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50
quality฀ by฀ members฀ of฀ management฀ and฀ the฀ Audit฀ Committee.฀ The฀ Audit฀ Committee฀ reviews฀ recent฀ Public฀
Company฀Accounting฀Oversight฀Board฀reports฀on฀PricewaterhouseCoopers฀LLP฀and฀its฀peer฀firms,฀and฀considers฀
PricewaterhouseCoopers฀LLP’s฀tenure฀as฀the฀Company’s฀independent฀public฀accountants฀and฀their฀familiarity฀
with฀our฀operations,฀businesses,฀accounting฀policies฀and฀practices฀and฀internal฀control฀over฀financial฀reporting.฀
Further,฀in฀conjunction฀with฀the฀mandated฀rotation฀of฀the฀public฀accountants’฀lead฀engagement฀partner,฀the฀Audit฀
Committee is directly involved in the selection of PricewaterhouseCoopers LLP’s lead engagement partner every
five฀years.฀The฀Audit฀Committee฀believes฀that฀the฀continued฀retention฀of฀PricewaterhouseCoopers฀LLP฀to฀serve฀
as฀the฀Company’s฀independent฀public฀accountants฀is฀in฀the฀best฀interests฀of฀the฀Company฀and฀its฀shareowners.
Based฀upon฀the฀review฀and฀discussions฀described฀in฀this฀report,฀the฀Audit฀Committee฀recommended฀
to฀the฀Board฀of฀Directors฀that฀the฀audited฀consolidated฀financial฀statements฀be฀included฀in฀the฀Company’s฀
Annual฀Report฀on฀Form฀10-K฀for฀the฀year฀ended฀February฀1,฀2014,฀as฀filed฀with฀the฀SEC.
This฀report฀is฀submitted฀by฀the฀Audit฀Committee.
Ronald฀L.฀Sargent,฀Chair
Susan฀J.฀Kropf
Susan฀M.฀Phillips
Bobby฀S.฀Shackouls
AP P R O V A L O F T H E 2 0 1 4 L O N G - T E R M I N C E N T I V E A N D C A S H B O N U S P L A N
( I T E M N O. 2 )
The฀Board฀of฀Directors฀has฀adopted,฀subject฀to฀shareholder฀approval,฀The฀Kroger฀Co.฀2014฀Long-Term฀
Incentive฀and฀Cash฀Bonus฀Plan฀(“Plan”)฀for฀which฀a฀maximum฀of฀25,000,000฀shares฀are฀reserved.฀The฀purpose฀
of฀the฀Plan฀is฀to฀assist฀in฀attracting฀and฀retaining฀employees฀and฀directors฀of฀outstanding฀ability฀and฀to฀align฀their฀
interests฀with฀those฀of฀the฀shareholders฀of฀Kroger.฀If฀approved,฀the฀Plan฀will฀be฀effective฀as฀of฀June฀26,฀2014.
DE S C R I P T I O N O F T H E P L A N
General.฀The฀Plan฀consists฀of฀two฀separate฀equity-based฀programs;฀the฀Insider฀Program฀and฀the฀Non-
Insider฀ Program.฀ Officers฀ and฀ directors฀ of฀ Kroger฀ subject฀ to฀ Section฀ 16(a)฀ of฀ the฀ Securities฀ Exchange฀ Act฀
of฀ 1934฀ (the฀ “Exchange฀ Act”)฀ are฀ eligible฀ for฀ grants฀ or฀ awards฀ under฀ the฀ Insider฀ Program฀ while฀ all฀ other฀
employees฀ of฀ Kroger฀ are฀ eligible฀ for฀ grants฀ or฀ awards฀ under฀ the฀ Non-Insider฀ Program.฀ As฀ of฀ the฀ date฀ of฀
this฀proxy฀statement,฀29฀employees฀and฀directors฀are฀eligible฀to฀participate฀in฀the฀Insider฀Program฀and฀the฀
remaining฀approximately฀375,000฀employees฀of฀Kroger฀are฀eligible฀to฀participate฀in฀the฀Non-Insider฀Program.฀
In฀addition,฀the฀Plan฀provides฀for฀a฀performance-based฀Cash฀Bonus฀Program฀in฀which฀all฀375,000฀employees฀
are฀eligible฀to฀participate.฀Shareholders฀last฀approved฀a฀similar฀plan,฀providing฀for฀issuance฀of฀a฀maximum฀of฀
25,000,000฀shares,฀at฀the฀annual฀meeting฀of฀shareholders฀held฀in฀June฀2011.฀Kroger฀intends฀for฀shares฀under฀
these฀plans฀to฀be฀sufficient฀for฀grants฀and฀awards฀made฀in฀the฀ordinary฀course฀for฀a฀period฀of฀three฀to฀four฀
years.฀Options฀may฀not฀be฀issued฀below฀the฀fair฀market฀value฀of฀a฀Kroger฀common฀share฀on฀the฀date฀of฀the฀
grant.฀Options฀and฀stock฀appreciation฀rights฀may฀not฀be฀repriced.
Administration.฀The฀Insider฀Program฀will฀be฀administered฀by฀a฀committee฀of฀the฀Board฀of฀Directors฀
that฀meets฀the฀standards฀of฀Rule฀16b-3(d)(1)฀under฀the฀Exchange฀Act฀and฀initially฀will฀be฀the฀Compensation฀
Committee฀of฀the฀Board฀of฀Directors,฀made฀up฀exclusively฀of฀independent฀directors.฀The฀Non-Insider฀Program฀
will฀be฀administered฀by฀a฀committee฀of฀three฀officers฀appointed฀by฀the฀Chief฀Executive฀Officer,฀the฀members฀
of฀ which฀ are฀ ineligible฀ to฀ receive฀ grants฀ or฀ awards฀ under฀ the฀ Non-Insider฀ Program.฀ The฀ administering฀
committee฀in฀each฀case฀is฀referred฀to฀as฀the฀“Committee.”฀The฀Cash฀Bonus฀Program฀will฀be฀administered฀by฀
the฀Committee฀under฀the฀Insider฀Program.฀The฀Plan฀is฀drafted฀to฀maintain฀the฀maximum฀amount฀of฀flexibility฀
with the Committee determining the ultimate provisions of each grant or award.
The฀Committee฀is฀authorized฀to฀award฀or฀grant฀nonstatutory฀stock฀options,฀stock฀appreciation฀rights,฀
performance฀units,฀restricted฀stock฀and฀incentive฀shares฀to฀participants฀under฀the฀Insider฀Program฀and฀the฀
Non-Insider฀Program,฀and฀to฀award฀performance-based฀cash฀bonuses฀under฀the฀Cash฀Bonus฀Program.฀The฀
Committee will determine the types and amounts of awards or grants, the recipients of awards or grants,
vesting schedules, restrictions, performance criteria, and other provisions of the grants or awards. All of these
provisions฀will฀be฀set฀forth฀in฀a฀written฀instrument.