SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended: April 27, 1996.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period __________ to __________.
Commission file number 0-16900
RICHFOOD HOLDINGS, INC.
Incorporated under the laws I.R.S.Employer Identification
of Virginia No. 54-1438602
P.O. Box 26967
Richmond, Virginia 23261
Telephone Number (804) 746-6000
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
without par value.
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 is not contained herein, and will not be contained, to the
best of the 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. _____
At June 28, 1996, the aggregate market value of all shares of voting stock held
by non-affiliates was $970,218,925 (based upon the last reported sale price of
the Common Stock on that date by The Nasdaq National Market). In determining
this figure, the Registrant has assumed that all directors and executive
officers are affiliates. Such assumption shall not be deemed conclusive for any
other purpose. The number of shares outstanding of each class of the
Registrant's common stock, as of June 28, 1996, was as follows: Common Stock,
without par value: 31,517,998 shares.
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended April 27, 1996, are incorporated by reference into Parts I, II and IV of
this Form 10-K. Portions of the Registrant's Proxy Statement prepared for use in
connection with the 1996 annual meeting of shareholders are incorporated by
reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
GENERAL
Richfood Holdings, Inc. ("Richfood" or the "Company"), a Virginia corporation
formed in July 1987, is headquartered at 8258 Richfood Road, Mechanicsville,
Virginia, 23116.
The Company is the leading wholesale food distributor in its Mid-Atlantic
operating region and the fourth largest wholesale food distributor in the United
States. Richfood supplies a comprehensive selection of national brand and
private label grocery products, dairy products, frozen foods, fresh produce
items, meats, delicatessen and bakery products and non-food items from its three
modern, highly efficient distribution centers. The Company's distribution
centers are strategically located within its operating region and have capacity
to accommodate additional growth. The Company services more than 1,700 retail
grocery stores, including leading regional chains and smaller independent
retailers throughout the Mid-Atlantic region, offering its customers a
dependable supply and prompt delivery of over 32,000 grocery and non-grocery
items at competitive prices.
The Company has four principal operating divisions: (i) Richfood/Virginia, based
in Richmond, Virginia, which operates a 1.3 million square foot distribution
center that is one of the largest and most efficient in the industry; (ii)
Richfood/Pennsylvania, which operates two distribution facilities totaling
approximately 1.0 million square feet in Harrisburg, Pennsylvania, including a
635,000 square foot highly efficient, automated distribution center, and a 6.3
million cubic foot automated frozen food distribution center based in West
Point, Pennsylvania; (iii) the METRO/BASICS Retail Division, headquartered in
the metropolitan Baltimore, Maryland area, which operates twelve 45,000 to
60,000 square foot "superstores" under the METRO tradename, and five smaller
traditional supermarkets under the BASICS tradename; and (iv) the Richfood
Dairy, located in Richmond, which is the largest fluid dairy in Virginia and
consists of a 65,000 square foot facility capable of processing and packaging
over 550,000 gallons per week of milk and other dairy products, fruit juices,
bottled water and related items.
Management implemented the regional division structure during the fiscal year
ended April 27, 1996 ("fiscal 1996") to serve properly the unique needs of
Richfood's customers in each of its geographic markets. Each division is headed
by a division president, together with a procurement officer and a distribution
and logistics officer, to oversee regional sales, marketing, procurement,
advertising, and distribution and logistics initiatives. Through its corporate
headquarters, the Company provides technology and support to the divisions on an
efficient, centralized basis, to avoid duplication of functions. Centralized
functions include corporate finance, legal, risk management, certain
distribution and logistics initiatives, management information systems, human
resources planning, development of safety and sanitation programs and support of
the Company's retail customers through store planning and development.
Richfood/Virginia includes the operations of Richfood, Inc., which was formed in
1935 and historically was the Company's principal operating subsidiary.
Richfood/Pennsylvania encompasses the operations of two of the Company's
recently acquired subsidiaries: Rotelle, Inc. ("Rotelle"), a wholesale frozen
food distribution company acquired by Richfood in August 1994, and Super Rite
Corporation ("Super Rite"), a full service wholesale food distribution company
acquired by Richfood in a stock-for-stock merger effective October 15, 1995 (the
"Super Rite Acquisition"). See "Business Strategy -- Pursuing Strategic
Acquisitions." The Company believes that combining the administrative functions
of Super Rite and Rotelle affords opportunities for substantial cost savings
through centralizing and eliminating certain duplicative corporate and
administrative functions and by enhancing opportunities to sell products of each
business to customers of the other.
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BUSINESS STRATEGY
Since joining Richfood in 1990, the current management team has implemented a
business strategy focused on reducing and controlling costs, increasing
efficiency and pursuing profitable growth. The success of this strategy has been
reflected in the growth of the Company's sales from $2.19 billion for fiscal
1992 to $3.25 billion for fiscal 1996, and in the Company's operating profit,
which has grown from $47.6 million to $89.6 million over the same period. The
key elements of the Company's strategy include:
Reducing and Controlling Costs; Increasing Efficiency in Logistics and
Distribution
Management believes that, as a result of its strategic focus on cost control,
logistics and distribution, the Company is now one of the most efficient
wholesale food distributors in the United States. Over the past five fiscal
years, the Company has reduced and controlled costs by (i) capitalizing on its
size to improve its purchasing power, (ii) rationalizing product purchasing and
pricing systems, (iii) implementing a pricing system that encourages efficient
use of the Company's services and (iv) instituting productivity-based incentives
for distribution center associates. Over the same period, the Company has
significantly improved the efficiency of its logistics and distribution
functions by, among other things, implementing state-of-the-art computer systems
related to purchasing, inventory management and fleet loading and routing. These
improvements have permitted the Company to drive substantially increased volume
through its distribution system and to increase capacity utilization
significantly, thereby benefitting from its operating leverage. As a result of
the cost savings and efficiencies realized by the Company under its current
management team, from fiscal 1992 to fiscal 1996 the Company's operating profit
as a percent of sales has increased from 2.2% to 2.8%, annual inventory turnover
has improved from 16.3x to 18.9x and working capital funding requirements have
been reduced substantially.
Increasing Sales
The Company's purchasing power, low cost structure and efficient service levels
permit Richfood to offer lower prices and better service to support the
competitive position of its retail customers, while increasing customer
penetration, attracting new customers within its operating region and supporting
customers in their efforts to open new retail sites served by Richfood. Since
1990, customer penetration, the percentage of customers' sales supplied by
Richfood, has increased from approximately 50% to over 60% for customers
supplied by Richfood/Virginia's Mechanicsville, Virginia distribution center.
Although there can be no assurance as to future results, management believes
that opportunities exist to increase significantly Richfood/Pennsylvania's
customer penetration rate, which is now approximately 50%, as Super Rite
previously offered its customers a limited selection of certain higher-margin
perishable products. See " -- Pursuing Strategic Acquisitions." The Company has
also successfully attracted new customers and has benefitted from growth by the
leading regional chains and smaller independent retail grocers that it serves.
The Company believes that its success depends upon the success of its retail
customers. Accordingly, Richfood supports its existing customers, and pursues
its goal of increasing customer penetration and attracting new customers, by (i)
using the Company's purchasing power, low cost structure and efficient
distribution system to provide products to its customers at the lowest available
prices, (ii) assisting its retail customers in adapting to changes in consumer
preferences and to competition in the marketplace and (iii) offering its retail
customers a wide variety of retail support services typical of those offered by
large retail chains to their individual stores. As a result of these
initiatives, Richfood is able to provide its retail customers with the
competitive advantages associated with large purchasing power and extensive
retail services similar to those of large supermarket chains, while each
customer retains its regional focus and flexibility to respond to local
demographics and market conditions.
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Pursuing Strategic Acquisitions
Consolidation trends in the food distribution industry present opportunities for
strategic acquisitions by the Company. The Company pursues strategic targets
that are well run, established wholesale operations, with modern facilities and
capacity to accommodate anticipated growth, and that complement the Company's
existing operations and geographic service area. Since 1990, the Company has
completed five acquisitions, which have more than doubled its sales, added
large, modern distribution centers in Harrisburg and West Point, Pennsylvania,
and enhanced its presence in various regional markets.
The Company began a series of strategic acquisitions in fiscal 1991 with the
purchase of the Waynesboro, Virginia division of Fleming Foods of Virginia,
Inc., which increased the Company's presence in the western portion of its
operating region. On January 22, 1993, the Company acquired certain assets and
assumed certain contracts of the Civilian Division of B. Green & Company, Inc.,
a wholesale and retail grocery distributor headquartered in Baltimore, Maryland.
The acquisition of the Civilian Division increased significantly the Company's
presence in the Baltimore/Washington, D.C. market, while permitting the Company
to achieve greater efficiency and productivity from its existing warehousing and
delivery operations. On August 23, 1994, the Company acquired all of the
outstanding common shares of Rotelle, one of the largest wholesale frozen food
distributors in the United States. Rotelle, through its state-of-the-art
distribution center, distributes frozen food, ice cream and frozen bakery
products to its customers. In addition, Rotelle operates a USDA-inspected meat
cutting facility and an ice manufacturing facility. On April 3, 1995, the
Company acquired certain assets and assumed certain contracts of the wholesale
division of Camellia Food Stores, Inc. ("Camellia"), a retail and wholesale food
distributor located in Norfolk, Virginia. As a result of that acquisition, the
Company serves as wholesale supplier to Camellia's 46 retail stores, and most of
the 120 independent retail stores previously served by Camellia's wholesale
division. The Camellia acquisition also has permitted the Company to achieve
additional efficiencies and economies of scale in its business.
Effective October 15, 1995, the Company completed the Super Rite Acquisition.
Super Rite, with fiscal 1995 sales of $1.47 billion, is a full service wholesale
food distributor supplying more than 240 retail supermarkets in Pennsylvania,
New Jersey, Maryland, Delaware, Virginia and West Virginia. Super Rite also
operated the Company's METRO/BASICS Retail Division, consisting of twelve 45,000
to 60,000 square foot "superstores" in the Baltimore, Maryland and Dover,
Delaware markets operating under the METRO tradename, and five smaller
traditional supermarkets in metropolitan Baltimore, Maryland, operating under
the BASICS tradename. Super Rite is a separate, wholly-owned subsidiary of the
Company and operates as part of the Richfood/Pennsylvania division. The Company
issued 9,770,188 shares of Common Stock in the Super Rite Acquisition, resulting
in former Super Rite shareholders holding approximately 31% of the
then-outstanding shares of Common Stock. The Super Rite Acquisition has been
accounted for as a pooling of interests.
Super Rite operates approximately 1.0 million square feet of warehouse space,
including a 635,000 square foot highly efficient, automated distribution center
in Harrisburg, Pennsylvania. Super Rite's distribution system complements the
Company's existing operations, and its service area is geographically contiguous
with the northern portion of the area served by Richfood/Virginia's
Mechanicsville, Virginia distribution center. As a result of the Super Rite
Acquisition, the Company anticipates that it will achieve significant cost
savings, operating efficiencies and growth opportunities resulting from: (i)
combining the purchasing volume of both companies, thereby increasing purchasing
power; (ii) centralizing and eliminating certain duplicative corporate and
administrative functions; (iii) selling certain higher-margin product lines to
Super Rite customers that are offered by Richfood but that were previously
offered on a limited basis by Super Rite, such as frozen foods, fresh produce,
meats and delicatessen and dairy products; (iv) consolidating distribution
networks to achieve logistical efficiencies and higher capacity utilization; and
(v) realizing interest expense savings by refinancing certain Super Rite
indebtedness at the lower rates available to the combined Company.
The Company's substantial growth since 1990 is largely attributable to
acquisitions, particularly the acquisition of Super Rite in fiscal 1996. While
the Company believes that additional acquisition opportunities consistent
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with its strategic criteria may arise from time to time, no assurance can be
given that the Company will consummate additional strategic acquisitions.
WHOLESALE OPERATIONS
Customer Base; Principal Markets
The Company services more than 1,700 retail grocery stores, including leading
regional chains and smaller independent retailers, in Virginia, Maryland,
Pennsylvania, Delaware, West Virginia, North Carolina, Washington, D.C., New
Jersey and New York. The Company's regional chain customers are high quality,
growth-oriented operations, and include: Giant Food Stores, Inc. based in
Carlisle, Pennsylvania ("Giant of Carlisle"); Farm Fresh, Inc. based in Norfolk,
Virginia ("Farm Fresh of Virginia"); Shoppers Food Warehouse Corp. ("Shoppers");
Ukrop's Super Markets, Inc. ("Ukrop's"); Acme Markets, Inc. ("Acme"); Genuardi's
Super Markets, Inc.; Redner's Markets, Inc.; Camellia; and the Company's own
METRO/BASICS stores. Customer store sizes range from 4,500 square feet to 60,000
square feet.
Richfood, Inc. and Super Rite are the principal sources of wholesale supply for
most of their customers, while Rotelle is the principal source of frozen food
supply for most of its customers. Since 1990, customer penetration has increased
from approximately 50% to over 60% for customers of Richfood/Virginia's
Mechanicsville, Virginia distribution center. Although there can be no assurance
as to future results, management believes that opportunities exist to increase
significantly Richfood/Pennsylvania's customer penetration rate, which is now
approximately 50%. Super Rite previously offered its customers a limited
selection of certain higher-margins perishable products, such as frozen foods,
fresh produce, meats and delicatessen and dairy products, that are offered by
Richfood/Virginia.
The Company's five largest customers in fiscal 1996 were Giant of Carlisle, Farm
Fresh of Virginia, Shoppers, Ukrop's and Acme, with Giant of Carlisle, Farm
Fresh of Virginia and Shoppers accounting for 16%, 11% and 9%, respectively, of
fiscal 1996 sales. The Company has enjoyed long-term supply relationships with
most of its principal customers: Ukrop's has been a Richfood customer for over
48 years; Farm Fresh of Virginia has been a Richfood customer for over 24 years;
Acme has been a Rotelle customer for over 20 years; Giant of Carlisle has been a
Super Rite customer for 16 years; and Shoppers has been a Super Rite customer
for five years.
Richfood is a party to multi-year supply agreements with most of its larger
customers that secure the Company's position as principal supplier to all stores
owned by such customers. Such supply agreements generally include minimum
purchase requirements by dollar amount and category of goods and may be subject
to adjustment as the customer acquires or disposes of stores. The Company's
supply agreements with Giant of Carlisle, Farm Fresh of Virginia and Acme expire
at varying dates between July 1997 and December 2001, while the Company's supply
agreement with Shoppers expires in 1996. Overall, sales to customers covered by
supply agreements accounted for approximately 79% of fiscal 1996 wholesale
division sales, including intersegment sales.
Management believes that the loss of one of the Company's larger customers could
have a material adverse effect on its business. However, management believes
that the Company's purchasing power, low cost structure and efficient service
levels, coupled with its commitment to the success of its retail customers,
should enable the Company to operate profitably in the event of the loss of a
larger customer.
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Products and Purchasing
The Company supplies a comprehensive selection of national brand and private
label grocery products, dairy products, frozen foods, fresh produce items,
meats, delicatessen and bakery products and non-food items from its three
modern, highly-efficient distribution centers. The Company offers its customers
a dependable supply and prompt delivery of over 32,000 grocery and non-grocery
items at competitive prices. The Company's business strategy includes assisting
its retail customers in adapting to changes in consumer preferences and in the
marketplace so they remain competitive. Accordingly, the Company continually
changes and enhances its product offerings to meet changing consumer demands.
The Company supplies more than 30,000 national brand products, which accounted
for approximately 90% of the Company's total wholesale grocery sales in fiscal
1996. The Company also offers private label products to its customers. Private
label products allow retail customers to carry single labels on a store-wide
basis similar to chain stores, while providing consumers a lower-priced
alternative to national brands. The Company currently offers approximately 1,300
products under the "RICHFOOD" label, 200 products under the budget-priced "ECON"
label, 100 products under the "IGA" label and 200 products under the "FROSTY
ACRES" label. The Company also coordinates private labels for certain regional
supermarket chains in the Mid-Atlantic region. In fiscal 1996, private label
products, including private label products packaged for certain customers,
accounted for approximately 10% of the Company's total wholesale grocery sales.
The Company is currently introducing its private label products to customers of
Super Rite, which historically did not have an extensive private label program.
The Company purchases products for resale from over 1,500 vendors in the United
States and overseas, and is not substantially dependent on any single source of
supply. The Company believes that its size enables it to purchase products at
the lowest available manufacturers' prices. The Company monitors manufacturers'
prices and uses its purchasing power to secure products at the best terms
available. In addition, because the Company maintains purchasing departments
associated with its Richfood/Virginia and Richfood/Pennsylvania operations,
Richfood is able to take advantage of regional buying opportunities. The Company
purchases long-term quantities of inventory items when manufacturers' prices are
advantageous ("forward-buys"). In particular, the Company purchases sufficient
quantities of certain staple items when offered at a discount and if justified
after giving effect to carrying costs.
Product Pricing
The Company sells products to its customers at landed vendor invoice cost. The
customer is also charged a service fee and a delivery fee based upon the
characteristics of the order. The fee structure includes incentives to encourage
customers to increase their purchases from the Company and to order and accept
merchandise for delivery more efficiently, thereby increasing the Company's
efficiency. Such incentives include minimum delivery fees that encourage
economic order quantities and lower fees for off-peak deliveries. Over the past
several years, the Company's pricing system, together with increased
efficiencies in purchasing operations, have resulted in more
competitively-priced merchandise and have placed the Company and its retail
customers in a stronger market position.
Logistics and Distribution
The Company is highly focused on reducing and controlling costs and on improving
efficiency in the logistics and distribution areas of its business. Over the
past five fiscal years, the Company's current management team has implemented
improvements in the logistics and distribution areas of its business that have
permitted Richfood to drive substantially increased volume through its
distribution system and to increase capacity utilization, thereby benefitting
from its operating leverage. These improvements have included: (i) implementing
state-of-the-art computer systems related to purchasing, inventory management
and fleet loading and routing; (ii) instituting a pricing system that encourages
customers to utilize the Company's services efficiently; and (iii)
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introducing warehouse management practices that reward workers for enhanced
productivity. Management believes that, as a result of its strategic focus on
cost control, logistics and distribution, the Company is now one of the most
efficient wholesale food distributors in the United States.
The Company distributes its products out of its three main distribution centers:
Richfood/Virginia's 1.3 million square foot Mechanicsville, Virginia
distribution center; Richfood/Pennsylvania's 635,000 square foot automated
distribution facility in Harrisburg, Pennsylvania; and Richfood/Pennsylvania's
6.3 million cubic foot frozen food distribution facility in West Point,
Pennsylvania. The Company's customers are generally located within 200 miles of
one of the Company's distribution centers.
Products are delivered to the Company's distribution centers by manufacturers,
common carriers and the Company's own fleet of trucks on return to its
distribution centers from deliveries to customers ("backhauls"). The Company
employs a management information system that enables it to lower its inbound
transportation costs by making optimum use of its own fleet for backhaul
opportunities. In addition, "drop shipments" are sent directly to retailers by
suppliers under programs established by the Company.
The Company produces and distributes catalogs with weekly updates indicating
manufacturers' prices and wholesale prices to customers for each of its more
than 32,000 products. In addition, the Company's sales personnel use
telemarketing to advise customers of periodic special prices and product
offerings. Customers place orders through direct computer links to the Company.
Customers' orders are then assembled in the appropriate distribution center,
shrink-wrapped to ensure order completeness and staged according to the required
delivery sequence. In fiscal 1996, the Company maintained an in-stock service
level of approximately 97%.
Products are delivered from the Company's distribution centers to retail
customers by the Company's drivers and contract carriers via trucks leased or
owned by the Company. In dispatching trucks for both pick-ups and deliveries,
the Company employs a computerized routing system designed to optimize delivery
efficiency and minimize drive time, wait time and excess mileage. Over the past
five fiscal years, improvements in the Company's fleet loading and routing
systems have permitted the Company to reduce the overall size of its fleet and
the cost per mile driven, even as the number of stores served has increased. The
Company currently leases 176 tractors, 202 refrigerated trailers and 331 dry
trailers, and owns 114 tractors, 128 refrigerated trailers and 128 dry trailers.
All of the Company's fleet utilizes on-board computer systems that monitor
vehicle speeds, fuel efficiency, idle time and other statistical information.
During fiscal 1996, the Mechanicsville, Virginia distribution center achieved an
on-time delivery record of approximately 96%.
Customers are billed for goods sold on a weekly basis with payment generally due
the following week. The Company reviews credit histories on an individual basis
and requires customers to provide collateral to secure outstanding accounts when
appropriate.
Retail Support
The Company's largest customers generally find it cost efficient to perform
their own retail support services and have selected the Company as a supplier
because of its competitive prices. The Company's smaller customers, however,
generally do not have the resources to perform the retail services that large
national chains provide to their individual stores. The Company offers a wide
variety of retail support services to assist its smaller customers. Customers
decide individually which services to use and are charged a fee for such
services.
Services offered by the Company include retail development, retail sales
consulting, marketing and merchandising assistance, data processing and
customized software, and financial planning and analysis. The Company's retail
development services are focused on store planning and development, and include
advising retailers on site planning through construction, lease negotiation,
product display and promotion. This assistance also includes demographic
studies, engineering support, contracting assistance and layout strategy. Retail
sales
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counselors assist customers with detailed analyses of their stores' operations,
pricing, advertising, delivery schedules, inventory control and merchandising
plans, to help each customer enhance its competitive position. Marketing
services include developing marketing strategies, designing and producing signs
and flyers and coordinating print and media campaigns. The Company provides data
processing services and customized software to many of its customers, which
allows them to manage accounting functions, time-and-attendance data and
inventories. The Company also assists customers in strategic planning and
capital budgeting as well as in cash management and overall financial planning.
The Company provides secured financing to retailers, primarily to finance store
acquisitions, construction and remodeling, generally at a variable interest rate
equal to the prime lending rate plus 2%. The Company has developed credit
criteria intended to ensure that such loans are made only with appropriate
collateral and in situations that are expected to contribute to the Company's
growth. The Company believes that its cash flow from operations and current
financing arrangements provide it with the necessary flexibility to offer
financing to its customers as a tool to expand its business. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
referred to in Item 7 of this Form 10-K.
At April 27, 1996, the Company had an aggregate $34.6 million of secured loans
outstanding to its retail customers. The Company expects to continue to provide
secured financing to creditworthy retail customers as part of its strategy to
retain existing business and attract new business. The amount of customer
financing that may be provided by the Company in future years is not presently
determinable since such amount will depend upon, among other things, the number
of store sites that are offered for sale or available for development in the
Company's service area and the availability of alternative sources of financing.
RETAIL OPERATIONS
The Company's METRO/BASICS Retail Division was acquired in connection with the
Super Rite Acquisition, and accounted for 9.9% of the Company's sales for fiscal
1996. The Company's Retail Grocery Division operates twelve 45,000 to 60,000
square foot "superstores" under the METRO tradename, and five smaller
traditional supermarkets under the BASICS tradename, in the metropolitan
Baltimore, Maryland and Dover, Delaware markets.
The Company believes that the METRO format offers significant opportunities for
growth. The METRO stores feature an expanded selection of higher-margin
perishables and prepared foods together with value-oriented dry groceries and
in-store banking facilities. In fiscal 1996, METRO/BASICS was the second largest
grocery retailer in the Baltimore market. During fiscal 1997, the Company
expects to continue its strategy of opening new METRO stores in the Baltimore
market and converting certain BASICS stores to the METRO format.
COMPETITION
The food distribution industry is highly competitive. The Company faces
competition from national, regional and local food distributors on the basis of
price, quality and assortment, frequency and reliability of deliveries and the
range and quality of services provided. In addition, the Company's customers and
its own METRO/BASICS Retail Division compete with retail supermarket chains that
provide their own distribution function, purchasing directly from producers and
distributing products to their supermarkets for sale to consumers.
The principal competitors of the Company's wholesale operations include Fleming
Companies, Inc., SuperValu Inc., Nash Finch Company, DiGiorgio Company,
Nassau-Suffolk Frozen Food Co., Inc. and Burris Foods, Inc. The primary retail
grocery competitors of the Company's wholesale customers and of the METRO/BASICS
Retail Division include Giant Food, Inc. based in Landover, Maryland, The Great
Atlantic & Pacific Tea Co., Weis Supermarkets, Inc., Safeway Inc., Food Lion,
Inc., Winn Dixie Stores, Inc., The Kroger Co., Harris Teeter, Inc. and Hannaford
Bros. Co.
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The Company believes that it can compete successfully on the wholesale level
while supporting the competitive efforts of its customers by pursuing its
business strategy focused on reducing and controlling costs, increasing
efficiency and pursuing profitable growth. In particular, the Company enhances
its competitive position by using its purchasing power, low cost structure and
efficient distribution system to provide products to its customers at the lowest
available prices, while offering its customers a wide variety of services to
support their competitive position. In addition, the Company expects to continue
to pursue opportunities for customers to acquire additional stores that become
available within and adjacent to the Company's principal service area.
EMPLOYEE RELATIONS
Management believes that relations with the Company's associates are excellent.
At April 27, 1996, the Company employed approximately 571 salaried and 4,354
non-salaried associates, compared to 555 salaried and 3,886 non-salaried
associates employed at April 29, 1995.
The Company is party to a four-year collective bargaining agreement that expires
in April 2000 covering its transportation unit employees at the Mechanicsville,
Virginia distribution center. The Company is also party to a four-year
collective bargaining agreement that expires in July 1998 covering warehouse
employees at the West Point, Pennsylvania distribution center and two four-year
collective bargaining agreements that expire in June 1997 covering employees of
the METRO/BASICS Retail Division. The Company is not a party to any other
collective bargaining agreements, nor is it aware of any pending union petitions
related to its employees.
REGULATION
The Company is subject to federal, state and local laws and regulations
governing the processing, purchase, handling, sale and transportation of its
products. Management believes that the Company is in material compliance with
all federal, state and local laws and regulations governing its business.
TRADEMARKS AND LICENSES
The Company owns or licenses various registered trademarks. Federal
registrations for the "RICHFOOD" and "ECON" trademarks have been obtained by the
Company for use on a variety of products distributed by the Company.
The Company licenses the "IGA" trademark from IGA, Inc., a Delaware non-stock
corporation. The IGA license authorizes the Company to supply "IGA" brand
products and to sublicense the "IGA" trademark to retailers that desire to
operate their retail stores under the "IGA" banner. IGA, Inc. may terminate the
license in the event the Company violates the terms of IGA, Inc.'s bylaws and
fails to cure the violation within the applicable cure period.
CERTAIN FINANCIAL INFORMATION
Information with respect to the Company's sales, operating profit and financial
condition for each of its past five fiscal years appears in the "Selected
Consolidated Financial Data" referred to in Item 6 of this Form 10-K.
Information with respect to the Company's working capital practices appears
above under the captions "Business Strategy -- Reducing and Controlling Costs;
Increasing Efficiency in Logistics and Distribution" and "Wholesale Operations
- -- Products and Purchasing," and in the "Financial Review" referred to in Item 7
of this Form 10-K.
ITEM 2. PROPERTIES
The Company's three principal facilities are: Richfood/Virginia's 1.3 million
square foot distribution center located in Mechanicsville, Virginia (the
"Mechanicsville Facility"); Richfood/Pennsylvania's leased 635,000 square foot
automated distribution facility located in Harrisburg, Pennsylvania (the
"Harrisburg Facility"); and
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Richfood/Pennsylvania's 6.3 million cubic foot highly automated frozen food
distribution facility located in West Point, Pennsylvania (the "West Point
Facility").
The Mechanicsville Facility, one of the largest grocery distribution centers in
the country, is situated on a 400 acre site, of which only 100 acres are
currently utilized. Richfood also has a long-term lease for a 550,000 square
foot warehouse in Chester, Virginia. Richfood currently utilizes approximately
355,000 square feet of the Chester warehouse, and subleases the remainder of the
facility to third parties under short-term leases. The Chester warehouse, which
formerly served as a regional grocery distribution center, is available to
supplement the Mechanicsville Facility to accommodate additional growth.
The Harrisburg Facility is a 635,000 square foot state-of-the-art distribution
center that utilizes fully automated inventory handling equipment. The lease for
the Harrisburg Facility expires in 2025. The Company also operates 160,480
square feet of refrigerated warehouse space in neighboring Shiremanstown,
Pennsylvania, under a lease that expires in 2015.
The West Point Facility is a highly automated, frozen food distribution facility
with 6.3 million cubic feet of refrigerated space. In addition, there are
approximately 185,000 square feet of office space and truck maintenance
facilities associated with this facility.
The Richfood Dairy, located in Richmond, Virginia, is a 65,000 square foot
facility capable of processing and packaging over 550,000 gallons per week of
milk and other dairy products, fruit juices, bottled water and related items.
This facility is owned by Richfood.
The METRO/BASICS Retail Division operates seventeen retail stores in the
Baltimore, Maryland and Dover, Delaware markets. These retail locations are all
leased on a long-term basis with lease terms, including options, exceeding four
years.
Each of the foregoing facilities is well-maintained and in good operating
condition. The Company believes that each of its facilities has adequate
capacity to meet the demands of anticipated growth.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to various legal actions that are incidental to its
business. While the outcome of legal actions cannot be predicted with certainty,
the Company believes that the outcome of any of these proceedings, or all of
them combined, will not have a material adverse effect on its consolidated
financial position or business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS
The following persons are executive officers of the Company. Officers serve at
the discretion of the Company's Board of Directors and are elected at each
annual meeting of the Board of Directors.
Donald D. Bennett, age 60, was elected Chairman of the Board and Chief Executive
Officer of the Company in June 1995. Mr. Bennett formerly served as President
and Chief Executive Officer of the Company from May 1990 to June 1995.
-9-
<PAGE>
John E. Stokely, age 43, was elected President and Chief Operating Officer of
the Company in June 1995 after serving as Executive Vice President-Finance and
Administration of the Company from August 1993 to June 1995. Mr. Stokely was
formerly Senior Vice President-Finance and Chief Financial Officer of the
Company from April 1991 to August 1993 and Vice President-Finance and Chief
Financial Officer of the Company from August 1990 to April 1991.
Gary L. Conrad, age 51, was elected Executive Vice President-Distribution and
Logistics of the Company in February 1996. Mr. Conrad formerly served as
Richfood, Inc.'s Executive Vice President-Distribution and Logistics from June
1995 to February 1996, Senior Vice President-Distribution and Logistics from
October 1994 to June 1995 and Vice President-Distribution of Richfood from
January 1988 to October 1994.
J. Stuart Newton, age 41, was elected Senior Vice President and Chief Financial
Officer of the Company in November 1995. Mr. Newton formerly served as Vice
President-Finance and Treasurer of Best Products Co., Inc. from June 1994 to
November 1995 and as Vice President and Controller of Best Products Co., Inc.
from 1991 to June 1994. Mr. Newton was Vice President, Finance and Treasurer of
Perry Drug Stores, Inc. from 1988 to 1991.
Daniel R. Schnur, age 36, was elected Senior Vice President, General Counsel and
Secretary of the Company in June 1995. Mr. Schnur formerly served as the
Company's Vice President, General Counsel and Secretary from January 1992 to
June 1995, and General Counsel and Secretary from January 1991 to January 1992
David W. Hoover, age 33, was elected Vice President-Finance of the Company in
August 1993. Mr. Hoover formerly served as Director, Planning and Analysis of
the Company from December 1990 to August 1993.
Alec C. Covington, age 39, was elected President and Chief Operating Officer of
Richfood, Inc. in May 1996. Mr. Covington formerly served as Executive Vice
President and Chief Operating Officer of Richfood, Inc. from October 1995 to May
1996 and President and Chief Operating Officer of Houchens Industries, Inc. from
June 1993 to October 1995. From 1990 to 1993, Mr. Covington served as President
of the Quincy, Florida division of SuperValu Inc. and President of the
Greenville, Kentucky division of Wetterau, Inc.
David G. Gundling, age 45, was elected President and Chief Operating Officer of
the wholesale division of Super Rite Foods, Inc. in October 1995. Mr. Gundling
formerly served as Executive Vice President of Super Rite Foods, Inc. from 1987
to 1995.
John D. Ryder, age 48, was elected President and Chief Operating Officer of the
retail division of Super Rite Foods, Inc. in 1990.
John F. Rotelle, age 60, was elected Chairman of Rotelle in October 1995. Mr.
Rotelle formerly was President of Rotelle, having served in such capacity since
1959.
Christopher A. Brown, age 33, was elected Senior Executive Vice President of
Super Rite Foods, Inc. in March 1996. Mr. Brown formerly served as President and
Chief Operating Officer of Rotelle from October 1995 through March 1996 and
Executive Vice President and Chief Operating Officer of Rotelle from August 1994
to October 1995. Mr. Brown was formerly Richfood, Inc.'s Executive Vice
President-Procurement and Marketing from September 1993 to August 1994, Senior
Vice President-Procurement from September 1992 to September 1993 and Vice
President-Procurement from February 1991 to August 1992.
-10-
<PAGE>
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K includes forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Although the Company
believes that its expectations are based on reasonable assumptions, it can give
no assurance that its goals or strategies will be achieved. Important factors
that could cause actual results to differ materially from those reflected in the
forward looking statements made herein include: any delay in realizing, or
inability to realize, the anticipated synergies related to the Super Rite
Acquisition; any failure to implement successfully the Company's plans to expand
Super Rite's product offerings; and any other factors and assumptions related to
forward looking statements set forth elsewhere in this Annual Report on Form
10-K.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock of the Company is traded in the over-the-counter (OTC) market
and is quoted through The Nasdaq National Market under the symbol RCHF. As of
June 28, 1996, there were 1,378 holders of record of the Company's Common Stock.
The information set forth under the headings "Market Price Range" and "Cash
Dividends Declared Per Common Share" and in the final paragraph of note 14 to
the Company's Consolidated Financial Statements, which appears in the Company's
Annual Report to Shareholders for Fiscal 1996 (the "1996 Annual Report"), is
hereby incorporated by reference.
The Company has paid cash dividends on its Common Stock since September 1991.
The Company expects to continue paying cash dividends on its Common Stock when
justified by the Company's financial condition. The amount of future dividends,
if any, will depend on general business conditions encountered by the Company,
its earnings, financial condition and capital requirements and such other
factors as the Board of Directors of the Company may deem relevant.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing under the caption "Selected Consolidated Financial
Data," which appears in the 1996 Annual Report, is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information appearing under the caption "Financial Review," which appears in
the 1996 Annual Report, is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and related notes of Richfood Holdings,
Inc. and its subsidiaries, together with the report of KPMG Peat Marwick LLP
thereon, which appear in the 1996 Annual Report, are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-11-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Company's Proxy Statement prepared for use in
connection with the 1996 annual meeting of shareholders (the "1996 Proxy
Statement") under the captions "Nominees for Election to the Board of
Directors," "Board of Directors and Committees" and "Section 16(a) Compliance"
is incorporated herein by reference. See also "Executive Officers" at the end of
Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the 1996 Proxy Statement under the caption
"Executive Compensation" is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained in the 1996 Proxy Statement under the caption
"Security Ownership of Certain Beneficial Owners and Management" is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the 1996 Proxy Statement under the captions
"Certain Relationships and Related Transactions" and "Compensation Committee
Interlocks and Insider Participation" is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) Financial statements, financial statement schedules and exhibits
included in this Form 10-K:
1. Financial Statements:
The following consolidated financial statements and independent
auditors' report, which appear on pages 19 through 33 of the 1996
Annual Report, are incorporated herein by reference:
Report of KPMG Peat Marwick LLP.
Richfood Holdings, Inc. Consolidated Balance Sheets at April 27,
1996, and April 29, 1995.
Richfood Holdings, Inc. Consolidated Statements of Earnings for
the fiscal years ended April 27, 1996, April 29, 1995 and April
30, 1994.
Richfood Holdings, Inc. Consolidated Statements of Shareholders'
Equity for the fiscal years ended April 27, 1996, April 29, 1995,
and April 30, 1994.
Richfood Holdings, Inc. Consolidated Statements of Cash Flows for
the fiscal years ended April 27, 1996, April 29, 1995, and April
30, 1994.
-12-
<PAGE>
Notes to Consolidated Financial Statements.
In addition, the report of Coopers & Lybrand L.L.P., which is referred
to in the report of KPMG Peat Marwick LLP, is filed herewith.
2. Financial Statement Schedules:
Report of KPMG Peat Marwick LLP.
Schedule I Condensed Financial Information of Registrant.
Schedule II Valuation and Qualifying Accounts.
Schedules other than those listed above have been omitted because such
schedules are not required or are not applicable.
3. Exhibits:
The exhibits that are required to be filed or incorporated by
reference herein are listed in the Exhibit Index. Exhibits 10.1 to
10.18 hereto constitute management contracts or compensatory plans or
arrangements required to be filed as exhibits hereto.
(b) Reports on Form 8-K:
None.
-13-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Super Rite Corporation
Harrisburg, Pennsylvania
We have audited the consolidated balance sheet of Super Rite Corporation and
subsidiaries as of March 4, 1995 and the related consolidated statements of
income, cash flows and stockholders' equity for the fifty-three week period
ended March 4, 1995 and the fifty-two week period ended February 26, 1994 (not
presented herein). We have also audited the financial statement schedules of
Super Rite Corporation as of March 4, 1995 and for the fifty-two week period
ended February 26, 1994 (not presented herein). These consolidated financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated 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 provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Super
Rite Corporation and subsidiaries as of March 4, 1995, and the consolidated
results of their operations and their cash flows for the fifty-three week period
ended March 4, 1995 and the fifty-two week period ended February 25, 1994 in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Harrisburg, Pennsylvania April 21, 1995, except for the sixth paragraph of Note
6 which is dated as of May 5, 1995
-14-
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors
Richfood Holdings, Inc.:
Under date of June 10, 1996, we reported on the consolidated balance sheets of
Richfood Holdings, Inc. and subsidiaries (the Company) as of April 27, 1996 and
April 29, 1995, and the related consolidated statements of earnings,
shareholders' equity and cash flows for each of the fiscal years in the
three-year period ended April 27, 1996, which are included in the Company's 1996
annual report to shareholders. These consolidated financial statements and our
report thereon are incorporated by reference in the annual report on Form 10-K
of Richfood Holdings, Inc. for the fiscal year ended April 27, 1996. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedules as listed
in the accompanying index. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based on our audits. The
consolidated financial statements and financial statement schedules give effect
to the merger on October 15, 1995 of a wholly-owned subsidiary of Richfood
Holdings, Inc. with and into Super Rite Corporation, which has been accounted
for using the pooling of interests method as described in note 2 to the
consolidated financial statements. We did not audit the fiscal 1995 and 1994
consolidated financial statements and financial statement schedules of Super
Rite Corporation, which consolidated financial statements reflect total assets
constituting approximately 48% of the related consolidated financial statement
total at April 29, 1995, and reflect sales constituting approximately 49% of the
related consolidated financial statement totals for each of fiscal 1995 and
1994. The fiscal 1995 and 1994 consolidated financial statements and financial
statement schedules of Super Rite Corporation were audited by other auditors,
whose reports thereon have been furnished to us, and our opinion expressed
herein, insofar as it relates to the amounts included for Super Rite
Corporation, is based solely on the reports of the other auditors.
In our opinion, based on our audits and the reports of other auditors, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
KPMG Peat Marwick LLP
Richmond, Virginia
June 10, 1996
-19-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I-CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RICHFOOD HOLDINGS, INC.
CONDENSED STATEMENTS OF EARNINGS
(dollar amounts in thousands)
Fiscal Year Ended
April 27, April 29, April 30,
1996 1995 1994
<S> <C>
Sales $1,754 $ - $ -
Cost and expenses, net:
Cost of goods sold 1,841 - -
Operating and administrative expenses 4,781 - -
Interest expense, net 305 1,035 -
Income tax benefit (1,590) (399) -
--------- ------------ -------
Net loss before equity in net earnings
of subsidiaries and equity in
extraordinary loss of subsidiary (3,583) (636) -
Equity in net earnings of subsidiaries 42,798 39,854 21,371
-------- -------- --------
Net earnings before equity in extraordinary
loss of subsidiary 39,215 - -
Equity in extraordinary loss of subsidiary (2,164) - -
-------- -------- --------
Net earnings $37,051 $39,218 $21,371
======== ======== ========
</TABLE>
See notes to condensed financial information.
-15-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I-continued
RICHFOOD HOLDINGS, INC.
CONDENSED BALANCE SHEETS
(dollar amounts in thousands)
April 27, April 29,
1996 1995
Assets
Current assets:
<S> <C>
Intercompany receivables $ 40,612 $ 1,708
Other 3,697 -
------------- -----------
Total current assets 44,309 1,708
Investment in subsidiaries 185,246 194,940
Other 1,113 -
------------ ------------
Total assets $ 230,668 $ 196,648
============ ===========
Liabilities and Shareholders' Equity
Current liabilities:
Intercompany payables $ 5,850 $ 36,135
Accrued expenses and other current
liabilities 20,757 183
----------- ------------
Total current liabilities 26,607 36,318
Deferred credits and other 4,499 -
Shareholders' Equity:
Common stock 66,964 63,978
Retained earnings 132,598 96,352
----------- -----------
Total shareholders' equity 199,562 160,330
----------- -----------
Total liabilities and shareholders' equity $ 230,668 $ 196,648
============ ===========
</TABLE>
See notes to condensed financial information.
-16-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I-continued
RICHFOOD HOLDINGS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
Fiscal Year Ended
April 27, April 29, April 30,
1996 1995 1994
Operating activities:
<S> <C>
Net earnings $ 37,051 $ 39,218 $ 21,371
Adjustments to reconcile net earnings
to net cash used for operating activities:
Changes in operating assets and liabilities 18,045 - -
Equity in net earnings of subsidiaries (40,634) (39,854) (21,371)
--------- --------- ----------
Net cash provided by (used for) operating activities 14,462 (636) -
Investing activities:
Acquisitions - (50,266) -
Investment in subsidiaries (18,829) - -
------------ ------------ ----------
Net cash used for investing activities (18,829) (50,266) -
Financing activities:
Proceeds from long-term debt - 35,000 -
Principal payments on long-term debt - (35,000) -
Proceeds from issuance of common
stock under employee stock
incentive plans and other 2,545 93 91
Cash dividends from subsidiaries 18,829 - -
Borrowings/(repayments) from
subsidiaries, net (14,058) 52,842 1,557
Cash dividends paid on common stock (2,949) (2,033) (1,648)
------------ ------------ ------------
Net cash provided by financing activities 4,367 50,902 -
------------ ------------ ------------
Increase in cash and cash equivalents - - -
Cash and cash equivalents at beginning
of fiscal year - - -
============= ============= ============
Cash and cash equivalents at end
of fiscal year $ - $ - $ -
=========== ============ =============
See notes to condensed financial information.
-17-
<PAGE>
SCHEDULE I-continued
RICHFOOD HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL INFORMATION
(DOLLAR AMOUNTS IN THOUSANDS)
1. Basis of Presentation
Pursuant to the rules and regulations of the Securities and Exchange Commission,
the Condensed Financial Statements of Richfood Holdings, Inc. do not include all
of the information and notes normally included with financial statements
prepared in accordance with generally accepted accounting principles. Therefore,
these Condensed Financial Statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the fiscal 1996
Annual Report to Shareholders as referenced in Form 10-K, Part II, Item 8.
The Condensed Financial Information presented for fiscal 1995 and fiscal 1994
have been restated for the fiscal 1996 business combination which was accounted
for as a pooling of interests. See note 2 to the Consolidated Financial
Statements on pages 25 and 26 of the Company's 1996 Annual Report to
Shareholders, incorporated herein by reference, for information on the business
combination.
2. Long-term Debt
On August 23, 1994, Richfood Holdings, Inc. entered into a $35 million revolving
credit facility with a commercial bank to finance a portion of the purchase
price of its acquisition of Rotelle. See note 2 to the Consolidated Financial
Statements on pages 25 and 26 of the Company's 1996 Annual Report to
Shareholders, incorporated herein by reference. The revolving credit facility
was repaid in full in fiscal 1995.
On September 1, 1994, Richfood Holdings, Inc. entered into an unsecured
revolving credit facility pursuant to which Richfood Holdings, Inc. may borrow
up to $50 million from a wholly owned subsidiary. The revolving credit facility
expires in December 1996 and bears interest at the prime rate plus 2%. At April
27, 1996, there were no borrowings outstanding under this facility.
Interest payments made under long-term debt were $159 and $862 in fiscal 1996
and fiscal 1995, respectively. No interest payments were made in fiscal 1994.
3. Related Party Transactions
Transactions between Richfood Holdings, Inc. and its subsidiaries are as
follows:
Fiscal year ended
April 27, April 29, April 30,
1996 1995 1994
Interest expense $190 $169 -
During fiscal 1996, Richfood Holdings, Inc. received $71,836 of dividends from
its subsidiaries. No dividends were paid to Richfood Holdings, Inc. by its
subsidiaries during fiscal 1995 or fiscal 1994.
-18-
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE II
RICHFOOD HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(Dollar amounts in thousands)
Balance at Charged to Balance at
Beginning of Costs and Deductions End of
Description Fiscal Year Expenses and other Fiscal Year
<S> <C>
For Fiscal Year Ended
April 27, 1996
Deducted for asset accounts:
Allowance for doubtful accounts 4,744 6,197 5,368 5,573
For Fiscal Year Ended
April 29, 1995
Deducted for asset accounts:
Allowance for doubtful accounts 3,518 4,490 3,264 4,744
For Fiscal Year Ended
April 30, 1994
Deducted for asset accounts:
Allowance for doubtful accounts 4,638 2,938 4,058 3,518
</TABLE>
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
RICHFOOD HOLDINGS, INC.
(Registrant)
/s/ Donald D. Bennett
------------------------
July 26, 1996
Donald D. Bennett
Chairman of the Board and
Chief Executive Officer
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.
By /s/ Donald D. Bennett
- -------------------------
Donald D. Bennett
Chairman of the Board and
Chief Executive Officer
By /s/ Roger L. Gregory
- ------------------------
Roger L. Gregory
Director
By /s/ Grace E. Harris
- ------------------------
Grace E. Harris
Director
By /s/ John C. Jamison
- ------------------------
John C. Jamison
Director
By /s/ Michael E. Julian, Jr.
- ----------------------------
Michael E. Julian, Jr.
Director
By /s/ G. Gilmer Minor, III
- ----------------------------
G. Gilmer Minor, III
Director
By /s/ Claude B. Owen, Jr.
- ----------------------------
Claude B. Owen, Jr.
Director
By /s/ John F. Rotelle
- ---------------------------
John F. Rotelle
Director
By /s/ Albert F. Sloan
- ---------------------------
Albert F. Sloan
Director
By /s/ John E. Stokely
- ---------------------------
John E. Stokely
Director, President and
Chief Operating Officer
By /s/ George H. Thomazin
- ----------------------------
George H. Thomazin
Director
By /s/ James E. Ukrop
- ----------------------------
James E. Ukrop
Director
By /s/ Edward Villanueva
- ----------------------------
Edward Villanueva
Director
By /s/ J. Stuart Newton
- ----------------------------
J. Stuart Newton
Senior Vice President and
Chief Financial Officer
By /s/ David W. Hoover
- ---------------------------
David W. Hoover
Vice President - Finance
(Principal Accounting Officer)
Each of the above signatures is affixed as of July 26, 1996.
-21-
<PAGE>
EXHIBIT INDEX
Page
2.1 Agreement and Plan of Reorganization, dated June 26, 1995,
by and between the Company and Super Rite Corporation. (1)
2.2 Amendment No. 1, dated October 13, 1995, to the Agreement
and Plan of Reorganization by and between the Company and
Super Rite Corporation. (2)
2.3 Amendment No. 2, dated February 6, 1996, and effective as
of October 15, 1995, to the Agreement and Plan of
Reorganization by and between the Company and Super Rite
Corporation. (3)
The Registrant agrees to furnish supplementally to the
Securities and Exchange Commission, upon request, copies of any
exhibits to such Agreement and Plan of Reorganization that were
not filed pursuant to Item 601(b)(2) of Regulation S-K.
3.1 Amended and Restated Articles of Incorporation of the
Company. (4)
3.2 Bylaws of the Company, amended and restated as of June 8,
1995. (5)
10.1 Employment and Severance Benefits Agreement, dated May 21,
1993, between the Company and Donald D. Bennett. (6)
10.2 First Amendment, dated July 21, 1995, to Employment and
Severance Benefits Agreement, dated May 21, 1993, between
the Company and Donald D. Bennett. (5)
10.3 Employment and Severance Benefits Agreement, dated as of
April 28, 1996, between the Company and Donald D. Bennett.
10.4 Employment and Severance Benefits Agreement, dated June 8,
1995, between the Company and John E. Stokely. (5)
10.5 Employment and Severance Benefits Agreement, dated April
28, 1996, between the Company and John E. Stokely.
10.6 Employment and Severance Benefits Agreement, dated August
23, 1994, between Rotelle, Inc. and John F. Rotelle. (5)
10.7 Employment Agreement, dated October 13, 1995, between
Super Rite Corporation and David G. Gundling.
10.8 Employment Agreement, dated October 13, 1995 between Super
Rite Corporation and John D. Ryder.
10.9 Employment Agreement, dated October 13, 1995, between
Super Rite Corporation and Peter Vanderveen.
10.10 Letter Agreement, dated June 14, 1996, between the Company and
Peter Vanderveen.
10.11 Consulting Agreement, dated April 28, 1996, between the
Company and Edgar E. Poore.
10.12 Amended and Restated Long-Term Incentive Plan. (7)
10.13 Amended and Restated Omnibus Stock Incentive Plan. (7)
10.14 Non-Employee Directors' Stock Option Plan. (5)
<PAGE>
10.15 Supplemental Executive Retirement Plan and related Trust
Agreement. (8)
10.16 Executive Officer Performance Plan. (9)
10.17 Executive Profit Sharing Deferred Income Growth Program.
(10)
10.18 Super Rite Corporation 1991 Omnibus Stock Incentive Plan.
(11)
10.19 Deferred Compensation Agreement, dated as of January 4,
1988, by and between David Gundling and Super Rite
Corporation. (12)
10.20 Bylaws of IGA, Inc., restated as of March 1, 1988. (6)
10.21 Promissory Note and Security Agreement, dated May 18,
1992, between Market Improvement Corporation and
Marketplace Acquisition Company. (6)
10.23 Revised and Restated Lease Agreement, dated October 13,
1995, between G. F. Lucknow Associates, as Landlord, and
Super Rite Foods, Inc.
10.24 Lease, dated November 1, 1977, originally made between
Safe-Chester Associates, as lessor, and Safeway Stores,
Incorporated, as lessee, as assigned to Richfood. (13)
11.1 Statement re computation of net earnings per common share.
12.1 Statement re computation of certain ratios.
13.1 Portions of Richfood Holdings, Inc.'s 1996 Annual Report
to Shareholders.
21.1 Subsidiaries of the Company.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
27.1 Financial Data Schedule.
The Registrant agrees to furnish to the Securities and Exchange
Commission, upon request, copies of those agreements defining the rights
of holders of long-term debt of the Registrant and its subsidiaries that
are not filed herewith pursuant to Item 601(b)(4)(iii) of Regulation S-K.
- ----------------------------
(1) Incorporated by reference to the Company's Current Report
on Form 8-K dated June 26, 1995 (Commission File No.
0-16900).
(2) Incorporated by reference to the Company's Current Report
on Form 8-K dated October 15, 1994 (Commission File No.
0-16900).
(3) Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended January 6, 1996
(Commission File No. 0-16900).
(4) Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the twelve week period ended July 24, 1993
(Commission File No. 0-16900).
(5) Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended April 29, 1995
(Commission File No. 0-16900).
<PAGE>
(6) Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended May 1, 1993 (Commission
File No. 0-16900).
(7) Incorporated by reference to the Company's Annual report on
Form 10-K for the fiscal year ended April 30, 1994
(Commission File No. 0-16900).
(8) Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended May 2, 1992 (Commission
File No. 0-16900).
(9) Incorporated by reference to the Company's Annual report on
Form 10-K for the fiscal year ended April 28, 1990
(Commission File No. 0-16900).
(10) Incorporated by reference to the Company's Registration
Statement on Form S-4 (Commission File No. 33-16174).
(11) Incorporated by reference to the Company's Registration
Statement on Form S-8 (Commission File No. 33-63447).
(12) Incorporated by reference to the Registration Statement on
Form S-4 (Commission File No. 33-30712) of Super
Rite Corporation (Commission File No. 0-17965).
(13) Incorporated by reference to the Company's Annual report on
Form 10-K for the fiscal year ended April 30, 1988
(Commission File No. 0-16900).
EXHIBIT 10.3
EMPLOYMENT AND SEVERANCE BENEFITS AGREEMENT
EMPLOYMENT AND SEVERANCE BENEFITS AGREEMENT (the "Agreement"), dated as
of April 28, 1996, between RICHFOOD HOLDINGS, INC., a Virginia corporation (the
"Company"), and DONALD D. BENNETT (the "Employee").
WHEREAS, the Board of Directors and the Executive Compensation Committee
(the "Committee") of the Board of Directors of the Company expect that the
Employee will make substantial contributions to the future growth and prospects
of the Company; and
WHEREAS, the Board and the Committee desire to obtain for the Company the
continued services of the Employee; and
WHEREAS, the Employee desires to continue to be employed by the Company
and to remain in the employ of the Company during the term of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto covenant and agree as
follows:
1. Definitions. When used in this Agreement, the following
terms shall have the meanings specified:
(a) Cause. "Cause," when referring to a termination of
employment, shall mean: (i) conviction by a court of competent jurisdiction for
a felony involving moral turpitude or which brings the Employee into disrepute
or causes material harm to the Company; (ii) breach of any material obligation
to the Company under any material agreement concerning any term of employment;
or (iii) willful or gross neglect of duties to the Company, which neglect is not
corrected within 30 days after notice from the Company, or willful or gross
misconduct in the performance of such duties. All determinations as to whether
termination is for Cause shall be made in good faith by the Board of Directors
of the Company and shall be binding on the parties hereto.
(b) Change in Control. A "Change in Control" of the
Company shall be deemed to have occurred if: (i) any "person" (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended) becomes the beneficial owner, directly or indirectly, of securities of
the Company representing more than 50% of the aggregate voting power of all
classes of the Company's then outstanding voting securities; or (ii) the
shareholders of the Company approve (A) a plan of merger, consolidation or share
exchange between the Company and an entity other than a direct or indirect
wholly-owned subsidiary of the Company, or (B) a proposal with respect to the
sale, lease, exchange or other disposal of all, or substantially all, of the
Company's property.
(c) Disability. "Disability" shall mean a condition,
determined on the basis of medical evidence satisfactory to a physician
designated by the Board of Directors of the Company, rendering the Employee, due
to bodily injury or disease or mental illness, unable to perform the duties
pertaining to his employment with the Company on a full-time basis for 180
consecutive days.
(d) Pre-Tax FIFO Earnings. The Company's "Pre-Tax FIFO
Earnings" for any fiscal year shall be deemed to be the Company's consolidated
earnings before provision for income taxes as reflected on the Company's audited
consolidated Statement of Operations for such fiscal year, as adjusted by
valuing inventories using the first-in, first-out method; provided, however,
that in calculating Pre-Tax FIFO Earnings for purposes of this Agreement, the
Board of Directors of the Company may, at its option, exclude any non-recurring
or extraordinary items affecting the Company's earnings for such period.
2. Term. This Agreement shall continue in full force and
effect through December 31, 1998.
3. Employment; Consulting Agreement; Election to the Board of
Directors. (a) The Company agrees to employ the Employee as: (i) its Chairman
of the Board and Chief Executive Officer through December 31, 1996; and (ii) as
its Chairman of the Board from January 1, 1997, through December 31, 1998, in
each case with a job description, responsibilities and duties commensurate with
his position; provided,
<PAGE>
however, that the Company may terminate the Employee's employment hereunder at
any time, subject to the provisions of Sections 5, 6, 7 and 8 hereof (it being
expressly understood that this Agreement is not intended to alter the at-will
nature of the Company's employment of the Employee). In consideration of the
Company's obligations under this Agreement, the Employee agrees that: (i) he
will not voluntarily leave the employment of the Company during the term of this
Agreement; and (ii) he will devote his full business time and attention to
service to the Company and its subsidiaries commensurate with his position
throughout the term of this Agreement (it being understood that after December
31, 1996, the Employee will not be required to be present at the Company's
facilities on a full-time basis).
(b) The Company and the Employee agree that prior to the
expiration of the term of this Agreement, they will enter into a consulting
agreement which will: (i) have a term commencing upon the expiration of this
Agreement and terminating upon the Employee's having attained the age of 65; and
(ii) provide that the Employee will perform services as a consultant to the
Company in such scope and for such compensation, and subject to customary
noncompetition agreements, as shall be mutually agreed upon by the Employee and
the Company.
(c) The Board of Directors of the Company agrees to
nominate the Employee for election to such Board at each annual meeting of
shareholders during the term of this Agreement and to use its best efforts to
cause the Employee to be duly elected to such Board at such shareholders'
meetings.
4. Compensation. During the term of this Agreement, and unless the
Employee's employment has been earlier terminated, the Company agrees to pay the
Employee as compensation for his services hereunder: (a) an annual base salary
of Five Hundred Thousand Dollars ($500,000); (b) permit the Employee to
participate in such long-term incentive compensation programs as the Committee
may make generally available to the Company's executive employees; (c) provide
for the benefit of the Employee such vacation, pension and disability benefits
as are, and such coverage under life, accident, medical and dental plans as is,
generally provided from time to time to the Company's executive employees;
provided, however, that the Company agrees to pay the Employee's portion of the
premiums for coverage under such life, accident, medical and dental plans; (d)
provide a car that is owned or leased by the Company for the Employee's use,
which car shall be of comparable quality to the car currently provided to the
Employee by the Company; and (e) pay for the Employee's initiation and annual
membership fees in a single business club located in the Richmond, Virginia,
metropolitan area. The Company will not be obligated to pay the Employee an
annual incentive bonus during the term of this Agreement.
5. Supplemental Executive Retirement Plan. As of the date of this
Agreement, the Company's Supplemental Executive Retirement Plan (the "SERP")
will be amended or otherwise modified to provide that the Employee is entitled
to a vested benefit thereunder based upon the Employee having attained age 65
and having completed 20 years of credited service, with credited monthly
compensation to be based on the $500,000 annual base salary contemplated in this
Agreement. In addition, upon any Change in Control of the Company, the Employee
shall be entitled to receive a lump-sum payment in an amount equal to the
actuarial equivalent of the benefit the Employee otherwise would be entitled to
receive upon retirement under the SERP, with the amount of such lump sum payment
to be calculated in accordance with Exhibit A attached hereto.
6. Post-Employment Benefits. Unless the Employee's employment is
terminated during the term of this Agreement (a) by the Company for Cause, or
(b) by the Employee (other than upon his Disability or following a Change in
Control of the Company), the Company agrees to provide for the benefit of the
Employee, upon the termination of the Employee's employment: (i) coverage under
life insurance policies consistent with those currently provided for the benefit
of the Employee through age 65; and (ii) coverage under such medical and dental
plans as is generally provided from time to time to the Company's executive
employees until the Employee's death (or, if the Employee is not entitled to
participate in such plans under the terms thereof following the termination of
his employment, then under third party arrangements that provide substantially
comparable coverage); provided, however, that the Company agrees to pay the
Employee's portion of the premiums for all such coverage.
7. Severance. In the event the Employee's employment is terminated (a) by
the Company during the term of this Agreement for any reason other than for
Cause or upon the Employee's death or Disability, or (b) by the Company for any
reason within one year after a Change in Control of the Company other than upon
the Employee's death or Disability, or (c) by the Employee for any reason within
one year after a Change in Control of the Company, then in each such instance
the Company shall pay to the Employee, in addition to any compensation, annual
incentive compensation or other incentive compensation awards theretofore
<PAGE>
earned by, or awarded to, the Employee that have not yet been paid to him, a
severance benefit in the amount of Five Hundred Thousand Dollars ($500,000).
Such severance benefit shall be paid to the Employee in a lump sum within sixty
(60) days of the date of such termination. The amount of such severance benefit
shall not be reduced by any compensation earned by the Employee as a result of
employment by another employer after the date of termination or otherwise.
8. Change in Control/Excise Taxes. If a Change in Control occurs during
the term of this Agreement and the Employee becomes liable, in any taxable year,
for the payment of an excise tax under Internal Revenue Service Code ("Code")
section 4999 with respect to any payment or benefit under this Agreement or
under any stock option plan or other program of the Company (including, for
example, the accelerated exercisability of stock options upon a Change in
Control) without regard to whether a termination of employment has occurred, the
Company shall pay to the Employee (i) an amount equal to the excise tax for
which the Employee is liable under Code section 4999, plus (ii) the federal,
state and local income taxes, and the hospital insurance tax under Code section
3111(b), for which the Employee is liable on account of the payment described in
clause (i) of this Section, together with an amount sufficient to satisfy any
additional federal, state or local income taxes or hospital insurance tax for
which the Employee is liable on account of the amounts received pursuant to this
clause (ii). Such payment shall be made in one or more installments at times
necessary to permit the Employee to make estimated tax payments with respect to
the Employee's relevant taxable year and a final payment shall be made not later
than 20 days after the date (or extended filing date) on which the tax return
reflecting the liability for such excise tax is required to be filed with the
Internal Revenue Service.
9. Successors; Binding Agreement. (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement, "Company"
shall mean the Company as defined herein and any successor to its business
and/or assets that executes and delivers the agreement provided for in this
Section 9 or that otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law or otherwise.
(b) This Agreement shall inure to the benefit of and be
enforceable by the personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees of the Employee.
10. Notice. For purposes of this Agreement, notice and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Company:
Richfood Holdings, Inc.
8258 Richfood Road
P. O. Box 26967
Richmond, Virginia 23261
Attention: President
with a copy to:
Gary E. Thompson, Esquire
Hunton & Williams
Riverfront Plaza - East Tower
951 E. Byrd Street
Richmond, Virginia 23219-4074
If to the Employee, to his address as reflected from time-to-time in the
personnel records of the Company. Either party hereto may change its address for
purposes of this Section by furnishing written notice to the other party in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
<PAGE>
11. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Employee and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver by either party
hereto at any time of any breach by the other party hereof of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. This Agreement constitutes the
entire agreement, and supersedes all prior agreements and understandings,
between the parties with respect to the subject matter hereof. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Virginia.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force
and effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed on its behalf, and the Employee has duly executed this Agreement, all
as of the date first above written.
RICHFOOD HOLDINGS, INC.
By: /s/ John E. Stokely
-----------------------
John E. Stokely
President and
Chief Operating
Officer
EMPLOYEE:
/s/ Donald D. Bennett
-----------------------
DONALD D. BENNETT
EXHIBIT 10.5
EMPLOYMENT AND SEVERANCE BENEFITS AGREEMENT
EMPLOYMENT AND SEVERANCE BENEFITS AGREEMENT (the "Agreement"), dated as
of April 28, 1996, between RICHFOOD HOLDINGS, INC., a Virginia corporation (the
"Company"), and JOHN E. STOKELY (the "Employee").
WHEREAS, the Board of Directors and the Executive Compensation Committee
(the "Committee") of the Board of Directors of the Company expect that the
Employee will make substantial contributions to the future growth and prospects
of the Company; and
WHEREAS, the Board and the Committee desire to obtain for the Company the
continued services of the Employee; and
WHEREAS, the Employee desires to continue to be employed by the Company
and to remain in the employ of the Company during the term of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto covenant and agree as
follows:
1. Definitions. When used in this Agreement, the following
terms shall have the meanings specified:
(a) Cause. "Cause," when referring to a termination of
employment, shall mean: (i) conviction by a court of competent jurisdiction for
a felony involving moral turpitude or which brings the Employee into disrepute
or causes material harm to the Company; (ii) breach of any material obligation
to the Company under any material agreement concerning any term of employment;
or (iii) willful or gross neglect of duties to the Company, which neglect is not
corrected within 30 days after notice from the Company, or willful or gross
misconduct in the performance of such duties. All determinations as to whether
termination is for Cause shall be made in good faith by the Board of Directors
of the Company and shall be binding on the parties hereto.
(b) Change in Control. A "Change in Control" of the
Company shall be deemed to have occurred if: (i) any "person" (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended) becomes the beneficial owner, directly or indirectly, of securities of
the Company representing more than 50% of the aggregate voting power of all
classes of the Company's then outstanding voting securities; or (ii) the
shareholders of the Company approve (A) a plan of merger, consolidation or share
exchange between the Company and an entity other than a direct or indirect
wholly-owned subsidiary of the Company, or (B) a proposal with respect to the
sale, lease, exchange or other disposal of all, or substantially all, of the
Company's property.
(c) Disability. "Disability" shall mean a condition,
determined on the basis of medical evidence satisfactory to a physician
designated by the Board of Directors of the Company, rendering the Employee, due
to bodily injury or disease or mental illness, unable to perform the duties
pertaining to his employment with the Company on a full-time basis for 180
consecutive days.
(d) Pre-Tax FIFO Earnings. The Company's "Pre-Tax FIFO
Earnings" for any fiscal year shall be deemed to be the Company's consolidated
earnings before provision for income taxes as reflected on the Company's audited
consolidated Statement of Operations for such fiscal year, as adjusted by
valuing inventories using the first-in, first-out method; provided, however,
that in calculating Pre-Tax FIFO Earnings for purposes of this Agreement, the
Board of Directors of the Company may, at its option, exclude any non-recurring
or extraordinary items affecting the Company's earnings for such period.
2. Term. This Agreement shall continue in full force and
effect through April 28, 2001.
3. Employment; Duties; Election to the Board of Directors.
(a) The Company agrees to employ the Employee as: (i) its President and Chief
Operating Officer through December 31, 1996; and (ii) its President and Chief
Executive Officer through the remaining term of this Agreement, in each case
with a job description, responsibilities and duties commensurate with his
position; provided, however, that the Company
<PAGE>
may terminate the Employee's employment hereunder at any time, subject to the
provisions of Sections 5, 6, 7, 8 and 9 hereof (it being expressly understood
that this Agreement is not intended to alter the at-will nature of the Company's
employment of the Employee). In consideration of the Company's obligations under
this Agreement, the Employee agrees that (i) he will not voluntarily leave the
employ of the Company during the term of this Agreement, and (ii) he will devote
his full business time and attention to service to the Company and its
subsidiaries commensurate with his position throughout the term of this
Agreement.
(b) The Board of Directors of the Company agrees to
nominate the Employee for election to such Board at each annual meeting of
shareholders during the term of this Agreement and to use its best efforts to
cause the Employee to be duly elected to such Board at such shareholders'
meetings.
4. Compensation. During the term of this Agreement and unless the
Employee's employment has been earlier terminated, the Company agrees to pay the
Employee as compensation for his services hereunder: (a) an annual base salary
of Four Hundred Thousand Dollars ($400,000) (it being understood that the
parties contemplate a good faith review of such base salary on an annual basis
for possible increase in light of the Employee's performance); (b) permit the
Employee to participate in such long-term incentive compensation programs as the
Committee may make generally available to the Company's executive employees; (c)
provide for the benefit of the Employee such vacation, pension and disability
benefits as are, and such coverage under life, accident, medical and dental
plans as is, generally provided from time to time to the Company's executive
employees; provided, however, that the Company agrees to pay the Employee's
portion of the premiums for coverage under such life, accident, medical and
dental plans; (d) provide a car that is owned or leased by the Company for the
Employee's use, which car shall be of comparable quality to the car currently
provided to the Employee by the Company; and (e) pay for the Employee's
initiation and annual membership fees in a single business club located in the
Richmond, Virginia, metropolitan area.
5. Annual Incentive Compensation. (a) In addition to the foregoing
compensation and benefits and subject to Section 5(b) hereof, the Company agrees
to pay the Employee annual incentive compensation for each of the Company's
fiscal years during the term of this Agreement in an amount equal to the sum of
(i) 50% of the Employee's annual base salary pursuant to Section 4 hereof if the
Company achieves target Pre-Tax FIFO Earnings, plus (ii) 1% of the amount by
which the Company's Pre-Tax FIFO Earnings exceed target Pre-Tax FIFO Earnings.
The target level of the Company's Pre-Tax FIFO Earnings for purposes of
calculating the Employee's incentive compensation hereunder shall be identical
to the target level of the Company's Pre-Tax FIFO Earnings established annually
by the Committee for the Company's Executive Officer Performance Plan. Such
incentive compensation shall be paid to the Employee in a lump sum within One
Hundred Twenty (120) days after the close of the fiscal year to which it
relates.
(b) The Employee shall be entitled to receive the
incentive compensation specified in Section 5(a) hereof with respect to any
fiscal year completed before any termination of his employment with the Company.
If the Employee's employment with the Company is terminated after the completion
of the second fiscal quarter of any fiscal year for which incentive compensation
is specified in Section 5(a) hereof and such termination is made (i) by the
Company for any reason other than for Cause, (ii) upon the Employee's death or
Disability or (iii) by the Company or the Employee within one year following the
occurrence of a Change in Control of the Company, then the Employee shall be
entitled to receive the full amount of incentive compensation specified in
Section 5(a) with respect to such fiscal year. Except as provided in the
preceding sentence, the Employee shall not be entitled to receive incentive
compensation pursuant to Section 5(a) hereof with respect to any fiscal year
that was not completed before any termination of his employment with the
Company.
6. Long-Term Incentive Compensation; SERP. (a) As soon as practicable
after the execution of this Agreement, the Company shall make the following
grants to the Employee under the Company's Omnibus Stock Incentive Plan: (i)
25,000 shares of restricted stock, with 2,500 of such shares to vest and be
transferable upon each of the first four anniversaries of such grant and the
remaining shares to vest and be transferable on the fifth anniversary of such
grant; and (ii) 50,000 nonqualified stock options, with 10,000 of such options
to become exercisable on each of the first five anniversaries of such grant.
Each of such grants shall be made pursuant to the forms of agreement, and
subject to the terms and conditions, currently in effect for such plan;
provided, however, that all such shares of restricted stock shall immediately
vest and become transferable and all such options shall immediately become
exercisable upon any Change in Control of the Company, (ii) upon the Employee's
death or Disability or (iii) if the Employee's employment is terminated by the
Company for any reason other than Cause.
<PAGE>
(b) Upon any Change in Control of the Company, the
Employee shall be entitled to receive a lump sum payment in an amount equal to
the actuarial equivalent of the benefit the Employee otherwise would be entitled
to receive upon retirement under the Company's Supplemental Executive Retirement
Plan. The amount of such lump sum payment shall be calculated in accordance with
Exhibit A attached hereto.
7. Post-Employment Benefits. Unless the Employee's employment is
terminated during the term of this Agreement (a) by the Company for Cause, or
(b) by the Employee (other than upon his Disability or following a Change in
Control of the Company), the Company agrees to provide for the benefit of the
Employee, upon the termination of the Employee's employment: (i) coverage under
life insurance policies consistent with those currently provided for the benefit
of the Employee for a period of five years following such termination of
employment; and (ii) coverage under such medical and dental plans as is
generally provided from time to time to the Company's executive employees for a
period of five years following such termination of employment (or, if the
Employee is not entitled to participate in such plans under the terms thereof
following the termination of his employment, then under third party arrangements
that provide substantially comparable coverage); provided, however that the
Company agrees to pay the Employee's portion of the premiums for all such
coverage.
8. Severance. In the event the Employee's employment is terminated (a) by
the Company during the term of this Agreement for any reason other than for
Cause or upon the Employee's death or Disability, or (b) by the Company for any
reason within one year after a Change in Control of the Company other than upon
the Employee's death or Disability, or (c) by the Employee for any reason within
one year after a Change in Control of the Company, then in each such instance
the Company shall pay to the Employee, in addition to any compensation, annual
incentive compensation or other incentive compensation awards theretofore earned
by, or awarded to, the Employee that have not yet been paid to him, a severance
benefit in the amount of Four Hundred Thousand Dollars ($400,000). Such
severance benefit shall be paid to the Employee in a lump sum within sixty (60)
days of the date of such termination. The amount of such severance benefit shall
not be reduced by any compensation earned by the Employee as a result of
employment by another employer after the date of termination or otherwise.
9. Change in Control/Excise Taxes. If a Change in Control occurs during
the term of this Agreement and the Employee becomes liable, in any taxable year,
for the payment of an excise tax under Internal Revenue Service Code ("Code")
section 4999 with respect to any payment or benefit under this Agreement or
under any stock option plan or other program of the Company (including, for
example, the accelerated exercisability of stock options upon a Change in
Control) without regard to whether a termination of employment has occurred, the
Company shall pay to the Employee (i) an amount equal to the excise tax for
which the Employee is liable under Code section 4999, plus (ii) the federal,
state and local income taxes, and the hospital insurance tax under Code section
3111(b), for which the Employee is liable on account of the payment described in
clause (i) of this Section, together with an amount sufficient to satisfy any
additional federal, state or local income taxes or hospital insurance tax for
which the Employee is liable on account of the amounts received pursuant to this
clause (ii). Such payment shall be made in one or more installments at times
necessary to permit the Employee to make estimated tax payments with respect to
the Employee's relevant taxable year and a final payment shall be made not later
than 20 days after the date (or extended filing date) on which the tax return
reflecting the liability for such excise tax is required to be filed with the
Internal Revenue Service.
10. Successors; Binding Agreement. (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement, "Company"
shall mean the Company as defined herein and any successor to its business
and/or assets that executes and delivers the agreement provided for in this
Section 10 or that otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law or otherwise.
(b) This Agreement shall inure to the benefit of and be
enforceable by the personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees of the Employee.
11. Notice. For purposes of this Agreement, notice and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
<PAGE>
If to the Company:
Richfood Holdings, Inc.
8258 Richfood Road
P. O. Box 26967
Richmond, Virginia 23261
Attention: Chairman of the Board
with a copy to:
Gary E. Thompson, Esquire
Hunton & Williams
Riverfront Plaza - East Tower
951 E. Byrd Street
Richmond, Virginia 23219-4074
If to the Employee, to his address as reflected from time-to-time in the
personnel records of the Company. Either party hereto may change its address for
purposes of this Section by furnishing written notice to the other party in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
12. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Employee and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver by either party
hereto at any time of any breach by the other party hereof of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. This Agreement constitutes the
entire agreement, and supersedes all prior agreements and understandings,
between the parties with respect to the subject matter hereof. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Virginia.
13. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force
and effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed on its behalf, and the Employee has duly executed this Agreement, all
as of the date first above written.
RICHFOOD HOLDINGS, INC.
By: /s/ Donald D. Bennett
-----------------------
Donald D. Bennett
Chairman and Chief
Executive
Officer
EMPLOYEE:
/s/ John E. Stokely
-----------------------
JOHN E. STOKELY
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 13th day of October,
1995, by and between SUPER RITE FOODS, INC., a Delaware corporation (the
"Company"), and DAVID GUNDLING, a Pennsylvania resident (the "Executive").
RECITALS
A. The Executive has been employed as an executive of the
Company for a number of years and currently serves as Executive
Vice President of the Company.
B. Pursuant to an Agreement and Plan of Reorganization between Richfood
Holdings, Inc. ("Richfood") and Super Rite Corporation, of which the Company is
a wholly-owned subsidiary ("SRC"), dated June 26, 1995 (the "Merger Agreement"),
upon the Effective Time of the Merger (as defined in the Merger Agreement) SRC
will become a wholly-owned subsidiary of Richfood.
C. As contemplated by the Merger Agreement and in anticipation of the
consummation of the Merger as therein provided, the Company and the Executive
wish to extend the term of the Executive's employment with the Company and
otherwise to amend and restate the agreement between the Company and the
Executive with respect to the Executive's continued employment with the Company
as hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration the receipt and adequacy
of which are acknowledged, the parties agree as follows:
1. EMPLOYMENT OF EXECUTIVE.
1.1 Duties and Status. The Company hereby engages and employs
the Executive as Executive Vice President of the Company for the Employment
Period, as defined in section 3.1, and the Executive accepts such employment, on
the terms and conditions set forth in this Agreement. During the Employment
Period, the Executive shall faithfully exercise such authority and perform such
executive duties commensurate with his position as the Board of Directors of the
Company shall determine.
1.2 Time and Effort. During the Employment Period, the
Executive shall devote his full time and effort to the business of the Company.
Notwithstanding the foregoing, the Executive may pursue such other personal
financial affairs of the Executive to the extent such activities do not
interfere with his performance of his duties hereunder.
<PAGE>
2. COMPENSATION AND BENEFITS.
2.1 Annual Base Salary. The Company shall pay the Executive an
annual base salary as determined from time to time by the Board of Directors
("Annual Base Salary"), which shall not be less than the annual base salary in
effect on June 26, 1995. The Executive's Annual Base Salary shall be payable in
equal installments in accordance with the practice of the Company in effect from
time to time for the payment of salaries to officers of the Company but in no
event less frequently than monthly.
2.2 Expenses. Subject to such policies as may from time to
time be established by the Board of Directors, the Company shall pay or
reimburse the Executive for all reasonable expenses actually paid or incurred by
the Executive during the Employment Period in the performance of the Executive's
services under this Agreement upon the Executive's presentation to the Chief
Financial Officer (or other person designated by or at the direction of the
Board of Directors) of expense statements or vouchers or such other supporting
information as the Board may reasonably require.
2.3 Bonuses Etc. The Executive shall be entitled to receive
such bonus compensation, and to participate in such bonus, profit-sharing, stock
option, incentive, and performance award plans and programs, if any, as may from
time to time be determined by the Board of Directors.
2.4 Benefits. The Executive shall be entitled to receive such
employee benefits, including without limitation any and all pension, retirement,
disability, group life, sickness, accident and health insurance programs, as the
Company may provide from time to time to its employees generally, all in
accordance with the terms governing any plans pursuant to which any such
benefits are provided, and such other benefits as the Board of Directors may
from time to time establish (collectively "Benefits")
2.5 Vacation. The Executive shall be entitled to vacation,
leave of absence, and leave for illness or temporary disability in accordance
with the policies of the Company in effect from time to time, which shall not be
less favorable than those in effect for any other executive officer of the
Company.
3. TERM AND TERMINATION.
3.1 Employment Period. The Executive's "Employment
Period" shall commence on the date of this Agreement and shall
terminate on the earlier of: (i) the close of business on the day
immediately preceding the third anniversary of the Effective Time
of the Merger and (ii) the death or retirement of the Executive.
-2-
<PAGE>
3.2 Termination. Each party shall have the right to terminate
the Executive's employment hereunder before the Employment Period expires to the
extent, and only to the extent, permitted by this section.
(a) By the Company for Cause. The Company shall
have the right to terminate the Executive's employment immediately upon written
notice to the Executive for "Cause," which for purposes of this Agreement means
that the Board of Directors has determined that the Executive (i) has stolen or
embezzled Company funds or property, (ii) has been convicted of a felony or a
crime involving moral turpitude, (iii) has, notwithstanding not less than thirty
(30) days' prior written notice from the Board of Directors, willfully failed to
perform or persistently neglected (other than by reason of illness or temporary
disability short of Total Disability) any duties hereunder to the detriment of
the Company or its prospects, (iv) has willfully violated or breached any
provision of this Agreement, or (v) has willfully violated any law or regulation
to the material detriment of the Company or its business.
(b) By the Company Upon Disability. The Company
shall have the right to terminate the Executive's employment on five (5) days'
prior written notice to the Executive if the Board of Directors determines that
the Executive is unable to perform his duties by reason of Total Disability. As
used herein "Total Disability" means the inability of the Executive due to
physical or mental illness or injury to perform his duties hereunder for any
period of 180 consecutive days or 180 days in the aggregate in any 365-day
period.
(c) By the Company Other Than for Cause or
Disability. The Company shall have the right to terminate the Executive's
employment on thirty (30) days' prior written notice to the Executive in the
Company's sole discretion, but any termination pursuant to this subsection (c)
shall obligate the Company to make the payments referred to in section 3.3.
(d) By the Executive. The Executive shall have
the right to terminate his employment hereunder upon (i) the failure of the
Company to make any required payment to the Executive hereunder, which failure
continues unremedied for ten (10) days after the Executive has given the Board
of Directors written notice of such failure, or (ii) any material failure by the
Company to comply with any of the provisions of this Agreement other than a
failure to make a required payment, which failure continues unremedied for
thirty (30) days after the Executive has given the Board of Directors written
notice of such failure.
-3-
<PAGE>
3.3 Continuation of Compensation and Benefits.
(a) Upon Death, Retirement, or Disability. In
the event that the Employment Period terminates pursuant to section 3.1(ii) on
account of the death of the Executive, or in the event that the Company elects
to terminate the employment of the Executive pursuant to section 3.2(b) because
of his Total Disability, the Company shall nevertheless continue to pay the
Executive (or his personal representative or other successor in interest, as the
case may be) his Annual Base Salary and provide to the Executive (or his
dependents, as the case may be) the Benefits for a period of six (6) months
following the date of the Executive's death or termination under section 3.2(b),
as the case may be, notwithstanding that such period may extend beyond the date
on which the then-current Employment Period would have expired (but for such
death or termination) In the event that the Employment Period terminates on
account of the Executive's retirement, the Executive's Annual Base Salary shall
terminate as of the date of retirement, and the Executive's Benefits shall
continue or terminate in accordance with the plans governing such Benefits.
(b) Upon Termination Other than for Cause or Upon
Death, Retirement, or Disability. In the event that the Company elects to
terminate the employment of the Executive pursuant to section 3.2(c), then the
Company shall nevertheless continue to pay the Executive his Annual Base Salary
and provide to the Executive the Benefits for the longer of (i) the balance of
the Employment Period and (ii) period ending two (2) years after the date of
termination (notwithstanding that such period may extend beyond the Employment
Period).
(c) In All Other Cases. Except as specifically
provided in this section, any and all obligations of the Company to make
payments to the Executive under this Agreement, other than payments of
previously accrued but unpaid compensation, shall cease as of the date the
Employment Period expires under section 3.1 or as of the date the Executive's
employment is terminated by the Company under section 3.2, as the case may be.
3.4 Survival of Covenants. Any provision of this Agreement to
the contrary notwithstanding, if the employment of the Executive hereunder is
terminated for any reason, the provisions and covenants of sections 4 and 5
hereof shall nevertheless remain in full force and effect in accordance with
their respective terms.
4. CONFIDENTIALITY.
The Executive shall not at any time during the term of this
Agreement or at any time thereafter, without the express written permission of
the Company, disclose any information, oral or written, disclosed by the Company
to the Executive or obtained
-4-
<PAGE>
by the Executive by virtue of his employment with the Company relating to the
customers or business of the Company (collectively, the "Confidential
Information"), including without limitation customer lists, marketing plans, and
financial information relating to the Company; provided, however, that the
foregoing restrictions shall not apply to any information otherwise deemed
Confidential Information hereunder that is in the public domain or that lawfully
becomes available to the Executive from a source other than the Company.
Promptly upon the termination of his employment hereunder for any reason, the
Executive shall return to the Company or destroy, as the Company may direct, all
materials (whether in written or machine-readable form) then in the possession
or control of the Executive that contain, embody, or reflect any Confidential
Information in whole or part, all of which the Executive hereby acknowledges
constitute property of the Company.
5. NONCOMPETITION.
5.1 Scope. During the Restriction Period (as hereinafter
defined), the Executive shall not engage directly or indirectly (whether as a
principal, employee, consultant, agent, or otherwise) in any trade or business
similar to or in competition with that of Richfood or any of its subsidiaries
anywhere within the geographic areas in which Richfood or any of its
subsidiaries is then engaged in business. For purposes hereof, "Restriction
Period" means the period beginning on the date of this Agreement and continuing:
(i) if the Executive's employment is terminated for Cause, until the day
immediately preceding the fourth anniversary of the Effective Time and (ii) in
all other cases, until the first anniversary of the termination of the
Executive's employment hereunder or for as long as the Company is continuing to
pay to the Executive his Annual Base Salary pursuant to section 3.3 (whichever
is longer).
5.2 Enforcement and Construction. If in any judicial
proceeding a court shall refuse to enforce as written the covenant set forth in
section 5.1, then such covenant shall be limited and restricted in scope and
duration to the extent necessary to make such covenant, as so limited and
restricted, enforceable. Notwithstanding the foregoing, it is the intent and
agreement of the parties that section 5.1 be given the maximum force, effect,
and application permissible under applicable law. The Executive acknowledges and
agrees that in the event of a breach or threatened breach of such covenant, the
Company will not have an adequate remedy at law, and accordingly the Company
shall be entitled to injunctive relief (without the necessity of posting bond)
in addition to any other remedies which may be available to it hereunder or
under applicable law.
-5-
<PAGE>
6. MISCELLANEOUS.
6.1 Applicable Law. This Agreement shall be construed under
and in accordance with the federal law of the United States and the laws of the
Commonwealth of Virginia (exclusive of any provision that would result in the
application of the laws of any other state or jurisdiction).
6.2 Headings. The headings and captions set forth
herein are for convenience of reference only and shall not affect
the construction or interpretation hereof.
6.3 Notices. Any notice or other communication required,
permitted, or desirable hereunder shall be hand delivered (including delivery by
a commercial courier service) or sent by United States registered or certified
mail, postage prepaid, addressed as follows:
To the Executive: David Gundling
4701 Great Oak Lane
Harrisburg, Pennsylvania 17110
To the Company Super Rite Foods, Inc.
or the Board of c/o Richfood Holdings, Inc.
Directors 2000 Richfood Road
Mechanicsville, Virginia 23211
Attention: Donald D. Bennett
Chairman and Chief
Executive Officer
or such other addresses as shall be furnished in writing by the parties. Any
such notice or communication shall be deemed to have been given as of the date
so delivered in person or three business days after so mailed.
6.4 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of successors and permitted assigns of the
parties. This Agreement may not be assigned, nor may performance of any duty
hereunder be delegated, by either party without the prior written consent of the
other.
6.5 Entire Agreement; Amendments. This Agreement sets forth
the entire agreement and understanding of the parties with respect to the
subject matter hereof, and there are no other contemporaneous written or oral
agreements, undertakings, promises, warranties, or covenants not specifically
referred to or contained herein. This Agreement specifically supersedes any and
all prior agreements and understandings of the parties with respect to the
subject matter hereof, all of which prior agreements and understandings (if any)
are hereby terminated and of no further force and effect. This Agreement may be
amended, modified, or
-6-
<PAGE>
terminated only be a written instrument signed by the parties
hereto.
6.6 Execution of Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same Agreement. This Agreement
may be delivered by facsimile transmission of an originally executed copy to be
followed by immediate delivery of the original of such executed copy.
6.7 Incorporation of Recitals. The Recitals to this
Agreement are an integral part of, and by this reference are hereby
incorporated into, this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ATTEST: SUPER RITE FOODS, INC.
________________________ By: ________________________
Title: ___________________
WITNESS: Executive:
- ------------------------ -----------------------------
David Gundling
-7-
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 22nd day of November,
1995, by and between SUPER RITE FOODS, INC., a Delaware corporation (the
"Company"), and JOHN RYDER, a Maryland resident (the "Executive").
RECITALS
A. The Executive has been employed as an executive of the
Company for a number of years and currently serves as President and
Chief Operating Officer of the Company's retail supermarket
division.
B. Pursuant to an Agreement and Plan of Reorganization between Richfood
Holdings, Inc. ("Richfood") and Super Rite Corporation, of which the Company is
a wholly-owned subsidiary ("SRC"), dated June 26, 1995 (the "Merger Agreement"),
upon the Effective Time of the Merger (as defined in the Merger Agreement) SRC
will become a wholly-owned subsidiary of Richfood.
C. As contemplated by the Merger Agreement and in anticipation of the
consummation of the Merger as therein provided, the Company and the Executive
wish to extend the term of the Executive's employment with the Company and
otherwise to amend and restate the agreement between the Company and the
Executive with respect to the Executive's continued employment with the Company
as hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration the receipt and adequacy
of which are acknowledged, the parties agree as follows:
1. EMPLOYMENT OF EXECUTIVE.
1.1 Duties and Status. The Company hereby engages and employs
the Executive as President and Chief Operating Officer of the Company's retail
supermarket division for the Employment Period, as defined in section 3.1, and
the Executive accepts such employment, on the terms and conditions set forth in
this Agreement. During the Employment Period, the Executive shall faithfully
exercise such authority and perform such executive duties commensurate with his
position as the Board of Directors of the Company shall determine.
1.2 Time and Effort. During the Employment Period, the
Executive shall devote his full time and effort to the business of
the Company. Notwithstanding the foregoing, the Executive may
<PAGE>
pursue such other personal financial affairs of the Executive to the extent such
activities do not interfere with his performance of his duties hereunder.
2. COMPENSATION AND BENEFITS.
2.1 Annual Base Salary. The Company shall pay the Executive an
annual base salary as determined from time to time by the Board of Directors
("Annual Base Salary"), which shall not be less than the annual base salary in
effect on June 26, 1995. The Executive's Annual Base Salary shall be payable in
equal installments in accordance with the practice of the Company in effect from
time to time for the payment of salaries to officers of the Company but in no
event less frequently than monthly.
2.2 Expenses. Subject to such policies as may from time to
time be established by the Board of Directors, the Company shall pay or
reimburse the Executive for all reasonable expenses actually paid or incurred by
the Executive during the Employment Period in the performance of the Executive's
services under this Agreement upon the Executive's presentation to the Chief
Financial Officer (or other person designated by or at the direction of the
Board of Directors) of expense statements or vouchers or such other supporting
information as the Board may reasonably require.
2.3 Bonuses Etc. The Executive shall be entitled to receive
such bonus compensation, and to participate in such bonus, profit-sharing, stock
option, incentive, and performance award plans and programs, if any, as may from
time to time be determined by the Board of Directors.
2.4 Benefits. The Executive shall be entitled to receive such
employee benefits, including without limitation any and all pension, retirement,
disability, group life, sickness, accident and health insurance programs, as the
Company may provide from time to time to its employees generally, all in
accordance with the terms governing any plans pursuant to which any such
benefits are provided, and such other benefits as the Board of Directors may
from time to time establish (collectively "Benefits")
2.5 Vacation. The Executive shall be entitled to vacation,
leave of absence, and leave for illness or temporary disability in accordance
with the policies of the Company in effect from time to time, which shall not be
less favorable than those in effect for any other executive officer of the
Company.
3. TERM AND TERMINATION.
3.1 Employment Period. The Executive's "Employment
Period" shall commence on the date of this Agreement and shall
terminate on the earlier of: (i) the close of business on the day
-2-
<PAGE>
immediately preceding the third anniversary of the Effective Time of the Merger
and (ii) the death or retirement of the Executive.
3.2 Termination. Each party shall have the right to terminate
the Executive's employment hereunder before the Employment Period expires to the
extent, and only to the extent, permitted by this section.
(a) By the Company for Cause. The Company shall
have the right to terminate the Executive's employment immediately upon written
notice to the Executive for "Cause," which for purposes of this Agreement means
that the Board of Directors has determined that the Executive (i) has stolen or
embezzled Company funds or property, (ii) has been convicted of a felony or a
crime involving moral turpitude, (iii) has, notwithstanding not less than thirty
(30) days' prior written notice from the Board of Directors, willfully failed to
perform or persistently neglected (other than by reason of illness or temporary
disability short of Total Disability) any duties hereunder to the detriment of
the Company or its prospects, (iv) has willfully violated or breached any
provision of this Agreement, or (v) has willfully violated any law or regulation
to the material detriment of the Company or its business.
(b) By the Company Upon Disability. The Company
shall have the right to terminate the Executive's employment on five (5) days'
prior written notice to the Executive if the Board of Directors determines that
the Executive is unable to perform his duties by reason of Total Disability. As
used herein "Total Disability" means the inability of the Executive due to
physical or mental illness or injury to perform his duties hereunder for any
period of 180 consecutive days or 180 days in the aggregate in any 365-day
period.
(c) By the Company Other Than for Cause or
Disability. The Company shall have the right to terminate the Executive's
employment on thirty (30) days' prior written notice to the Executive in the
Company's sole discretion, but any termination pursuant to this subsection (c)
shall obligate the Company to make the payments referred to in section 3.3.
(d) By the Executive. The Executive shall have
the right to terminate his employment hereunder upon (i) the failure of the
Company to make any required payment to the Executive hereunder, which failure
continues unremedied for ten (10) days after the Executive has given the Board
of Directors written notice of such failure, or (ii) any material failure by the
Company to comply with any of the provisions of this Agreement other than a
failure to make a required payment, which failure continues unremedied for
thirty (30) days after the Executive has given the Board of Directors written
notice of such failure.
-3-
<PAGE>
3.3 Continuation of Compensation and Benefits.
(a) Upon Death, Retirement, or Disability. In the
event that the Employment Period terminates pursuant to section 3.1(ii) on
account of the death of the Executive, or in the event that the Company elects
to terminate the employment of the Executive pursuant to section 3.2(b) because
of his Total Disability, the Company shall nevertheless continue to pay the
Executive (or his personal representative or other successor in interest, as the
case may be) his Annual Base Salary and provide to the Executive (or his
dependents, as the case may be) the Benefits for a period of six (6) months
following the date of the Executive's death or termination under section 3.2(b),
as the case may be, notwithstanding that such period may extend beyond the date
on which the then-current Employment Period would have expired (but for such
death or termination) In the event that the Employment Period terminates on
account of the Executive's retirement, the Executive's Annual Base Salary shall
terminate as of the date of retirement, and the Executive's Benefits shall
continue or terminate in accordance with the plans governing such Benefits.
(b) Upon Termination Other than for Cause or Upon
Death, Retirement, or Disability. In the event that the Company elects to
terminate the employment of the Executive pursuant to section 3.2(c), then the
Company shall nevertheless continue to pay the Executive his Annual Base Salary
and provide to the Executive the Benefits for the longer of (i) the balance of
the Employment Period and (ii) period ending two (2) years after the date of
termination (notwithstanding that such period may extend beyond the Employment
Period).
(c) In All Other Cases. Except as specifically
provided in this section, any and all obligations of the Company to make
payments to the Executive under this Agreement, other than payments of
previously accrued but unpaid compensation, shall cease as of the date the
Employment Period expires under section 3.1 or as of the date the Executive's
employment is terminated by the Company under section 3.2, as the case may be.
3.4 Survival of Covenants. Any provision of this Agreement to
the contrary notwithstanding, if the employment of the Executive hereunder is
terminated for any reason, the provisions and covenants of sections 4 and 5
hereof shall nevertheless remain in full force and effect in accordance with
their respective terms.
4. CONFIDENTIALITY.
The Executive shall not at any time during the term of this
Agreement or at any time thereafter, without the express written permission of
the Company, disclose any information, oral or written, disclosed by the Company
to the Executive or obtained
-4-
<PAGE>
by the Executive by virtue of his employment with the Company relating to the
customers or business of the Company (collectively, the "Confidential
Information"), including without limitation customer lists, marketing plans, and
financial information relating to the Company; provided, however, that the
foregoing restrictions shall not apply to any information otherwise deemed
Confidential Information hereunder that is in the public domain or that lawfully
becomes available to the Executive from a source other than the Company.
Promptly upon the termination of his employment hereunder for any reason, the
Executive shall return to the Company or destroy, as the Company may direct, all
materials (whether in written or machine-readable form) then in the possession
or control of the Executive that contain, embody, or reflect any Confidential
Information in whole or part, all of which the Executive hereby acknowledges
constitute property of the Company.
5. NONCOMPETITION.
5.1 Scope. During the Restriction Period (as hereinafter
defined), the Executive shall not engage directly or indirectly (whether as a
principal, employee, consultant, agent, or otherwise) in any trade or business
similar to or in competition with that of Richfood or any of its subsidiaries
anywhere within the geographic areas in which Richfood or any of its
subsidiaries is then engaged in business. For purposes hereof, "Restriction
Period" means the period beginning on the date of this Agreement and continuing:
(i) if the Executive's employment is terminated for Cause, until the day
immediately preceding the fourth anniversary of the Effective Time and (ii) in
all other cases, until the first anniversary of the termination of the
Executive's employment hereunder or for as long as the Company is continuing to
pay to the Executive his Annual Base Salary pursuant to section 3.3 (whichever
is longer).
5.2 Enforcement and Construction. If in any judicial
proceeding a court shall refuse to enforce as written the covenant set forth in
section 5.1, then such covenant shall be limited and restricted in scope and
duration to the extent necessary to make such covenant, as so limited and
restricted, enforceable. Notwithstanding the foregoing, it is the intent and
agreement of the parties that section 5.1 be given the maximum force, effect,
and application permissible under applicable law. The Executive acknowledges and
agrees that in the event of a breach or threatened breach of such covenant, the
Company will not have an adequate remedy at law, and accordingly the Company
shall be entitled to injunctive relief (without the necessity of posting bond)
in addition to any other remedies which may be available to it hereunder or
under applicable law.
-5-
<PAGE>
6. MISCELLANEOUS.
6.1 Applicable Law. This Agreement shall be construed under
and in accordance with the federal law of the United States and the laws of the
Commonwealth of Virginia (exclusive of any provision that would result in the
application of the laws of any other state or jurisdiction).
6.2 Headings. The headings and captions set forth
herein are for convenience of reference only and shall not affect
the construction or interpretation hereof.
6.3 Notices. Any notice or other communication required,
permitted, or desirable hereunder shall be hand delivered (including delivery by
a commercial courier service) or sent by United States registered or certified
mail, postage prepaid, addressed as follows:
To the Executive: John Ryder
461 Old Orchard Circle
Point Field Landing
Millersville, Maryland 21108
To the Company Super Rite Foods, Inc.
or the Board of c/o Richfood Holdings, Inc.
Directors 2000 Richfood Road
Mechanicsville, Virginia 23211
Attention: Donald D. Bennett
Chairman and Chief
Executive Officer
or such other addresses as shall be furnished in writing by the parties. Any
such notice or communication shall be deemed to have been given as of the date
so delivered in person or three business days after so mailed.
6.4 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of successors and permitted assigns of the
parties. This Agreement may not be assigned, nor may performance of any duty
hereunder be delegated, by either party without the prior written consent of the
other.
6.5 Entire Agreement; Amendments. This Agreement sets forth
the entire agreement and understanding of the parties with respect to the
subject matter hereof, and there are no other contemporaneous written or oral
agreements, undertakings, promises, warranties, or covenants not specifically
referred to or contained herein. This Agreement specifically supersedes any and
all prior agreements and understandings of the parties with respect to the
subject matter hereof, all of which prior agreements and understandings (if any)
are hereby terminated and of no further
-6-
<PAGE>
force and effect. This Agreement may be amended, modified, or
terminated only be a written instrument signed by the parties
hereto.
6.6 Execution of Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same Agreement. This Agreement
may be delivered by facsimile transmission of an originally executed copy to be
followed by immediate delivery of the original of such executed copy.
6.7 Incorporation of Recitals. The Recitals to this
Agreement are an integral part of, and by this reference are hereby
incorporated into, this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ATTEST: SUPER RITE FOODS, INC.
________________________ By: ________________________
Title: ___________________
WITNESS: Executive:
- ------------------------ -----------------------------
John Ryder
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 13th day of October,
1995, by and between SUPER RITE FOODS, INC., a Delaware corporation (the
"Company"), and PETER VANDERVEEN, a Pennsylvania resident (the "Executive").
RECITALS
A. The Executive has been employed as an executive of the
Company for a number of years and currently serves as President and
Chief Operating Officer of the Company.
B. Pursuant to an Agreement and Plan of Reorganization between Richfood
Holdings, Inc. ("Richfood") and Super Rite Corporation, of which the Company is
a wholly-owned subsidiary ("SRC"), dated June 26, 1995 (the "Merger Agreement"),
upon the Effective Time of the Merger (as defined in the Merger Agreement) SRC
will become a wholly-owned subsidiary of Richfood.
C. As contemplated by the Merger Agreement and in anticipation of the
consummation of the Merger as therein provided, the Company and the Executive
wish to extend the term of the Executive's employment with the Company and
otherwise to amend and restate the agreement between the Company and the
Executive with respect to the Executive's continued employment with the Company
as hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration the receipt and adequacy
of which are acknowledged, the parties agree as follows:
1. EMPLOYMENT OF EXECUTIVE.
1.1 Duties and Status. The Company hereby engages and employs
the Executive as President and Chief Operating Officer of the Company for the
Employment Period, as defined in section 3.1, and the Executive accepts such
employment, on the terms and conditions set forth in this Agreement. During the
Employment Period, the Executive shall faithfully exercise such authority and
perform such executive duties commensurate with his position as the Board of
Directors of the Company shall determine.
1.2 Time and Effort. During the Employment Period, the
Executive shall devote his full time and effort to the business of the Company.
Notwithstanding the foregoing, the Executive may pursue such other personal
financial affairs of the Executive to the extent such activities do not
interfere with his performance of his duties hereunder.
<PAGE>
2. COMPENSATION AND BENEFITS.
2.1 Annual Base Salary. The Company shall pay the Executive an
annual base salary as determined from time to time by the Board of Directors
("Annual Base Salary"), which shall not be less than the annual base salary in
effect on June 26, 1995. The Executive's Annual Base Salary shall be payable in
equal installments in accordance with the practice of the Company in effect from
time to time for the payment of salaries to officers of the Company but in no
event less frequently than monthly.
2.2 Expenses. Subject to such policies as may from time to
time be established by the Board of Directors, the Company shall pay or
reimburse the Executive for all reasonable expenses actually paid or incurred by
the Executive during the Employment Period in the performance of the Executive's
services under this Agreement upon the Executive's presentation to the Chief
Financial Officer (or other person designated by or at the direction of the
Board of Directors) of expense statements or vouchers or such other supporting
information as the Board may reasonably require.
2.3 Bonuses Etc. The Executive shall be entitled to receive
such bonus compensation, and to participate in such bonus, profit-sharing, stock
option, incentive, and performance award plans and programs, if any, as may from
time to time be determined by the Board of Directors.
2.4 Benefits. The Executive shall be entitled to receive such
employee benefits, including without limitation any and all pension, retirement,
disability, group life, sickness, accident and health insurance programs, as the
Company may provide from time to time to its employees generally, all in
accordance with the terms governing any plans pursuant to which any such
benefits are provided, and such other benefits as the Board of Directors may
from time to time establish (collectively "Benefits")
2.5 Vacation. The Executive shall be entitled to vacation,
leave of absence, and leave for illness or temporary disability in accordance
with the policies of the Company in effect from time to time, which shall not be
less favorable than those in effect for any other executive officer of the
Company.
3. TERM AND TERMINATION.
3.1 Employment Period. The Executive's "Employment
Period" shall commence on the date of this Agreement and shall
terminate on the earlier of: (i) the close of business on the day
immediately preceding the third anniversary of the Effective Time
of the Merger and (ii) the death or retirement of the Executive.
-2-
<PAGE>
3.2 Termination. Each party shall have the right to terminate
the Executive's employment hereunder before the Employment Period expires to the
extent, and only to the extent, permitted by this section.
(a) By the Company for Cause. The Company shall
have the right to terminate the Executive's employment immediately upon written
notice to the Executive for "Cause," which for purposes of this Agreement means
that the Board of Directors has determined that the Executive (i) has stolen or
embezzled Company funds or property, (ii) has been convicted of a felony or a
crime involving moral turpitude, (iii) has, notwithstanding not less than thirty
(30) days' prior written notice from the Board of Directors, willfully failed to
perform or persistently neglected (other than by reason of illness or temporary
disability short of Total Disability) any duties hereunder to the detriment of
the Company or its prospects, (iv) has willfully violated or breached any
provision of this Agreement, or (v) has willfully violated any law or regulation
to the material detriment of the Company or its business.
(b) By the Company Upon Disability. The Company
shall have the right to terminate the Executive's employment on five (5) days'
prior written notice to the Executive if the Board of Directors determines that
the Executive is unable to perform his duties by reason of Total Disability. As
used herein "Total Disability" means the inability of the Executive due to
physical or mental illness or injury to perform his duties hereunder for any
period of 180 consecutive days or 180 days in the aggregate in any 365-day
period.
(c) By the Company Other Than for Cause or
Disability. The Company shall have the right to terminate the Executive's
employment on thirty (30) days' prior written notice to the Executive in the
Company's sole discretion, but any termination pursuant to this subsection (c)
shall obligate the Company to make the payments referred to in section 3.3.
(d) By the Executive. The Executive shall have the
right to terminate his employment hereunder upon (i) the failure of the Company
to make any required payment to the Executive hereunder, which failure continues
unremedied for ten (10) days after the Executive has given the Board of
Directors written notice of such failure, or (ii) any material failure by the
Company to comply with any of the provisions of this Agreement other than a
failure to make a required payment, which failure continues unremedied for
thirty (30) days after the Executive has given the Board of Directors written
notice of such failure.
-3-
<PAGE>
3.3 Continuation of Compensation and Benefits.
(a) Upon Death, Retirement, or Disability. In the
event that the Employment Period terminates pursuant to section 3.1(ii) on
account of the death of the Executive, or in the event that the Company elects
to terminate the employment of the Executive pursuant to section 3.2(b) because
of his Total Disability, the Company shall nevertheless continue to pay the
Executive (or his personal representative or other successor in interest, as the
case may be) his Annual Base Salary and provide to the Executive (or his
dependents, as the case may be) the Benefits for a period of six (6) months
following the date of the Executive's death or termination under section 3.2(b),
as the case may be, notwithstanding that such period may extend beyond the date
on which the then-current Employment Period would have expired (but for such
death or termination) In the event that the Employment Period terminates on
account of the Executive's retirement, the Executive's Annual Base Salary shall
terminate as of the date of retirement, and the Executive's Benefits shall
continue or terminate in accordance with the plans governing such Benefits.
(b) Upon Termination Other than for Cause or Upon
Death, Retirement, or Disability. In the event that the Company elects to
terminate the employment of the Executive pursuant to section 3.2(c), then the
Company shall nevertheless continue to pay the Executive his Annual Base Salary
and provide to the Executive the Benefits for the longer of (i) the balance of
the Employment Period and (ii) period ending two (2) years after the date of
termination (notwithstanding that such period may extend beyond the Employment
Period).
(c) In All Other Cases. Except as specifically
provided in this section, any and all obligations of the Company to make
payments to the Executive under this Agreement, other than payments of
previously accrued but unpaid compensation, shall cease as of the date the
Employment Period expires under section 3.1 or as of the date the Executive's
employment is terminated by the Company under section 3.2, as the case may be.
3.4 Survival of Covenants. Any provision of this Agreement to
the contrary notwithstanding, if the employment of the Executive hereunder is
terminated for any reason, the provisions and covenants of sections 4 and 5
hereof shall nevertheless remain in full force and effect in accordance with
their respective terms.
4. CONFIDENTIALITY.
The Executive shall not at any time during the term of this
Agreement or at any time thereafter, without the express written permission of
the Company, disclose any information, oral or written, disclosed by the Company
to the Executive or obtained
-4-
<PAGE>
by the Executive by virtue of his employment with the Company relating to the
customers or business of the Company (collectively, the "Confidential
Information"), including without limitation customer lists, marketing plans, and
financial information relating to the Company; provided, however, that the
foregoing restrictions shall not apply to any information otherwise deemed
Confidential Information hereunder that is in the public domain or that lawfully
becomes available to the Executive from a source other than the Company.
Promptly upon the termination of his employment hereunder for any reason, the
Executive shall return to the Company or destroy, as the Company may direct, all
materials (whether in written or machine-readable form) then in the possession
or control of the Executive that contain, embody, or reflect any Confidential
Information in whole or part, all of which the Executive hereby acknowledges
constitute property of the Company.
5. NONCOMPETITION.
5.1 Scope. During the Restriction Period (as hereinafter
defined), the Executive shall not engage directly or indirectly (whether as a
principal, employee, consultant, agent, or otherwise) in any trade or business
similar to or in competition with that of Richfood or any of its subsidiaries
anywhere within the geographic areas in which Richfood or any of its
subsidiaries is then engaged in business. For purposes hereof, "Restriction
Period" means the period beginning on the date of this Agreement and continuing:
(i) if the Executive's employment is terminated for Cause, until the day
immediately preceding the fourth anniversary of the Effective Time and (ii) in
all other cases, until the first anniversary of the termination of the
Executive's employment hereunder or for as long as the Company is continuing to
pay to the Executive his Annual Base Salary pursuant to section 3.3 (whichever
is longer).
5.2 Enforcement and Construction. If in any judicial
proceeding a court shall refuse to enforce as written the covenant set forth in
section 5.1, then such covenant shall be limited and restricted in scope and
duration to the extent necessary to make such covenant, as so limited and
restricted, enforceable. Notwithstanding the foregoing, it is the intent and
agreement of the parties that section 5.1 be given the maximum force, effect,
and application permissible under applicable law. The Executive acknowledges and
agrees that in the event of a breach or threatened breach of such covenant, the
Company will not have an adequate remedy at law, and accordingly the Company
shall be entitled to injunctive relief (without the necessity of posting bond)
in addition to any other remedies which may be available to it hereunder or
under applicable law.
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<PAGE>
6. MISCELLANEOUS.
6.1 Applicable Law. This Agreement shall be construed under
and in accordance with the federal law of the United States and the laws of the
Commonwealth of Virginia (exclusive of any provision that would result in the
application of the laws of any other state or jurisdiction).
6.2 Headings. The headings and captions set forth
herein are for convenience of reference only and shall not affect
the construction or interpretation hereof.
6.3 Notices. Any notice or other communication required,
permitted, or desirable hereunder shall be hand delivered (including delivery by
a commercial courier service) or sent by United States registered or certified
mail, postage prepaid, addressed as follows:
To the Executive: Peter Vanderveen
4700 Great Oak Lane
Harrisburg, Pennsylvania 17110
To the Company Super Rite Foods, Inc.
or the Board of c/o Richfood Holdings, Inc.
Directors 2000 Richfood Road
Mechanicsville, Virginia 23211
Attention: Donald D. Bennett
Chairman and Chief
Executive Officer
or such other addresses as shall be furnished in writing by the parties. Any
such notice or communication shall be deemed to have been given as of the date
so delivered in person or three business days after so mailed.
6.4 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of successors and permitted assigns of the
parties. This Agreement may not be assigned, nor may performance of any duty
hereunder be delegated, by either party without the prior written consent of the
other.
6.5 Entire Agreement; Amendments. This Agreement sets forth
the entire agreement and understanding of the parties with respect to the
subject matter hereof, and there are no other contemporaneous written or oral
agreements, undertakings, promises, warranties, or covenants not specifically
referred to or contained herein. This Agreement specifically supersedes any and
all prior agreements and understandings of the parties with respect to the
subject matter hereof, all of which prior agreements and understandings (if any)
are hereby terminated and of no further force and effect. This Agreement may be
amended, modified, or
-6-
<PAGE>
terminated only be a written instrument signed by the parties
hereto.
6.6 Execution of Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same Agreement. This Agreement
may be delivered by facsimile transmission of an originally executed copy to be
followed by immediate delivery of the original of such executed copy.
6.7 Incorporation of Recitals. The Recitals to this
Agreement are an integral part of, and by this reference are hereby
incorporated into, this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ATTEST: SUPER RITE FOODS, INC.
________________________ By: ________________________
Title: ___________________
WITNESS: Executive:
- ------------------------ -----------------------------
Peter Vanderveen
-7-
EXHIBIT 10.10
June 14, 1996
Mr. Peter Vanderveen
4700 Great Oak Lane
Harrisburg, PA 17110
Agreement Related to Early Retirement
Dear Pete:
It is my understanding that you have elected to take voluntary early
retirement from your position as President and Chief Operating Officer of Super
Rite Foods, Inc. ("Super Rite") effective May 24, 1996. In keeping with our
recent discussions, we have agreed to enter into this letter agreement to
memorialize certain understandings we have reached in connection with your early
retirement, and to confirm certain additional retirement benefits that will be
provided to you in recognition of your many years of valuable service to Super
Rite.
Recitals.
(a) This letter agreement (the "Agreement") is intended to document the
agreement reached between you (the "Executive") and Richfood Holdings, Inc.
("Richfood" and together with the Executive, the "parties") in connection with
the Executive's decision to retire from his positions with Super Rite effective
May 24, 1996.
(b) Each reference in this Agreement to "Richfood" shall include Richfood
Holdings, Inc., and any of its current or former divisions, parents, direct or
indirect subsidiaries (including, without limitation, Super Rite), affiliates,
shareholders, owners, officers, directors, employees, servants, attorneys,
agents, representatives, predecessors, successors and assigns.
(c) Each reference in this Agreement to the "Executive" shall include
Peter Vanderveen and any of his executors, administrators, heirs, beneficiaries,
successors and assigns.
(d) The Executive has been employed as President and Chief Operating
Officer of Super Rite pursuant to an Employment Agreement dated October 13, 1995
(the "Employment Agreement") and a Deferred Compensation Agreement, dated as of
January 4, 1988 (the "Deferred Compensation Agreement" and together with the
Employment Agreement, the "Arrangement"). Except as specifically provided in
this Agreement, the terms of this Agreement shall supersede the terms of the
Arrangement.
(e) The Executive and Richfood desire to resolve any and all issues
relating to the Executive's voluntary early retirement from Super Rite on
mutually satisfactory terms. These terms are intended to recognize the
Executive's valuable service to Super Rite and to protect and promote Richfood's
legitimate business interests.
Early Retirement.
The Executive hereby notifies Super Rite of his decision to retire from
Super Rite, and to resign as President and Chief Operating Officer of Super Rite
Corporation, Super Rite and all of their respective subsidiaries, in each case
effective as of May 24, 1996 (the "Retirement Date").
Maintenance of Confidentiality and Noncompetition Agreement.
<PAGE>
(a) As set forth above, the parties acknowledge that the terms of this
Agreement shall supersede all of the terms of the Arrangement except as
specifically provided herein. The parties hereby agree that the provisions of
paragraphs 4 and 5 of the Employment Agreement, as hereinafter amended (the
"Surviving Paragraphs"), shall continue in full force and effect after the
Retirement Date. The Surviving Paragraphs are hereby incorporated in this
Agreement by reference.
(b) With respect to paragraph 5 of the Employment Agreement, the
Executive and Richfood agree that the definition of the "Restriction Period" as
set forth in paragraph 5.1 of the Employment Agreement is hereby redefined to
include and be limited to the twelve (12) month period following the Retirement
Date.
(i) The Executive acknowledges that the restrictions
contained in paragraph 5 of the Employment Agreement, as amended herein,
are reasonable and that Richfood has a legitimate interest in preventing
him from engaging in the activities specified in such paragraph 5; and
(ii) The Executive acknowledges that, in the event he
decides to pursue some form of employment notwithstanding his retirement
from Super Rite, he will reasonably be able to earn a livelihood without
violating the terms of paragraph 5 of the Employment Agreement, as
amended herein.
(c) The Executive specifically agrees to comply with the provisions, as
amended, of the Surviving Paragraphs of the Employment Agreement as set forth in
this Section.
Payment of Remaining Compensation; Enhanced Deferred Compensation.
(a) In connection with his retirement from Super Rite, the Executive
shall be entitled to payment of his earned and unpaid salary through the
Retirement Date, additional salary payments in lieu of his accrued and unused
vacation through the Retirement Date and any other previously vested benefit or
right under Richfood's employee benefit plans. The Executive understands that as
a term of his retirement he waives any claims to any payments or benefits from
Richfood other than those described in this Agreement. The Executive further
understands that all amounts payable hereunder shall be subject to applicable
withholding taxes and other applicable deductions.
(b) In addition to the foregoing and in light of the Executive's many
years of valuable service to Super Rite, Richfood agrees that the Executive
shall be entitled to a vested benefit under the Deferred Compensation Agreement
as if the Executive had retired after having attained age 65 and completed 20
years of service with Super Rite.
Mutual Waiver, Release and Covenant Not to Sue.
As is customary in agreements relating to retirement, the parties desire
to memorialize their understanding that each will hold the other completely
harmless with respect to matters that occurred prior to the Retirement Date.
Accordingly, the parties have agreed as follows:
(a) (i) The Executive acknowledges that there are laws and regulations
prohibiting employment discrimination including Title VII, The Civil Rights Act
of 1964, as amended, and the Age Discrimination and Employment Act, as amended,
as well as other federal and state executive orders, statutes and regulations
regulating employment. By signing this Agreement, the Executive forever waives,
releases and covenants not to sue Richfood with respect to any and all claims
against Richfood of any kind or nature whatsoever arising from any events that
have occurred up to the date the Executive executes this Agreement or arising
from or relating in any way to the Executive's employment with Richfood and his
decision to retire, whether such claims are now known or later discovered. The
Executive specifically acknowledges that this waiver and release includes, but
is not limited to, any claims which could be brought under the employment
discrimination laws set forth above.
(ii) The Executive acknowledges that there is a risk that
after this Agreement is executed he may discover, incur or suffer from claims
which were unknown or unanticipated at the time this Agreement is executed,
including, but not limited to, any claims arising from or relating to his
employment with Richfood or his decision to retire, which, if known at the time
this Agreement is executed, could have materially affected his decision to
execute this Agreement. The Executive acknowledges that he is assuming the risk
of such unknown and unanticipated claims and agrees that this Agreement applies
to any and all such claims.
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<PAGE>
b. (i) By signing this Agreement, Richfood forever waives, releases and
covenants not to sue the Executive with respect to any and all claims against
the Executive of any kind or nature whatsoever arising from any events that have
occurred up to the date Richfood executes this Agreement or arising from or
relating in any way to the Executive's employment with Richfood, whether such
claims are now known or later discovered. Richfood acknowledges that there is a
risk that after this Agreement is executed it may discover, incur or suffer from
claims which were unknown or unanticipated at the time this Agreement is
executed which, if known at the time this Agreement is executed, could have
materially affected Richfood's decision to execute this Agreement. Richfood
acknowledges that it is assuming the risk of such unknown and unanticipated
claims and agrees that this Agreement applies to any and all such claims.
(ii) Without limiting the generality of the foregoing, and
provided that the Executive complies with all provisions of the Surviving
Paragraphs, Richfood waives any right it has or may ever have to terminate the
Executive's payments under the Deferred Compensation Agreement. In addition, and
except as may be limited by applicable law, from the Retirement Date and for a
period of three years thereafter, Richfood shall cause Super Rite to maintain
all rights of indemnification existing in favor of the Executive on terms no
less favorable than those provided in the certificate of incorporation and
by-laws of Super Rite on the Retirement Date.
Construction of Agreement.
(a) The Executive and Richfood agree that this Agreement contains all of
the promises and covenants made by them with respect to its subject matter, and
any and all prior understandings and agreements between them have merged herein
or cancelled by the mutual agreement of the parties, except for the Surviving
Paragraphs of the Employment Agreement as set forth herein.
(b) Any waiver of a breach of this Agreement will not constitute a waiver
of a future breach, whether of a similar or dissimilar nature.
(c) This Agreement will be governed by and interpreted in accordance with
the laws of the Commonwealth of Virginia, without any presumption or
construction against the party causing the Agreement to be drafted.
(d) If any provision of this Agreement is held invalid, such invalidity
will not invalidate the entire Agreement, and the remainder of the Agreement
will not be affected.
(e) The Executive acknowledges and agrees that Richfood is not
undertaking to advise him with respect to the tax consequences of this Agreement
and that he is solely responsible for determining those consequences.
Employment References.
Upon receipt of a request for an employment reference or employment
verification for the Executive, Richfood shall verify only the Executive's
position and dates of employment unless authorized by the Executive to provide
additional information.
If the foregoing accurately reflects your understanding of our agreement
in connection with your retirement, please execute the enclosed copy of this
Agreement and return it to me at your earliest convenience.
Again, thank you for your extraordinary service to Super Rite, and good
luck in your future endeavors.
Very truly yours,
RICHFOOD HOLDINGS, INC.
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<PAGE>
By: /s/ JOHN E. STOKELY
John E. Stokely
President & Chief Operating
Officer
Agreed to and executed as of June 14, 1996:
/s/ PETER VANDERVEEN
Peter Vanderveen
-39-
EXHIBIT 10.11
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated as of April 28, 1996, by and between RICHFOOD
HOLDINGS, INC., a Virginia corporation ("Richfood"), and EDGAR E. POORE, a
Virginia resident ("Consultant").
RECITALS
WHEREAS, Richfood desires to retain the Consultant, and the Consultant
desire to provide consulting services to Richfood, on the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Retention; Term. Richfood hereby hires Consultant to serve as a
consultant to Richfood for the purposes stated herein, and the Consultant hereby
agrees to serve as a consultant to Richfood, on the terms and subject to
conditions set forth herein, for a term beginning on April 28, 1996, and ending
on May 2, 1998 (such period is referred to herein as the "Term"), unless sooner
terminated as set forth herein.
2. Duties. During the Term of this Agreement, Consultant shall be
available generally to Richfood and shall provide such consulting, counseling
and advice on matters related to Richfood's business as Richfood shall
reasonably request. During the Term of this Agreement, the Consultant shall meet
with Richfood at such times as shall be requested by Richfood and shall devote
his time, attention and best efforts to Richfood in connection with the
performance of his obligations hereunder. Notwithstanding the foregoing,
Consultant shall not be required to render more than twenty (20) hours of
service hereunder per week (excluding travel time). The Consultant shall serve
as an independent contractor and not as an employee of Richfood. The Consultant
shall report directly to the President of Richfood and to such other persons as
the President of Richfood may designate from time to time. The Consultant shall
be solely responsible for filing all returns and reports, and for paying all
taxes, arising from compensation received for his services hereunder.
3. Compensation. (a) Richfood agrees to pay the Consultant, as
compensation for his consulting services rendered hereunder, the sum of FIVE
THOUSAND DOLLARS ($5,000.00) per month, such amount to be payable on the first
day of each month during the term of this Agreement.
(b) In addition to the compensation set forth in Section 3(a) hereof,
Richfood shall reimburse Consultant for his reasonable documented travel and
business expenses incurred in connection with the performance of his services
hereunder. Such reimbursement shall be subject to, and made in accordance with,
Richfood's policies with respect to business expenses, as they may be in effect
from time to time.
4. Benefits. (a) The parties acknowledge that prior to the date of this
Agreement, Consultant was an employee of Richfood, and that Consultant
voluntarily elected to take Early Retirement under the Richfood Employees'
Retirement Plan (the "Retirement Plan"). Consultant shall be entitled to receive
all benefits that Consultant accrued prior to the date hereof under the
Retirement Plan in accordance with the terms of the Retirement Plan.
(b) (i) As of the date of this Agreement, the following stock options and
stock appreciation rights previously granted to Consultant under the Richfood
Holdings, Inc. Long-Term Incentive Plan and the Richfood Holdings, Inc. Omnibus
Stock Incentive Plan (collectively, the "Options Plans") are vested and
exercisable (the "Vested Options"):
Number of Exercise
Date of Grant Vested Options Price
1/16/91 50,000* $3.825
11/8/91 25,000 $6.5625
- --------
*Includes 50,000 corresponding stock appreciation rights.
<PAGE>
11/5/92 24,000 $ 8.5625
11/4/93 5,000 $ 15.50
11/3/94 3,000 $ 15.50
Richfood shall cause Consultant's Non-Qualified Stock Option Agreements to be
amended to permit Consultant to continue to exercise the Vested Options at any
time during the term of this Agreement and for a period of sixty (60) days
thereafter, notwithstanding that Consultant is no longer an employee of
Richfood, but subject to all of the other terms and conditions of such
Agreements.
(ii) The following Stock Options and Shares of Restricted Stock
previously granted to Consultant under the Option Plans are not vested or
exercisable as of the date of this Agreement:
Number of Exercise
Date of Grant Options/Shares Price
11/5/92 8,000 options $ 8.5625
11/5/92 8,000 shares N/A
restricted stock
11/4/93 5,000 options $15.50
11/3/94 9,000 options $15.50
Richfood shall cause Consultant's Non-Qualified Stock Option Agreements and
Restricted Stock Award Agreement to be amended to permit stock options and
shares of restricted stock covered thereby to vest during the term of this
Agreement in accordance with the vesting schedules currently set forth therein,
and to permit such vested options to be exercisable during the term of this
Agreement and for a period of sixty (60) days thereafter, notwithstanding that
Consultant is no longer an employee of Richfood, but subject to all of the other
terms and conditions of such Agreements.
(iii) Consultant acknowledges that the foregoing amendments to his
Non-Qualified Stock Option Agreements and Restricted Stock Award Agreement may
be deemed to constitute new grants under applicable securities laws and that,
therefore, Consultant agrees not to sell or otherwise dispose of any shares
acquired pursuant to such amended Agreements until the earlier of (A) six months
after the date of Consultant's last transaction in Richfood Common Stock while
he was an executive officer of Richfood and (B) six months after the date of
such amendments.
(c) During the Term of this Agreement, Consultant shall be offered such
medical, dental and life insurance coverage as is generally offered from time to
time by Richfood to its former employees who have elected to take Early
Retirement under the Retirement Plan.
(d) Upon the termination of this Agreement, provided that Consultant has
performed his obligations hereunder in accordance with the terms and conditions
set forth herein, Consultant shall be credited with two (2) years of additional
service to Richfood solely for the purpose of enabling Consultant to qualify for
benefits under the Richfood Holdings, Inc. Supplemental Executive Retirement
Plan, it being the intention of the parties that upon the termination of this
Agreement on May 2, 1998, the combination of Consultant's age plus his years of
service (including such additional two (2) years) shall equal 75.
5. Total Compensation/Benefits. The compensation and benefits set forth
in Sections 3 and 4 hereof constitute all of the compensation and benefits that
Consultant is entitled to receive in connection with his former employment by
Richfood, the termination of such employment and Consultant's services
hereunder. Consultant shall not be entitled to any other benefits or to
participate in any other benefit plans generally available to Richfood's
employees.
6. Release and Indemnity. Consultant hereby releases, remises and forever
discharges Richfood from any and all claims, charges, suits, actions, or causes
of action, at law or in equity, and Consultant hereby agrees to indemnify and
hold harmless Richfood from and against any and all damages, costs, losses,
expenses or liabilities of whatever kind or nature (including Richfood's
reasonable attorneys' fees and related legal expenses), suffered or incurred as
a result of (i) damage to property, injury to any person or persons or death of
any person or persons (including without limitation injury to or death of
Consultant), (A) arising from or in connection with, in any case whether
directly or indirectly, the acts or omissions of Consultant or (B) incurred by
Consultant during or in connection with the performance of his services
hereunder and (ii) any claim by Consultant arising out of any labor, worker's
compensation, equal employment or employee benefit law.
<PAGE>
7. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the Commonwealth of Virginia
without regard to the conflicts of law rules thereof.
(b) Entire Agreement; Amendment. This Agreement contains
all of the understandings and representations between the parties hereto
pertaining to the subject matter hereof and supersedes all undertakings and
agreements, whether oral or in writing, if any, previously entered into by them
with respect thereto. This Agreement may not be amended otherwise than by a
writing signed by the parties hereto.
(c) Severability. If any provision, clause or part of
this Agreement, or the application thereof under certain circumstances, is held
invalid or unenforceable for any reason, the remainder of this Agreement, or the
application of such provision, clause or part under other circumstances shall
not be affected thereby.
(d) Notices. All communications, notices and disclosures
required or permitted by this Agreement shall be in writing and shall be deemed
to have been given when delivered personally or by messenger or by overnight
delivery service, or when mailed by registered or certified United States mail,
postage prepaid, return receipt requested, or when received via telecopy, telex
or other electronic transmission, in all cases addressed to the person for whom
it is intended at the address set forth on the signature page hereof or to such
other address as a party shall have designated by notice in writing to the other
party in the manner provided by this Section.
(e) Counterparts; Headings. This Agreement may be
executed in counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument. The Section
headings in this Agreement are inserted for convenience of reference only and
shall not constitute a part hereof.
(f) Assignment; Successors and Assigns. This Agreement
may not be assigned by Consultant. This Agreement shall be binding on and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
(g) Medical Representation. Consultant hereby represents
and warrants to Richfood that Consultant is not subject to any medical condition
or restriction that would prevent him from performing his services hereunder nor
has Consultant been advised by any physician or other medical personnel that
Consultant should refrain from activities of the type contemplated by this
Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first written above.
Address: RICHFOOD HOLDINGS, INC.
P.O. Box 26967
Richmond, VA 23261-6967
By: ___________________________
Title: ________________________
-------------------------------
Address: EDGAR E. POORE
Route 1, Box 2770
Montpelier, VA 23192
EXHIBIT 10.23
REVISED AND RESTATED LEASE AGREEMENT
This Revised and Restated Lease Agreement (this "Lease") is made as of
the 13th day of October, 1995 by and between G. F. LUCKNOW ASSOCIATES, a
Pennsylvania limited partnership, having a principal office at Harrison & Grass,
20 Erford Road, Suite 201, LeMoyne, Pennsylvania 17043 ("Landlord") and SUPER
RITE FOODS, INC., a Delaware corporation, having a principal office at 3900
Industrial Road, Harrisburg, Pennsylvania 17110 ("Tenant") and provides as
follows:
Recitals
Landlord and Tenant have heretofore entered into a Lease Agreement dated
February 16, 1984, as amended by a First Amendment to Lease dated October 15,
1990 (as amended, the "Original Lease"). Landlord and Tenant desire to amend and
restate the Original Lease in its entirety.
Now, therefore, for and in consideration of the premises, the mutual
covenants, promises and agreements hereafter set forth; Landlord and Tenant
hereby agree that the Lease is amended in its entirety so that it now reads as
follows:
1. PREMISES
The premises (the "Premises") shall consist of a tract of
forty-seven (47) acres, more or less, together with the buildings, improvements
and fixtures (the "Improvements") located thereon and located at 3900 Industrial
Road, Harrisburg, Pennsylvania 17110 and more particularly described on Exhibit
A hereto.
2. USE
Tenant shall have the right to use the Premises for any
lawful use; provided, however, that the Premises shall not be used (i) for any
illegal purpose or (ii) in violation of any applicable zoning laws, regulations
and restrictions.
3. TERM
The term of this Lease (the "Term") shall continue on the
date hereof and shall terminate at the close of business on December 31, 2025.
4. RENTAL
Tenant shall pay to Landlord, as minimum rent for the
Premises, the following:
a. During the period October 1, 1995 through December
31, 2000, the annual sum of $3,340,000.00 per year, payable in equal monthly
installments of $278,333.33 per month;
b. During the period January 1, 2001 through December
31, 2005, the annual sum of $4,100,000.00 per year, payable in equal monthly
installments of $341,666.67 per month;
c. During the period January 1, 2006 through December
31, 2010, the annual sum of $4,600,000.00 per year, payable in equal monthly
installments of $383,333.33 per month;
d. During the period January 1, 2011 through December
31, 2014, the annual sum of $5,250,000.00 per year, payable in equal monthly
installments of $437,500.00 per month;
<PAGE>
e. During the period January 1, 2015 through December
31, 2015, the annual sum of $4,442,500.00 per year, payable as follows:
$437,500.00 per month for the months of January through October; $67,500 for the
month of November and zero for the month of December;
f. During the period January 1, 2016 through December
31, 2025, the annual sum of $3,400,000.00 per year, payable in equal monthly
installments of $283,333.33 per month;
All minimum rent shall be payable in equal monthly
installments in advance at the office of the Landlord set forth above. Minimum
rent for the first and last months of the lease term shall be adjusted pro rata.
Minimum rent, as well as all other items of rental set forth in Paragraph 4(a)
through (i) below and Paragraph 5 shall be due and payable without deduction,
set-off, or counterclaim on the date due except as set forth in Paragraph 24
hereof. All minimum rent, additional rent (which shall include all other charges
payable by Tenant under this Lease) are collectively referred to as Rent.
The following items are additional rent required to be paid
by the Tenant hereunder:
a. All real estate sales and other sales and taxes and
assessments in lieu of real estate law, including operations taxes and business
occupancy taxes which by the levied upon the Premises and Improvements from time
to time during the term of this Lease.
b. All expenses required for the operations of the
Improvements and other facilities on the Premises.
c. All expenses for utility services serving the
Premises and the Improvements.
d. All costs of insurance as more particularly described
hereinafter under Paragraph 6.
e. All costs of maintenance, replacement, and repair of
any and all elements of the Improvements and Premises.
f. Any and all fees for management of the Premises and
the Improvements.
g. Any and all fines which may become due by reason of
any failure of Tenant to comply with any of the covenants of this Lease.
h. Any and all damages, costs, and expenses Landlord may
suffer or incur by reason of any default of Tenant or failure on its part to
comply with the covenants of this Lease.
i. Any and all damages to the Premises caused by any act
or neglect of Tenant.
The parties intend this Lease to be a "net lease" pursuant
to which the rent payable shall be absolutely net return to Landlord for the
term of the Lease, undiminished by taxes with respect to the Premises, or any
carrying charges, maintenance charges, or any other charges or loss of any kind
or nature; and Landlord shall not be required to perform any services or furnish
any utilities of any kind or nature.
Tenant covenants and agrees, without demand, to pay the
minimum and additional rental and all other charges herein reserved as rent on
the days and times and at the places that the same are made payable, without
fail. If Landlord shall at any time or times accept said rent or other charges
after the same shall have become due and payable, such acceptance shall not
excuse delay upon subsequent occasions, or constitute or be construed as a
waiver of any of Landlord's rights. Tenant agrees that any charge or payment
herein reserved, included, or agreed to be treated or collected as rent and/or
any other charge or taxes, expenses or costs herein agreed to be paid by Tenant
may be processed for and recovered by Landlord by distraint or other process in
the same manner as rent due and in arrears.
<PAGE>
5. PAYMENT OF ALL TAXES
With respect to the Premises and Improvements, prior to the
time when interest or penalties commence to accrue thereon, Tenant shall pay all
taxes, sewer and water rents, easements, and other charges, including charges in
lieu of taxes and all taxes and other claims owing the Commonwealth of
Pennsylvania or any other governmental authority, and all taxes, charges, and
claims owing to the United States of America and will produce to Landlord
receipts of all such payments promptly after payment.
If at any time during the term of this Lease, under the
laws of the Commonwealth of Pennsylvania or any political subdivision thereof, a
tax or excise on rents or other tax, however described, is levied or assessed by
the Commonwealth or political subdivision against Landlord or the basic rent
expressly reserved hereunder, Tenant covenants to pay and discharge such tax or
excise on rents or other tax but only to the extent or the amount thereof which
is lawfully assessed or imposed as a direct result of Landlord's ownership of
the Premises, or of this Lease or of the rentals accruing under this Lease.
Nothing in this Lease contained shall require Tenant to pay any income, excess
profits, or revenue tax or any other tax, assessment, charge or levy upon the
rent payable by Tenant under this Lease except to the extent hereinabove
provided, or any franchise, estate, inheritance, succession, capital levy, or
transfer tax of Landlord.
Tenant shall have the right to contest the amount or
validity of any imposition upon the Premises, the Improvements, or the ownership
or operation thereof, provided that it does so at its own risk and cost.
Landlord agrees to allow Tenant to use its name where necessary in such
proceedings.
6. INSURANCE
A. Casualty Insurance
Tenant shall keep the Premises, Improvements, and all
building equipment insured for the benefit of Landlord and any mortgagees
designated by Landlord, as their interests may appear, against "all risks", upon
terms and in companies satisfactory to Landlord and said mortgagees, at all
times and in amounts required by any mortgagee and not less than the full sound
replacement value of the Improvements and deliver all such policies of insurance
to Landlord, each of such policies to contain non-contributory mortgagee clauses
reasonably satisfactory to mortgagee.
The casualty insurance obtained hereunder must
provide for thirty (30) days' prior written notice of cancellation or material
change in coverage, with copies to Landlord and Landlord's mortgagee.
B. LIABILITY INSURANCE
Tenant shall maintain public liability insurance
against claims for personal injury or death or for damage to property suffered
by others occurring upon, in or about, any of the Premises and/or Improvements
in amounts which from time to time shall be reasonably agreed to by Landlord and
Tenant. At the commencement of this Lease, such amounts shall be not less than
Five Million Dollars ($5,000,000) in respect of bodily injury or death to any
one (1) person and not less than Fifteen Million Dollars ($15,000,000) in
respect of bodily injury or death to any number of persons in any one (1)
accident or occurrence. All such policies shall name Landlord as co-insured and
a copy of all current insurance policies shall be furnished to Landlord.
C. SELF INSURANCE
To the extent that the Tenant has maintained a net
worth determined from time to time in accordance with generally accepted
accounting principles for its prior full two-year fiscal period, of not less
than One Hundred Million Dollars ($100,000,000) in Constant Dollars (as defined
below), and Tenant supplies Landlord with evidence reasonably satisfactory to
Landlord of such net worth, the Tenant shall be entitled to self-insure as to
any risk required by this Lease for Tenant to be insured against.
<PAGE>
As used herein "Constant Dollars" means the present
value of the dollars to which such phrase refers. Constant Dollars shall be
determined by multiplying the dollar amount to be adjusted by a fraction, the
numerator of which is the Current Index Number (as defined below) and the
denominator of which is the Base Index Number (as defined below). The "Base
Index Number" shall be the level of the Index (as defined below) for the month
of October 1995; the "Current Index Number" shall be the level of the Index for
the month of October of the year preceding the year during which the calculation
of the adjustment in Constant Dollars is to be effective; the "Index" shall be
the Consumer Price Index for all Urban Consumers, U.S. City Average, All Items,
as published by the United States Department of Commerce (Base Year 1982-84 =
100), or any successor index thereto as hereinafter provided. If publication of
the Index is discontinued, or if the basis of calculating the Index is
materially changed, then the Landlord and the Tenant shall substitute for the
Index comparable statistics as computed by an agency of the United States
government or, if no such statistics are computed, by a substantial responsible
periodical or publication of recognized authority most closely approximating the
result which would have been achieved by the Index.
Notwithstanding the foregoing, in the event any
institutional mortgagee holding a mortgage on the Premises will not permit
Tenant to self insure then Tenant agrees to maintain the insurance provided for
in Subparagraphs 6A and 6B above, which may so long as Tenant meets the net
worth requirement for self insurance contain a deductible of $500,000 in
Constant Dollars, Landlord agrees to use its commercially reasonable efforts to
persuade any institutional mortgagee to permit Tenant to self insure.
7. STRUCTURAL ALTERATIONS
Tenant shall have the absolute right to make nonstructural
alterations to the Premises, without the necessity of obtaining Landlord's
approval, which do not affect the structure or materially affect the mechanical
systems of the Improvements. Should Tenant desire to make any structural
alterations or material alterations to the mechanical systems for the
Improvements (collectively, "Material Alterations"), then Tenant agrees to
submit all plans and specifications for the same to Landlord for Landlord's
written approval (which approval Landlord agrees not to unreasonably withhold,
delay or condition) before beginning such work. All alterations (whether
Material Alterations or not) shall be made at Tenant's expense and by
contractors reasonably acceptable to Landlord. Upon Tenant's receipt of
Landlord's written approval of any Material Alterations, or Landlord's failure,
within thirty (30) days after Tenant's submission of plans and specifications,
to give such approval or to disapprove in a written notice to Tenant specifying
the reasons, which failure shall be deemed approval, Tenant may proceed with the
construction of the approved Material Alterations, but only so long as they are
in substantial compliance with the approved plans and specifications and with
the provisions of this Paragraph 7. All such approved Material Alterations done
by, or for, Tenant shall (a) not materially adversely affect the structure or
safety of the Improvements, (b) comply with all applicable building, safety,
fire, plumbing, electrical and other codes and applicable governmental and
insurance requirements, and (c) be completed promptly and in a good and
workmanlike manner.
8. RESTORATION AFTER CASUALTY
In the event of damage or destruction of the Improvements
on the Premises or any part thereof, Tenant shall promptly restore same at its
cost including utilization of insurance proceeds, which proceeds shall be in
trust with Landlord and Tenant until proper completion, subject to any prior
rights of any mortgagee of the Premises and/or the Improvements. Rent shall not
abate during any period of untenantability.
9. ASSIGNMENT AND SUBLETTING
A. Affiliates. Tenant may, from time to time and at any
time, without the need for the consent of Landlord, assign this Lease or sublet
all or any part of the Premises to a parent of, affiliate of or an entity that
controls or is controlled by Tenant (an "Affiliate"). Tenant agrees to give
written notice to Landlord of any such assignment of this Lease to an Affiliate
of Tenant or of any subletting of all or any part of the Premises to an
Affiliate of Tenant within ten (10) days after such assignment or subletting. No
assignment or subletting permitted under this Paragraph 9 shall (i) materially
adversely affect Landlord's rights under any guaranty of Tenant's obligations
under this Lease or (ii) relieve Tenant of any of Tenant's obligations under
this
<PAGE>
Lease, and, Tenant shall remain fully liable for the faithful performance of all
covenants, terms and conditions hereof on the Tenant's part to be performed.
B. Merger, Consolidation or Acquisition. Tenant may,
from time to time and at any time, without the need for the consent of Landlord,
assign this Lease to another entity in connection with the merger or
consolidation of Tenant and such other entity or to the purchaser or transferee
of all or substantially all of the business and assets of Tenant, provided that
(i) the successor entity, purchaser or transferee shall, as a result of such
merger, consolidation or acquisition, be legally bound to pay the Rent, and all
other rentals and charges hereunder, and to observe and perform all of the other
terms, covenants and provisions of this Lease on the part of Tenant to be
observed or performed, and (ii) the net worth and proforma revenues (as
reasonably estimated) of such successor entity, purchaser or transferee as of
the effective date of assignment shall be no less than that of Tenant during the
one-year period immediately preceding the effective date of assignment
hereunder. No such assignment permitted under this Paragraph 9 shall relieve
Tenant of any of Tenant's obligations under this Lease, and Tenant shall remain
fully liable for the faithful performance of all covenants, terms and conditions
hereof on the Tenant's part to be performed. Tenant agrees to give written
notice to Landlord of any such assignment permitted under this Paragraph 9
within ten (10) days after such assignment.
C. Other Assignments or Subleasing.
a. Except for assignments or subleasing
expressly permitted pursuant to Subparagraphs 9A and B above, Tenant shall not
have the right to assign this Lease or to sublet all or any portion of the
Premises without the prior written consent of Landlord, which consent shall not
be unreasonably withheld, delayed or conditioned. Should Tenant desire to assign
this Lease or any right or interest herein or sublet the Premises or any part
thereof and such assignment or sublease requires Landlord's prior written
consent hereunder, Tenant shall given Landlord written notice of such desire,
which notice shall contain (1) the name and address of the proposed subtenant or
assignee and its form of organization, (2) the nature of the proposed
subtenant's or assignee's business to be conducted in the Premises, (3) the
material terms and conditions of the proposed sublease or assignment (including,
without limitation, the location of the space proposed to be sublet and the
approximate Net Rentable Area thereof and the proposed commencement date of the
proposed sublease or assignment), and (4) in the case of a proposed
assignment,financial statements for the three (3) most recently completed fiscal
years of the proposed assignee and such other financial information as Landlord
shall reasonably request (or if the proposed assignee has not been extant for at
least three (3) years, such financial statements as are available), together
with a request that Landlord approve such assignment or sublease (which request
shall contain a statement that in the event the proposed sublease or assignment
is not approved or disapproved by Landlord in writing to Tenant within fifteen
(15) business days following receipt of such written request, the proposed
sublease or assignment shall be deemed approved. Landlord shall have a period of
fifteen (15) business days following receipt of such written notice within which
to notify Tenant in writing that Landlord elects either (A) to deny Tenant the
right to consummate such sublease or assignment or (B) to permit Tenant to
assign this Lease or sublet such space.
D. Upon execution of any sublease or assignment approved
by Landlord under this Paragraph 9, a fully-executed counterpart of the sublease
or assignment shall be promptly delivered to Landlord by Tenant. In addition, in
the case of any sublease approved by Landlord under this Paragraph 9, Tenant
shall deliver to Landlord copies of any financial statements or other financial
information relating to the subtenant which are obtained by Tenant.
10. LEASEHOLD MORTGAGE
A. Tenant is hereby given the right by Landlord in
addition to any other rights herein granted, without Landlord's consent, to
mortgage its entire interest in this Lease (such mortgage, a "Leasehold
Mortgage") and to assign this Lease, as collateral security for such Leasehold
Mortgages, upon the condition that (a) all rights acquired under such Leasehold
Mortgages shall be subject and subordinate to each and all of the covenants,
conditions and restrictions set forth in this Lease, and to all rights and
interests of Landlord herein, none of which covenants, conditions or
restrictions is or shall be waived by Landlord by reason of the right given
pursuant to this Paragraph 10 to mortgage such interest, (b) all rights acquired
under such Leasehold
<PAGE>
Mortgages shall be subject and subordinate to each and all of the covenants,
conditions and restrictions set forth in this Lease and to all rights of Tenant
herein, and (c) the maturity date of any indebtedness secured by any Leasehold
Mortgage shall not be later than the then-expiration date of the Lease Term, and
in the event of the sooner termination of this Lease, Tenant shall, as a
covenant surviving the expiration or terminations hereof, cause to be released
the liens of all Leasehold Mortgages. Landlord agrees that so long as any
Leasehold Mortgage shall remain unsatisfied of record or until written notice of
satisfaction is given by the holder thereof to Landlord, the following
provisions shall apply:
B. There shall be no cancellation, surrender or
modification of this Lease by joint action of Landlord and Tenant without the
prior consent in writing of a holder who has given Landlord notice of the
existence of such Leasehold Mortgage (a "Leasehold Mortgagee"). This
Subparagraph shall not apply to any action taken by either Landlord or Tenant to
enforce its rights hereunder pursuant to any other provisions of this Lease.
C. Landlord shall, upon serving Tenant with any notice
of default, simultaneously serve a copy of such notice upon the Leasehold
Mortgagee at the address last supplied by such Leasehold Mortgagee to Landlord,
and as the Tenant thereupon the Leasehold Mortgagee shall have the same period
to remedy or cause to be remedied the defaults complained of. Landlord shall
accept such performance by or at the instigation of such Leasehold Mortgagee as
if the same had been done by Tenant.
D. Landlord agrees that in the event of termination of
this Lease by reason of any default by Tenant, Landlord will enter into a new
lease of the Premises with the Leasehold Mortgagee or its nominee, for the
remainder of the Lease term, effective as of the date of such termination, at
the rent and upon the terms, provisions, covenants and agreements as herein
contained and subject only to the same conditions of title as this Lease is
subject on the date of the execution of the new lease, except any conditions of
title occurring after the date of this Lease which are in violation of the terms
of this Lease, provided:
(i) The Leasehold Mortgagee or its nominee shall
make written request upon Landlord for such new lease within fifteen (15) days
after the date of notice of such termination and such written request is
accompanied by payment to Landlord of the Rent then due or past due to Landlord
under this Lease;
(ii) The Leasehold Mortgagee or its nominee shall
pay to Landlord, at the time of the execution and delivery of the new lease, any
and all sums which would, at the time of the execution and delivery thereof, be
due pursuant to this Lease but for such termination;
(iii) The Leasehold Mortgagee or its nominee shall
perform and observe all covenants herein contained on Tenant's part to be
performed and, to the extent such defaults are susceptible of being cured by
such Leasehold Mortgagee or nominee, shall further remedy any other defaults
which Tenant under the terminated lease was obligated to perform under the terms
of this Lease;
(iv) The new lease shall be expressly made
subject to the rights, if any, of Tenant and anyone claiming by, through or
under Tenant, under the terminated lease;
E. (i) Any Leasehold Mortgagee or its subsidiary
acquiring the leasehold estate of Tenant pursuant to foreclosure, assignment in
lieu of foreclosure and only such Leasehold Mortgagee or its subsidiary may,
upon acquiring the leasehold estate, sell and assign the leasehold estate on
such terms and to such persons and organizations as are acceptable to such
Leasehold Mortgagee or its subsidiary (the "Assignee") and thereafter shall be
relieved of all future obligations under this Lease, (ii) any other person or
entity except for the Leasehold Mortgagee or its subsidiary (herein "Other
Person") may acquire the leasehold estate pursuant to foreclosure or assignment
in lieu of foreclosure, provided that in either case (x) Landlord has approved
such Assignee or Other Person pursuant to the provisions of Paragraph 9C hereof
(Landlord shall approve or disapprove of any proposed Assignee or Other Person
within 5 business days after receipt of notice thereof) and (y) such Assignee or
Other Person delivers to Landlord its written agreement to be bound by all of
the
<PAGE>
provisions of this Lease (other than for those terms, covenants and conditions
which are specifically, pursuant to express provisions of this Lease, not
required to be observed or performed by such Assignee or Other Person).
F. Cure of Defaults. Nothing herein contained shall
require the Leasehold Mortgagee or its nominee to cure any default of Tenant
under this Lease nor shall any Leasehold mortgagee be personally liable therefor
except where such Leasehold Mortgagee is a Mortgagee in possession or has
acquired title to the Premises from Tenant.
11. TENANT INDEMNIFICATION
Tenant hereby agrees to indemnify and save harmless
Landlord from and against any and all claims asserted by any other person
arising from the conduct or management of or any work done in or about the
Premises and/or the Improvements.
12. AFFIRMATIVE OBLIGATIONS OF TENANT
Tenant covenants and agrees to:
a. Comply with any and all requirements of the public
authorities and with the terms of any state or Federal statute or local
ordination or regulation applicable to the Premises, the Improvements, and/or
Tenant, and hold Landlord harmless from penalties, fines, costs, or damages from
Tenant's failure to do so.
b. Use every reasonable precaution against fire.
c. Forcibly deliver up and surrender possession of the
Premises and Improvements upon expiration or sooner termination of this Lease.
d. Give Landlord and Landlord's mortgagee prompt notice
of any accident, fire, or damage occurring to the Premises and/or Improvements.
13. LANDLORD'S RIGHTS
Tenant covenants and agrees that Landlord shall have the
right to do the following things and matters in and above the Premises:
a. At all reasonable times, by itself or its duly
authorized agents, to go upon and inspect the Premises and Improvements and/or
at its option to make repairs, alterations, and additions to the Premises and/or
Improvements.
b. At any time or times and from time to time to make
such rules and regulations as in its judgment may from time to time be necessary
for the safety, care, and cleanliness of the Premises and Improvements, and for
the preservation of good order therein. Such rules and regulations shall, when
notice thereof is given to Tenant, form a part of this Lease.
14. TENANT RESPONSIBILITIES
a. Tenant agrees to be responsible for and to relieve
and hereby relieves Landlord from all liability by reason of any injury or
damage to any person or property in the Premises and Improvements, whether
belonging to the Tenant or any other person, caused by any firm, breakage, or
leakage in any part or portion of the Premises and Improvements, or from water,
rain, or snow that may leak into, issue or flow from any part of the Premises
and Improvements, or from the drawings, pipes, or plumbing work or from any
place or quarter, whether such breakage, leakage, injury or damage is caused by
or results from the negligence of Landlord or its servants or agents or any
persons whatsoever.
<PAGE>
b. Tenant also agrees to be responsible for and to
relieve and hereby relieves Landlord from all liability by reason of any damage
or injury to any person or thing which may arise from or be due to the use,
misuse or abuse of all or any of the elevators, hatches, openings, stairways,
hallways, of any kind whatsoever, which may exist or hereafter be erected or
constructed on the said Premises and Improvements, or from any kind of injury
which may arise from any other cause whatsoever on the said Premises and
Improvements, whether such damage, injury, use, misuse or abuse be caused by or
result from the negligence of Landlord, its servants or agents or any other
person or persons whatsoever.
15. WAIVER OF CUSTOM
It is hereby covenanted and agreed, any law, usage, or
custom to the contrary notwithstanding, that Landlord shall have the right at
all times to enforce the covenants and provisions of this Lease in strict
accordance with the terms hereof, notwithstanding any conduct or custom on the
part of Landlord in refraining from so doing at any time or times; and further,
that the failure of Landlord at any time or times to enforce its rights under
said covenants and provisions strictly in accordance with the same shall not be
construed as having created a custom in any way or manner contrary to the
specific terms, provisions, and covenants of this Lease or as having in any way
or manner modified same.
16. DEFAULT AND REMEDIES OF LANDLORD
A. "Event of Default" Defined. Any one or more of the
following events shall constitute an Event of Default under this Lease:
If Tenant:
a. Does not pay in full when due any and all
installments of rent and/or any other charge or payment herein reserved,
included, or agreed to be traded or collected as rent and/or any other charge,
expense, or cost herein agreed to be paid by Tenant (as to the first two such
defaults in any twelve month period within ten (10) days after the giving of
notice thereof by Landlord); or
b. Violates or fails to perform or otherwise breaks any
covenant or agreement herein contained (other than a default involving the
payment of money), which default is not cured within thirty (30) days after the
giving of notice thereof by Landlord, unless such default is (i) an emergency in
which event Tenant shall immediately undertake the curing of such default or
(ii) is of such a nature that it cannot be cured within such thirty (30) day
period, in which case no Event of Default shall occur so long as Tenant
commences the curing of the default within such thirty (30) day period and
thereafter diligently prosecutes the curing of same; or
c. Vacates the premises or removes or attempts to remove
or manifests an intention to reserve any goods or property therefrom otherwise
than in the ordinary and usual course of business without having first paid and
satisfied Landlord in full for all rent and other charges then due or that may
thereafter become due until the expiration of the then current term, above
mentioned; or
d. Becomes insolvent or makes an assignment for the
benefit of creditors, or if a petition in bankruptcy is filed by or against
Tenant, or a bill in equity or other proceeding for the appointment of a
receiver for Tenant is filed, or if proceedings for reorganization or for
composition with creditors under any State or Federal law be instituted by or
against Tenant, or if the real or personal property of Tenant shall be sold or
levied by any Sheriff, Marshal or Constable;
B. Remedies. Upon the occurrence and continuance of an
Event of Default, Landlord, without notice to Tenant in any instance (except
where expressly provided for below) may do any one or more of the following:
<PAGE>
(i) Landlord may perform, on behalf and at the
expense of Tenant, any obligation of Tenant under this Lease which Tenant has
failed to perform, the cost of which performance by Landlord shall be deemed
additional rent and shall be payable by Tenant to Landlord upon demand.
(ii) Landlord may elect to terminate this Lease
and the tenancy created hereby by giving notice of such election to Tenant, and
may reenter the Premises, by summary proceedings or otherwise, and may remove
Tenant and all other persons and property from the Premises, and may either sell
at auction after reasonable notice to Tenant or store such property in a public
warehouse or elsewhere at the cost of and for the account of Tenant without
resort to legal process and without Landlord being deemed guilty of trespass or
becoming liable for any loss or damage occasioned thereby.
(iii) Landlord may enter into and take possession of
the Premises without termination of this Lease and relet the premises or any
part thereof, for the account of Tenant, to any person, firm or corporation for
such rent, for such time and upon such terms as Landlord may reasonably
determine.
C. Damages. If this Lease is terminated by Landlord
pursuant to Subparagraph 16B(ii) above or if Landlord takes possession thereof
pursuant to Subparagraph 16B(iii) above then Tenant nevertheless shall remain
liable for any Rent and damages which may be due or sustained prior thereto as
they come due, and shall pay Landlord for all reasonable costs and expenses,
including, but not limited to, reasonable attorneys' fees and reasonable
brokers' fees and expenses, paid or incurred by Landlord in connection with: (i)
obtaining possession of the Premises; (ii) removal and storage of Tenant's or
other occupant's property; (iii) care, maintenance and repair of the Premises
while vacant; (iv) reletting the whole or any part of the Premises; and (v)
repairing, altering, renovating, partitioning, enlarging, remodeling, or
otherwise putting the Premises, either separately or as part of larger premises,
into condition acceptable to, and reasonably necessary to obtain new tenants.
In the event this Lease is terminated pursuant to this
Section, Tenant shall further be liable to Landlord for liquidated damages to be
calculated and payable as follows: the Present Value of all Rent payable by
Tenant hereunder, which shall be payable when due, less the Present Value of the
greater of (a) the Rent, if any, received by Landlord from others to whom the
Premises may be rented on such terms and conditions and at such rentals as
Landlord, in its reasonable discretion, shall deem proper or (b) the fair market
rental of the Premises for the remainder of the Lease term. Present Value shall
be computed by discounting such amount at a rate equal to the "Prime Rate" as
announced in the Money Rates column of the Wall Street Journal plus one percent
on the date of or most recent to the date of acceleration, or if such column
shall no longer be published then the Prime Rate then in effect at Citibank N.A.
or any successor bank.
17. CUMULATIVE REMEDIES
All of the remedies hereinbefore given to Landlord and all
rights and remedies given to him by law and equity shall be cumulative and
concurrent. No termination of this Lease or the taking or recovering of the
Premises shall deprive Landlord of any of his remedies or actions against Tenant
for Rent due or which, under the terms hereof, would in the future become due as
if there has been no termination, nor shall the bringing of any action for Rent
or breach of covenant, or the resort to any other remedy herein provided for the
recovery of Rent be construed as a waiver of the right to obtain possession of
the Premises.
18. CONDEMNATION
In the event that the Premises or any part thereof is taken
or condemned for a public or quasi-public use, this Lease shall, as to the part
so taken, terminate as of the date title shall vest in the condemnor, and rent
shall abate in proportion to the acreage of leased space taken or condemned or
shall cease if the entire premises be so taken. In either event, Tenant waives
all claims against Landlord by Tenant of the complete or partial taking of the
Premises, and it is agreed that Tenant shall not be entitled to any notice
whatsoever of the partial or complete termination of this Lease by reason of the
aforesaid.
<PAGE>
19. QUIET ENJOYMENT, SUBORDINATION AND ATTORNMENT
A. Quiet Enjoyment. So long as Tenant complies with the
terms, covenants and conditions of this Lease required on Tenant's part, Tenant
shall have the peaceful and quiet use of the Premises, subject to the terms,
covenants and conditions of this Lease, without interference by Landlord or
anyone claiming rights in the Premises by, through or under Landlord.
B. Subordination to Mortgages. Landlord covenants that
this Lease shall have priority over any future mortgage or deed of trust, except
that in the event that (i) a mortgagee or a prospective mortgagee shall request
that this Lease be subject and subordinate to its mortgage; (ii) such mortgage
covers or will cover the Improvements or any part thereof of which the Premises
is a part; (iii) Landlord consents thereto; and (iv) Landlord obtains a
Non-disturbance and Attornment Agreement from such mortgagee or prospective
mortgagee, in form reasonably satisfactory to such mortgagee and Tenant, which
Agreement shall provide that the occupancy of the Premises by Tenant shall not
be disturbed so long as Tenant is not in default hereunder and shall contain
such other terms and provisions as are reasonably required by institutional
mortgagees, then this Lease and Tenant's interest herein shall be subject and
subordinate to such mortgage and to all renewals, modifications, replacements,
consolidations and extensions thereof and to any and all advances made
thereunder and the interest thereon, and Tenant shall, within thirty (30) days
of receipt of same, execute, acknowledge and deliver any and all documents and
instruments subordinating this Lease and Tenant's interest herein. The word
"mortgage" as used herein shall include deeds of trust and other indentures and
encumbrances of similar nature.
C. Attornment. In the event of (i) a transfer of
Landlord's interest in the Premises, or (ii) the purchase of the Premises or
Landlord's interest therein in a foreclosure sale or by deed in lieu of
foreclosure under any mortgage or deed of trust or pursuant to a power of sale
contained in any mortgage or deed of trust, then in any of such events Tenant,
upon request, shall attorn to and recognize the transferee or purchaser of
Landlord's interest (as the case may be) as Landlord under this Lease for the
balance then remaining of the Term, and thereafter this Lease shall continue as
a direct lease between such person, as "Landlord", and Tenant, as "Tenant".
Tenant shall execute such agreement in confirmation of such attornment as such
holder or successor shall reasonably request.
20. MISCELLANEOUS
a. It is expressly understood and agreed by and between
the parties hereto that this Lease sets forth the promises, agreements,
conditions, and understanding between Landlord and Tenant relative to the
Premises, and that there are no promises, agreements, conditions, or
understandings, either oral or written, between them other than as herein set
forth. It is further understood and agreed that, except as herein otherwise
provided, no subsequent alteration, amendment, change, or addition to this Lease
shall be binding upon Landlord or Tenant unless reduced to writing and signed by
them.
b. All rights and liabilities herein given to or imposed
upon the respective parties hereto shall extend to and bind the several and
respective heirs, executors, administrators, successors, and assigns of said
parties. No rights, however shall inure to the benefit of any assignee of Tenant
unless the assignment to such assignee has been approved by Landlord in writing
as aforesaid.
c. Any headings preceding the text of the several
paragraphs and subparagraphs hereof are inserted solely for convenience of
reference and shall not constitute a part of this Lease, nor shall they affect
its meaning, construction, or effect.
21. RIGHT OF FIRST REFUSAL
Tenant is hereby given a right of first refusal to purchase
the Premises, subject to and in accordance with the following:
<PAGE>
a. The right of first refusal shall apply only to a
proposed sale (herein, an "Industry Sale") by Landlord of the Premises to a
person (the "Grocery Person") engaged in the wholesale or retail grocery
business, or to any Affiliate of such person. As used in this Paragraph, the
term "Affiliate" means (i) an entity controlled by or under common control with
such person, or (ii) a person related by marriage to, or a lineal descendant of,
such person.
b. In the event Landlord shall desire to enter into an
Industry Sale, Landlord shall first notify Tenant in writing of the material
economic terms of such proposed Industry Sale, including the name of the
proposed purchaser (the "Offer Notice"). Tenant shall then have a period of
thirty (30) days in which to advise Landlord that it wishes to accept the offer
set forth in the Offer Notice. If the Tenant does accept such offer, then
closing upon the purchase and sale of the Premises shall be held at 10:00 a.m.
on the sixtieth (60th) day after the date of such acceptance, at the offices of
Landlord (or at any other place in Harrisburg, Pennsylvania which may be agreed
upon by the Landlord and Tenant in writing).
c. At closing of the sale of the Premises, pursuant to
this Paragraph, the Landlord shall convey the Premises to the Tenant upon the
terms and conditions contained in the Offer Notice by a special warranty deed
containing a covenant of further assurances free and clear of all mortgages and
liens not caused by Tenant's acts or actions in violation of Tenant's
obligations under this Lease and subject to the following:
(i) except as set forth above all matters of
record affecting the Premises as of the date thereof;
(ii) all real property taxes;
(iii) any condemnation (provided, however, that if
such condemnation occurs between the date of the Tenant's elections to purchase
the Premises and the date of closing, the Tenant shall be entitled to all awards
therefor);
(iv) any other instrument or matter to which
Tenant is a party or with respect to which the Tenant gives its consent in
writing;
(v) any matter arising from prescriptive right
or adverse possession as to the Premises;
(vi) any other instruments or matters to which
the Industry Sale shall be subject provided they do not discriminate against the
Tenant or materially adversely affect Tenant's use and enjoyment of the
Premises.
d. The Tenant shall be deemed to have declined such
offer unless within thirty (30) days after the Tenant's receipt of the
Landlord's Offer Notice the Tenant gives written notice to the Landlord that the
Tenant accepts the offer set forth in the Landlord's Offer Notice. If the Tenant
declines or is deemed to have declined the offer set forth in the Landlord's
Offer Notice, then the Landlord shall be entitled, at any time within one
hundred eighty (180) days after the date of the Landlord's Offer Notice to sell
or otherwise transfer the Premises to the person named in the Offer Notice at a
price which is not less than ninety-seven percent (97%) of the price set forth
in the Landlord's Offer Notice and upon such other essential economic terms as
are not materially more favorable to the purchasing party than those set forth
in the Landlord's Offer Notice but during such period the Landlord shall not be
entitled to sell or otherwise transfer the Landlord's Interest for any lower
price than 97% or upon any other terms materially more favorable to the
purchasing party than those contained in the Landlord's Offer Notice, and after
such 180-day period the Landlord shall not be entitled to transfer the Premises
without again observing the procedure set forth in this paragraph.
e. If the Tenant elects not to exercise its right to
purchase the Premises under this paragraph as to any one or more proposed
transfers of the Premises, the Tenant agrees that upon written request by the
Landlord, the Tenant shall execute an estoppel certificate acknowledging that it
has elected not to exercise its right as to such proposed transfer.
<PAGE>
22. REMOVAL OF FIXTURES, EQUIPMENT AND EFFECTS.
Landlord hereby confirms that Tenant is the owner of all
fixtures currently installed within the Premises, including but not limited to
the Rapistan System. Tenant may sell, encumber or remove any such fixtures from
time to time, provided, however, that Tenant shall repair all damage caused to
the Premises by such removal. Tenant shall upon the expiration or termination of
the Term or any renewal thereof, remove all personalty and movable equipment
which it has placed upon the Premises and Tenant shall be responsible for the
cost of any repairs of any damage caused by removal of such personalty and
equipment. Tenant shall have the option to remove all fixtures (other than
standard walls, the electrical, mechanical and plumbing systems, installed
carpeting, millwork, lighting, doors and door hardware) installed by Tenant, but
tenant shall be responsible for the cost of repairs of any damage caused by
removal of such fixtures.
23. NOTICES
All notices and other communications authorized or required
hereunder shall be in writing and shall be deemed duly served and received if
(i) sent by commercial messenger service with receipted delivery; or (ii) mailed
by registered or certified mail in any post office station or letter box in the
continental United States, return receipt requested, addressed as to Tenant at
the address of Tenant set forth herein or such other address as Tenant shall
have last designated by notice to Landlord and addressed as to Landlord to it at
the address of Landlord set forth herein or such other address as Landlord shall
have last designated by notice to Tenant. Such notice or communication shall be
deemed to have been given when served personally with evidence of receipt or
when received if mailed in the above-provided manner. Notices shall be addressed
as follows:
LANDLORD: C. F. LUCKNOW ASSOCIATES
c/o Martin Grass
30 Hunter Lane
Camp Hill, Pennsylvania 17011
And To: Alex Grass
4025 Crooked Hill Road
Harrisburg, Pennsylvania 17110
TENANT: SUPER RITE FOODS, INC.
Post Office Box 2201
Harrisburg, Pennsylvania 17105
And To: Daniel R. Schnur, Esquire
Richfood, Inc.
2000 Richfood Road
Mechanicsville, Virginia 23111
And To: Gary E. Thompson, Esquire
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
<PAGE>
24. RIGHT TO PERFORM FOR LANDLORD
If Landlord shall fail to perform or comply with any of its
monetary obligations (which are not an obligation of Tenant under this Lease)
under any mortgage or deed of trust covering the Premises and Tenant has not
entered into a Nondisturbance and Attornment Agreement with the holder of such
mortgage or deed of trust, then Tenant so long as it is not in default in the
payment of Rent hereunder may (but shall not be obligated to) make such payment
and Landlord shall promptly pay to Tenant on demand the amount of such payment,
together with interest thereon at the Prime Rate plus three percent from the
date Tenant made such payment to the date of payment by Landlord. To the extent
Tenant is not promptly reimbursed for such monies, Tenant may offset the amount
of monies due it against Rent due under this Lease.
IN WITNESS WHEREOF and intending to be legally bound
hereby, the parties hereto affixed their hands and seals as of the date set
forth above.
G. F. LUCKNOW ASSOCIATES, a
Witness: Pennsylvania Limited Partnership
________________________ By:_______________________________
Sole General Partner
Attest: SUPER RITE FOODS, INC., a
Delaware corporation
________________________ By:_______________________________
(Corporate Seal) Name:
Title:
EXHIBIT 11.1
RICHFOOD HOLDINGS, INC.
COMPUTATION OF NET EARNINGS PER COMMON SHARE (dollar amounts
in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
April 27, April 29, April 30,
1996 1995 1994
<S> <C>
Net Earnings:
Earnings before extraordinary loss $ 39,215 $ 39,218 $ 21,371
Extraordinary loss, net of tax (2,164) - -
------------ ----------- -----------
Net earnings $ 37,051 $ 39,218 $ 21,371
=========== =========== ===========
Primary Earnings Per Common Share:
Weighted average number of
common shares outstanding 31,216,738 31,140,926 30,514,503
Net additional common shares
issuable upon exercise of dilutive
options, determined by
treasury stock method 398,434 332,084 390,900
----------- ----------- -----------
Common shares and equivalents 31,615,172 31,473,010 30,905,403
=========== =========== ===========
Earnings before extraordinary loss $ 1.24 $ 1.25 $ 0.69
Extraordinary loss, net of tax (0.07) - -
------------ ----------- -----------
Net earnings per common share (a) $ 1.17 $ 1.25 $ 0.69
=========== =========== ===========
Fully Diluted Earnings Per Common Share:
Common shares and equivalents 31,615,172 31,473,010 30,905,403
Net additional common shares issuable upon exercise of dilutive options,
determined by treasury stock method using quarter-end market price,
if higher than average price 119,763 100,937 30,936
----------- ----------- -----------
Common shares and equivalents (b) 31,734,935 31,573,947 30,936,339
=========== =========== ===========
Earnings before extraordinary loss $ 1.24 $ 1.24 $ 0.69
Extraordinary loss, net of tax (0.07) - -
----------- ----------- -----------
Net earnings per common share (a) $ 1.17 $ 1.24 $ 0.69
=========== =========== ===========
</TABLE>
NOTE: (a) Dilution is less than 3%.
(b) The Company does not have any other potentially dilutive
securities.
EXHIBIT 12.1
RICHFOOD HOLDINGS, INC.
COMPUTATION OF CERTAIN RATIOS
The following relates to the ratio computations in the portions of the Company's
fiscal 1996 Annual Report to Shareholders incorporated by reference herein.
Net earnings as a percent of sales = Net earnings divided by sales.
Book value = Total shareholders' equity divided by the shares of common
stock outstanding at fiscal year end.
Working capital = Current assets minus current liabilities.
Current ratio = Current assets divided by current liabilities.
Inventoryturnover = Cost of goods sold divided by average inventories. Average
inventories was computed by adding the inventories at the beginning of
the fiscal year to the inventories at the end of the fiscal year and
dividing this sum by two.
Return on average assets = Net earnings divided by average total assets.
Average total assets was computed by adding the total assets at the
beginning of the fiscal year to the total assets at the end of the
fiscal year and dividing this sum by two.
Debt to equity ratio = Total debt, including capital lease obligations and
current maturities, divided by total shareholders' equity.
Return on average shareholders' equity = Net earnings divided by average
shareholders' equity. Average shareholders' equity was computed by
adding the shareholders' equity at the beginning of the fiscal year to
the shareholders' equity at the end of the fiscal year and dividing
this sum by two.
FINANCIAL REVIEW
The following discussion of the Company's consolidated results of operations and
financial position should be read in conjunction with the Consolidated Financial
Statements and notes thereto included in this annual report. References in the
following discussion are to the fiscal years ended April 27, 1996 ("fiscal
1996"), April 29, 1995 ("fiscal 1995") and April 30, 1994 ("fiscal 1994").
Effective October 15, 1995, Super Rite Corporation ("Super Rite"), a full
service wholesale and retail food distributor based in Harrisburg, Pennsylvania,
became a wholly-owned subsidiary of Richfood Holdings, Inc. (the "Super Rite
Acquisition"). The Super Rite Acquisition has been accounted for as a pooling of
interests, which requires that the historical consolidated financial statements
of Richfood and Super Rite as of and for the periods ended prior to the
effective time of the Super Rite Acquisition be combined as if the transaction
had occurred as of the beginning of the earliest period presented. Accordingly,
the Consolidated Financial Statements discussed and analyzed below reflect the
combined operations of Richfood and Super Rite. See note 2 to the Consolidated
Financial Statements for further information with respect to the Super Rite
Acquisition.
RESULTS OF OPERATIONS
Comparison of Fiscal 1996 with Fiscal 1995
Sales of $3.25 billion for fiscal 1996 consisted of $3.10 billion of wholesale
grocery sales and $322.8 million of retail grocery sales. Wholesale grocery
sales included $168.9 million of intersegment sales to the Company's retail
grocery division. Wholesale grocery sales of $3.10 billion increased $239.6
million, or 8.4%, over sales of $2.86 billion for fiscal 1995. The Company's
results of operations for fiscal 1996 included fifty-two weeks of operations for
Super Rite, compared to fifty-three weeks in fiscal 1995. Excluding the effect
of the additional week in fiscal 1995 for Super Rite, wholesale grocery sales
would have increased $264.9 million, or 9.4%. This increase in wholesale grocery
sales was primarily attributable to: sales to former customers of the wholesale
division of Camellia Food Stores, Inc. ("Camellia"), which was acquired by the
Company on April 3, 1995; the inclusion in fiscal 1996 of a full year of sales
for Rotelle, Inc. ("Rotelle"), which was acquired by the Company on August 23,
1994; and sales to customers who expanded their retail operations.
Retail grocery sales of $322.8 million for fiscal 1996 increased $18.1
million, or 5.9%, over sales of $304.7 million for fiscal 1995. Excluding the
effect of the additional week in fiscal 1995 for Super Rite, retail grocery
sales would have increased $23.8 million, or 7.9%. This increase is primarily
attributable to sales increases resulting from the Company's conversion of three
former BASICS stores to the METRO format and the opening of two new METRO stores
between May 1994 and April 1996. Sales for the METRO/BASICS Retail Division
increased 6.7% on a comparable store basis in fiscal 1996, compared to fiscal
1995.
Gross margin increased to 10.04% of sales for fiscal 1996 from 9.95% of
sales for fiscal 1995. The increase was primarily attributable to increased
gross margins in the Company's retail operations resulting from an emphasis on
selling categories with higher margins such as meat, perishables and private
label items.
Operating and administrative expenses were 7.28% of sales in fiscal 1996,
compared to 7.22% of sales in fiscal 1995. The increase in operating and
administrative expenses was primarily attributable to the Company increasing its
provision for doubtful accounts in fiscal 1996 and the effect of incremental
depreciation and amortization expense resulting primarily from the inclusion of
a full year of Rotelle's operating results in fiscal 1996.
The Company's operating results for fiscal 1996 included a one-time
charge for merger and integration costs of $12.0 million in connection with the
Super Rite Acquisition. This charge primarily related to transaction costs
associated with the Super Rite Acquisition, severance costs and costs related to
the conversion of certain BASICS locations to the METRO store format, including
write-offs of property and equipment.
Interest expense decreased to $12.4 million in fiscal 1996 from $18.3
million in fiscal 1995. The decrease was primarily due to the early
extinguishment of $27.5 million of the Company's 10 5/8% Senior Subordinated
Notes due April 2002 ("Senior Subordinated Notes") and the repayment in full of
borrowings under a $25.0 million term loan facility and a $25.0 million
revolving credit facility.
<PAGE>
The Company's effective income tax rate was 42.8% in fiscal 1996,
compared to 41.2% in fiscal 1995. The higher effective tax rate for fiscal 1996
was primarily attributable to certain nondeductible merger and integration costs
associated with the Super Rite Acquisition.
The extraordinary loss, net of tax, of $2.2 million for fiscal 1996
primarily related to the repurchase, at market prices above par, of $27.5
million principal amount of Senior Subordinated Notes and is comprised of (i)
the amount paid in excess of their par value, and (ii) the write-off of related
deferred financing costs. The Company expects to continue to repurchase these
notes, from time-to-time, when market prices therefor are economically
beneficial in relation to the Company's cost of funds. The Senior Subordinated
Notes include an optional redemption provision which permits the Company to
redeem all, or any portion of, the notes at a declining redemption price
(initially 105.31% of par) at any time from and after April 1, 1997.
Excluding the effects of the one-time charge for merger and integration
costs related to the Super Rite Acquisition and the extraordinary loss related
to early extinguishment of debt, net earnings for fiscal 1996 were $47.0
million, or $1.51 per share, a 19.9% increase over net earnings of $39.2
million, or $1.26 per share, for fiscal 1995. Net earnings for fiscal 1996,
including the effects of the one-time charge and extraordinary loss, were $37.1
million, or $1.19 per share.
Comparison of Fiscal 1995 with Fiscal 1994
Fiscal 1995 results of operations include the effects of two strategic
acquisitions completed by the Company during the fiscal year: on August 23,
1994, the Company acquired all of the outstanding common stock of Rotelle, a
wholesale frozen food distributor located in West Point, Pennsylvania; and on
April 3, 1995, the Company acquired certain assets and assumed certain contracts
of Camellia, a retail and wholesale food distributor located in Norfolk,
Virginia. Each of these acquisitions was accounted for under the purchase method
of accounting and, accordingly, the results of operations of the acquired
businesses have been included in the Company's results from the respective dates
that the acquisitions were completed.
Sales of $2.99 billion for fiscal 1995 consisted of $2.86 billion of
wholesale grocery sales and $304.7 million of retail grocery sales. Wholesale
grocery sales included $169.4 million of intersegment sales to the Company's
retail grocery division. Wholesale grocery sales of $2.86 billion for fiscal
1995 increased $397.5 million, or 16.2%, over sales of $2.46 billion for fiscal
1994. Excluding the effect of the additional week in fiscal 1995 for Super Rite,
wholesale grocery sales would have increased $372.3 million, or 15.1%. This
increase in wholesale grocery sales for fiscal 1995 was primarily attributable
to sales of $235.2 million recorded by Rotelle after its acquisition by the
Company and the growth of existing customers' retail operations.
Retail grocery sales of $304.7 million for fiscal 1995 increased $44.0
million, or 16.9%, over sales of $260.7 million for fiscal 1994. Excluding the
effect of the additional week in fiscal 1995 for Super Rite, retail grocery
sales would have increased $38.3 million, or 14.7%. This increase in retail
grocery sales for fiscal 1995 was primarily due to sales by three new METRO
superstores opened during the fiscal year and sales gains in comparable METRO
stores. Excluding the effect of the additional week of retail grocery sales in
fiscal 1995 for Super Rite, same store sales increased 7.0%.
Gross margin increased to 9.95% of sales for fiscal 1995, compared to
9.84% of sales for fiscal 1994. The increase in gross margin in fiscal 1995 was
primarily attributable to Rotelle's higher margin frozen food sales and
increased gross margin in the METRO stores. These increases were offset in part
as a result of a greater percentage of Super Rite sales being in lower margin
dry grocery product lines in fiscal 1995 as compared to fiscal 1994.
Operating and administrative expenses were 7.22% of sales in fiscal 1995,
compared to 7.34% of sales in fiscal 1994. Lower operating and administrative
expenses as a percent of sales in fiscal 1995 as compared to fiscal 1994
reflects the incremental leveraging of fixed expenses in the Company's wholesale
operations through increased sales, offset in part by the inclusion of the
higher operating expense ratio for Rotelle's frozen food wholesale operation in
fiscal 1995 results and expenses incurred in the transition of the Camellia
sales volume to the Company's Mechanicsville, Virginia, distribution center.
During fiscal 1994, the Company recognized a loss on the disposal of
assets of $13.1 million, which included an additional reserve of $7.0 million
related to the write down of the assets of five closed retail grocery stores
located in the Washington, D. C. area to their estimated net realizable values.
This additional reserve of $7.0 million increased the fiscal 1993 reserve of
$9.2 million related to these stores. Also included in the loss on the disposal
of assets in fiscal 1994 was $6.1 million related to the write down of the
assets of three retail grocery stores located in Raleigh, North Carolina, to
their estimated net realizable values. The assets related to these eight stores
were sold during fiscal 1995.
<PAGE>
Interest expense increased $0.8 million in fiscal 1995 over fiscal 1994,
due to increasing average interest rates under the Company's variable rate
borrowing facilities and additional borrowings made by the Company, primarily to
finance the Company's acquisition of Rotelle in fiscal 1995.
Interest income was $3.3 million in fiscal 1995 compared to $3.2 million
in fiscal 1994. Average notes receivable were $37.3 million and $43.7 million
for fiscal 1995 and 1994, respectively. The Company's effective interest rate
earned on its portfolio of loans to retailers, most of which bear interest at a
variable rate equal to the prime lending rate plus 2%, increased during fiscal
1995, primarily due to increases in the prime lending rate.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $17.4 million at April 27, 1996, compared to
$29.4 million at April 29, 1995.
Net Cash Provided by Operating Activities
The Company's operations continue to generate significant cash to support the
Company's growth. Net cash provided by operating activities for fiscal 1996 was
$89.6 million. This amount included: net earnings of $37.1 million; adjustments
to conform the fiscal year end of the pooled company, including net earnings of
$2.5 million and non-cash components of $2.0 million; and depreciation and
amortization of $27.1 million. The adjustments to conform the fiscal year end of
the pooled company consist of Super Rite's net earnings for the eight week
period between March 4, 1995, its former fiscal year end, and the Company's
April 29, 1995, fiscal year end, and certain non-cash components, primarily
depreciation and amortization for the same period.
Net cash provided by operating activities was $100.4 million and $63.0
million for fiscal 1995 and 1994, respectively. These amounts primarily
consisted of net earnings of $39.2 million in fiscal 1995 and $21.4 million in
fiscal 1994, and depreciation and amortization of $23.9 million in fiscal 1995
and $22.4 million in fiscal 1994.
Working capital was $40.8 million at April 27, 1996 and $72.8 million at
April 29, 1995. The decrease in working capital from April 29, 1995, to April
27, 1996, related primarily to a reduction in cash and cash equivalents, which
were utilized to reduce long-term debt, and an increase in accounts payable
resulting from the Company's continued focus on effective accounts payable
management, offset in part by an increase in inventories.
The Company's working capital needs are financed primarily through cash
provided by operations. The Company also utilizes, on a short-term basis, two
unsecured $20.0 million revolving lines of credit. Amounts drawn under these
lines of credit are typically repaid within a few business days. The revolving
lines of credit expire in July 1997 and December 1997. There were no borrowings
outstanding under the facilities at April 27, 1996.
Net Cash Used for Investing Activities
Net cash used for investing activities was $20.3 million for fiscal 1996, $77.7
million for fiscal 1995 and $20.4 million for fiscal 1994. The increase in net
cash used for investing activities in fiscal 1995 was primarily attributable to
the Company's purchase of Rotelle for $50.7 million.
Capital expenditures were $14.8 million for fiscal 1996, $20.0 million
for fiscal 1995 and $20.7 million for fiscal 1994. Capital expenditures for all
years included capital employed for the addition of new METRO stores and the
conversion of existing BASICS stores to the METRO format. In addition, capital
expenditures for such periods included the purchase of warehouse racking and
material handling equipment at the Company's distribution centers and
improvements to the dairy plant. Fiscal 1994 capital expenditures also included
$4.5 million to construct a 67,000 square foot freezer expansion at the
Mechanicsville, Virginia, distribution center. The Company anticipates that
fiscal 1997 capital expenditures will be approximately $20.0 million. Budgeted
capital expenditures for the wholesale operations include certain material
handling equipment, improvements at the distribution centers and dairy plant and
further investments in technology. Budgeted capital expenditures for the
METRO/BASICS Retail Division include the addition of new METRO stores in the
Baltimore, Maryland, market and the conversion of certain BASICS stores to the
METRO format.
<PAGE>
The Company remains committed to providing secured financing to support the
growth of its retail customers. Loans issued to retailers were $16.8 million in
fiscal 1996, $15.9 million in fiscal 1995 and $16.8 million in fiscal 1994.
Collections on loans were $14.0 million in fiscal 1996, $12.4 million in fiscal
1995 and $16.8 million in fiscal 1994.
The Company financed its $50.7 million acquisition of Rotelle during
fiscal 1995 with borrowings under a $35.0 million revolving credit facility with
a commercial bank, together with internally generated funds and borrowings under
an existing revolving credit facility. The $35.0 million revolving credit
facility was repaid in full in fiscal 1995.
Net Cash Used for Financing Activities
Net cash used for financing activities was $81.2 million for fiscal 1996, $14.4
million for fiscal 1995 and $27.9 million for fiscal 1994. During fiscal 1996,
the Company reduced its total debt, including capital lease obligations and
current maturities, by $80.8 million. The $80.8 million of net repayments
primarily related to the repayment of outstanding borrowings under a $25.0
million revolving credit facility and a $25.0 million term loan facility, as
well as the early extinguishment of $27.5 million of Senior Subordinated Notes.
During fiscal 1994, the Company issued $45.0 million of 6.15% Senior
Notes due July 1, 2000 ("Senior Notes"), the net proceeds of which were used to
repay in full the $40.0 million bridge loan facility incurred to finance the
acquisition of the Civilian Wholesale Division of B. Green & Company, Inc. in
January 1993 and for general corporate purposes. The Senior Notes require
semi-annual interest payments and, commencing on July 1, 1996, five annual
sinking fund payments of $9.0 million of principal plus accrued interest.
The Company's total debt, including capital lease obligations and current
maturities, was $97.7 million at April 27, 1996, compared to $178.5 million at
April 29, 1995. The ratio of total debt, including capital lease obligations and
current maturities, to equity was 0.49 to 1 at April 27, 1996, and 1.11 to 1 at
April 29, 1995.
The Company increased the cash dividend on its common stock to $0.12 per
share in fiscal 1996, from $0.10 per share in fiscal 1995 and $0.08 per share in
fiscal 1994. Cash dividends paid were $2.9 million in fiscal 1996, $2.0 million
in fiscal 1995 and $1.6 million in fiscal 1994. Shareholders' equity increased
to $199.6 million at April 27, 1996, up from $160.3 million at April 29, 1995.
The Company's capitalization at the end of the past two fiscal years is
set forth below:
(dollar amounts in thousands) April 27, 1996 April 29, 1995
- -------------------------------------------------------------------------------
Total debt, including
capital lease
obligations and
current maturities $ 97,743 32.9% $178,531 52.7%
Shareholders'
equity 199,562 67.1% 160,330 47.3%
- -------------------------------------------------------------------------------
Total capitalization $297,305 100.0% $338,861 100.0%
- -------------------------------------------------------------------------------
The Company believes that it has the ability to continue to generate
adequate funds from its operations and through borrowings under its long-term
debt facilities to maintain its competitive position and expand its business.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of,"
and SFAS No. 123, "Accounting for Stock-Based Compensation," must be adopted by
the Company no later than the fiscal year ending May 3, 1997. The adoption of
these accounting standards is not expected to have a material impact on the
Company's financial position or results of operations.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended
- -------------------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands, April 27, April 29, April 30, May 1, May 2,
except per share data) 1996 1995(a) 1994 1993(b) 1992
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Operations:
Sales $ 3,250,868 $ 2,992,735 $ 2,545,676 $ 2,357,706 $ 2,186,097
Gross margin 326,307 297,715 250,441 236,944 223,163
Operating and administrative expenses 236,661 216,099 186,912 191,058 175,613
Merger and integration costs 11,993(c) -- -- -- --
Loss on disposal of assets -- -- 13,148(d) 9,188(e) --
Interest expense 12,354 18,312 17,534 17,619 16,895
Earnings before income taxes and
extraordinary loss 68,529 66,643 36,025 22,765 31,911
Earnings before extraordinary loss 39,215 39,218 21,371 14,311 19,150
Extraordinary loss, net of tax (2,164)(d) -- -- (5,042)(f) --
Net earnings 37,051 39,218 21,371 9,269 19,150
Preferred stock dividends -- -- -- 8,838 3,791
Net earnings applicable to common stock 37,051 39,218 21,371 431 15,359
Net earnings as a percent of sales 1.14% 1.31% 0.84% 0.39% 0.88%
- --------------------------------------------------------------------------------------------------------------------------------
Per Common Share Data:
Earnings before extraordinary loss $ 1.26 $ 1.26 $ 0.70 $ 0.18 $ 0.54
Net earnings 1.19 1.26 0.70 0.01 0.54
Cash dividends declared 0.12 0.10 0.08 0.07 0.05
Book value 6.37 5.14 3.92 3.14 3.13
Market price range-- High 33 20 18 1/4 14 1/2 9 3/8
-- Low 19 1/2 13 1/2 12 3/4 7 7/8 6 1/8
Weighted average common
shares outstanding 31,216,738 31,140,926 30,514,503 30,192,221 28,283,235
- --------------------------------------------------------------------------------------------------------------------------------
Financial Position:
Working capital $ 40,828 $ 72,780 $ 84,926 $ 68,401 $ 39,780
Total assets 564,261 580,770 487,904 487,266 418,353
Long-term debt 97,743 178,531 181,576 208,875 131,873
Shareholders' equity 199,562 160,330 121,868 95,395 93,966
- --------------------------------------------------------------------------------------------------------------------------------
Financial Ratios and Other Data:
Current ratio 1.16 to 1 1.31 to 1 1.47 to 1 1.36 to 1 1.23 to 1
Inventory turnover 18.90 18.80 16.18 15.40 16.32
Return on average assets 6.47% 7.34% 4.38% 2.05% 4.94%
Debt to equity ratio 0.49 to 1 1.11 to 1 1.49 to 1 2.19 to 1 1.40 to 1
Return on average shareholders' equity 20.59% 27.79% 19.67% 0.46% 21.59%
Number of employees at fiscal year-end 4,925 4,600 4,639 4,397 5,197
================================================================================================================================
</TABLE>
All historical financial data presented has been restated to reflect Richfood
Holdings, Inc.'s October 15, 1995, acquisition of Super Rite Corporation which
was accounted for as a pooling of interests (see note 2 to the Consolidated
Financial Statements).
(a) Results for fiscal 1995 reflect the acquisitions of Rotelle, Inc. on August
23, 1994, and the Wholesale Division of Camellia Food Stores, Inc. on
April 3, 1995 (see note 2 to the Consolidated Financial Statements).
(b) Results for fiscal 1993 reflect the acquisition of the Civilian Wholesale
Division of B. Green & Company, Inc. on January 22, 1993.
(c) See note 2 to the Consolidated Financial Statements and Financial Review for
further discussion.
(d) See note 7 to the Consolidated Financial Statements and Financial Review for
further discussion.
(e) See Financial Review for further discussion.
(f) The $5.0 million extraordinary loss, net of tax, in fiscal 1993 primarily
related to the early redemption of then-outstanding Super Rite Foods, Inc.
Senior Subordinated 13 1/4% Notes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Richfood Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Richfood
Holdings, Inc. and subsidiaries as of April 27, 1996 and April 29, 1995, and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the fiscal years in the three-year period ended April 27, 1996. The
consolidated financial statements give effect to the merger on October 15, 1995
of a wholly-owned subsidiary of Richfood Holdings, Inc. with and into Super Rite
Corporation, which has been accounted for using the pooling of interests method
as described in note 2 to the consolidated financial statements. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the fiscal 1995 and
1994 consolidated financial statements of Super Rite Corporation, which
consolidated financial statements reflect total assets constituting
approximately 48% of the related consolidated financial statement total at April
29, 1995, and reflect sales constituting approximately 49% of the related
consolidated financial statement totals for each of fiscal 1995 and 1994. The
fiscal 1995 and 1994 consolidated financial statements of Super Rite Corporation
were audited by other auditors, whose report thereon has been furnished to us,
and our opinion expressed herein, insofar as it relates to the amounts included
for Super Rite Corporation, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. 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 Richfood Holdings, Inc. and
subsidiaries as of April 27, 1996 and April 29, 1995, and the results of their
operations and their cash flows for each of the fiscal years in the three-year
period ended April 27, 1996, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
Richmond, Virginia
June 10, 1996
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended
- ----------------------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands, April 27, Percent April 29, Percent April 30, Percent
except per share data) 1996 of Sales 1995 of Sales 1994 of Sales
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Sales (note 11) $ 3,250,868 100.00% $ 2,992,735 100.00% $ 2,545,676 100.00%
Costs and expenses, net:
Cost of goods sold 2,924,561 89.96 2,695,020 90.05 2,295,235 90.16
Operating and administrative
expenses 236,661 7.28 216,099 7.22 186,912 7.34
Merger and integration costs
(note 2) 11,993 0.37 -- -- -- --
Loss on disposal of assets
(note 7) -- -- -- -- 13,148 0.52
Interest expense 12,354 0.38 18,312 0.61 17,534 0.69
Interest income (3,230) (0.10) (3,339) (0.11) (3,178) (0.13)
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes
and extraordinary loss 68,529 2.11 66,643 2.23 36,025 1.42
Income taxes (note 8) 29,314 0.90 27,425 0.92 14,654 0.58
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings before extraordinary
loss 39,215 1.21 39,218 1.31 21,371 0.84
Extraordinary loss, net of tax
(note 7) (2,164) (0.07) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 37,051 1.14% $ 39,218 1.31% $ 21,371 0.84%
=================================================================================================================================
Earnings per common share:
Earnings before
extraordinary loss $ 1.26 $ 1.26 $ 0.70
Extraordinary loss, net of tax (0.07) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 1.19 $ 1.26 $ 0.70
=================================================================================================================================
Cash dividends declared
per common share $ 0.12 $ 0.10 $ 0.08
=================================================================================================================================
Weighted average common
shares outstanding 31,216,738 31,140,926 30,514,503
=================================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
========================================================================================================================
April 27, April 29,
(Dollar amounts in thousands) 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Current assets:
Cash and cash equivalents (note 1(c)) $ 17,415 $ 29,381
Receivables, less allowance for doubtful accounts of $3,994 and $3,667 (note 4) 100,385 107,651
Inventories (note 3) 162,461 147,005
Other current assets (note 8) 19,987 20,302
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 300,248 304,339
Notes receivable, less allowance for doubtful accounts of $1,579 and $1,077 (note 4) 27,179 26,988
Property and equipment, net (note 5) 122,659 130,261
Goodwill, net (note 1(f)) 74,455 79,732
Other assets (notes 1(f) and 10) 39,720 39,450
- ------------------------------------------------------------------------------------------------------------------------
Total assets $564,261 $580,770
========================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt and capital lease obligations (notes 5 and 6) $ 10,712 $ 11,618
Accounts payable 187,010 162,189
Accrued expenses and other current liabilities 61,698 57,752
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 259,420 231,559
Long-term debt and capital lease obligations (notes 5 and 6) 87,031 166,913
Deferred credits and other (notes 8 and 10) 18,248 21,968
Shareholders' equity (note 9):
Preferred stock, without par value; authorized 5,000,000 shares;
none issued or outstanding -- --
Common stock, without par value; authorized 60,000,000 shares;
issued and outstanding 31,325,068 and 31,199,663 shares 66,964 63,978
Retained earnings 132,598 96,352
- ------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 199,562 160,330
Commitments and contingent liabilities (notes 5, 6, 10 and 12)
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $564,261 $580,770
========================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
===============================================================================================================================
(Dollar amounts in thousands, Common Stock Retained
except share data) Shares Dollars Earnings Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Balance at May 1, 1993 30,374,148 $ 55,786 $ 39,609 $ 95,395
Net earnings -- -- 21,371 21,371
Issuance of common stock under employee
stock incentive plans 364,775 2,321 -- 2,321
Tax benefit from common stock issued -- 1,039 -- 1,039
Shares canceled/surrendered (43,145) (646) -- (646)
Exercises of contingent stock options of
pooled company 371,256 4,093 -- 4,093
Cash dividends declared on common stock -- -- (1,705) (1,705)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at April 30, 1994 31,067,034 62,593 59,275 121,868
Net earnings -- -- 39,218 39,218
Issuance of common stock under employee
stock incentive plans 150,668 1,305 -- 1,305
Tax benefit from common stock issued -- 378 -- 378
Shares canceled/surrendered (18,039) (298) -- (298)
Cash dividends declared on common stock -- -- (2,141) (2,141)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at April 29, 1995 31,199,663 63,978 96,352 160,330
Net earnings -- -- 37,051 37,051
Effect of change in fiscal year end of pooled company -- -- 2,548 2,548
Issuance of common stock under employee
stock incentive plans 155,391 1,301 -- 1,301
Tax benefit from common stock issued -- 374 -- 374
Proceeds from short-swing profits (note 9) -- 1,628 -- 1,628
Shares canceled/surrendered (29,986) (317) -- (317)
Cash dividends declared on common stock -- -- (3,353) (3,353)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at April 27, 1996 31,325,068 $66,964 $132,598 $199,562
===============================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
April 27, April 29, April 30,
1996 1995 1994
(Dollar amounts in thousands)
- ---------------------------------------------------------------------------------------------------------
<S> <C>
OPERATING ACTIVITIES:
Net earnings
Adjustments to conform fiscal year of pooled company: $ 37,051 $ 39,218 $ 21,371
Net earnings 2,548 - -
Non-cash components 1,959 - -
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization 27,089 23,903 22,390
Provision for doubtful accounts 6,197 4,490 2,938
Deferred income taxes (note 8) (2,051) 1,821 (4,762)
Extraordinary loss - loss on debt extinguishment,
non-cash component (note 7) 1,116 - -
Provision for loss on disposal of assets (note 7) - - 13,148
Other, net (63) 382 1,916
Changes in operating assets and liabilities, net of effects of
acquisitions:
Receivables 564 (4,838) (4,309)
Inventories (19,405) 13,337 6,508
Other current assets 643 1,516 1,284
Accounts payable, accrued expenses and other liabilities 33,903 20,578 2,515
- ---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 89,551 100,407 62,999
- ---------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (note 2) - (56,977) -
Purchases of property and equipment (14,781) (19,976) (20,736)
Proceeds from sale of property and equipment 208 4,230 -
Issuance of notes receivable (16,805) (15,902) (16,823)
Collections of notes receivable 13,988 12,425 16,830
Other, net (2,935) (1,493) 329
- ---------------------------------------------------------------------------------------------------------
Net cash used for investing activities (20,325) (77,693) (20,400)
- ---------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net repayment of revolving credit facilities (25,000) - (11,772)
Proceeds from long-term debt - - 45,000
Principal payments on long-term debt and capital lease
obligations (55,788) (12,481) (59,755)
Proceeds from issuance of common stock under employee
stock incentive plans and other 2,545 93 291
Cash dividends paid on common stock (2,949) (2,033) (1,648)
- ---------------------------------------------------------------------------------------------------------
Net cash used for financing activities (81,192) (14,421) (27,884)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (11,966) 8,293 14,715
Cash and cash equivalents at beginning of fiscal year 29,381 21,088 6,373
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of fiscal year $ 17,415 $ 29,381 $ 21,088
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation and Presentation
The Consolidated Financial Statements of Richfood Holdings, Inc. and
subsidiaries (the "Company") as of and for the fiscal years ended April 27, 1996
("fiscal 1996"), April 29, 1995 ("fiscal 1995") and April 30, 1994 ("fiscal
1994") include the accounts of Richfood Holdings, Inc. and all subsidiaries
after the elimination of significant intercompany transactions and balances. See
note 2 for information on the restatement of the Consolidated Financial
Statements for the fiscal 1996 business combination that was accounted for as a
pooling of interests.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from these estimates.
(b) Fiscal Year
The Company reports on a 52-53 week fiscal year ending the Saturday nearest
April 30.
(c) Cash and Cash Equivalents
Cash equivalents of $16,613 and $25,156 at April 27, 1996 and April 29, 1995,
respectively consist of money market funds, commercial paper and certificates of
deposit. For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid investments with initial maturities of three months
or less to be cash equivalents.
(d) Inventories
The Company values inventories at the lower of cost or market with the cost of
the majority of inventories determined using the last-in, first-out ("LIFO")
method. Cost for the remaining inventories is determined using the first-in,
first-out ("FIFO") method.
(e) Property and Equipment
Property and equipment are stated at cost or, in the case of assets under
capital leases, at the lesser of the fair value of the leased property or the
present value of minimum lease payments at the inception of the lease, less
accumulated depreciation and amortization.
Depreciation is computed using the straight-line method over the
estimated useful lives of the respective assets. Assets under capital leases are
amortized over the lesser of their useful lives or the terms of the respective
leases using the straight-line method. In general, the estimated useful lives
for computing depreciation and amortization are: 20 to 45 years for buildings; 3
to 15 years for vehicles, fixtures and equipment; and 2 to 9 years for assets
under capital leases.
(f) Goodwill and Other Assets
The excess of cost over the fair value of net assets of businesses acquired
(goodwill) is being amortized on a straight-line basis generally over 40 years.
The Company's policy is to record an impairment loss against the unamortized
goodwill in the period when it is determined that the carrying amount of the
asset may not be recoverable. An evaluation is made periodically and is based on
such factors as the occurrence of a significant event, a significant change in
the environment in which the business operates or if the expected future net
cash flows (undiscounted and without interest) would become less than the
carrying amount of the asset. Goodwill is shown net of accumulated amortization
of $12,361 and $10,171 at April 27, 1996 and April 29, 1995, respectively.
Other assets primarily consist of supply agreements, the prepaid pension
asset (note 10), lease acquisition costs and noncompetition agreements. The
supply agreements generally provide that the Company will be the principal
supplier for the customers and generally include minimum purchase requirements
by product category. Supply agreements are recorded at their acquisition cost
and are being amortized on a straight-line basis over the terms of the
respective supply agreements. Supply agreements included in other assets were
$17,281 (net of $13,845 accumulated amortization) and $22,942 (net of $14,100
accumulated amortization) at April 27, 1996 and April 29, 1995, respectively. An
evaluation of the recorded value for supply agreements is made periodically and
is based on such factors as the relationship with the applicable customer and
expectations as to future revenues under the applicable contract. Lease
acquisition costs incurred, principally for the purchase of existing store
locations, are being amortized on a straight-line basis over the terms of the
respective leases. Other assets also include noncompetition agreements which are
being amortized on a straight-line basis over the terms of the respective
agreements.
<PAGE>
(g) Store Pre-opening Costs
Costs associated with the Company opening new retail stores are charged to
expense as incurred.
(h) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between the financial statement and
tax bases of existing assets and liabilities. Deferred tax assets and
liabilities are measured using income tax rates expected to apply to taxable
income in the years in which the temporary differences are expected to be
recovered or settled.
(i) Fair Value of Financial Instruments
Financial instruments include cash and cash equivalents, accounts and notes
receivable, accounts payable and long-term debt reported in the Consolidated
Balance Sheets. The carrying amounts for cash and cash equivalents, accounts
receivable, accounts payable and certain notes receivable approximate fair value
at April 27, 1996 and April 29, 1995 because of the short-term nature of these
financial instruments. The carrying amount of certain notes receivable and
long-term debt, which are subject to variable interest rates, approximate fair
value at April 27, 1996 and April 29, 1995 due to variable interest rates
related to these financial instruments. The fair value of long-term debt with
fixed interest rates approximates the carrying value at April 27, 1996 and April
29, 1995 and is calculated by discounting scheduled cash flows through maturity
using estimated rates currently offered for long-term debt with similar terms
and average maturities.
(j) Earnings per Common Share
Earnings per common share amounts are computed based on earnings divided by the
weighted average number of common shares outstanding during the respective
fiscal years presented. Stock options are not considered as common stock
equivalents in the earnings per share calculations because they have no material
dilutive effect.
(2) Merger and Acquisitions
On October 15, 1995, Super Rite Corporation ("Super Rite"), a full service
wholesale and retail grocery distributor headquartered in Harrisburg,
Pennsylvania, became a wholly-owned subsidiary of Richfood Holdings, Inc.
("Richfood") and each outstanding share of common stock of Super Rite was
converted into the right to acquire 1.0205 shares of common stock of Richfood.
Under the terms of the merger, Richfood issued 9,770,188 shares of common stock
to the shareholders of Super Rite and outstanding options to acquire shares of
Super Rite common stock were converted into options to acquire approximately
230,000 shares of Richfood common stock.
The merger has been accounted for using the pooling of interests method
and, accordingly, the Consolidated Financial Statements for periods prior to
October 15, 1995 have been restated to include the accounts of Super Rite. Super
Rite previously used the fiscal year ending on the Saturday closest to February
29th or March 1st for its financial reporting purposes. Super Rite's
consolidated balance sheet at its fiscal year-end of March 4, 1995 has been
combined with that of Richfood for its fiscal year-end of April 29, 1995. Super
Rite's results of operations for its fifty-three week fiscal 1995 and fifty-two
week fiscal 1994 periods have been combined with those of Richfood for its
fifty-two week fiscal 1995 and 1994 periods, respectively. In order to conform
to Richfood's fiscal year, Super Rite's net earnings of $2,548, on sales of
$228,113, for the eight-week period from March 5, 1995 to April 29, 1995, have
been reflected as a direct adjustment to retained earnings. Richfood has
conformed certain of Super Rite's accounting practices and methods to the
Company's in conjunction with the restatements of the prior years' historical
consolidated financial statements, in accordance with the pooling of interests
method. Adjustments to conform certain of Super Rite's accounting practices and
methods to those of the Company primarily relate to the accounting for
inventories, store pre-opening and closing expenses, insurance and certain other
operating expenses. The cumulative effect of conforming accounting practices and
methods on periods prior to fiscal 1994 was an $8,800 decrease in retained
earnings at May 1, 1993.
As a result of the merger, the Company recorded a one-time charge for
merger and integration costs of $11,993 in the third quarter of fiscal 1996.
This charge included $4,881 of costs, including write-offs of property and
equipment, associated with the conversion of certain of the Company's retail
grocery stores operating under the BASICS format to the METRO store format,
$3,709 of direct transaction costs and professional fees, $1,403 of severance
and related costs associated with the elimination of duplicate employee
functions, $1,100 of costs associated with terminating certain transportation
equipment leases and duplicate product lines and $900 of other acquisition
related costs. During the third and fourth quarters of fiscal 1996, $5,473 of
the merger and integration reserve was utilized. The remaining reserve of $6,520
at April 27, 1996 is expected to be utilized within the next fiscal year.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Dollar amounts in
thousands, except per share data)
Sales and net earnings information of the separate companies, and
respective subsidiaries, for the twenty-four week period preceding the October
15, 1995 merger and for fiscal 1995 and fiscal 1994 are as follows:
Twenty-four
Weeks Ended Fiscal Year Ended
- -----------------------------------------------------------------------------
October 14, April 29, April 30,
1995 1995 1994
- -----------------------------------------------------------------------------
Sales:
Richfood Holdings, Inc. $ 782,932 $1,520,450 $1,287,402
Super Rite Corporation 703,244 1,473,822 1,259,234
Adjustments to conform
certain of Super Rite
Corporation's accounting
practices and methods (1,666) (1,537) (960)
- -----------------------------------------------------------------------------
Combined $1,484,510 $2,992,735 $2,545,676
- -----------------------------------------------------------------------------
Net earnings:
Richfood Holdings, Inc. $ 12,903 $ 25,401 $ 17,175
Super Rite Corporation 6,054 12,951 5,053
Adjustments to conform
certain of Super Rite
Corporation's accounting
practices and methods 1,058 866 (857)
- -----------------------------------------------------------------------------
Combined $ 20,015 $ 39,218 $ 21,371
- -----------------------------------------------------------------------------
On August 23, 1994, the Company acquired all of the outstanding common
stock of Rotelle, Inc. ("Rotelle"), a wholesale frozen food distributor
headquartered in West Point, Pennsylvania. The purchase price of the acquisition
was $50,700. The Company accounted for the Rotelle acquisition under the
purchase method and, accordingly, the results of operations of the acquired
business have been included in the Company's Consolidated Statements of Earnings
since the date of acquisition.
The following unaudited pro forma financial information presents the
results of operations of the Company as if the Rotelle acquisition had occurred
as of the beginning of fiscal 1994:
Fiscal Year Ended
- ------------------------------------------------------------------------------
April 29, April 30,
1995 1994
- ------------------------------------------------------------------------------
Sales $3,085,360 $2,883,509
Net earnings 40,016 21,752
Net earnings per common share 1.28 0.71
- ------------------------------------------------------------------------------
Fair value of assets acquired and liabilities assumed in the purchase of
Rotelle are as follows:
Fair Value as of
August 23, 1994
- ------------------------------------------------------------------------------
Current assets $36,049
Noncurrent assets 55,957
- ------------------------------------------------------------------------------
Total assets 92,006
Current liabilities 25,040
Noncurrent liabilities 16,266
- ------------------------------------------------------------------------------
Total liabilities 41,306
Net cash paid $50,700
On April 3, 1995, the Company acquired certain assets and assumed certain
contracts of Camellia Food Stores, Inc. ("Camellia"), a wholesale and retail
grocery distributor headquartered in Norfolk, Virginia. In connection with the
transaction, the Company acquired Camellia's wholesale inventory, customer notes
and fluid dairy operation and assumed the lease for Camellia's truck fleet.
Additionally, in connection with this acquisition, the Company entered into
five-year supply agreements with Camellia and certain other independent retail
customers. The purchase price of the acquisition was approximately $7,100.
(3) Inventories
At April 27, 1996 and April 29, 1995, approximately 87% and 84%, respectively,
of total inventories were valued using the LIFO method. Costs for the remaining
inventories were determined using the FIFO method. If all inventories were
valued at the lower of FIFO cost or market, inventories would have been higher
by approximately $8,081 at April 27, 1996 and $6,647 at April 29, 1995, and net
earnings would have been higher by approximately $821 for fiscal 1996, $935 for
fiscal 1995 and $209 for fiscal 1994. FIFO value of inventories approximates
their replacement cost.
(4) Notes Receivable
The Company's notes receivable are due principally from customers and relate
primarily to financing for store acquisitions and improvements. The related
operating profit generated from these financing activities is not significant.
The majority of such notes bear interest at the prime rate plus 2% (10 1/4 % at
April 27, 1996) and have remaining terms ranging from 1 to 12 years. Collateral
securing such notes varies, but may include inventory, equipment, fixtures,
<PAGE>
accounts receivable, contract rights, personal assets and pledges of Richfood
common stock. Receivables shown in current assets include $5,878 and $8,141 at
April 27, 1996 and April 29, 1995, respectively, related to current maturities
of these notes receivable.
(5) Property and Equipment and Leases
Property and equipment are summarized as follows:
April 27, April 29,
1996 1995
- ------------------------------------------------------------------------------
Land $ 5,471 $ 5,471
Buildings 63,815 62,469
Fixtures and equipment 106,364 100,078
Leasehold improvements 27,195 26,834
Trucks and autos 13,862 14,916
Assets under capital leases:
Truck fleet 3,168 5,502
Buildings 662 662
Other 2,212 2,288
- ------------------------------------------------------------------------------
Total property and equipment 222,749 218,220
Less accumulated depreciation
and amortization 100,090 87,959
- ------------------------------------------------------------------------------
Property and equipment, net $122,659 $130,261
- ------------------------------------------------------------------------------
Capital lease obligations have imputed interest rates that are
principally at 6.5% and are due in varying monthly amounts through fiscal 2002.
Capital lease payments generally include executory costs which cover taxes,
maintenance, insurance and other related expenses.
Future minimum lease payments under capital leases at April 27, 1996 are
as follows:
Fiscal Year Lease Obligations
- -----------------------------------------------------------------------------
1997 $1,157
1998 336
1999 59
2000 59
2001 59
Later years 9
- -----------------------------------------------------------------------------
Total future minimum lease payments 1,679 Less:
Executory costs (540)
Imputed interest (88)
- -----------------------------------------------------------------------------
Obligations under capital leases,
including current installments of $752 $1,051
- -----------------------------------------------------------------------------
The Company leases certain warehouse, office and storage facilities,
equipment and retail stores under noncancelable operating leases that expire
within 29 years from April 27, 1996 and have renewal options from 5 to 35 years.
The majority of the leases provide for the payment of taxes, insurance and
maintenance (and contingent rentals based on sales volume for retail store
leases) by the Company. The Company subleases certain warehouse space and
certain retail stores to third parties.
The Company's Harrisburg, Pennsylvania distribution center, refrigerated
warehouse space and certain retail locations are leased at fair market rates
from various partnerships, the partners of which are related parties. The annual
rent expense was $5,996, $5,475 and $5,067 in fiscal 1996, fiscal 1995 and
fiscal 1994, respectively. The leases, which expire at various dates through
2025, are accounted for as operating leases and certain of the leases have
renewal options up to 25 years. Future minimum lease rentals to be paid under
these leases are $4,923 for fiscal 1997, $4,959 for fiscal 1998, $4,988 for
fiscal 1999, $5,020 for fiscal 2000, $5,274 for fiscal 2001 and $123,771 for
later years.
As of April 27, 1996, minimum rentals to be paid and minimum sublease
rentals to be received on noncancelable operating leases with remaining terms
greater than one year are as follows:
Minimum Minimum
Lease Sublease
Rentals To Rentals To Net
Fiscal Year Be Paid Be Received Rentals
- ------------------------------------------------------------------------------
1997 $ 25,262 $ 5,907 $ 19,355
1998 23,962 5,580 18,382
1999 22,538 5,352 17,186
2000 19,928 4,942 14,986
2001 17,864 4,410 13,454
Later years 207,671 30,981 176,690
- ------------------------------------------------------------------------------
Total $317,225 $57,172 $260,053
Total annual rental expense under noncancelable operating leases with
terms greater than one year are as follows:
Fiscal Year Ended
- -----------------------------------------------------------------------------
April 27, April 29, April 30,
1996 1995 1994
- -----------------------------------------------------------------------------
Minimum rentals $26,243 $26,993 $25,021
Less sublease income (8,174) (8,280) (7,515)
- -----------------------------------------------------------------------------
Rental expense $18,069 $18,713 $17,506
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Dollar amounts in
thousands, except per share data)
In connection with various guarantees of certain customer store leases,
the Company is contingently liable, in the event of customer nonperformance, for
future lease payments with a present value of approximately $36,000 at April 27,
1996. The related leases expire at varying dates over the next 17 years.
(6) Long-term Debt and Capital Lease Obligations
Long-term debt, including capital lease obligations, consists of the following:
April 27, April 29,
1996 1995
- ------------------------------------------------------------------------------
Senior Subordinated Notes,
unsecured, interest rate of 10 5/8%,
due April 2002 $47,525 $ 75,000
Senior Notes, interest rate of 6.15%,
unsecured, due July 1996 to July 2000 45,000 45,000
Term Loan Facility, repaid October 1995 -- 25,000
Revolving Credit Facilities, repaid
October 1995 -- 25,000
Other long-term debt, including
obligations under capital leases (note 5) 5,218 8,531
- ------------------------------------------------------------------------------
Total long-term debt and capital
lease obligations 97,743 178,531
Less current installments 10,712 11,618
- ------------------------------------------------------------------------------
Long-term debt and capital lease
obligations, net of current installments $87,031 $166,913
- ------------------------------------------------------------------------------
On April 14, 1992, the Company issued $75,000 aggregate principal amount
of 10 5/8% Senior Subordinated Notes, due 2002. The Senior Subordinated Notes
require semiannual interest payments. During fiscal 1996, the Company
repurchased, at market prices above par, $27,475 of the Senior Subordinated
Notes (note 7). The Senior Subordinated Notes include an optional redemption
provision whereby the Company may elect to redeem all, or any portion, of the
notes at a declining redemption price (initially 105.31% of par) at any time
from and after April 1, 1997.
On July 16, 1993, the Company issued $45,000 aggregate principal amount
of 6.15% Senior Notes, due over a term of seven years. The Senior Notes require
semiannual interest payments and, commencing on July 1, 1996, five annual
sinking fund payments consisting of principal of $9,000 plus accrued interest
through July 2000. The Senior Notes also include an optional redemption
provision whereby the Company may elect to redeem all, or any portion, of the
debt prior to maturity subject to certain make-whole provisions.
In December 1995, the Company entered into a $20,000 revolving credit
facility with a commercial bank to provide for the general working capital needs
of the Company. The unsecured revolving credit facility expires in December
1997. Borrowings under the facility bear interest at a fixed rate of interest
equal to (i) the commercial bank's Overnight Commercial Loan Rate or (ii) a
Eurodollar Rate fixed for an interest period determined by the Company. The
facility includes a 0.20% fee on the average daily unused portion of the
facility. There were no borrowings outstanding under this revolving credit
facility at April 27, 1996.
In February 1996, the Company entered into a $20,000 revolving credit
facility with a commercial bank to provide for the general working capital needs
of the Company. The unsecured revolving credit facility expires in July 1997.
Borrowings under the facility bear interest at a rate, selected by the Company,
equal to (i) a floating rate equal to the commercial bank's overnight cost of
funds plus 0.35% or (ii) a fixed rate equal to LIBOR plus 0.35%, and include a
0.125% fee on the average daily unused portion of the facility. There were no
borrowings outstanding under this revolving credit facility at April 27, 1996.
Future principal repayments on long-term debt, excluding obligations
under capital leases, for the five fiscal years subsequent to fiscal 1996 are:
fiscal 1997-- $9,960; fiscal 1998--$9,583; fiscal 1999--$9,500; fiscal
2000--$9,500; and fiscal 2001--$9,500.
The Company's long-term debt facilities contain covenants that, among
other things, limit the incurrence of additional indebtedness; prohibit certain
liens on the Company's assets; require the Company to maintain a minimum net
worth; limit Richfood, Inc.'s and Super Rite's ability to transfer funds to
Richfood Holdings, Inc. in the form of loans, advances or cash dividends and
require the Company to meet certain financial ratios as of each quarter end.
Under the most restrictive of these covenants, at April 27, 1996, (i) the
Company had approximately $104,000 of shareholders' equity available for cash
dividends, (ii) approximately $46,000 of Richfood, Inc.'s net assets of $61,000
were subject to restrictions on transfer to Richfood Holdings, Inc. and (iii)
approximately $50,000 of Super Rite's net assets of $57,000 were subject to
restriction on transfer to Richfood Holdings, Inc.
<PAGE>
The Company has issued $10,194 in standby letters of credit, primarily
for self-insurance purposes. These letters of credit are subject to annual
renewal and will be replaced with similar letters of credit in the normal course
of business.
Interest payments made under long-term debt, including capital leases,
were $11,671 for fiscal 1996, $17,706 for fiscal 1995 and $16,533 for fiscal
1994.
(7) Extraordinary Loss and Loss on Disposal of Assets
The extraordinary loss of $2,164, net of tax benefit of $1,733, for fiscal 1996
primarily related to the repurchase, at market prices above par, of $27,475
principal amount of Senior Subordinated Notes and is comprised of (i) the amount
paid in excess of their par value, and (ii) the write-off of related deferred
financing costs. The Company expects to continue to repurchase these notes, from
time-to-time, when market prices therefor are economically beneficial in
relation to the Company's cost of funds.
During fiscal 1994, the Company recorded a $6,975 loss on disposal of
assets in connection with the Company's February 1993 announcement of its plans
to sell its remaining seven supermarkets in the Washington, D.C. area and its
strategy to concentrate its retail operations in the metropolitan Baltimore,
Maryland market. The fiscal 1994 provision for loss on disposal of assets
primarily represented the loss on the sale of the stores and estimated operating
losses through the date of closing. During fiscal 1994, two of the stores were
closed. During fiscal 1995, a third store was closed and the four remaining
stores were sold to various buyers. The $2,500 and $4,000 of operating losses
generated by these stores in fiscal 1995 and 1994, respectively, were charged
against the reserve for loss on disposal of assets and, accordingly, have not
been included in the Company's results of operations for fiscal 1995 and fiscal
1994. Sales and operating losses for these stores were $120,209 and $867 for
fiscal 1993, respectively.
During fiscal 1994, the Company adopted a formal plan to sell the assets
of three retail Pack `n Save grocery stores located in Raleigh, North Carolina
and the sale was completed in fiscal 1995. As a result, for the fiscal year
ended April 30, 1994, the Company recorded a $6,173 provision for loss on
disposal of assets in the fourth quarter to write down the assets of the Pack `n
Save stores to their estimated net realizable values. The Company incurred a
loss from operations relating to the Pack `n Save stores of $547, net of tax
benefits of $294, for the period from November 27, 1993 through April 30, 1994.
Sales for the Pack `n Save stores were $12,292 for the period from November 27,
1993 through April 30, 1994.
(8) Income Taxes
The components of income tax expense (benefit) related to earnings before income
taxes and extraordinary loss are as follows:
Fiscal Year Ended
- -----------------------------------------------------------------------------
April 27, April 29, April 30,
1996 1995 1994
- -----------------------------------------------------------------------------
Current:
Federal $26,767 $21,502 $16,289
State 4,598 4,102 3,127
- -----------------------------------------------------------------------------
31,365 25,604 19,416
Deferred:
Federal (1,370) 876 (4,595)
State (681) 945 (167)
- -----------------------------------------------------------------------------
(2,051) 1,821 (4,762)
Income taxes $29,314 $27,425 $14,654
Income tax payments $26,517 $21,160 $17,148
Income tax expense differs from the amounts resulting from applying the
statutory federal income tax rate to earnings before income taxes and
extraordinary loss as follows:
Fiscal Year Ended
- -----------------------------------------------------------------------------
April 27, April 29, April 30,
1996 1995 1994
- -----------------------------------------------------------------------------
Taxes computed using
federal statutory rate 35.00% 35.00% 35.00%
State income taxes, net of
federal income tax benefit 4.98 4.28 4.55
Nondeductibility of goodwill
amortization expense 2.58 1.11 2.05
Change in valuation
allowance (1.35) 1.08 1.30
Other, net 1.57 (0.32) (2.22)
- -----------------------------------------------------------------------------
Effective tax rate 42.78% 41.15% 40.68%
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Dollar amounts in
thousands, except per share data)
Deferred income taxes for fiscal 1996 and fiscal 1995 reflect the income
tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of deferred tax assets and liabilities at April
27, 1996 and April 29, 1995 are as follows:
<PAGE>
April 27, April 29,
1996 1995
- ------------------------------------------------------------------------------
Deferred tax assets:
Allowance for doubtful accounts $ 2,010 $ 1,620
Inventories 2,277 2,105
Deferred revenue 1,987 1,890
Accrued expenses 14,831 15,013
Other 2,060 1,883
- ------------------------------------------------------------------------------
Total deferred tax assets 23,165 22,511
Valuation allowance -- (1,418)
- ------------------------------------------------------------------------------
Total deferred tax assets, net 23,165 21,093
Deferred tax liabilities:
Property and equipment--depreciation (12,170) (11,499)
Retirement plan (2,804) (3,304)
Lease acquisition costs (2,193) (2,054)
Other (498) (345)
- ------------------------------------------------------------------------------
Total deferred tax liabilities (17,665) (17,202)
Net deferred tax assets $ 5,500 $ 3,891
Net current deferred tax assets 17,295 17,885
Net noncurrent deferred tax liabilities (11,795) (13,994)
- ------------------------------------------------------------------------------
Net deferred tax assets $ 5,500 $ 3,891
- ------------------------------------------------------------------------------
The Company has sufficient taxable income in the available carryback
periods and future taxable income from reversing taxable temporary differences
to realize all of its deferred tax assets at April 27, 1996. Management
believes, based on the Company's history of generating earnings and expectations
of future earnings, that it is more likely than not that its net deferred tax
assets will be realized.
(9) Stock Option Plans and Other
The Company's Omnibus Stock Incentive Plan (the "Omnibus Plan") authorizes the
granting of a maximum of 900,000 shares of Richfood common stock (subject to
adjustment to reflect certain dilutive events), in the form of shares of
restricted common stock, incentive stock options and nonqualified stock options
with or without stock appreciation rights, to certain employees. Options to
purchase Richfood common stock are granted at a price no less than the fair
market value of the stock on the date of grant (if the option is an incentive
stock option) or 50% of the fair market value of the stock on the date of grant
(if the option is a nonqualified stock option). Options to purchase 708,675
shares of common stock remain outstanding under the Omnibus Plan at April 27,
1996. At April 27, 1996, 81,875 shares of common stock remain available for
grant.
The Company's Non-Employee Directors' Stock Option Plan (the "Directors'
Stock Plan") authorizes the granting of a maximum of 75,000 shares of Richfood
common stock (subject to adjustment to reflect certain dilutive events) in the
form of nonqualified stock options. The Directors' Stock Plan provides for each
eligible director to receive, on September 1 of each year, an option to purchase
1,000 shares of common stock. Options to purchase Richfood common stock are
granted at the fair market value of the stock on the date of grant. Options to
purchase 19,400 shares of common stock remain outstanding under the Directors'
Stock Plan at April 27, 1996. At April 27, 1996, 55,000 shares of common stock
remain available for grant.
The Company also has options to purchase 207,781 shares of Richfood
common stock outstanding at April 27, 1996 that were granted under other
employee incentive stock plans. The Company does not anticipate any future
grants under these plans.
The number of shares (in thousands) subject to outstanding stock options
is as follows:
Options
- -----------------------------------------------------------------------------
Shares Price Range
- -----------------------------------------------------------------------------
Outstanding at May 1, 1993 787 $ 2.63- 9.57
Granted 288 8.69- 15.50
Exercised (213) 2.63- 8.56
Canceled (30) 3.83- 15.50
- -----------------------------------------------------------------------------
Outstanding at April 30, 1994 832 3.83- 15.50
Granted 202 14.75- 15.88
Exercised (114) 3.83- 15.50
Canceled (20) 3.83- 15.50
- -----------------------------------------------------------------------------
Outstanding at April 29, 1995 900 3.83- 15.88
- -----------------------------------------------------------------------------
Granted 267 21.50- 27.50
Exercised (155) 3.83- 15.88
Canceled (76) 8.56- 25.88
- -----------------------------------------------------------------------------
Outstanding at April 27, 1996 936 $ 3.83- 27.50
Exercisable at April 27, 1996 420 $ 3.83- 25.88
During fiscal 1996 certain officers of Super Rite who participated in the
Company's April 1996 secondary public offering, which was completed within six
months after the date of the Super Rite Acquisition, remitted proceeds from
short swing profits of $1,628 to the Company.
<PAGE>
(10) Retirement Plans
Substantially all of the Company's employees are covered by defined benefit
plans. The funded status of the plans is as follows:
<TABLE>
<CAPTION>
April 27, 1996 April 29, 1995
- -------------------------------------------------------------------------------------------------------------------------------
Assets Exceed Accumulated Benefits Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets Accumulated Benefits Exceed Assets
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Actuarial present value of vested
benefit obligation $25,280 $3,972 $21,236 $ 5,081
- -------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation $26,705 $4,070 $22,398 $ 5,250
- -------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets $54,247 $3,304 $47,708 $ 4,275
Projected benefit obligation 39,531 4,109 34,782 5,290
- -------------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation 14,716 (805) 12,926 (1,015)
Unrecognized net transition asset (5,099) -- (5,949) (37)
Unrecognized prior service cost 177 -- -- 160
Unrecognized net (gain) loss (761) 120 1,525 164
Minimum liability -- (80) -- (247)
- -------------------------------------------------------------------------------------------------------------------------------
Net pension asset (liability) $ 9,033 $ (765) $ 8,502 $ (975)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company's retirement plans cover employees who meet certain age and
service requirements. Retirement benefits vest under the various plans after 5
years of service, and are based on years of service and either average final
compensation, or a fixed dollar payment per month. The Company's funding policy
has been to contribute annually the amount actuarially determined to provide the
plans with sufficient assets to meet future benefit payment requirements. Plan
assets under the various plans at April 27, 1996 consist of equity securities,
U.S. government and agency obligations, mortgage-backed securities, corporate
obligations, mutual funds and guaranteed insurance contracts.
The following are the components of net retirement expense (income)
related to the defined benefit plans:
Fiscal Year Ended
- ------------------------------------------------------------------------------
April 27, April 29, April 30,
1996 1995 1994
- ------------------------------------------------------------------------------
Service cost -- present value
of benefits earned during
the year $ 2,440 $ 2,109 $ 1,676
Interest cost on projected
benefit obligation 3,087 2,781 2,203
Expected return on plan assets,
net of amount deferred (6,325) (4,034) (3,073)
Net amortization and deferral 811 (1,128) (1,711)
- ------------------------------------------------------------------------------
Net retirement expense
(income) $ 13 $ (272) $ (905)
- ------------------------------------------------------------------------------
The weighted average discount rate assumed by the Company ranged from
7.75% to 8% for all years presented. The Company assumed an expected long-term
rate of return of 9% and a projected increase in compensation of 6% for all
years presented.
The Company maintains two nonqualified, unfunded supplemental retirement
plans for selected management personnel. Supplemental retirement plan benefits
vest after specified years of service requirements are met and are based on
years of service and average final compensation. The Company established a trust
that maintains life insurance policies to act as a financing source for one of
the plans. The cash surrender value of the life insurance policies was $1,066 at
April 27, 1996 and $846 at April 29, 1995. The projected benefit obligation for
this plan was $1,327 at April 27, 1996 and $831 at April 29, 1995, and is
included in deferred credits and other on the accompany-ing Consolidated Balance
Sheets. The projected benefit obligation for the second plan was $964 and $587
at April 27, 1996 and April 29, 1995, respectively, and is included in deferred
credits and other on the accompanying Consolidated Balance Sheets.
The Company maintains defined contribution employee savings and stock
ownership plans under section 401(k) of the Internal Revenue Code. These plans
are offered to substantially all employees who meet certain age and service
requirements and allow for participant pretax contributions and employer
matching contributions. The Company contributed $655, $783 and $763 to the plans
for fiscal 1996, fiscal 1995 and fiscal 1994, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Dollar amounts in
thousands, except per share data)
Certain employees are covered under union- sponsored, collectively
bargained, multi-employer pension plans. The Company's contribution to these
plans was $346, $348 and $397 in fiscal 1996, fiscal 1995 and fiscal 1994,
respectively.
(11) Significant Customers
Sales to three customers accounted for 16%, 11% and 9% of the Company's sales in
fiscal 1996, 15%, 13% and 10% of sales in fiscal 1995 and 16%, 15% and 10% of
sales in fiscal 1994. The Company maintains supply agreements with these
customers which expire in December 1999, December 2001 and September 1996,
respectively.
(12) Litigation And Related Matters
The Company is party to various legal actions that are incidental to its
business. While the outcome of legal actions cannot be predicted with certainty,
the Company believes that the outcome of any of these proceedings, or all of
them combined, will not have a material adverse effect on its consolidated
financial position or business.
(13) Industry Segments
At April 27, 1996 the Company operated a wholesale grocery division and eighteen
retail grocery stores in the Mid-Atlantic region. The Company provides a full
range of grocery, dairy, frozen food, produce and meat products to chains and
independent retailers throughout the region. Sales by industry segment include
sales to unaffiliated customers, as reported in the Consolidated Statements of
Earnings, and sales between industry segments, which are accounted for on terms
comparable to unaffiliated customers.
Operating profit is sales, less cost of goods sold, operating and
administrative expenses and loss on disposal of assets. Identifiable assets by
segment, except for goodwill, are those assets used directly in the operations
of that unit.
The following is industry segment information:
As of or for
Fiscal Year Ended
- -----------------------------------------------------------------------------
April 27, April 29, April 30,
1996 1995 1994
- -----------------------------------------------------------------------------
Sales:
Wholesale grocery $3,096,997 $ 2,857,374 $2,459,840
Retail grocery 322,787 304,718 260,734
Intersegment sales (168,916) (169,357) (174,898)
- -----------------------------------------------------------------------------
Total sales $3,250,868 $2,992,735 $2,545,676
=============================================================================
Operating profit (loss):
Wholesale grocery $ 84,095 $ 78,705 $ 64,058
Retail grocery 5,551 2,911 (13,677)(a)
- -----------------------------------------------------------------------------
Total operating profit 89,646 81,616 50,381
- -----------------------------------------------------------------------------
Merger and integration costs 11,993 -- --
Interest expense 12,354 18,312 17,534
Interest income (3,230) (3,339) (3,178)
- -----------------------------------------------------------------------------
Earnings before income
taxes and extra-
ordinary loss $ 68,529 $ 66,643 $ 36,025
- -----------------------------------------------------------------------------
Identifiable assets:
Wholesale grocery $ 494,266 $ 505,810 $ 415,472
Retail grocery 69,995 74,960 72,432
- -----------------------------------------------------------------------------
Total identifiable
assets $ 564,261 $ 580,770 $ 487,904
- -----------------------------------------------------------------------------
Depreciation and
amortization:
Wholesale grocery $ 21,092 $ 19,119 $ 16,415
Retail grocery 5,997 4,784 5,975
- -----------------------------------------------------------------------------
Total depreciation
and amortization $ 27,089 $ 23,903 $ 22,390
- -----------------------------------------------------------------------------
Capital expenditures:
Wholesale grocery $ 9,518 $ 6,276 $ 9,295
Retail grocery 5,263 13,700 11,441
- -----------------------------------------------------------------------------
Total capital
expenditures $ 14,781 $ 19,976 $ 20,736
=============================================================================
(a)Includes loss on disposal of assets of $13,148.
<PAGE>
(14) Selected Quarterly Data (Unaudited)
Summarized quarterly financial information for the quarters indicated and market
price and dividend information for Richfood's common stock are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended April 27, 1996(a)
- -------------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
(12 Weeks) (12 Weeks) (12 Weeks) (16 Weeks)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Sales $766,967 $717,543 $766,802 $999,556
Gross margin 76,999 68,708 75,731 104,869
Merger and integration costs -- -- 11,993 --
Earnings before extraordinary loss 10,165 9,850 3,774 15,426
Extraordinary loss, net of tax -- -- (1,002) (1,162)
- -------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 10,165 $ 9,850 $ 2,772 $ 14,264
===============================================================================================================================
Earnings per common share:
Earnings before extraordinary loss $ 0.33 $ 0.32 $ 0.12 $ 0.49
Extraordinary loss -- -- (0.03) (0.03)
- -------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 0.33 $ 0.32 $ 0.09 $ 0.46
===============================================================================================================================
Cash dividends declared per common share $ 0.025 $ 0.03 $ 0.03 $ 0.03
===============================================================================================================================
Market price range:
Low $ 19 1/2 $ 22 3/4 $ 24 3/4 $ 23 5/8
High 24 1/4 26 3/4 29 33
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended April 29, 1995(b)
- --------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
(12 Weeks) (12 Weeks) (12 Weeks) (16 Weeks)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Sales $647,229 $684,979 $756,873 $903,654
Gross margin 63,927 69,638 75,244 88,906
==========================================================================================================================
Net earnings $ 8,469 $ 9,044 $ 10,086 $ 11,619
- --------------------------------------------------------------------------------------------------------------------------
Net earnings per common share $ 0.27 $ 0.29 $ 0.33 $ 0.37
==========================================================================================================================
Cash dividends declared per common share $ 0.025 $ 0.025 $ 0.025 $ 0.025
==========================================================================================================================
Market price range:
Low $ 13 1/2 $ 13 3/4 $ 14 3/4 $ 16 1/4
High 16 3/4 16 1/2 17 20
</TABLE>
Market price information for Richfood's common stock reflects
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.
(a) Fiscal 1996 first, second, third and fourth quarters include thirteen,
eleven, twelve and sixteen weeks, respectively, of Super Rite operating results.
(b) Fiscal 1995 first, second and third quarters include thirteen weeks and the
fourth quarter includes fourteen weeks of Super Rite operating results.
<PAGE>
EXHIBIT 21.1
RICHFOOD CONSOLIDATED GROUP
(As of 4/5/96)
SUBSIDIARIES OF RICHFOOD HOLDINGS, INC. [VIRGINIA]
Richfood, Inc. [Virginia]
Rotelle, Inc. [Pennsylvania]
Market Funding, Inc. [Delaware]
Market Insurance Company, Ltd. [Bermuda]
Market Transportation Services, Inc. [Delaware]
Super Rite Corporation [Delaware]
SUBSIDIARIES OF RICHFOOD, INC. [VIRGINIA]
Market Improvement Corporation [Virginia]
Market Insurance Agency, Inc. [Virginia]
G.W.M. Holdings, Inc. [Virginia]
Rich-Temps, Inc. [Virginia]
Maryland Retail Services, Inc. [Virginia]
Retail Funding Corporation [Virginia]
Market Leasing Company [Virginia]
MFFL, Inc. [Virginia]
Market Brands, Inc. [Delaware]
SUBSIDIARIES OF ROTELLE, INC. [PENNSYLVANIA]
Rotelle Management, Inc. [Pennsylvania]
Spring House Leasing, Inc. [Pennsylvania]
Penn Brands, Inc. [Delaware]
<PAGE>
SUBSIDIARIES OF SUPER RITE CORPORATION [DELAWARE]
Super Rite Foods, Inc. [Delaware]
SUBSIDIARIES OF SUPER RITE FOODS, INC. [DELAWARE]
Foodarama Incorporated [Delaware]
SRF Subsidiary Corporation [Delaware]
SUBSIDIARIES OF FOODARAMA INCORPORATED [DELAWARE]
Foodarama, Inc. [Maryland]
Foodarama Group, Inc. [Maryland]
Midway Markets of Delaware, Inc. [Delaware]
Food-A-Rama-G.U., Inc. [Maryland]
EXHIBIT 23.1
Consent Of Independent Auditors
The Board of Directors
Richfood Holdings, Inc.:
We consent to incorporation by reference in the registration statements (Nos.
33-41210, 33-41570, 33-43652, 33-55299, 33-63447, 333-1251 and 333-1253) on Form
S-8 of Richfood Holdings, Inc. of our report dated June 10, 1996, relating to
the consolidated balance sheets of Richfood Holdings, Inc. and subsidiaries as
of April 27, 1996 and April 29, 1995, and the related consolidated statements of
earnings, shareholders' equity and cash flows for each of the fiscal years in
the three-year period ended April 27, 1996, which report is incorporated by
reference in the April 27, 1996 annual report on Form 10-K of Richfood Holdings,
Inc. We also consent to the incorporation by reference in the aforementioned
registration statements of our report dated June 10, 1996, relating to the
financial statement schedules of Richfood Holdings, Inc. and subsidiaries, which
report is included in this Form 10-K. The consolidated financial statements give
effect to the merger on October 15, 1995 of a wholly-owned subsidiary of
Richfood Holdings, Inc. with and into Super Rite Corporation, which has been
accounted for using the pooling of interests method as described in note 2 to
the consolidated financial statements. We did not audit the fiscal 1995 and 1994
consolidated financial statements and financial statement schedules of Super
Rite Corporation, which consolidated financial statements reflect total assets
constituting approximately 48% of the related consolidated financial statement
total at April 29, 1995, and reflect sales constituting approximately 49% of the
related consolidated financial statement totals for each of fiscal 1995 and
1994. The fiscal 1995 and 1994 consolidated financial statements and financial
statement schedules of Super Rite Corporation were audited by other auditors,
whose reports thereon have been furnished to us, and our opinions incorporated
by reference into the registration statements, insofar as they relate to the
amounts included for Super Rite Corporation, are based solely on the reports of
the other auditors.
KPMG Peat Marwick LLP
Richmond, Virginia
July 26, 1996
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our report dated April 21, 1995,
except for the sixth paragraph of Note 6 which is dated as of May 5, 1995, on
our audits of the consolidated financial statements and financial statement
schedules of Super Rite Corporation for the fifty-three week period ended March
4, 1995 and the fifty-two week period ended February 26, 1994, into: (1) the
Registration Statement on Form S-8 (333-01251) of Richfood Holdings, Inc.; (2)
the Registration Statement on Form S-8 (333-01253) of Richfood Holdings, Inc.;
(3) the Registration Statement on Form S-8 (33-63447) of Richfood Holdings,
Inc.; (4) the Registration Statement on Form S-8 (33-55299) of Richfood
Holdings, Inc.; (5) the Registration Statement on Form S-8 (33-43652) of
Richfood Holdings, Inc.; (6) the Registration Statement on Form S-8 (33-41570)
of Richfood Holdings, Inc.; and (7) the Registration Statement on Form S-8
(33-41210) of Richfood Holdings, Inc., which report is included in this Annual
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Harrisburg, Pennsylvania
July 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Company's
Consolidated Financial Statements for the fiscal year ended April 27, 1996
and is qualified in its entirety by reference to such Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-27-1996
<PERIOD-END> APR-27-1996
<CASH> 17,415
<SECURITIES> 0
<RECEIVABLES> 104,379
<ALLOWANCES> 3,994
<INVENTORY> 162,461
<CURRENT-ASSETS> 300,248
<PP&E> 222,749
<DEPRECIATION> 100,090
<TOTAL-ASSETS> 564,261
<CURRENT-LIABILITIES> 259,420
<BONDS> 0
0
0
<COMMON> 66,964
<OTHER-SE> 132,598
<TOTAL-LIABILITY-AND-EQUITY> 564,261
<SALES> 3,250,868
<TOTAL-REVENUES> 3,250,868
<CGS> 2,924,561
<TOTAL-COSTS> 2,924,561
<OTHER-EXPENSES> 248,654
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,354
<INCOME-PRETAX> 68,529
<INCOME-TAX> 29,314
<INCOME-CONTINUING> 39,215
<DISCONTINUED> 0
<EXTRAORDINARY> (2,164)
<CHANGES> 0
<NET-INCOME> 37,051
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.19
</TABLE>
