 (Amended) of this Agreement. 3. Representations and Warranties. The Company hereby represents and warrants to the Agent and the Banks as follows: (a) No Default or Event of Default has occurred and is continuing (or would result from the amendment of the Credit Agreement contemplated hereby). (b) The execution, delivery and performance by the Company of this Agreement and the Credit Agreement (as amended by this Agreement) have been duly authorized by all necessary corporate and other action and do not and will not require any registration with, consent or approval of, or notice to or action by, any Person (including any Governmental Authority) in order to be effective and enforceable. (c) This Agreement and the Credit Agreement (as amended by this Agreement) constitute the legal, valid and binding obligations of the Company, enforceable against it in accordance with their respective terms. (d) All representations and warranties of the Company contained in the Credit Agreement are true and correct (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date and except that this subsection (d) shall be deemed instead to refer to (x) the last day of the most recent quarter and year for which financial statements have then been delivered; (y) to the most recent Form 10-K and Forms 10-Q filed subsequently thereto by the Company with the SEC, in respect of the representations and warranties made in Section 5.05 of the Credit Agreement; and (z) to the most recent Form 10-K filed by the Company with the SEC, in respect of the representations and warranties made in Section 5.10(a) of the Credit Agreement). (e) There has occurred since February 3, 2000, no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect. (f) The Company is entering into this Agreement on the basis of its own investigation and for its own reasons, without reliance upon the Agent and the Banks or any other Person. (g) The Company's obligations under the Credit Agreement and under the other Loan Documents are not subject to any defense, counterclaim, set-off, right of recoupment, abatement or other claim. 4. Conditions of Effectiveness. (a) The effectiveness of Section 2 of this Agreement shall be subject to the satisfaction of each of the following conditions precedent: 2 (1) The Agent shall have received from the Company and each of the Banks a duly executed original (or, if elected by the Agent, an executed facsimile copy) of this Agreement. (2) The Agent shall have received evidence of payment by the Company of all fees, costs and expenses due and payable as of the Effective Date hereunder and under the Credit Agreement, including any costs and expenses payable under Section 5(g) of this Agreement (including the Agent's Attorney Costs, to the extent invoiced on or prior to the Effective Date). (3) The Agent shall have received from the Company a copy of the resolutions passed by the board of directors of the Company, certified as of the Effective Date by the Secretary or an Assistant Secretary of such Person, authorizing the execution, delivery and performance of this Agreement and the Credit Agreement (as amended by this Agreement). (4) The Agent shall have received an opinion of Thomas R. Saldin, Executive Vice-President and General Counsel to the Company, dated the Effective Date and addressed to the Agent and the Banks, in form and substance satisfactory to the Agent and the Banks. (5) The Agent shall have received a favorable opinion of Brobeck, Phleger & Harrison LLP, special counsel to the Agent, dated as of the Effective Date. (6) The Agent shall have received all other documents it or any Bank may reasonably request relating to any matters relevant hereto, all in form and substance satisfactory to the Agent and each Bank. (7) The representations and warranties in Section 3 of this Agreement shall be true and correct on and as of the Effective Date with the same effect as if made on and as of the Effective Date. (b) For purposes of determining compliance with the conditions specified in Section 4(a), each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted, or to be satisfied with, each document or other matter either sent, or made available for inspection, by the Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Bank. (c) From and after the Effective Date, the Credit Agreement is amended as set forth herein. The Credit Agreement (as amended by this Agreement) is hereby ratified and confirmed in all respects. (d) The Agent will notify the Company and the Banks of the occurrence of the Effective Date. 5. Miscellaneous. (a) The Company acknowledges and agrees that the execution and delivery by the Agent and the Banks of this Agreement shall not be deemed to create a course of dealing or an obligation to execute similar amendments or provide any waivers or other amendments under the same or similar circumstances in the future. 3 (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective successors and assigns. (c) This Agreement shall be governed by and construed in accordance with the law of the State of New York provided that the Agent and the Banks shall retain all rights arising under Federal law. (d) This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Each of the parties hereto understands and agrees that this document (and any other document required herein) may be delivered by any party thereto either in the form of an executed original or an executed original sent by facsimile transmission to be followed promptly by mailing of a hard copy original, and that receipt by the Agent of a facsimile transmitted document purportedly bearing the signature of a Bank or the Company shall bind such Bank or the Company, respectively, with the same force and effect as the delivery of a hard copy original. Any failure by the Agent to receive the hard copy executed original of such document shall not diminish the binding effect of receipt of the facsimile transmitted executed original of such document of the party whose hard copy page was not received by the Agent. (e) This Agreement contains the entire and exclusive agreement of the parties hereto with reference to the matters discussed herein. This Agreement supersedes all prior drafts and communications with respect hereto. This Agreement may not be amended except in accordance with the provisions of Section 10.01 of the Credit Agreement. (f) If any term or provision of this Agreement shall be deemed prohibited by or invalid under any applicable law, such provision shall be invalidated without affecting the remaining provisions of this Agreement, the Credit Agreement or the Loan Documents. (g) The Company agrees to pay or reimburse BofA (including in its capacity as Agent), upon demand, for all reasonable costs and expenses (including reasonable Attorney Costs) incurred by BofA (including in its capacity as Agent) in connection with the development, preparation, negotiation, execution and delivery of this Agreement. [Signature pages follow] 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. ALBERTSON'S, INC. By: _______________________________ Title: ____________________________ BANK OF AMERICA, N.A., as Administrative Agent By: _______________________________ Title: ____________________________ BANK OF AMERICA, N.A., as Swingline Bank and as a Bank By: _______________________________ Title: ____________________________ BANK ONE, NA, as Documentation Agent and as a Bank By: _______________________________ Title: ____________________________ WACHOVIA BANK, N.A., as Syndication Agent and as a Bank By: _______________________________ Title: ____________________________ BANCA DI ROMA, SAN FRANCISCO BRANCH By: _______________________________ Title: ____________________________ THE BANK OF NEW YORK By: _______________________________ Title: ____________________________ BANK OF OKLAHOMA, N.A. By: _______________________________ Title: ____________________________ FIRST UNION NATIONAL BANK By: _______________________________ Title: ____________________________ THE HUNTINGTON NATIONAL BANK By: _______________________________ Title: ____________________________ INTERNATIONAL BANK OF COMMERCE By: _______________________________ Title: ____________________________ KEYBANK NATIONAL ASSOCIATION By: _______________________________ Title: ____________________________ THE NORTHERN TRUST COMPANY By: _______________________________ Title: ____________________________ SOUTHTRUST BANK, N.A. By: _______________________________ Title: ____________________________ SUNTRUST BANK By: _______________________________ Title: ____________________________ UMB BANK, N.A. By: _______________________________ Title: ____________________________ UNION BANK OF CALIFORNIA, N.A. By: _______________________________ Title: ____________________________ US BANK NATIONAL ASSOCIATION By: _______________________________ Title: ____________________________ WELLS FARGO BANK, N.A. By: _______________________________ Title: ____________________________ MERRILL LYNCH BANK USA By: _______________________________ Title: ____________________________ ANNEX I (AMENDED) PRICING GRID Applicable Margin and Applicable Fee Amount (Facility Fee): The Facility Fee and the Applicable Margin for Offshore Rate Committed Loans and Base Rate Committed Loans shall be, at any time, the rate per annum set forth in the tables below. "Indebtedness Rating" means the long term unsecured senior, non-credit enhanced debt rating of the Company by Standard & Poor's Ratings Group or Moody's Investors Service Inc. (in the case of a split rating, the higher rating will apply, unless the split results in a difference of more than one rating, in which case the rating one rating below the highest rating will apply). Any change in the Applicable Margin or Applicable Fee Amount for the Facility Fee shall become effective five Business Days after any public announcement of Indebtedness Rating requiring such a change.
- ------------------------------ ---------------------- ------------------------- ----------------------------- Indebtedness Offshore Rating Facility Fee Rate Spread Base Rate Spread - ------------------------------ ---------------------- ------------------------- ----------------------------- => A or A2 8.0 bps 17.0 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- => A- or A3 9.0 bps 28.5 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- => BBB+ or Baa1 10.0 bps 40.0 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- => BBB or Baa2 12.5 bps 50.0 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- <= BBB- or Baa3 20.0 bps 80.0 bps 0 bps - ------------------------------ ---------------------- ------------------------- -----------------------------
Applicable Fee Amount (Utilization Fee): The Utilization Fee applicable to Loans shall be, at any time, the rate per annum set forth in the table below, determined in accordance with usage: -------------------------- ----------------------- Facility Utilization Fee Usage % -------------------------- ----------------------- 50% 12.5 bps -------------------------- ----------------------- If usage shall equal or exceed the applicable percentage specified above, the utilization fee corresponding to such percentage shall apply with respect to all outstanding Loans. Annex I (Amended) -1. SCHEDULE 10.02 (AMENDED) PAYMENT OFFICES; ADDRESSES FOR NOTICES; LENDING OFFICES COMPANY Address for Notices: Albertson's, Inc. 250 Park Center Blvd. Box 20 Boise, Idaho 83726 Attention: Finance Department Telephone: (208) 395-6534 Facsimile: (208) 395-6631 BANK OF AMERICA, N.A. as Agent Notices for Borrowing, Conversions/Continuations, and Payments: Bank of America, N.A. Mail Code: CA4-706-05-09 Agency Services 1850 Gateway Boulevard Concord, California 94520 Attention: Jeff Khamsivone Telephone: (925) 675-8432 Facsimile: (925) 969-2869 Other Notices: Bank of America, N.A. Retail Industry Group Mail Code: IL1-231-09-44 231 South LaSalle Street Chicago, IL 60697 Attention: Bridget Garavalia Telephone: (312) 828-1259 Facsimile: (312) 828-6269 S-10.02 (Amended) -1. Agent's Payment Office: Bank of America, N.A. Attention: Agency Services #5596 Reference: Albertson's, Inc. For credit to Acct. No. 3750836479 ABA No. 111000012 BANK OF AMERICA, N.A. as a Bank Domestic and Offshore Lending Office: (Borrowing Notices, Notices of Conversion/Continuation and Payments) Bank of America, N.A. Mail Code: CA4-706-05-09 Agency Services 1850 Gateway Boulevard Concord, California 94520 Attention: Jeff Khamsivone Telephone: (925) 675-8432 Facsimile: (925) 969-2869 All other Notices: Bank of America, N.A. Retail Industry Group Mail Code: IL1-231-09-44 231 South LaSalle Street Chicago, IL 60697 Attention: Bridget Garavalia Telephone: (312) 828-1259 Facsimile: (312) 828-6269 WACHOVIA BANK, N.A. as Syndication Agent and as a Bank Domestic and Offshore Lending Office: Wachovia Bank, N.A. 191 Peachtree Street NE MC-GA 370 Atlanta, Georgia 30303 Attention: Bill Allen Telephone: (404) 332-5271 Facsimile: (404) 332-4320 S-10.02 (Amended) -2. Notices (other than Borrowing Notice and Notices of Conversion/Continuation): Wachovia Bank, N.A. 191 Peachtree Street NE MC-GA 370 Atlanta, Georgia 30303 Attention: John A. Whitner Telephone: (404) 332-6738 Facsimile: (404) 332-6898 BANK ONE, NA as Documentation Agent and as a Bank Domestic and Offshore Lending Office: Bank One, NA 1 Bank One Plaza IL1-0088, 14th Floor Chicago, Illinois 60670 Attention: Mike Parisi Telephone: (312) 732-8588 Facsimile: (312) 732-2715 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Bank One, NA 1 Bank One Plaza IL1-0086, 14th Floor Chicago, Illinois 60670 Attention: Paul E. Rigby Telephone: (312) 732-6132 Facsimile: (312) 336-4380 E-mail: paul.rigby@Bankone.com WELLS FARGO BANK, N.A. as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: Wells Fargo Bank, N.A. 707 Wilshire Boulevard, 16th Floor MAC E28-18-165 Los Angeles, California 90017 Attention: Matthew Frey Telephone: (213) 614-5038 Facsimile: (213) 614-2305 S-10.02 (Amended) -3. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Wells Fargo Bank, N.A. 999 Third Avenue Seattle, Washington 98104 Attention: Steve Andersen Telephone: (206) 292-3666 Facsimile: (206) 292-3595 US BANK NATIONAL ASSOCIATION as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: U.S. Bank National Association 101 South Capital Boulevard Boise, Idaho 83702 Attention: Kathy O'Grady Telephone: (503) 275-3805 Facsimile: (503) 275-8181 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): U.S. Bank National Association 101 South Capital Boulevard Boise, Idaho 83702 Attention: James W. Henken Telephone: (208) 383-7823 Facsimile: (208) 383-7563 FIRST UNION NATIONAL BANK as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: First Union National Bank 301 South College Street, 4th Floor Charlotte, North Carolina 28288-0479 Attention: Todd Tucker Telephone: (704) 383-0905 Facsimile: (704) 383-7999 S-10.02 (Amended) -4. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): First Union National Bank One First Union Center Charlotte, North Carolina 28288 Attention: Mike Grady Telephone: (704) 383-7514 Facsimile: (704) 383-7236 UNION BANK OF CALIFORNIA, N.A. as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: Union Bank of California, N.A. Commercial Customer Service Unit 1980 Saturn Street Monterey Park, California 91755 Attention: Ruby Gonzales Telephone: (323) 720-7055 Facsimile: (323) 724-6198 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Union Bank of California, N.A. 350 California Street, 6th Floor San Francisco, California 94104 Attention: Timothy P. Streb Telephone: (415) 705-7021 Facsimile: (415) 705-7085 THE NORTHERN TRUST COMPANY as Managing Agent and as a Bank Domestic and Offshore Lending Office: The Northern Trust Company 50 South LaSalle Chicago, Illinois 60675 Attention: Linda Honda Telephone: (312) 444-3532 Facsimile: (312) 630-1566 S-10.02 (Amended) -5. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): The Northern Trust Company 50 South LaSalle Chicago, Illinois 60675 Attention: Patrick J. Connelly Telephone: (312) 444-5048 Facsimile: (312) 444-5055 THE BANKS SUNTRUST BANK, CENTRAL FLORIDA, N.A. Domestic and Offshore Lending Office: Suntrust Bank, Central Florida, N.A. 200 South Orange Avenue Orlando, Florida 32801 Attention: Joanna Contreras Telephone: (407) 237-5283 Facsimile: (407) 237-5342 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Suntrust Bank, Central Florida, N.A. 303 Peachtree Street, 3rd Floor Atlanta, Georgia 30308 Attention: Ann Ford Telephone: (407) 724-3899 Facsimile: (407) 827-6270 KEYBANK NATIONAL ASSOCIATION Domestic and Offshore Lending Office: KeyBank National Association 831 East Parkcenter Boulevard Boise, Idaho 88705 Attention: Specialty Services Team Telephone: (800) 297-5518 Facsimile: (800) 297-5495 S-10.02 (Amended) -6. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): KeyBank National Association 700 Fifth Avenue WA31-10-4612 Seattle, Washington 98104 Attention: Patrick Kennedy Telephone: (206) 684-6079 Facsimile: (206) 684-6035 THE HUNTINGTON NATIONAL BANK Domestic and Offshore Lending Office: The Huntington National Bank 7450 Huntington Park Drive Mail Code HZ0338 Columbus, Ohio 43235 Attention: Alla Kier Telephone: (614) 480-1200 Facsimile: (614) 480-2533 Notices (other than Borrowing Notice and Notices of Conversion/Continuation): The Huntington National Bank 240 South Pineapple Avenue Mail Code FL631 Sarasota, Florida 34236 Attention: James C. Wardlaw Telephone: (941) 951-4686 Facsimile: (941) 951-4659 THE BANK OF NEW YORK Domestic and Offshore Lending Office: The Bank of New York One Wall Street, 8th Floor New York, New York 10286 Attention: Charlotte Sohn Telephone: (212) 635-7869 Facsimile: (212) 635-1481/1483 S-10.02 (Amended) -7. Notices (other than Borrowing Notice and Notices of Conversion/Continuation): The Bank of New York One Wall Street, 8th Floor New York, New York 10286 Attention: Charlotte Sohn Telephone: (212) 635-7869 Facsimile: (212) 635-1481/1483 INTERNATIONAL BANK OF COMMERCE Domestic and Offshore Lending Office: International Bank of Commerce 130 East Travis San Antonio, Texas 78205 Attention: Christine D. McCullar Telephone: (210) 518-2507 Facsimile: (210) 518-2591 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): International Bank of Commerce 130 East Travis San Antonio, Texas 78205 Attention: Thomas Travis Telephone: (210) 518-2502 Facsimile: (210) 518-2590 UMB BANK, N.A. Domestic and Offshore Lending Office: UMB Bank, n.a. 1010 Grand Boulevard Kansas City, Missouri 64106 Attention: Vaughnda Ritchie Telephone: (816) 860-7019 Facsimile: (816) 860-3772 S-10.02 (Amended) -8. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): UMB Bank, n.a. 1010 Grand Boulevard Kansas City, Missouri 64106 Attention: David A. Proffitt Telephone: (816) 860-7935 Facsimile: (816) 860-7143 SOUTHTRUST BANK Domestic and Offshore Lending Office: SouthTrust Bank 600 West Peachtree Street, 27th Floor Atlanta, Georgia 30308 Attention: Robert M. Searson Telephone: (404) 853-5754 Facsimile: (404) 853-5766 Notices (other than Borrowing Notice and Notices of Conversion/Continuation): SouthTrust Bank 600 West Peachtree Street, 27th Fl Atlanta, Georgia 30308 Attention: Donna King Telephone: (404) 853-5763 Facsimile: (404) 853-5766 BANCA DI ROMA, SAN FRANCISCO BRANCH Domestic and Offshore Lending Office: Banca di Roma, San Francisco Branch One Market Steuart Tower, Suite 1000 San Francisco, California 94105 Attention: Richard G. Dietz Telephone: (415) 977-7320 Facsimile: (415) 357-9869 S-10.02 (Amended) -9. Notices (other than Borrowing Notice and Notices of Conversion/Continuation): Banca di Roma, San Francisco Branch One Market Steuart Tower, Suite 1000 San Francisco, California 94105 Attention: Thomas C. Woodruff Telephone: (415) 977-7308 Facsimile: (415) 357-9869 BANK OF OKLAHOMA, N.A. Domestic and Offshore Lending Office: Bank Of Oklahoma, N.A. P.O. Box 2300 Tulsa, Oklahoma 74192 Attention: Sharon Shannon Telephone: (918) 588-6335 Facsimile: (918) 588-8231 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Bank Of Oklahoma, N.A. One Williams Tower Tulsa, Oklahoma 74192 Attention: Jane Faulkenberry Telephone: (918) 588-6272 Facsimile: (918) 588-8231 MERRILL LYNCH BANK USA Domestic and Offshore Lending Office: Merrill Lynch Bank USA 15 W. South Temple Suite 300 Salt Lake City, UT 84101 Attention: Frank Stepan Telephone: (801) 526-8316 Facsimile: (801) 521-6466 S-10.02 (Amended) -10. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Merrill Lynch Bank USA 15 W. South Temple Suite 300 Salt Lake City, UT 84101 Attention: Butch Alder Telephone: (801) 526-8324 Facsimile: (801) 526-6466 S-10.02 (Amended) -11. EX-10 15 abs10k2000exhibit10-29.txt AMENDED AND RESTATED CREDIT AGREEMENT 364 DAY Exhibit 10.29 [364-Day Agreement] EXECUTION COPY ================================================================================ AMENDED AND RESTATED CREDIT AGREEMENT Dated as of March 15, 2001 among ALBERTSON'S, INC., BANK OF AMERICA, N.A., as Administrative Agent, BANK ONE, NA, as Syndication Agent, WELLS FARGO BANK, N.A., as Documentation Agent, THE HUNTINGTON NATIONAL BANK and UNION BANK OF CALIFORNIA, N.A., as Senior Managing Agents, KEYBANK NATIONAL ASSOCIATION, WACHOVIA BANK, N.A. and THE NORTHERN TRUST COMPANY as Managing Agents and THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO Arranged by Banc of America Securities LLC, Sole Lead Arranger and Sole Book Manager ================================================================================ AMENDED AND RESTATED CREDIT AGREEMENT This Amended and Restated Credit Agreement (this "Agreement") is entered into as of March 15, 2001 by and among Albertson's, Inc., a Delaware corporation (the "Company"), the several financial institutions from time to time party to this Agreement (individually, a "Bank" and, collectively, the "Banks"), Bank One, NA, as syndication agent (in such capacity, the "Syndication Agent"), Wells Fargo Bank, N.A., as documentation agent (the "Documentation Agent"), The Huntington National Bank and Union Bank of California, N.A., as senior managing agents (in such capacity, the "Senior Managing Agents"), KeyBank National Association, Wachovia Bank, N.A and The Northern Trust Company, as managing agents (in such capacity, the "Managing Agents"), and Bank of America, N.A., as administrative agent for itself, the Designated Bidders and the Banks (in such capacity, the "Agent"). WHEREAS, the Company, the Banks party thereto and the Agent entered into a Credit Agreement dated as of March 22, 2000 (as in effect as of the date of this Agreement, the "Original Agreement") providing for a 364-day revolving credit facility; and WHEREAS, the parties hereto desire to amend the Original Agreement as set forth herein and to restate the Original Agreement in its entirety to read as set forth in the Original Agreement with the amendments specified below, subject to the terms and conditions of this Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. Definitions; References; Interpretation. (a) Unless otherwise specifically defined herein, each term used herein (including in the Recitals hereof) which is defined in the Original Agreement shall have the meaning assigned to such term in the Original Agreement. (b) Each reference to "this Agreement", "hereof", "hereunder", "herein" and "hereby" and each other similar reference contained in the Original Agreement, and each reference to "the Credit Agreement" and each other similar reference in the other Loan Documents, shall from and after the Effective Date (as defined in subsection 2) refer to the Original Agreement as amended and restated hereby. (c) The rules of interpretation set forth in Section 1.02 of the Original Agreement shall be applicable to this Agreement. 2. Amendments to Original Agreement. Subject to the terms and conditions hereof, the Original Agreement is amended as follows, effective as of the date of satisfaction of the conditions set forth in Section 4 (the "Effective Date"): (a) Amendments to Article I of the Original Agreement. (1) The term "Notes" defined in the Original Agreement shall include from and after the Effective Date the Notes delivered under this Agreement. 2 (2) The definition of "Closing Date" is amended in its entirety to provide as follows: "Closing Date" means the date occurring on or before March 15, 2001 on which all conditions precedent set forth in Section 4.01 are satisfied or waived by all Banks (or, in the case of subsection 4.01(e), waived by the Person entitled to receive such payment). (3) The definition of "Eligible Assignee" is amended in its entirety to provide as follows: "Eligible Assignee" means (a) a commercial bank or savings bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $250,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000, provided that such bank is acting through a branch or agency located in the United States; and (c) a Person that is primarily engaged in the business of commercial lending and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a Person of which a Bank is a Subsidiary, or (iii) a Person of which a Bank is a Subsidiary. (4) The definition of "Revolving Termination Date" is amended in its entirety to provide as follows: "Revolving Termination Date" means the earlier to occur of: a. March 14, 2002 as the same may be extended from time to time pursuant to Section 2.16; and b. the date on which the Commitments terminate in accordance with the provisions of this Agreement. (b) Amendment to Annex I of the Original Agreement. Annex I of the Original Agreement is replaced in its entirety by Annex I (Amended) attached to this Agreement. (c) Amendment to Schedule 2.01 of the Original Agreement. Schedule 2.01 of the Original Agreement is replaced in its entirety by Schedule 2.01 (Amended) of this Agreement. (d) Amendment to Schedule 10.02 of the Original Agreement. Schedule 10.02 of the Original Agreement is replaced in its entirety by Schedule 10.02 (Amended) of this Agreement. 3. Representations and Warranties. The Company hereby represents and warrants to the Agent and the Banks as follows: 3 (a) No Default or Event of Default has occurred and is continuing (or would result from the amendment of the Original Agreement contemplated hereby). (b) The execution, delivery and performance by the Company of this Agreement and the Original Agreement (as amended and restated by this Agreement) have been duly authorized by all necessary corporate and other action and do not and will not require any registration with, consent or approval of, or notice to or action by, any Person (including any Governmental Authority) in order to be effective and enforceable. (c) This Agreement, each Note delivered hereunder and the Original Agreement (as amended and restated by this Agreement) constitute the legal, valid and binding obligations of the Company, enforceable against it in accordance with their respective terms. (d) All representations and warranties of the Company contained in the Original Agreement are true and correct (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date and except that this subsection (d) shall be deemed instead to refer to (x) the last day of the most recent quarter and year for which financial statements have then been delivered; (y) to the most recent Form 10-K and Forms 10-Q filed subsequently thereto by the Company with the SEC, in respect of the representations and warranties made in Section 5.05 of the Original Agreement; and (z) to the most recent Form 10-K filed by the Company with the SEC, in respect of the representations and warranties made in Section 5.10(a) of the Original Agreement). (e) There has occurred since February 3, 2000, no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect. (f) The Company is entering into this Agreement on the basis of its own investigation and for its own reasons, without reliance upon the Agent and the Banks or any other Person. (g) The Company's obligations under the Original Agreement and under the other Loan Documents are not subject to any defense, counterclaim, set-off, right of recoupment, abatement or other claim. 4. Conditions of Effectiveness. (a) The effectiveness of Section 2 of this Agreement shall be subject to the satisfaction of each of the following conditions precedent: (1) The Agent shall have received from the Company and each of the Banks (i) a duly executed original (or, if elected by the Agent, an executed facsimile copy) of this Agreement; and (ii) if requested by any Bank, a Note (or replacement Note) substantially in the form of Exhibit I to the Original Agreement. (2) The Agent shall have received evidence of payment by the Company of all fees, costs and expenses due and payable as of the Effective Date hereunder and under the Original Agreement, including any costs and expenses payable under Section 6(g) of this Agreement (including the Agent's Attorney Costs, to the extent invoiced on or prior to the Effective Date). 4 (3) The Agent shall have received from the Company a copy of the resolutions passed by the board of directors of the Company, certified as of the Effective Date by the Secretary or an Assistant Secretary of such Person, authorizing the execution, delivery and performance of this Agreement, the Notes to be delivered hereunder and the Original Agreement (as amended and restated by this Agreement). (4) The Agent shall have received an opinion of Thomas R. Saldin, Executive Vice-President and General Counsel to the Company, dated the Effective Date and addressed to the Agent and the Banks, in form and substance satisfactory to the Agent and the Banks. (5) The Agent shall have received a favorable opinion of Brobeck, Phleger & Harrison LLP, special counsel to the Agent, dated as of the Effective Date. (6) The Agent shall have received all other documents it or any Bank may reasonably request relating to any matters relevant hereto, all in form and substance satisfactory to the Agent and each Bank. (7) The representations and warranties in Section 3 of this Agreement shall be true and correct on and as of the Effective Date with the same effect as if made on and as of the Effective Date. (b) For purposes of determining compliance with the conditions specified in Section 4(a), each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted, or to be satisfied with, each document or other matter either sent, or made available for inspection, by the Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Bank. (c) From and after the Effective Date, the Original Agreement is amended as set forth herein and is restated in its entirety to read as set forth in the Original Agreement with the amendments specified herein, and all outstanding Notes under the Original Agreement shall be superseded and replaced by the Notes delivered under this Agreement. All such previously outstanding Notes will be deemed cancelled upon the occurrence of the Effective Date. The Original Agreement (as amended and restated by this Agreement) is hereby ratified and confirmed in all respects. (d) The Agent will notify the Company and the Banks of the occurrence of the Effective Date. 5. Fees. At Closing, the Company shall pay to the Agent for itself the fees set forth in the Fee Letter dated as of February 9, 2001 by and between the Company and the Agent. 6. Miscellaneous. (a) The Company acknowledges and agrees that the execution and delivery by the Agent and the Banks of this Agreement shall not be deemed to create a course of dealing or an obligation to execute similar amendments or provide any waivers or other amendments under the same or similar circumstances in the future. 5 (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective successors and assigns. (c) This Agreement shall be governed by and construed in accordance with the law of the State of New York provided that the Agent and the Banks shall retain all rights arising under Federal law. (d) This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Each of the parties hereto understands and agrees that this document (and any other document required herein) may be delivered by any party thereto either in the form of an executed original or an executed original sent by facsimile transmission to be followed promptly by mailing of a hard copy original, and that receipt by the Agent of a facsimile transmitted document purportedly bearing the signature of a Bank or the Company shall bind such Bank or the Company, respectively, with the same force and effect as the delivery of a hard copy original. Any failure by the Agent to receive the hard copy executed original of such document shall not diminish the binding effect of receipt of the facsimile transmitted executed original of such document of the party whose hard copy page was not received by the Agent. (e) This Agreement contains the entire and exclusive agreement of the parties hereto with reference to the matters discussed herein. This Agreement supersedes all prior drafts and communications with respect hereto. This Agreement may not be amended except in accordance with the provisions of Section 10.01 of the Original Agreement. (f) If any term or provision of this Agreement shall be deemed prohibited by or invalid under any applicable law, such provision shall be invalidated without affecting the remaining provisions of this Agreement, the Original Agreement or the Loan Documents. (g) The Company agrees to pay or reimburse BofA (including in its capacity as Agent), upon demand, for all reasonable costs and expenses (including reasonable Attorney Costs) incurred by BofA (including in its capacity as Agent) in connection with the development, preparation, negotiation, execution and delivery of this Agreement. [Signature pages follow] 6 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. ALBERTSON'S, INC. By: ___________________________________ Title: _________________________________ BANK OF AMERICA, N.A., as Administrative Agent By: ___________________________________ Title: _________________________________ BANK OF AMERICA, N.A., as a Bank By: ___________________________________ Title: _________________________________ BANK ONE, NA, as Syndication Agent and as a Bank By: ___________________________________ Title: _________________________________ WELLS FARGO BANK, N.A., as Documentation Agent and as a Bank By: ___________________________________ Title: _________________________________ THE HUNTINGTON NATIONAL BANK, as Senior Managing Agent and as a Bank By: ___________________________________ Title: _________________________________ UNION BANK OF CALIFORNIA, N.A., as Senior Managing Agent and as a Bank By: ___________________________________ Title: _________________________________ KEYBANK NATIONAL ASSOCIATION, as Managing Agent and as a Bank By: ___________________________________ Title: _________________________________ WACHOVIA BANK, N.A., as Managing Agent and as a Bank By: ___________________________________ Title: _________________________________ THE NORTHERN TRUST COMPANY, as Managing Agent and as a Bank By: ___________________________________ Title: _________________________________ THE BANK OF NEW YORK By: ___________________________________ Title: _________________________________ BANK OF OKLAHOMA, N.A. By: ___________________________________ Title: _________________________________ FIRST UNION NATIONAL BANK By: ___________________________________ Title: _________________________________ INTERNATIONAL BANK OF COMMERCE By: ___________________________________ Title: _________________________________ MERRILL LYNCH BANK USA By: ___________________________________ Title: _________________________________ SOUTHTRUST BANK, N.A. By: ___________________________________ Title: _________________________________ UMB BANK, N.A. By: ___________________________________ Title: _________________________________ WASHINGTON MUTUAL BANK By: ___________________________________ Title: _________________________________ ANNEX I (AMENDED) PRICING GRID Applicable Margin and Applicable Fee Amount (Facility Fee): The Facility Fee and the Applicable Margin for Offshore Rate Committed Loans and Base Rate Committed Loans shall be, at any time, the rate per annum set forth in the tables below. "Indebtedness Rating" means the long term unsecured senior, non-credit enhanced debt rating of the Company by Standard & Poor's Ratings Group or Moody's Investors Service Inc. (in the case of a split rating, the higher rating will apply, unless the split results in a difference of more than one rating, in which case the rating one rating below the highest rating will apply). If the Term Loan option is utilized, the rate of interest on all Loans outstanding will include the Applicable Margin plus 25 basis points. Any change in the Applicable Margin or Applicable Fee Amount for the Facility Fee shall become effective five Business Days after any public announcement of Indebtedness Rating requiring such a change.
- ------------------------------ ---------------------- ------------------------- ----------------------------- Indebtedness Offshore Rating Facility Fee Rate Spread Base Rate Spread - ------------------------------ ---------------------- ------------------------- ----------------------------- => A or A2 6.5 bps 18.5 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- => A- or A3 7.5 bps 30.0 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- => BBB+ or Baa1 10.0 bps 40.0 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- => BBB or Baa2 12.5 bps 50.0 bps 0 bps - ------------------------------ ---------------------- ------------------------- ----------------------------- <= BBB- or Baa3 17.5 bps 82.5 bps 0 bps - ------------------------------ ---------------------- ------------------------- -----------------------------
Applicable Fee Amount (Utilization Fee): The Utilization Fee applicable to Loans shall be, at any time, the rate per annum set forth in the table below, determined in accordance with usage: ------------------------- ---------------------- Facility Utilization Fee Usage % ------------------------- ---------------------- 50% 12.5 bps ------------------------- ---------------------- If usage shall equal or exceed the applicable percentage specified above, the utilization fee corresponding to such percentage shall apply with respect to all outstanding Loans. Annex I (Amended) -1. SCHEDULE 2.01 (AMENDED) COMMITMENTS AND PRO RATA SHARES
PRO RATA BANK COMMITMENT SHARE ---- ---------- -------- BANK OF AMERICA, N.A. $100,000,000 14.285714286%* BANK ONE, NA $100,000,000 14.285714286%* WELLS FARGO BANK, N.A. $95,000,000 13.571428571%* THE HUNTINGTON NATIONAL BANK $65,000,000 9.285714286%* UNION BANK OF CALIFORNIA, N.A. $65,000,000 9.285714286%* KEYBANK, NATIONAL ASSOCIATION $50,000,000 7.142857143%* WACHOVIA BANK, N.A. $50,000,000 7.142857143%* THE NORTHERN TRUST COMPANY $35,000,000 5.000000000%* FIRST UNION NATIONAL BANK $25,000,000 3.571428571%* MERRILL LYNCH BANK USA $25,000,000 3.571428571%* WASHINGTON MUTUAL BANK $25,000,000 3.571428571%* UMB BANK, NA $17,500,000 2.500000000%* THE BANK OF NEW YORK $12,500,000 1.785714286%* INTERNATIONAL BANK OF COMMERCE $12,500,000 1.785714286%* SOUTHTRUST BANK, N.A. $12,500,000 1.785714286%* BANK OF OKLAHOMA, N.A. $10,000,000 1.428571429%* ------------ -------------- TOTAL $700,000,000 100% * [9 DECIMAL PTS.]
S-2.01 (Amended) -1. SCHEDULE 10.02 (AMENDED) PAYMENT OFFICES; ADDRESSES FOR NOTICES; LENDING OFFICES COMPANY Address for Notices: Albertson's, Inc. 250 Park Center Blvd. Box 20 Boise, Idaho 83726 Attention: Finance Department Telephone: (208) 395-6534 Facsimile: (208) 395-6631 BANK OF AMERICA, N.A. as Agent Notices for Borrowing, Conversions/Continuations, and Payments: Bank of America, N.A. Mail Code: CA4-706-05-09 Agency Services 1850 Gateway Boulevard Concord, California 94520 Attention: Jeff Khamsivone Telephone: (925) 675-8432 Facsimile: (925) 969-2869 Other Notices: Bank of America, N.A. Retail Industry Group Mail Code: IL1-231-09-44 231 South LaSalle Street Chicago, IL 60697 Attention: Bridget Garavalia Telephone: (312) 828-1259 Facsimile: (312) 828-6269 S-10.02 (Amended) -1. Agent's Payment Office: Bank of America, N.A. Attention: Agency Services #5596 Reference: Albertson's, Inc. For credit to Acct. No. 3750836479 ABA No. 111000012 BANK OF AMERICA, N.A. as a Bank Domestic and Offshore Lending Office: (Borrowing Notices, Notices of Conversion/Continuation and Payments) Bank of America, N.A. Mail Code: CA4-706-05-09 Agency Services 1850 Gateway Boulevard Concord, California 94520 Attention: Jeff Khamsivone Telephone: (925) 675-8432 Facsimile: (925) 969-2869 All other Notices: Bank of America, N.A. Retail Industry Group Mail Code: IL1-231-09-44 231 South LaSalle Street Chicago, IL 60697 Attention: Bridget Garavalia Telephone: (312) 828-1259 Facsimile: (312) 828-6269 BANK ONE, NA as Syndication Agent and as a Bank Domestic and Offshore Lending Office: Bank One, NA 1 Bank One Plaza IL1-0088, 14th Floor Chicago, Illinois 60670 Attention: Mike Parisi Telephone: (312) 732-8588 Facsimile: (312) 732-2715 S-10.02 (Amended) -2. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Bank One, NA 1 Bank One Plaza IL1-0086, 14th Floor Chicago, Illinois 60670 Attention: Paul E. Rigby Telephone: (312) 732-6132 Facsimile: (312) 336-4380 Email: paul.rigby@bankone.com WELLS FARGO BANK, N.A. as Documentation Agent and as a Bank Domestic and Offshore Lending Office: Wells Fargo Bank, N.A. 201 Third Street MAC A0187-081 Los Angeles, California 94103 Attention: Ginnie Padgett Telephone: (415) 477-5374 Facsimile: (415) 512-1943 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Wells Fargo Bank, N.A. 999 Third Avenue, 11th Floor MAC P6540-11E Seattle, Washington 98104 Attention: Steven J. Andersen Telephone: (206) 292-3666 Facsimile: (206) 292-3595 Secondary Contact: 1300 SW 5th Ave., 7th Floor MAC P6101-076 Portland, OR 97201 Attention: Meggie A. Chichioco Telephone: (503) 886-2215 Facsimile: (503) 886-2211 S-10.02 (Amended) -3. THE HUNTINGTON NATIONAL BANK as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: The Huntington National Bank 7450 Huntington Park Drive Mail Code HZ0338 Columbus, Ohio 43285 Attention: Donna Coventry Telephone: (614) 480-2956 Facsimile: (614) 480-2533 Email: donna.coventry@huntington.com Notices (other than Borrowing Notice and Notices of Conversion/Continuation): Huntington National Bank 201 E. Pine Street Suite 1310 Orlando, Florida 32801 Attention: Steven Woodell Telephone: (407) 245-8407 Facsimile: (407) 245-8422 Email: steven.woodell@huntington.com UNION BANK OF CALIFORNIA, N.A. as Senior Managing Agent and as a Bank Domestic and Offshore Lending Office: Union Bank of California, N.A. Commercial Customer Service Unit 1980 Saturn Street Monterey Park, California 91755 Attention: Ruby Gonzales Telephone: (323) 720-7055 Facsimile: (323) 724-6198 S-10.02 (Amended) -4. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Union Bank of California, N.A. 350 California Street, 6th Floor San Francisco, California 94104 Attention: Timothy P. Streb Telephone: (415) 705-7021 Facsimile: (415) 705-7085 Email: timothy.streb@uboc.com KEYBANK NATIONAL ASSOCIATION as Managing Agent and as a Bank Domestic and Offshore Lending Office: KeyBank National Association 601 108th Avenue, N.E. 5th Floor Bellevue, WA 98004 Attention: Specialty Services Team Telephone: (800) 297-5518 Facsimile: (800) 297-5495 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): KeyBank National Association 601 108th Avenue, N.E. 5th Floor Bellevue, WA 98004 Attention: Tony Yee Telephone: (425) 709-4578 Facsimile: (425) 709-4587 WACHOVIA BANK, N.A. as Managing Agent and as a Bank Domestic and Offshore Lending Office: Wachovia Bank, N.A. 191 Peachtree Street NE MC-GA 3940 Atlanta, Georgia 30303 Attention: Bill Allen Telephone: (404) 332-5271 Facsimile: (404) 332-4320 S-10.02 (Amended) -5. Notices (other than Borrowing Notice and Notices of Conversion/Continuation): Wachovia Bank, N.A. 191 Peachtree Street NE MC-GA 370 Atlanta, Georgia 30303 Attention: Jessica S. Wright Telephone: (404) 332-5397 Facsimile: (404) 332-4136 THE NORTHERN TRUST COMPANY as Managing Agent and as a Bank Domestic and Offshore Lending Office: The Northern Trust Company 50 South LaSalle Chicago, Illinois 60675 Attention: Linda Honda Telephone: (312) 444-3532 Facsimile: (312) 630-1566 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): The Northern Trust Company 50 South LaSalle Chicago, Illinois 60675 Attention: David J. Mitchell Telephone: (312) 444-5033 Facsimile: (312) 444-5055 THE BANK OF NEW YORK Domestic and Offshore Lending Office: The Bank of New York One Wall Street, 8th Floor New York, New York 10286 Attention: Charlotte Sohn Telephone: (212) 635-7869 Facsimile: (212) 635-1481/1483 S-10.02 (Amended) -6. Notices (other than Borrowing Notice and Notices of Conversion/Continuation): The Bank of New York One Wall Street, 8th Floor New York, New York 10286 Attention: Charlotte Sohn/Edward Vietor (backup contact) Telephone: (212) 635-7869/7867 Facsimile: (212) 635-1481/1483 BANK OF OKLAHOMA, N.A. Domestic and Offshore Lending Office: Bank Of Oklahoma, N.A. P.O. Box 2300 Tulsa, Oklahoma 74192 Attention: Sharon Shannon Telephone: (918) 588-6335 Facsimile: (918) 588-8231 Email: Sshannon@bokf.com Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Bank Of Oklahoma, N.A. P.O. Box 2300 Tulsa, Oklahoma 74192 Attention: Jane Faulkenberry Telephone: (918) 588-6272 Facsimile: (918) 588-8231 Email: jfaulkenberry@bokf.com FIRST UNION NATIONAL BANK Domestic and Offshore Lending Office: First Union National Bank 201 South College Street Charlotte, North Carolina 28288 Attention: Todd Tucker Telephone: (704) 383-0905 Facsimile: (704) 383-7999 Email: todd.tucker@funb.com S-10.02 (Amended) -7. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): First Union National Bank One South Penn Square Widener Bldg., 12th Floor Philadelphia, PA 19107 Attention: Margaret Gibbons Telephone: (215) 786-4351 Facsimile: (215) 973-1887 Email: margaret.gibbons@funb.com INTERNATIONAL BANK OF COMMERCE Domestic and Offshore Lending Office: International Bank of Commerce 130 East Travis San Antonio, Texas 78205 Attention: Yolanda Garza Telephone: (210) 518-2508 Facsimile: (210) 518-2591 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): International Bank of Commerce 130 East Travis San Antonio, Texas 78205 Attention: Michael K. Sohn Telephone: (210) 518-2506 Facsimile: (210) 518-2591 Email: msohn@ibco.com MERRILL LYNCH BANK USA Domestic and Offshore Lending Office: Merrill Lynch Bank USA 15 W. South Temple Suite 300 Salt Lake City, UT 84101 Attention: Frank Stepan Telephone: (801) 526-8316 Facsimile: (801) 521-6466 S-10.02 (Amended) -8. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Merrill Lynch Bank USA 15 W. South Temple Suite 300 Salt Lake City, UT 84101 Attention: Butch Alder Telephone: (801) 526-8324 Facsimile: (801) 526-6466 SOUTHTRUST BANK Domestic and Offshore Lending Office: SouthTrust Bank 600 West Peachtree Street, N.E., 27th Floor Atlanta, Georgia 30308 Attention: Bonnie Heeter Telephone: (404) 853-5755 Facsimile: (404) 853-5766 Notices (other than Borrowing Notice and Notices of Conversion/Continuation): SouthTrust Bank 600 West Peachtree Street, N.E., 27th Fl Atlanta, Georgia 30308 Attention: Bonnie Heeter Telephone: (404) 853-5755 Facsimile: (404) 853-5766 Email: bonnie.heeter@southtrust.com UMB BANK, N.A. Domestic and Offshore Lending Office: UMB Bank, n.a. 928 Grand Boulevard Kansas City, Missouri 64106 Attention: Vaughnda Ritchie Telephone: (816) 860-7019 Facsimile: (816) 860-3772 Email: vaughnda.ritchie@umb.com S-10.02 (Amended) -9. Notices (other than Borrowing Notices and Notices of Conversion/Continuation): UMB Bank, n.a. 1010 Grand Boulevard Kansas City, Missouri 64106 Attention: David A Proffitt Telephone: (816) 860-7935 Facsimile: (816) 860-7143 Email: david.proffitt@umb.com WASHINGTON MUTUAL BANK Domestic and Offshore Lending Office: Washington Mutual Bank 1201 Third Avenue, Suite 1000 Seattle, WA 98101 Attention: Margaret Tsao Telephone: (206) 377-4012 Facsimile: (206) 377-2575 Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Washington Mutual Bank 1201 Third Avenue, Suite 1000 Seattle, WA 98101 Attention: Bruce Kendrex/Richard Ameny(backup contact) Telephone: (206) 490-4465/461-3479 Facsimile: (206) 377-2575 Email: bkendrex@westernbank.com S-10.02 (Amended) -10. EX-10 16 abs10k2000exhibit10-312.txt AMENDMENT TO STOCK PLAN FOR NON EMPLOYEE DIRECTORS Exhibit 10.31.2 AMENDMENT TO THE AMERICAN STORES COMPANY 1997 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS This Amendment is made by Albertson's, Inc., a Delaware corporation (the "Corporation"). RECITALS: A. The Board of Directors of the Corporation (the "Board"), pursuant to Section 13 of the Plan, may amend the Plan as it may deem proper and in the best interests of the Corporation; and B. The Board has determined that it is advisable to amend the Plan and the options heretofore granted in the manner hereinafter set forth and that such amendments do not impair the rights of a participant under any award theretofore granted. AMENDMENT The Plan is amended, as of March 15, 2001, in the following respects: 1. Section 2 of the Plan is amended and restated to read, in its entirety, as follows: "PURPOSE OF PLAN. The purpose of the Plan is to enable American Stores Company, a Delaware corporation (the "Corporation"), to attract and retain qualified persons as directors and special advisors to the Board ("Special Advisors"), to enhance the equity interest of directors and Special Advisors in the Corporation, and to solidify the common interests of its directors, Special Advisors and stockholders in enhancing the value of the Corporation's common stock, par value $1.00 per share (the "Common Stock"). The Plan seeks to encourage the highest level of director and Special Advisor performance by providing such directors and Special Advisors with a proprietary interest in the Corporation's performance and progress by crediting them with Common Stock annually as part of their annual retainer." 2. Section 4 of the Plan is amended and restated to read, in its entirety, as follows: "ELIGIBLE PARTICIPANTS. Each member of the Board on the date of the 1997 Annual Shareholders' Meeting and each member of the Board and each Special Advisor from time to time thereafter who is not a full-time employee of the Corporation or any of its subsidiaries shall be a participant ("Participant") in the Plan. Notwithstanding anything to the contrary herein, service as a Special Advisor shall be treated as service as a director for all purposes and no termination of service shall be deemed to occur in the event a director is designated as a Special Advisor in connection with such director's termination of directorship. Each credit of shares of Common Stock pursuant to the Plan shall be evidenced by a written agreement duly executed and delivered by or on behalf of the Corporation and a Participant, if such an agreement is required by the Corporation to assure compliance with all applicable laws and regulations." IN WITNESS WHEREOF, this Amendment to the Plan has been duly executed by the undersigned as of March 15, 2001. ALBERTSON'S, INC. By: /s/ Thomas R. Saldin --------------------- Name: Thomas R. Saldin Title: Executive Vice President and General Counsel 2 EX-13 17 abs10k2000exhibit13.txt 2000 ANNUAL REPORT Exhibit 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (dollars in millions, except per share data) Business Combinations On June 23, 1999, Albertson's, Inc. ("Albertson's" or the "Company") and American Stores Company ("ASC") consummated a merger with the issuance of 177 million shares of Albertson's common stock (the "Merger"). The Merger constituted a tax-free reorganization and has been accounted for as a pooling of interests for accounting and financial reporting purposes. The pooling of interests method of accounting is intended to present, as a single interest, two or more common stockholders' interests that were previously independent; accordingly, these consolidated financial statements restate the historical financial statements as though the companies had always been combined. The restated consolidated financial statements are adjusted to conform accounting policies and financial statement presentations. The following table compares amounts previously reported by Albertson's and ASC prior to the Merger transaction and the combined amounts for fiscal 1998:
Albertson's ASC Combined Net revenues $ 16,005 $ 19,867 $ 35,872 Net earnings 567 234 801
In connection with the Merger, the Company entered into agreements with the Attorneys General of California, Nevada and New Mexico and the Federal Trade Commission, under which the Company was required to divest 145 stores to enable the Merger to proceed under applicable antitrust, competition and trade regulation law. The divested stores had sales of $2,300 in fiscal 1998. Subsequent growth comparisons were affected by these divestitures. During 1998 the Company acquired the stock of three separate operating companies representing 64 retail food and drug stores in transactions accounted for using the purchase method of accounting. In accordance with an agreement with the Federal Trade Commission, nine acquired stores and six previously owned stores were divested. Reported results include these operations from the date of consummation of the acquisition. 1 Albertson's, Inc. Results of Operations Sales for 2000 were $36,762 compared to $37,478 in 1999 (a 53-week year) and $35,872 in 1998. The following table sets forth certain income statement components expressed as a percent to sales, and the year-to-year percentage changes in the amounts of such components:
Percent To Sales Percentage Change - ------------------------------------------------------------------------------------------------------------------------ 2000 1999 1998 2000 1999 vs. 1999 vs. 1998 - ------------------------------------------------------------------------------------------------------------------------ Sales 100.00 100.00 100.00 (1.9) 4.5 Gross profit 28.36 27.52 27.08 1.1 6.2 Selling, general and administrative expenses 23.77 23.06 21.87 1.1 10.1 Merger-related and exit costs 0.07 1.06 0.54 n.m. n.m. Litigation settlement 0.10 n.m. n.m. Impairment - store closures 0.07 n.m. Operating profit 4.52 3.31 4.60 34.0 (24.9) Interest expense, net 1.05 0.94 0.94 9.2 4.6 Earnings before income taxes and extraordinary item 3.46 2.40 3.73 41.6 (32.8) Net earnings 2.08 1.08 2.23 89.2 (49.5) n.m. - not meaningful
Sales for 2000 increased 3.8% when compared on a 52-week basis to the prior year and excluding sales from divested stores from both years. Increases in sales are primarily attributable to the continued development of new stores and identical and comparable store sales increases. During 2000 the Company opened or acquired 91 stores, remodeled 114 stores and closed or sold 71 stores. Net retail square footage increased by 2.5% during 2000. During 1999, net retail square footage decreased by 1.7%. The 1999 decrease includes the effect of required divestitures, which reduced square footage by 6.1 million square feet or 6.2% from 1998. Identical store sales, stores that have been in operation for two full fiscal years, increased 0.3% in 2000 and 1.7% in 1999. Comparable store sales, which include replacement stores, increased 0.6% in 2000 and 2.1% in 1999. Identical and comparable store sales continued to increase through higher average ticket sales per customer. Management estimates that there was overall deflation in products the Company sells of approximately 0.4% in 2000, overall inflation of 0.2% in 1999 and overall deflation of 0.1% in 1998. In addition to store development, the Company has increased sales through its continued implementation of best practices across the Company and its investment in programs designed to provide solutions to customer needs. These programs include the Front End Manager program; the "Quick Fixin' Ideas" home meal solutions process; special destination categories; and increased emphasis on training programs utilizing Computer Guided Training. To provide additional solutions to customer needs, in 1999 the Company added new gourmet-quality bakery products and organic grocery and produce items. Other solutions include neighborhood marketing, targeted advertising and exciting new and remodeled stores. Gross profit, as a percent to sales, increased primarily as a result of improved sales mix of partially prepared, value-added products. Gross profit improvements were also realized through the continued utilization of Company distribution facilities and increased buying efficiencies. The merger has created buying synergies and margin improvements from the implementation of best practices across the Company. The pre-tax LIFO adjustment, as a percent to sales, increased gross margin by $23 (0.06%) in 2000 and reduced gross margin by $30 (0.08%) in 1999 and $16 (0.04%) in 1998. The increase in 2000 is due to deflation and lower inventory levels. Selling, general and administrative expenses as a percent to sales increased in 2000, primarily due to increased salary and related benefit costs resulting from the Company's initiatives to increase sales, increased depreciation expense associated with the Company's expansion program and larger losses from asset impairment and disposition. The increase in 1999 over 1998 was primarily due to integration costs associated with the Merger, including activities associated with the banner change in California, Nevada and New Mexico. 2 Albertson's, Inc. Results of operations for year ended February 1, 2001, include $151 of merger-related costs ($93 after tax) and the results of operations for year ended February 3, 2000, included $683 of merger-related costs ($529 after tax). The following table presents the pre-tax costs incurred by category of expenditure and merger-related accruals included in the Company's Consolidated Balance Sheets:
Exit Merger Extraordinary Period Costs Charge Loss Costs Total - --------------------------------------------------------------------------------------------------------------------- Severance costs $ 99 $ 8 $ 9 $ 116 Write-down of assets to net realizable value 239 12 251 Transaction and financing costs $ 31 71 102 Integration costs 3 164 167 Stock option charge 47 47 - --------------------------------------------------------------------------------------------------------------------- Total costs 338 58 31 256 683 Cash expenditures (75) (8) (31) (252) (366) Write-down of assets to net realizable value (237) (237) Stock option charge (47) (47) - --------------------------------------------------------------------------------------------------------------------- Merger-related accruals at February 3, 2000 26 3 4 33 Severance costs 11 7 18 Write-down of assets to net realizable value 13 23 36 Integration costs 97 97 - --------------------------------------------------------------------------------------------------------------------- Total costs 24 127 151 Cash expenditures (30) (2) (107) (139) Write-down of assets to net realizable value (13) (19) (32) - --------------------------------------------------------------------------------------------------------------------- Merger-related accruals at February 1, 2001 $ 7 $ 1 $ 5 $ 13 =====================================================================================================================
Severance costs consist of obligations to employees who were terminated or were notified of termination under a plan authorized by senior management. Total merger-related terminations were 663 employees as of February 1, 2001, and no further terminations are expected under this plan. The write-down of assets to net realizable value includes the expected loss on disposal of stores required to be divested and duplicate and abandoned facilities, including administrative offices, intangibles and information technology equipment which were abandoned by the Company or are being held for sale. The estimated fair value of assets held for sale has been determined using negotiated sales prices or independent appraisals. Transaction and financing costs consist primarily of professional fees paid for investment banking, legal, accounting, printing and regulatory filing fees. Financing costs also include the extraordinary loss on extinguishment of debt. Integration costs consist primarily of incremental transition and integration costs associated with integrating the operations of Albertson's and ASC and are being expensed as incurred. These include such costs as advertising, labor associated with systems conversions and training and relocation costs. The Company's stock option award plans contain provisions for automatic vesting upon a change of control. Under ASC plans, option holders had the right (limited stock appreciation right or LSAR), during an exercise period of up to 60 days after the occurrence of a change of control (but prior to consummation of the Merger), to elect to surrender all or part of their options in exchange for shares of Albertson's common stock having a value equal to the excess of the change of control price over the exercise price. Certain stock option plans of ASC defined change of control as the date of stockholder approval of the Merger. Approval of the Merger Agreement on November 12, 1998, by ASC's stockholders accelerated the vesting of 6.4 million equivalent stock options granted under pre-1997 ASC plans and permitted the holders of these options to exercise LSARs. The exercisability of the 6.4 million LSARs resulted in the Company recognizing a pre-tax $195 merger-related stock option charge during 1998. 3 Albertson's, Inc. In the first quarter of 1999, a market price adjustment of $29 was recorded as a reduction of pre-tax merger-related costs to reflect a decline in the relevant stock price at the end of the first fiscal quarter relative to LSARs. The actual change of control price used to measure the value of these exercised LSARs became determinable at the date the Merger was consummated and resulted in no further adjustments. Upon Merger consummation, the change of control price was $53.77 per share, resulting in the issuance of approximately 1.7 million Albertson's shares. LSARs relating to approximately 4.0 million equivalent stock options became exercisable upon regulatory approval of the Merger, which resulted in recognition of an additional pre-tax charge of $76 in the second quarter of fiscal 1999. This charge was based upon a change of control price of $56.96 per share, which included an adjustment factor for the early termination of the LSAR feature. A total of 0.8 million Albertson's shares were issued in satisfaction of those options for which the LSAR feature was elected and the remaining options were converted into options to acquire approximately 1.2 million Albertson's shares. The Company recorded a $20 pre-tax one-time charge to earnings during first quarter of 2000 and included it in selling, general and administrative expenses to reflect liabilities related to certain previously assigned leases and subleases to tenants who are in bankruptcy. The Company recorded a $37 pre-tax one-time charge to earnings during the third quarter of 1999 resulting from an agreement reached to settle eight multi-state cases combined in the United States District Court in Boise, Idaho, which raised various issues including "off-the-clock" work allegations. Under the agreement, current and former employees who meet eligibility criteria may present their claims to a settlement administrator. While the Company cannot specify the exact number of individuals who are likely to submit claims and the exact amount of their claims, the one-time charge is the Company's current estimate of the total monetary liability, including attorney fees, for all eight cases. The Company recorded an impairment charge to earnings during 1998 related to management's decision to close 16 underperforming stores in eight states. The $24 pre-tax charge included impaired real estate and equipment, as well as the present value of remaining liabilities under leases, net of expected sublease recoveries. The Company's effective income tax rate from continuing operations for 2000 was 40.0%, as compared to 52.5% for 1999 and 40.2% for 1998. The increase for 1999 is primarily due to the non-deductible portion of merger-related costs. Due to the significance of the merger-related costs and other one-time expenses and their effect on operating results, the following table is presented to assist in the comparison of income statement components without these costs and expenses:
52 Weeks Ended 53 Weeks Ended 52 Weeks Ended February 1, 2001 February 3, 2000 January 28, 1999 - ------------------------------------------------------------------------------------------------------------------------- As Reported One-Time W/O One-Time W/O One-Time W/O One-Time - ------------------------------------------------------------------------------------------------------------------------- Sales $36,762 $36,762 100.00% $37,478 100.00% $35,872 100.00% Cost of sales 26,336 $ (37) 26,299 71.54 27,122 72.37 26,156 72.92 - ------------------------------------------------------------------------------------------------------------------------- Gross profit 10,426 37 10,463 28.46 10,356 27.63 9,716 27.08 Selling, general and administrative expenses 8,740 (110) 8,630 23.47 8,427 22.49 7,845 21.87 Merger-related and exit costs 24 (24) - ------------------------------------------------------------------------------------------------------------------------- Operating profit 1,662 171 1,833 4.99 1,929 5.15 1,871 5.22 Interest expense, net (385) (385) (1.05) (352) (0.94) (337) (0.94) Other (expense) income, net (3) (3) (0.01) 12 0.03 24 0.07 - ------------------------------------------------------------------------------------------------------------------------- Earnings before income taxes 1,274 171 1,445 3.93 1,589 4.24 1,558 4.34 Income taxes 509 66 575 1.56 634 1.69 609 1.70 - ------------------------------------------------------------------------------------------------------------------------- Net earnings $ 765 $ 105 $ 870 2.37% $ 955 2.55% $ 949 2.65% =========================================================================================================================
4 Albertson's, Inc. The costs of integrating the two companies have resulted in significant non-recurring charges and incremental expenses. These costs had a significant effect on both 2000 and 1999 results of operations of the Company. Non-recurring charges and expenses of implementing integration actions were originally estimated to total $700 after income tax benefits. On an after-tax basis, and subsequent to the first quarter 1999, the Company has incurred $638 of merger-related costs and does not expect to exceed its original estimate. Liquidity and Capital Resources Cash provided by operating activities during 2000 was $1,780, compared to $1,418 in 1999 and $1,441 in 1998. Cash provided by operating activities in fiscal 2000 was primarily impacted by higher earnings when compared to fiscal 1999. Also, driving the change is the decrease in inventories offset by the decrease in other current liabilities, mostly tax related. Cash provided by operating activities during 1999 was negatively impacted by $230 for merger-related after-tax expenditures (the offsetting proceeds from divestitures is included with cash flow from investing activities). These expenditures include severance, transaction, financing and integration costs. In addition, for fiscal 1999 a combination of increased inventories and the reduction of accounts payable leverage negatively impacted cash provided from operating activities. During 2000 the Company implemented several initiatives designed to enhance working capital, which include reducing inventory levels and increasing accounts payable leverage. The Company intends to continue these initiatives, which are expected to reduce the cash requirements of the business. The Company's financing activities for 2000 included net new borrowings of $340 and dividend payments of $315 (which represents 36.3% of 2000 net earnings without merger-related costs and one-time expenses). The Company also purchased and retired 18.7 million shares of its common stock at a total cost of $451. The Board of Directors at its March 2001 meeting maintained the regular quarterly cash dividend of $0.19 per share, for an annual rate of $0.76 per share. The Company utilizes its commercial paper and bank line programs primarily to supplement cash requirements for seasonal fluctuations in working capital and to fund its capital expenditure program. Accordingly, commercial paper and bank line borrowings will fluctuate between reporting periods. The Company had $1,128 of commercial paper borrowings outstanding at February 1, 2001, as compared to $1,628 outstanding as of February 3, 2000. In support of the Company's commercial paper program, the Company had two credit facilities totaling $1,900 during fiscal 2000. One agreement for $950 expired in March 2001 and was replaced by a $700 364-day credit agreement. A second agreement for $950 expires in March 2005. At the expiration of the 364-day credit agreement and upon due notice, the Company may extend the term for an additional 364-day period if the lenders holding at least 75% of the commitments agree. The 364-day agreement also contains an option which would allow the Company, upon due notice, to convert any outstanding amounts at the expiration date to term loans. The agreements contain certain covenants, the most restrictive of which requires the Company to maintain consolidated tangible net worth, as defined, of at least $2,100. In addition the Company executed a $200 forward underwriting agreement in December 2000 to support the commercial paper program. This agreement expired in March 2001. The Company also has an uncommitted bank line of credit totaling $25. The entire amount under the bank line was outstanding as of February 1, 2001. No borrowings were outstanding under the credit facilities (including the forward underwriting agreement) as of February 1, 2001, and February 3, 2000. Following the Merger, the Company consolidated several of the commercial paper, bank lines and other financing arrangements. The consolidation of debt included the repayment of ASC debt containing change of control provisions and the tender for, or open market purchases of, certain higher coupon debt. At the effective date of the Merger, approximately $900 of ASC's debt became due or callable by the creditors due to change of control provisions, of which approximately $700 was repaid, and a $200 term loan was amended to waive the change of control provision. Albertson's filed a shelf registration statement with the Securities and Exchange Commission (SEC), which became effective in February 2001 (the "2001 Registration Statement"), to authorize the issuance of up to $3,000 in debt securities. The Company intends to use the net proceeds of any securities sold pursuant to the 2001 Registration Statement for retirement of debt and general corporate purposes, including the potential purchase of outstanding shares of Albertson's common stock. 5 Albertson's, Inc. Albertson's filed a shelf registration statement with the SEC, which became effective in February 1999 (the "1999 Registration Statement"), to authorize issuance of up to $2,500 in debt securities. In January 2001 the Company issued $700 of term notes under the 1999 Registration Statement. The notes consist of $700 of principal bearing interest at 7.5% due February 15, 2011. Proceeds were used primarily to repay borrowings under the Company's commercial paper program. In May 2000 the Company issued $500 of term notes under the 1999 Registration Statement. The notes are composed of $275 of principal bearing interest at 8.35% due May 1, 2010, and $225 of principal bearing interest at 8.7% due May 1, 2030. Proceeds were used primarily to repay borrowings under the Company's commercial paper program. In July 1999 the Company issued $1,300 of term notes under the 1999 Registration Statement. The notes are composed of $300 of principal bearing interest at 6.55% due August 1, 2004; $350 of principal bearing interest at 6.95% due August 1, 2009; and $650 of principal bearing interest at 7.45% due August 1, 2029. Proceeds were used primarily to repay borrowings under the Company's commercial paper program. During 1998 Albertson's issued a total of $317 in medium-term notes under a shelf registration statement filed with the SEC in December 1997. Proceeds from this issuance were used to reduce borrowings under Albertson's commercial paper program. On March 19, 1998, ASC issued $45 of 6.5% notes due March 20, 2008, under an outstanding Series B Medium-Term Note Program. On March 30, 1998, ASC issued an additional $100 of 7.1% notes due March 20, 2028, under the same program. Proceeds were used to refinance short-term debt and for general corporate purposes. The Board of Directors adopted a program on April 25, 2000, authorizing, but not requiring, the Company to purchase and retire up to $500 of the Company's common stock. This program was increased by an additional $1,000 by the Board of Directors on December 6, 2000, for a total of $1,500. The revised program enables the Company to purchase stock from April 25, 2000, through December 6, 2001. During fiscal 2000 the Company purchased and retired 18.7 million shares at a total cost of $451 or an average price of $24.15 per share. The Company's operating results continue to enhance its financial position and ability to continue its planned expansion program. Cash flows from operations and available borrowings are sufficient for the future operating and capital needs of the Company. The following leverage ratios demonstrate the Company's levels of long-term financing as of the indicated year end:
February 1, February 3, 2001 2000 - ----------------------------------------------------------------------------------------------------- Long-term debt and capitalized lease obligations to capital (1) 51.1% 46.7% Long-term debt and capitalized lease obligations to total assets 37.0 31.7 (1) Capital includes long-term debt, capitalized lease obligations and stockholders' equity
The Company continues to retain ownership of real estate when possible. As of February 1, 2001, the Company held title to the land and buildings of 40% of the Company's stores and held title to the buildings on leased land of an additional 7% of the Company's stores. The Company also holds title to the land and buildings of most of its administrative offices and distribution facilities. 6 Albertson's, Inc. The Company is committed to keeping its stores up to date. In the last three years, the Company has opened or remodeled 727 stores representing 32% of the Company's retail square footage as of February 1, 2001. The following summary of historical capital expenditures includes capital leases, stores acquired in business and asset acquisitions, assets acquired with related debt and the estimated fair value of property financed by operating leases:
2000 1999 1998 - ---------------------------------------------------------------------------------------------------------- New and acquired stores $1,066 $1,126 $1,146 Remodels 423 296 299 Retail replacement equipment, technology and other 170 248 289 Distribution facilities and equipment 174 198 139 - ---------------------------------------------------------------------------------------------------------- Total capital expenditures 1,833 1,868 1,873 Estimated fair value of property financed by operating leases 99 230 224 - ---------------------------------------------------------------------------------------------------------- $1,932 $2,098 $2,097 ==========================================================================================================
The Company's strong financial position provides the flexibility for the Company to grow through its store development program and future acquisitions. Recent Accounting Standard In June 1998 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for all fiscal years beginning after June 15, 2000. This new standard as amended establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company will adopt SFAS No. 133 effective February 2, 2001. The Company has completed its evaluation of this standard and its impact on the Company's accounting and reporting requirements and management does not expect the adoption of this statement to have a significant impact on the financial position, results of operations or cash flows of the Company. Quantitative and Qualitative Disclosures about Market Risk The Company is exposed to certain market risks that are inherent in the Company's financial instruments, which arise from transactions entered into in the normal course of business. From time to time, the Company enters into derivative transactions. The objective of these derivative transactions is to reduce the Company's exposure to changes in interest rates, and each transaction is evaluated periodically by the Company for changes in market value and counterparty credit exposure. The Company is subject to interest rate risk on its fixed interest rate debt obligations. Commercial paper borrowings do not give rise to significant interest rate risk because these borrowings have maturities of less than three months. Generally, the fair value of debt with a fixed interest rate will increase as interest rates fall, and the fair value will decrease as interest rates rise. The Company manages its exposure to interest rate risk by utilizing a combination of fixed rate borrowings and commercial paper borrowings. During 1997 ASC entered into a $300 five-year LIBOR basket swap. The LIBOR basket swap agreement diversified the indices used to determine the interest rate on a portion of ASC's variable rate debt by providing for payments based on an average of foreign LIBOR indices which reset every three months, and also provided for a maximum interest rate of 8.0%. The Company recognized no income or expense in 1998 or 1997 related to this swap. During 1999 ASC terminated the LIBOR basket swap and recognized a loss of $1. There have been no material changes in the primary risk exposures or management of the risks since the prior year. The Company expects to continue to manage risks in accordance with the current policy. 7 Albertson's, Inc. The table below provides information about the Company's debt obligations that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates:
There- Fair 2001 2002 2003 2004 2005 after Total Value - -------------------------------------------------------------------------------------------------------------- Debt obligations (excluding commercial paper and bank line): Fixed rate $ 62 $ 104 $ 104 $ 504 $ 203 $3,647 $4,624 $4,470 Weighted average interest rate 6.6% 10.4% 7.3% 6.6% 7.4% 7.5% 7.4%
Environmental The Company has identified environmental contamination sites related primarily to underground petroleum storage tanks and groundwater contamination at various store, warehouse, office and manufacturing facilities (related to current operations as well as previously disposed of businesses). The Company conducts an ongoing program for the inspection and evaluation of new sites proposed to be acquired by the Company and the remediation/monitoring of contamination at existing and previously owned sites. Undiscounted reserves have been established for each environmental contamination site unless an unfavorable outcome is remote. Although the ultimate outcome and expense of environmental remediation is uncertain, the Company believes that required remediation and continuing compliance with environmental laws, in excess of current reserves, will not have a material adverse effect on the financial condition of the Company. Charges against earnings for environmental remediation were not material in 2000, 1999 or 1998. Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private Securities Litigation Reform Act of 1995 From time to time, information provided by the Company, including written or oral statements made by its representatives, may contain forward-looking information as defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as integration of the operations of acquired or merged companies, expansion and growth of the Company's business, future capital expenditures and the Company's business strategy, contain forward-looking information. In reviewing such information it should be kept in mind that actual results may differ materially from those projected or suggested in such forward-looking information. This forward-looking information is based on various factors and was derived using numerous assumptions. Many of these factors have previously been identified in filings or statements made by or on behalf of the Company. Important assumptions and other important factors that could cause actual results to differ materially from those set forth in the forward-looking information include changes in the general economy, changes in consumer spending, competitive factors and other factors affecting the Company's business in or beyond the Company's control. These factors include changes in the rate of inflation, changes in state or federal legislation or regulation, adverse determinations with respect to litigation or other claims (including environmental matters), labor negotiations, the cost and stability of power sources, the Company's ability to recruit and develop employees, its ability to develop new stores or complete remodels as rapidly as planned, its ability to implement new technology successfully, stability of product costs and the Company's ability to integrate the operations of acquired or merged companies. Other factors and assumptions not identified above could also cause the actual results to differ materially from those set forth in the forward-looking information. The Company does not undertake to update forward-looking information contained herein or elsewhere to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking information. 8 Albertson's, Inc. CONSOLIDATED EARNINGS
52 weeks 53 weeks 52 weeks February 1, February 3, January 28, (in millions, except per share data) 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------- Sales $36,762 $37,478 $35,872 Cost of sales 26,336 27,164 26,156 - ---------------------------------------------------------------------------------------------------------------------------- Gross profit 10,426 10,314 9,716 Selling, general and administrative expenses 8,740 8,641 7,846 Merger-related and exit costs 24 396 195 Litigation settlement 37 Impairment - store closures 24 - ---------------------------------------------------------------------------------------------------------------------------- Operating profit 1,662 1,240 1,651 Other (expense) income: Interest, net (385) (353) (337) Other, net (3) 12 24 - ---------------------------------------------------------------------------------------------------------------------------- Earnings before income taxes and extraordinary item 1,274 899 1,338 Income taxes 509 472 537 - ---------------------------------------------------------------------------------------------------------------------------- Earnings before extraordinary item 765 427 801 Extraordinary loss on extinguishment of debt, net of tax benefit of $7 (23) - ---------------------------------------------------------------------------------------------------------------------------- Net Earnings $ 765 $ 404 $ 801 ============================================================================================================================ Basic Earnings Per Share: Earnings before extraordinary item $ 1.83 $ 1.01 $ 1.91 Extraordinary item (.05) - ---------------------------------------------------------------------------------------------------------------------------- Net Earnings $ 1.83 $ 0.96 $ 1.91 ============================================================================================================================ Diluted Earnings Per Share: Earnings before extraordinary item $ 1.83 $ 1.00 $ 1.90 Extraordinary item (.05) - ---------------------------------------------------------------------------------------------------------------------------- Net Earnings $ 1.83 $ 0.95 $ 1.90 ============================================================================================================================ Weighted Average Common Shares Outstanding: Basic 418 422 419 Diluted 418 423 422
See Notes to Consolidated Financial Statements 9 Albertson's, Inc. CONSOLIDATED BALANCE SHEETS
February 1, February 3, (in millions, except per share data) 2001 2000 - --------------------------------------------------------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents $ 57 $ 245 Accounts and notes receivable, net 547 581 Inventories 3,364 3,481 Prepaid expenses 155 155 Property held for sale 71 100 Refundable income taxes 36 Deferred income taxes 70 29 - --------------------------------------------------------------------------------------------------------------------- Total Current Assets 4,300 4,591 Land, Buildings and Equipment, net 9,622 8,911 Goodwill and Intangibles, net 1,705 1,761 Other Assets 451 456 - --------------------------------------------------------------------------------------------------------------------- Total Assets $16,078 $15,719 ===================================================================================================================== Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 2,163 $ 2,176 Salaries and related liabilities 561 555 Taxes other than income taxes 141 172 Income taxes 82 Self-insurance 218 187 Unearned income 112 110 Merger-related reserves 13 33 Current portion of capitalized lease obligations 20 19 Current maturities of long-term debt 62 620 Other 105 115 - --------------------------------------------------------------------------------------------------------------------- Total Current Liabilities 3,395 4,069 Long-Term Debt 5,715 4,803 Capitalized Lease Obligations 227 187 Self-Insurance 216 222 Deferred Income Taxes 116 52 Other Long-Term Liabilities and Deferred Credits 715 684 Commitments and Contingencies Stockholders' Equity: Preferred stock - $1.00 par value; authorized - 10 shares; designated - 3 shares of Series A Junior Participating; issued - none Common stock - $1.00 par value; authorized - 1,200 shares; issued - 405 shares and 424 shares, respectively 405 424 Capital in excess of par 48 145 Retained earnings 5,241 5,133 - --------------------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 5,694 5,702 - --------------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $16,078 $15,719 =====================================================================================================================
See Notes to Consolidated Financial Statements 10 Albertson's, Inc. CONSOLIDATED CASH FLOWS
52 weeks 53 weeks 52 weeks February 1, February 3, January 28, (in millions) 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- Cash Flows From Operating Activities: Net earnings $ 765 $ 404 $ 801 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 944 853 803 Goodwill amortization 57 58 58 Noncash merger-related charges 21 272 195 Impairment - store closures 24 Net gain on asset sales (4) (2) (14) Net deferred income taxes 11 (53) (72) Decrease (increase) in cash surrender value of Company-owned life insurance 4 (12) (23) Changes in operating assets and liabilities, net of business acquisitions: Receivables and prepaid expenses (4) 46 (86) Inventories 118 (233) (156) Accounts payable (12) (9) 7 Other current liabilities (175) 108 54 Self-insurance 25 (79) (134) Unearned income 19 76 (16) Other long-term liabilities 11 (11) - -------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 1,780 1,418 1,441 - -------------------------------------------------------------------------------------------------------------------------- Cash Flows From Investing Activities: Capital expenditures (1,771) (1,837) (1,627) Proceeds from disposal of land, buildings and equipment 189 83 162 Proceeds from divestitures and duplicate assets 393 Business acquisitions, net of cash acquired (260) Decrease (increase) in other assets 33 (122) (90) - -------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (1,549) (1,483) (1,815) - -------------------------------------------------------------------------------------------------------------------------- Cash Flows From Financing Activities: Proceeds from long-term borrowings 1,232 1,841 462 Payments on long-term borrowings (417) (970) (213) Net commercial paper activity and bank borrowings (475) (430) 300 Proceeds from stock options exercised 7 32 66 Cash dividends paid (315) (265) (263) Tax payments for options exercised (14) Stock purchases and retirements (451) (18) - -------------------------------------------------------------------------------------------------------------------------- Net cash (used in) provided by financing activities (419) 194 334 - -------------------------------------------------------------------------------------------------------------------------- Net (Decrease) Increase in Cash and Cash Equivalents (188) 129 (40) ========================================================================================================================== Cash and Cash Equivalents at Beginning of Year 245 116 156 ========================================================================================================================== Cash and Cash Equivalents at End of Year $ 57 $ 245 $ 116 ==========================================================================================================================
See Notes to Consolidated Financial Statements 11 Albertson's, Inc. CONSOLIDATED STOCKHOLDERS' EQUITY
Common Stock Capital In Excess Retained Treasury (dollars in millions) $1.00 Par Value of Par Value Earnings Stock Total - ---------------------------------------------------------------------------------------------------------------------------------- Balance at January 29, 1998 $ 435 $ 384 $ 4,502 $ (580) $ 4,741 Net earnings 801 801 Issuance of 1,989,505 shares of stock for stock options, awards and Employee Stock Purchase Plan (ESPP) (11) 63 52 Merger-related stock option charge 195 195 Exercise of stock options, including tax benefits 13 13 Treasury stock purchases and retirements (6) (10) (2) (18) Stock purchase incentive plan 1 1 Shares related to directors' stock compensation plan - 12,633 shares 3 3 Dividends (266) (266) - ---------------------------------------------------------------------------------------------------------------------------------- Balance at January 28, 1999 435 579 5,027 (519) 5,522 Net earnings 404 404 Issuance of 131,099 shares of stock for stock options and awards (1) 4 3 Merger-related stock option charge 47 47 Exercise of stock options, including tax benefits 1 30 31 Treasury and fractional share retirements (14) (496) 510 Shares issued for limited stock appreciation rights 2 (16) (14) Stock purchase incentive plan 2 5 7 Dividends (298) (298) - ---------------------------------------------------------------------------------------------------------------------------------- Balance at February 3, 2000 424 145 5,133 5,702 Net earnings 765 765 Deferred tax adjustment related to stock options (12) (12) Exercise of stock options, including tax benefits 6 6 Stock purchases and retirements - 18,659,200 shares (19) (92) (340) (451) Deferred stock unit plan 1 1 Dividends (317) (317) - ---------------------------------------------------------------------------------------------------------------------------------- Balance at February 1, 2001 $ 405 $ 48 $ 5,241 $ 5,694 ==================================================================================================================================
See Notes to Consolidated Financial Statements 12 Albertson's, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in millions, except per share data) Basis of Presentation On June 23, 1999, Albertson's, Inc. ("Albertson's" or the "Company") and American Stores Company ("ASC") consummated a merger, with the issuance of 177 million shares of Albertson's common stock (the "Merger"). The Merger constituted a tax-free reorganization and has been accounted for as a pooling of interests for accounting and financial reporting purposes. The pooling of interests method of accounting is intended to present, as a single interest, two or more common stockholders' interests that were previously independent; accordingly, these consolidated financial statements restate the historical financial statements as though the companies had always been combined. The restated consolidated financial statements are adjusted to conform accounting policies and financial statement presentations. There were no material conforming adjustments. The Company The Company is incorporated under the laws of the State of Delaware and is the successor to a business founded by J.A. Albertson in 1939. Based on sales, the Company is one of the largest retail food and drug chains in the United States. As of February 1, 2001, the Company operated 2,512 stores in 36 Western, Midwestern, Eastern and Southern states. Retail operations are supported by 19 major Company distribution operations, strategically located in the Company's operating markets. Summary of Significant Accounting Policies FISCAL YEAR END The Company's fiscal year is generally 52 weeks and periodically consists of 53 weeks because the fiscal year ends on the Thursday nearest to January 31 (the Saturday nearest to January 31 for ASC during fiscal year 1998). During fiscal 1999, ASC's fiscal year was converted from a Saturday year end to a Thursday year end. Unless the context otherwise indicates, reference to a fiscal year of the Company refers to the calendar year in which such fiscal year commences. CONSOLIDATION The consolidated financial statements include the results of operations, account balances and cash flows of the Company and its subsidiaries. All material intercompany balances have been eliminated. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Investments, which consist of government-backed money market funds and repurchase agreements backed by government securities, are recorded at cost which approximates market value. INVENTORIES The Company values inventories at the lower of cost or market. Cost of substantially all inventories is determined on a last-in, first-out (LIFO) basis. CAPITALIZATION, DEPRECIATION AND AMORTIZATION Land, buildings and equipment are recorded at cost. Depreciation is provided on the straight-line method over the estimated useful life of the asset. Estimated useful lives are generally as follows: buildings and improvements-10 to 35 years; fixtures and equipment-3 to 10 years; software-3 to 5 years; leasehold improvements-10 to 25 years; intangibles-3 to 10 years; and capitalized leases-20 to 30 years. The costs of major remodeling and improvements on leased stores are capitalized as leasehold improvements. Leasehold improvements are amortized on the straight-line method over the shorter of the life of the applicable lease or the useful life of the asset. Assets under capital leases are recorded at the lower of the fair market value of the asset or the present value of future minimum lease payments. These leases are amortized on the straight-line method over their primary term. Beneficial lease rights and lease liabilities are recorded on purchased leases based on differences between contractual rents under the respective lease agreements and prevailing market rents at the date of the acquisition of the lease. Beneficial lease rights and lease liabilities are amortized over the lease term using the straight-line method. GOODWILL - Goodwill resulting from business acquisitions represents the excess of cost over fair value of net assets acquired and is being amortized over 40 years using the straight-line method. Goodwill is principally from the acquisition of Lucky Stores, Inc. in 1988. Accumulated amortization amounted to $660 and $603 in 2000 and 1999, respectively. 13 Albertson's, Inc. IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews and evaluates long-lived assets for impairment when events or circumstances indicate costs may not be recoverable. The net book value of long-lived assets is compared to expected undiscounted future cash flows. An impairment loss would be recorded for the excess of net book value over the fair value of the asset impaired. The fair value is estimated based on expected discounted future cash flows. SELF-INSURANCE The Company is partially self-insured for property loss, workers' compensation and general liability costs. For ASC, beginning in fiscal 1998 through first quarter 2000, insurance was purchased for workers' compensation, general liability and automotive liability coverage. Self-insurance liabilities are determined actuarially based on claims filed and estimates for claims incurred but not reported. The majority of these liabilities are not discounted. REVENUE RECOGNITION Revenue is recognized at the point of sale for retail sales. Vendor allowances and credits that relate to the Company's buying and merchandising activity are recognized as earned. STORE OPENING AND CLOSING COSTS Noncapital expenditures incurred in opening new stores or remodeling existing stores are expensed in the year in which they are incurred. When a store is closed, the remaining investment in land, buildings and equipment, net of expected recovery value, is expensed. For properties under operating lease agreements, the present value of any remaining liability under the lease, net of expected sublease recovery, is also expensed. ADVERTISING Advertising costs incurred to produce media advertising for major new campaigns are expensed in the year in which the advertising first takes place. Other advertising costs are expensed when incurred. Cooperative advertising income from vendors is recorded in the period in which the related expense is incurred. Gross advertising expenses of $550, $654 and $631, excluding cooperative advertising income from vendors, were included with cost of sales in the Company's Consolidated Earnings for 2000, 1999 and 1998, respectively. STOCK OPTIONS Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. Accordingly, compensation cost of stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the option exercise price and is charged to operations over the vesting period. Income tax benefits attributable to stock options exercised are credited to capital in excess of par value. COMPANY-OWNED LIFE INSURANCE The Company has purchased life insurance policies to cover its obligations under certain deferred compensation plans for officers, key employees and directors. Cash surrender values of these policies are adjusted for fluctuations in the market value of underlying investments. The cash surrender value is adjusted each reporting period and any gain or loss is included with other income (expense) in the Company's Consolidated Earnings. INCOME TAXES The Company provides for deferred income taxes resulting from temporary differences in reporting certain income and expense items for income tax and financial accounting purposes. The major temporary differences and their net effect are shown in the "Income Taxes" note. Amortization of goodwill is generally not deductible for purposes of calculating income tax provisions. EARNINGS PER SHARE (EPS) Basic EPS is computed by dividing consolidated net earnings by the weighted average number of common shares outstanding. Diluted EPS is computed by dividing consolidated net earnings by the sum of the weighted average number of common shares outstanding and the weighted average number of potential common shares outstanding. Potential common shares consist primarily of outstanding options under the Company's stock option plans. Outstanding options excluded in 2000 and 1999 (option price exceeded the average market price during the period) amounted to 16.6 million shares and 3.5 million shares, respectively. There were no outstanding options excluded from the computation of potential common shares in 1998. In connection with the Merger, certain options of ASC were exchanged for shares of Albertson's based on the fair value of the options, including contractual rights. For purposes of the EPS calculation, all shares and potential common shares of ASC were converted at the 0.63 to 1 exchange ratio. COMPREHENSIVE INCOME The Company has no items of other comprehensive income in any period presented. Therefore, net earnings as presented in the Company's Consolidated Earnings equals comprehensive income. 14 Albertson's, Inc. USE OF ESTIMATES The preparation of the Company's consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. RECLASSIFICATIONS Certain reclassifications have been made in prior years' financial statements to conform to classifications used in the current year. Merger, Divestitures and Related Costs The following table compares amounts previously reported by Albertson's and ASC prior to the Merger transaction and the combined amounts for fiscal 1998:
Albertson's ASC Combined Net revenues $ 16,005 $ 19,867 $ 35,872 Net earnings 567 234 801
In connection with the Merger, the Company entered into agreements with the Attorneys General of California, Nevada and New Mexico and the Federal Trade Commission. Under these agreements, the Company was required to divest 145 stores to enable the Merger to proceed under applicable antitrust, competition and trade regulation law. The stores divested had sales of $2,300 in fiscal 1998. Results of operations for year ended February 1, 2001, included $151 of merger-related costs ($93 after tax) and the results of operations for year ended February 3, 2000, included $683 of merger-related costs ($529 after tax). The following table presents the pre-tax costs incurred by category of expenditure and merger-related accruals included in the Company's Consolidated Balance Sheets:
Exit Merger Extraordinary Period Costs Charge Loss Costs Total - --------------------------------------------------------------------------------------------------------------------- Severance costs $ 99 $ 8 $ 9 $ 116 Write-down of assets to net realizable value 239 12 251 Transaction and financing costs $31 71 102 Integration costs 3 164 167 Stock option charge 47 47 - --------------------------------------------------------------------------------------------------------------------- Total costs 338 58 31 256 683 Cash expenditures (75) (8) (31) (252) (366) Write-down of assets to net realizable value (237) (237) Stock option charge (47) (47) - --------------------------------------------------------------------------------------------------------------------- Merger-related accruals at February 3, 2000 26 3 4 33 - --------------------------------------------------------------------------------------------------------------------- Severance costs 11 7 18 Write-down of assets to net realizable value 13 23 36 Integration costs 97 97 - --------------------------------------------------------------------------------------------------------------------- Total costs 24 127 151 Cash expenditures (30) (2) (107) (139) Write-down of assets to net realizable value (13) (19) (32) - --------------------------------------------------------------------------------------------------------------------- Merger-related accruals at February 1, 2001 $ 7 $ 1 $ 5 $ 13 =====================================================================================================================
15 Albertson's, Inc. Severance costs consist of obligations to employees who were terminated or were notified of termination under a plan authorized by senior management. Total merger-related terminations were 663 employees as of February 1, 2001, and no further terminations are expected under this plan. The write-down of assets to net realizable value includes the expected loss on disposal of stores required to be divested and duplicate and abandoned facilities, including administrative offices, intangibles and information technology equipment which were abandoned by the Company or are being held for sale. The estimated fair value of assets held for sale has been determined using negotiated sales prices or independent appraisals. Transaction and financing costs consist primarily of professional fees paid for investment banking, legal, accounting, printing and regulatory filing fees. Financing costs also include the extraordinary loss on extinguishment of debt. Integration costs consist primarily of incremental transition and integration costs associated with integrating the operations of Albertson's and ASC and are being expensed as incurred. These include such costs as advertising, labor associated with systems conversions and training and relocation costs. As discussed in the "Stock Options and Stock Awards" note, the Company recorded net pre-tax charges through the first two quarters of 1999 of $47 related to limited stock appreciation rights (LSARs). The actual change of control price used to measure the value of these exercised LSARs became determinable at the date the Merger was consummated. The costs of integrating the two companies have resulted in significant non-recurring charges and incremental expenses. These costs had a significant effect on both 2000 and 1999 results of operations of the Company. Non-recurring charges and expenses of implementing integration actions were originally estimated to total $700 after income tax benefits. On an after-tax basis, and subsequent to first quarter 1999, the Company has incurred $638 of merger-related costs and does not expect to exceed its original estimate. Supplemental Cash Flow Information Selected cash payments and noncash activities were as follows:
2000 1999 1998 - ----------------------------------------------------------------------------------------------------------- Cash payments for income taxes $ 549 $ 520 $ 589 Cash payments for interest, net of amounts capitalized 373 413 331 Noncash investing and financing activities: Tax benefits related to stock options 1 11 10 Capitalized lease obligations incurred 62 24 25 Capitalized lease obligations terminated 6 14 6 Liabilities assumed in connection with asset acquisitions 7 2 Deferred tax adjustment - related to stock options 12
Business Acquisitions During 1998 the Company acquired 64 stores in three separate stock purchase acquisitions and 15 stores in an asset acquisition transaction. In connection with one of the stock purchase acquisitions, the Company agreed with the Federal Trade Commission to divest nine of the acquired stores and six previously owned stores. These four acquisition transactions had a combined purchase price of $302. The above acquisitions were accounted for using the purchase method of accounting. The results of operations of the acquired businesses have been included in the consolidated financial statements from their date of acquisition. Pro forma results of operations have not been presented due to the immaterial effects of these acquisitions on the Company's consolidated operations. For these acquisitions, the excess of the purchase price over the fair market value of net assets acquired, of $151, was allocated to goodwill which is being amortized over 40 years. 16 Albertson's, Inc. Accounts and Notes Receivable Accounts and notes receivable consist of the following:
February 1, February 3, 2001 2000 - ------------------------------------------------------------------------------------------------------------ Trade and other accounts receivable $ 578 $ 597 Current portion of notes receivable 7 15 Allowance for doubtful accounts (38) (31) - ------------------------------------------------------------------------------------------------------------ $ 547 $ 581 ============================================================================================================
Inventories Approximately 97% of the Company's inventories are valued using the last-in, first-out (LIFO) method. If the first-in, first-out (FIFO) method had been used, inventories would have been $591 and $614 higher at the end of 2000 and 1999, respectively. Net earnings (basic and diluted earnings per share) would have been lower by $14 ($0.03) in 2000, higher by $18 ($0.04) in 1999, and higher by $10 ($0.02) in 1998. The replacement cost of inventories valued at LIFO approximates FIFO cost. During 2000, inventory quantities were reduced. This reduction resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of 2000 purchases, the effect of which decreased cost of goods sold by approximately $26 and increased net income by approximately $15 or $0.04 per share. Land, Buildings and Equipment, net Land, buildings and equipment, net, consist of the following:
February 1, February 3, 2001 2000 - ------------------------------------------------------------------------------------------------------------ Land $ 2,224 $ 1,999 Buildings 5,504 4,908 Fixtures and equipment 5,558 5,309 Leasehold improvements 1,648 1,504 Capitalized leases 314 275 - ------------------------------------------------------------------------------------------------------------ 15,248 13,995 Accumulated depreciation and amortization (5,626) (5,084) - ------------------------------------------------------------------------------------------------------------ $ 9,622 $ 8,911 ============================================================================================================
17 Albertson's, Inc. Indebtedness Long-term debt consists of the following (borrowings are unsecured unless indicated):
February 1, February 3, 2001 2000 - ------------------------------------------------------------------------------------------------------------ Commercial paper and bank lines of credit $ 1,153 $ 1,628 7.5% Notes due February 15, 2011 700 8.35% Notes due May 1, 2010 275 8.7% Debentures due May 1, 2030 225 7.45% Debentures due August 1, 2029 650 650 6.95% Notes due August 1, 2009 350 350 6.55% Notes due August 1, 2004 300 300 Medium-term notes, due 2013 through 2028, average interest rate of 6.5% 317 317 Medium-term notes, due 2007 through 2027, average interest rate of 6.8% 200 200 7.75% Debentures due June 2026 200 200 6.375% Notes due June 2000 200 Medium-term notes due 2000, average interest rate of 6.1% 90 7.5% Debentures due 2037 200 200 8.0% Debentures due 2026 272 272 7.9% Debentures due 2017 95 95 7.4% Notes due 2005 200 200 Medium-term notes, due 2000 through 2028, average interest rate of 7.0% 245 295 9.125% Notes due 2002 80 80 Notes due 2004, average interest rate of 6.5% 200 200 Industrial revenue bonds, average interest rate of 6.1% 11 14 Secured mortgage notes and other notes payable, average interest rates of 9.4% and 8.3%, respectively 104 132 - ------------------------------------------------------------------------------------------------------------ 5,777 5,423 Current maturities (62) (620) - ------------------------------------------------------------------------------------------------------------ $ 5,715 $ 4,803 ============================================================================================================
Interest rates on the outstanding commercial paper borrowings as of February 1, 2001, ranged from 6.2% to 8.0% with an effective weighted average rate of 7.3%. The Company has established the necessary credit facilities, through its revolving credit agreements, to refinance the commercial paper and bank line borrowings on a long-term basis. These borrowings have been classified as noncurrent because it is the Company's intent to refinance these obligations on a long-term basis. Following the Merger the Company consolidated several of the commercial paper, bank lines and other financing arrangements. The consolidation of debt included the repayment of outstanding amounts under ASC's revolving credit facilities and other debt containing change of control provisions and the tender for, or open market purchases of, certain higher coupon debt. As a result, the following debt was extinguished during 1999:
Triggering Factor Amount Extinguished Revolving Credit Facility Change of control $ 500 Bank borrowing due 2000 Change of control 75 10.63% Note due in 2004 Change of control 93 9.125% Notes due 2002 Tender offer 169 8.0% Debentures due 2026 Open market purchases 78 7.9% Debentures due 2017 Open market purchases 5
18 Albertson's, Inc. In July 1999 the Company issued $500 million of floating rate notes under the commercial paper program with interest based on LIBOR commercial paper rates that reset monthly. These notes were paid in full during July 2000. Effective March 2000 the Company entered into two new revolving credit agreements for $1,900. One agreement for $950 expired in March 2001 and was replaced by a $700 364-day credit agreement. A second agreement for $950 expires in March 2005. At the expiration of the 364-day credit agreement and upon due notice, the Company may extend the term for an additional 364-day period if lenders holding at least 75% of commitments agree. The 364-day agreement also contains an option which would allow the Company, upon due notice, to convert any outstanding amounts at the expiration date to term loans. The agreements contain certain covenants, the most restrictive of which requires the Company to maintain consolidated tangible net worth, as defined, of at least $2,100. In addition, the Company executed a $200 forward underwriting agreement in December 2000 to support the commercial paper program. This agreement expired in March 2001. No borrowings were outstanding under the credit facilities (including the forward underwriting agreement) as of February 1, 2001. During fiscal 2000 the Company had an uncommitted bank line of credit totaling $25. The entire amount under the bank line was outstanding as of February 1, 2001. Albertson's filed a shelf registration statement with the Securities and Exchange Commission (SEC), which became effective in February 1999 (the "1999 Registration Statement"), to authorize the issuance of up to $2,500 in debt securities. In January 2001 the Company issued the remaining $700 of term notes under the 1999 Registration Statement. The $700 principal bears interest at 7.5% and matures February 15, 2011. Proceeds were used primarily to reduce borrowings under the Company's commercial paper program. In May 2000 the Company issued $500 of term notes under the 1999 Registration Statement. The notes are composed of $275 of principal bearing interest at 8.35% due May 1, 2010, and $225 of principal bearing interest at 8.7% due May 1, 2030. Proceeds were used primarily to repay borrowings under the Company's commercial paper program. In July 1999 the Company issued $1,300 of term notes under the 1999 Registration Statement. The notes are composed of $300 of principal bearing interest at 6.55% due August 1, 2004; $350 of principal bearing interest at 6.95% due August 1, 2009; and $650 of principal bearing interest at 7.45% due August 1, 2029. Proceeds were used primarily to repay borrowings under the Company's commercial paper program. In July 1999 the Company negotiated an amendment to a $200 term loan agreement between ASC and a group of commercial banks. The amended loans carry interest based upon a pricing schedule (which averages 6.45%) dependent upon the Company's long-term debt rating, and mature July 3, 2004. During 1998 Albertson's issued a total of $317 in medium-term notes under a $500 shelf registration statement filed with the SEC in December 1997. The remaining authorization of $183 under the 1997 shelf registration statement was rolled into the 1999 Registration Statement. Proceeds were used to reduce borrowings under the Company's commercial paper program. On March 19, 1998, ASC issued $45 of 6.5% notes due March 20, 2008, under an outstanding Series B Medium-term Note Program. On March 30, 1998, ASC issued an additional $100 of 7.1% notes due March 20, 2028, under the same program. Proceeds were used to refinance short-term debt and for general corporate purposes. The Company has pledged real estate with a cost of $161 as collateral for mortgage notes which are payable on various schedules, including interest at rates ranging from 6.8% to 16.5%. The notes mature from 2001 to 2019. Medium-term notes of $30 due July 2027 contain a put option which would require the Company to repay the notes in July 2007 if the holder of the note so elects by giving the Company a 60-day notice. Medium-term notes of $50 due April 2028 contain a put option which would require the Company to repay the notes in April 2008 if the holder of the note so elects by giving the Company a 60-day notice. The $200 of 7.5% debentures due 2037 contain a put option which will require the Company to repay the note in 2009 if the holder of the notes so elects by giving the Company a 60-day notice. Albertson's filed a shelf registration statement with the Securities and Exchange Commission (SEC), which became effective on February 13, 2001 ("2001 Registration Statement") to authorize the issuance of up to $3,000 in debt securities. The Company will use the net proceeds of any securities sold pursuant to the 2001 Registration Statement for retirement of debt and general corporate purposes including the potential purchase of outstanding shares of Albertson's common stock. No amounts have been issued pursuant to this registration statement. 19 Albertson's, Inc. Net interest expense was as follows:
2000 1999 1998 - ------------------------------------------------------------------------------------------------------------ Debt $ 366 $ 350 $ 322 Capitalized leases 27 27 25 Capitalized interest (21) (26) (17) - ------------------------------------------------------------------------------------------------------------ Interest expense 372 351 330 Bank service charges, net of interest income 13 2 7 - ------------------------------------------------------------------------------------------------------------ $ 385 $ 353 $ 337 ============================================================================================================
The scheduled aggregate maturities of debt outstanding at February 1, 2001, are summarized as follows: $62 in 2001, $104 in 2002, $104 in 2003, $504 in 2004, $203 in 2005 and $4,800 thereafter. Capital Stock On December 2, 1996, the Board of Directors adopted a stockholder rights plan, which was amended on August 2, 1998, and March 16, 1999, under which all stockholders receive one right for each share of common stock held. Each right will entitle the holder to purchase, under certain circumstances, one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $1.00 per share, of the Company (the "preferred stock") at a price of 160 dollars. Subject to certain exceptions, the rights will become exercisable for shares of preferred stock 10 business days (or such later date as may be determined by the Board of Directors) following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 15% or more of the outstanding shares of common stock. Under the plan, subject to certain exceptions, if any person or group as defined by the plan becomes the beneficial owner of 15% or more of the outstanding common stock or takes certain other actions, each right will then entitle its holder as defined by the plan, other than such person or group, upon payment of the 160 dollars exercise price, to purchase common stock (or, in certain circumstances, cash, property or other securities of the Company) with a value equal to twice the exercise price. The rights may be redeemed by the Board of Directors at a price of $0.001 per right under certain circumstances. The rights, which do not vote and are not entitled to dividends, will expire at the close of business on March 21, 2007, unless earlier redeemed or extended by the Board of Directors of the Company. In connection with the Merger, no person or group became the beneficial owner of 15% or more of the common stock. The Board of Directors adopted a program on March 2, 1998, which authorized the Company to purchase and retire up to 5 million shares of its common stock. On August 2, 1998, the Board of Directors rescinded the remaining authorization in connection with the Merger. The Board of Directors adopted a program on April 25, 2000, authorizing, but not requiring, the Company to purchase and retire up to $500 of the Company's common stock. This program was increased by an additional $1,000 by the Board of Directors on December 6, 2000, for a total of $1,500. The revised program enables the Company to purchase stock from April 25, 2000 through December 6, 2001. During fiscal 2000 the Company purchased and retired 18.7 million shares at a total cost of $451 or an average price of $24.15 per share. 20 Albertson's, Inc. Income Taxes Deferred tax assets and liabilities consist of the following:
February 1, February 3, 2001 2000 - ------------------------------------------------------------------------------------------------------------ Deferred tax assets (no valuation allowance considered necessary): Basis in fixed assets $ 157 $ 123 Self-insurance 162 174 Compensation and benefits 238 181 Unearned income 22 36 Other, net 128 140 - ------------------------------------------------------------------------------------------------------------ Total deferred tax assets 707 654 - ------------------------------------------------------------------------------------------------------------ Deferred tax liabilities: Basis in fixed assets and capitalized leases (584) (515) Inventories (104) (105) Compensation and benefits (36) (33) Other, net (29) (24) - ------------------------------------------------------------------------------------------------------------ Total deferred tax liabilities (753) (677) - ------------------------------------------------------------------------------------------------------------ Net deferred tax liability $ (46) $ (23) ============================================================================================================
The change in the net deferred tax liability includes an adjustment related to stock options of $12. The Company has federal and state net operating loss carryforwards of $10 and $34, respectively, that will expire in years 2006 through 2021. Based on management's assessment, it is more likely than not that all of the deferred tax assets associated with the net operating loss carryforwards will be realized; therefore, no valuation allowance is considered necessary. Income tax expense on continuing operations consists of the following:
2000 1999 1998 - ------------------------------------------------------------------------------------------------------------ Current: Federal $458 $476 $537 State 40 48 72 - ------------------------------------------------------------------------------------------------------------ 498 524 609 Deferred: Federal 10 (47) (63) State 1 (5) (9) - ------------------------------------------------------------------------------------------------------------ 11 (52) (72) - ------------------------------------------------------------------------------------------------------------ $509 $472 $537 ============================================================================================================
21 Albertson's, Inc. The reconciliations between the federal statutory tax rate and the Company's effective tax rates are as follows:
2000 Percent 1999 Percent 1998 Percent - ------------------------------------------------------------------------------------------------------------ Taxes computed at statutory rate $446 35.0 $315 35.0 $468 35.0 State income taxes net of federal income tax benefit 41 3.3 28 3.2 51 3.8 Goodwill amortization 21 1.6 22 2.4 22 1.6 Merger-related charges 2 0.2 115 12.8 15 1.1 Other (1) (0.1) (8) (0.9) (19) (1.3) - ------------------------------------------------------------------------------------------------------------ $509 40.0 $472 52.5 $537 40.2 ============================================================================================================
Stock Options and Stock Awards The Company's stock option plans provide for the grant of options to purchase shares of common stock and stock awards. At February 1, 2001, Albertson's had one stock option plan in effect under which grants could be made with respect to 30 million shares of the Company's common stock. Under this plan, approved by the stockholders in 1998, options may be granted to officers and key employees to purchase the Company's common stock. During 1999, the Company's stock option plan was amended to, among other things, include the grant of options and other awards to non-employee members of the Board of Directors. Generally, options are granted with an exercise price at not less than 100% of the closing market price on the date of the grant. The Company's options generally become exercisable in installments of 20% per year on each of the first through fifth anniversaries of the grant date and have a maximum term of 10 years. In connection with the Merger, all outstanding options under prior Albertson's and ASC plans became exercisable in accordance with the change of control provisions included in the stock option plans and all outstanding ASC options were converted into a right to acquire an equivalent number of Albertson's shares. No further options will be granted under ASC plans. Additionally, all restrictions lapsed with respect to all outstanding stock awards under the ASC stock award plans. DEFERRED STOCK UNITS PLAN The Board of Directors adopted a program effective December 6, 2000, which authorized the award of 1,081,300 deferred stock units with dividend equivalents paid in cash quarterly under Albertson's, Inc. 1995 Amended and Restated Stock-Based Incentive Plan to key officers of the Company. Under this program, three-quarters of the units will be distributed in stock on December 5, 2003, if the officer is still employed by the Company on that date as an officer of the Company and one-quarter will be distributed in stock on December 5, 2003, if the preceding condition is met and the closing price of the Company's stock is at least $28.84 for at least 20 consecutive trading days at any time from December 6, 2000, through December 5, 2003. The Company is recognizing this expense over the three-year service period. VARIABLE ACCOUNTING TREATMENT FOR OPTION PLANS The Company's stock option award plans contain provisions for automatic vesting upon a change of control. Under ASC plans, option holders had the right (limited stock appreciation right or LSAR), during an exercise period of up to 60 days after the occurrence of a change of control (but prior to consummation of the Merger), to elect to surrender all or part of their options in exchange for shares of Albertson's common stock having a value equal to the excess of the change of control price over the exercise price. Certain stock option plans of ASC defined change of control as the date of stockholder approval of the Merger. Approval of the Merger Agreement on November 12, 1998, by ASC's stockholders accelerated the vesting of 6.4 million equivalent stock options granted under pre-1997 ASC plans and permitted the holders of these options to exercise LSARs. The exercisability of the 6.4 million LSARs resulted in the Company recognizing a pre-tax $195 merger-related stock option charge during 1998. In the first quarter of 1999, a market price adjustment of $29 was recorded as a reduction of pre-tax merger-related costs to reflect a decline in the relevant stock price at the end of the first fiscal quarter relative to LSARs. The actual change of control price used to measure the value of these exercised LSARs became determinable at the date the Merger was consummated and resulted in no further adjustments. Upon Merger consummation, the change of control price was $53.77 per share, resulting in the issuance of approximately 1.7 million Albertson's shares. 22 Albertson's, Inc. LSARs relating to approximately 4.0 million equivalent stock options became exercisable upon regulatory approval of the Merger, which resulted in recognition of an additional pre-tax charge of $76 in the second quarter of fiscal 1999. This charge was based upon a change of control price of $56.96 per share, which included an adjustment factor for the early termination of the LSAR feature. A total of 0.8 million Albertson's shares were issued in satisfaction of those options for which the LSAR feature was elected and the remaining options were converted into options to acquire approximately 1.2 million Albertson's shares. STOCK OPTIONS A summary of shares reserved for outstanding options as of the fiscal year end, changes during the year and related weighted average exercise price is presented below (shares in thousands, all ASC amounts included based upon the conversion ratio of 0.63 to 1):
February 1, 2001 February 3, 2000 January 28, 1999 -------------------- ------------------- -------------------- Shares Price Shares Price Shares Price - ------------------------------------------------------------------------------------------------------------------- Outstanding at beginning of year 18,015 $38.34 9,989 $35.01 16,527 $32.74 Granted 8,683 21.78 12,536 39.76 159 40.39 Exercised (287) 21.54 (3,907) 33.00 (5,858) 29.16 Forfeited (1,121) 39.58 (603) 39.43 (839) 32.11 - ------------------------------------------------------------------------------------------------------------------- Outstanding at end of year 25,290 $32.79 18,015 $38.34 9,989 $35.01 ===================================================================================================================
As of February 1, 2001, there were 5.5 million shares of Company common stock reserved for the granting of additional options and deferred stock units. The following table summarizes options outstanding and options exercisable as of February 1, 2001, and the related weighted average remaining contractual life (years) and weighted average exercise price (shares in thousands):
Options Outstanding Options Exercisable ----------------------------------------- ------------------------- Shares Remaining Shares Option Price per Share Outstanding Life Price Exercisable Price - ------------------------------------------------------------------------------------------------------------------ $16.87 to $22.63 8,849 9.6 $ 21.61 228 $ 18.50 24.31 to 33.25 8,067 7.9 30.27 2,792 29.83 34.87 to 45.94 3,130 5.8 40.14 3,130 40.14 47.00 to 51.19 5,244 8.4 51.15 1,101 51.01 - ------------------------------------------------------------------------------------------------------------------ $16.87 to $51.19 25,290 8.4 $ 32.79 7,251 $ 37.14 ==================================================================================================================
The weighted average fair value at date of grant for Albertson's options granted during 2000 and 1999 was $7.30 and $10.42 per option, respectively. Pre-merger Albertson's grants per option were $17.14 for 1998. Pre-merger ASC grants per option were $11.86 for 1998. The fair value of options at date of grant was estimated using the Black-Scholes model with the following weighted average assumptions:
2000 1999 1998 ------------------ ABS ASC - ------------------------------------------------------------------------------------------------------------ Expected life (years) 3.0 3.0 8.0 6.5 Risk-free interest rate 5.46% 5.96% 5.74% 4.70% Volatility 54.83 37.03 26.70 21.20 Dividend yield 3.49 1.81 1.48 1.80
23 Albertson's, Inc. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Had compensation cost been determined based on the fair value at the grant date consistent with the provisions of this statement, the Company's pro forma net earnings and earnings per share would have been as follows:
2000 1999 1998 - ------------------------------------------------------------------------------------------------------------ Net earnings: As reported $ 765 $ 404 $ 801 Pro forma 738 375 914 Basic earnings per share: As reported 1.83 0.96 1.91 Pro forma 1.77 0.89 2.16 Diluted earnings per share: As reported 1.83 0.95 1.90 Pro forma 1.76 0.89 2.14
The 2000 pro forma net income of $738 resulted from reported net income of $765, less the 2000 pro forma after-tax compensation expense of $27. The 1999 pro forma income of $375 resulted from net income of $404, less the 1999 pro forma after-tax compensation expense of $67 ($49 of which related to an adjustment for the acceleration of unamortized compensation expense for the stock options granted prior to 1999 which vested in connection with the Merger) and the elimination of net merger-related after-tax stock option charges of $38 included with as-reported net earnings. The 1998 pro forma net income of $914 resulted from reported net income of $801, less the 1998 pro forma after-tax compensation expense of $19 and the elimination of the merger-related after-tax stock option charge of $132 included with as reported net earnings. The pro forma effect on net earnings is not representative of the pro forma effect on net earnings in future years. FORMER ASC PLANS The following ASC Plans were terminated in connection with the Merger on June 23, 1999. Performance Incentive Program The 1998 Performance Incentive Program provided certain of the ASC key executives an incentive award of shares of two-year restricted stock if certain ASC performance objectives were attained for the 1998 fiscal year. Employee Stock Purchase Plan The ASC Employee Stock Purchase Plan, which began January 1, 1996, enabled eligible employees of the Company to subscribe for shares of common stock on quarterly offering dates at a purchase price which was the lesser of 85% of the fair market value of the shares on the first day or the last day of the quarterly offering period. Employee Benefit Plans Substantially all employees working over 20 hours per week are covered by retirement plans. Union employees participate in multi-employer retirement plans under collective bargaining agreements. The Company sponsors both defined benefit and defined contribution plans. The Albertson's Salaried Employees Pension Plan and Albertson's Employees Corporate Pension Plan are funded, qualified, defined benefit, noncontributory plans for eligible Albertson's employees who are 21 years of age with one or more years of service and (with certain exceptions) are not covered by collective bargaining agreements. Benefits paid to retirees are based upon age at retirement, years of credited service and average compensation. The Company's funding policy for these plans is to contribute the larger of the amount required to fully fund the Plan's current liability or the amount necessary to meet the funding requirements as defined by the Internal Revenue Code. The Company also sponsors the Albertson's Savings and Retirement Estates (ASRE) Plan (formerly the American Stores Retirement Estates Plan) which is a defined contribution retirement plan. ASRE was originally authorized by the ASC Board of Directors for the purpose of providing retirement benefits for employees of ASC and its subsidiaries. During 1999, ASRE was authorized by Albertson's Board of Directors to provide retirement benefits for all qualified employees of the Company and its subsidiaries. In conjunction with the authorization of ASRE, the Company-sponsored defined benefit plans were amended to close the plans to future new entrants. Future accruals for participants in the defined benefit plans are offset by the value of Company profit sharing contributions to the new defined contribution plan. 24 Albertson's, Inc. The Company sponsors a tax-deferred savings plan which is a salary deferral plan pursuant to Section 401(k) of the Internal Revenue Code. The plan covers employees meeting age and service eligibility requirements, except those represented by a labor union, unless the collective bargaining agreement provides for participation. In addition, the Company provides a matching contribution based on the amount of eligible compensation contributed by the employee. All Company contributions to ASRE and the Company sponsored 401(k) plan are made at the discretion of the Board of Directors. The total amount contributed by the Company is included with the ASRE defined contribution plan expense. The Company also sponsors an unfunded Executive Pension Makeup Plan and an Executive ASRE Makeup Plan. These plans are nonqualified and provide certain key employees retirement benefits which supplement those provided by the Company's other retirement plans. Net periodic benefit (income) expense for defined benefit plans is determined using assumptions as of the beginning of each year. The projected benefit obligation and related funded status are determined using assumptions as of the end of each year. Assumptions used at the end of each year for the Company-sponsored defined benefit pension plans were as follows:
2000 1999 1998 - ------------------------------------------------------------------------------------------------------------ Weighted-average discount rate 7.15% 7.50% 6.25% Annual salary increases 3.70-4.50 4.35-4.50 4.50-4.95 Expected long-term rate of return on assets 9.50 9.50 9.50
Net periodic benefit (income) expense for Company-sponsored defined benefit pension plans was as follows:
2000 1999 1998 - ------------------------------------------------------------------------------------------------------------ Service cost - benefits earned during the period $ 14 $ 45 $ 42 Interest cost on projected benefit obligations 32 34 30 Expected return on assets (55) (49) (42) Amortization of prior service cost 5 1 Recognized net actuarial (gain) loss (4) 1 2 - ------------------------------------------------------------------------------------------------------------ $ (8) $ 31 $ 33 ============================================================================================================
25 Albertson's, Inc. The following table sets forth the funded status of the Company-sponsored defined benefit pension plans:
February 1, February 3, 2001 2000 - ------------------------------------------------------------------------------------------------------------ Change in projected benefit obligation: Beginning of year benefit obligation $ 423 $ 547 Service cost 14 45 Interest cost 32 34 Actuarial loss (gain) 29 (105) Amendments 11 (88) Benefits paid (14) (10) - ------------------------------------------------------------------------------------------------------------ End of year benefit obligation 495 423 - ------------------------------------------------------------------------------------------------------------ Change in plan assets: Plan assets at fair value at beginning of year 582 549 Actual return on plan assets (32) 89 Employer contributions (return) 1 (46) Benefit payments (14) (10) - ------------------------------------------------------------------------------------------------------------ Plan assets at fair value at end of year 537 582 - ------------------------------------------------------------------------------------------------------------ Funded status 42 159 Unrecognized net loss (gain) 19 (100) Unrecognized prior service cost (79) (85) Additional minimum liability (1) - ------------------------------------------------------------------------------------------------------------ Net accrued pension cost $ (19) $ (26) ============================================================================================================ Prepaid pension cost included with other assets $ 16 $ 8 Accrued pension cost included with other long-term liabilities (35) (34) - ------------------------------------------------------------------------------------------------------------ Net accrued pension cost $ (19) $ (26) ============================================================================================================
The following table summarizes the projected benefit obligation and the accumulated benefit obligation of the unfunded Executive Pension Makeup Plan:
February 1, February 3, 2001 2000 - ------------------------------------------------------------------------------------------------------------ Projected benefit obligation $ 18 $ 15 Accumulated benefit obligation 16 13
Assets of the two funded Company defined benefit pension plans are invested in directed trusts. Assets in the directed trusts are invested in common stocks (including $52 and $33 of the Company's common stock at February 1, 2001 and February 3, 2000, respectively), U.S. government obligations, corporate bonds, international equity funds, real estate and money market funds. 26 Albertson's, Inc. The Company also contributes to various plans under industrywide collective bargaining agreements, primarily for defined benefit pension plans. Total contributions to these plans were $58 for 2000, $98 for 1999 and $100 for 1998. Retirement plans expense was as follows:
2000 1999 1998 - ------------------------------------------------------------------------------------------------------------ Defined benefit pension plans $ (8) $ 31 $ 33 ASRE defined contribution plan 167 110 93 Multi-employer plans 58 98 100 - ------------------------------------------------------------------------------------------------------------ $217 $ 239 $ 226 ============================================================================================================
Most retired employees of the Company are eligible to remain in its health and life insurance plans. Retirees who elect to remain in the Albertson's-sponsored plans are charged a premium which is equal to the difference between the estimated costs of the benefits for the retiree group and a fixed contribution amount made by the Company. The Company also provides certain health care benefits to eligible ASC retirees of certain defined employee groups under two unfunded plans, a defined dollar and a full coverage plan. The net periodic postretirement benefit cost was as follows:
2000 1999 1998 - ------------------------------------------------------------------------------------------------------------ Service cost $ 3 $ 3 $ 3 Interest cost 4 4 5 Amortization of unrecognized gain (1) (1) (1) - ------------------------------------------------------------------------------------------------------------ $ 6 $ 6 $ 7 ============================================================================================================
The following table sets forth the funded status of the Company-sponsored postretirement health and life insurance benefit plans:
February 1, February 3, 2001 2000 - ------------------------------------------------------------------------------------------------------------ Change in accumulated benefit obligation: Beginning of year benefit obligation $ 62 $ 69 Service cost 3 3 Interest cost 4 4 Plan participants' contributions 10 9 Actuarial loss (gain) 2 (12) Benefits paid (15) (11) - ------------------------------------------------------------------------------------------------------------ End of year benefit obligation 66 62 - ------------------------------------------------------------------------------------------------------------ Plan assets activity: Employer contributions 5 2 Plan participants' contributions 10 9 Benefit payments (15) (11) - ------------------------------------------------------------------------------------------------------------ Funded status (66) (62) Unrecognized net gain (16) (21) - ------------------------------------------------------------------------------------------------------------ Accrued postretirement benefit obligations included with other long-term liabilities $ (82) $ (83) - ------------------------------------------------------------------------------------------------------------ Discount rates as of end of year 7.15% 7.50% ============================================================================================================
27 Albertson's, Inc. For measurement purposes, a 6% annual rate of increase in the per capita cost of covered health care benefits was assumed for plans covering ASC retirees for 2000 and is expected to remain at that level thereafter. For the ASC defined dollar plan, no future increases in the subsidy level were assumed. Annual rates of increases in health care costs are not applicable in the calculation of the Albertson's benefit obligation because Albertson's contribution is a fixed amount per participant. With the exception of the plans covering ASC grandfathered retirees, all postretirement plans are contributory, with participants' contributions adjusted annually. The accounting for the health care plans anticipates that the Company will not increase its contribution for health care benefits for non-grandfathered retirees in future years. Since the subsidy levels for the Albertson's and the ASC defined dollar plans are fixed and the proportion of grandfathered ASC retirees is small, a health care cost trend increase or decrease has no material impact on the accumulated postretirement benefit obligation or the postretirement benefit expense. Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" requires employers to recognize an obligation for benefits provided to former or inactive employees after employment but before retirement. The Company is self-insured for certain of its employees' short-term and long-term disability plans which are the primary benefits paid to inactive employees prior to retirement. Following is a summary of the obligation for postemployment benefits included in the Company's Consolidated Balance Sheets:
February 1, February 3, 2001 2000 - ------------------------------------------------------------------------------------------------------------ Included with salaries and related liabilities $ 12 $ 11 Included with other long-term liabilities 74 53 - ------------------------------------------------------------------------------------------------------------ $ 86 $ 64 ============================================================================================================
The Company also contributes to various plans under industrywide collective bargaining agreements which provide for health care benefits to both active employees and retirees. Total contributions to these plans were $286 for 2000, $316 for 1999, and $270 for 1998. Employment Contract In December 2000 the Company entered into a severance agreement with the current Chairman of the Board and Chief Executive Officer, under which he will receive a severance payment of $3 upon his retirement from the Company (expected to occur in June 2001). He 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. Leases The Company leases a portion of its real estate. The typical lease period is 20 to 30 years and most leases contain renewal options. Exercise of such options is dependent on the level of business conducted at the location. In addition, the Company leases certain equipment. Some leases contain contingent rental provisions based on sales volume at retail stores or miles traveled for trucks. Capitalized leases are calculated using interest rates appropriate at the inception of each lease. Following is an analysis of the Company's assets under capitalized leases:
February 1, February 3, 2001 2000 - ------------------------------------------------------------------------------------------------------------ Real estate and equipment $314 $275 Accumulated amortization (132) (132) - ------------------------------------------------------------------------------------------------------------ $182 $143 ============================================================================================================
28 Albertson's, Inc. Future minimum lease payments for noncancelable operating leases which exclude the amortization of acquisition-related fair value adjustments, related subleases and capital leases at February 1, 2001, were as follows:
Operating Capital Leases Subleases Leases - ------------------------------------------------------------------------------------------------------------ 2001 $ 318 $ (34) $ 46 2002 312 (33) 37 2003 295 (22) 34 2004 280 (15) 33 2005 254 (10) 31 Remainder 2,138 (43) 386 - ------------------------------------------------------------------------------------------------------------ Total minimum obligations (receivables) $3,597 $(157) 567 =============================================================================================== Interest (320) - ------------------------------------------------------------------------------------------------------------ Present value of net minimum obligations 247 Current portion (20) - ------------------------------------------------------------------------------------------------------------ Long-term obligations at February 1, 2001 $ 227 ============================================================================================================
The Company is contingently liable as a guarantor of certain leases that were assigned to third parties in connection with various store closures and dispositions. The Company believes the likelihood of a significant loss from these agreements is remote because of the wide dispersion among third parties and remedies available to the Company should the primary party fail to perform under the agreements. Rent expense under operating leases, excluding the amortization of acquisition-related fair value adjustments of $14 in 2000, 1999 and 1998, was as follows:
2000 1999 1998 - ------------------------------------------------------------------------------------------------------------ Minimum rent $ 369 $ 330 $ 309 Contingent rent 30 29 25 - ------------------------------------------------------------------------------------------------------------ 399 359 334 Sublease rent (97) (58) (60) - ------------------------------------------------------------------------------------------------------------ $ 302 $ 301 $ 274 ============================================================================================================
Financial Instruments Financial instruments which potentially subject the Company to concentration of credit risk consist principally of cash equivalents and receivables. The Company limits the amount of credit exposure to each individual financial institution and places its temporary cash into investments of high credit quality. Concentrations of credit risk with respect to receivables are limited due to their dispersion across various companies and geographies. The estimated fair values of cash and cash equivalents, accounts receivable, accounts payable, short-term debt, commercial paper and bank line borrowings approximate their carrying amounts. Substantially all of the fair values were estimated using quoted market prices. The estimated fair values and carrying amounts of outstanding debt (excluding commercial paper and bank line borrowings) were as follows:
February 1, February 3, 2001 2000 - ------------------------------------------------------------------------------------------------------------ Fair value $4,470 $3,718 Carrying amount 4,624 3,800
29 Albertson's, Inc. Environmental The Company has identified environmental contamination sites related primarily to underground petroleum storage tanks and ground water contamination at various store, warehouse, office and manufacturing facilities (related to current operations as well as previously disposed of businesses). The Company conducts an ongoing program for the inspection and evaluation of new sites proposed to be acquired by the Company and the remediation/monitoring of contamination at existing and previously owned sites. Undiscounted reserves have been established for each environmental contamination site unless an unfavorable outcome is remote. Although the ultimate outcome and expense of environmental remediation is uncertain, the Company believes that required remediation and continuing compliance with environmental laws, in excess of current reserves, will not have a material adverse effect on the financial condition of the Company. Charges against earnings for environmental remediation were not material in 2000, 1999 or 1998. Legal Proceedings On August 23, 2000, a class action complaint was filed against Jewel Food Stores, Inc., an indirect wholly-owned subsidiary of the Company, in the Circuit Court of Cook County, Illinois (Maureen Baker, et al., v. Jewel Food Stores, Inc. and Dominick's Supermarkets, Inc., Case No. 00L 009664) alleging milk price fixing. The Company has strong defenses against this lawsuit, and is vigorously defending it. Although this lawsuit is subject to the uncertainties inherent in the litigation process, based on the information presently available to the Company, management does not expect the ultimate resolution of this action to have a material adverse effect on the Company's financial condition. An agreement has been reached, and court approval granted, to settle eight purported multi-state cases combined in the United States District Court in Boise, Idaho, which raise various issues including "off the clock" work allegations. Under the settlement agreement, current and former employees who meet eligibility criteria are in the process of presenting their claims to a settlement administrator. While the Company cannot specify the exact amount of their claims, the $37 pre-tax ($22 after-tax) one-time charge recorded by the Company in 1999 is the Company's current estimate of the total monetary liability, including attorney fees, for all eight cases. The Company is also involved in routine litigation incidental to operations. The Company utilizes various methods of alternative dispute resolution, including settlement discussions, to manage the costs and uncertainties inherent in the litigation process. In the opinion of management, the ultimate resolution of these legal proceedings will not have a material adverse effect on the Company's financial condition. Segment Information In June 1997 the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which establishes annual and interim reporting standards for an enterprise's operating segments and related disclosures about its products, services, geographic areas and major customers. The Company has analyzed the reporting requirements of the standard and has determined that its operations are within a single operating segment. All of the Company's operations are within the United States. Recent Accounting Standard In June 1998 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for all fiscal years beginning after June 15, 2000. This new standard as amended establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company will adopt SFAS No. 133 effective February 2, 2001. The Company has completed its evaluation of this standard and its impact on the Company's accounting and reporting requirements and management does not expect the adoption of this statement to have a significant impact on the financial position, results of operations or cash flows of the Company. 30 Albertson's, Inc. Independent Auditors' Report Deloitte & Touche The Board of Directors and Stockholders of Albertson's, Inc.: We have audited the accompanying consolidated balance sheets of Albertson's, Inc., and subsidiaries as of February 1, 2001 and February 3, 2000, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended February 1, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits. The consolidated financial statements give retroactive effect to the merger of Albertson's, Inc. and American Stores Company, which has been accounted for as a pooling of interests as described in the Basis of Presentation note to the consolidated financial statements. We did not audit the statements of earnings, stockholders' equity, and cash flows of American Stores Company for the year ended January 28, 1999, which statements reflect net earnings of approximately $234 million for the year ended January 28, 1999. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for American Stores Company for 1998, is based solely on the report of such other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Albertson's, Inc., and subsidiaries at February 1, 2001 and February 3, 2000, and the results of their operations and their cash flows for each of the three years in the period ended February 1, 2001, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP -------------------------- Deloitte & Touche LLP Boise, Idaho March 19, 2001 31 Albertson's, Inc. Independent Auditors' Report Ernst & Young Shareholders and Board of Directors of American Stores Company: We have audited the accompanying consolidated statements of earnings, shareholders' equity and cash flows of American Stores Company and subsidiaries for the year ended January 30, 1999 (not presented herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of American Stores Company and subsidiaries for the year ended January 30, 1999, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP ---------------------- Ernst & Young LLP Salt Lake City, Utah March 17, 1999 32 Albertson's, Inc. Responsibility for Financial Reporting The management of Albertson's, Inc., is responsible for the preparation and integrity of the consolidated financial statements of the Company. The accompanying consolidated financial statements have been prepared by the management of the Company, in accordance with accounting principles generally accepted in the United States of America, using management's best estimates and judgment where necessary. Financial information appearing throughout this Annual Report is consistent with that in the consolidated financial statements. To help fulfill its responsibility, management maintains a system of internal controls designed to provide reasonable assurance that assets are safeguarded against loss or unauthorized use and that transactions are executed in accordance with management's authorizations and are reflected accurately in the Company's records. The concept of reasonable assurance is based on the recognition that the cost of maintaining a system of internal accounting controls should not exceed benefits expected to be derived from the system. The Company believes that its long-standing emphasis on the highest standards of conduct and ethics, set forth in comprehensive written policies, serves to reinforce its system of internal controls. Deloitte & Touche LLP, independent auditors, audited the consolidated financial statements in accordance with auditing standards generally accepted in the United States of America to independently assess the fair presentation of the Company's financial position, results of operations and cash flows. The Audit Committee of the Board of Directors, composed entirely of outside directors, oversees the fulfillment by management of its responsibilities over financial controls and the preparation of financial statements. The Audit Committee meets with internal and external auditors at least four times per year to review audit plans and audit results. This provides internal and external auditors direct access to the Board of Directors. Management recognizes its responsibility to conduct the business of Albertson's, Inc., in accordance with high ethical standards. This responsibility is reflected in key policy statements that, among other things, address potentially conflicting outside business interests of Company employees and specify proper conduct of business activities. Ongoing communications and review programs are designed to help ensure compliance with these policies. /s/ Gary G. Michael /s/ A. Craig Olson ------------------------- ---------------------------- Gary G. Michael A. Craig Olson Chairman of the Board and Executive Vice President and Chief Executive Officer Chief Financial Officer 33 Albertson's, Inc. Five-Year Summary of Selected Financial Data
52 weeks 53 weeks 52 weeks 52 weeks 52 weeks February 1, February 3, January 28, January 29, January 30, (dollars in millions, except per share data) 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------- Operating Results: Sales $36,762 $37,478 $35,872 $33,828 $32,455 Earnings before extraordinary item 765 427 801 797 781 Extraordinary item (23) Net earnings 765 404 801 797 781 Net earnings as a percent to sales 2.08% 1.08% 2.23% 2.36% 2.41% Common Stock Data: Earnings per share before extraordinary item: Basic $1.83 $1.01 $1.91 $1.89 $1.79 Diluted 1.83 1.00 1.90 1.88 1.79 Extraordinary item: Basic (0.05) Diluted (0.05) Earnings per share: Basic 1.83 0.96 1.91 1.89 1.79 Diluted 1.83 0.95 1.90 1.88 1.79 Cash dividends per share: Albertson's, Inc. 0.76 0.72 0.68 0.64 0.60 American Stores Company Equivalent 0.14 0.57 0.56 0.51 Financial Position: Total assets $16,078 $15,719 $15,131 $13,767 $12,608 Long-term debt and capitalized lease obligations 5,942 4,990 5,108 4,333 3,665 Other Year End Statistics: Number of stores 2,512 2,492 2,564 2,435 2,355
All fiscal years consist of 52 weeks, except for 1999 which is a 53-week year. 2000 operating results included pre-tax merger-related costs of $151 ($93 after tax or $0.22 per share), and a pre-tax charge of $20 ($12 after tax or $0.03 per share) for an impairment - lease contingency. Merger-related costs included severance, the write-down of assets to net realizable value and integration costs. 1999 operating results included pre-tax merger-related costs of $683 ($529 after tax or $1.25 per share), and a pre-tax charge of $37 ($22 after tax or $0.05 per share) for a litigation settlement. Merger-related costs included severance, the write-down of assets to net realizable value, transaction and financing costs, integration costs and stock option charges. During 1999 American Stores Company paid only one quarterly dividend due to the consummation of the Merger. 1998 operating results included a pre-tax merger-related stock option charge of $195 ($132 after tax or $0.31 per share) related to the exercisability of 6 million equivalent limited stock appreciation rights due to the approval by ASC's stockholders of the Merger Agreement and a $24 pre-tax charge ($16 after tax or $0.04 per share) related to management's decision to close 16 underperforming stores. 1997 operating results included pre-tax charges of $34 related to the sale of stock by a major stockholder and pre-tax charges of $13 related to the sale of a division of ASC's communications subsidiary (total of $41 after tax or $0.10 per share). 1996 operating results included pre-tax charges of $100 ($60 after tax or $0.14 per share) primarily related to ASC's re-engineering activities. 34 Albertson's, Inc. Quarterly Financial Data
First Second Third Fourth Year - ------------------------------------------------------------------------------------------------------------ 2000 Sales $9,013 $9,214 $8,991 $9,544 $36,762 Gross profit 2,509 2,642 2,553 2,722 10,426 Operating profit 376 421 384 481 1,662 Net earnings 179 194 172 220 765 Earnings per share: Basic 0.42 0.46 0.41 0.54 1.83 Diluted 0.42 0.46 0.41 0.54 1.83 - ------------------------------------------------------------------------------------------------------------ 1999 Sales $9,215 $9,381 $8,983 $9,899 $37,478 Gross profit 2,503 2,555 2,465 2,791 10,314 Operating profit (loss) 473 (75) 301 541 1,240 Net earnings (loss) 238 (228) 130 264 404 Earnings (loss) per share: Basic 0.57 (0.54) 0.31 0.62 0.96 Diluted 0.56 (0.54) 0.31 0.62 0.95 - ------------------------------------------------------------------------------------------------------------
Fourth quarter of 1999 includes 14 weeks of operations. All other quarters include 13 weeks of operations. During 2000 and 1999 all four quarters' operating results were affected by pre-tax merger-related costs totaling $151 ($93 after tax) and $683 ($529 after tax), respectively. Merger-related costs included severance, the write-down of assets to net realizable value and integration costs. In addition, 1999 merger-related costs included transaction and financing costs and stock option charges. First quarter 2000 included a pre-tax one-time charge of $20 ($12 after tax) for an impairment - lease contingency. Third quarter 1999 included a pre-tax one-time charge of $37 ($22 after tax) for a litigation settlement. The following table reflects the net earnings (loss) and earnings per share (EPS) effect of these items.
First Second Third Fourth Annual Net EPS Net EPS Net EPS Net EPS Net EPS Earnings (Loss) Effect Loss Effect Loss Effect Loss Effect Loss Effect - ---------------------------------------------------------------------------------------------------------------------------------- 2000 Merger-related costs $(35) $(0.08) $ (17) $(0.04) $(16) $(0.04) $(25) $(0.06) $ (93) $(0.22) Impairment - Lease contingency (12) (0.03) (12) (0.03) - ---------------------------------------------------------------------------------------------------------------------------------- 1999 Merger-related costs $ 15 $ 0.03 $(464) $(1.10) $(34) $(0.08) $(46) $(0.11) $(529) $(1.25) Litigation settlement (22) (0.05) (22) (0.05)
The Company estimates the quarterly LIFO reserves, which cannot be accurately determined until year end. The LIFO method of valuing inventories (decreased) increased net earnings and EPS as follows:
First Second Third Fourth Year - ------------------------------------------------------------------------------------------------------------ 2000 Net earnings $ (3) $ (3) $ (5) $ 25 $ 14 Basic and diluted EPS (0.01) (0.01) (0.01) 0.06 0.03 - ------------------------------------------------------------------------------------------------------------ 1999 Net earnings $ (5) $ (5) $ (5) $ (3) $ (18) Basic and diluted EPS (0.01) (0.01) (0.01) (0.01) (0.04)
Due to rounding and different periods used to compute weighted average outstanding shares, the sum of the quarterly EPS may not equal the annual EPS. 35 Albertson's, Inc. COMPANY STOCK INFORMATION The Company's stock is traded on the New York and Pacific stock exchanges under the symbol ABS. The high and low stock prices by quarter were as follows:
First Second Third Fourth Year High Low High Low High Low High Low High Low - --------------------------------------------------------------------------------------------------------------------- 2000 $34.94 $23.06 $39.25 $30.00 $31.50 $20.06 $28.88 $21.00 $39.25 $20.06 1999 61.94 49.06 56.94 48.56 52.25 37.00 38.31 29.00 61.94 29.00 1998 54.94 46.31 53.69 44.00 58.13 44.50 67.13 53.38 67.13 44.00
Cash dividends declared per share were:
First Second Third Fourth Year - --------------------------------------------------------------------------------------------------------------------- 2000 $0.19 $0.19 $0.19 $0.19 $0.76 1999 0.18 0.18 0.18 0.18 0.72 1998 0.17 0.17 0.17 0.17 0.68
In March 2001 the Board of Directors maintained the regular quarterly cash dividend of $0.19 per share, for an annual rate of $0.76 per share. The quarterly rate will be paid on May 10, 2001, to stockholders of record on April 16, 2001. ALBERTSON'S FAMILY OF STORES Albertsons Acme Jewel Super Saver Food Seessel's Jewel-Osco Sav-on drugs Max Foods Osco Drug 36 Albertson's, Inc. EX-21 18 abs10k2000exhibit21.txt PRINCIPAL SUBSIDIARIES Exhibit 21 ALBERTSON'S, INC. PRINCIPAL SUBSIDIARIES As Of February 1, 2001 Subsidiary State of Incorporation American Stores Company DE EX-23 19 abs10k2000exhibit23.txt INDEPENDENT AUDITORS' CONSENT DELOITTE TOUCHE LLP Exhibit 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-54998 on Form S-3 and Registration Statement Nos. 2-80776, 33-2139, 33-7901, 33-15062, 33-43635, 33-62799, 33-59803, 333-82157, 333-82161, and 333-87773 on Form S-8 of Albertson's, Inc. and subsidiaries of our report dated March 19, 2001, incorporated by reference in this Annual Report on Form 10-K from the 2000 Annual Report to Stockholders of Albertson's, Inc. and subsidiaries for the year ended February 1, 2001. /s/ Deloitte & Touche LLP - ------------------------- Deloitte & Touche LLP Boise, Idaho April 19, 2001 EX-23 20 abs10k2000exhibit23-1.txt INDEPENDENT AUDITORS' CONSENT ERNST AND YOUNG LLP Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statements (Form S-3 No. 333-54998 and related Prospectus and Forms S-8 No. 2-80776, 33-2139, 33-7901, 33-15062, 33-43635, 33-62799, 33-59803, 333-82157, 333-82161 and 333-87773) of Albertson's Inc. and subsidiaries of our report dated March 17, 1999 with respect to the consolidated financial statements of American Stores Company, included in the Annual Report (Form 10-K) for the year ended February 1, 2001 of Albertson's Inc. and subsidiaries filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP - --------------------- Ernst & Young LLP Salt Lake City, Utah April 19, 2001 -----END PRIVACY-ENHANCED MESSAGE-----