1997 STOCK OPTION AND STOCK AWARD PLAN
SECTION 1. Purpose; Definitions
The purpose of the Plan is to give the Corporation a competitive advantage in attracting,
retaining and motivating officers and employees and to provide the Corporation and its
subsidiaries with a stock plan providing incentives more directly linked to the profitability of the
Corporation businesses and increases in shareholder value.
For purposes of the Plan, the following terms are defined as set forth below:(a) "Affiliate " means a corporation or other entity controlled by the Corporation
and designated by the Committee from time to time as such.
(b) "Award" means a Stock Appreciation Right, Stock Option, Restricted Stock or
Performance Units.
(c) "Award Cycle " shall mean a period of consecutive fiscal years or portions
thereof designated by the Committee over which Performance Units are to be earned.
(d) "Board" means the Board of Directors of the Corporation.
(e) "Cause" means ( I ) conviction of a participant for committing a felony under
federal law or the law of the state in which such action occurred, (2) dishonesty in the
course of fulfilling a participant's employment duties or (3) willful and deliberate failure
on the part of a participant to perform his employment duties in any material respect, or
such other events as shall be determined by the Committee. The Committee shall have
the sole discretion to determine whether "Cause" exists, and its determination shall be
final.
(f) "Change in Control" and "Change in Control Price" have the meanings set
forth in Sections 10(b) and (c), respectively.
(g) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
(h) "Commission" means the Securities and Exchange Commission or any
successor agency.
(i) "Committee" means the Committee referred to in Section 2.
(j) "Common Stock" means common stock, par value $ 1.00 per share, of the
Corporation.
(k) "Corporation" means American Stores Company, a Delaware corporation.
(1) "Covered Employee" means a participant designated prior to the grant of
shares of Restricted Stock or Performance Units by the Committee who is or may be a
"covered employee" within the meaning of Section 162(m) (3) of the Code in the year in
which Restricted Stock or Performance Units are expected to be taxable to such
participant.
(m) "Disability" means permanent and total disability as determined under
procedures established by the Committee for purposes of the Plan.
(n) "Early Retirement" means retirement from active employment with the
Corporation, a subsidiary or Affiliate at or after age 57.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor thereto.
(p) "Fair Market Value" means, except as provided in Sections 5 (j) and 6 (b) (ii)
(2), as of any given date. the mean between the highest and lowest reported sales prices
of the Common Stock on the Ne" York Stock Exchange Composite Tape or, if not listed
on such exchange, on any other national securities exchange on which the Common
Stock is listed or on NASDAQ. If there is no regular public trading market for such
Common Stock, the Fair Market Value of the Common Stock shall be determined by the
Committee in good faith.
(q) "Incentive Stock Option- means any Stock Option designated as, and qualified
as, an "incentive stock option" within the meaning of Section 422 of the Code.
(r) "Non-Employee Director" means a member of the Board who qualifies as a
non-employee director as defined in Rule 16b-3 (b) (3) (i), as promulgated by the
Commission under the Exchange Act, or any successor definition adopted by the
Commission.
(s) "Non Qualified Stock Option" means any Stock Option that is not an Incentive
Stock Option.
(t) "Normal Retirement" means retirement from active employment with the
Corporation, a subsidiary or Affiliate at or after age 65.
(u) "Performance Goals" means the performance goals established by the Committee prior to the
grant of Restricted Stock or Performance Units or other Award that are based on the attainment
of one or any combination of the following: cash flow, comparable stores sales, earnings per
share, operating income, revenues, return on assets, return on sales, return on equity, shareholder
return (measured in terms of stock price appreciation) and/or total shareholder return (measured
in terms of stock price appreciation and/or dividend growth), achievement of cost control,
working capital, or stock price of the Corporation or such subsidiary, division or department of
the Corporation for or within which the participant is primarily employed, in each case as
reported or as adjusted for non-recurring events and the effects thereof. Such Performance Goals
also may be based upon attaining specified levels of Corporation performance under one or more
of the measures described above relative to the performance of other corporations. The
Performance Goals may be established on a corporate-wide basis or established with respect to
one or more operating units, divisions, acquired businesses, minority investments, partnerships
or joint ventures. Such Performance Goals are intended to qualify under Section 162 (m) (4) (c)
of the Code and shall be set by the Committee within the time period prescribed by Section
162(m) of the Code and related regulations.(v) "Performance Units" means an award made pursuant to Section 8.(w) "Plan " means the American Stores Company 1997 Stock Option and Stock
Award Plan, as set forth herein and as hereinafter amended from time to time.
(x) "Restricted Stock" means an award granted under Section 7.
(y) "Retirement" means Normal or Early Retirement.
(z) "Rule l6b-3- means Rule 16b-3, as promulgated by the Commission under
Section 16(b) of the Exchange Act, as amended from time to time.
(aa) "Stock Appreciation Right" means a right granted under Section 6.
(bb) "Stock Option" means an option granted under Section 5.
(cc) "Termination of Employment" means the termination of the participant's
employment with the Corporation and any subsidiary or Affiliate. A participant employed
by a subsidiary or an Affiliate shall also be deemed to incur a Termination of
Employment if the subsidiary or Affiliate ceases to be such a subsidiary or an Affiliate, as
the case may be, and the participant does not immediately thereafter become an employee
of the Company or another subsidiary or Affiliate. Temporary absences from
employment because of illness, vacation or leave of absence and transfers among the
Corporation and its subsidiaries and Affiliates shall not be considered Terminations of
Employment.
In addition, certain other terms used herein have definitions given to them in the first
place in which they are used.
SECTION 2. Administration
The Plan shall be administered by the Compensation and Stock Option Committee or
such other committee of the Board as the Board may from time to time designate (the
"Committee"), which shall be composed of not less than two Non-Employee Directors, each of
whom shall be an "outside director" for purposes of Section 162(m) (4) of the Code, and shall be
appointed by and serve at the pleasure of the Board. The Committee shall have plenary authority to grant Awards pursuant to the terms of the
Plan to officers and employees of the Company and its subsidiaries and Affiliates.
Among other things, the Committee shall have the authority, subject to the terms of the
Plan:
(a) To select the officers and employees to whom Awards may from time to time
be granted;
(b) Determine whether and to what extent Incentive Stock Options, NonQualified
Stock Options, Stock Appreciation Rights, Restricted Stock and Performance Units or
any combination thereof are to be granted hereunder;
(c) Determine the number of shares of Common Stock to be covered by each
Award granted hereunder,
(d) Determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the option price (subject to Section 5(a)), any vesting
condition, restriction or limitation (which may be related to the performance of the
participant, the Company or any subsidiary or Affiliate) and any vesting acceleration or
forfeiture waiver regarding any Award and the shares of Common Stock relating thereto,
based on such factors as the Committee shall determine;
(e) Modify, amend or adjust the terms and conditions of any Award, at any time
or from time to time, including but not limited to Performance Goals; provided, however,
that the Committee may not adjust upwards the amount payable to a designated Covered
Employee with respect to a particular award upon the satisfaction of applicable
Performance Goals;
(f) Determine to what extent and under what circumstances Common Stock and
other amounts payable with respect to an Award shall be deferred; and
(g) Determine under what circumstances an Award may be settled in cash or
Common Stock under Sections 5 (j) and 8 (b) (i).
The Committee shall have the authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the Plan as it shall from time to time deem advisable, to
interpret the terms and provisions of the Plan and any Award issued under the Plan (and any
agreement relating thereto) and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office, except that the
members thereof may: (i) delegate to an officer of the Company the authority to make decisions
pursuant to paragraphs (c), (f), (g), (h) and (i) of Section 5 (provided that no such delegation may
be made that would cause Awards or other transactions under the Plan to cease to be exempt
from Section 16(b) of the Exchange Act); and (ii) authorize any one or more of their number or
any officer of the Company to execute and deliver documents on behalf of the Committee.
Any determination made by the Committee or pursuant to delegated authority pursuant to
the provisions of the Plan with respect to any Award shall be made in the sole discretion of the
Committee or such delegate at the time of the grant of the Award or, unless in contravention of
any express term of the Plan, at any time thereafter. All decisions made by the Committee or any
appropriately delegated officer pursuant to the provisions of the Plan shall be final and binding
on all persons, including the Corporation and Plan participants.
SECTION 3. Common Stock Subject to Plan
The total number of shares of Common Stock reserved and available for grant under the
Plan shall be 6,500,000. No participant may be granted Awards covering in excess of 2,000,000
shares of Common Stock over the life of the Plan. Shares subject to an Award under the Plan
may be authorized and unissued shares or may be treasury shares.
Subject to Section 7 (c) (1v), if any shares of Restricted Stock are forfeited for which the
participant did not receive any benefits of ownership (as such phrase is construed by the
Commission or its Staff), or if any Stock Option (and related Stock Appreciation Right, if any)
terminates without being, exercised, or if any Stock Appreciation Right is exercised for cash,
shares subject to such Awards shall again be available for distribution in connection wiih Awards
under the Plan.
In the event of any change in corporate capitalization, such as a stock split or a corporate
transaction, such as any merger. consolidation, separation, including a spin-off or other
distribution of stock or property of the Corporation. any reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the Code) or any
partial or complete liquidation of the Corporation, the Committee or Board may make such
substitution or adjustments in the aggregate number and kind of shares reserved for issuance
under the Plan. in the number, kind and option price of shares subject to outstanding Stock
Options and Stock Appreciation Rights, in the number and kind of shares subject to other
outstanding Awards granted under the Plan and/or such other equitable substitution or
adjustments as it may determine to be appropriate in its sole discretion; provided, however, that
the number of shares subject to any Award shall always be a whole number. Such adjusted
option price shall also be used to determine the amount payable by the Corporation upon the
exercise of any Stock Appreciation Right associated with any Stock Option.
SECTION 4. Eligibility
Officers and employees of the Corporation, its subsidiaries and Affiliates who are
responsible for or contribute to the management, growth and profitability of the business of the
Corporation, its subsidiaries and Affiliates are eligible to be granted Awards under the Plan. No
grant shall be made under this Plan to a director who is not an officer or a salaried employee of
the Corporation, its subsidiaries or Affiliates.
SECTION 5. Stock Options
Stock Options may be granted alone or in addition to other Awards granted under the
Plan and may be of two types: Incentive Stock Options and Nonqualified Stock Options. Any
Stock Option granted under the Plan shall be in such form as the Committee may from time to
time approve.
The Committee shall have the authority to grant any optionee Incentive Stock Options,
Nonqualified Stock Options or both types of Stock Options (in each case with or without Stock
Appreciation Rights); provided, however, that grants hereunder are subject to the aggregate limit
on grants to individual participants set forth in Section 3. Incentive Stock Options may be
granted only to employees of the Corporation and its subsidiaries (within the meaning of Section
424(f) of the Code). To the extent that any Stock Option is not designated as an Incentive Stock
Option or even if so designated does not qualify as an Incentive Stock Option, it shall constitute
a Nonqualified Stock Option.
Stock Options shall be evidenced by option agreements, the terms and provisions of
which may differ. An option agreement shall indicate on its face whether it is intended to be an
agreement for an Incentive Stock Option or a Nonqualified Stock Option. The grant of a Stock
Option shall occur on the date the Committee by resolution selects an individual to be a
participant in any grant of a Stock Option, determines the number of shares of Common Stock to
be subject to such Stock Option to be granted to such individual, and specifies the terms and
provisions of the Stock Option. The Corporation shall notify a participant of any grant of a Stock
Option, and a written option agreement or agreements shall be duly executed and delivered by
the Corporation to the participant. Such agreement or agreements shall become effective upon
execution by the Corporation and the participant.
Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to
Incentive Stock Options shall be interpreted, amended or altered nor shall any discretion or
authority granted under the Plan be exercised so as to disqualify the Plan under Section 422 of
the Code or, without the consent of the optionee affected. to disqualify any Incentive Stock
Option under such Section 422.
Stock Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions as the Committee shall deem
desirable:
(a) Option Price. The option price per share of Common Stock purchasable under
a Stock Option shall be determined by the Committee and set forth in the option
agreement.
(b) Option Term. The term of each Stock Option shall be fixed by the Committee,
but no Incentive Stock Option shall be exercisable more than 10 years after the date the
Stock Option is granted.
(c) Exercisability. Except as otherwise provided herein, Stock Options shall be
exercisable at such time or times and subject to such terms and conditions as shall be
determined by the Committee, including subjecting exercisability of Stock Options to
Performance Goals or ownership of Common Stock by an Optionee. If the Committee
provides that any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part, based on such
factors as the Committee may determine. In addition, the Committee may at any time
accelerate the exercisability, and/or extend the exercise period, of any Stock Option.(d) Method of Exercise. Subject to the provisions of this Section 5 and the terms
of any Stock Option agreement, Stock Options may be exercised, in whole or in part, at
any time during the option term by giving written notice of exercise to the Corporation
specifying the number of shares of Common Stock subject to the Stock Option to be
purchased.
Such notice shall be accompanied by payment in full of the purchase price by
certified or bank check or such other instrument as the Company may accept. If approved
by the Committee, payment, in full or in part, may also be made in the form of
unrestricted Common Stock already owned by the optionee of the same class as the
Common Stock subject to the Stock Option (based on the Fair Market Value of the
Common Stock on the date the Stock Option is exercised); provided, however, that, in the
case of an Incentive Stock Option, the right to make a payment in the form of already
owned shares of Common Stock of the same class as the Common Stock subject to the
Stock Option may be authorized only at the time the Stock Option is granted.
In the discretion of the Committee, payment for any shares subject to a Stock
Option may also be made by delivering a properly executed exercise notice to the
Corporation, together with a copy of irrevocable instructions to a broker to deliver
promptly to the Corporation the amount of sale or loan proceeds to pay the purchase
price, and, if requested, by the amount of any federal, state, local or foreign withholding
taxes. To facilitate the foregoing, the Corporation may enter into agreements for
coordinated procedures with one or more brokerage firms.
In addition, in the discretion of the Committee, payment for any shares subject to
a Stock Option may also be made by instructing the Committee to withhold a number of
such shares having a Fair Market Value on the date of exercise equal to the aggregate
exercise price of such Stock Option.
No shares of Common Stock shall be issued until full payment therefor has been
made. An optionee shall have all of the rights of a shareholder of the Corporation holding
the class or series of Common Stock that is subject to such Stock Option (including, if
applicable, the right to vote the shares and the right to receive dividends), when the
optionee has given written notice of exercise, has paid in full for such shares and, if
requested, has given the representation described in Section 13(a).
(e) Nontransferability of Stock Options. No option (or related stock appreciation
rights, if any) granted under the Plan shall be transferable by the optionee other than (i)
by will or by the laws of descent and distribution, (ii) in the case of a Non-Qualified
Stock Option, pursuant to a qualified domestic relations order (as defined in the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder); or (iii) pursuant to approval by the Committee on the terms set forth
below. The Committee may, in its discretion. authorize all or a portion of the options
granted or to be granted to an optionee to be on terms which permit transfer by such
optionee to (i) the spouse, children or grandchildren of the optionee ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate Family
members, or (iii) a partnership in which such Immediate Family Members are the only
partners, provided that (x) there may be no consideration for any such transfer. (y) the
stock option agreement pursuant to which such options are granted must be approved by
the Committee and must expressly provide for transferability in a manner consistent with
this Section 5(e). and (z) subsequent transfers of transferred options shall be prohibited
except those in accordance with this Section 5(e). Following transfer, any such options
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Section 5(e) hereof the term
"optionee" shall be deemed to refer to the transferee. The events of termination of
employment of Section 5(i) hereof shall continue to be applied with respect to the
original optionee. following which the options shall be exercisable by the transferee only
to the extent, and for the periods specified in Section 5 (i). All options shall be
exercisable, subject to the terms of the Plan. during the optionqes lifetime only by the
optionee or by the transferee. In the event an option or options are transfer-red by an
optionee in the manner provided herein, the original optionee shall remain subject to
withholding taxes for the amount of the income realized upon exercise of the options, and
the Company shall have no obligation to provide notice to the transferee of the
termination of the option due to termination of the original optionee's employment or the
death, disability or retirement of such original optionce. Further, the Company shall be
under no obligation to file a registration statement under the Securities Act of 1933, as
amended, with respect to the shares issuable upon exercise of the options that have been
transferred.(f) Termination b1v Death. Unless otherwise determined by the Committee, if an
optionee's employment terminates by reason of death, any Stock Option held by such
optionee may thereafter be exercised, to the extent then exercisable, or on such
accelerated basis as the Committee may determine, for a period of one year (or such other
period as the Committee may specify in the option agreement) from the date of such
death or until the expiration of the stated term of such Stock Option, whichever period is
the shorter.
(g) Termination by Reason of Disability. Unless otherwise determined by the
Committee, if an optionee's employment terminates by reason of Disability, any Stock
Option held by such optionee may thereafter be exercised by the optionee to the extent it
was exercisable at the time of termination, or on such accelerated basis as the Committee
may determine, for a period of three years (or such shorter period as the Committee may
specify in the option agreement) from the date of such termination of employment or
until the expiration of the stated term of such Stock Option, whichever period is the
shorter: provided, however, that if the optionee dies within such period, any unexercised
Stock Option held by such optionee shall. notwithstanding the expiration of such period,
continue to be exercisable the extent to which it was exercisable at the time of death for a
period of 12 months from the date of such death or until the expiration of the stated term
of such Stock Option, whichever period is the shorter. In the event of termination of
employment by reason of Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of the Code,
such Stock Option will thereafter be treated as a Nonqualified Stock Option.(h) Termination by Reason of Retirement. Unless otherwise determined by the
Committee, if an optionee's employment terminates by reason of Retirement, any Stock
Option held by such optionee may thereafter be exercised by the optionee, to the extent it
was exercisable at the time of such Retirement, or on such accelerated basis as the
Committee may determine, for a period of five years (or such shorter period as the
Committee may specify in the option agreement) from the date of such termination of
employment or until the expiration of the stated term of such Stock Option, whichever
period is the shorter: provided, however, that if the optionee dies within such period any
unexercised Stock Option held by such optionee shall, notwithstanding the expiration of
such period, continue to be exercisable to the extent to which it was exercisable at the
time of death for a period of 12 months from the date of such death or until the expiration
of the stated term of such Stock Option, whichever period is the shorter. In the event of
termination of employment by reason of Retirement, if an Incentive Stock Option is
exercised after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option will thereafter be treated as a Nonqualified Stock
Option.
(i) Other Termination. Unless otherwise determined by the Committee: (A) if an
optionee incurs a Termination of Employment for Cause, all Stock Options held by such
optionee shall thereupon terminate; and (B) if an optionee incurs a Termination of
Employment for any reason other than death, Disability or Retirement or for Cause, any
Stock Option held by such optionee, to the extent then exercisable, or on such accelerated
basis as the Committee may determine, may be exercised for the lesser of three months
from the date of such Termination of Employment or the balance of such Stock Option's
term; provided, however, that if the optionee dies within such three-month period, any
unexercised Stock Option held by such optionee shall, notwithstanding the expiration of
such threemonth period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 12 months from the date of such death or
until the expiration of the stated term of such Stock Option, whichever period is the
shorter. Notwithstanding the foregoing, if an optionee incurs a Termination of
Employment at or after a Change in Control (as defined Section 10(b)), other than by
reason of death, Disability or Retirement, any Stock Option held by such optionee shall
be exercisable for the lesser of ( I ) six months and one day from the date of such
Termination of Employment, and (2) the balance of such Stock Option's term. In the
event of Termination of Employment, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of the Code,
such Stock Option will thereafter be treated as a Nonqualified Stock Option.
(j) Cashing Out of Stock Option. On receipt of written notice of exercise, the
Committee may elect to cash out all or part of the portion of the shares of Common Stock
for which a Stock Option is being exercised by paying the optionee an amount, in cash or
Common Stock, equal to the excess of the Fair Market Value of the Common Stock over
the option price times the number of shares of Common Stock for which the Option is
being exercised on the effective date of such cash-out.
(k) Change in Control Cash-Out. Notwithstanding any other provision of the Plan,
during the 60-day period from and after a Change in Control (the "Exercise Period"),
unless the Committee shall determine otherwise at the time of grant, an optionee shall
have the right, whether or not the Stock Option is fully exercisable and in lieu of the
payment of the exercise price for the shares of Common Stock being purchased under the
Stock Option and by giving notice to the Corporation, to elect (within the Exercise
Period) to surrender all or part of the Stock Option to the Corporation and to receive cash,
within 30 days of such notice, in an amount equal to the amount by which the Change in
Control Price per share of Common Stock on the date of such election shall exceed the
exercise price per share of Common Stock under the Stock Option (the "Spread")
multiplied by the number of shares of Common Stock granted under the Stock Option as
to which the right granted under this Section 5(k) shall have been exercised; provided,
however, that if the Change in Control is within six months of the date of grant of a Stock
Option held by an optionee who is an officer or director of the Corporation and is subject
to Section 16(b) of the Exchange Act, and if the exercise or surrender of such Stock
Option by such optionee would not be an exempt transaction under Section 16b, no such
election shall be made by such optionee with respect to such Stock Option prior to six
months from the date of grant. However, if the end of such 60-day period from and after
a Change in Control is within six months of the date of grant of a Stock Option held by
an optionee who is an officer or director of the Corporation and is subject to Section
16(b) of the Exchange Act, and the exercise or surrender of such Stock Option would not
be an exempt transaction under Section 16(b), such Stock Option shall be cancelled in
exchange for a cash payment to the optionee, effected on the day which is six months and
one day after the grant of such Option, equal to the Spread multiplied by the number of
shares of Common Stock granted under the Stock Option. Notwithstanding the foregoing,
if any right granted pursuant to this Section 5(k) would make a Change in Control
transaction ineligible for pooling of interests accounting under APB No. 16 that but for
this Section 5 (k) would otherwise be eligible for such accounting treatment, the
Committee shall have the ability to substitute the cash payable pursuant to this Section
5(k) with Stock with a Fair Market Value equal to the cash that would otherwise be
payable hereunder.
SECTION 6. Stock Appreciation Rights (a) Grant and Exercise. Stock Appreciation Rights may be granted in conjunction
with all or part of any Stock Option granted under the Plan. In the case of a Nonqualified
Stock Option, such rights may be granted either at or after the time of grant of such Stock
Option. In the case of an Incentive Stock Option, such rights may be granted only at the
time of grant of such Stock Option. A Stock Appreciation Right shall terminate and no
longer be exercisable upon the termination or exercise of the related Stock Option.A Stock Appreciation Right may be exercised by an optionee in accordance with
Section 6(b) by surrendering the applicable portion of the related Stock Option in
accordance with procedures established by the Committee. Upon such exercise and
surrender, the optionee shall be entitled to receive an amount determined in the manner
prescribed in Section 6(b). Stock Options which have been so surrendered shall no longer
be exercisable to the extent the related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to such
terms and conditions as shall be determined by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at such time or
times and to the extent that the Stock Options to which they relate are exercisable
in accordance with the provisions of Section 5 and this Section 6.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall be
entitled to receive an amount in cash, shares of Common Stock or both, equal in
value to the excess of the Fair Market Value of one share of Common Stock over
the option price per share specified in the related Stock Option multiplied by the
number of shares in respect of which the Stock Appreciation Right shall have
been exercised, with the Committee having the right to determine the form of
payment.
(iii) Stock Appreciation Rights shall be transferable only to permitted
transferees of the underlying Stock Option in accordance with Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or
part thereof to which such Stock Appreciation Right is related shall be deemed to
have been exercised for the purpose of the limitation set forth in Section 3 on the
number of shares of Common Stock to be issued under the Plan, but only to the
extent of the number of shares covered by the Stock Appreciation Right at the
time of exercise based on the value of the Stock Appreciation Right at such time.
SECTION 7. Restricted Stock (a) Administration. Shares of Restricted Stock may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine the
officers and employees to whom and the time or times at which grants of Restricted
Stock will be awarded, the number of shares to be awarded to any participant (subject to
the aggregate limit on grants to individual participants set forth in Section 3), the
conditions for vesting, the time or times within which such Awards may be subject to
forfeiture and any other terms and conditions of the Awards, in addition to those
contained in Section 7(c).
The Committee may, prior to grant, condition the vesting of Restricted Stock
upon the attainment of Performance Goals. The Committee may, in addition to or instead
of requiring satisfaction of Performance Goals, condition vesting upon the continued
service of the participant. The provisions of Restricted Stock Awards (including the
applicable Performance Goals) need not be the same with respect to each recipient.
(b) Awards and Certificates. Shares of Restricted Stock shall be evidenced in such
manner as the Committee may deem appropriate, including book-entry registration or
issuance of one or more stock certificates. Any certificate issued in respect of shares of
Restricted Stock shall be registered in the name of such participant and shall bear an
appropriate legend referring to the terms, conditions, and restrictions applicable to such
Award, substantially in the following form:
"The transferability of this certificate and the shares of stock represented
hereby are subject to the terms and conditions (including forfeiture) of the
American Stores Company 1997 Stock Option and Stock Award Plan and a
Restricted Stock Agreement. Copies of such Plan and Agreement are on file at the
offices of American Stores Company, Salt Lake City, Utah."
The Committee may require that the certificates evidencing such shares be held in custody by the
Company until the restrictions thereon shall have lapsed and that, as a condition of any Award of
Restricted Stock, the participant shall have delivered a stock power, endorsed in blank, relating
to the Common Stock covered by such Award. (c) Terms and Conditions. Shares of Restricted Stock shall be subject to the
following terms and conditions:
(i) Subject to the provisions of the Plan and the Restricted Stock
Agreement referred to in Section 7 (c) (vi), during the period, if any, set by the
Committee, commencing with the date of such Award for which such participant's
continued service is required (the "Restriction Period"), and until the later of (i)
the expiration of the Restriction Period and (ii) the date the applicable
Performance Goals (if any) are satisfied, the participant shall not be permitted to
sell, assign, transfer, pledge or otherwise encumber shares of Restricted Stock;
provided that the foregoing shall not prevent a participant from pledging
Restricted Stock as security for a loan, the sole purpose of which is to provide
funds to pay the option price for Stock Options. Within these limits, the
Committee may provide for the lapse of restrictions based upon period of service
in installments or otherwise and may accelerate or waive, in whole or in part,
restrictions based upon period of service or upon performance; provided,
however, that in the case of Restricted Stock subject to Performance Goals
granted to a participant who is a Covered Employee, the applicable Performance
Goals have been satisfied.
(ii) Except as provided in this paragraph (ii) and Section 7 (c) (i) and the
Restricted Stock Agreement, the participant shall have, with respect to the shares
of Restricted Stock, all of the rights of a stockholder of the Corporation holding
the class or series of Common Stock that is the subject of the Restricted Stock,
including, if applicable, the right to vote the shares and the right to receive any
cash dividends. If so determined by the Committee in the applicable Restricted
Stock Agreement and subject to Section 13(e) of the Plan, (1) cash dividends on
the class or series of Common Stock that is the subject of the Restricted Stock
Award shall be automatically deferred and reinvested in additional Restricted
Stock, held subject to the vesting of the underlying Restricted Stock, or held
subject to meeting Performance Goals applicable only to dividends, and (2)
dividends payable in Common Stock shall be paid in the form of Restricted Stock
of the same class as the Common Stock with which such dividend was paid, held
subject to the vesting of the underlying Restricted Stock, or held subject to
meeting Performance Goals applicable only to dividends.(iii) Except to the extent otherwise provided in the applicable Restricted
Stock Agreement and Sections 7(c) (i), 7(c) (iv) and 10(a) (ii), upon a participant's
Termination of Employment for any reason during the Restriction Period or
before the applicable Performance Goals are satisfied, all shares still subject to
restriction shall be forfeited by the participant.
(iv) Except to the extent otherwise provided in Section 10(a)(ii), in the
event that a participant retires or such participant's employment is involuntarily
terminated (other than for Cause), the Committee shall have the discretion to
waive, in whole or in part, any or all remaining restrictions (other than, in the case
of Restricted Stock with respect to which a participant is a Covered Employee,
satisfaction of the applicable Performance Goals unless the participant's
employment is terminated by reason of death or Disability) with respect to any or
all of such participant's shares of Restricted Stock.
(v) If and when any applicable Performance Goals are satisfied and the
Restriction Period expires without a prior forfeiture of the Restricted Stock,
unlegended certificates for such shares shall be delivered to the participant upon
surrender of the legended certificates.
(vi) Each Award shall be confirmed by, and be subject to, the terms of a
Restricted Stock Agreement.
SECTION 8. Performance Units (a) Administration. Performance Units may be awarded either alone or in addition to
other Awards granted under the Plan. The Committee shall determine the officers and employees
to whom and the time or times at which Performance Units shall be awarded. the number of
Performance Units to be awarded to any participant (subject to the aggregate limit on grants to
individual participants set forth in Section 3), the duration of the Award Cycle and any other
terms and conditions of the Award, in addition to those contained in Section 8(b).
The Committee may condition the settlement of Performance Units upon the continued
service of the participant, the attainment of Performance Goals, or both. The provisions of such
Awards (including the applicable Performance Goals) need not be the same with respect to each
recipient.
(b) Terms and Conditions. Performance Units Awards shall be subject to the following
terms and conditions:
(i) Subject to the provisions of the Plan and the Performance Units Agreement
referred to in Section 8 (b) (vi), Performance Units may not be sold, assigned, transfer-
red, pledged or otherwise encumbered during the Award Cycle. At the expiration of the
Award Cycle, the Committee shall evaluate the Company's performance in light of the
Performance Goals for such Award to the extent applicable. and shall determine the
number of Performance Units granted to the participant which have been earned and the
Committee may then elect to deliver (I) a number of shares of Common Stock equal to
the number of Performance Units determined by the Committee to have been earned, or
(2) cash equal to the Fair Market Value of such number of shares of Common Stock to
the participant.
(ii) Except to the extent otherwise provided in the applicable Performance Unit
Agreement and Sections (b) (iii) and 10(a) (Iii), upon a participant's Termination of
Employment for any reason during the Award Cycle or before any applicable
Performance Goals are satisfied, the rights to the shares still covered by the Performance
Units Award shall be forfeited by the participant.
(iii) Except to the extent otherwise provided in Section 10(a) (iii), in the event that
a participant's employment is terminated (other than for Cause), or in the event a
participant retires, the Committee shall have the discretion to waive, in whole or in part,
any or all remaining payment limitations (other than. in the case of Performance Units
with respect to which a participant is a Covered Employee, satisfaction of any applicable
Performance Goals unless the participant's employment is terminated by reason of' death
or Disability ) with respect to any or all of such participant's Performance Units.
(iv) A participant may elect to further defer receipt of the Performance Units
payable under an Award (or an installment of an Award) for a specified period or until a
specified event, subject in each case to the Committee's approval and to such terms as are
determined by the Committee (the "Elective Deferral Period”), Subject to any exceptions
adopted by the Committee, such election must generally be made prior to commencement
of the Award Cycle for the Award (or for such installment of an Award).
(v) If and when any applicable Performance Goals are satisfied and the Elective
Deferral Period expires without a prior forfeiture of the Performance Units, payment in
accordance with Section 8(b)(i) hereof shall be made to the participant.
(vi) Each Award shall be confirmed by, and be subject to, the terms of a
Performance Unit Agreement.
SECTION 9. Tax Offset BonusesAt the time an Award is made hereunder or at any time thereafter, the Committee may
grant to the participant receiving such Award the right to receive a cash payment in an amount
specified by the Committee, to be paid at such time or times (if ever) as the Award results in
compensation income to the participant, for the purpose of assisting the participant to pay the
resulting taxes, all as determined by the Committee and on such other terms and conditions as
the Committee shall determine.
SECTION 10. Change in Control Provisions
(a) Impact of Event. Notwithstanding any other provision of the Plan to the contrary, in
the event of a Change in Control, except as otherwise provided at the time of grant:
(i) Any Stock Options and Stock Appreciation Rights outstanding as of the date
such Change in Control is determined to have occurred, and which are not then
exercisable and vested, shall become fully exercisable and vested to the full extent of the
original grant.
(ii) The restrictions and deferral limitations applicable to any Restricted Stock
shall lapse, and such Restricted Stock shall become free of all restrictions and become
fully vested and transferable to the full extent of the original grant and share certificates
relating to Restricted Stock shall be delivered to participants forthwith.
(iii) All Performance Units shall be considered to be earned and payable in full,
and any deferral or other restriction shall lapse and such Performance Units shall be
settled in cash as promptly as is practicable.
(b) Definition of Change in Control. For purposes of the Plan, a "Change in Control"
shall mean the happening of any of the following events:
(i) An acquisition by any individual, entity or group (within the meaning of
Section 13 (d) (3) or 14(d) (2) of the Exchange Act) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more
of either (1) the then outstanding shares of common stock of the Corporation (the
"Outstanding Corporation Common Stock") or (2) the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote generally in the election
of directors (the "Outstanding Corporation Voting Securities"); excluding, however, the
following: ( I ) Any acquisition directly from the Corporation, other than an acquisition
by virtue of the exercise of a conversion privilege unless the security being so converted
was itself acquired directly from the Corporation, (2) Any acquisition by the Corporation,
(3) Any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the Corporation, or (4)
Any acquisition by any corporation pursuant to a transaction which complies with clauses
( I ), (2) and (3) of subsection (iii) of this Section 10 (b); or
(ii) A change in the composition of the Board such that the individuals who, as of
the effective date of the Plan, constitute the Board (such Board shall be hereinafter
referred to as the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, for purposes of this Section 10 (b), that any
individual who becomes a member of the Board subsequent to the effective date of the
Plan, whose election, or nomination for election by the Corporation's shareholders, was
approved by a vote of at least a majority of those individuals who are members of the
Board and who were also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be considered as though such individual were a member of
the Incumbent Board; but, provided further, that any such individual whose initial
assumption of office occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board shall not be so considered as a member of the
Incumbent Board; or
(iii) The approval by the shareholders of the Corporation of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all of the assets
of the Corporation ("Corporate Transaction") or, if consummation of such Corporate
Transaction is subject, at the time of such approval by shareholders, to the consent of any
government or governmental agency, obtaining of such consent (either explicitly or
implicitly by consummation); excluding however, such a Corporate Transaction pursuant
to which (I ) all or substantially all of the individuals and entities who are the beneficial
owners, respectively, of the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding
shares of common stock, and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership, immediately prior
to such Corporate Transaction, of the Outstanding Corporation Common Stock and
Outstanding Company Voting Securities, as the case may be, (2) no Person (other than
the Corporation, any employee benefit plan (or related trust) of the Corporation or such
corporation resulting from such Corporate Transaction) will beneficially own, directly or
indirectly, 20% or more of, respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the combined voting power of
the outstanding voting securities of such corporation entitled to vote generally in the
election of directors except to the extent that such ownership existed prior to the
Corporate Transaction, and (3) individuals who were members of the Incumbent Board
which approved the agreement providing for the Corporate Transaction will constitute at
least a majority of the members of the board of directors of the corporation resulting from
such Corporate Transaction, or
(iv) The approval by the stockholders of the Corporation of a complete liquidation
or dissolution of the Corporation.
(c) Change in Control Price. For purposes of the Plan, "Change in Control Price" means
the higher of (i)the highest reported sales price, regular way, of a share of Common Stock in any
transaction reported on the New York Stock Exchange Composite Tape or other national
exchange on which such shares are listed or on NASDAQ during the 60-day period prior to and
including the date of a Change in Control or (ii) if the Change in Control is the result of a tender
or exchange offer or a Corporate Transaction, the highest price per share of Common Stock paid
in such tender or exchange offer or Corporate Transaction; provided, however, that (x) in the
case of a Stock Option which (A) is held by an optionee who is an officer or director of the
Corporation and is subject to Section 16(b) of the Exchange Act and (B) was granted within 240
days of the Change of Control, and (C) the exercise or surrender of such Stock Option would not
be an exempt transaction under Section 16(b), then the Change in Control Price for such Stock
Option shall be the Fair Market Value of the Common Stock on the date such Stock Option is
exercised or deemed exercised and (y ) in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, the Change in Control Price shall be in
all cases the Fair Market Value of the Common Stock on the date such Incentive Stock Option or
Stock Appreciation Right is exercised. To the extent that the consideration paid in any such
transaction described above consists all or in part of securities or other noncash consideration,
the value of such securities or other noncash consideration shall be determined in the sole
discretion of the Board.
SECTION 11. Term, Amendment and Termination
The Plan will terminate 10 years after the effective date of the Plan. Under the Plan,
Awards outstanding as of such date shall not be affected or impaired by the termination of the
Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment, alteration or
discontinuation shall be made " hich would (i) impair the rights of an optionee under a Stock
Option or a recipient of a Stock Appreciation Right, Restricted Stock Award or Performance
Unit Award theretofore granted without the optionee's or recipient's consent, except such an
amendment made to cause the Plan to qualify for the exemption provided by Rule 16b-3, or (ii)
disqualify the Plan from the exemption provided by Rule 16b-3. In addition, no such amendment
shall be made without the approval of the Corporation's shareholders to the extent such approval
is required by law or agreement.
The Committee may amend the terms of any Stock Option or other Award theretofore
granted, prospectively or retroactively but no such amendment shall impair the rights of any
holder without the holder's consent except such an amendment made to cause the Plan or Award
to qualify for the exemption provided by Rule 16b-3.
Subject to the above provisions, the Board shall have authority to amend the Plan to take
into account changes in law and tax and accounting rules as well as other developments, and to
grant Awards which qualify for beneficial treatment under such rules without stockholder
approval.
SECTION 12. Unfunded Status of PlanIt is presently intended that the Plan constitute an "unfunded" plan for incentive and
deferred compensation. The Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver Common Stock or make
payments; provided, however, that unless the Committee otherwise determines, the existence of
such trusts or other arrangements is consistent with the "unfunded" status of the Plan.
SECTION 13. General Provisions
(a) The Committee may require each person purchasing or receiving shares pursuant to
an Award to represent to and agree with the Corporation in writing that such person is acquiring
the shares without a view to the distribution thereof. The certificates for such shares may include
any legend which the Committee deems appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan or agreements made pursuant thereto,
the Corporation shall not be required to issue or deliver any certificate or certificates for shares
of Common Stock under the Plan prior to fulfillment of all of the following conditions:
(i) Listing or approval for listing upon notice of issuance, of such shares on the
New York Stock Exchange, Inc., or such other securities exchange as may at the time be
the principal market for the Common Stock;
(ii) Any registration or other qualification of such shares of the Corporation under
any state or federal law or regulation, or the maintaining in effect of any such registration
or other qualification which the Committee shall, in its absolute discretion upon the
advice of counsel, deem necessary or advisable; and
(iii) Obtaining any other consent, approval, or permit from any state or federal
governmental agency which the Committee shall, in its absolute discretion after receiving
the advice of counsel, determine to be necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Corporation or any subsidiary or
Affiliate from adopting other or additional compensation arrangements for its employees.
(c) Adoption of the Plan shall not confer upon any employee any right to continued
employment, nor shall it interfere in any way with the right of the Corporation or any subsidiary
or Affiliate to terminate the employment of any employee at any time.
(d) No later than the date as of which an amount first becomes includible in the gross
income of the participant for federal income tax purposes with respect to any Award under the
Plan, the participant shall pay to the Corporation, or make arrangements satisfactory to the
Corporation regarding the payment of, any federal, state, local or foreign taxes of any kind
required by law to be withheld with respect to such amount. Unless otherwise determined by the
Corporation, withholding obligations may be settled with Common Stock, including Common
Stock that is part of the Award that gives rise to the withholding requirement. The obligations of
the Corporation under the Plan shall be conditional on such payment or arrangements, and the
Corporation and its Affiliates shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the participant. The Committee may establish
such procedures as it deems appropriate, including making irrevocable elections, for the
settlement of withholding obligations with Common Stock.(e) Reinvestment of dividends in additional Restricted Stock at the time of any dividend
payment shall only be permissible if sufficient shares of Common Stock are available under
Section 3 for such reinvestment (taking into account then outstanding Stock Options and other
Awards).
(f) The Committee shall establish such procedures as it deems appropriate for a
participant to designate a beneficiary to whom any amounts payable in the event of the
participant's death are to be paid or by whom any rights of the participant, after the participant's
death, may be exercised.
(g) In the case of a grant of an Award to any employee of a subsidiary of the Corporation,
the Corporation may, if the Committee so directs, issue or transfer the shares of Common Stock,
if any, covered by the Award to the subsidiary, for such lawful consideration as the Committee
may specify, upon the condition or understanding that the subsidiary will transfer the shares of
Common Stock to the employee in accordance with the terms of the Award specified by the
Committee pursuant to the provisions of the Plan.
(h) The Plan and all Awards made and actions taken thereunder shall be governed by and
construed in accordance with the laws of the State of Delaware, without reference to principles
of conflict of laws.
SECTION 14. Effective Date of Plan
The Plan shall be effective as of the date it is approved by at least a majority of the
outstanding shares of Common Stock of the Corporation.
American Stores Company 5/2/97
