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As filed with the Securities and Exchange Commission on July 29, 1999
(No. 333- )
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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SUPERVALU INC.
(Exact name of registrant as specified in its charter)
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Delaware 5140 41-0617000
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
SUPERVALU INC. John P. Breedlove, Esq.
11840 Valley View Road Secretary
Eden Prairie, Minnesota 55344 11840 Valley View Road
(612) 828-4000 Eden Prairie, Minnesota 55344
(Address, including zip code, and (612) 828-4000
telephone number, including area code, (Name, address, including zip code,
of registrant's principal executive and telephone number, including area
offices) code, of agent for service)
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Copies to:
Gary L. Tygesson, Esq. William R. Kunkel, Esq. Gary E. Thompson, Esq.
Dorsey & Whitney LLP Skadden, Arps, Slate, Hunton & Williams
220 South Sixth Street Meagher Riverfront Plaza, East
Minneapolis, Minnesota & Flom (Illinois) Tower
55402 333 West Wacker Drive 951 East Byrd Street
(612) 340-8753 Chicago, Illinois 60606 Richmond, Virginia 23219
(312) 407-0700 (804) 788-8200
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Approximate date of commencement of proposed sale to the public: as soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
Title of each class of Proposed maximum Proposed maximum
securities to be Amount to be offering price aggregate Amount of
registered registered(1) per share(2) offering price(2) registration fee(3)
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<S> <C> <C> <C> <C>
Common Stock, $1 par
value.................. 29,436,115 $18.16 $534,559,849 $148,608
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(1) Based upon an estimate of the maximum number of shares of common stock,
without par value, of Richfood Holdings, Inc., which may be exchanged for
shares of common stock, $1 par value, of SUPERVALU INC. pursuant to the
merger described herein.
(2) Pursuant to Rules 457(f)(1) and 457(c), the registration fee is based on
the average of the high and low sale prices on July 26, 1999 of Richfood
common stock on the New York Stock Exchange multiplied by the maximum
number of shares of SUPERVALU common stock into which such shares of
Richfood common stock may be converted upon consummation of the merger
described herein and computed based on the estimated maximum number of
shares of Richfood common stock that may be converted into the securities
to be registered.
(3) A fee of $176,592 was previously paid upon filing of a proxy
statement/prospectus on Schedule 14A, which constitutes a part of this
Registration Statement. The schedule 14A fee was calculated pursuant to
Securities Exchange Act Rule 0-11. No additional fee is payable because
the amount of the registration fee hereunder, $148,608, is less than the
amount of such Schedule 14A fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
[RICHFOOD HOLDINGS, INC. LOGO]
MERGER PROPOSAL--YOUR VOTE IS VERY IMPORTANT
The board of directors of Richfood Holdings, Inc. has unanimously approved a
merger and a merger agreement with SUPERVALU INC. and is seeking your approval
of this important transaction.
The Richfood board of directors believes that the merger is in your and
Richfood's best interests and unanimously recommends that you vote FOR approval
of the merger agreement.
If we complete the merger, Richfood's shareholders will receive either (1)
$18.50 in cash, or (2) shares of SUPERVALU common stock having a market value
of $18.50 for each Richfood share that they own. For purposes of the exchange
of Richfood common stock, the number of shares of SUPERVALU common stock having
a market value of $18.50 will be based on the average trading price of
SUPERVALU common stock during the 20 trading-day period ending on the seventh
trading day prior to the closing of the merger. The amount of cash and
SUPERVALU common stock to be received at the election of each Richfood common
shareholder will be subject to allocation and pro rata adjustment to the extent
required to ensure that the aggregate consideration is composed of the
proportions of cash and SUPERVALU common stock called for by the merger
agreement.
SUPERVALU common stock trades on the New York Stock Exchange under the
symbol "SVU." On July 27, 1999, the closing price of SUPERVALU common stock was
$25 5/16. Richfood shareholders will not incur federal income tax as a result
of the receipt of shares of SUPERVALU common stock; however, any cash
consideration they receive will be subject to federal income tax.
Please see pages 16-21 for detailed information about the exchange of
Richfood common stock, as well as pages 1 and 2 for a description of additional
factors that may affect the value of the SUPERVALU common stock to be issued in
the merger, along with several other risk factors pertaining to the merger that
you should consider.
Richfood has scheduled a special meeting on August 31, 1999, to vote on the
approval of the merger and the merger agreement. Your vote is important,
regardless of the number of shares you own. Please vote as soon as possible to
make sure that your shares are represented at the meeting. To grant your proxy
to vote your shares, you must complete and return the enclosed proxy card. You
may also cast your vote in person at the special meeting. If you do not vote,
it will have the same effect as voting against the merger.
In the materials accompanying this letter, you will find a Notice of Special
Meeting, a proxy statement/prospectus relating to the actions to be taken by
Richfood's shareholders at the special meeting, an election form/letter of
transmittal and a proxy card. The proxy statement/prospectus provides you with
detailed information about the merger. I encourage you to read the entire proxy
statement/prospectus and notice carefully. Should you have questions about the
merger, please call Georgeson & Company Inc. at 1-800-223-2064.
On behalf of your board of directors, I thank you for your support and urge
you to vote FOR approval and adoption of the merger agreement.
/s/ John E. Stokely
John E. Stokely
Chairman, President and
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved the SUPERVALU common stock to be issued under this
document or determined if this document is accurate or adequate. Any
representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated July 29, 1999, and is
first being mailed to shareholders on or about July 30, 1999.
<PAGE>
RICHFOOD HOLDINGS, INC.
Notice of Special Meeting of Shareholders
A special meeting of shareholders of Richfood Holdings, Inc. will be held at
the Crester Bank Auditorium, 4th floor, 919 East Main Street, Richmond,
Virginia, at 10:00 a.m., local time, on August 31, 1999, for the following
purposes:
1.to consider and vote upon a proposal to approve the Agreement and Plan of
Merger, dated as of June 9, 1999, among Richfood, SUPERVALU INC. and a
wholly owned subsidiary of SUPERVALU, providing for the merger of Richfood
with and into the subsidiary of SUPERVALU; and
2.to act upon any other matters properly coming before the special meeting
and any adjournment or postponement of the meeting.
Only holders of record of Richfood common stock at the close of business on
July 27, 1999, are entitled to vote at the special meeting or any adjournments
or postponements thereof. Approval of the merger proposal at the special
meeting requires the affirmative vote of the holders of more than two-thirds of
the outstanding shares of Richfood common stock.
/s/ John C. Belknap
John C. Belknap
Executive Vice President,
Chief Financial Officer and
Secretary
July 29, 1999
Please mark, sign, date and return your proxy promptly, whether or
not you plan to attend the special meeting.
The Richfood board of directors unanimously
recommends that shareholders vote FOR the proposal to approve the
merger agreement at the special meeting.
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TABLE OF CONTENTS
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Page
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QUESTIONS AND ANSWERS ABOUT THE MERGER................................... i
SUMMARY.................................................................. S-1
General................................................................ S-1
Parties to the Merger.................................................. S-1
Special Meeting........................................................ S-1
Required Vote.......................................................... S-1
The Merger............................................................. S-2
Reasons of Richfood for the Merger..................................... S-2
Recommendation of the Richfood Board of Directors...................... S-2
Opinion of Richfood's Financial Advisor................................ S-2
Merger Consideration and Shareholder Elections......................... S-2
Material Federal Income Tax Consequences............................... S-3
Interests of Richfood's Directors and Officers in the Merger........... S-3
Accounting Treatment................................................... S-3
No Appraisal or Dissenters' Rights..................................... S-4
Regulatory Matters..................................................... S-4
Shareholders Agreements................................................ S-4
Conditions to the Merger............................................... S-4
No Solicitation of Transactions by Richfood............................ S-4
Termination of the Merger Agreement.................................... S-5
Termination Fees and Expenses.......................................... S-5
COMPARATIVE UNAUDITED PER COMMON SHARE DATA OF RICHFOOD AND SUPERVALU.... S-6
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS.............. S-7
Introduction........................................................... S-7
Pro Forma Condensed Combined Statements of Earnings (Unaudited)........ S-7
Notes to the Unaudited Pro Forma Condensed Combined Statements of
Earnings.............................................................. S-8
Pro Forma Condensed Combined Balance Sheet (Unaudited)................. S-9
Notes to the Unaudited Pro Forma Condensed Combined Balance Sheet...... S-10
SELECTED CONSOLIDATED FINANCIAL INFORMATION.............................. S-11
SUPERVALU--Before the Merger........................................... S-11
Richfood--Before the Merger............................................ S-12
RISK FACTORS............................................................. 1
Holders of Richfood Common Stock May Not Receive their Requested Form
of Merger Consideration............................................... 1
SUPERVALU Faces Some Uncertainties in Integrating Richfood's Operations
and Achieving Cost Savings............................................ 1
The Price of SUPERVALU's Common Stock May Fluctuate.................... 1
Richfood Faces Some Risks if the Merger is Not Consummated............. 2
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION............................................ 2
THE SPECIAL MEETING...................................................... 3
Meeting Date........................................................... 3
Matters to be Considered at the Special Meeting........................ 3
Record Date and Voting Rights and Requirements......................... 3
Voting of Proxies...................................................... 4
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<TABLE>
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Page
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Revocation of Proxies................................................... 4
Solicitation of Proxies................................................. 4
THE MERGER................................................................ 5
Description of Merger................................................... 5
Background of the Merger................................................ 5
Reasons of Richfood for the Merger...................................... 10
Reasons of SUPERVALU for the Merger..................................... 11
Opinion of Richfood's Financial Advisor................................. 11
Procedures for Shareholder Elections.................................... 17
Shareholder Elections................................................... 17
Allocation Rules........................................................ 17
The Effective Time...................................................... 21
Exchange of Certificates................................................ 21
Treatment of Richfood Stock Options and Warrants........................ 22
No Solicitation of Transactions by Richfood............................. 22
Representations and Warranties.......................................... 23
Covenants Under the Merger Agreement.................................... 25
Conditions to the Merger................................................ 26
Indemnification and Insurance of Directors and Officers................. 27
Termination of the Merger Agreement..................................... 28
Termination Fees and Expenses........................................... 29
Material Federal Income Tax Consequences................................ 30
Interests of Richfood's Directors and Officers in the Merger............ 32
No Appraisal Or Dissenters' Rights...................................... 36
Accounting Treatment.................................................... 36
Regulatory Matters...................................................... 36
SHAREHOLDERS AGREEMENTS................................................... 37
MANAGEMENT AND OPERATIONS AFTER THE MERGER................................ 37
ACQUISITION FINANCING..................................................... 37
PRICE RANGE OF COMMON STOCK AND DIVIDENDS................................. 38
SUPERVALU............................................................... 38
Richfood................................................................ 39
BUSINESS OF RICHFOOD...................................................... 39
BUSINESS OF SUPERVALU..................................................... 40
General................................................................. 40
Recent Developments..................................................... 40
DESCRIPTION OF SUPERVALU CAPITAL STOCK.................................... 40
General................................................................. 40
Common Stock............................................................ 40
Preferred Stock......................................................... 41
Other "Anti-Takeover" Provisions........................................ 41
COMPARATIVE RIGHTS OF HOLDERS OF RICHFOOD COMMON
STOCK AND SUPERVALU COMMON STOCK........................................ 42
Authorized Capital Stock................................................ 42
Directors............................................................... 43
Removal of Directors.................................................... 44
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Page
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Vacancies on the Board of Directors.................................... 44
Notice of Shareholder Nominations of Directors and Shareholder
Proposals............................................................. 44
Director Standard of Conduct........................................... 45
Limitations on Director Liability...................................... 45
Indemnification........................................................ 46
Mergers, Share Exchanges and Sales of Assets........................... 46
Anti-Takeover Statutes................................................. 46
Amendments to Articles of Incorporation................................ 48
Amendments to Bylaws................................................... 48
Dissenters' Rights..................................................... 48
Transfer Restrictions.................................................. 49
FEDERAL SECURITIES LAWS CONSEQUENCES;
STOCK TRANSFER RESTRICTION AGREEMENTS.................................. 50
LEGAL MATTERS............................................................ 50
EXPERTS.................................................................. 50
SHAREHOLDER PROPOSALS.................................................... 51
OTHER MATTERS............................................................ 51
WHERE YOU CAN FIND MORE INFORMATION...................................... 52
Information Regarding SUPERVALU and Richfood........................... 53
ANNEXES
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ANNEX A Merger Agreement
ANNEX B Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
</TABLE>
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What am I being asked to vote on?
A: You are being asked to approve the merger agreement that provides for the
merger of Richfood with and into a wholly owned subsidiary of SUPERVALU.
Q: What will I receive when the merger occurs?
A: You have the right to elect to receive in exchange for each of your shares
of Richfood common stock either $18.50 in cash or $18.50 worth of SUPERVALU
common stock. If you hold more than one share of Richfood common stock, you
may elect to receive cash for some of your shares and stock for your other
shares. An election form/letter of transmittal has been provided to you
together with this document.
Q: Will I receive the type of consideration that I elect to receive when the
merger occurs?
A: You may not receive the type of consideration that you elect and will not
know at the time of your vote or election what you will ultimately receive
in exchange for your shares of Richfood common stock. This is because the
merger agreement provides that in the aggregate, subject to adjustment in
some circumstances, half of the shares of Richfood common stock outstanding
will be exchanged for cash and half of the shares will be exchanged for
SUPERVALU common stock, and the actual allocation of the cash and SUPERVALU
common stock depends on the elections made by all Richfood shareholders.
To the extent that Richfood shareholders as a group elect to receive cash
and SUPERVALU common stock in proportions that differ from the composition
of the aggregate merger consideration provided for under the merger
agreement, the excess cash or stock, as the case may be, will be allocated
among Richfood shareholders as described in the merger agreement.
Q: How do I vote my shares?
A: After carefully reading and considering the information contained in this
document, you should fill out and sign your proxy card. Then mail your
completed, signed proxy card in the enclosed return envelope to Norwest
Bank as soon as possible so that your shares can be voted at the special
meeting of Richfood shareholders.
You should return your proxy card whether or not you plan to attend the
special meeting. If you attend the special meeting, you may revoke your
proxy at any time before it is voted and vote in person.
Q: Can I change my vote after I have mailed my signed proxy?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this either by (1) submitting to the Executive
Vice President, Chief Financial Officer and Secretary of Richfood a written
notice of revocation or a completed, later-dated proxy card or (2)
attending the special meeting and voting in person.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will not be able to vote your shares without instructions from
you. You should follow the directions provided by your broker to vote your
shares.
Q: How do I elect the form of merger consideration I wish to receive?
A: You should complete the election form/letter of transmittal according to
the instructions printed on the form. Then mail the form, together with the
stock certificates representing your shares of Richfood common stock, in
the enclosed return envelope addressed to the exchange agent, Norwest Bank.
You must submit your completed election form/letter of transmittal to the
exchange agent before the election deadline, which is 5:00 p.m., New York
City time, on the business day that is two trading days prior to the
closing of the merger. The merger agreement requires SUPERVALU to publicly
announce the closing date no fewer than five trading days before the
closing of the merger.
i
<PAGE>
Q: What if I do not complete and return the election form/letter of transmittal
before the election deadline?
A: If you do not submit a completed election form/letter of transmittal prior
to the deadline, your shares will be exchanged for cash and/or SUPERVALU
common stock in accordance with allocation and proration procedures
described in the merger agreement.
Q: When will the merger be completed?
A: SUPERVALU and Richfood are working to complete the merger as quickly as
possible after the special meeting of Richfood shareholders. SUPERVALU and
Richfood expect to complete the merger on or about August 31, 1999.
Q: To whom should I address questions?
A: If you have questions, you should contact Georgeson & Company Inc. at 1-800-
223-2064.
ii
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SUMMARY
General
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire proxy statement/prospectus and the documents incorporated by reference
in this proxy statement/prospectus. See "WHERE YOU CAN FIND MORE INFORMATION."
Parties to the Merger
SUPERVALU INC.
11840 Valley View Road
Eden Prairie, Minnesota 55344
(612) 828-4000
SUPERVALU is the nation's 11th largest food retailer and largest food
distributor based on revenues. SUPERVALU operates three principal store formats
at retail, and sells food and non-food products at wholesale. As of February
27, 1999, SUPERVALU operated 345 corporate retail stores under its principal
retail formats including price superstores, combination food and drug stores,
and limited assortment stores under such retail banners as Cub Foods, Shop 'n
Save, Save-A-Lot, bigg's, Scott's Foods, Laneco and Hornbachers. Through its
Save-A-Lot banner, as of February 27, 1999, SUPERVALU also supplied 630
licensed independent Save-A-Lot limited assortment stores. Additionally, as of
February 27, 1999, SUPERVALU was the primary supplier of approximately 2,700
additional stores and a partial supplier of approximately 1,200 additional
stores in 48 states. SUPERVALU's principal executive offices are located at
11840 Valley View Road, Eden Prairie, Minnesota 55344.
Richfood Holdings, Inc.
4860 Cox Road, Suite 300
Glen Allen, Virginia 23060
(804) 915-6000
Richfood is a major food wholesaler and retailer operating primarily in the
Mid-Atlantic region of the United States. Richfood's wholesale division is the
leading wholesale food distributor in the Mid-Atlantic region and the fourth
largest publicly owned food wholesaler in the United States. As a result of
recent acquisitions, Richfood's retail division is now one of the largest food
retailers in its Mid-Atlantic operating region. Richfood's wholesale division
serves approximately 1,400 retail grocery stores, offering over 37,000 grocery
and non-grocery items. Richfood's retail division operates the 39 store Farm
Fresh chain located primarily in the Hampton Roads region of Virginia, 37
Shoppers Food Warehouse stores in the greater Washington, D.C., metropolitan
area and the Metro chain of 16 retail grocery stores in the metropolitan
Baltimore, Maryland area. Richfood's principal executive offices are located at
4860 Cox Road, Suite 300, Glen Allen, Virginia 23060.
Special Meeting (see page 2)
The special meeting will be held on August 31, 1999, at 10:00 a.m. local
time, at the Crestar Bank Auditorium, 4th Floor, 919 East Main Street,
Richmond, Virginia. At the meeting, you will be asked:
1. To consider and vote upon a proposal to approve the Agreement and Plan of
Merger, dated as of June 9, 1999, among Richfood, SUPERVALU and a wholly owned
subsidiary of SUPERVALU, providing for the merger of Richfood with and into the
subsidiary of SUPERVALU.
2. To transact such other business as may properly come before the special
meeting and any adjournment or adjournments thereof.
Only Richfood shareholders of record as of the close of business on July 27,
1999, will be entitled to the notice of, and to vote at, the special meeting.
Required Vote (see page 3)
The affirmative vote of more than two-thirds of the shares entitled to vote
on the record date is required to approve the merger agreement.
S-1
<PAGE>
The Merger (see page 5)
The merger agreement provides that Richfood will merge with and into a
subsidiary of SUPERVALU, becoming a wholly owned subsidiary of SUPERVALU. You
may elect to receive cash, SUPERVALU common stock, or a combination of cash and
SUPERVALU common stock, in exchange for your shares of Richfood common stock
upon completion of the merger. The merger agreement is included in this proxy
statement/prospectus as Annex A.
SUPERVALU and Richfood are working to complete the merger as quickly as
possible after the special meeting of Richfood shareholders. SUPERVALU and
Richfood expect to complete the merger on or about August 31, 1999.
Reasons of Richfood for the Merger (see page 9)
Richfood's board of directors approved the merger agreement based on its
careful consideration of a number of material factors, including those
described below:
. trends affecting the wholesale and retail food industry, including: (1)
continued rapid consolidation and the effects of that consolidation on
Richfood's wholesale and retail operations; (2) escalating cost of
technology necessary to compete effectively; (3) increased retail
competition; and (4) low national population growth, low inflation,
increased interest costs and a tightening labor market;
. public market valuations of food wholesalers compared to relatively higher
public market valuations of food retailers, which limited Richfood's ability
to use its common stock to continue to effect retail acquisitions, and
Richfood's relative debt level following recent acquisitions, which limited
Richfood's ability to incur additional debt on favorable terms to finance
additional wholesale or retail acquisitions;
. a review of the possible alternatives to the merger, including continuing to
operate Richfood as an independent entity, various potential strategic
acquisitions or the sale of strategic business segments and the possible
benefits of each alternative to Richfood's shareholders and the timing and
likelihood of actually accomplishing such alternative; and
. a review of the terms of the merger agreement.
Recommendation of the Richfood Board of Directors (see page 11)
The Richfood Board of Directors believes that the merger is in your and
Richfood's best interests and unanimously recommends that you vote FOR approval
of the merger agreement.
Opinion of Richfood's Financial Advisor (see page 11)
Donaldson, Lufkin & Jenrette Securities Corporation, Richfood's financial
advisor, delivered an opinion to Richfood's board of directors that, as of the
date of execution of the merger agreement, the merger consideration was fair to
Richfood shareholders from a financial point of view, subject to the factors,
qualifications and assumptions described in its opinion. DLJ has confirmed its
opinion by delivery to the Richfood board of a written opinion, dated July 29,
1999. The complete opinion of Donaldson, Lufkin & Jenrette delivered on July
29, 1999, is attached as Annex B. You should read the opinion in its entirety.
Merger Consideration and Shareholder Elections (see pages 5 and 17)
You may elect to receive, in exchange for your shares of Richfood common
stock, merger consideration consisting of all cash (without interest), all
SUPERVALU common stock or a combination of the two. Under the merger agreement,
each share of Richfood common stock will be converted into either:
. $18.50 in cash; or
. the number of shares of SUPERVALU common stock having a market value of
$18.50, as determined by the average trading price of SUPERVALU common stock
on the New York Stock Exchange during a 20 trading-day computation period
prior to the closing of the merger.
See "THE MERGER--Description of the Merger--Consideration to be Received in the
Merger" on page 5.
S-2
<PAGE>
You have received an election form/letter of transmittal with this proxy
statement/prospectus. You should use this form to elect to receive cash,
SUPERVALU common stock or a combination of cash and stock in exchange for your
shares of Richfood common stock after the merger is completed. The election
form/letter of transmittal contains instructions on how to surrender your
Richfood common stock certificates to the exchange agent, Norwest Bank, in
exchange for cash and/or SUPERVALU common stock, as the case may be. See "THE
MERGER--Procedures for Shareholder Elections" on page 16 and "THE MERGER--
Shareholder Elections" on page 17.
Although you may designate the relative amount of cash and stock you desire
to receive in the merger, the proportionate amounts you actually receive will
depend upon the proportionate amount of cash and stock that Richfood
shareholders elect to receive in the aggregate when compared to the
proportionate amount of cash and stock comprising the aggregate merger
consideration. Subject to adjustment under some circumstances, the composition
of the aggregate merger consideration will be 50% cash and 50% SUPERVALU common
stock. See "THE MERGER--Allocation Rules" on page 17.
No fractional shares of SUPERVALU common stock will be issued as merger
consideration. Instead, Richfood shareholders will receive in cash the value of
any fractions of a share that they would otherwise have been entitled to
receive. See "THE MERGER--Exchange of Certificates" on page 21.
Material Federal Income Tax Consequences (see page 30)
The obligations of SUPERVALU and Richfood to consummate the merger are
conditioned upon their receipt of an opinion from counsel to the effect that
the merger will qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code.
Provided that the merger qualifies as a reorganization, neither Richfood nor
SUPERVALU will recognize any gain or loss for federal income tax purposes as a
result of the merger. The federal income tax consequences of the merger to you
as a Richfood shareholder depend on whether you receive cash, shares of
SUPERVALU common stock or a combination of cash and SUPERVALU common stock in
exchange for your Richfood common stock. In general, a Richfood shareholder
will not recognize any gain or loss as a result of the receipt of SUPERVALU
common stock in exchange for Richfood common stock, but will recognize gain, if
any, with respect to any cash received.
Under the merger agreement, you may be required to receive some cash even if
you elect to receive only SUPERVALU common stock, or to receive some SUPERVALU
common stock even if you elect to receive only cash. You should consult with
your tax advisor about the tax consequences of the merger in light of your
individual circumstances, including the application of any federal, state,
local or foreign law.
Interests of Richfood's Directors and Officers in the Merger (see page 32)
When considering the recommendation of Richfood's board, you should be aware
that some Richfood directors and officers have interests in the merger that are
different from, or are in addition to, yours.
In particular, a number of executive officers of Richfood, including one
executive officer who is also a director, are entitled to benefits as a result
of the merger. The benefits are payable under employment and severance benefits
agreements. Each of these executive officers will receive significant
compensation if they remain employees of Richfood until the merger is
completed. Each employment and severance benefits agreement also provides for
substantial payments to an executive officer whose employment is terminated
following completion of the merger. In addition, under option agreements and
incentive plans that will be assumed by SUPERVALU in the merger, Richfood's
directors and officers would, upon completion of the merger, be entitled to
accelerated vesting of options and restricted stock.
Accounting Treatment (see page 36)
The merger will be accounted for as a purchase for accounting and financial
reporting purposes.
S-3
<PAGE>
No Appraisal or Dissenters' Rights (see page 36)
Under Virginia law, you are not entitled to appraisal or dissenters' rights
in the merger.
Regulatory Matters (see page 36)
Under the Hart-Scott-Rodino Antitrust Improvements Act, the merger could not
be completed until SUPERVALU and Richfood had furnished required information
and materials to the Antitrust Division of the Department of Justice and to the
Federal Trade Commission and the applicable waiting period was terminated or
expired. SUPERVALU and Richfood each filed with the Department of Justice and
the Federal Trade Commission a Notification and Report Form with respect to the
merger on July 6, 1999. We were granted early termination of the applicable
waiting period on July 22, 1999.
As with any merger in the United States, the Department of Justice or the
Federal Trade Commission has the authority to challenge the merger on antitrust
grounds before or after the merger is completed. There can be no assurance that
the merger will not be challenged on antitrust grounds or, if challenged, that
SUPERVALU and Richfood would prevail.
While we are not aware of any other material governmental approvals or
actions required to complete the merger, should any approval or action be
required, we anticipate that we would seek the required governmental approval
or action. There can be no assurance, however, that the approval or action, if
needed, could be obtained within the time frame contemplated by, or on terms
consistent with, the merger agreement.
Shareholders Agreements (see page 37)
The directors and certain executive officers of Richfood have entered into
shareholders agreements to vote their shares of Richfood common stock for
approval of the merger and the merger agreement.
A total of 1,403,489 shares of Richfood common stock, representing in the
aggregate approximately 2.9% of the outstanding shares of Richfood common
stock, are subject to shareholders agreements.
Conditions to the Merger (see page 26)
SUPERVALU's and Richfood's respective obligations to complete the merger are
subject to the prior satisfaction or waiver of a number of conditions,
including the following, among others:
. the merger agreement must be approved by Richfood's shareholders;
. the registration statement filed by SUPERVALU in connection with the
issuance of its common stock in the merger must be effective and not subject
to a Securities and Exchange Commission stop order;
. the shares of SUPERVALU common stock to be issued in the merger must be
approved for listing on the New York Stock Exchange;
. the respective representations and warranties of the parties to the merger
agreement must be true and correct, and there must not have been a material
adverse effect on the business of Richfood between the date of the merger
agreement and the date of closing;
. each of SUPERVALU, Richfood and the wholly owned subsidiary of SUPERVALU
into which Richfood will be merged, must have complied with its respective
obligations under the merger agreement; and
. each of SUPERVALU and Richfood must have received an opinion of counsel to
the effect that the merger will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code for federal income
tax purposes.
No Solicitation of Transactions by Richfood (see page 22)
The merger agreement includes provisions that prohibit Richfood from
soliciting or encouraging submission of third-party acquisition proposals, but
which permit Richfood to negotiate with and furnish information to a third
party if the Richfood board determines that:
. the third party's unsolicited proposal would be more favorable, from a
financial point of view,
S-4
<PAGE>
to Richfood and its shareholders than the merger; and
. negotiating with and providing information to the third party is in the best
interests of Richfood and its shareholders and is consistent with the
board's fiduciary duties under applicable law.
Termination of the Merger Agreement (see page 28)
The merger agreement may be terminated under various circumstances at any
time before completion of the merger, as summarized below. The merger agreement
may be terminated:
. by the mutual consent of SUPERVALU and Richfood;
. by either SUPERVALU or Richfood if Richfood shareholders do not approve the
merger agreement at the special meeting;
. subject to limited exceptions, by either SUPERVALU or Richfood if the merger
has not occurred on or before January 15, 2000;
. by either SUPERVALU or Richfood if there is a final governmental order that
cannot be appealed prohibiting the merger;
. under some circumstances, by Richfood if Richfood is fully prepared to enter
into a binding agreement with an acquirer other than SUPERVALU on terms that
would be more favorable to Richfood shareholders, from a financial point of
view, than the merger;
. by Richfood if SUPERVALU or the wholly owned subsidiary of SUPERVALU into
which Richfood will be merged has materially breached the merger agreement
and a 30-day cure period has elapsed;
. by SUPERVALU if Richfood has materially breached the merger agreement and a
30-day cure period has elapsed;
. by SUPERVALU and, subject to limited exceptions, by Richfood if the average
trading price of SUPERVALU common stock used to compute the merger
consideration is less than $18.50 per share; or
. by SUPERVALU if the Richfood board withdraws or adversely modifies its
approval or recommendation of the merger agreement.
Termination Fees and Expenses (see page 29)
Richfood must pay SUPERVALU a termination fee of $27 million and up to $3
million of expenses incurred by SUPERVALU if the merger agreement is terminated
by reason of:
. failure of Richfood's shareholders to approve the merger agreement;
. Richfood's intention to enter into an acquisition transaction with a third
party;
. Richfood's material breach of the merger agreement, if Richfood acted
intentionally or in bad faith; or
. the Richfood board's withdrawal or adverse modification, or failure to
reconfirm upon SUPERVALU's request, its recommendation of the merger
agreement.
If the merger is not consummated, SUPERVALU and Richfood will bear their
respective legal fees and expenses, except as provided in connection with the
termination fees.
S-5
<PAGE>
COMPARATIVE UNAUDITED PER COMMON SHARE DATA
OF RICHFOOD AND SUPERVALU
The following table presents selected comparative unaudited per share data
for SUPERVALU on a historical and pro forma combined basis, and for Richfood on
a historical and pro forma equivalent basis, giving effect to the merger using
the purchase method of accounting. The information presented below is derived
from the consolidated historical financial statements of SUPERVALU and
Richfood, including the related notes thereto, incorporated by reference into
this proxy statement/prospectus. This information should be read in conjunction
with such historical financial statements and the related notes thereto. See
"WHERE YOU CAN FIND MORE INFORMATION."
The per share data included herein is not necessarily indicative of the
results of future operations of the combined entity or the actual results that
would have been achieved had the merger been consummated prior to the periods
indicated.
The pro forma combined book value per share of SUPERVALU common stock is
based upon the pro forma total common equity for SUPERVALU, divided by the
total pro forma shares of SUPERVALU common stock assuming conversion of
Richfood common stock at an exchange ratio of 0.77 shares of SUPERVALU common
stock for each share of Richfood common stock (the "Pro Forma Exchange Ratio"),
which ratio is based on the assumptions that 50% of the merger consideration is
paid in the form of SUPERVALU common stock and that the 20 trading-day average
price of SUPERVALU common stock is $24.00. The pro forma equivalent book values
per share of Richfood common stock represents the pro forma combined amount per
share multiplied by the Pro Forma Exchange Ratio. The pro forma combined
dividends declared assume no changes in the historical dividends declared per
share of SUPERVALU common stock. The pro forma equivalent dividends per share
of Richfood common stock represents the cash dividends declared on a share of
SUPERVALU common stock multiplied by the Pro Forma Exchange Ratio. The pro
forma combined net income per share has been computed based on the average
number of outstanding shares and common equivalent shares of SUPERVALU, and the
average number of outstanding shares of Richfood common stock adjusted for the
Pro Forma Exchange Ratio. The pro forma equivalent net income per share of
Richfood common stock represents the pro forma combined net income per share
multiplied by the Pro Forma Exchange Ratio.
<TABLE>
<CAPTION>
SUPERVALU Common
Stock Richfood Common Stock
--------------------- ---------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Book Value:
As of the end of the latest
fiscal quarter(1)............... $11.20 $12.75 $8.15 $9.82
Dividends Declared:
Latest fiscal quarter(1)......... 0.13 1/4 0.13 1/4 0.05 0.10 1/5
Fiscal year 1999(2).............. 0.52 3/4 0.52 3/4 0.20 0.40 3/5
Net Income--Diluted:
Latest fiscal quarter(1)......... 0.55 0.57 0.53 0.44
Fiscal year 1999(2).............. 1.57 1.60 1.53 1.23
</TABLE>
- --------
(1) Richfood's latest fiscal quarter for which financial information is
available ended May 1, 1999. SUPERVALU's latest fiscal quarter ended
June 19, 1999.
(2) Richfood's fiscal year 1999 ended on May 1, 1999. SUPERVALU's fiscal year
1999 ended on February 27, 1999.
S-6
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Introduction
The unaudited pro forma combined financial statements give effect to the
merger, as described under "THE MERGER." The unaudited pro forma combined
financial statements have been prepared on the basis of assumptions described
in the notes to the unaudited pro forma combined financial statements and
include assumptions relating to the allocation of the consideration paid for
Richfood to the consolidated assets and liabilities of Richfood based on
preliminary estimates of their respective fair values. The actual allocation of
such consideration may differ from that reflected in the pro forma combined
financial statements after an appropriate review of the fair values of the
consolidated assets and liabilities of Richfood has been completed. Amounts
allocated will be based upon the estimated fair values at the time of the
merger which could vary significantly from the amounts reflected in the
unaudited pro forma combined financial statements. The unaudited pro forma
combined financial statements do not reflect any cost savings and other
synergies nor any transaction costs or other merger related expenses
anticipated by SUPERVALU's management. The pro forma information also does not
give effect to the non-renewal of Richfood's supply agreement with Giant Food
Stores, Inc., which will expire in December 1999. Richfood's sales to Giant in
fiscal 1999 were approximately $629 million. The merger has been accounted for
using the purchase method of accounting. The unaudited pro forma combined
financial statements should be read in conjunction with the respective
financial statements of SUPERVALU and Richfood and the related notes
incorporated by reference in this proxy statement/prospectus. See "WHERE YOU
CAN FIND MORE INFORMATION."
Pro Forma Condensed Combined Statements of Earnings (Unaudited)
The pro forma condensed combined statement of earnings for the fiscal year
ended February 27, 1999, has been prepared by combining the consolidated
statement of earnings of SUPERVALU for the fiscal year (52 weeks) ended
February 27, 1999, with the consolidated statement of earnings of Richfood for
the fiscal year (52 weeks) ended May 1, 1999, adjusted to give effect to the
merger as if it had occurred on March 1, 1998. The pro forma condensed combined
statement of earnings for the first quarter of fiscal 2000 (16 weeks) ended
June 19, 1999, has been prepared by combining the consolidated statement of
earnings of SUPERVALU for the fiscal quarter (16 weeks) ended June 19, 1999,
with the consolidated statement of earnings of Richfood for the fiscal quarter
(16 weeks) ended May 1, 1999, adjusted to give effect to the merger as if it
had occurred on February 28, 1999. The pro forma combined financial statements
do not necessarily reflect the actual results of operations of SUPERVALU which
would have resulted had the merger occurred as of the dates presented. The pro
forma information is not necessarily indicative of future results of operations
for the combined companies.
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------
(52 Weeks)
February 27, 1999
(52 Weeks) (52 Weeks) --------------------------
February 27, 1999 May 1, 1999 Pro Forma Pro Forma
SUPERVALU Richfood Adjustments Combined
----------------- ----------- ----------- -----------
(In thousands, except per share data and ratios)
<S> <C> <C> <C> <C>
Net sales............... $17,420,507 $3,968,239 $ $21,388,746
Costs and expenses:
Cost of sales.......... 15,620,127 3,247,017 18,867,144
Selling and
administrative
expenses.............. 1,382,212 558,560 11,800 (A) 1,952,572
Interest, net.......... 101,907 43,087 47,800 (B) 192,794
----------- ---------- -------- -----------
Total costs and
expenses............. 17,104,246 3,848,664 59,600 21,012,510
----------- ---------- -------- -----------
Earnings before taxes... 316,261 119,575 (59,600) 376,236
Provision for income
taxes.................. 124,923 46,532 (18,881)(C) 152,574
----------- ---------- -------- -----------
Net earnings............ $ 191,338 $ 73,043 $(40,719) $ 223,662
=========== ========== ======== ===========
Weighted average common
shares--diluted........ 121,961 18,000 (D) 139,961
Net earnings per common
share--diluted......... $ 1.57 $ 1.60
Ratio of earnings to
fixed charges (E)
Including one-time
items................. 3.17 2.92 2.47
Excluding one-time
items................. 3.17 2.92 2.47
</TABLE>
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Statements
of Earnings on Page S-8.
S-7
<PAGE>
<TABLE>
<CAPTION>
Fiscal Quarter Ended
---------------------------------------------------
(16 Weeks)
June 19, 1999
(16 Weeks) (16 Weeks) -------------------------
June 19, 1999 May 1, 1999 Pro Forma Pro Forma
SUPERVALU Richfood Adjustments Combined
------------- ----------- ----------- ----------
(In thousands, except per share data and ratios)
<S> <C> <C> <C> <C>
Net sales................ $5,289,720 $1,211,081 $ $6,500,801
Costs and expenses:
Cost of sales........... 4,746,897 984,057 5,730,954
Selling and
administrative
expenses............... 420,424 173,427 3,630 (A) 597,481
Gain on sale............ (163,662) (163,662)
Restructuring and other
charges................ 103,596 103,596
Interest, net........... 30,245 12,422 14,707 (B) 57,374
---------- ---------- -------- ----------
Total costs and
expenses.............. 5,137,500 1,169,906 18,337 6,325,743
---------- ---------- -------- ----------
Earnings before taxes.... 152,220 41,175 (18,337) 175,058
Provision for income
taxes................... 85,499 15,931 (5,809)(C) 95,621
---------- ---------- -------- ----------
Net earnings............. $ 66,721 $ 25,244 $(12,528) $ 79,437
========== ========== ======== ==========
Weighted average common
shares--diluted......... 120,769 18,000 (D) 138,769
Net earnings per common
share--diluted.......... $ 0.55 $ 0.57
Ratio of earnings to
fixed charges (E)
Including one-time
items.................. 4.71 3.23 3.35
Excluding one-time
items.................. 3.23 3.23 2.54
</TABLE>
Notes to the Unaudited Pro Forma Condensed
Combined Statements of Earnings
(A) To amortize over forty years the cost in excess of fair value of net assets
acquired, net of goodwill amortization previously recorded by Richfood.
(B) SUPERVALU intends to finance the acquisition with a combination of existing
cash, commercial paper issuances (supported by bank credit facilities) and
the proceeds of one or more debt offerings. Approximately $886 million will
be paid to Richfood shareholders, consisting of $443 million of cash and
the issuance of $443 million of SUPERVALU common stock. SUPERVALU intends
to repay approximately $366 million of outstanding Richfood debt,
consisting of a bank term loan and revolving bank loans. SUPERVALU intends
to finance approximately $500 million with the proceeds of one or more debt
offerings. For the purposes of the pro forma combined financial statements,
an annual average interest rate of 7.3% is assumed for the debt securities,
and an annual interest rate of 5.3% is assumed for commercial paper and
borrowings under credit facilities.
(C) To provide for income taxes at an effective tax rate of 39.5% for all
adjustments except goodwill amortization.
(D) To increase common shares outstanding for the anticipated 18 million shares
to be issued in the transaction based on an assumed SUPERVALU common stock
price of $24.00 per share.
(E) Earnings used to calculate the ratio of earnings to fixed charges consist
of earnings from operations before income taxes, adjusted for the portion
of fixed charges deducted from such earnings. Fixed charges consist of
interest on all indebtedness (including capital lease obligations),
amortization of debt expense and the portion of interest expense on
operating leases deemed representative of the interest factor. Ratios are
presented on a consolidated basis.
S-8
<PAGE>
Pro Forma Condensed Combined Balance Sheet (Unaudited)
The pro forma condensed combined balance sheet as of June 19, 1999, has been
prepared by combining the consolidated balance sheet of SUPERVALU as of June
19, 1999, with the consolidated balance sheet of Richfood as of May 1, 1999,
adjusted to give effect to the merger as if it had occurred on June 19, 1999.
The pro forma financial statements do not necessarily reflect the actual
financial position of SUPERVALU that would have resulted had the merger
occurred as of the date presented. The pro forma information is not necessarily
indicative of the future financial position for the combined companies.
<TABLE>
<CAPTION>
June 19, 1999
-------------------------
June 19, 1999 May 1, 1999 Pro Forma Pro Forma
SUPERVALU Richfood Adjustments Combined
------------- ----------- ----------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Cash and cash
equivalents............. $ 213,898 $ 4,911 $(206,150)(F) $ 12,659
Receivables, net......... 386,717 117,757 504,474
Inventories.............. 1,066,622 227,539 7,000 (G) 1,301,161
Other current assets..... 111,623 60,846 172,469
---------- ---------- --------- ----------
Total current assets... 1,778,860 411,053 (199,150) 1,990,763
Long-term investment in
direct financing
leases.................. 99,179 99,179
Long-term notes
receivable, net......... 57,643 34,291 91,934
Net property, plant and
equipment............... 1,657,750 248,716 1,906,466
Goodwill................. 503,936 587,479 534,600 (H) 1,626,015
Other assets and deferred
charges................. 238,584 139,566 378,150
---------- ---------- --------- ----------
Total assets........... $4,335,952 $1,421,105 $ 335,450 $6,092,507
========== ========== ========= ==========
Notes payable............ $ 37,537 $ $ 103,126 (F) $ 140,663
Accounts payable......... 1,036,103 206,173 1,242,276
Current maturities of
long-term debt and
capitalized leases...... 185,137 217,907 (210,000)(F) 193,044
Other current
liabilities............. 289,510 125,884 70,000 (G) 485,394
---------- ---------- --------- ----------
Total current
liabilities........... 1,548,287 549,964 (36,874) 2,061,377
Long-term debt and
capitalized leases...... 1,248,264 455,981 344,000 (F) 2,048,245
Deferred taxes........... 30,252 (26,000)(G) 4,252
Other liabilities........ 167,514 26,484 193,998
Common stock............. 150,670 91,691 (91,691)(H) 150,670
Additional paid-in
capital................. 172,500 (I) 172,500
Retained earnings........ 1,721,381 296,985 (296,985)(H) 1,721,381
Treasury stock, at cost.. (530,416) 270,500 (I) (259,916)
---------- ---------- --------- ----------
Total stockholders'
equity................ 1,341,635 388,676 54,324 1,784,635
---------- ---------- --------- ----------
Total liabilities and
stockholders'
equity.............. $4,335,952 $1,421,105 $ 335,450 $6,092,507
========== ========== ========= ==========
</TABLE>
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Balance
Sheet on Page S-10
S-9
<PAGE>
Notes to the Unaudited Pro Forma Condensed
Combined Balance Sheet
(F) SUPERVALU intends to finance the acquisition with a combination of existing
cash, commercial paper issuances (supported by bank credit facilities) and
the proceeds of one or more debt offerings. Approximately $886 million will
be paid to Richfood shareholders, consisting of $443 million of cash and
the issuance of $443 million of SUPERVALU common stock. SUPERVALU intends
to repay approximately $366 million of outstanding Richfood debt,
consisting of a bank term loan and revolving bank loans. SUPERVALU intends
to finance approximately $500 million with the proceeds of one or more debt
offerings. For the purposes of the pro forma combined financial statements,
an annual average interest rate of 7.3% is assumed for the debt securities,
and an annual interest rate of 5.3% is assumed for commercial paper and
borrowings under credit facilities.
(G) To record Richfood's consolidated assets and liabilities based on the
estimated fair values of the assets acquired and the liabilities assumed,
all in accordance with purchase accounting principles.
(H) To record the excess of purchase price over the estimated fair market value
of net assets acquired and the elimination of Richfood equity accounts and
goodwill.
(I) To record the estimated 18 million shares to be issued in the transaction
out of treasury stock at cost with the difference recorded to additional
paid-in capital. The estimated 18 million shares is based on an assumed
SUPERVALU common stock price of $24.00 per share.
S-10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
SUPERVALU--Before the Merger
The following table sets forth selected consolidated financial information
of SUPERVALU. The information set forth below was selected or derived from the
financial statements and notes thereto of SUPERVALU. The unaudited interim
period financial information, in the opinion of SUPERVALU, includes all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation for the periods shown. Results for the first quarter of fiscal
2000 (16 weeks) ended June 19, 1999, are not necessarily indicative of results
to be expected for the full fiscal year. The information set forth below is
qualified in its entirety by and should be read in conjunction with the
detailed information and consolidated financial statements, including the notes
thereto, incorporated by reference in this proxy statement/prospectus. See
"WHERE YOU CAN FIND MORE INFORMATION." The merger will have a material impact
on the financial position and results of operations of SUPERVALU.
<TABLE>
<CAPTION>
First Quarter Fiscal Year Ended
Ended ----------------------------------------------------------------------------
(16 Weeks) (52 Weeks) (53 Weeks) (52 Weeks)
------------------------ ------------ ------------ --------------------------------------------
June 19, June 20, February 27, February 28, February 22, February 24, February 25,
1999 1998 1999 1998 1997 1996 1995
---------- ---------- ------------ ------------ ------------ ------------ ------------
(In thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Earnings
Data
Net sales................ $5,289,720 $5,202,576 $ 17,420,507 $17,201,378 $16,551,902 $16,486,321 $16,563,772
Costs and expenses:
Cost of sales........... 4,746,897 4,683,755 15,620,127 15,430,642 14,885,249 14,906,602 15,040,117
Selling and
administrative
expenses............... 420,424 400,373 1,382,212 1,365,327 1,286,121 1,212,967 1,169,843
Gain on sale............ 163,662(1)
Restructuring and other
charges................ 103,596(2) 244,000
Interest, net........... 30,245 32,145 101,907 113,993 120,695 116,678 111,271
Equity in earnings and
gain on sale of
ShopKo................. 93,364 20,675 17,618 17,384
Earnings before taxes.... 152,220 86,303 316,261 384,780 280,512 267,692 15,925
Net earnings............. 66,721 51,798 191,338 230,757 175,044 166,433 43,334
Balance Sheet Data
Inventories(3).......... 1,194,501 1,259,008 1,195,217 1,247,429 1,221,344 1,158,028 1,230,017
Working capital(3)...... 358,452 265,799 188,000 286,800 361,260 355,124 319,429
Net property, plant and
equipment.............. 1,657,750 1,594,026 1,699,024 1,589,601 1,648,524 1,600,166 1,571,298
Total assets............ 4,335,952 4,091,948 4,265,949 4,093,010 4,283,326 4,183,503 4,305,149
Long-term debt and
capital leases......... 1,248,264 1,190,309 1,246,269 1,260,728 1,420,591 1,445,562 1,459,766
Total stockholders'
equity................. 1,341,635 1,246,872 1,305,639 1,201,905 1,307,423 1,216,176 1,193,222
Per Share Data
Earnings per common
share--diluted......... 0.55 0.42 1.57 1.82 1.30 1.21 0.30
Cash dividends per
common share........... 0.13 1/4 0.13 0.52 3/4 0.51 1/2 0.49 3/4 0.48 1/2 0.46 1/4
Book value (at period
end)................... 11.20 10.31 10.82 9.94 9.73 8.97 8.46
Ratio of Earnings to
Fixed Charges(4)
Including one-time
items.................. 4.71 2.97 3.17 3.49 2.72 2.63 1.03
Excluding one-time
items.................. 3.23 2.97 3.17 2.90 2.72 2.63 2.62
</TABLE>
- --------
(1) Reflects the pre-tax gain on the sale of Hazelwood Farms Bakeries on May
22, 1999.
(2) During the first quarter of fiscal 2000, SUPERVALU recorded a one-time,
pre-tax restructuring charge of $103.6 million, including $14.9 million
for asset impairment costs. The restructuring charge includes costs for
facility consolidation, non-core store disposals and rationalization of
redundant and certain decentralized administrative functions.
(3) Working capital and inventories are calculated after adding back the LIFO
reserve.
(4) Earnings used to calculate the ratio of earnings to fixed charges consist
of earnings from operations before income taxes, adjusted for the portion
of fixed charges deducted from such earnings. Fixed charges consist of
interest on all indebtedness (including capital lease obligations),
amortization of debt expense and the portion of interest expense on
operating leases deemed representative of the interest factor. Ratios are
presented on a consolidated basis.
S-11
<PAGE>
Richfood--Before the Merger
The following table sets forth selected consolidated financial information
of Richfood. Except for the ratio of earnings to fixed charges, the information
set forth below was selected or derived from the financial statements and notes
thereto of Richfood. The information set forth below is qualified in its
entirety by and should be read in conjunction with the detailed information and
consolidated financial statements, including the notes thereto, incorporated by
reference in this proxy statement/prospectus. See "WHERE YOU CAN FIND MORE
INFORMATION."
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------
(52 Weeks) (53 Weeks) (52 Weeks)
---------------------- ---------- ----------------------
May 1, May 2, May 3, April 27, April 29,
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(In thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C>
Statement of Earnings
Data
Net sales............... $3,968,239 $3,203,731 $3,411,625 $3,250,868 $2,992,735
Costs and expenses:
Cost of sales.......... 3,247,017 2,832,505 3,053,299 2,924,561 2,695,020
Selling and
administrative
expenses.............. 558,560 256,660 252,885 236,661 216,099
Restructuring costs.... 24,179
Merger and integration
costs................. 11,993
Interest, net.......... 43,087 2,202 3,494 9,124 14,973
Total costs and
expenses............. 3,848,664 3,115,546 3,309,678 3,182,339 2,926,092
Earnings before taxes
and extraordinary
loss................... 119,575 88,185 101,947 68,529 66,643
Provision for income
taxes.................. 46,532 33,479 40,596 29,314 27,425
Earnings before
extraordinary loss..... 73,043 54,706 61,351 39,215 39,218
Extraordinary loss, net
of tax(1).............. (1,882) (2,164)
Net earnings............ $ 73,043 $ 54,706 $ 59,469 $ 37,051 $ 39,218
Balance Sheet Data
Inventories............ 227,539 194,875 163,510 162,461 147,005
Working capital........ (138,911) 54,337 21,868 40,828 72,780
Net property, plant and
equipment............. 248,716 187,288 121,594 122,659 130,261
Total assets........... 1,421,105 908,851 581,480 564,261 580,770
Long-term debt and
capital leases
excluding current
portion............... 455,981 253,087 32,069 87,031 166,913
Total shareholders'
equity................ 388,676 324,214 258,650 199,562 160,330
Per Share Data
Net earnings per common
share--assuming
dilution.............. 1.53 1.15 1.25 0.78 0.83
Cash dividends per
common share.......... 0.20 0.16 0.12 0.08 0.07
Book value (at period
end).................. 8.15 6.80 5.46 4.25 3.43
Ratio of Earnings to
Fixed Charges(2)....... 2.92 5.68 6.79 4.03 3.37
</TABLE>
- --------
(1) During fiscal 1996, Richfood repurchased, at market prices above par,
$27.475 million of 10 5/8% Senior Subordinated Notes. In April 1997, on the
first permitted redemption date, Richfood redeemed the remaining $47.525
million of such notes at a redemption price above par. The fiscal 1997
redemption and the fiscal 1996 repurchase resulted in extraordinary losses
of $1.882 million and $2.164 million, respectively.
(2) Earnings used to calculate the ratio of earnings to fixed charges consist
of earnings from operations before income taxes, adjusted for the portion
of fixed charges deducted from such earnings. Fixed charges consist of
interest on all indebtedness (including capital lease obligations),
amortization of debt expense and the portion of interest expense on
operating leases deemed representative of the interest factor. Ratios are
presented on a consolidated basis.
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RISK FACTORS
In addition to the other information included in this proxy
statement/prospectus or incorporated herein by reference, you should consider
carefully the matters described below in determining whether to approve the
merger agreement.
Holders of Richfood Common Stock May Not Receive their Requested Form of Merger
Consideration
The merger agreement provides that, in the aggregate, the merger
consideration will be paid 50% in SUPERVALU common stock and 50% in cash,
regardless of the number of shareholders electing stock consideration or cash
consideration, unless such percentages are adjusted as described under "THE
MERGER--Termination of the Merger Agreement." In the event that the aggregate
number of shares of Richfood common stock in respect of which stock elections
or cash elections are received is greater than 50%, the shares as to which
stock elections or cash elections (as the case may be) have been made will be
converted into the right to receive cash consideration and/or stock
consideration in the manner described under "THE MERGER--Allocation Rules."
Accordingly, no assurance can be given that holders of Richfood common stock
will receive their requested form of merger consideration.
SUPERVALU Faces Some Uncertainties in Integrating Richfood's Operations and
Achieving Cost Savings
The success of any merger, including this merger, is in part dependent on
the ability following the merger to consolidate operations, integrate
departments, systems and procedures and thereby obtain business synergies and
related cost savings. SUPERVALU expects to achieve annual synergies totaling
$40 million by the fiscal year ending February 2003, with at least $25 million
accruing in the fiscal year ending February 2001 from purchasing leverage,
volume efficiencies and cost reductions. While the management of SUPERVALU,
with assistance of the management of Richfood, intends to work diligently to
effectively integrate and rationalize the operations of the two companies and
achieve synergies following the merger, there can be no assurance as to the
timing or extent to which cost savings and synergies will be achieved.
The Price of SUPERVALU's Common Stock May Fluctuate
SUPERVALU common stock could experience in the future substantial price
volatility as a result of a number of factors, including the following:
. quarter to quarter variations in SUPERVALU's actual or anticipated
financial results;
. acquisitions or other significant corporate developments;
. other announcements by SUPERVALU, its competitors or its customers;
. government regulations; and
. industry developments.
In addition, the stock market has experienced extreme price and volume
fluctuations, which have affected the market price of many companies and which
at times have been unrelated to the operating performance of the specific
companies whose stock is traded. Broad market fluctuations, as well as economic
conditions, both generally and in SUPERVALU's industries specifically, may
adversely affect the market price of SUPERVALU common stock.
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Richfood Faces Some Risks if the Merger is Not Consummated
If the merger is not consummated, there can be no assurance that Richfood
will be able to sustain or improve upon its recent financial performance.
Factors that may adversely effect Richfood's future financial performance if
the merger is not consummated include:
. the non-renewal of Richfood's supply agreement with Giant Food Stores,
Inc., Richfood's largest wholesale customer, which expires in December
1999;
. increased competition from existing and new participants in the food
retail and distribution industries, particularly in light of the ongoing
consolidation occurring in these industries;
. increased difficulty continuing to grow through strategic acquisitions,
because public market valuations of food wholesalers are relatively
lower than public market valuations of food retailers, which limits
Richfood's ability to use its common stock to continue to effect retail
acquisitions, and because of Richfood's relative debt level following
recent acquisitions, which limits Richfood's ability to incur additional
debt on favorable terms to finance additional wholesale or retail
acquisitions; and
. increased difficulty retaining existing employees and wholesale
customers and attracting new employees and wholesale customers in light
of the uncertainties that may surround Richfood in the event the merger
agreement is terminated.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
This proxy statement/prospectus (including information incorporated by
reference herein) contains forward-looking statements with respect to the
financial condition, results of operations, plans, objectives, future
performance and business of each of SUPERVALU and Richfood, as well as
information relating to the merger, including, without limitation, statements
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "estimates" or similar expressions. These forward-looking
statements involve risks and uncertainties. Actual results may differ
materially from those contemplated by such forward-looking statements due to,
among others, the risks described in "RISK FACTORS," matters described in the
documents incorporated by reference herein and the following factors:
. the nature and extent of the consolidation of the retail food and food
distribution industries and the ability of SUPERVALU and Richfood to
grow through acquisition and assimilate the acquired entities;
. the competitive practices in the retail food and food distribution
industries;
. the ability of SUPERVALU and Richfood to attract and retain customers
for their food distribution operations and to control food distribution
costs; and
. the ability of SUPERVALU and Richfood and their vendors, customers and
others to resolve Year 2000 issues in a timely manner.
See "WHERE YOU CAN FIND MORE INFORMATION."
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THE SPECIAL MEETING
Richfood is furnishing this proxy statement/prospectus to Richfood
shareholders as part of the solicitation of proxies by the Richfood board of
directors for use at a special meeting of Richfood shareholders. Richfood is
mailing this proxy statement/prospectus and the enclosed proxy to Richfood
shareholders on or about July 30, 1999.
Meeting Date
The special meeting will be held at 10:00 a.m. local time on Tuesday, August
31, 1999, at the Crestar Bank Auditorium, 4th Floor, 919 East Main Street,
Richmond, Virginia.
Matters to be Considered at the Special Meeting
The purpose of the special meeting is to consider and vote on a proposal to
approve the Agreement and Plan of Merger, dated as of June 9, 1999, among
SUPERVALU, Winter Acquisition, Inc., a wholly owned subsidiary of SUPERVALU
("Acquisition"), and Richfood. According to the merger agreement, Richfood will
merge with and into Acquisition, becoming a subsidiary of SUPERVALU, and all
outstanding shares of Richfood common stock, excluding any shares held by
Richfood or SUPERVALU (in each case other than shares held on behalf of third
parties) will be converted into cash or shares of SUPERVALU common stock as
described in the merger agreement. Richfood shareholders may also be asked to
consider any other business that properly comes before the special meeting.
Finally, Richfood shareholders may be asked to vote on a proposal to adjourn or
postpone the special meeting, which could be used to allow more time for the
soliciting of additional votes to approve the merger agreement. Each copy of
this proxy statement/prospectus mailed to Richfood shareholders is accompanied
by a proxy for use at the special meeting.
Record Date and Voting Rights and Requirements
Record Date. The Richfood board of directors has fixed July 27, 1999, as the
record date for the determination of Richfood shareholders entitled to receive
notice of, and to vote at, the special meeting. Accordingly, only Richfood
shareholders of record at the close of business on the record date will be
entitled to notice of, and to vote at, the special meeting. At the close of
business on the record date, there were 47,734,240 shares of Richfood common
stock entitled to vote at the special meeting, held by approximately 1,481
holders of record.
Voting Rights. Each share of Richfood common stock outstanding on the record
date entitles its holder to one vote on the proposal to approve the merger
agreement and on any other proposal that properly comes before the special
meeting.
Quorum Requirement. The presence, in person or by proxy, of shares of
Richfood common stock representing a majority of the total voting power of the
shares entitled to vote on the record date is necessary to constitute a quorum
at the special meeting.
Vote Required. Under Virginia law, the affirmative vote of more than two-
thirds of the shares entitled to vote on the record date is required to approve
the merger agreement.
Abstentions and Broker Non-Votes. Richfood will count shares of Richfood
common stock present in person at the special meeting but not voting, and
shares of Richfood common stock for which it has received proxies but where
holders of these shares have abstained, as present at the special meeting for
purposes of determining whether a quorum is present for the transaction of
business. The NYSE rules provide that brokers who hold shares of Richfood
common stock in nominee or "street name" for customers who are the beneficial
owners of the shares are prohibited from giving a proxy to vote shares held for
these customers on the matters to be voted on at the special meeting without
specific instructions from these customers. Shares of Richfood common stock
represented by proxies returned by a broker holding those shares in nominee or
"street name" will be counted for purposes of determining whether a quorum
exists, even if the shares are broker non-votes. Abstentions from voting and
broker non-votes will be counted as votes against the approval of the merger
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agreement. Accordingly, the Richfood board of directors urges each Richfood
shareholder to complete, date and sign the enclosed proxy card and return it
promptly in the enclosed, postage-paid envelope.
Voting by Richfood's Directors and Executive Officers. As of the record
date, 1,513,442 shares of Richfood common stock, or approximately 3.17% of the
shares entitled to vote at the special meeting, were owned by directors and
executive officers of Richfood. It is currently expected that each director and
executive officer of Richfood will vote the shares of Richfood common stock
owned by him or her for approval of the merger agreement. Moreover, at the same
time the merger agreement was signed, each of Richfood's directors and certain
of its executive officers entered into a shareholders agreement under which
they agreed to vote all shares of Richfood common stock held of record and
beneficially owned by them for approval of the merger agreement. A form of this
agreement has been filed as an exhibit to the registration statement of which
this proxy statement/prospectus is a part. See "SHAREHOLDERS AGREEMENTS."
Voting of Proxies
Richfood shareholders may use the proxy that came with this proxy
statement/prospectus if they are unable to attend the special meeting in person
or wish to have their shares voted by proxy even if they do attend the special
meeting. All shares represented by valid proxies received pursuant to this
solicitation and not revoked before they are exercised will be voted in the
manner that the proxies specify. If Richfood shareholders return proxies
without specifying how their proxies are to be voted, their proxies will be
voted for approval of the merger agreement. There are no matters other than
voting on the merger agreement that are scheduled to be brought before the
special meeting. If any other business is properly brought before the special
meeting, including a motion to adjourn or postpone the special meeting to
another time and/or place for the purpose of soliciting additional proxies in
favor of the merger agreement or to permit dissemination of information
regarding material developments relating to the merger or otherwise relevant to
the special meeting, the persons named in the proxy will vote the shares
represented by proxies as determined in their discretion.
If the special meeting is adjourned for any reason prior to the approval of
the merger agreement, then the approval of the merger agreement may be
considered and voted on by shareholders at any subsequently reconvened meeting.
Revocation of Proxies
A Richfood shareholder may revoke his or her proxy at any time before it is
exercised either by submitting to the Executive Vice President, Chief Financial
Officer and Secretary of Richfood, before or at the special meeting, a written
notice of revocation or a properly executed proxy of a later date or by
attending the special meeting and voting in person. However, attendance by a
Richfood shareholder at the special meeting will not in and of itself
constitute a revocation of his or her proxy. Richfood shareholders should
address any written notice of revocation and other communications about the
revocation of Richfood proxies to Richfood Holdings, Inc., 4860 Cox Road, Suite
300, Glen Allen, Virginia 23060, Attention: John C. Belknap, Executive Vice
President, Chief Financial Officer and Secretary.
Solicitation of Proxies
This solicitation of proxies is made on behalf of the Richfood board of
directors. Richfood will pay all of the costs of soliciting the proxies;
however, SUPERVALU and Richfood will share equally the cost of printing and
mailing this proxy statement/prospectus and the cost of filing the registration
statement, of which this proxy statement/prospectus is a part, with the SEC.
Proxies may be solicited by officers, directors and employees of Richfood, none
of whom will receive any additional compensation for their services, but who
may be reimbursed for reasonable out-of-pocket expenses in connection with the
solicitation. In addition, Richfood has engaged Georgeson & Company Inc. to
solicit proxies for a fee of approximately $20,000, including expenses.
Solicitations of proxies may be made personally or by mail, telephone,
facsimile or messenger. Moreover, Richfood may pay persons holding shares of
Richfood common stock in their names or in the names of nominees, but not
owning the shares beneficially, such as brokerage houses, banks and other
fiduciaries, for the expense of forwarding soliciting materials to their
principals.
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THE MERGER
The following description of the merger and the merger agreement does not
purport to be complete and is qualified in its entirety by reference to the
full text of the merger agreement, a copy of which is included in this proxy
statement/prospectus as Annex A and is incorporated herein by reference.
Description of Merger
Form of Merger. SUPERVALU, Richfood and Acquisition have entered into a
merger agreement, which provides that, if all the conditions set forth in the
merger agreement are satisfied or waived, Richfood will merge with and into
Acquisition, a wholly owned subsidiary of SUPERVALU. Acquisition will be the
surviving corporation in the merger.
Consideration to be Received in the Merger. On the date the merger becomes
effective, each issued and outstanding share of Richfood common stock
(excluding shares of Richfood common stock held by SUPERVALU, Richfood and
their respective subsidiaries, other than shares held on behalf of third
parties ("Excluded Shares")), will be converted into, and become exchangeable
for, the merger consideration to be paid by SUPERVALU. The merger consideration
will consist of equal amounts, by value, of cash and SUPERVALU common stock,
provided that, if the price per share of SUPERVALU common stock falls to within
a specified range, SUPERVALU or Richfood may terminate the merger agreement;
however, in such event, if Richfood elects to terminate the merger agreement,
SUPERVALU may increase the proportion of the merger consideration composed of
cash. See "--Termination of the Merger Agreement." Excluded Shares will be
cancelled.
Each holder of Richfood common stock may elect to receive in exchange for
each of his or her shares of Richfood common stock either (1) $18.50 in cash,
or (2) shares of common stock of SUPERVALU having a market value of $18.50. For
purposes of the exchange of Richfood common stock, the number of shares of
SUPERVALU common stock having a market value of $18.50 (the "Conversion Ratio")
will be based on the average trading price of SUPERVALU common stock during the
20 trading-day period ending on the seventh trading day prior to the closing of
the merger. The amount of cash and stock to be received at the election of each
Richfood common stock holder will be subject to pro rata adjustment to the
extent required to ensure that the aggregate consideration is composed of the
proportions of cash and SUPERVALU common stock called for by the merger
agreement. See "--Procedures for Shareholder Elections," "--Shareholder
Elections" and "--Allocation Rules."
Upon the conversion of the shares of Richfood common stock pursuant to the
merger, all Richfood common stock will no longer be outstanding, will be
cancelled and retired and will cease to exist. Each certificate representing
Richfood common stock will thereafter represent only (1) the right to receive,
upon surrender of the certificate, the merger consideration and (2) with
respect to SUPERVALU common stock to be issued in exchange therefor, the right
(a) to receive any dividends or other distributions, without interest, with a
record date at or after the date the merger becomes effective and (b) to vote
at any meeting of SUPERVALU shareholders the number of whole shares of
SUPERVALU common stock represented by the certificate.
Background of the Merger
In recent years, the food distribution and retailing industry has undergone
substantial consolidation. The reasons for this trend have included: (1) a
desire to achieve the economies of scale resulting from improved utilization of
infrastructure and technology and from increased purchasing power; (2) the
capital requirements necessary to develop and maintain a modern retail store
base and an efficient wholesale distribution and logistics network; (3)
increased competition from traditional and alternative channels of
distribution; and (4) the benefits of geographic diversification. Since 1990,
Richfood's business strategy has included taking advantage of opportunities
presented by industry consolidation to effect strategic acquisitions. During
that period, Richfood completed eight acquisitions, which more than tripled its
sales, improved its operating leverage,
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expanded its customer base, enhanced its presence in various regional markets
and resulted in the creation of its retail division.
Beginning in early 1998, as part of its ongoing strategic planning, Richfood
management reviewed with the Richfood board of directors the continuing
industry consolidation trends and possible strategic opportunities available to
Richfood. Over the remainder of 1998 and into early 1999, Richfood management
initiated contacts with a number of potential acquisition targets. In certain
instances, those contacts resulted in substantial negotiations and due
diligence regarding possible acquisitions, but none of those contacts resulted
in an acquisition transaction.
Simultaneously, beginning in July 1998 and continuing into early 1999,
Richfood engaged in negotiations with Giant Food Stores, Inc., Richfood's
largest wholesale customer, regarding an extension of Giant's long-term supply
agreement with Richfood, which was scheduled to expire in December 1999. Giant
notified Richfood in January 1999 that Giant had selected Richfood as its long-
term supplier and that Giant was prepared to enter into a new long-term supply
agreement, subject to completion of definitive documentation. However, Giant
subsequently interrupted the documentation process and, following the
announcement of a significant strategic acquisition by Giant's parent company,
notified Richfood that, notwithstanding earlier indications, the supply
relationship would not be extended.
In January 1999, a company in the retail food business contacted Richfood on
an unsolicited basis regarding the possibility of a business combination. That
company entered into a confidentiality agreement with Richfood and conducted
initial due diligence but, by February 1999, indicated that it had determined
not to pursue further discussions.
In light of the lack of strategic acquisition targets then available to
Richfood, uncertainties regarding renewal of the Giant supply relationship and
the unsolicited acquisition contact, and in order to assist Richfood's board of
directors in evaluating Richfood's available strategic alternatives, Mr. John
E. Stokely, Chairman, President and Chief Executive Officer of Richfood,
determined to contact Mr. Michael W. Wright, Chairman, President and Chief
Executive Officer of SUPERVALU, to ascertain whether SUPERVALU was interested
in evaluating a possible merger with Richfood. Mr. Stokely viewed SUPERVALU as
the most compelling strategic partner for Richfood, in light of SUPERVALU's
position as the largest grocery wholesaler in the United States, its successful
expansion of its retail grocery operations, its financial strength, the absence
of substantial geographic overlap of SUPERVALU's wholesale or retail operations
with those of Richfood, which might otherwise present antitrust impediments to
a merger, and the common business philosophies of the two companies.
During the week of February 22, 1999, Mr. Stokely called Mr. Wright to
propose a meeting. On March 2, 1999, Mr. Stokely and Mr. Wright met in
Washington, D.C., and discussed SUPERVALU's possible interest in an acquisition
of Richfood and the merits of such a transaction. These discussions were
preliminary and no decisions or commitments were made, but it was agreed that
discussions would continue. Mr. Stokely and Mr. Wright maintained regular
contacts thereafter through the execution of the merger agreement.
On March 30, 1999, Richfood and SUPERVALU entered into a confidentiality
agreement and, on March 31, 1999, Richfood delivered initial due diligence
materials to SUPERVALU. Throughout April 1999, Richfood provided SUPERVALU with
additional due diligence materials, including financial projections reflecting
the loss of the Giant supply relationship.
On April 7, 1999, Mr. Wright advised SUPERVALU's board of directors at its
regularly scheduled meeting of SUPERVALU's interest in an acquisition of
Richfood.
On April 28 and 29, 1999, Richfood's board of directors held its regularly-
scheduled annual planning meeting. At that meeting, management reviewed
industry developments over the past year, including continued industry
consolidation and its effects on Richfood's wholesale and retail operations. In
addition, management
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reviewed Richfood's efforts towards effecting strategic acquisitions, the
anticipated effects of the loss of the Giant supply relationship, the
unsolicited inquiry received by management regarding a possible business
combination involving Richfood and Mr. Stokely's contact of Mr. Wright and the
subsequent delivery of due diligence materials to SUPERVALU on a confidential
basis. In addition, management presented certain operational restructuring
alternatives that were expected to result in improved earnings and enhanced
strategic opportunities. After considering and approving those operational
restructuring alternatives, the board instructed management to request that
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") undertake a study
of Richfood's strategic alternatives, and authorized management to continue
confidential discussions with SUPERVALU regarding a possible merger.
On May 7, 1999, Mr. Wright wrote a letter to Mr. Stokely setting forth
SUPERVALU's preliminary, non-binding indication of interest in a possible
merger with a value in the range of $17.00 to $19.00 per share of Richfood
common stock. Mr. Wright also indicated that SUPERVALU would consider offering
Richfood shareholders the opportunity to elect to receive either cash or
SUPERVALU common stock in the transaction (subject to allocation and proration
such that 50% of the total consideration would consist of cash and 50% would
consist of stock), and structuring the merger so that it would be tax-free for
federal income tax purposes to the extent a Richfood shareholder received
shares of SUPERVALU common stock.
On April 30, 1999, another company in the retail food business contacted
Richfood on an unsolicited basis to express interest in a possible business
combination. On May 11, 1999, Mr. Stokely met with a senior executive officer
of the third party to discuss the third party's interest in an acquisition of
Richfood and the potential cost savings and other benefits associated with a
merger. Later that day, Richfood entered into a confidentiality agreement with
that third party and provided the third party with initial due diligence
materials. On May 21, 1999, senior executives of the third party and the third
party's financial advisor contacted DLJ and expressed a preliminary, non-
binding indication of interest in a possible merger with a value in the range
of $18.00 to $20.00 per share of Richfood common stock. On May 25, 1999, Mr.
Stokely, together with other senior executives of Richfood and representatives
of DLJ, met with senior executive officers and the financial advisors of the
third party to evaluate the seriousness of such party's interest and to discuss
operational and regulatory issues that Richfood believed would impair the third
party's ability successfully to complete an acquisition of Richfood. The third
party thereafter did not pursue any substantial due diligence activity. On June
7, 1999, following additional discussions between Mr. Stokely and a senior
executive of the third party regarding operational impediments to a merger, the
third party indicated that it was no longer interested in pursuing a
transaction.
During May 1999, Richfood received two other unsolicited inquiries from
companies in the wholesale and/or retail food industry regarding possible
acquisitions of Richfood. One party executed a confidentiality agreement, but
did not commence due diligence, while the second party did not sign a
confidentiality agreement. In addition, at the request of Richfood's board of
directors, DLJ initiated contacts in late May 1999 with two other national
retail grocery companies, and confirmed that neither of such companies was
interested in a possible acquisition of Richfood.
On May 18, 1999, Mr. Stokely, Mr. John C. Belknap, Executive Vice President,
Chief Financial Officer and Secretary of Richfood, and Mr. Alec C. Covington,
President and Chief Operating Officer of Richfood's wholesale division,
together with representatives of DLJ, met in New York with Mr. Wright and
certain senior executives of SUPERVALU, together with representatives of
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merill Lynch"). The
purpose of the meeting was to permit representatives of SUPERVALU to conduct
due diligence with senior executives of Richfood, and to permit the parties to
discuss matters relative to the value of Richfood, including potential cost
savings and operational benefits associated with a possible transaction.
During the evening of May 18, 1999, Merrill Lynch advised DLJ by telephone
that SUPERVALU was prepared to refine its range of potential value to $18.00 to
$19.00 per share of Richfood common stock, and requested that SUPERVALU and its
advisors be given access to a broader range of due diligence materials
concerning Richfood.
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On May 19, 1999, at a special meeting, Richfood's board of directors was
advised of the status of discussions with SUPERVALU, and received presentations
from management and DLJ regarding the current industry environment and a range
of possible strategic alternatives to increase shareholder value. These
alternatives included the operational reorganization approved by the board at
its previous meeting, the sale or spin-off of either or both of Richfood's
wholesale and retail divisions, and the sale of the entire company. In
addition, management and representatives of DLJ reviewed for the board their
views on potential acquirors of Richfood other than SUPERVALU and the parties
from whom Richfood had received unsolicited inquiries regarding potential
transactions, in each case concluding that other potential acquirors faced
financial, regulatory or strategic impediments that would substantially impair
their ability to consummate a transaction on terms comparable with the range of
value expressed by SUPERVALU. After considering the possible advantages and
disadvantages of each strategic alternative reviewed for the board and the
potential shareholder value that Richfood might achieve under each scenario,
and discussing factors related to other potential purchasers of Richfood, the
board authorized management to continue discussions with SUPERVALU.
Following discussions between Merrill Lynch and DLJ over the course of the
day on May 20, 1999, Merrill Lynch indicated that SUPERVALU had further refined
its potential valuation to $18.50 per share of Richfood common stock.
On May 21, 1999, Mr. Stokely and Mr. Wright met in Chicago and had
additional discussions regarding the companies' operating philosophies and the
potential benefits of the possible transaction to both companies, including
potential cost savings and operational benefits associated with a merger.
During the course of that meeting, and after extensive discussions between Mr.
Stokely and Mr. Wright regarding SUPERVALU's potential valuation for Richfood,
Mr. Wright confirmed his willingness to recommend to SUPERVALU's board of
directors a valuation of $18.50 per share of Richfood common stock, subject to
satisfactory completion of due diligence. Later that day, SUPERVALU supplied a
detailed due diligence request list to Richfood and its legal and financial
advisors.
On May 23, 1999, SUPERVALU and its advisors began detailed due diligence at
the offices of Richfood's legal advisors. That due diligence, together with
visits by SUPERVALU representatives to various Richfood operational locations,
continued through June 4, 1999.
On May 29, 1999, SUPERVALU's legal advisors provided an initial draft of the
merger agreement to Richfood and its legal and financial advisors. Richfood and
its advisors reviewed that draft and provided initial comments to SUPERVALU and
its advisors on June 2, 1999. In addition, on June 2, 1999, at a special
meeting of Richfood's board of directors, management together with Richfood's
financial and legal advisors provided the board with an update of the status of
discussions with SUPERVALU and other potential acquirors, and an initial review
of issues concerning the draft merger agreement.
On June 3, 1999, DLJ, on behalf of Richfood, delivered to Merrill Lynch a
due diligence document request with respect to SUPERVALU. On June 4, 1999,
Richfood entered into a confidentiality agreement with SUPERVALU relating to
the requested information. From June 5 through June 7, 1999, representatives of
Richfood, DLJ and Richfood's legal advisors conducted a due diligence
examination of SUPERVALU, which included a meeting of certain senior executive
officers of Richfood and representatives of DLJ with certain senior executives
of SUPERVALU in Minneapolis.
On June 4, 1999, representatives of SUPERVALU, together with its legal and
financial advisors, met with representatives of Richfood and its legal and
financial advisors in Richmond to negotiate the terms of the merger agreement,
including the scope of representations and warranties, the conditions to
closing, the treatment of outstanding Richfood stock options in the
transaction, events permitting either party to terminate the transaction, the
circumstances under which Richfood would be required to pay a termination fee
to SUPERVALU and the size of such fee.
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On June 7, 1999, representatives of SUPERVALU and its legal advisors had a
series of telephone conversations with Richfood's legal advisors concerning
certain unresolved issues related to the draft merger agreement, including the
circumstances under which Richfood would be permitted to terminate the
agreement, the size of any termination fee, the treatment of outstanding stock
options and Richfood's plans related to executive retention bonuses. Certain of
those issues were resolved on June 7, 1999, while negotiations related to other
issues continued through the execution of the merger agreement on June 9, 1999.
On June 8, 1999, Richfood received a revised draft of the merger agreement,
which was distributed to Richfood's directors.
On June 9, 1999, at 7:00 a.m. (local time), Richfood's board of directors
convened a special meeting to receive an update with respect to the proposed
transaction with SUPERVALU. Mr. Stokely reported on the course of negotiations
since the board's last meeting, the resolution of certain principal business
issues and the status of certain unresolved issues. Richfood's legal advisors
then reviewed for the board their standard of conduct in evaluating any
potential extraordinary transaction under Virginia law. Representatives of DLJ
then delivered a detailed presentation regarding the terms of SUPERVALU's
proposal, an analysis of the valuation of SUPERVALU's proposal and a review of
SUPERVALU's business and its financial performance. At the conclusion of that
presentation, DLJ indicated that, subject to the satisfactory resolution of the
remaining issues related to the merger agreement, DLJ was prepared to deliver
its opinion to the board of directors that the merger consideration was fair,
from a financial point of view, to Richfood's shareholders. Richfood's legal
advisors then reviewed in detail the principal provisions of the draft merger
agreement. After extensive discussion, the board authorized management to
attempt to reach a definitive agreement regarding the proposed transaction, and
adjourned the meeting until later that day.
On June 9, 1999, SUPERVALU convened a special board of directors' meeting
with respect to the proposed transaction with Richfood. Representatives of
Merrill Lynch delivered a presentation on the proposed transaction. Senior
officers of SUPERVALU updated the board of directors on Richfood's wholesale
and retail operations, the financial aspects of the proposed transaction and
the terms and conditions of the proposed merger agreement. After extensive
discussion, the board unanimously approved the proposed transaction.
Over the course of the day on June 9, 1999, representatives of Richfood and
SUPERVALU continued to negotiate with respect to certain terms of the draft
merger agreement and to review and finalize the disclosure schedules associated
with the agreement. Late in the afternoon of June 9, 1999, following resolution
of the remaining principal issues, primarily related to Richfood's right to
terminate the agreement under certain circumstances and the circumstances under
which a termination fee would be payable, Richfood's board of directors
reconvened its meeting. Richfood's management and legal advisors reviewed the
resolution of the remaining principal issues. Representatives of DLJ then
advised the board that DLJ would deliver its written opinion to the board of
directors to the effect that, as of the date of the meeting and subject to the
conditions, limitations, qualifications and other matters contained in its
opinion, DLJ was of the opinion that the consideration to be received in the
merger by holders of Richfood common stock was fair, from a financial point of
view. A draft of DLJ's written opinion was then distributed to the board, and
DLJ's executed opinion was delivered to Richfood's board later that day. The
Richfood board of directors then, by unanimous vote, determined that the merger
was in the best interest of Richfood and its shareholders, and approved the
merger agreement and authorized its execution. Each member of the board,
together with Messrs. Belknap and Covington, then entered into a voting
agreement pursuant to which he agreed to vote his shares of Richfood common
stock in favor of the merger, as described under "SHAREHOLDERS AGREEMENTS."
Thereafter, on June 9, 1999, Richfood, SUPERVALU and Acquisition executed
and delivered the merger agreement and publicly announced the proposed merger.
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<PAGE>
Reasons of Richfood for the Merger
At its meeting on June 9, 1999, Richfood's board of directors voted
unanimously to enter into the merger agreement and to recommend that Richfood
shareholders vote to approve the merger and the merger agreement. Richfood's
board of directors made its determination after careful consideration of, and
based on, a number of factors including the following material factors:
. trends affecting the wholesale and retail food industry, including: (1)
continued rapid consolidation and the effects of that consolidation on
Richfood's wholesale and retail operations, including increased relative
size required to maximize purchasing power, increased competition
affecting Richfood's wholesale customers and the potential acquisition
of those customers by third parties; (2) escalating cost of technology
necessary to compete effectively; (3) increased retail competition from
self-distributing national chains, supercenters and alternative channels
of distribution and (4) low national population growth, low inflation,
increased interest costs and a tightening labor market;
. public market valuations of food wholesalers compared to relatively
higher public market valuations of food retailers, which limited
Richfood's ability to use its common stock to continue to effect retail
acquisitions, and Richfood's relative debt level following recent
acquisitions, which limited Richfood's ability to incur additional debt
on favorable terms to finance additional wholesale or retail
acquisitions;
. a review of the possible alternatives to the transactions contemplated
by the merger agreement, including the possibilities of continuing to
operate Richfood as an independent entity, various potential strategic
acquisitions and a sale or partial sale of Richfood through a merger or
by other means and, in respect of each alternative, the range of
possible benefits to Richfood's shareholders of such alternative and the
timing and likelihood of actually accomplishing such alternative;
. the views of management and DLJ regarding the likelihood of other
potential offers for Richfood on terms more favorable to the Richfood
shareholders than the merger;
. the financial and valuation analyses presented to the board of directors
by DLJ, including market prices and financial data relating to other
companies engaged in businesses considered comparable to Richfood and
the prices and premiums paid in recent selected acquisitions of
companies engaged in businesses considered comparable to those of
Richfood;
. the written opinion of DLJ that, based on certain assumptions and
subject to certain limitations described below under "--Opinion of
Richfood's Financial Advisor," the consideration to be received by the
shareholders of Richfood pursuant to the merger agreement is fair to
such shareholders from a financial point of view;
. the likelihood that the merger would be consummated, including the
experience, reputation and financial condition of SUPERVALU and the
risks to Richfood if the merger were not consummated following its
public announcement;
. the amount and form of the consideration to be received by Richfood
shareholders in the merger and information on the historical trading
ranges of Richfood common stock and SUPERVALU common stock;
. that the merger would provide Richfood shareholders who elect to receive
SUPERVALU common stock the opportunity to participate in the future
growth and profitability of SUPERVALU, the largest food wholesaler and
(following the merger) tenth largest supermarket retailer in the United
States, together with the belief of Richfood's board of directors that
SUPERVALU's growth and profitability would be enhanced as a result of
the merger;
. that the merger consideration of $18.50 per share of Richfood common
stock would provide Richfood shareholders with a premium of
approximately 24.4% over the closing sales price of $14.875 per Richfood
common share on June 8, 1999, the last trading day prior to the
announcement of the merger, and a premium of approximately 42.9% over
the average price at which Richfood common shares had traded in the 20
trading days prior to the announcement of the merger;
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<PAGE>
. that the merger would be a tax-free transaction for federal income tax
purposes to the extent a Richfood shareholder receives shares of
SUPERVALU common stock in the merger, as described under "THE MERGER--
Material Federal Income Tax Consequences;" and
. the financial and other terms and conditions of the merger and the
merger agreement including, without limitation: (1) the limited
conditions to SUPERVALU's obligation to close the merger; (2) the
opportunity for Richfood shareholders to elect to receive for their
Richfood common stock either $18.50 in cash or shares of SUPERVALU
common stock valued at $18.50 per share, subject to allocation and
proration, as noted above; and (3) the fact that the terms of the merger
agreement should not unduly discourage third parties from making bona
fide proposals subsequent to signing the merger agreement and, if any
such proposal were made, that Richfood's board of directors, in the
exercise of its good faith business judgment of the best interests of
Richfood and its shareholders, could authorize Richfood to provide
information to, engage in negotiations with, and, subject to payment of
the termination fee, enter into a transaction with, another party.
In view of the number and wide variety of factors considered in connection
with its evaluation of the merger, and the complexity of these matters,
Richfood's board of directors did not find it practicable to, nor did it
attempt to, quantify, rank or otherwise assign relative weights to the specific
factors it considered. In addition, the Richfood board did not undertake to
make any specific determination as to whether any particular factor was
favorable or unfavorable to the board of directors' ultimate determination or
assign any particular weight to any factor, but rather conducted an overall
analysis of the factors described above, including considering the information,
opinions, reports and statements presented by Richfood's management and its
legal and financial advisors. In considering the foregoing factors, individual
members of the board of directors may have given different weight to different
factors. Richfood's board of directors considered all these factors as a whole,
and overall considered the factors to be favorable to and to support its
determination.
Richfood's board of directors believes that the terms of the merger are fair
to and in the best interests of Richfood and its shareholders and unanimously
recommends to its shareholders that they vote FOR the proposal to approve the
merger agreement.
Reasons of SUPERVALU for the Merger
SUPERVALU's board of directors has determined that the acquisition of
Richfood via the merger has the potential to enable SUPERVALU to realize long-
term improved operating and financial results and a stronger competitive
position in both its retail and distribution business segments. Potential
benefits of the merger include the following:
. the acquisition of Richfood's Shoppers Food Warehouse, Metro and Farm
Fresh retail grocery stores would provide SUPERVALU with leading retail
supermarket outlets in growing market areas where SUPERVALU currently
does not have a retail presence;
. on a pro forma basis, the acquisition would have increased SUPERVALU's
retail food sales for fiscal 1999 by approximately 35%, from
approximately $5 billion to approximately $7 billion; and
. the acquisition of Richfood's food distribution business would enhance
SUPERVALU's industry-leading distribution network and provide a platform
for SUPERVALU to expand its operations in the Mid-Atlantic region of the
United States.
Opinion of Richfood's Financial Advisor
In its role as financial advisor to Richfood, DLJ was asked by Richfood to
render an opinion to the Richfood board of directors as to the fairness to
Richfood shareholders, from a financial point of view, of the merger
consideration pursuant to the terms of the merger agreement. DLJ was not
retained as an advisor or agent to Richfood's shareholders or any other person,
other than as an advisor to the Richfood board of directors. On June 9, 1999,
DLJ delivered an oral opinion, subsequently confirmed in writing as of the same
date (the "June Opinion"), to the effect that as of the date of such opinion,
and based upon and subject to the assumptions, limitations and qualifications
set forth in such opinion, the merger consideration was fair to the
11
<PAGE>
Richfood shareholders from a financial point of view. DLJ subsequently
confirmed its opinion as of July 29, 1999 (the "July Opinion").
The full text of the July Opinion is attached to this document as Annex B.
Richfood shareholders are urged to read such opinion carefully and in its
entirety for assumptions made, procedures followed, other matters considered
and limits of the review undertaken in arriving at such opinion. The
description of DLJ's opinion contained in this document is qualified in its
entirety by reference to the full text of such opinion.
DLJ's opinion was prepared for the Richfood board of directors and is
directed only to the fairness of the merger consideration to Richfood
shareholders, from a financial point of view, and does not address the merits
of the decision by Richfood to engage in the merger or other business
strategies considered by the Richfood board of directors, nor does it address
the board's decision to proceed with the merger. DLJ's opinion does not
constitute a recommendation to any Richfood shareholder as to how such
shareholder should vote at the Richfood shareholders' meeting.
DLJ's opinion does not constitute an opinion as to the price at which the
SUPERVALU common stock or the Richfood common stock will trade at any time. The
merger consideration was determined in arms-length negotiations between
Richfood and SUPERVALU, in which negotiations DLJ advised Richfood. No
restrictions or limitations were imposed by Richfood upon DLJ with respect to
the investigations made or the procedures followed by DLJ in rendering its
opinion.
In arriving at its opinion, DLJ reviewed, among other things, the merger
agreement. DLJ also reviewed financial and other information that was publicly
available or furnished to it by Richfood and SUPERVALU, including information
provided during discussions with their respective managements. Included in the
information provided to DLJ were certain financial projections of Richfood
prepared by Richfood management and certain financial projections of SUPERVALU
prepared by SUPERVALU management. In addition, DLJ reviewed the historical
stock prices and trading volumes of the common stock of Richfood and SUPERVALU,
compared certain financial and securities data of Richfood and SUPERVALU with
various other comparable companies whose securities are traded in public
markets, reviewed prices and premiums paid in certain other business
combinations and conducted such other financial studies, analyses and
investigations as DLJ deemed appropriate for purposes of its opinion.
In rendering its opinion, DLJ relied upon and assumed, without independent
verification, the accuracy, completeness and fairness of all of the financial
and other information that was available to it from public sources, that was
provided to it by Richfood and SUPERVALU or their respective representatives or
that was otherwise reviewed by it. DLJ assumed that the financial projections
supplied to it were reasonably prepared on the basis reflecting the best
currently available estimates and judgments of the respective managements of
Richfood and SUPERVALU as to the future operating and financial performance of
Richfood and SUPERVALU, respectively. DLJ has not assumed any responsibility
for making an independent evaluation of any assets or liabilities or for making
any independent verification of any of the information reviewed by it. DLJ
relied as to certain legal matters on advice of counsel to Richfood.
DLJ's opinion is necessarily based on economic, market, financial and other
conditions as they existed on, and on the information made available to DLJ as
of, the date of its opinion. It should be understood that, although subsequent
developments may affect its opinion, DLJ does not have any obligation to
update, revise or reaffirm its opinion.
The following is a brief summary of the principal financial analyses
performed by DLJ to arrive at its June Opinion. This summary does not purport
to be a complete description of the analyses performed by DLJ. DLJ drew upon no
specific conclusions from any of these analyses, but subjectively factored its
observations from these analyses into its qualitative assessment of the
relevant facts and circumstances.
Common Stock Trading Price History. DLJ reviewed the daily closing prices
of Richfood's common stock from June 4, 1998, to June 4, 1999. DLJ noted that
the daily trading price of Richfood's common stock
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<PAGE>
ranged from a high of $24.81 on February 3, 1999, to a low of $11.88 on April
23, 1999. DLJ also noted that Richfood's common stock price declined 25.8% to
$11.88 on April 23, 1999, following the public announcement of the decision of
Giant Food Stores, Inc., Richfood's largest wholesale customer, not to renew
its supply agreement.
Analysis of Selected Publicly Traded Companies. DLJ compared financial
information for Richfood to corresponding information for three publicly traded
food distribution companies that also operate food retail stores. The selected
companies consisted of SUPERVALU, Fleming Companies, Inc. and Nash Finch
Company. DLJ noted that Richfood generated a higher percentage of its latest
twelve months ("LTM") earnings before interest, taxes, depreciation and
amortization ("EBITDA") from its retail operations than the percentage of the
LTM EBITDA generated by the selected companies' retail operations. DLJ
calculated and compared the market values and certain ratios based upon stock
prices as of June 4, 1999, for the selected companies and the merger
consideration for Richfood. Such ratios included enterprise value divided by
LTM EBITDA and earnings before interest and taxes ("EBIT") and stock prices
divided by estimated calendar 1999 earnings per share and estimated calendar
2000 earnings per share. Enterprise value represents the market value of common
equity plus the book value of debt, less cash and cash equivalents. Enterprise
value for Richfood incorporates the cash proceeds from the sale of Trak Auto
Corporation completed in May 1999. Earnings per share projections for the
selected companies were based upon the First Call Research Network consensus
research analyst estimates and earnings per share projections for Richfood were
provided by Richfood management. With respect to the LTM financial data for
Richfood, DLJ utilized data, which was provided by Richfood management, that
reflected the loss of the Giant supply relationship as if such loss had
occurred at the beginning of the LTM period.
No other company utilized in DLJ's analysis of selected publicly traded
companies is identical to Richfood. Accordingly, such analysis necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of Richfood and other companies
included in such analysis.
The analysis showed:
Summary of Analysis of Selected Publicly Traded Companies
<TABLE>
<CAPTION>
Share Price/
---------------------------------
CY 1999E CY 2000E
Enterprise Value/ EPS EPS
------------------------- ---------------- ----------------
(Selected companies EPS is based
LTM Retail on First Call Research Network
EBITDA LTM LTM and Richfood EPS provided
Contribution EBITDA EBIT by Richfood management)
------------- ----------- ------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
Range of Selected
Companies.............. 15.6% - 34.3% 5.2x - 6.9x 10.8x - 11.8x 14.1x - 14.6x 11.8x - 13.2x
Average of Selected
Companies.............. 25.0% 6.0x 11.2x 14.3x 12.5x
Richfood at Merger
Consideration (based on
pro forma data provided
by Richfood management
to reflect the loss of
the Giant supply
relationship).......... 41.5% 7.7x 10.8x 14.1x 12.3x
</TABLE>
Analysis of Selected Publicly Traded Companies Adjusted for Richfood Retail
Contribution. To account for Richfood generating a higher percentage of its LTM
EBITDA from its retail operations than the percentage of the LTM EBITDA
generated by the selected companies' retail operations, DLJ recalculated the
ratios of enterprise value to LTM EBITDA for the selected companies to reflect
the same LTM EBITDA contribution from their retail operations as Richfood's LTM
retail EBITDA contribution and assuming a value for the selected companies'
retail operations. As part of this analysis, DLJ calculated the implied
wholesale LTM EBITDA multiple for the selected companies based on the ratio of
enterprise value to LTM EBITDA for the
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<PAGE>
selected companies, the LTM retail EBITDA contribution for the selected
companies and the assumed value of the selected companies' retail operations.
To value the retail operations of the selected companies, DLJ calculated the
average ratio of enterprise value to LTM EBITDA for selected publicly traded
regional food retailers based upon June 4, 1999, stock prices. The selected
publicly traded regional food retailers consisted of Food Lion, Inc., Hannaford
Bros. Co., Ruddick Corporation, The Great Atlantic & Pacific Tea Company, Inc.,
Weis Markets, Inc. and Winn-Dixie Stores, Inc. The average total enterprise
value to LTM EBITDA ratio for these selected regional food retailers was 7.6x.
The analysis showed:
Calculation of Implied Wholesale LTM EBITDA Multiple
<TABLE>
<CAPTION>
Regional
Food Implied
Enterprise LTM Retailer LTM Wholesale
Value/ Retail LTM Wholesale LTM
LTM EBITDA EBITDA EBITDA EBITDA
EBITDA Contribution Multiple Contribution Multiple
----------- = ------------- x -------- + ------------- x -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Range of Selected
Companies.............. 5.2x - 6.9x = 15.6% - 34.3% x 7.6x + 84.4% - 65.7% x 4.8x - 6.5x
Average of Selected
Companies.............. 6.0x = 25.0% x 7.6x + 75.0% x 5.5x
</TABLE>
Calculation of Adjusted LTM EBITDA Multiple
<TABLE>
<CAPTION>
Regional
Food Richfood Implied
Richfood Retailer LTM Wholesale Adjusted
LTM LTM Wholesale LTM LTM
Retail EBITDA EBITDA EBITDA EBITDA EBITDA
Contribution x Multiple + Contribution x Multiple = Multiple
------------- --- -------- --- ------------ --- ---------- --- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Range of Selected
Companies.............. 41.5% x 7.6x + 58.5% x 4.8x - 6.5x = 5.9x - 7.0x
Average of Selected
Companies.............. 41.5% x 7.6x + 58.5% x 5.5x = 6.3x
Richfood at Merger
Consideration (based on
pro forma data provided
by Richfood management
to reflect the loss of
the Giant supply
relationship).......... -- -- -- -- 7.7x
</TABLE>
Comparable Transactions Analysis. DLJ reviewed four selected comparable
acquisitions in the food wholesaling industry announced since June 1992 with
enterprise values greater than $200 million. The comparable transactions
included SUPERVALU's acquisition of Wetterau, Inc., Fleming Companies, Inc.'s
acquisition of Scrivner Inc., Richfood's acquisition of Super Rite Corporation
and Nash Finch Company's acquisition of Super Food Services, Inc. For each of
the comparable transactions, DLJ calculated the ratio of enterprise value to
LTM EBITDA prior to the announcement of the merger. With respect to the LTM
financial data for Richfood, DLJ utilized data, which was provided by Richfood
management, that reflected the loss of the Giant supply relationship as if such
loss had occurred at the beginning of the LTM period.
No transaction utilized in the comparable transactions analysis is identical
to the merger. Accordingly, such analysis necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of Richfood and SUPERVALU and other factors that could affect
the acquisition value of the companies to which they are being compared.
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<PAGE>
The analysis showed:
Summary of Comparable Transactions Analysis
<TABLE>
<CAPTION>
Enterprise
Value/
LTM EBITDA
-----------
<S> <C>
Range of Comparable
Transactions.................... 6.5x - 8.9x
Average of Comparable
Transactions.................... 7.3x
Richfood at Merger Consideration
(based on pro forma data
provided by Richfood management
to reflect the loss of the Giant
supply relationship)............ 7.7x
</TABLE>
Premiums Paid Analysis. DLJ analyzed the purchase price premium paid over
the market price prior to announcement in selected merger and acquisition
transactions from January 1, 1995, to June 4, 1999, involving transactions with
enterprise values ranging from $1.0 billion to $2.0 billion. DLJ compared the
average premiums in these transactions one day prior, one week prior and one
month prior to announcement of the respective transaction to the premiums
implied by the merger consideration one day prior, one week prior and one month
prior to Richfood's closing stock price on June 7, 1999.
The analysis showed:
Summary of Premiums Paid Analysis
<TABLE>
<CAPTION>
Premiums to Closing Stock Price
------------------------------------
One Day One Week One Month
Prior Prior Prior
---------- ---------- -----------
<S> <C> <C> <C>
Average of Selected Transactions....... 28.7% 35.1% 38.1%
Merger Consideration................... 39.6% 44.4% 41.0%
</TABLE>
Discounted Cash Flow Analysis. DLJ performed a discounted cash flow analysis
for the five-year period ending with fiscal year 2004 on the unlevered free
cash flows of Richfood using financial projections provided by Richfood
management. Unlevered free cash flows were calculated as: (1) the projected
EBIT adjusted for taxes, plus (2) projected depreciation and amortization, plus
(or minus) (3) projected net changes in working capital and minus (4) projected
capital expenditures. DLJ calculated terminal values by applying a range of
estimated EBITDA multiples of 5.75x to 6.75x to projected fiscal year 2004
EBITDA. The unlevered free cash flows and terminal values were then discounted
to April 30, 1999, using discount rates ranging from 11.0% to 13.0%,
representing an estimated range of the weighted average cost of capital for
Richfood, adjusted for Richfood's relatively small equity capitalization and
other subjective judgments.
The analysis showed:
Summary of Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
Low High
------ ------
<S> <C> <C>
Richfood per Share Equity Value (based on financial
projections provided by Richfood management)........... $15.93 $22.34
</TABLE>
EPS Accretion/Dilution Analysis. DLJ analyzed the impact of the merger on
the projected earnings per share of SUPERVALU for the projected fiscal years
ending February 26, 2000, and February 25, 2001, on a pro forma basis as if the
merger had occurred on February 27, 1999. This analysis is based on assumptions
provided by the respective managements of Richfood and SUPERVALU, including the
projected financial performances of Richfood and SUPERVALU and prevailing
interest rates and excluding potential cost savings. The results of the
analysis indicated that the merger would be accretive to SUPERVALU's earnings
per share for the projected fiscal years ending February 26, 2000, and February
25, 2001.
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<PAGE>
The actual results achieved by the combined company may vary from projected
results and the variations may be material.
The summary set forth above describes the principal elements of the
presentation made by DLJ to the Richfood board on June 9, 1999. The preparation
of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, such an opinion
is not readily susceptible to summary description. Each of the analyses
conducted by DLJ was carried out in order to provide a different perspective on
the transaction and add to the total mix of information available. DLJ did not
form a conclusion as to whether any individual analysis, considered in
isolation, supported or failed to support an opinion as to fairness from a
financial point of view. Rather, in reaching its conclusion, DLJ considered the
results of the analyses in light of each other and ultimately reached its
opinion based upon the results of all analyses taken as a whole. DLJ did not
place particular reliance or weight on any individual analysis, but instead
concluded that its analyses, taken as a whole, supported its determination.
Accordingly, notwithstanding the separate factors summarized above, DLJ
believes that its analyses must be considered as a whole and that selecting
portions of its analysis and the factors considered by it, without considering
all analyses and factors, could create an incomplete or misleading view of the
evaluation process underlying its opinion. In performing its analyses, DLJ made
numerous assumptions with respect to industry performance, business and
economic conditions and other matters. The analyses performed by DLJ are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Pursuant to the terms of an engagement letter dated May 19, 1999, Richfood
agreed to pay DLJ (1) a fee of $1 million at the time Richfood entered into a
definitive agreement with respect to any sale, merger, consolidation or other
business combination involving all or substantially all of the business,
securities or assets of Richfood, (2) a fee of $1 million at the time DLJ
delivered a fairness opinion to the Richfood board irrespective of the
conclusion reached therein and (3) an additional fee of $7.5 million, less the
fees earned pursuant to clauses (1) and (2), which amount will be paid upon
consummation of the merger. Richfood has also agreed to reimburse DLJ promptly
for all out-of-pocket expenses, including the reasonable fees and out-of-pocket
expenses of counsel, incurred by DLJ in connection with its engagement, whether
or not the merger is consummated, and to indemnify DLJ and related persons
against liabilities in connection with its engagement, including liabilities
under the federal securities laws. The terms of the fee arrangement with DLJ,
which DLJ and Richfood believe are customary in transactions of this nature,
were negotiated at arms-length between Richfood and DLJ, and the Richfood board
was aware of such arrangement, including the fact that a significant portion of
the aggregate fee payable to DLJ is contingent upon consummation of the merger.
In the ordinary course of business, DLJ may actively trade the securities of
both Richfood and SUPERVALU for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
DLJ, as part of its investment banking services, is regularly engaged in the
valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
Richfood selected DLJ based on its experience in transactions similar to the
merger and its reputation in the retail and investment communities. DLJ has
performed investment banking and other services for Richfood and certain of its
subsidiaries in the past and has received customary compensation for such
services, including in the past three years (1) acting as a co-manager in a
$105 million follow-on offering of Richfood common stock in April 1996, (2)
advising Richfood in its acquisition of Dart Group Corporation in May 1998 and
(3) advising Dart Group Corporation in its sale of Trak Auto Corporation in May
1999.
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Procedures for Shareholder Elections
SUPERVALU has appointed Norwest Bank as exchange agent in connection with
the merger. At the time the merger becomes effective, SUPERVALU will deposit
with the exchange agent, for the benefit of holders of shares of Richfood
common stock, certificates representing shares of SUPERVALU common stock and
the cash to be issued or paid pursuant to the allocation rules described below.
In accordance with the allocation procedures, record holders of Richfood common
stock as of the record date (other than Excluded Shares) will be entitled to
(1) elect to receive for each share of Richfood common stock either cash
consideration or stock consideration or (2) effect a non-election by indicating
no preference as to the receipt of cash consideration or stock consideration.
Under the merger agreement, shares of Richfood common stock in respect of which
a non-election is made or is deemed to have been made are referred to as "Non-
Election Shares." Subject to the allocation rules described below, Non-Election
Shares of Richfood common stock will, as nearly as possible, be deemed (1)
shares in respect of which stock elections have been made in an amount equal to
50% of the total number of those shares and (2) shares in respect of which cash
elections have been made in an amount equal to 50% of the total number of those
shares.
Shareholder Elections
All shareholder elections will be made on the election form/letter of
transmittal that is being provided along with this proxy statement/prospectus.
Richfood will use its best efforts to make an election form/letter of
transmittal available to all persons who become holders of record of Richfood
common stock between the date of mailing of this proxy statement/prospectus and
the election deadline. To be effective, an election form/letter of transmittal
must be returned, properly completed and accompanied by the stock
certificate(s) as to which the election is being made, to the exchange agent no
later than the election deadline (5:00 p.m., New York City time on the business
day that is two trading days prior to the closing of the merger). A record
holder that fails to submit an effective election form/letter of transmittal
prior to the election deadline will be deemed to have made a non-election. In
the event that any stock certificate has been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
to have been lost, stolen or destroyed and, if required by SUPERVALU, the
posting of a bond in customary amount as indemnity against any claim that may
be made against it with respect to the certificate, the exchange agent will
issue in exchange for the lost, stolen or destroyed certificate the merger
consideration and any cash payable and related unpaid dividends or other
distributions upon due surrender of, and deliverable in respect of, Richfood
common stock represented by the certificate. If the merger is not approved at
the special meeting (unless the special meeting is adjourned to a later date),
stock certificates that have previously been delivered to the exchange agent
will be returned to the shareholders of record.
Elections may be revoked or amended upon written notice to the exchange
agent prior to the election deadline. If a holder revokes the election
form/letter of transmittal and does not properly resubmit the form, the
holder's shares will be deemed Non-Election Shares.
Allocation Rules
The number of shares of Richfood common stock to be converted into the right
to receive cash consideration in the merger, and the number of shares of
Richfood common stock to be converted into the right to receive stock
consideration in the merger, will in each case be equal to 50% of (1) the total
number of shares of Richfood common stock issued and outstanding immediately
prior to the effective time of the merger less (2) the number of Excluded
Shares, unless such percentages are adjusted as described below in "--
Termination of the Merger Agreement." The conversion ratios, allocations and
consideration amounts set forth below under the headings "Allocation of
SUPERVALU Common Stock Available for Election," "Allocation of Cash Available
for Election" and "Illustration of Potential Effects of Allocation Procedures"
are based on the assumption that the percentage of shares of Richfood common
stock to be converted into the right to receive cash consideration and the
percentage of shares of Richfood common stock to be converted into the right to
receive stock consideration will each equal 50%. If such percentages are
adjusted, the conversion ratios, allocations and consideration amounts would be
adjusted accordingly.
17
<PAGE>
Because of the limitations on the number of shares of Richfood common stock
to be converted into the right to receive cash consideration and stock
consideration under the election and allocation procedures described in this
proxy statement/prospectus, no assurance can be given that holders of Richfood
common stock will receive their requested form of merger consideration.
Allocation of SUPERVALU Common Stock Available for Election. The merger
agreement provides that 50% of the aggregate number of shares of Richfood
common stock issued and outstanding immediately prior to the effective time of
the merger (less the number of Excluded Shares) will be converted into stock
consideration (the "Stock Election Number"). If stock elections are received
for a number of shares of Richfood common stock that is 50% or less of the
aggregate number of shares of Richfood common stock issued and outstanding
immediately prior to the effective time of the merger (less the number of
Excluded Shares), each share of Richfood common stock covered by stock
elections will be converted into the right to receive a fraction of a share of
SUPERVALU common stock equal to the Conversion Ratio. In the event that the
aggregate number of shares of Richfood common stock in respect of which stock
elections are received ("Stock Election Shares") is greater than 50% of the
number of shares of Richfood common stock issued and outstanding immediately
prior to the effective time of the merger (less the number of Excluded Shares),
the shares as to which stock elections have been made will be converted into
the right to receive stock consideration and/or cash consideration in the
following manner:
. Non-Election Shares which would otherwise be deemed to be Stock Election
Shares as described above in "--Procedures for Shareholder Elections"
will be deemed converted into shares of Richfood common stock for which
a cash election has been received (the "Cash Election Shares"), on a
pro-rata basis for each record holder of Richfood common stock with
respect to those shares, if any, of the record holder that are Non-
Election Shares, to the minimum extent necessary so that the aggregate
number of Stock Election Shares following the conversion will equal as
closely as practicable the Stock Election Number and the Non-Election
Shares so converted will be converted into the right to receive cash
consideration;
. in the event that the aggregate number of Stock Election Shares still
exceeds the Stock Election Number, Stock Election Shares will be deemed
converted to Cash Election Shares, on a pro-rata basis for each record
holder of Richfood common stock with respect to those shares, if any, of
the record holder that are Stock Election Shares, to the minimum extent
necessary so that the aggregate number of Stock Election Shares
following the conversion (after taking into account the actions
described in the clause immediately above) will equal as closely as
practicable the Stock Election Number and all Stock Election Shares so
converted will be converted into the right to receive cash
consideration; and
. any remaining Stock Election Shares will be converted into the right to
receive stock consideration.
Allocation of Cash Available for Election. The merger agreement provides
that the number of shares of Richfood common stock to be converted into the
right to receive the cash consideration pursuant to the merger ("Cash Election
Number") will equal 50% of the aggregate number of shares of Richfood common
stock issued and outstanding immediately prior to the effective time of the
merger (less the number of Excluded Shares). If cash elections are received for
a number of shares of Richfood common stock that is 50% or less of the
aggregate number of shares of Richfood common stock issued and outstanding
immediately prior to the effective time of the merger (less the number of
Excluded Shares), each share as to which a cash election has been made will be
converted into the right to receive the cash consideration. In the event that
Cash Election Shares exceed 50% of the aggregate number of shares of Richfood
common stock issued and outstanding immediately prior to the effective time of
the merger (less the number of Excluded Shares), the Cash Election Shares will
be converted into the right to receive cash consideration or stock
consideration in the following manner:
. Cash Election Shares (including those Non-Election Shares deemed to be
Cash Election Shares) will be deemed converted to Stock Election Shares,
on a pro-rata basis for each record holder of Richfood
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<PAGE>
common stock with respect to those shares, if any, of the record holder
that are or deemed to be Cash Election Shares, to the minimum extent
necessary so that the aggregate number of Cash Election Shares following
the conversion will equal as closely as practicable the Cash Election
Number and all Cash Election Shares so converted will be converted into
the right to receive stock consideration; and
. any remaining Cash Election Shares will be converted into the right to
receive cash consideration.
Illustration of Potential Effects of Allocation Procedures. The tables
below illustrate the potential effects of the allocation procedures described
above on a holder of 100 shares of Richfood common stock who elects, (1) in
the case of Table 1, to receive stock consideration with respect to all 100
shares and (2) in the case of Table 2, to receive cash consideration with
respect to all 100 shares. Both tables assume a Conversion Ratio of .7708
based on the assumption that the 20-trading-day average price of SUPERVALU
common stock is $24.00. The tables set forth below are for purposes of
illustration only, and are based on the assumptions described in the tables
and elsewhere under "Allocation Rules." The actual amounts of stock
consideration and/or cash consideration to be received by a Richfood
shareholder may differ based on the actual Conversion Ratio and the actual
elections made by all Richfood shareholders in the aggregate.
TABLE 1*
Illustration of Potential Effects of Allocation Procedures
on a Holder of 100 Shares of Richfood Common Stock Who
Makes a Stock Election With Respect to All 100 Shares
<TABLE>
<CAPTION>
Percentage
of all Shares Number of Shares Number of Number of
of Richfood of Richfood Shares of Richfood SUPERVALU Amount
Common Stock Common Stock Common Stock Shares Received of Cash
Making Stock Conversion Allocated to Stock Allocated to Cash as Stock Consideration
Elections(1) Ratio(2) Consideration(3) Consideration(4) Consideration Received(5)
- ------------- ---------- ------------------ ------------------ --------------- -------------
<S> <C> <C> <C> <C> <C>
50% .7708 100 0 77.08 $ 0.00
75% .7708 67 33 51.64 $610.50
85% .7708 59 41 45.48 $758.50
100% .7708 50 50 38.54 $925.00
</TABLE>
- --------
*This table assumes all Non-Election Shares have been converted into Cash
Election Shares in accordance with the allocation procedures described above.
(1) For any percentage below 50%, all of that holder's shares of Richfood
common stock would be converted into stock consideration.
(2) Based on the assumption that the 20-trading-day average price of SUPERVALU
common stock is $24.00.
(3) Calculated by dividing the stock election threshold (50%) by the
percentages in column 1 and multiplying by 100 shares.
(4) Calculated by subtracting the number of shares in column 3 from 100.
(5) Cash payments in respect of fractional shares are not taken into account
in the table.
19
<PAGE>
TABLE 2*
Illustration of Potential Effects of Allocation Procedures
on Holder of 100 Shares of Richfood Common Stock Who Makes
A Cash Election With Respect to All 100 Shares
<TABLE>
<CAPTION>
Percentage of Number of Shares Number of Shares Number of
all Shares of of Richfood of Richfood SUPERVALU
Richfood Common Stock Common Stock Shares Amount of
Common Stock Allocated to Allocated to Received as Cash
Making Cash Conversion Cash Stock Stock Consideration
Elections(1) Ratio(2) Consideration(3) Consideration(4) Consideration Received(5)
- ------------- ---------- ---------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
50% .7708 100 0 0.00 $1,850.00
75% .7708 67 33 25.44 $1,239.50
85% .7708 59 41 31.60 $1,091.50
100% .7708 50 50 38.54 $ 925.00
</TABLE>
- --------
*This table assumes that all Non-Election Shares have been deemed to be divided
equally between Cash Election Shares and Stock Election Shares.
(1) For any percentage below 50%, all of that holder's shares of Richfood
common stock would be converted into cash consideration.
(2) Based on the assumption that the 20-trading-day average price of SUPERVALU
common stock is $24.00.
(3) Calculated by dividing the cash election threshold (50%) by the percentages
in column 1 and multiplying by 100 shares.
(4) Calculated by subtracting the number of shares in column 3 from 100.
(5) Cash payments in respect of fractional shares are not taken into account in
the table.
As of the effective time of the merger, SUPERVALU will deposit, or cause to
be deposited, in trust with the exchange agent, for the benefit of holders of
Richfood common stock, (1) certificates representing the number of shares of
SUPERVALU common stock and the cash to be issued or paid as merger
consideration (including cash in lieu of fractional shares) pursuant to the
merger agreement and (2) any cash, dividends or other distributions with
respect to SUPERVALU common stock to be issued as merger consideration.
Upon surrender of each certificate representing shares of Richfood common
stock, the exchange agent will pay to the holder of that certificate, as soon
as practicable after the effective time of the merger, the merger consideration
(including cash in lieu of fractional shares) and that certificate will then be
cancelled. At the effective time of the merger, certificates representing
shares of Richfood common stock (other than Excluded Shares) will represent
solely the right to receive the merger consideration (including cash in lieu of
fractional shares). No interest will be paid or accrue on the merger
consideration.
After the effective time of the merger, there will be no transfers on the
stock transfer books of Richfood of any shares of Richfood common stock. If,
after the effective time of the merger, certificates formerly representing
shares of Richfood common stock are presented to the exchange agent or
Richfood, as the case may be, they will be cancelled and (subject to applicable
abandoned property, escheat and similar laws) exchanged for merger
consideration (and cash in lieu of fractional shares), as provided above.
No dividends or other distributions declared or made after the effective
time of the merger with respect to shares of SUPERVALU common stock will be
paid to the holder of any unsurrendered certificate with respect to those
shares of SUPERVALU common stock until the holder of the certificate surrenders
the certificate in accordance with the provisions of the merger agreement.
At the effective time of the merger, all shares of Richfood common stock
that are owned by Richfood (other than shares owned on behalf of third parties)
will cease to be outstanding, will be cancelled and retired without payment of
any consideration for those shares and will cease to exist.
20
<PAGE>
The Effective Time
The merger will be effected by the filing, at the time of the closing of the
merger, of a certificate of merger or other appropriate documents with the
Secretary of State of the State of Delaware and the filing of articles of
merger with the State Corporation Commission of Virginia in accordance with the
provisions of the Delaware General Corporation Law and the Virginia Stock
Corporation Act, respectively. The merger will become effective at the time the
State Corporation Commission of Virginia issues a certificate of merger or, if
Acquisition and Richfood have so agreed, at a later date or time specified in
the articles of merger.
The closing of the merger will take place no later than the second business
day following satisfaction or waiver of all of the conditions to consummation
of the merger or on such other date to which SUPERVALU and Richfood may
mutually agree. See "--Conditions to the Merger."
Exchange of Certificates
On the date the merger becomes effective, SUPERVALU will deposit with
Norwest Bank (the exchange agent) certificates representing the shares of its
common stock and the cash to be issued or paid as merger consideration. This
proxy statement/prospectus is accompanied by an election form/letter of
transmittal for each Richfood shareholder to elect to receive cash, SUPERVALU
common stock or a combination of both to the extent permitted by the merger
agreement. See "--Procedures for Shareholder Elections." The election
form/letter of transmittal contains instructions on how to surrender Richfood
common stock certificates to the exchange agent and receive cash, SUPERVALU
common stock, or a combination thereof, as the case may be. See "--Procedures
for Shareholder Elections" and "--Shareholder Elections."
SUPERVALU will not issue any fractions of a share as merger consideration.
Instead, Richfood shareholders will receive in cash the value of any fractions
of a share that they would otherwise have been entitled to receive due to the
merger. A shareholder's cash payment in lieu of a fractional share will be
equal to the product of (1) the average trading price of SUPERVALU common stock
during the 20 trading-day period ending on the seventh trading day prior to the
closing of the merger and (2) the fractional interest to which the shareholder
would otherwise be entitled.
Richfood shareholders will not be entitled to receive any dividends or other
distributions payable by SUPERVALU until they exchange their Richfood stock
certificates for certificates representing shares of SUPERVALU common stock.
Once they deliver their Richfood stock certificates to the exchange agent, the
Richfood shareholders will, subject to applicable laws, receive any accumulated
dividends and distributions, without interest.
Any merger consideration deposited with the exchange agent that has remained
unclaimed by Richfood shareholders for one year after the effectiveness of the
merger will be returned to SUPERVALU. Thereafter, Richfood shareholders that
have not previously complied with the exchange procedures pursuant to the
merger agreement may look only to Acquisition in its capacity as the surviving
corporation in the merger for payment of any merger consideration upon
surrender of their certificates of Richfood common stock.
The exchange agent or SUPERVALU will be entitled to deduct and withhold from
the merger consideration any amounts that the exchange agent, SUPERVALU or
Acquisition, in its capacity as the surviving corporation in the merger, is
required to deduct and withhold under applicable tax laws. Any amounts so
withheld will be treated for all purposes of the merger agreement as having
been paid to the holder of the shares of Richfood common stock in respect of
which the deduction and withholding has been made.
21
<PAGE>
Treatment of Richfood Stock Options and Warrants
On the date the merger becomes effective, each unexpired and unexercised
option granted by Richfood to purchase shares of Richfood common stock will be
assumed by SUPERVALU as follows:
. 50% of the stock options that have a per share exercise price equal to
or less than $18.50 will be automatically converted into the right to
receive in cash the amount by which $18.50 exceeds the per share
exercise price;
. the remaining 50% of the stock options that have a per share exercise
price equal to or less than $18.50 will be automatically converted into
the right to receive options to purchase shares of SUPERVALU common
stock equal in number to the number of Richfood shares that could have
been purchased under the Richfood stock options multiplied by the
Conversion Ratio; and
. each other Richfood stock option will be converted into an option to
purchase shares of SUPERVALU common stock equal in number to the number
of Richfood shares that could have been purchased under the Richfood
stock option, multiplied by the Conversion Ratio.
The exercise price of the options assumed by SUPERVALU pursuant to the merger
agreement will be equal to the exercise price of such options divided by the
Conversion Ratio. SUPERVALU has agreed to file a registration statement under
the Securities Act with respect to the shares of SUPERVALU common stock
underlying the Richfood stock options converted into SUPERVALU common stock
options in connection with the merger.
Upon effectiveness of the merger, all references to Richfood in Richfood
stock option plans, stock options and stock award agreements will be deemed to
refer to SUPERVALU, and SUPERVALU will assume Richfood's stock plans and all of
Richfood's obligations with respect to Richfood stock options. SUPERVALU has
agreed to reserve a number of shares of its common stock equal to the number of
shares of its common stock issuable upon exercise of the Richfood stock options
that SUPERVALU will assume pursuant to the merger agreement. Richfood has
agreed that, from the date of the merger agreement through the time of
effectiveness of the merger, it will not grant any stock options, restricted
stock, stock appreciation rights or limited stock appreciation rights.
Outstanding and unexercised warrants to purchase Richfood common stock
issued pursuant to Richfood's acquisition of Farm Fresh will, upon
effectiveness of the merger, be automatically converted into the right to
receive, upon exercise, the amount of cash or number of shares of SUPERVALU
common stock that the warrant holder would have received pursuant to the merger
if the warrant holder had (1) exercised the warrant just prior to the merger
and (2) been entitled to receive the per share merger consideration to be
received by the plurality of Richfood shareholders that failed to make, or are
deemed not to have made, an election as to the amount of cash consideration and
stock consideration to be received in the merger.
No Solicitation of Transactions by Richfood
Richfood has agreed, prior to the merger becoming effective, to certain
limitations on its ability to take action with respect to any Acquisition
Transaction. Notwithstanding these limitations, Richfood may respond to a
Superior Proposal. Under the merger agreement,
. the term "Acquisition Transaction" means any merger, consolidation or
other business combination involving Richfood or any Richfood subsidiary
or the acquisition of all or any significant part of the assets or
capital stock of Richfood or any Richfood subsidiary; and
. the term "Superior Proposal" means a bona fide, written and unsolicited
proposal or offer made by any person or group (other than SUPERVALU or
any of its subsidiaries) with respect to an Acquisition Transaction on
terms which, as determined by the Richfood board in good faith (based on
the written advice of independent financial advisors) and in a manner
consistent with its fiduciary
22
<PAGE>
duties under applicable law, are more favorable, from a financial point
of view, to Richfood and its shareholders than the transactions
contemplated by the merger agreement.
Prior to the merger becoming effective, Richfood has agreed not to solicit,
initiate, facilitate or encourage any Acquisition Transaction and not to
negotiate, explore or otherwise engage in discussions with any person other
than SUPERVALU with respect to any Acquisition Transaction or which may
reasonably be expected to lead to a proposal for an Acquisition Transaction.
Richfood has also agreed to provide SUPERVALU with detailed information about
any inquiries or proposals, or indications of desire to make a proposal, that
it receives with respect to an Acquisition Transaction.
Richfood may, however, engage in discussions with and furnish information
to a third party in response to an unsolicited written proposal from the third
party regarding a Superior Proposal, but only if the Richfood board determines
in good faith, after consultation with its financial advisors and outside
independent counsel, that doing so is in the best interests of Richfood and
its shareholders and is consistent with the Richfood board's fiduciary duties
under applicable law.
If Richfood receives a specific request from a person without prior contact
from Richfood, Richfood may waive the provisions of any third-party standstill
agreement to the extent required to allow the person to submit a proposal for
an Acquisition Transaction that the Richfood board believes, in its good faith
judgment, is reasonably likely to result in a Superior Proposal if
. the waiver does not otherwise violate or conflict with the merger
agreement's provisions restricting solicitation of Acquisition
Transactions; and
. the waiver would not permit the person requesting the waiver to acquire
ownership of shares of Richfood common stock or to participate in any
tender offer or proxy solicitation relating to shares of Richfood common
stock that would otherwise be prohibited by the standstill agreement to
which the waiver applies.
Richfood's acceptance of a Superior Proposal could result in termination of
the merger agreement. See "--Termination of the Merger Agreement." Richfood
may terminate the merger agreement if it is fully prepared to enter into a
binding written agreement concerning a transaction that constitutes a Superior
Proposal. In such a circumstance, Richfood must notify SUPERVALU in writing
that it intends to enter into the binding written agreement and provide
SUPERVALU with the most current version of the agreement. Under the merger
agreement, Richfood may not enter into such an agreement until at least the
third business day after it has provided the required notice to SUPERVALU, and
Richfood must notify SUPERVALU promptly if its intention to enter into the
written agreement referred to in its notification changes. The merger
agreement will not be terminated in connection with a Superior Proposal if,
within two business days of receiving the initial notice from Richfood in
connection with the Superior Proposal, SUPERVALU makes an offer to amend the
merger agreement and Richfood's board determines, in good faith after
consultation with its financial advisors, that the merger agreement as amended
would be at least as favorable to Richfood shareholders as the Superior
Proposal, from a financial point of view.
Representations and Warranties
The merger agreement contains representations and warranties made by each
of the parties to the agreement. None of these representations and warranties
will survive beyond the time the merger becomes effective.
The merger agreement contains customary representations and warranties of
Richfood and each of SUPERVALU and Acquisition as to, among other things:
. due organization and good standing;
. capitalization;
23
<PAGE>
. corporate authorization of the merger agreement and related shareholders
agreements and authorization to enter into the transactions contemplated
thereby;
. the binding effect of the merger agreement and related shareholders
agreements;
. governmental approvals required in connection with the transactions
contemplated by the merger agreement;
. conflicts, violations and defaults under its charter and bylaws; any
other agreements or instruments; or any judgments, orders or laws as a
result of the transactions contemplated by the merger agreement;
. filings with the Securities and Exchange Commission;
. undisclosed liabilities;
. compliance with laws;
. pending litigation, actions and proceedings;
. material adverse changes or effects since the end of its most recent
fiscal year (other than changes or effects resulting from the merger
agreement and shareholders agreements, the transactions contemplated
thereby or the announcement thereof), except as disclosed in prior
filings with the Securities and Exchange Commission;
. brokers fees, commissions or similar fees in connection with the
transactions contemplated by the merger agreement; and
. the information included in this joint proxy statement/prospectus and
the related registration statement filed by SUPERVALU.
In addition, the merger agreement contains representations and warranties by
Richfood as to, among other things:
. the required vote of Richfood's shareholders to approve the merger;
. ownership and condition of tangible assets;
. rights to intangible assets;
. environmental matters;
. labor matters;
. tax matters and compliance with relevant tax laws;
. the status of permits;
. employee benefit plans;
. the existence of any agreements or benefit plans, to which Richfood is a
party, under which any benefits will be increased or the vesting of the
benefits accelerated by the occurrence of, or under which the value of
the benefits will be calculated on the basis of, any of the transactions
contemplated by the merger agreement;
. material contracts under which the transactions contemplated by the
merger agreement will constitute a "change of control," require the
consent from or the giving of notice to any third party or cause the
acceleration or vesting of repurchase rights;
. receipt of a fairness opinion from its financial advisor; and
. the applicability of state anti-takeover statutes or of anti-takeover
provisions in Richfood's organizational documents to Richfood, its
common stock and the transactions contemplated by the merger agreement.
24
<PAGE>
In addition, SUPERVALU represents and warrants in the merger agreement that
it is authorized to issue the number of shares of its common stock required to
be issued in connection with the merger and its assumption of Richfood's
options and warrants and that those shares, when issued, will be validly
issued, fully paid, nonassessable and not subject to preemptive rights.
The representations and warranties in the merger agreement are complicated
and not easily summarized. You are urged to read carefully the articles of the
merger agreement entitled "Representations and Warranties of the Company" and
"Representations and Warranties of Parent and Acquisition."
Covenants Under the Merger Agreement
Conduct of Richfood's Business
Richfood has agreed that until the merger agreement is terminated or the
merger becomes effective, or unless SUPERVALU consents in writing, that it
will, and will cause each of its subsidiaries to, conduct its operations
according to its ordinary and usual course of business consistent with past
practice and use best efforts to preserve intact its current business
organizations, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers, and others
having business dealings with it. Except as otherwise permitted or disclosed
under the merger agreement, Richfood and its subsidiaries will conduct their
business in compliance with restrictions relating to the following:
. issuance, disposition or encumbrance of capital stock, securities
convertible into shares of capital stock, or rights to acquire capital
stock;
. amendment of articles of incorporation or bylaws;
. alteration of the corporate structure or ownership of any Richfood
subsidiary:
. issuance of dividends (except for regular quarterly dividends not in
excess of $0.05 per share of Richfood common stock) or other
distributions or payments to shareholders;
. payments or distributions (other than normal salaries) to any affiliate
of Richfood;
. entrance into or modification of contracts;
. employment, severance and consulting agreements;
. compensation of officers, employees and directors;
. pension and welfare plans, collective bargaining agreements, and other
plans, arrangements and policies for the benefit of any director,
officer or employee;
. material acquisitions or dispositions of assets or securities;
. capital expenditures;
. settlement of litigation or material claims;
. accounting policies and procedures;
. incurrence of indebtedness;
. guarantees, acquisitions of securities, loans and capital contributions,
and other investments in property or assets;
. insurance;
. preservation of the business organization, retention of the services of
employees, and conduct in the best interests of Richfood of business
with suppliers, customers, creditors and others having business
relationships with Richfood; and
. actions, or failures to act, that would result in a breach of any
representation made by Richfood in the merger agreement.
25
<PAGE>
The covenants in the merger agreement relating to the conduct of Richfood's
business are complicated and not easily summarized. You are urged to read
carefully the section of the merger agreement entitled "Conduct of Business by
the Company."
Other Covenants
The merger agreement contains a number of mutual covenants of Richfood and
SUPERVALU, including covenants relating to
. accuracy of information to be supplied for inclusion in (1) the
registration statement to be filed by SUPERVALU with the SEC in
connection with the issuance of shares of its common stock in the merger
and (2) this proxy statement/prospectus;
. cooperation in obtaining governmental approval relating to antitrust
matters;
. cooperation in the preparation and filing of the registration statement
and proxy statement/prospectus relating to the merger;
. furnishing each other with information needed for all governmental
filings; and
. keeping each other apprised of the status of matters relating to the
completion of the transactions contemplated by the merger agreement,
including by promptly furnishing the other with copies of any notice or
other communication received from any third party relating to the
merger.
In addition, the merger agreement contains covenants requiring each of the
parties to
. use all reasonable efforts to do, or cause to be done, all things
required to consummate and make effective the transactions contemplated
by the merger agreement, including obtaining the consent of government
agencies and other third parties; defending any lawsuits or other legal
proceedings challenging the merger agreement or the transactions
contemplated thereby; and executing and delivering any additional
instruments;
. if any antitakeover statute or regulation is or may become applicable to
the merger or other transactions contemplated by the merger agreement,
take the actions necessary to minimize the effects of the statute or
regulation on the merger and other transactions; and
. use all reasonable efforts to cause the merger to constitute a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code for tax purposes.
The merger agreement also contains covenants of Richfood relating to
obtaining shareholder approval of the merger agreement and delivering to
SUPERVALU a list of affiliates and an affiliate's letter from each affiliate of
Richfood identified on the list of affiliates.
In addition, SUPERVALU is required to use its best efforts to cause the
shares of its common stock that are to be issued in the merger to be approved
for listing on the NYSE, subject to official notice of issuance, prior to the
date on which the merger closes.
Conditions to the Merger
The parties' respective obligations to complete the merger are subject to
the satisfaction or waiver of each of the following conditions:
. requisite approval and authorization by Richfood shareholders of the
merger, the merger agreement and the transactions contemplated thereby;
26
<PAGE>
. effectiveness of the registration statement filed by SUPERVALU in
connection with the issuance of its common stock in the merger, no stop
order having been issued by the SEC and no proceeding for that purpose
having been initiated by the SEC and not concluded or withdrawn;
. the shares of SUPERVALU common stock to be issued in the merger having
been approved for listing on the NYSE, subject to official notice of
issuance;
. no statute, rule or regulation having been enacted or promulgated which
prohibits, restricts or makes illegal the consummation of the merger;
and
. no court order or injunction in effect precluding or restricting
consummation of the merger.
The obligations of SUPERVALU and Acquisition to consummate the merger are
further subject to the following conditions:
. (1) Richfood's representations and warranties that are qualified by
materiality must be true and correct at the time the merger is to become
effective, and Richfood's representations and warranties not so
qualified must be true and correct in all material respects at the time
the merger is to become effective, as if made at and as of that time and
(2) Richfood must have performed in all material respects all of its
obligations under the merger agreement required to be performed before
the time of effectiveness of the merger, and SUPERVALU must have
received a certificate of the chief executive officer and chief
financial officer of Richfood to that effect;
. during the period from the date of the merger agreement to the date of
the closing of the merger, there must not have occurred and be
continuing on the date of closing and at the time of effectiveness of
the merger any material adverse effect on the business, financial
condition, results of operations, assets or liabilities of Richfood and
its subsidiaries, taken as a whole, excluding any changes and effects
resulting from general changes in economic, market, regulatory or
political conditions or changes in conditions generally applicable to
the industries in which Richfood is involved; and
. SUPERVALU must have received an opinion from Skadden, Arps, Slate,
Meagher & Flom (Illinois) in form and substance reasonably satisfactory
to SUPERVALU to the effect that the merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code.
The obligation of Richfood to consummate the merger is subject to the
satisfaction of the following express conditions precedent:
. (1) the representations and warranties made by SUPERVALU and Acquisition
that are qualified by materiality must be true and correct at the time
the merger is to become effective, and their representations and
warranties not so qualified must be true and correct in all material
respects at the time the merger is to become effective, as if made at
and as of that time and (2) SUPERVALU and Acquisition must have
performed in all material respects all of their obligations under the
merger agreement required to be performed before the time of
effectiveness of the merger, and Richfood must have received a
certificate of the chief executive officer and chief financial officer
of SUPERVALU to that effect; and
. Richfood must have received an opinion from Hunton & Williams in form
and substance reasonably satisfactory to Richfood to the effect that the
merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code.
Indemnification and Insurance of Directors and Officers
The merger agreement provides that SUPERVALU will cause Acquisition, as the
surviving corporation in the merger, to provide for indemnification of the
officers, directors, employees and agents of Richfood and its subsidiaries and
to purchase a three-year extended reporting period endorsement under Richfood's
existing
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directors' and officers' liability insurance policy on terms that are no less
advantageous to the intended beneficiaries than the existing directors' and
officers' liability insurance coverage. See "--Interests of Richfood's
Directors and Officers in the Merger--Indemnification; Insurance."
Termination of the Merger Agreement
The merger agreement may be terminated, and the transactions contemplated by
the merger agreement abandoned, at any time prior to the closing of the merger,
whether before or after approval of the merger agreement by Richfood
shareholders:
. by mutual written agreement of SUPERVALU and Richfood;
. by either SUPERVALU or Richfood, if the merger has not become effective
on or before January 15, 2000, except that the right to terminate the
merger agreement for that reason is not available to any party whose
failure to fulfill any obligation under the merger agreement has been
the cause of, or resulted in, the failure of the merger to become
effective on or before January 15, 2000;
. by either SUPERVALU or Richfood, if there is any final, non-appealable
governmental order or other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by the merger
agreement;
. by either SUPERVALU or Richfood, if the merger agreement fails to
receive the requisite vote by Richfood shareholders at the Richfood
shareholders' meeting to be convened for the purpose of consideration of
and voting upon approval of the merger agreement;
. by Richfood, if Richfood is fully prepared to enter into a binding
written agreement concerning a transaction that constitutes a Superior
Proposal, provided that
-- Richfood complies with requirements to notify SUPERVALU of its
intent to enter into the agreement;
-- SUPERVALU does not make, within two business days of receiving
notice from Richfood, an offer to amend the merger agreement that
Richfood's board determines, in good faith after consultation with
its financial advisors, would make the merger agreement as amended
at least as favorable to Richfood shareholders as the Superior
Proposal, from a financial point of view;
-- Richfood pays any termination fees required under the merger
agreement; and
-- Richfood in fact enters into the transaction with the third party
substantially simultaneously with the termination;
. by Richfood, if SUPERVALU or Acquisition has materially breached any of
their respective representations, warranties, covenants or other
agreements contained in the merger agreement, which breach cannot be or
has not been cured in all material respects within 30 days after the
giving of written notice to SUPERVALU or Acquisition;
. by Richfood, if the average trading price of SUPERVALU common stock
during the 20 trading-day period ending on the seventh trading day prior
to the closing of the merger is less than $18.50 and Richfood provides
written notice of termination to SUPERVALU prior to the close of
business on the second trading day following the end of the 20 trading-
day period, unless (1) the average trading price over the 20 trading-day
period is equal to or greater than $15.00 and (2) on or before the close
of business on the third trading day following its receipt of Richfood's
written notice of termination, SUPERVALU agrees to increase the portion
of the merger consideration consisting of cash such that the aggregate
merger consideration consists of an aggregate number of shares of
SUPERVALU common stock equal to 50% of the shares of Richfood common
stock eligible to be exchanged for merger consideration and the
remainder in cash (provided, however, if the amount of aggregate cash
consideration thus determined plus the cash to be paid to Richfood
option holders pursuant to the
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merger agreement would exceed the maximum amount permitted without
preventing the merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, then SUPERVALU
may agree to provide all merger consideration corresponding to such
excess amount in the form of shares of its common stock, with the number
of shares representing the excess amount determined by using the average
price per share of SUPERVALU common stock during the 20 trading-day
period);
. by SUPERVALU if, prior to consummation of the merger, Richfood has
breached any of its representations, warranties, covenants or other
agreements contained in the merger agreement, which breach cannot be or
has not been cured in all material respects within 30 days after the
giving of written notice to Richfood;
. by SUPERVALU if, at any time prior to the time at which the merger is to
become effective, the Richfood board has withdrawn or adversely modified
its approval or recommendation of the merger agreement or failed to
reconfirm its recommendation of the merger agreement within five
business days after a written request by SUPERVALU to do so; or
. by SUPERVALU if the average price per share of SUPERVALU common stock
during the 20 trading-day period ending on the seventh trading day prior
to the closing of the merger is less than $18.50 and SUPERVALU provides
written notice of termination to Richfood prior to the close of business
on the second trading day following the end of the 20 trading-day
period.
In the event of termination of the merger agreement as described above, no
provision thereof will survive other than provisions relating to the
obligation of SUPERVALU and Acquisition to keep confidential and not to use
certain information obtained from Richfood and Richfood's obligation to pay a
termination fee to SUPERVALU in certain circumstances described below.
Termination Fees and Expenses
Pursuant to the merger agreement, Richfood must immediately make
termination payments to SUPERVALU consisting of $27 million and all reasonably
documented out-of-pocket expenses, not to exceed $3 million, reasonably
incurred by SUPERVALU and Acquisition in connection with the merger agreement
and the merger, if the merger agreement is terminated:
. because of the failure of Richfood shareholders to approve the merger
agreement;
. by Richfood in connection with Richfood's acceptance of a Superior
Proposal;
. by SUPERVALU in connection with Richfood's uncured breach of a
representation, warranty, covenant or other agreement contained in the
merger agreement, if the breach thereof is due to Richfood's intentional
or bad faith acts; or
. by SUPERVALU in connection with the Richfood board's withdrawal or
adverse modification of its approval or recommendation of the merger
agreement or failure to reconfirm its recommendation of the merger
agreement within five business days after a written request by SUPERVALU
to do so.
Upon receipt of the termination payments, SUPERVALU will not be entitled to
and will waive the right to seek damages or other amounts or remedies from
Richfood for breach of, or otherwise in connection with, the merger agreement.
If, however, the merger agreement is terminated by Richfood, on the one hand,
or SUPERVALU or Acquisition, on the other hand, and the non-terminating party
is not entitled to receive the termination payments, then the non-terminating
party will be entitled to pursue any available legal rights to recover actual
damages, including, without limitation, its reasonable costs and expenses
incurred in pursuing such recovery (including, without limitation, reasonable
attorneys' fees).
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The merger agreement provides that, except in connection with the
termination fees described above, if the merger agreement is not consummated,
SUPERVALU and Acquisition, on the one hand, and Richfood, on the other hand,
will bear their respective legal fees and expenses.
Material Federal Income Tax Consequences
The following summarizes the material federal income tax consequences of the
merger to Richfood shareholders. This summary is based on current law, which is
subject to change at any time, possibly with retroactive effect. This summary
is not a complete description of all tax consequences of the merger and, in
particular, may not address federal income tax consequences applicable to you
if you are subject to special treatment under federal income tax law, such as
rules relating to Richfood shareholders who are not citizens or residents of
the United States, who are financial institutions, tax-exempt organizations,
insurance companies or dealers in securities, shareholders who acquired their
shares of Richfood common stock pursuant to the exercise of options or similar
derivative securities or otherwise as compensation, and shareholders who hold
their shares of Richfood common stock as part of a straddle or conversion
transaction. In addition, this summary does not address the tax consequences of
the merger under applicable state, local or foreign laws. This discussion
assumes you hold your shares of Richfood common stock as a capital asset within
the meaning of Section 1221 of the Internal Revenue Code. Each Richfood
shareholder should consult with his or her tax advisor about the tax
consequences of the merger in light of his or her individual circumstances,
including the application of any federal, state, local or foreign law.
The merger is intended to be a "reorganization" under Section 368(a) of the
Internal Revenue Code. A condition to completing the merger is that, on the
closing date, Richfood receive the opinion of Hunton & Williams, counsel to
Richfood, and SUPERVALU receive the opinion of Skadden, Arps, Slate, Meagher &
Flom (Illinois), special counsel to SUPERVALU, that the merger will qualify as
such a reorganization. The closing date opinions will be based on customary
assumptions and customary representations made by Richfood and SUPERVALU. An
opinion of counsel represents counsel's best legal judgment and is not binding
on the Internal Revenue Service or any court. If the merger does not qualify as
a reorganization, the disposition of Richfood common stock in the merger will
be a taxable transaction.
Neither Richfood nor SUPERVALU intends to waive the condition that it
receive an opinion that the merger will qualify as a reorganization. If,
however, Richfood decides to waive the condition, Richfood will recirculate
this document to disclose the waiver and to make all related material
disclosures, and will resolicit proxies from the Richfood shareholders.
Provided the merger qualifies as a reorganization, neither Richfood nor
SUPERVALU will recognize any gain or loss for federal income tax purposes. The
federal income tax consequences to you as a Richfood shareholder will depend on
whether you receive shares of SUPERVALU common stock, cash, or a combination of
SUPERVALU common stock and cash for your Richfood common stock. The
consequences of each of these three possibilities are summarized separately
below. Because the merger agreement may require you to receive some cash even
if you elect to receive only SUPERVALU common stock, or to receive some
SUPERVALU common stock even if you elect to receive only cash, you should
consider the tax consequences under the heading "Receipt of SUPERVALU Common
Stock and Cash" even if you intend to elect to receive only SUPERVALU common
stock or only cash.
Receipt of SUPERVALU Common Stock Only. This section applies to you if you
receive only shares of SUPERVALU common stock, or only shares of SUPERVALU
common stock plus cash instead of a fractional share, in exchange for all your
Richfood common stock. If this section applies to you:
. You will not recognize any gain or loss on the exchange of your Richfood
common stock for SUPERVALU common stock, except for the receipt of cash
instead of a fractional share.
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. Your aggregate tax basis for the shares of SUPERVALU common stock,
including any fractional share interest, received for your Richfood
common stock will be the same as your aggregate tax basis for the
Richfood common stock.
. Your holding period for shares of SUPERVALU common stock, including any
fractional share interest, received for your Richfood common stock will
include your holding period for the Richfood common stock exchanged for
the SUPERVALU common stock.
. If you receive cash instead of a fractional share of SUPERVALU common
stock, you will recognize gain or loss equal to the difference between
the amount of the cash received and your tax basis allocable to the
fractional share. This gain or loss generally will be capital gain or
loss.
Receipt of Cash Only. This section applies to you if you exchange all your
Richfood common stock solely for cash in the merger. If this section applies to
you:
. The exchange of your Richfood common stock for cash will be a taxable
transaction.
. The exchange of your Richfood common stock for cash generally will be
treated as a sale of the stock except as provided below. Accordingly,
you should recognize gain or loss equal to the difference between the
amount of cash received and your tax basis in your Richfood common
stock. The gain or loss generally will be capital gain or loss.
. If you or a person related to you for purposes of Section 302 of the
Internal Revenue Code will own shares or rights to acquire shares of
SUPERVALU common stock after the merger, the entire amount of cash
received for your Richfood common stock might be taxable as a dividend
in certain circumstances. This potential treatment of the cash as a
dividend should not apply if (1) the SUPERVALU common stock you and
related persons directly or indirectly own after the merger, as a
percentage of all SUPERVALU common stock, is less than (2) the
percentage of all SUPERVALU common stock you and related persons would
directly or indirectly own after the merger if all outstanding Richfood
common stock were exchanged solely for shares of SUPERVALU common stock.
You should consult your tax advisor to determine whether your exchange of
Richfood stock for cash will be treated as a sale of stock, as typically will
be the case, or potentially as a dividend.
Receipt of SUPERVALU Common Stock and Cash. This section applies to you if
you exchange your Richfood common stock for shares of SUPERVALU common stock
and cash, excluding cash received instead of a fractional share. This section
applies whether you elect to receive both SUPERVALU common stock and cash or
whether, even though you elect to receive solely SUPERVALU common stock or
solely cash, you receive both stock and cash because of the proration
provisions of the merger agreement. If this section applies to you:
. You will recognize any gain you realize up to the amount of cash
received, excluding cash paid instead of a fractional share, but will
not recognize any loss on the exchange of your Richfood common stock for
SUPERVALU common stock and cash. The amount of gain or loss you realize
will be the difference between your tax basis for your Richfood common
stock and the sum of the fair market value, on the date of the merger,
of the SUPERVALU common stock you receive and the cash you receive.
. The amount of gain recognized generally will be a capital gain. Under
certain circumstances, however, the amount of gain you recognize could
be taxable as a dividend to the extent of the portion of Richfood's
accumulated earnings, as computed for federal income tax purposes,
allocable to your stock at the time of the merger. This potential
treatment of your recognized gain as a dividend depends on the amount of
SUPERVALU common stock that you, as well as persons related to you
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for purposes of Section 302 of the Internal Revenue Code, directly or
indirectly own after the merger. None of your gain should be treated as
a dividend if (1) the SUPERVALU common stock you and related persons
directly or indirectly own after the merger, as a percentage of all
SUPERVALU common stock, is less than (2) the percentage of all SUPERVALU
common stock that you and related persons would directly or indirectly
own after the merger if all the outstanding Richfood common stock were
exchanged solely for shares of SUPERVALU common stock. Accordingly, the
smaller the number of shares of Richfood common stock that you exchange
for cash, as a percentage of all your Richfood common stock, the greater
the possibility that your taxable gain will be treated as a dividend.
. Your aggregate tax basis for the shares of SUPERVALU common stock,
including any fractional share interest, received for your Richfood
common stock will be the same as your aggregate tax basis for the
Richfood common stock, plus the amount of gain you recognize, minus the
amount of cash you receive, excluding cash paid instead of a fractional
share.
. Your holding period for shares of SUPERVALU common stock, including any
fractional share interest, received for your Richfood common stock will
include your holding period for the Richfood common stock exchanged for
the SUPERVALU common stock.
. If you exchange two or more "blocks" of Richfood common stock for which
you paid different prices per share or otherwise have different tax
bases, the amounts of gain realized and recognized should be computed
separately for each block. As a result, you may not reduce the amount of
gain to be recognized for one block of Richfood common stock by a loss
you realize on another block.
. If you receive cash instead of a fractional share, you will recognize
gain or loss equal to the difference between the amount of cash received
and your tax basis allocable to the fractional share. This gain or loss
generally will be capital gain or loss.
You should consult your tax advisor to determine whether the gain you
recognize on the exchange of your Richfood common stock for SUPERVALU common
stock and cash is to be treated as capital gain or as a dividend.
Interests of Richfood's Directors and Officers in the Merger
In considering the recommendation of Richfood's board of directors with
respect to the merger proposal, Richfood shareholders should be aware that
some Richfood executive officers, including one executive officer who is also
a director, have interests in the merger that are in addition to their
interests as Richfood shareholders generally. Richfood's board of directors
was aware of these interests and considered them, among other matters, in
approving the merger.
Employment and Severance Benefits Agreements Between Richfood and Certain
Employees
John E. Stokely. Richfood entered into an employment and severance benefits
agreement with Mr. Stokely, effective April 28, 1996, which extended his
employment with Richfood in the capacity of President and Chief Executive
Officer through April 28, 2001. The agreement, as subsequently amended,
provides for the payment of a lump-sum severance benefit of $500,000 in the
event Mr. Stokely is terminated during the term of the agreement (1) by
Richfood other than for cause or upon his death or disability, (2) by Richfood
for any reason other than death or disability within one year following a
"change in control" of Richfood (as defined below) or (3) by Mr. Stokely
within one year following a "change in control" of Richfood. The agreement
also provides that upon any "change in control" of Richfood, Mr. Stokely shall
be entitled to receive a lump-sum payment in an amount equal to the actuarial
equivalent of the benefit he otherwise would be entitled to receive under
Richfood's Supplemental Executive Retirement Plan (the "SERP") upon retirement
on or after December 1, 2007. The amount of this SERP payment is estimated to
be $2,965,161. In addition to the benefits described above, Mr. Stokely will
be entitled to the following benefits
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upon consummation of the merger: (1) all 26,250 shares of his unvested
restricted Richfood common stock (with an estimated market value of $485,625)
will vest and become fully transferable (subject to the restrictions on the
transfer of shares of SUPERVALU common stock by affiliates as described under
"FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTION AGREEMENTS");
and (2) 30,000 of his 183,125 unvested options to purchase shares of Richfood
common stock will vest. Mr. Stokely's employment and severance benefits
agreement also provides that if his employment with Richfood is terminated
after the completion of the second fiscal quarter of any fiscal year (October
16, 1999, in the case of fiscal year 2000) and, among various circumstances,
such termination occurs within one year of a "change in control" of Richfood,
then Mr. Stokely shall be entitled to receive immediate full payment of his
annual incentive bonus for that fiscal year (estimated to be $250,000 for
fiscal 2000).
Richfood entered into a benefits continuation agreement with Mr. Stokely,
effective April 22, 1998, which superseded the benefits continuation provisions
of his employment and severance benefits agreement. The benefits continuation
agreement provides that, unless Mr. Stokely's employment is terminated for
cause, Richfood will provide to Mr. Stokely following the termination of his
employment (at Richfood's expense, subject to mitigation to the extent that
substantially similar coverage is provided by any successor employer) coverage
under life insurance policies consistent with those currently provided by
Richfood for his benefit through age 65, and medical and dental benefits of the
type generally provided from time-to-time to Richfood's executive employees
until his death.
In considering the merger, Richfood's board of directors determined that it
was essential that Richfood be managed and operated efficiently and effectively
through and until the merger closes, and that Richfood retain its key
management in the event that the merger does not occur. To provide an incentive
for Mr. Stokely to remain in Richfood's employ through the closing of the
merger, Richfood amended Mr. Stokely's employment and severance benefits
agreement, effective June 9, 1999, to provide that if Mr. Stokely remains in
the employ of Richfood through the closing of the merger, Mr. Stokely will
receive a lump sum cash payment of $1,500,000 in addition to all other amounts
payable under the agreement.
Under the terms of the merger agreement, 50% of outstanding Richfood stock
options with an exercise price below $18.50 per share will be converted to
SUPERVALU stock options and 50% of such Richfood stock options will be
cancelled in consideration of a cash payment equal to the difference between
their exercise price and $18.50. See "THE MERGER--Treatment of Richfood Stock
Options and Warrants." Mr. Stokely holds 55,500 Richfood stock options with
exercise prices below $18.50, 27,250 of which will be cancelled in accordance
with the terms of the merger agreement in consideration of a payment to Mr.
Stokely of $176,567.
In addition, if a "change in control" of Richfood occurs during the term of
his employment and severance benefits agreement and Mr. Stokely becomes liable
for any excise tax with respect to any payment or benefit received under the
agreement or any of Richfood's benefits plans, Richfood shall pay Mr. Stokely
an amount equal to (1) such excise tax, plus (2) the federal, state and local
income taxes, and federal hospitalization tax, for which Mr. Stokely is liable
on account of the payment described in clause (1) of this sentence and the
additional payments described in this clause (2). The amount of this payment
(assuming Mr. Stokely's employment is terminated following consummation of the
merger and during the term of his employment and severance benefits agreement
and, for purposes of his annual incentive bonus, that such termination occurs
during the final two fiscal quarters of fiscal year 2000) is estimated to be
$2,650,000.
John C. Belknap. Richfood entered into an employment and severance benefits
agreement with Mr. Belknap, effective August 20, 1998, employing him as
Executive Vice President and Chief Financial Officer through August 19, 2001.
The agreement provides for the payment of a lump-sum severance benefit equal to
$650,000 in the event Mr. Belknap is terminated during the term of the
agreement (1) by Richfood other than for cause or upon his death or disability,
(2) by Richfood for any reason other than death or disability within one year
following a "change in control" of Richfood or (3) by Mr. Belknap within one
year following a "change in control" of Richfood. The agreement, as
subsequently amended, also provides that
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upon any "change in control" of Richfood, Mr. Belknap shall be entitled to
receive a lump sum payment in an amount equal to the actuarial equivalent of
the benefit he otherwise would be entitled to receive under the SERP upon
retirement on or after September 1, 2009. The amount of this SERP payment is
estimated to be $1,415,791. In addition to the benefits described above, if Mr.
Belknap's employment with Richfood is terminated during the term of the
agreement and within one year after a "change in control" of Richfood (other
than by reason of his death or disability), Mr. Belknap will be entitled to
continued insurance coverage with an estimated value of $15,000.
In considering the merger, Richfood's board of directors determined that it
was essential that Richfood be managed and operated efficiently and effectively
through and until the merger closes, and that Richfood retain its key
management in the event that the merger does not occur. To provide an incentive
for Mr. Belknap to remain in Richfood's employ through the closing of the
merger, Richfood amended the agreement with Mr. Belknap, effective June 9,
1999, to provide that if Mr. Belknap remains in the employ of Richfood through
the closing of the merger, Mr. Belknap will receive a lump sum cash payment of
$500,000 in addition to all other amounts payable under the agreement.
Mr. Belknap does not hold any Richfood stock options with an exercise price
below $18.50 that would be cancelled in consideration of a cash payment
pursuant to the merger agreement.
In addition, if a "change in control" of Richfood occurs during the term of
the agreement and Mr. Belknap becomes liable for any excise tax with respect to
any payment or benefit under his employment and severance benefits agreement or
any of Richfood's benefit plans, Richfood shall pay Mr. Belknap an amount equal
to (1) such excise tax, plus (2) the federal, state and local income taxes, and
federal hospitalization tax, for which Mr. Belknap is liable on account of the
payment described in clause (1) of this sentence and the additional payments
described in this clause (2). The amount of this payment (assuming
Mr. Belknap's employment is terminated following consummation of the merger and
during the term of his employment and severance benefits agreement) is
estimated to be $1,300,000.
Alec C. Covington. Richfood entered into an employment and severance
benefits agreement with Mr. Covington, effective August 20, 1998, employing him
as President-Wholesale Operations through August 19, 2001. The agreement
provides for the payment of a lump-sum severance benefit equal to $650,000 in
the event Mr. Covington is terminated during the term of the agreement (1) by
Richfood other than for cause or upon his death or disability, (2) by Richfood
for any reason other than death or disability within one year following a
"change in control" of Richfood or (3) by Mr. Covington within one year
following a "change in control" of Richfood. The agreement, as subsequently
amended, also provides that upon any "change in control" of Richfood, Mr.
Covington shall be entitled to receive a lump sum payment in an amount equal to
the actuarial equivalent of the benefit he otherwise would be entitled to
receive under the SERP upon retirement on or after April 1, 2012. The amount of
this SERP payment is estimated to be $1,556,210. In addition to the benefits
described above, if Mr. Covington's employment with Richfood is terminated
during the term of the agreement and within one year after a "change in
control" of Richfood (other than by reason of his death or disability), Mr.
Covington will be entitled to continued insurance coverage with an estimated
value of $15,000.
Mr. Covington holds 60,000 Richfood stock options with exercise prices below
$18.50, 30,000 of which will be cancelled in accordance with the terms of the
merger agreement in consideration of a payment of $40,020.
In addition, if a "change in control" of Richfood occurs during the term of
the agreement and Mr. Covington becomes liable for any excise tax with respect
to any payment or benefit under his employment and severance benefits agreement
or any of Richfood's benefit plans, Richfood shall pay Mr. Covington an amount
equal to (1) such excise tax, plus (2) the federal, state and local income
taxes, and federal hospitalization tax, for which Mr. Covington is liable on
account of the payment described in clause (1) of this sentence and the
additional payments described in this clause (2). The amount of this payment
(assuming
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Mr. Covington's employment is terminated following consummation of the merger
and during the term of his employment and severance benefits agreement) is
estimated to be $1,200,000.
Other Employment Arrangements. Prior to the consummation of the merger,
SUPERVALU expects to enter into employment arrangements with certain Richfood
executive officers, including Alec C. Covington, Ronald E. Dennis, John R.
Ryder and William J. White, to ensure their continued employment after the
merger. SUPERVALU expects that the terms of these arrangements will be
substantially similar to the terms of existing employment arrangements between
Richfood and these executive officers, except that the arrangement with
Mr. Covington likely will include a one-time cash payment of $650,000 (which
would be payable in lieu of any change in control severance payment and in
exchange for the termination of his employment and severance benefits agreement
with Richfood), a restricted stock grant of 20,000 shares of SUPERVALU common
stock and a guaranteed minimum bonus payment of $200,000 for the first year of
such arrangement. SUPERVALU expects that the compensation and benefits provided
pursuant to these arrangements will be substantially similar to the
compensation and benefits it currently provides to its officers who perform
similar duties for SUPERVALU.
Definition of "Change in Control." For purposes of Mr. Stokely's, Mr.
Belknap's and Mr. Covington's employment and severance benefits agreements, a
"change in control" of Richfood means, in general, the occurrence of any of the
following events: (1) any person or group becomes the beneficial owner of
securities representing more than 50% of the aggregate voting power of all
classes of Richfood's then-outstanding voting securities; or (2) the
shareholders of Richfood approve (a) a plan of merger, consolidation or share
exchange between Richfood and any entity other than a subsidiary, or (b) a
proposal with respect to the sale, lease, exchange or other disposal of all, or
substantially all, of Richfood's property. The merger will constitute a "change
in control" of Richfood.
Indemnification; Insurance. Under the merger agreement, SUPERVALU has agreed
to:
. cause the corporation surviving the merger to indemnify and hold
harmless each person who is or has been at any time prior to the date of
the merger agreement, an officer, director, employee or agent of
Richfood or any of its subsidiaries against any losses, claims, damages,
judgments, settlements, liabilities, costs or expenses (including
reasonable attorneys' fees and out-of-pocket expenses) incurred in
connection with any claim, action, suit, proceeding or investigation
arising out of or pertaining to acts or omissions, or alleged acts or
omissions, by them in their capacities as such occurring at or prior to
the effective time of the merger (including actions taken or omitted in
connection with the merger), to the fullest extent that Richfood or such
subsidiaries would have been permitted, under applicable law, the
Richfood articles of incorporation or bylaws or the organizational
documents of such subsidiaries;
. cause the certificate of incorporation and bylaws of the surviving
corporation to contain provisions providing for exculpation of director
and officer liability and indemnification by the surviving corporation
not less favorable than those provisions providing for exculpation of
director and officer liability and indemnification by Richfood contained
in the articles of incorporation and bylaws of Richfood as in effect on
the date of the merger agreement, and not amend, repeal or modify such
provisions for a period of five years after the merger; and
. cause the surviving corporation to purchase a three-year extended
reporting period endorsement under Richfood's existing directors' and
officers' liability insurance coverage that shall extend the director
and officer liability coverage in force as of the date of the merger on
terms are no less advantageous to the intended beneficiaries than the
existing directors' and officers' liability insurance.
Stock Options and Stock Awards. Pursuant to the merger agreement,
outstanding and unexercised options to purchase shares of Richfood common stock
granted under Richfood's stock option plans, including those held by Richfood's
executive officers and directors, will be converted into cash or options to
purchase SUPERVALU common stock with the number of shares and exercise price
adjusted for the Conversion Ratio,
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but otherwise subject to the same terms and conditions as the Richfood options.
See "--Description of the Merger." Completion of the merger will result in a
"change in control" under the Richfood stock option plans. As a result, the
SUPERVALU options issued in the merger will immediately vest upon the post
merger termination of the employment of an employee option holder and become
fully exercisable for their full term. Options held by directors will vest
immediately upon the directors separation from service as a director following
a change in control and become fully exercisable for their term.
Similarly, as of the effective time of the merger, shares of restricted
Richfood common stock will be converted into restricted SUPERVALU common stock,
as adjusted for the Conversion Ratio and subject to the restrictions, terms and
conditions of the Richfood common stock award plans. Since completion of the
merger will result in a "change in control" under the Richfood common stock
award plans, the restrictions placed on the restricted SUPERVALU common stock
issued in the merger will lapse upon the post merger termination of the
employment of an employee holder and the stock will become immediately
transferable.
No Appraisal Or Dissenters' Rights
Shareholders of a corporation that is proposing to merge or consolidate with
another entity are sometimes entitled to appraisal or dissenters' rights in
connection with the proposed transaction depending on the circumstances. Most
commonly, these rights confer on shareholders who oppose the merger or
consolidation the right to receive the fair value for their shares as
determined in a judicial appraisal proceeding, in lieu of the consideration
being offered in the merger.
Richfood shareholders are not entitled to appraisal or dissenters' rights
under Virginia law in connection with the merger because Richfood common shares
were listed on the NYSE on the record date for its special shareholders'
meeting and the SUPERVALU common stock that Richfood shareholders will be
entitled to receive in the merger will be listed on the NYSE at the effective
time of the merger.
Accounting Treatment
The merger will be accounted for under the purchase method of accounting
under which the total consideration paid in the merger will be allocated among
Richfood's consolidated assets and liabilities based on the fair values of the
assets acquired and liabilities assumed as provided for under generally
accepted accounting principles.
Regulatory Matters
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission, certain acquisition transactions may not be consummated unless
notice has been given and certain information has been furnished to the
Antitrust Division of the United States Department of Justice and the FTC and
certain waiting period requirements have been satisfied. The merger is subject
to these requirements.
SUPERVALU and Richfood each filed with the Antitrust Division and the FTC a
Notification and Report Form with respect to the merger on July 6, 1999. Under
the HSR Act, the merger could not be consummated until the expiration of a
waiting period of at least 30 days following the receipt of each filing, unless
the waiting period was earlier terminated. On July 22, 1999, SUPERVALU and
Richfood received notice that the FTC had granted early termination of the
waiting period.
The FTC and the Antitrust Division frequently scrutinize the legality of
transactions such as the merger under the antitrust laws. Notwithstanding the
early termination of the waiting period under the HSR Act, at any time before
or after the effective time of the merger, the FTC or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the merger or
seeking the divestiture of Richfood by SUPERVALU, in whole or in part, or the
divestiture of substantial assets of SUPERVALU, Richfood or their respective
subsidiaries. State Attorneys General and
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private parties may also bring legal actions under the federal or state
antitrust laws under certain circumstances. Based upon an examination of
information available to SUPERVALU and Richfood relating to the businesses in
which SUPERVALU, Richfood and their respective subsidiaries are engaged,
SUPERVALU and Richfood believe that the consummation of the merger will not
violate the antitrust laws. Nevertheless, there can be no assurance that a
challenge to the proposed merger on antitrust grounds will not be made or, if
such a challenge is made, that SUPERVALU and Richfood will prevail.
Neither SUPERVALU nor Richfood is aware of any other material governmental
approvals or actions that may be required for consummation of the merger except
as described above. Should any such approval or action be required, it is
presently contemplated that such approval or action would be sought. There can
be no assurance, however, that any such approval or action, if needed, could be
obtained and would not be conditioned in a manner that would cause the parties
to abandon the merger.
SHAREHOLDERS AGREEMENTS
Concurrently and in connection with the execution of the merger agreement,
the directors and certain executive officers of Richfood entered into
shareholders agreements. Pursuant to the shareholders agreements, the directors
and certain executive officers agreed to vote the shares of Richfood common
stock that they hold of record and beneficially for approval of the merger and
the merger agreement. The shareholders agreements terminate upon termination of
the merger agreement.
A total of 1,403,489 shares of Richfood common stock, representing in the
aggregate approximately 2.9% of the outstanding shares of Richfood common
stock, are subject to shareholders agreements.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Acquisition will be the surviving corporation in the merger and will become
a wholly owned subsidiary of SUPERVALU upon consummation of the merger. The
directors of Acquisition immediately prior to the effective time of the merger
will be the initial directors of the surviving corporation, and the officers of
Richfood immediately prior to the effective time of the merger will be the
initial officers of the surviving corporation. SUPERVALU currently expects
that, after the effective time of the merger, it will retain most of the
executive officers of Richfood responsible for the retail and distribution
operations of Richfood and will not retain most of the executive officers of
Richfood responsible for the corporate functions of Richfood.
ACQUISITION FINANCING
SUPERVALU intends to finance the acquisition with a combination of existing
cash, commercial paper issuances (supported by bank credit facilities) and the
proceeds of one or more debt offerings. Approximately $886 million will be paid
to Richfood shareholders, consisting of $443 million of cash and the issuance
of $443 million of SUPERVALU common stock. SUPERVALU intends to repay
approximately $366 million of outstanding Richfood debt, consisting of a bank
term loan and revolving bank loans. SUPERVALU intends to finance approximately
$500 million with the proceeds of one or more debt offerings.
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PRICE RANGE OF COMMON STOCK AND DIVIDENDS
SUPERVALU
SUPERVALU common stock is listed on the NYSE and traded under the symbol
"SVU." The following table sets forth, for the periods indicated, the high and
low reported closing sale prices per share of SUPERVALU common stock on the
NYSE Composite Transactions reporting system and cash dividends declared per
share of SUPERVALU common stock.
<TABLE>
<CAPTION>
Price Range of
Common Stock
-------------------- Dividends
High Low Declared
------- ------- ---------
<S> <C> <C> <C>
Fiscal 1998
First Quarter.......................... $ 18 5/16 $ 14 5/16 $.1250
Second Quarter......................... 20 13/16 17 1/4 .1300
Third Quarter.......................... 20 7/8 17 7/16 .1300
Fourth Quarter......................... 24 9/32 19 25/32 .1300
Fiscal 1999
First Quarter.......................... $ 24 5/8 $ 20 6/16 $.1300
Second Quarter......................... 25 1/32 20 5/16 .1325
Third Quarter.......................... 28 7/16 21 1/2 .1325
Fourth Quarter......................... 28 3/4 24 1/8 .1325
Fiscal 2000
First Quarter.......................... $ 25 11/16 $ 19 9/16 $.1325
Second Quarter (through July 27,
1999)................................. 26 1/8 23 13/16 .1350
</TABLE>
On June 9, 1999, the last trading day before SUPERVALU and Richfood publicly
announced the execution of the merger agreement, the closing price per share of
SUPERVALU common stock on the NYSE Composite Transactions reporting system was
$24.81. On July 27, 1999, the latest practicable date prior to the date of this
proxy statement/prospectus, such price was $25 5/16. Past price performance is
not necessarily indicative of likely future price performance. Holders of
Richfood common stock are urged to obtain current market quotations for shares
of SUPERVALU common stock.
SUPERVALU has declared a cash dividend on its common stock for 62
consecutive years. Although the SUPERVALU Board of Directors presently intends
to continue the policy of declaring a quarterly cash dividend, future SUPERVALU
dividends would depend upon the earnings of SUPERVALU and its subsidiaries,
their financial condition and other factors, including applicable governmental
regulations and policies.
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Richfood
Richfood common stock is listed on the NYSE and traded under the symbol
"RFH." The following table sets forth, for the periods indicated, the high and
low reported closing sale prices per share of Richfood common stock on the NYSE
Composite Transactions reporting system and cash dividends declared per share
of Richfood common stock.
<TABLE>
<CAPTION>
Price Range of
Common Stock
-------------------- Dividends
High Low Declared
------- ------- ---------
<S> <C> <C> <C>
Fiscal 1998
First Quarter.......................... $ 26 3/16 $19 7/8 $0.04
Second Quarter......................... 26 1/2 21 11/16 0.04
Third Quarter.......................... 28 15/16 22 1/2 0.04
Fourth Quarter......................... 32 26 3/16 0.04
Fiscal 1999
First Quarter.......................... $ 27 $19 1/4 $0.05
Second Quarter......................... 23 13 13/16 0.05
Third Quarter.......................... 22 16 0.05
Fourth Quarter......................... 24 13/16 11 7/8 0.05
Fiscal 2000
First Quarter ......................... $ 18 1/8 $11 15/16 $0.00
Second Quarter (through July 27,
1999)................................. 18 3/16 18 1/8 0.00
</TABLE>
On July 27, 1999, the latest practicable date prior to the date of this
proxy statement/prospectus, the closing price per share of Richfood common
stock on the NYSE Composite Transactions reporting system was $18 3/16.
Richfood has paid cash dividends on its common stock since September 1991.
Richfood expects to continue paying cash dividends on its common stock when
justified by Richfood's financial condition. The amount of future dividends, if
any, will depend on the consummation of the merger, general business conditions
encountered by Richfood, its earnings, financial condition and capital
requirements and such other factors as the board of directors may deem
relevant.
BUSINESS OF RICHFOOD
Richfood is a major food wholesaler and retailer operating primarily in the
Mid-Atlantic region of the United States. Richfood's wholesale division is the
leading wholesale food distributor in the Mid-Atlantic region and the fourth
largest publicly owned food wholesaler in the United States. As a result of
recent acquisitions, Richfood's retail division is now one of the largest food
retailers in its Mid-Atlantic operating region.
Richfood's wholesale division 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 two principal distribution centers. Richfood's distribution centers are
strategically located within its operating region and have capacity to
accommodate additional growth. Richfood's wholesale division serves
approximately 1,400 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 37,000 grocery
and non-grocery items at competitive prices. Richfood's retail division
operates the 39 store Farm Fresh chain located primarily in the Hampton Roads
region of Virginia, 37 Shoppers Food Warehouse stores in the greater
Washington, D.C., metropolitan area and the Metro chain of 16 retail grocery
stores in the metropolitan Baltimore, Maryland area.
Richfood was organized in July 1987 as the successor to a wholesale grocery
firm established in 1935. Richfood's principal executive offices are located at
4860 Cox Road, Suite 300, Glen Allen, Virginia 23060 (Telephone 804-915-6000).
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BUSINESS OF SUPERVALU
General
SUPERVALU is the nation's 11th largest food retailer and largest food
distributor based on revenues. SUPERVALU operates three principal store formats
at retail, and sells food and non-food products at wholesale. As of February
27, 1999, SUPERVALU operated 345 corporate retail stores under its principal
retail formats including price superstores, combination food and drug stores,
and limited assortment stores under such retail banners as Cub Foods, Shop 'n
Save, Save-A-Lot, bigg's, Scott's Foods, Laneco and Hornbachers. Through its
Save-A-Lot banner, as of February 27, 1999, SUPERVALU also supplied 630
licensed independent Save-A-Lot limited assortment stores. Additionally, as of
February 27, 1999, SUPERVALU was the primary supplier of approximately 2,700
additional stores and a partial supplier of approximately 1,200 additional
stores in 48 states.
SUPERVALU's growth strategy includes growing its retail operations through
new store development and acquisitions, expanding Save-A-Lot, SUPERVALU's
limited assortment store banner, and increasing efficiencies in its food
distribution operations while participating in the consolidation of the food
distribution industry. During fiscal 1999, SUPERVALU added 73 retail stores
through new store development and acquisition. In addition, SUPERVALU commenced
operations of its second "upstream" facility, a regional distribution facility
in Ogelsby, Illinois, for slow moving grocery product, general merchandise and
health and beauty care product, and began construction of a regional
distribution facility in Minneapolis, Minnesota for fast moving product.
SUPERVALU INC., a Delaware corporation, was organized in 1925 as the
successor to two wholesale grocery firms established in the 1870's. SUPERVALU's
principal executive offices are located at 11840 Valley View Road, Eden
Prairie, Minnesota 55344 (Telephone: 612-828-4000).
Recent Developments
On July 20, 1999, SUPERVALU signed a letter of understanding for a supply
arrangement with Kmart Corporation. The letter of understanding contemplates
that SUPERVALU will distribute and replenish an estimated $2.3 billion of
Kmart's grocery related distribution volume annually. SUPERVALU expects to
reach a definitive three-year agreement, which it anticipates will be effective
beginning in early 2000 and subject to an early termination right by Kmart, and
to commence start-up of the supply arrangement in the fall of 1999. The
foregoing revenue estimate is based on a number of assumptions and revenue
actually realized under the supply arrangement with Kmart may be more or less
than this amount.
DESCRIPTION OF SUPERVALU CAPITAL STOCK
The following description of the capital stock of SUPERVALU does not purport
to be complete and is subject in all respects, to applicable Delaware law and
to the provisions of SUPERVALU's certificate of incorporation.
General
SUPERVALU's authorized capital stock consists of 200,000,000 shares of
common stock, $1 par value, and 1,000,000 shares of preferred stock, no par
value. SUPERVALU's board of directors has adopted certificates of designation
with respect to a series of 6,000 shares of 4.50% preferred stock, no par
value, and a series of 100,000 shares of Series B Junior Participating
preferred stock, no par value.
Common Stock
On July 27, 1999, there were 119,902,123 shares of SUPERVALU common stock
outstanding. All outstanding shares of SUPERVALU common stock are, and the
shares offered hereby, when issued, will be
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fully paid and nonassessable. All holders of SUPERVALU common stock have voting
rights and are entitled to one vote for each share held of record on all
matters submitted to a vote to the stockholders. Holders of SUPERVALU common
stock do not have the right to cumulate votes in the election of directors and
do not have a right of redemption or any preferential right of subscription for
any securities of SUPERVALU.
Subject to preferences that may be applicable to any shares of SUPERVALU
preferred stock outstanding at the time, holders of SUPERVALU common stock are
entitled to dividends when and as declared by SUPERVALU's board of directors
from funds legally available therefor and are entitled, in the event of
liquidation, to share ratably in all assets remaining after payment of
liabilities.
Preferred Stock
On July 27, 1999, there were 1,341 shares of 4.50% preferred stock
outstanding and no shares of Series B preferred stock outstanding. The Series B
preferred stock was issuable under the terms of SUPERVALU's Preferred Share
Purchase Rights Plan, which has expired.
All holders of 4.50% preferred stock have voting rights and are entitled to
one vote for each share held of record on all matters submitted to a vote of
the stockholders. Holders of 4.50% preferred stock and SUPERVALU common stock
vote together as one class on all matters submitted to a vote of the
stockholders. Subject to preferences that may be applicable to any series of
SUPERVALU preferred stock ranking prior to 4.50% preferred stock with respect
to dividends, the holders of shares of 4.50% preferred stock, in preference to
the holders of SUPERVALU common stock, are entitled to receive, when, as and if
declared by the board of directors out of funds legally available therefor,
quarterly dividends payable in cash on the fifteenth day of March, June,
September and December in each year in an amount per share equal to $45 per
annum. In the event of liquidation, holders of 4.50% preferred stock are
entitled to receive, out of the assets of SUPERVALU available for distribution
to its stockholders, an amount equal to $1,000 per share plus any accrued but
unpaid dividends, prior to any distribution to the holders of SUPERVALU common
stock.
SUPERVALU's board of directors has the authority, without further
stockholder action, to issue from time to time all or any part of the
authorized SUPERVALU preferred stock. Additional SUPERVALU preferred stock is
issuable in one or more series, and SUPERVALU's board of directors is
authorized to determine the designation and number of shares in each series and
to fix the dividend, redemption, liquidation, retirement, conversion and voting
rights, if any, of such series, and any other rights and preferences thereof.
Any shares of SUPERVALU preferred stock which may be issued may have
disproportionately high voting rights or class voting rights, may be
convertible into shares of SUPERVALU common stock and may rank prior in right
to shares of SUPERVALU common stock as to payment of dividends and upon
liquidation. Although the issuance of additional SUPERVALU preferred stock may
have an adverse effect on the rights (including voting rights) of holders of
SUPERVALU common stock, the consent of the holders of SUPERVALU common stock
would not be required for any such issuance of SUPERVALU preferred stock. In
addition, the issuance of additional SUPERVALU preferred stock may have the
effect of delaying, deferring or preventing a change in control of SUPERVALU.
SUPERVALU has no current plans to issue any new series of SUPERVALU preferred
stock.
Other "Anti-Takeover" Provisions
SUPERVALU's certificate of incorporation requires, with certain exceptions,
the affirmative vote of 75% of the outstanding voting stock to effect a merger,
sale or lease of substantially all of the assets of SUPERVALU, or certain other
transactions, where the other party to the transaction is the beneficial owner
of 5% or more of the outstanding SUPERVALU capital stock. In addition, each
such covered transaction, with certain exceptions, must be approved by the
majority of the outstanding capital stock of SUPERVALU, excluding the capital
stock beneficially owned by the other party to the transaction. Any amendment,
change or repeal of this provision would require the affirmative vote of 75% of
the outstanding capital stock, and a majority of the outstanding shares of
capital stock, excluding capital stock beneficially owned by any party which is
the beneficial owner of 5% or more of the outstanding capital stock.
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SUPERVALU's bylaws provide for a classified board of directors, elected to
staggered terms of three years each. As a result, at least two stockholders'
meetings will generally be required for stockholders to effect a change in
control of its board of directors.
Although SUPERVALU's board of directors has no present intention of issuing
any additional shares of preferred stock or common stock as an anti-takeover
device, the issuance of additional stock could be used to create impediments to
or otherwise discourage person attempting to gain control of SUPERVALU. For
example, the issuance of additional shares could be used to dilute the voting
power of persons seeking to obtain control of SUPERVALU. In addition,
SUPERVALU's board of directors has the authority to issue a series of preferred
stock with rights and preferences that could impede completion of any proposed
transaction. It is possible that the takeovers that may be impeded may be those
that the majority of unaffiliated stockholders believe to be in their best
interest.
COMPARATIVE RIGHTS OF HOLDERS OF RICHFOOD COMMON
STOCK AND SUPERVALU COMMON STOCK
The following is a comparison of certain of the rights of holders of
SUPERVALU common stock and those of holders of Richfood common stock. Because
Richfood is organized under the laws of the Commonwealth of Virginia and
SUPERVALU is organized under the laws of the State of Delaware, differences in
the rights of holders of SUPERVALU common stock and those of holders of
Richfood common stock arise from differing provisions of Delaware law and
Virginia law, in addition to differing provisions of SUPERVALU's and Richfood's
respective organizational documents.
The following summary does not purport to be a complete statement of the
provisions affecting, and differences between, the rights of holders of
SUPERVALU common stock and those of holders of Richfood common stock. The
identification of specific provisions or differences is not meant to indicate
that other equally or more significant differences do not exist. This summary
is qualified in its entirety by reference to Virginia law and Delaware law and
by the governing corporate instruments of Richfood and SUPERVALU, to which
shareholders are referred.
Authorized Capital Stock
Richfood. Richfood's authorized capital stock consists of 90,000,000 shares
of Richfood common stock and 5,000,000 shares of Richfood preferred stock,
without par value. As of July 27, 1999, 47,734,240 shares of Richfood common
stock and no shares of Richfood preferred stock were issued and outstanding. As
of the record date, 1,283,525 shares of Richfood common stock were reserved for
issuance pursuant to Richfood's stock-based benefit plans. The Richfood board
of directors may determine the preferences, limitations and relative rights, to
the extent permitted by Virginia law, of any class or series of shares of
Richfood preferred stock before issuance of such shares. The issuance of such
shares does not require the approval of the holders of Richfood common stock.
SUPERVALU. SUPERVALU's authorized capital stock consists of 200,000,000
shares of common stock, $1 par value, and 1,000,000 shares of preferred stock,
no par value. SUPERVALU's board of directors has adopted certificates of
designation with respect to a series of 6,000 shares of 4.50% preferred stock,
no par value, and a series of 100,000 shares of Series B Junior Participating
preferred stock, no par value. On July 27, 1999, there were 119,902,123 shares
of SUPERVALU common stock outstanding, 1,341 shares of 4.50% preferred stock
outstanding and no shares of Series B preferred stock outstanding. The
SUPERVALU board of directors may determine the preferences, limitations and
relative rights, to the extent permitted by Delaware law, of any class or
series of shares of SUPERVALU preferred stock before issuance of such shares.
The issuance of such shares does not require the approval of the holders of
SUPERVALU common stock.
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Directors
Richfood. Virginia law provides that the board of directors of a Virginia
corporation shall consist of a number of individuals specified in or fixed in
accordance with the bylaws of the corporation or, if not specified or fixed in
accordance with the bylaws, then a number specified in or fixed in accordance
with the articles of incorporation of the corporation.
The Richfood bylaws provide that the number of members of the Richfood board
of directors shall be 11 and shall be subject to change as provided in the
Richfood articles of incorporation. The Richfood articles of incorporation
provide that the Richfood board of directors may amend the Richfood bylaws from
time to time to increase or decrease the number of directors by up to 30% of
the number of directors last elected by the Richfood shareholders; provided,
that any decrease in the number of directors may not shorten an incumbent
director's term or reduce any quorum or voting requirements until such persons
cease to be directors.
The Richfood articles of incorporation provide further that no person shall
be eligible to serve as a member of the Richfood board of directors if such
person is "related" to an existing director or nominee. A person is deemed to
be "related" to an existing director or nominee, if such person is an
"affiliate" or an "associate" of an existing director or nominee or if such
person is an affiliate, associate or employee of a single "customer." The
Richfood articles of incorporation define an "affiliate" as any person that
directly or indirectly controls, is controlled by or is under the common
control with the person specified. The Richfood articles of incorporation
define an "associate" of any person as including (1) a corporation of which
such person owns beneficially 10% or more of any class of equity securities,
(2) a trust or an estate in which such person has a substantial beneficial
interest or as to which such person serves as a fiduciary and (3) a relative or
spouse of such person who shares the same home. For purposes of this provision,
a "customer" means any person engaged in the sale of grocery products that uses
Richfood, Inc., a wholly owned subsidiary of Richfood, as its primary source of
supply for such products (or such other persons as may be determined by a
majority of the Richfood board of directors).
Directors are elected by a plurality of the votes cast by shares of Richfood
common stock entitled to vote at a meeting at which a quorum is present.
Holders of Richfood common stock do not have cumulative voting rights in the
election of directors.
SUPERVALU. Delaware law provides that the board of directors of a Delaware
corporation shall consist of the number of individuals specified in or fixed in
accordance with the bylaws or the certificate of incorporation of the
corporation.
The SUPERVALU bylaws provide that the number of directors may be increased
or decreased from time to time by resolution of a majority of the whole board
of directors or of the holders of at least 75% of the stock of SUPERVALU
entitled to vote, considered as one class. The number of directors is currently
set at 11.
Under the SUPERVALU bylaws, the board of directors is divided into three
classes with the number of directors divided equally so far as possible among
the three classes. At each annual election of directors, the successors to the
directors of each class whose term expires in that year is elected to hold
office for a term of three years from their date of election. In case of any
increase or decrease in the number of directors, the increase or decrease shall
be distributed among the several classes as nearly equal as possible, as
determined by the vote of a majority of the whole board or by the holders of at
least 75% of the stock of SUPERVALU entitled to vote, considered as one class.
Directors are elected by a plurality of the votes cast by holders of
SUPERVALU stock entitled to vote at a meeting at which a quorum is present.
Holders of SUPERVALU common stock do not have cumulative voting rights in the
election of directors.
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Removal of Directors
Richfood. Pursuant to Virginia law, a member of the Richfood board of
directors may be removed with or without cause by a majority of the votes
entitled to be cast at a meeting of shareholders called expressly for that
purpose at which a quorum is present. If a director is elected by a voting
group of shareholders, only the shareholders of that voting group may
participate in the vote to remove such director.
SUPERVALU. Pursuant to Delaware law, a member of the SUPERVALU board of
directors may be removed only for cause by the holders of a majority of shares
of SUPERVALU stock then entitled to vote for the election of directors.
Vacancies on the Board of Directors
Richfood. The Richfood bylaws provide that any vacancy occurring on the
Richfood board of directors may be filled by the affirmative vote of the
majority of the remaining directors, though less than a quorum of the Richfood
board of directors, and the term of any director so elected shall expire at the
next annual meeting of shareholders and when his or her successor is elected.
SUPERVALU. The SUPERVALU bylaws provide that any vacancies on the board of
directors and newly created directorships resulting from an increase in the
number of directors may be filled by a majority of the directors then in
office, although less than a quorum, or by the sole remaining director, and
each director so elected shall hold office until the next annual meeting of
stockholders.
Notice of Shareholder Nominations of Directors and Shareholder Proposals
Richfood. The Richfood bylaws provide that, subject to the rights of holders
of any class of Richfood preferred stock, a shareholder may nominate one or
more persons for election as directors at a meeting only if written notice of
such shareholder's nomination has been given to the Secretary of Richfood not
less than 50 nor more than 75 days before the first anniversary of the date of
Richfood's proxy statement in connection with the last meeting of shareholders
called for the election of directors. Each notice must contain: (1) the name,
age, business address and, if known, residential address of each nominee; (2)
the principal occupation or employment of each nominee; and (3) the number and
class of capital shares of Richfood beneficially owned by each nominee. The
Secretary of Richfood delivers all such notices to Richfood's Nominating
Committee for review. After such review, the Nominating Committee makes its
recommendation regarding nominees to the Richfood board of directors. The
chairman of any shareholders' meeting called for the election of directors may
determine that a shareholder nomination was not made in accordance with the
procedures and declare to the meeting that the defective nomination shall be
disregarded.
For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing
to the Secretary of Richfood. To be timely, a shareholder's notice must be
given, either by personal delivery or by mail, to the Secretary not less than
60 days before the first anniversary of the date of Richfood's proxy statement
in connection with the last annual meeting. The notice must contain as to each
matter the shareholder proposes to bring before the annual meeting: (1) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting; (2) the name
and record address of the shareholder proposing such business; (3) the class,
series and number of Richfood's shares beneficially owned by the shareholder;
and (4) any material interest of the shareholder in such business. If business
is brought before an annual meeting without complying with these provisions,
the chairman of the meeting shall declare that the business was not properly
brought before the meeting, and such business shall not be transacted.
SUPERVALU. For nominations or other business to be properly brought before
an annual meeting by a stockholder, SUPERVALU's bylaws provide that the
stockholder must have given timely notice thereof in writing to the Secretary
and such other business must be a proper matter for stockholder action. To be
timely,
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a stockholder's notice shall be delivered to the Secretary at the principal
executive offices of SUPERVALU not later than the close of business on the
120th day nor earlier than the close of business on the 150th day prior to the
first anniversary of the preceding year's annual meeting. In the event that the
date of the annual meeting is more than 30 days before or more than 60 days
after the anniversary of the preceding year's annual meeting, notice by the
stockholder to be timely must be delivered not earlier than the close of
business on the 150th day prior to such annual meeting and not earlier than the
close of business on the later of the 120th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date of such
meeting is first made. A stockholder notice shall set forth (1) as to each
person whom the stockholder proposes to nominate for election or reelection as
a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); (2) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (3) as to the stockholder giving the notice, the name and address of
such stockholder and the class and number of shares of SUPERVALU stock which
are owned beneficially and of record by such stockholder.
SUPERVALU's bylaws provide that only such business shall be conducted at a
special meeting of stockholders as shall have been brought before the meeting
pursuant to SUPERVALU's notice of meeting. Nominations of persons for election
to the board of directors may be made at a special meeting of stockholders at
which directors are to be elected pursuant to notice of meeting by any
stockholder of SUPERVALU who is a stockholder of record at the time of giving
of notice who is entitled to vote at the meeting and who complies with the
notice procedures described above. To be timely, such notice shall be delivered
to the Secretary at the principal executive offices of SUPERVALU not earlier
than the close of business on the 120th day prior to such special meeting and
not later than the close of business on the later of the 90th day prior to such
special meeting or the 10th day following the day on which public announcement
is first made of the date of the special meeting and of the nominees proposed
by the board of directors to be elected at such meeting.
Director Standard of Conduct
Richfood. Virginia law requires that a director of a Virginia corporation
discharge his duties as a director in accordance with his good faith business
judgment of the best interests of the corporation.
SUPERVALU. Delaware common law requires that a director of a Delaware
corporation discharge his or her duties as a director in accordance with the
fiduciary duties of care and loyalty. The duty of care requires that directors,
in performing their corporate duties, exercise the care that an ordinarily
prudent person would exercise under similar circumstances. The duty of loyalty
prohibits self-dealing by directors.
Limitations on Director Liability
Richfood. The Richfood articles of incorporation eliminate personal
liability for monetary damages for all officers and directors of Richfood,
except with respect to willful misconduct or a knowing violation of criminal
law or any federal or state securities law, in any proceeding brought by a
shareholder of Richfood in the right of Richfood or brought by or on behalf of
shareholders of Richfood.
SUPERVALU. The SUPERVALU certificate of incorporation provides that a
director of SUPERVALU shall not be personally liable to SUPERVALU or its
holders for monetary damages for breach of fiduciary duty as a director, except
for liability (1) for any breach of the director's duty of loyalty to SUPERVALU
or its stockholders, (2) for acts or omissions not in good faith or which
involved intentional misconduct or knowing violation of law, (3) under Section
174 of the Delaware General Corporation Law relating to the unlawful payment of
dividends, (4) for any transaction from which the director derived an improper
personal benefit or (5) for any act or omission occurring prior to the date
when the articles providing such limitations became effective.
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Indemnification
Richfood. The Richfood articles of incorporation require indemnification in
any proceeding, including a proceeding brought by Richfood or by a shareholder
in the right of Richfood or brought by or on behalf of the shareholders of
Richfood, against (1) any person who was or is a party to such proceeding by
reason of the fact that he is or was a director or officer of Richfood, and (2)
any director or officer of Richfood in connection with service at the request
of Richfood as director, trustee, partner or officer of another enterprise, in
either case unless the person engaged in willful misconduct or a knowing
violation of the criminal law.
SUPERVALU. The SUPERVALU bylaws provide that SUPERVALU shall indemnify any
director or officer of SUPERVALU and may indemnify any employee or agent of the
corporation in the discretion of the board of directors for such liabilities in
such manner, under such circumstances and to such extent as permitted by
Section 145 of the Delaware General Corporation Law. In addition, the SUPERVALU
bylaws provide that SUPERVALU shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (including a proceeding by or in
the right of SUPERVALU to procure a judgment in its favor) by reason of the
fact that he or she (1) is or was a director or officer of SUPERVALU or (2) is
or was serving at the request of SUPERVALU as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such proceeding (even if such wrongful act arose out of neglect or breach of
duty not involving willful misconduct), so long as he or she did not act out of
personal profit or advantage which was undisclosed to SUPERVALU and he or she
acted in a manner reasonably believed to be in or not opposed to the best
interests of SUPERVALU, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct was unlawful.
Mergers, Share Exchanges and Sales of Assets
Richfood. The Richfood articles of incorporation generally require that any
merger, share exchange or sale of all or substantially all the assets of
Richfood not in the ordinary course of business be approved by more than two-
thirds of the votes entitled to be cast by each voting group that is entitled
to vote on such transaction.
SUPERVALU. Delaware law generally requires that any merger, share exchange
or sale of all or substantially all the assets of a corporation not in the
ordinary course of business be approved by the affirmative vote of the majority
of the issued and outstanding shares entitled to vote. The SUPERVALU
certificate of incorporation provides that (1) any merger or consolidation of
SUPERVALU with a beneficial owner (an "Interested Stockholder"), directly or
indirectly, of more than 5% of the capital stock entitled to vote generally in
the election of directors ("Capital Stock") of SUPERVALU, (2) any sale, lease,
exchange or other disposition of all or any substantial part of the assets of
SUPERVALU to an Interested Stockholder, (3) the issuance of transfer of any
securities of SUPERVALU to an Interested Stockholder in exchange for assets or
securities or a combination thereof (except assets or securities or a
combination thereof so acquired in a single transaction or a series of related
transactions having an aggregate fair market value of less than $5,000,000) or
(4) the issuance or transfer of any securities of SUPERVALU to an Interested
Stockholder for cash, in each case shall not be consummated without the
approval by the affirmative vote of the holders of at least 75% of the then
outstanding shares of Capital Stock. The SUPERVALU certificate of incorporation
provides an exception to the foregoing voting requirement if (a) the Interested
Stockholder is a corporation and a majority of the outstanding shares of
Capital Stock of such Interested Stockholder is owned of record or beneficially
by SUPERVALU and/or its subsidiaries or (b) the board of directors of SUPERVALU
approved a memorandum of understanding with the Interested Stockholder with
respect to an substantially consistent with the transaction prior to the time
the Interested Stockholder became an Interested Stockholder.
Anti-Takeover Statutes
Richfood. Virginia law contains provisions governing "affiliated
transactions." In general, these provisions require approval of material
acquisition transactions between a Virginia corporation and any holder
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of more than 10% of any class of its outstanding voting shares (an "interested
shareholder") by the holders of at least two-thirds of the remaining voting
shares. Affiliated transactions subject to this approval requirement include
mergers, share exchanges, material dispositions of corporate assets not in the
ordinary course of business, any dissolution of the corporation proposed by or
on behalf of an interested shareholder or any reclassification, including
reverse stock splits, recapitalization or merger of the corporation with its
subsidiaries, which increases the percentage of voting shares owned
beneficially by an interested shareholder by more than 5%. These provisions
were designed to deter certain takeovers of Virginia corporations. In addition,
the statute provides that, by affirmative vote of a majority of the voting
shares other than shares owned by any interested shareholder, a corporation can
adopt an amendment to its articles of incorporation or bylaws providing that
the affiliated transactions provisions shall not apply to the corporation.
Richfood's articles of incorporation provide that these provisions shall not be
applicable to Richfood.
Virginia law also contains provisions relating to "control share
acquisitions," which are transactions causing the voting strength of any person
acquiring beneficial ownership of shares of a Virginia public corporation to
meet or exceed certain threshold percentages (20%, 33 1/3% or 50%) of the total
votes entitled to be cast for the election of directors. Shares acquired in a
control share acquisition have no voting rights unless (1) the voting rights
are granted by a majority vote of all outstanding shares other than those held
by the acquiring person or any officer or employee director of the corporation,
or (2) the articles of incorporation or bylaws of the corporation provide that
these Virginia law provisions do not apply to acquisitions of its shares. The
acquiring person may require that a special meeting of the shareholders be held
to consider the grant of voting rights to the shares acquired in the control
share acquisition. These provisions were designed to deter certain takeovers of
Virginia public corporations. The board of directors of a Virginia corporation
may adopt a bylaw providing that the control share provisions of Virginia law
do not apply to acquisitions of the corporation's shares. Such a bylaw may be
adopted at any time up to four days following receipt by a corporation of
notice of a proposed control share acquisition. Richfood's board of directors
has not adopted any such bylaw opting-out of the control share acquisition
provisions of Virginia.
SUPERVALU. Section 203 of the Delaware General Corporation Law provides that
a corporation shall not engage in any "business combination" with any
"interested stockholder" for a period of three years following the time that
such stockholder became an interested stockholder, unless (1) prior to such
time, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (2) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer
or (c) at or subsequent to such time, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
two-thirds of the outstanding voting stock which is not owned by the interested
stockholder. A "business combination" under the Delaware General Corporation
Law is generally defined as any of the following transactions involving the
corporation and an interested stockholder thereof: (1) a merger or
consolidation; (2) a sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 10% or more of the corporation's assets; (3) an issuance or
transfer of the corporation's stock; (4) a transaction having the effect of
directly or indirectly increasing the proportionate share of the corporation's
stock held by such interested stockholder; or (5) any receipt by such
interested stockholder of the benefit of any loans, guarantees, pledges or
other financial benefits. An "interested stockholder" under the Delaware
General Corporation Law is generally defined as any person owning 15% or more
of the corporation's outstanding voting stock.
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Amendments to Articles of Incorporation
Richfood. The Richfood articles of incorporation provide that any amendment
to the Richfood articles of incorporation shall be approved by more than two-
thirds of the votes entitled to be cast by each voting group that is entitled
to vote on the matter.
SUPERVALU. Delaware law provides generally that a Delaware corporation's
certificate of incorporation may be amended by the board of directors and by
the affirmative vote of the holders of a majority of the outstanding shares
entitled to vote. However, to amend the provisions described above under "--
Mergers, Share Exchanges and Sales of Assets," the SUPERVALU certificate of
incorporation requires the approval of (1) at least 75% of the outstanding
shares of capital stock of SUPERVALU entitled to vote generally in the election
of directors (considered for this purpose as one class) and (2) at least a
majority of the outstanding shares of capital stock of SUPERVALU entitled to
vote generally in the election of directors (considered for this purpose as one
class), exclusive of all voting stock of SUPERVALU beneficially owned, directly
or indirectly, by any corporation, person or entity which is, as of the record
date for the determination of stockholders entitled to notice of such
amendment, the beneficial owner, directly or indirectly, of 5% or more of the
outstanding shares of capital stock of SUPERVALU entitled to vote generally in
the election of directors (considered for this purpose as one class).
Amendments to Bylaws
Richfood. The Richfood bylaws provide that the Richfood board of directors
shall have the power to adopt, amend or repeal the Richfood bylaws with or
without the approval of the shareholders of Richfood by affirmative vote of a
majority of the directors, although bylaws so adopted, amended or repealed by
the Richfood board of directors may be further adopted, amended or repealed by
the shareholders and the shareholders in adopting or amending a particular
bylaw may provide expressly that the Richfood board of directors may not amend
or repeal such bylaw.
SUPERVALU. SUPERVALU's bylaws may be amended by a majority vote of the whole
board of directors or by a majority vote of the stockholders at any meeting at
which a quorum is present. However, the provisions of SUPERVALU's bylaws
relating to the number, election and term of office of directors may be amended
only by a 75% vote of stockholders or by a majority of the whole board of
directors.
Dissenters' Rights
Richfood. Under Virginia law, a shareholder of a Virginia corporation is
entitled to dissent from, and to receive payment of the "fair value" of his or
her shares in the event of, any of the following corporate transactions: (1)
consummation of a merger to which the corporation is a party, provided that
either (a) shareholder approval is required for the merger pursuant to Virginia
law or the corporation's articles of incorporation and the shareholder is
entitled to vote, or (b) the corporation is a subsidiary being merged with its
parent pursuant to a particular Virginia law provision for such transactions;
(2) consummation of a plan of share exchange to which the corporation is a
party as the party whose shares will be acquired, provided that the shareholder
is entitled to vote on the plan; (3) consummation of the sale or exchange of
all or substantially all the property of the corporation, if the shareholder is
entitled to vote on the transaction or the transaction is in furtherance of a
dissolution on which the shareholder is entitled to vote, and provided that the
transaction is neither (i) a transaction pursuant to court order, nor (ii) a
transaction for cash pursuant to a plan by which all or substantially all of
the net proceeds will be distributed to shareholders within one year; or (4)
any corporate action taken pursuant to a shareholder vote, to the extent that
the articles of incorporation, the bylaws or a resolution of the board of
directors provides that voting and nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
With respect to shares of any class or series that are either listed on a
national securities exchange or held by at least 2,000 record shareholders,
dissenters' rights are not available to the holders of such shares by reason
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of a merger, share exchange or sale or exchange of property unless: (1) the
articles of incorporation of the corporation issuing such shares provide
otherwise; (2) in the case of a merger or share exchange, the holders of such
shares are required to accept anything other than (a) cash, (b) shares of the
surviving or acquiring corporation or shares of any other corporation that are
either listed subject to notice of issuance on a national securities exchange
or held by more than 2,000 record shareholders or (c) a combination of cash and
such shares; or (3) the transaction is an affiliated transaction and has not
been approved by a majority of the disinterested directors as defined in
Virginia law.
A shareholder who has the right to dissent from a transaction and receive
payment of the "fair value" of his or her shares must follow specific
procedural requirements as set forth in Virginia law in order to maintain such
right and obtain such payment.
SUPERVALU. Under Delaware law, a stockholder of a Delaware corporation is
entitled to an appraisal by the Court of Chancery of the "fair value" of his or
her shares in the event of the consummation of a merger or consolidation to
which the corporation is a party, provided that either (1) approval by the
stockholders of the corporation is required for the merger pursuant to Delaware
law or the corporation's certificate of incorporation and the stockholder is
entitled to vote, or (2) the corporation is a subsidiary being merged with its
parent or another subsidiary of the parent pursuant to a particular Delaware
law provision for such transactions and all of the stock of the corporation is
not owned by the parent corporation.
With respect to shares of any class or series that are either listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc. or held by at least 2,000 record stockholders, appraisal rights
are not available to the holders of such shares by reason of a merger or
consolidation unless the holders thereof are required by the terms of an
agreement of merger or consolidation to accept for such stock anything except
(1) cash in lieu of fractional shares, (2) shares of the surviving corporation
or shares of any other corporation that are either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the NASD or held by more than 2,000 record
stockholders or (3) a combination of cash in lieu of fractional shares and such
shares.
A Delaware corporation may provide in its certificate of incorporation that
appraisal rights shall be available for the shares of any class or series of
its stock as a result of an amendment to its certificate of incorporation, any
merger or consolidation to which the corporation is a party or the sale of all
or substantially all of the assets of the corporation.
A stockholder who has the right to appraisal in connection with a
transaction and to receive payment of the "fair value" of his or her shares
must follow specific procedural requirements as set forth in Delaware law in
order to maintain such right and obtain such payment.
Transfer Restrictions
Richfood. The Richfood articles of incorporation establish certain
restrictions on the original issuance and transfer of shares of Richfood common
stock.
Shares of Richfood common stock may not be transferred to any person who,
immediately following such transfer would, together with such person's
affiliates and associates, be the beneficial owner of more than 20% of such
shares, unless the proposed transfer is approved in advance by the Richfood
board of directors. The Richfood articles of incorporation provide that an
attempt to transfer shares of Richfood common stock without prior approval by
the Richfood board of directors to any person who would thereafter own more
than 20% of such shares shall be null and void and shall not be recognized by
Richfood for any purpose, except that the Richfood board of directors may elect
to recognize such attempted transfer and simultaneously redeem such shares at
their "restricted share redemption price" (generally the lowest price actually
paid by the transferee for shares of Richfood common stock during the two year
period immediately before the attempted transfer or,
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if such price cannot be determined readily by the Richfood board of directors,
then the lowest closing price for such shares in their principal trading market
during such period).
The Richfood articles of incorporation require record holders of Richfood
common stock to disclose to Richfood upon demand information with respect to
beneficial ownership of the shares then held by them. Richfood may enforce the
restrictions on transfer of shares of Richfood common stock by polling
registered holders with respect to the beneficial ownership of their shares and
by monitoring filings with the Commission by persons beneficially owning 5% or
more of the common stock as required pursuant to Section 13(d) of the Exchange
Act.
SUPERVALU. The transfer of SUPERVALU common stock is not restricted by its
certificate of incorporation or bylaws or by the Delaware General Corporation
Law.
FEDERAL SECURITIES LAWS CONSEQUENCES;
STOCK TRANSFER RESTRICTION AGREEMENTS
This document does not cover any resales of the SUPERVALU common stock to be
received by Richfood's shareholders upon consummation of the merger, and no
person is authorized to make any use of this document in connection with any
such resale.
All SUPERVALU common stock that Richfood shareholders receive in the merger
will be freely transferable, with the exception of the SUPERVALU common stock
received by persons who are deemed to be "affiliates" of Richfood under the
Securities Act of 1933 at the time of the special meeting. These "affiliates"
who receive SUPERVALU common stock in the merger may only resell that stock in
transactions permitted by Rule 145 under the Securities Act of 1933 or as
otherwise permitted under that Act. Persons who may be deemed to be affiliates
of Richfood for such purposes generally include individuals or entities that
control, are controlled by, or are under common control with, Richfood and may
include some officers, directors and principal shareholders of Richfood. The
merger agreement requires Richfood to seek to deliver or cause to be delivered
to SUPERVALU on or prior to the effective time of the merger from each of those
affiliates an executed letter agreement to the effect that those persons will
not offer or sell or otherwise dispose of any SUPERVALU common stock issued to
them in the merger in violation of the Securities Act of 1933.
LEGAL MATTERS
The validity of the SUPERVALU common stock to be issued in connection with
the merger will be passed upon by Dorsey & Whitney LLP. It is a condition to
the consummation of the merger that Richfood receive an opinion from Hunton &
Williams, legal counsel to Richfood, to the effect that the merger will be a
reorganization for federal income tax purposes. It also is a condition to the
consummation of the merger that SUPERVALU receive an opinion from Skadden,
Arps, Slate, Meagher & Flom (Illinois), special legal counsel to SUPERVALU, to
the effect that the merger will be a reorganization for federal income tax
purposes. We describe the conditions for consummation of the merger under the
heading "THE MERGER--Conditions to the Merger."
EXPERTS
The consolidated financial statements of SUPERVALU appearing in the
SUPERVALU Annual Report (Form 10-K) for the fiscal year ended February 27,
1999, have been audited by KPMG Peat Marwick LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
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The consolidated financial statements of SUPERVALU as of and for the two
fiscal years (53 and 52 weeks) in the period ended February 28, 1998,
incorporated herein by reference from the SUPERVALU Annual Report (Form 10-K)
for the year ended February 27, 1999, have been audited by Deloitte & Touche
LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Richfood appearing in the Richfood
Annual Report (Form 10-K) for the fiscal year ended May 1, 1999, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing. Representatives of Ernst & Young LLP are expected to
be present at the special meeting. These representatives will have the
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
SHAREHOLDER PROPOSALS
If for any reason the merger agreement is terminated (other than in
connection with Richfood's execution of an agreement relating to a Superior
Proposal), Richfood will hold its Annual Meeting of Shareholders for 1999 as
soon as possible thereafter. Any proposal that a Richfood shareholder wishes to
have included in Richfood's proxy materials for any such Annual Meeting of
Shareholders to be held in 1999 must be received at the main office of Richfood
at 4860 Cox Road, Suite 300, Glen Allen, Virginia 23060, a reasonable time
before Richfood begins to print and mail its proxy materials. Richfood's board
of directors reviews each proposal received to determine if it satisfies the
criteria established by Richfood's bylaws and applicable law for inclusion in
Richfood's proxy materials.
OTHER MATTERS
Richfood's board of directors does not know of any matters to be presented
to the special meeting other than those set forth above. However, if other
matters come before the special meeting, it is the intention of the persons
named in the accompanying proxy to vote such proxy in accordance with the
recommendation of the Richfood board of directors on such matters, and
discretionary authority to do so is included in the proxy.
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WHERE YOU CAN FIND MORE INFORMATION
SUPERVALU has filed with the SEC a registration statement under the
Securities Act of 1933 that registers the SUPERVALU common stock to be issued
to Richfood shareholders in connection with the merger. The registration
statement, including the attached exhibits and schedules, contains additional
relevant information about SUPERVALU and SUPERVALU common stock. The rules and
regulations of the SEC allow us to omit certain information included in the
registration statement from this proxy statement/prospectus.
In addition, SUPERVALU and Richfood file reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934. You may
read and copy this information at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
You also may obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like SUPERVALU
and Richfood, who file electronically with the SEC. The address of that site is
http://www.sec.gov.
You also can inspect reports, proxy statements and other information about
SUPERVALU and Richfood at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
The SEC allows SUPERVALU and Richfood to "incorporate by reference"
information into this proxy statement/prospectus. This means that SUPERVALU and
Richfood can disclose important information to you by referring you to another
document filed separately with the SEC. The information incorporated by
reference is considered to be a part of this proxy statement/prospectus, except
for any information that is superseded by information that is included directly
in this document.
This proxy statement/prospectus incorporates by reference the documents
listed below that SUPERVALU has previously filed with the SEC. They contain
important information about SUPERVALU and its financial condition.
<TABLE>
<CAPTION>
SUPERVALU SEC Filings Period
--------------------- ------
<S> <C>
Annual Report on Form For the fiscal year ended February 27, 1999,
10-K................... as filed April 16, 1999
Quarterly Report on Form For the fiscal quarter ended June 19, 1999,
10-Q................... as filed July 12, 1999
Current Report on Form Filed July 21, 1999
8-K....................
This proxy statement/prospectus incorporates by reference the document
listed below that Richfood has previously filed with the SEC. It contains
important information about Richfood and its financial condition.
<CAPTION>
Richfood SEC Filing Period
------------------- ------
<S> <C>
Annual Report on Form For the fiscal year ended May 1, 1999,
10-K................... as filed July 16, 1999
</TABLE>
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SUPERVALU and Richfood incorporate by reference additional documents that
each may file with the SEC between the date of this proxy statement/prospectus
and the date of the special meeting. These documents include periodic reports,
such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements. SUPERVALU also incorporates
by reference the description of SUPERVALU common stock in any of its
registration statements filed by it under the Securities Exchange Act of 1934,
including any amendment or report filed for the purpose of updating such
description.
Information Regarding SUPERVALU and Richfood
SUPERVALU has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to SUPERVALU, as well as
all pro forma financial information, and Richfood has supplied all information
relating to Richfood.
Documents incorporated by reference by SUPERVALU and Richfood are available
from the companies without charge, excluding any exhibits to those documents
unless the exhibit is specifically incorporated by reference as an exhibit to
this proxy statement/prospectus. You can obtain documents incorporated by
reference to this proxy statement/prospectus by requesting them in writing or
by telephone from the appropriate company at the following addresses:
SUPERVALU Richfood
Investor Relations Investor/Public Relations
SUPERVALU INC. Richfood Holdings, Inc.
11840 Valley View Road 4860 Cox Road, Suite 300
Eden Prairie, Minnesota 55344 Glen Allen, Virginia 23060
(612) 828-4000 (804) 915-6000
Telecopy: (612) 828-4838 Telecopy: (804) 915-6010
If you would like to request documents, please do so by August 23, 1999, to
receive them before the special meeting. If you request any incorporated
documents from us, we will mail them to you by first class mail, or another
equally prompt means, within one business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that is different from, or in
addition to, that contained in this proxy statement/prospectus or in any of the
materials that we have incorporated into this document. Therefore, if anyone
does give you information of this sort, you should not rely on it. If you are
in a jurisdiction where offers to exchange or sell, or solicitations of offers
to exchange or purchase, the securities offered by this document or the
solicitation of proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer presented in this
document does not extend to you. This proxy statement/prospectus is dated July
29, 1999. The information contained in this document speaks only as of such
date unless the information specifically indicates that another date applies.
53
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
dated as of
June 9, 1999
among
SUPERVALU INC.,
WINTER ACQUISITION, INC.
and
RICHFOOD HOLDINGS, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1
THE MERGER................................................................ A-2
1.1 The Merger.......................................................... A-2
1.2 Effective Time; Filing of Certificate and Articles of Merger........ A-2
1.3 Certificate of Incorporation........................................ A-2
1.4 Bylaws.............................................................. A-2
1.5 Directors and Officers.............................................. A-2
1.6 Additional Actions.................................................. A-2
1.7 Time and Place of Closing........................................... A-2
1.8 Effect of Merger on Capital Stock................................... A-3
1.9 Allocation of Merger Consideration; Election Procedures............. A-3
1.10 Company Stock Options and Warrants................................. A-7
ARTICLE 2
OTHER AGREEMENTS.......................................................... A-8
2.1 Access.............................................................. A-8
2.2 Disclosure Schedule................................................. A-8
2.3 Acquisition Proposals............................................... A-9
2.4 Public Announcements................................................ A-10
2.5 Confidentiality Agreement........................................... A-10
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. A-10
3.1 Due Incorporation................................................... A-10
3.2 Capitalization...................................................... A-11
3.3 Authorization; Enforceability....................................... A-11
3.4 No Violation or Conflict............................................ A-12
3.5 SEC Documents and Other Reports..................................... A-13
3.6 No Undisclosed Liabilities.......................................... A-13
3.7 No Violation of Law................................................. A-13
3.8 Title to Assets..................................................... A-13
3.9 Litigation.......................................................... A-13
3.10 Absence of Certain Changes or Events............................... A-14
3.11 Performance of Contracts........................................... A-14
3.12 ERISA.............................................................. A-14
3.13 Taxes.............................................................. A-15
3.14 Labor Matters...................................................... A-16
3.15 Existing Permits................................................... A-16
3.16 Intangible Assets.................................................. A-17
3.17 Environmental Matters.............................................. A-17
3.18 Vote Required...................................................... A-17
3.19 Disclosure Documents............................................... A-17
3.20 Opinion of Financial Advisor....................................... A-18
3.21 Certain Agreements................................................. A-18
3.22 Finders or Brokers................................................. A-18
3.23 Takeover Statutes.................................................. A-18
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION.................. A-18
4.1 Due Incorporation................................................... A-18
</TABLE>
i
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<TABLE>
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<S> <C>
4.2 Capitalization..................................................... A-19
4.3 Authorization; Enforceability...................................... A-19
4.4 No Violation or Conflict........................................... A-19
4.5 SEC Documents and Other Reports.................................... A-20
4.6 No Undisclosed Liabilities......................................... A-20
4.7 No Violation of Law................................................ A-21
4.8 Litigation......................................................... A-21
4.9 Absence of Certain Changes or Events............................... A-21
4.10 Authorization of Parent Common Stock.............................. A-21
4.11 Brokers or Finders................................................ A-21
4.12 Disclosure Documents.............................................. A-21
ARTICLE 5
COVENANTS................................................................ A-22
5.1 Conduct of Business by the Company................................. A-22
5.2 Information Supplied............................................... A-23
5.3 Shareholder Meeting................................................ A-23
5.4 Filings; Approvals and Consents; Cooperation....................... A-24
5.5 Listing of Parent Common Stock..................................... A-25
5.6 Affiliates......................................................... A-25
5.7 Takeover Statute................................................... A-25
5.8 Tax-Free Reorganization............................................ A-25
ARTICLE 6
CONDITIONS............................................................... A-26
6.1 Conditions to Each Party's Obligation to Effect the Merger......... A-26
6.2 Conditions to Parent's and Acquisition's Obligation to Effect the
Merger................................................................ A-26
6.3 Conditions to the Company's Obligation to Effect the Merger........ A-27
ARTICLE 7
NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION........... A-27
7.1 No Survival of Representations and Warranties...................... A-27
7.2 Directors' and Officers' Indemnification; Insurance................ A-27
ARTICLE 8
TERMINATION.............................................................. A-28
8.1 Termination........................................................ A-28
8.2 Rights on Termination.............................................. A-30
8.3 Termination Fee Payable to Parent.................................. A-30
8.4 Other Remedies..................................................... A-30
ARTICLE 9
MISCELLANEOUS............................................................ A-30
9.1 Expenses........................................................... A-30
9.2 Entire Agreement; Amendment........................................ A-30
9.3 Governing Law...................................................... A-30
9.4 Assignment......................................................... A-31
9.5 Notices............................................................ A-31
9.6 Counterparts; Headings............................................. A-31
9.7 Interpretation..................................................... A-32
9.8 Specific Performance............................................... A-32
9.9 No Reliance........................................................ A-32
9.10 Exhibits and Schedules............................................ A-32
9.11 No Third Party Beneficiary........................................ A-32
</TABLE>
ii
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<TABLE>
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ARTICLE 10
DEFINITIONS............................................................... A-32
10.1 Affiliate.......................................................... A-32
10.2 Agreement.......................................................... A-32
10.3 Buildings.......................................................... A-32
10.4 Contracts.......................................................... A-32
10.5 Control............................................................ A-32
10.6 DGCL............................................................... A-32
10.7 Disclosure Schedule................................................ A-32
10.8 Employees.......................................................... A-33
10.9 Environmental Claim................................................ A-33
10.10 Environmental Laws................................................ A-33
10.11 Equipment......................................................... A-33
10.12 ERISA............................................................. A-33
10.13 Existing Insurance Policies....................................... A-33
10.14 Existing Liens.................................................... A-33
10.15 Existing Options.................................................. A-33
10.16 Existing Permits.................................................. A-33
10.17 Governmental Entity............................................... A-33
10.18 Hazardous Materials............................................... A-33
10.19 Indebtedness...................................................... A-34
10.20 Intangible Assets................................................. A-34
10.21 Investment........................................................ A-34
10.22 Knowledge......................................................... A-34
10.23 Law............................................................... A-34
10.24 Lien.............................................................. A-34
10.25 Material Adverse Effect........................................... A-34
10.26 Merger............................................................ A-34
10.27 Parent Disclosure Schedule........................................ A-35
10.28 Permitted Liens................................................... A-35
10.29 Person............................................................ A-35
10.30 Real Estate....................................................... A-35
10.31 SEC............................................................... A-35
10.32 Shareholders...................................................... A-35
10.33 Subsidiary........................................................ A-35
10.34 VSCA.............................................................. A-35
</TABLE>
EXHIBITS
<TABLE>
<C> <S>
Exhibit 1 Certificate of Merger
Exhibit 2 Articles of Merger
Exhibit 3 Affiliates Letter
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 9, 1999, among SUPERVALU
INC., a Delaware corporation (the "Parent"), Winter Acquisition, Inc., a
Delaware corporation and a wholly owned subsidiary of Parent ("Acquisition"),
and Richfood Holdings, Inc., a Virginia corporation (the "Company"). The
Company and Acquisition are hereinafter sometimes collectively referred to as
the "Constituent Corporations." Capitalized terms not otherwise defined herein
are used as defined in Section 10 hereof.
WHEREAS, the Boards of Directors of Parent, Acquisition and the Company
have approved and deem it advisable and in the best interests of their
respective shareholders to consummate the acquisition of the Company by the
Parent upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance thereof it is proposed that the acquisition be
accomplished by a merger of the Company with and into Acquisition (the
"Merger") pursuant to which each outstanding share of common stock, without
par value, of the Company (the "Company Common Stock") will be converted into
the right to receive the Merger Consideration (as hereinafter defined), upon
the terms and conditions set forth in this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, simultaneously with the execution and delivery of this Agreement,
Parent has entered into an agreement (the "Company Shareholders Agreement")
with certain shareholders of the Company pursuant to which such shareholders
agreed to vote the shares of Company Common Stock owned by them in favor of
the Merger (the Company Shareholders Agreement and this Agreement are
collectively referred to herein as the "Transaction Agreements").
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, Parent, Acquisition and the Company agree as follows:
A-1
<PAGE>
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions of this
Agreement and in accordance with the DGCL and VSCA, at the Effective Time (as
hereinafter defined), the Company shall be merged with and into Acquisition,
and Acquisition shall be the surviving corporation in the Merger (in such
capacity, the "Surviving Corporation").
1.2 Effective Time; Filing of Certificate and Articles of Merger. The
Merger shall be effected by the filing at the time of the Closing (as
hereinafter defined) of a properly executed certificate of merger (the
"Certificate of Merger") or other appropriate documents (in the form attached
as Exhibit 1 hereto) with the Secretary of State of the State of Delaware and
the filing of properly executed articles of merger (the "Articles of Merger")
with the State Corporation Commission of Virginia (the "SCC") (in the form
attached as Exhibit 2 hereto) in accordance with the provisions of the DGCL
and VSCA, respectively. The Merger shall become effective at the time a
certificate of merger is issued by the SCC or at such later date or time as
Acquisition and the Company shall agree and as specified in the Articles of
Merger (the "Effective Time").
1.3 Certificate of Incorporation. At the Effective Time, the Certificate of
Incorporation of Acquisition as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended in accordance with its terms and the DGCL.
1.4 Bylaws. At the Effective Time, the Bylaws of Acquisition, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with its terms and the
DGCL.
1.5 Directors and Officers. The directors of Acquisition immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation. The officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation. Each director
and officer of the Surviving Corporation shall hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation until
his or her successor is duly appointed and qualified.
1.6 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that consistent with the
terms of this Agreement any further assignments or any other acts are
necessary or desirable (i) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, title to and possession of any
property or right of either Constituent Corporation acquired or to be acquired
by reason of, or as a result of, the Merger, or (ii) otherwise to carry out
the purposes of this Agreement, then, subject to the terms and conditions of
this Agreement, the officers and directors of the Surviving Corporation shall
be directed and authorized to execute and deliver, in the name and on behalf
of the Constituent Corporations, all such documents and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of
such property or rights in the Surviving Corporation and otherwise to carry
out the purposes of this Agreement; and the officers and directors of the
Surviving Corporation are fully authorized in the name of either Constituent
Corporation to take any and all such action.
1.7 Time and Place of Closing. The closing of the Merger (the "Closing")
shall take place (a) at the offices of Hunton & Williams, Riverfront Plaza,
East Tower, 951 East Byrd Street, Richmond, Virginia 23219 as soon as
practicable and no later than the second business day following satisfaction
or waiver of all of the conditions set forth in Article 6, or (b) at such
other place, at such other time or on such other date as Parent and the
Company may mutually agree (the date of the Closing is hereinafter sometimes
referred to as the "Closing Date").
A-2
<PAGE>
1.8 Effect of Merger on Capital Stock. At the Effective Time, as a result
of the Merger and without any action on the part of the holder of any capital
stock of the Company:
(a) Merger Consideration. Subject to Section 1.9, each share of Company
Common Stock issued and outstanding at the Effective Time (other than
Company Common Stock owned by Parent or any direct or indirect Subsidiary
of Parent or Company Common Stock owned by the Company or any direct or
indirect Subsidiary of the Company) shall be converted into, and become
exchangeable for, at the election of the holder of Company Common Stock in
accordance with Section 1.9(b): (i) $18.50 in cash (the "Cash
Consideration"), or (ii) the number of shares of common stock, par value
$1.00 per share, of Parent ("Parent Common Stock") equal to the ratio (the
"Conversion Ratio") determined by dividing $18.50 by the average of the per
share last sales prices, regular way (rounded to four decimal points, the
"Average Parent Price") of Parent Common Stock as reported on the New York
Stock Exchange, Inc. (the "NYSE") composite transactions reporting system
(as reported in the New York City edition of The Wall Street Journal or, if
not reported thereby, another authoritative source) for the twenty (20)
consecutive trading days (the "Averaging Period") ending on (and including)
the seventh trading day (the "Determination Date") prior to the Closing
Date (the "Stock Consideration") (the Cash Consideration or the Stock
Consideration, as applicable, being hereinafter referred to as the "Merger
Consideration"). "Aggregate Merger Consideration" shall mean the amount of
cash and shares of Parent Common Stock (valued at the Average Parent Price)
which, when combined, equals $18.50 times the Aggregate Company Shares (as
defined in Section 1.9).
(b) Cancellation of Shares. At the Effective Time, all Company Common
Stock (other than Company Common Stock owned by Parent or any direct or
indirect Subsidiary of Parent, except for shares owned on behalf of third
parties ("Parent Shares"), and other than Company Common Stock owned by the
Company or any direct or indirect Subsidiary of the Company, except for
shares owned on behalf of third parties (collectively, "Excluded Shares"))
shall no longer be outstanding and shall be canceled and retired and shall
cease to exist, and each certificate (a "Certificate") representing any of
such Company Common Stock (other than Excluded Shares) shall thereafter
represent only the right to receive the Merger Consideration and the right,
if any, to receive cash in lieu of fractional shares pursuant to Section
1.9(e) and any dividends or other distributions pursuant to Section 1.9(c).
Each share of Company Common Stock issued and outstanding immediately prior
to the Effective Time and owned by the Company or any direct or indirect
Subsidiary of the Company (other than Company Common Stock that is owned on
behalf of third parties), shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding, shall be
canceled and retired without payment of any consideration therefor and
shall cease to exist.
1.9 Allocation of Merger Consideration; Election Procedures.
(a) Allocation. Notwithstanding anything in this Agreement to the
contrary, the number of shares of Company Common Stock (the "Cash Election
Number") to be converted into the right to receive Cash Consideration in
the Merger, and the number of shares of Company Common Stock (the "Stock
Election Number") to be converted into the right to receive Stock
Consideration in the Merger shall in each case be equal to fifty percent
(50%) of (i) the number of shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time less (ii) the number of
Excluded Shares ((i) less (ii) shall mean "Aggregate Company Shares"),
unless such percentages are adjusted pursuant to the provisions of
Section 8.1(c)(iii) and then as so adjusted (the "Adjusted Percentage").
(b) Election Procedures; Proration.
(i) As of the Effective Time, Parent shall deposit, or shall cause
to be deposited, with an exchange agent selected by Parent, with the
Company's prior approval, which shall not be unreasonably withheld (the
"Exchange Agent"), for the benefit of the holders of Company Common
Stock, certificates representing the shares of Parent Common Stock and
any cash to be issued or paid pursuant to
A-3
<PAGE>
Section 1.8 and any cash, dividends or other distributions with respect
to the Parent Common Stock to be issued or paid pursuant to Section
1.9(c) (such cash and certificates for shares of Parent Common Stock,
together with the amount of any dividends or other distributions
payable with respect thereto, being hereinafter referred to as the
"Exchange Fund").
(ii) Subject to allocation, conversion and proration in accordance
with the provisions of this Section 1.9, each record holder of Company
Common Stock (other than Excluded Shares) issued and outstanding
immediately prior to the Election Deadline (as defined below) shall be
entitled (A) to elect to receive in respect of each such share of
Company Common Stock (x) Cash Consideration (a "Cash Election") or (y)
Stock Consideration (a "Stock Election") or (B) to indicate that such
record holder has no preference as to the receipt of Cash Consideration
or Stock Consideration for such Company Common Stock (a "Non-
Election"). Shares of Company Common Stock in respect of which a Non-
Election is made (including shares in respect of which such an election
is deemed to have been made pursuant to this Agreement (collectively,
"Non-Election Shares")) shall, as nearly as possible, be deemed (A)
shares of Company Common Stock in respect of which Stock Elections have
been made in an amount equal to fifty percent (50%) of the total number
of such shares of Company Common Stock (Company Common Stock in respect
of which a Stock Election has been made, together with Company Common
Stock in respect of which a Stock Election is deemed to be made
pursuant to Section 1.9, being hereinafter referred to as "Stock
Election Shares"), and (B) shares of Company Common Stock in respect of
which Cash Elections have been made in an amount equal to fifty percent
(50%) of the total number of such shares of Company Common Stock
(Company Common Stock in respect of which a Cash Election has been
made, together with Company Common Stock in respect of which a Cash
Election is deemed to be made pursuant to Section 1.9, being
hereinafter referred to as "Cash Election Shares"), unless the Adjusted
Percentage applies and then according to the Adjusted Percentage.
(iii) Elections pursuant to Section 1.9(b) (ii) shall be made on a
form and with such other provisions to be reasonably agreed upon by the
Company and Parent (a "Form of Election") to be provided by the
Exchange Agent for that purpose to holders of record of Company Common
Stock (other than holders of Excluded Shares), together with
appropriate transmittal materials, at the time of mailing to holders of
record of Company Common Stock of the Proxy Statement/Prospectus (as
hereinafter defined) in connection with the Shareholder Meeting
referred to in Section 5.3. Elections shall be made by mailing to the
Exchange Agent a duly completed Form of Election. To be effective, a
Form of Election must be (x) properly completed, signed and submitted
to the Exchange Agent at its designated office, by 5:00 p.m., on the
business day that is two trading days prior to the Closing Date (which
date shall be publicly announced, along with the Conversion Ratio, by
Parent as soon as practicable but in no event less than five trading
days prior to the Closing Date) (the "Election Deadline") and (y) in
the case of Shares that are not held in book entry form, accompanied by
the Certificate(s) representing the Company Common Stock (a
"Certificate" or "Certificates") as to which the election is being made
or an affidavit of loss and indemnification in lieu thereof (or by an
appropriate guarantee of delivery of such Certificate(s) by a
commercial bank or trust company in the United States or a member of a
registered national security exchange or of the National Association of
Securities Dealers, Inc., provided that such Certificates are in fact
delivered to the Exchange Agent within three trading days after the
date of execution of such guarantee of delivery). For shares of Company
Common Stock that are held in book entry form, Parent shall establish
procedures for the delivery of such Company Common Stock, which
procedures shall be reasonably acceptable to the Company. The Company
shall use its best efforts to make a Form of Election available as
promptly as practicable to all Persons who become holders of record of
Company Common Stock (other than Excluded Shares) between the date of
mailing described in the first sentence of this Section 1.9(b)(iii) and
the Election Deadline. Neither Parent nor the Exchange Agent will be
under any obligation to notify any Person of any defect in a Form of
Election submitted to the Exchange Agent. A holder of Company Common
Stock that does not submit an effective Form of Election prior to the
Election Deadline shall be deemed to have made a Non-Election.
A-4
<PAGE>
(iv) An election may be revoked or amended, but only by written
notice received by the Exchange Agent prior to the Election Deadline.
Any Certificate(s) that have been submitted to the Exchange Agent in
connection with an election shall be returned without charge to the
holder thereof in the event such election is revoked as aforesaid and
such holder requests in writing the return of such Certificate(s). Upon
any such revocation, unless a duly completed Form of Election is
thereafter submitted in accordance with paragraph (b)(iii), such shares
of Company Common Stock shall be Non-Election Shares. In the event that
this Agreement is terminated pursuant to the provisions hereof and any
shares of Company Common Stock have been transmitted to the Exchange
Agent pursuant to the provisions hereof, such shares shall promptly be
returned without charge to the Person submitting the same.
(v) In the event that the aggregate number of Cash Election Shares
exceeds the Cash Election Number, all Cash Election Shares shall be
converted into the right to receive Stock Consideration or Cash
Consideration in the following manner:
(A) Cash Election Shares shall be deemed converted to Stock
Election Shares, on a pro-rata basis for each record holder of
Company Common Stock with respect to those shares, if any, of such
record holder that are Cash Election Shares, to the minimum extent
necessary so that the aggregate number of Cash Election Shares
following such conversion shall equal as closely as practicable the
Cash Election Number; all such Cash Election Shares so converted
shall be converted into the right to receive Stock Consideration;
and
(B) any remaining Cash Election Shares shall be converted into
the right to receive Cash Consideration.
(vi) In the event that the aggregate number of Stock Election Shares
exceeds the Stock Election Number, all Stock Election Shares shall be
converted into the right to receive Stock Consideration or Cash
Consideration in the following manner:
(A) Non-Election Shares which would otherwise be deemed to be
Stock Election Shares pursuant to Section 1.9(b)(ii) shall be deemed
converted to Cash Election Shares, on a pro-rata basis for each
record holder of Company Common Stock with respect to those shares,
if any, of such record holder that are Non-Election Shares, to the
minimum extent necessary so that the aggregate number of Stock
Election Shares following such conversion shall equal as closely as
practicable the Stock Election Number; all such Non-Election Shares
so converted shall be converted into the right to receive Cash
Consideration;
(B) in the event that the aggregate number of Stock Election
Shares still exceeds the Stock Election Number, all Stock Election
Shares shall be converted into the right to receive Stock
Consideration or Cash Consideration in the following manner: Stock
Election Shares shall be deemed converted to Cash Election Shares,
on a pro-rata basis for each record holder of Company Common Stock
with respect to those shares, if any, of such record holder that are
Stock Election Shares, to the minimum extent necessary so that the
aggregate number of Stock Election Shares following such conversion
(after taking into account the actions described in (vi) (A) above)
shall equal as closely as practicable the Stock Election Number; all
such Stock Election Shares so converted shall be converted into the
right to receive Cash Consideration; and
(C) any remaining Stock Election Shares shall be converted into
the right to receive Stock Consideration.
(vii) In the event that clause (v) of this Section 1.9(b) is not
applicable, all Cash Election Shares shall be converted into the right
to receive Cash Consideration, and in the event that clause (vi) of
this Section 1.9(b) is not applicable, all Stock Election Shares shall
be converted into the right to receive Stock Consideration.
A-5
<PAGE>
(viii) The Exchange Agent, in consultation with Parent and the
Company, shall make all computations to give effect to this Section
1.9.
(ix) In the event of a transfer of ownership of Company Common Stock
that is not registered in the transfer records of the Company, the
Merger Consideration together with any other cash, dividends or
distributions in respect thereof, may be issued and/or paid to such a
transferee if the Certificate formerly representing such Company Common
Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. If any certificate for
shares of Parent Common Stock is to be issued in a name other than that
in which the Certificate surrendered in exchange therefore is
registered, it shall be a condition of such exchange that the Person
(as defined herein) requesting such exchange shall pay any transfer or
other taxes required by reason of the issuance of certificates for
shares of Parent Common Stock in a name other than that of the
registered holder of the Certificate surrendered, or shall establish to
the satisfaction of Parent or the Exchange Agent that such tax has been
paid or is not applicable.
(c) Distributions with Respect to Unexchanged Shares; Voting.
(i) All shares of Parent Common Stock to be issued pursuant to the
Merger shall be deemed issued and outstanding as of the Effective Time
and whenever a dividend or other distribution is declared by Parent in
respect of the Parent Common Stock, the record date for which is at or
after the Effective Time, that declaration shall include dividends or
other distributions in respect of all shares issuable pursuant to this
Agreement, provided that no dividends or other distributions declared
or made in respect of the Parent Common Stock after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until
the holder of such Certificate shall surrender such Certificate in
accordance with this Section 1.9. Thereafter, subject to the effect of
applicable laws, following surrender of any such Certificate, there
shall be issued and/or paid to the holder of the certificates
representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (A) at the time of such surrender, the
dividends or other distributions with a record date at or after the
Effective Time theretofore payable with respect to such whole shares of
Parent Common Stock and not paid and (B) at the appropriate payment
date, the dividends or other distributions payable with respect to such
whole shares of Parent Common Stock with a record date at or after the
Effective Time but with a payment date subsequent to surrender.
(ii) Holders of unsurrendered Certificates representing Stock
Election Shares shall be entitled to vote after the Effective Time at
any meeting of Parent shareholders the number of whole shares of Parent
Common Stock represented by such Certificates, regardless of whether
such holders have exchanged their Certificates.
(d) Transfers. After the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the shares of Company Common
Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates formerly representing shares of
Company Common Stock are presented to the Surviving Corporation or the
Exchange Agent, they shall be canceled and (subject to applicable abandoned
property, escheat and similar laws) exchanged for Merger Consideration (and
cash in lieu of fractional interests in accordance with Section 1.9(e)),
without any interest thereon, as provided in this Section 1.9.
(e) Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of Parent Common Stock will be issued and
any holder of Company Common Stock entitled to receive a fractional share
of Parent Common Stock but for this Section 1.9(e) shall be entitled to
receive a cash payment in lieu thereof, which payment shall equal the
product of (i) such holder's proportionate interest in a share of Parent
Common Stock, and (ii) the Average Parent Price.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
(including the proceeds of any investments thereof and any Parent Common
Stock) that remains unclaimed by the shareholders of the
A-6
<PAGE>
Company for one year after the Effective Time shall be paid to Parent. Any
shareholders of the Company who have not theretofore complied with this
Section 1.9 shall thereafter look only to the Surviving Corporation for
payment of the Merger Consideration and any cash, dividends and other
distributions in respect thereof payable and/or issuable pursuant to
Section 1.8 and Section 1.9 upon due surrender of their Certificates (or
affidavits of loss and indemnification in lieu thereof), in each case,
without any interest thereon. Notwithstanding the foregoing, none of
Parent, the Surviving Corporation, the Exchange Agent or any other Person
shall be liable to any former holder of Company Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(g) Lost, Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the Person claiming such Certificate to be lost, stolen or
destroyed and, if required by Parent, the posting by such Person of a bond
in customary amount as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen, or destroyed Certificate the Merger
Consideration and any cash payable and any unpaid dividends or other
distributions deliverable in respect thereof pursuant to Section 1.9.
(h) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange into Stock Consideration by any
"affiliate" (as determined pursuant to Section 5.6) of the Company shall
not be exchanged until Parent has received a written agreement from such
Person as provided in Section 5.6 hereof.
(i) Withholding. The Exchange Agent or Parent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of Company Common Stock such amounts as the
Exchange Agent, Parent or the Surviving Corporation, as the case may be, is
required to deduct and withhold with respect to such payment under the Code
or any provisions of state, local or foreign tax law. Any amounts so
withheld shall be treated for all purposes of this Agreement as having been
paid to the holder of the Company Common Stock in respect of which such
deduction and withholding was made.
1.10 Company Stock Options and Warrants.
(a) At the Effective Time, by virtue of the Merger and without any
further action on the part of the Company or the holder thereof each
unexpired and unexercised option to purchase shares of Company Common Stock
(a "Company Stock Option") granted under the Company Stock Plans (as
hereinafter defined) or otherwise granted by the Company outside of any
Company Stock Plan, will be assumed by Parent as hereinafter provided. At
the Effective Time, 50% of the Company Stock Options which have a per share
option exercise price equal to or less than the Cash Consideration
("Positive Value Options") shall be automatically converted into the right
to receive cash equal to the difference between the Cash Consideration and
the per share exercise price of such Positive Value Options and the
remaining 50% of the Positive Value Options will be automatically converted
into the right to receive options (the "Parent Stock Options") to purchase
a number of shares of Parent Common Stock equal to the number of shares of
Company Common Stock that could have been purchased under such Positive
Value Options multiplied by the Conversion Ratio, at a price per share of
Parent Common Stock equal to the per share option exercise prices specified
in the Positive Value Option, divided by the Conversion Ratio. Positive
Value Options will be equally allocated between cash and Parent Stock
Options. Such Parent Stock Options shall otherwise be subject to the same
terms and conditions as such Positive Value Options. All Company Stock
Options which have a per share option exercise price greater than the Cash
Consideration shall be automatically converted into an option to purchase a
number of shares of Parent Common Stock equal to the number of shares of
Company Common Stock that could have been purchased under such Company
Stock Option multiplied by the Conversion Ratio, at a price per share of
Parent Common Stock equal to the per share option exercise price specified
in the Company Stock Option, divided by the Conversion Ratio. At the
Effective Time, (i) all references in the Company Stock Plans, the
applicable stock option or other awards agreements issued
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thereunder and in any other Company Stock Options to the Company shall be
deemed to refer to Parent; and (ii) Parent shall assume the Company Stock
Plans and all of the Company's obligations with respect to the Company
Stock Options.
(b) In respect of each Company Stock Option as converted into a Parent
Stock Option pursuant to Section 1.10(a) and assumed by Parent, and the
shares of Parent Common Stock underlying such option, Parent shall file as
soon as practicable after the Effective Time with the SEC, and keep current
the effectiveness of, a registration statement on Form S-8 (which may be
accomplished by amendment of the registration statement on Form S-4) or
other appropriate form for as long as such options remain outstanding (and
maintain the current status of the prospectus with respect thereto). Parent
agrees to reserve a number of shares of Parent Common Stock equal to the
number of shares of Parent Common Stock issuable upon the exercise of such
Company Stock Options. Notwithstanding the provisions of this Section 1.10,
with respect to any Person subject to Section 16(b) of the Exchange Act,
any cash paid in connection with the cancellation of a Company Stock Option
shall be paid as soon as practicable after the first date payment can be
made without liability of such Person under Section 16(b) of the Exchange
Act. The surrender of a Company Stock Option for cash hereunder shall be
deemed a release of any and all rights the holder had or may have had in
respect of such Company Stock Option.
(c) The Company agrees that, from the date hereof through the Effective
Time, it will not grant any stock options, restricted stock, stock
appreciation rights or limited stock appreciation rights.
(d) At the Effective Time, by virtue of the Merger and without any
further action on the part of the Company or the holder thereof, each
outstanding and unexercised warrant to purchase shares of Company Common
Stock (the "Warrants") issued pursuant to that certain Warrant Agreement,
dated as of March 4, 1998, between the Company and First Union National
Bank, as Warrant Agent (the "Warrant Agreement") will, pursuant to the
terms of the Warrant Agreement, be automatically converted into the right
to receive, upon exercise of such Warrant, the amount of cash or number of
shares of Parent Common Stock receivable per share by the holders of a
plurality of Non-Election Shares as would be received by a holder of the
number of shares of Company Common Stock issuable under exercise of such
Warrant immediately prior to the Merger.
ARTICLE 2
OTHER AGREEMENTS
2.1 Access. Subject to the provisions of the Confidentiality Agreement
referred to in Section 2.5 below, and so long as this Agreement has not been
terminated as herein provided, upon reasonable request, the Company shall
grant to Parent, Acquisition and their agents, accountants, attorneys and
other advisers reasonable access at all reasonable times to all of the
properties, facilities, books, records, financial statements and other
documents and materials relating to its financial condition, assets,
liabilities and business, including, without limitation, permitting Parent (at
its expense and subject to the prior approval of the Company, which approval
shall not be unreasonably withheld) to: (a) conduct appraisals of the
Equipment, Buildings, Real Estate and other properties of the Company; and (b)
conduct an environmental and occupational safety inspection of the properties
of the Company. Parent shall coordinate all requests for such access through
the Company's Chief Executive Officer or Chief Financial Officer. In addition,
the Company shall confer and consult with representatives of Parent, as Parent
may reasonably request, to report on operational matters, financial matters
and the general status of ongoing business operations of the Company.
2.2 Disclosure Schedule.
(a) Disclosure Schedule. The Company has delivered to Parent the
Disclosure Schedule and Parent has delivered to the Company the Parent
Disclosure Schedule, each of which was signed by the President and the
Secretary of the Company or Parent, as the case may be, stating that such
disclosure schedule was
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delivered pursuant to this Agreement and is the Disclosure Schedule or
Parent Disclosure Schedule, as the case may be, referred to in this
Agreement. The Disclosure Schedule and the Parent Disclosure Schedule are
collectively referred to herein as the "Disclosure Schedules." The
Disclosure Schedules are deemed to constitute an integral part of this
Agreement and to modify, as specified, the representations, warranties,
covenants or agreements of the Company or Parent, as the case may be,
contained in this Agreement.
(b) Updates. The Company and Parent shall update the disclosure schedule
delivered by such party (by either (i) revision of specific schedules
included in the original disclosure schedule referred to in Section 2.2(a)
or (ii) addition of new schedules that were neither included in said
original disclosure schedule nor referred to in or contemplated by this
Agreement as of the date of this Agreement) as soon as practicable by
written notice to the other party to reflect any matters which occur from
and after the date of this Agreement and which, if existing on the date of
delivery of the Disclosure Schedules, would have been required to be
described in the Disclosure Schedules. If the Disclosure Schedules are
updated by the addition of new schedules not referred to in or contemplated
by this Agreement as of the date of this Agreement: (i) each new schedule
shall be numbered to correspond to the applicable section or subsection
which such new schedule is intended to modify and (ii) the applicable
section or subsection corresponding to such new schedule shall be read to
include the words "except as set forth in Schedule [insert applicable
section or subsection number]" or words of similar meaning to appropriately
connote the modifications created by such new schedule. If requested by
either Parent or the Company, as the case may be, prior to Closing, the
other party shall meet and discuss with the requesting party prior to
Closing any update to the Disclosure Schedules disclosed by such other
party which is, in the reasonable judgment of the requesting party, adverse
in any manner to either the Company or Parent. The delivery of an update to
the Disclosure Schedules pursuant to this Section 2.2 shall not cure any
breach of any representation or warranty made in this Agreement, have any
effect for the purpose of determining the satisfaction of the conditions
set forth in Article 6 of this Agreement or otherwise limit or affect the
remedies available hereunder to any party.
2.3 Acquisition Proposals.
(a) Prior to the Effective Time, the Company agrees that neither it, nor
any of its Subsidiaries or Affiliates, nor any of their respective
directors, officers, employees, agents or representatives, will, directly
or indirectly, (i) solicit, initiate, facilitate or encourage (including by
way of furnishing or disclosing non-public information) any inquiries or
the making of any proposal with respect to any merger, consolidation or
other business combination involving the Company or any Subsidiary of the
Company, the acquisition of all or any significant part of the assets or
capital stock of the Company or any Subsidiary of the Company (an
"Acquisition Transaction") or (ii) negotiate, explore or otherwise engage
in discussions with any Person (other than Parent and its representatives)
with respect to any Acquisition Transaction, or which may reasonably be
expected to lead to a proposal for an Acquisition Transaction, or enter
into any agreement, arrangement or understanding with respect to any such
Acquisition Transaction; provided, however, that the Company may, in
response to an unsolicited written proposal from a third party regarding a
Superior Proposal (as hereinafter defined), furnish information to and
engage in discussions and negotiations with such third party, but only if
the Board of Directors of the Company determines in good faith, after
consultation with its financial advisors and outside independent counsel,
that taking such action is in the best interests of the Company and its
shareholders and such action is consistent with its fiduciary duties under
applicable Law. If specifically requested by a Person without prior contact
from the Company or its representatives, the Company may waive the
provisions of any "standstill" agreements between the Company and any
Person to the extent necessary to permit such Person to submit a proposal
for an Acquisition Transaction that the Board of Directors believes, in its
good faith judgment, is reasonably likely to result in a Superior Proposal;
provided, that such waiver (i) does not violate or conflict with the
foregoing provisions of this Section 2.3(a) and (ii) would not, in any
event, permit such Person to acquire any direct or indirect beneficial
ownership of shares of Company Common Stock or participate in any tender
offer or proxy solicitation relating to shares of the Company Common Stock
that would otherwise be prohibited by such "standstill" agreement. It is
understood and agreed, without limitation of the Company's obligations,
that any violation of this Section 2.3 by any director, officer, Affiliate,
investment banker, financial advisor,
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attorney or other advisor or representative of the Company, whether or not
such Person is purporting to act on behalf of the Company, or otherwise,
shall be deemed to be a breach of this Section 2.3 by the Company.
(b) The Company agrees that, as of the date hereof, it, its Subsidiaries
and Affiliates, and the respective directors, officers, employees, agents
and representatives of the foregoing, shall immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
Person (other than Parent and its representatives) conducted heretofore
with respect to any Acquisition Transaction. The Company agrees to promptly
advise Parent in writing of the existence of (x) any inquiries or proposals
(or desire to make a proposal) received by (or indicated to), any such
information requested from, or any negotiations or discussions sought to be
initiated or continued with, the Company, its Subsidiaries or Affiliates,
or any of the respective directors, officers, employees, agents or
representatives of the foregoing, in each case from a Person (other than
Parent and its representatives) with respect to an Acquisition Transaction,
and (y) the terms thereof, including the identity of such third party and
the terms of any financing arrangement or commitment in connection with
such Acquisition Transaction, and to update on an ongoing basis or upon
Parent's reasonable request, the status thereof. As used herein, "Superior
Proposal" means a bona fide, written and unsolicited proposal or offer made
by any Person (or group) (other than Parent or any of its Subsidiaries)
with respect to an Acquisition Transaction on terms which, as determined by
the Board of Directors of the Company in good faith (based on the written
advice of independent financial advisors) and in a manner consistent with
its fiduciary duties under applicable Law, are more favorable, from a
financial point of view, to the Company and its Shareholders than the
transactions contemplated hereby.
2.4 Public Announcements. Any public announcement made by or on behalf of
either Parent or the Company prior to the termination of this Agreement
pursuant to Article 8 hereof concerning this Agreement, the transactions
described herein or any other aspect of the dealings heretofore had or
hereafter to be had between the Company and Parent and their respective
Affiliates must first be approved by the other party (any such approval not to
be unreasonably withheld), subject to either party's obligations under
applicable Law (but such party shall use its best efforts to consult with the
other party as to all such public announcements).
2.5 Confidentiality Agreement. The Company and Parent agree that the
Confidentiality Agreement entered into between the Company and Parent, dated
March 30, 1999, remains in effect, but shall at the Effective Time be deemed
to have terminated without further action by the parties.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Acquisition that:
3.1 Due Incorporation. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the Commonwealth of
Virginia, has the corporate power and authority to own its properties and
assets and to carry on its business as it is now being conducted and is duly
qualified to do business and is in good standing in each of the jurisdictions
in which the ownership of its properties or the conduct of its business
requires such qualification, except for jurisdictions in which the failure to
be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. The Company has delivered to Parent copies of the articles of
incorporation and bylaws or other organizational documents of the Company and
each of its Subsidiaries. Such articles of incorporation and bylaws or other
organizational documents are complete and correct and in full force and
effect, and neither the Company nor any of its Subsidiaries is in violation of
any of the provisions of their respective articles of incorporation, bylaws or
similar organizational documents. Each of the Company's Subsidiaries is duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation or organization, has the corporate, limited
liability company or partnership power and authority, as the case may be, to
own its properties and assets and to carry on its business as it is now being
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conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect. Except as set forth in Section 3.1 of the Disclosure
Schedule, all the outstanding shares of capital stock of, or other ownership
interests in, the Company's Subsidiaries are duly authorized, validly issued,
fully paid and non-assessable and are owned by the Company, directly or
indirectly, free and clear of all Liens, claims, mortgages, encumbrances,
pledges, security interests, equities or charges of any kind. Other than the
Subsidiaries and except as set forth in Section 3.1 of the Disclosure
Schedule, there are no other Persons in which the Company owns, of record or
beneficially, any direct or indirect equity or similar interest or any right
(contingent or otherwise) to acquire the same.
3.2 Capitalization. The authorized capital stock of the Company consists of
90,000,000 shares of Company Common Stock and 5,000,000 shares of preferred
stock, without par value ("Company Preferred Stock"). As of June 7, 1999: (i)
47,727,490 shares of Company Common Stock were issued and outstanding and no
shares of Company Preferred Stock were issued and outstanding; (ii) 990,350
shares of Company Common Stock were subject to outstanding options issued
pursuant to the Company's Amended and Restated Omnibus Stock Incentive Plan,
dated July 1997 (the "Omnibus Plan") and 1,247,525 shares of Company Common
Stock were reserved for issuance under the Omnibus Plan; (iii) 67,100 shares
of Company Common Stock were subject to outstanding options issued pursuant to
the Company's Non-Employee Directors' Stock Option Plan (the "Directors' Stock
Plan") and 42,750 shares of Company Common Stock were reserved for issuance
under the Directors' Stock Plan; (iv) options to purchase 554,150 shares of
the Company Common Stock were outstanding that were granted under other
employee stock incentive plans (and together with the Omnibus Plan and the
Directors' Stock Plan, the "Company Stock Plans"); and (v) warrants to
purchase 1,500,000 shares of Company Common Stock at $25 per share were
outstanding in connection with the acquisition of substantially all of the
assets of Farm Fresh, Inc. Except as set forth in Section 3.2 of the Company
Disclosure Schedule, the Company has previously provided a complete and
correct list of all holders of Existing Options, including such person's name,
the number of options (vested, unvested and total) held by such person and the
exercise price for each such option. All the outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and non-
assessable and free of preemptive rights. Except as set forth above or in
Section 3.2 of the Disclosure Schedule, or as otherwise contemplated by this
Agreement, (1) there are no shares of capital stock of the Company authorized,
issued or outstanding, (2) there are no authorized or outstanding options,
warrants, calls, preemptive rights, subscriptions or other rights, agreements,
arrangements or commitments of any character relating to the issued or
unissued capital stock of the Company or any of its Subsidiaries, obligating
the Company or any of its Subsidiaries to issue, transfer or sell or cause to
be issued, transferred or sold any shares of capital stock or other equity
interests in the Company or any of its Subsidiaries or securities convertible
into or exchangeable for such shares or equity interests, or obligating the
Company or any of its Subsidiaries to grant, extend or enter into any such
option, warrant, call, subscription or other right, agreement, arrangement or
commitment, and (3) there are no outstanding contractual obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares or other capital stock of the Company or any Subsidiary of the
Company or to provide funds to make any investment (in the form of a loan,
capital contribution or otherwise) in any Subsidiary of the Company or any
other Person.
3.3 Authorization; Enforceability. The Board of Directors of the Company
has on or prior to the date of this Agreement (a) declared the Merger
advisable and in the best interests of the Company and the Shareholders and
approved this Agreement in accordance with applicable Law, (b) resolved to
recommend the approval of this Agreement by the Shareholders and (c) directed
that this Agreement be submitted to the Shareholders for approval. The Company
has all requisite corporate power and authority to enter into the Transaction
Agreements to which it is a party and, subject to approval by the Shareholders
of the Merger, to consummate the transactions contemplated hereby and thereby.
The execution and delivery of the Transaction Agreements to which it is a
party by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to (x) approval by the
Shareholders and (y) the filing of the Articles of Merger pursuant to the VSCA
and the filing
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of the Certificate of Merger pursuant to the DGCL. The Transaction Agreements
to which it is a party have been duly executed and delivered by the Company
and (assuming the valid authorizations, execution and delivery thereof by the
other parties thereto) each such Transaction Agreement constitutes the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws relating
to or affecting creditors generally or by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3.4 No Violation or Conflict. Assuming all consents, approvals,
authorizations and other actions described in this Section 3.4 have been
obtained and all filings and obligations described in this Section 3.4 have
been made and except as set forth in Section 3.4 of the Disclosure Schedule,
the execution and delivery of the Transaction Agreements do not, and the
consummation of the transactions contemplated hereby and thereby and
compliance with the provisions hereof and thereof will not, conflict with,
result in any violation of, or breach or default (with or without notice or
lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any material obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any of its Subsidiaries under, any provision of (i) the articles of
incorporation or bylaws of the Company, (ii) any provision of the comparable
charter or organizational documents of any of the Company's Subsidiaries,
(iii) any loan or credit agreement, note, bond, mortgage, lease, indenture or
other contract, agreement, instrument, permit, concession, franchise or
license applicable to the Company or any of its Subsidiaries, or (iv) any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of clauses (ii),
(iii) or (iv), any such conflicts, violations, breaches, defaults, rights,
liens, security interests, charges or encumbrances that, individually or in
the aggregate, would not have a Material Adverse Effect, or adversely affect
the consummation of any of the transactions contemplated hereby or thereby. No
filing, notification or registration with, or authorization, consent or
approval of, any governmental entity is required by or with respect to the
Company or any of its Subsidiaries in connection with the execution and
delivery of the Transaction Agreements by the Company or is necessary for the
consummation by the Company of the Merger and the other transactions
contemplated by the Transaction Agreements, except for (i) in connection, or
in compliance, with the provisions of the HSR Act, the Securities Act of 1933,
as amended, and the rules and regulations thereunder (collectively, the
"Securities Act") and the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder (collectively, the "Exchange Act"), (ii) the
filing of the Articles of Merger with the SCC and the Certificate of Merger
with the Secretary of State of the State of Delaware and the filing of
appropriate documents with the relevant authorities of other states in which
the Company or any of its Subsidiaries is qualified to do business, (iii) such
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or
required approval triggered by the Merger or by the transactions contemplated
by this Agreement, (iv) applicable requirements, if any, of blue sky laws and
the NYSE, and (v) such other consents, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would
not, individually or in the aggregate, have a Material Adverse Effect or
adversely affect the consummation of any of the transactions contemplated
hereby or by any other Transaction Agreement. The execution and delivery of
the Transaction Agreements do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof will not, conflict with, result in any violation of, or breach or
default (with or without notice or lapse of time, or both) under, or give to
others a right of termination, cancellation or acceleration of any material
obligation or the loss of a material benefit under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries under any
leases, subleases, reciprocal operating agreements or reciprocal easement
agreements relating to the Company's retail stores, other than conflicts,
violations, breaches, defaults, rights, liens, security interests, charges or
encumbrances that would not have, individually or in the aggregate, a Material
Adverse Effect, or adversely affect the consummation of any of the
transactions contemplated hereby or thereby.
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3.5 SEC Documents and Other Reports. The Company has filed all required
documents with the SEC since April 27, 1996 (the "Company SEC Reports"). As of
their respective dates, the Company SEC Reports complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and, at the respective times they were filed, none of the
Company SEC Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements (including,
in each case, any notes thereto) of the Company included in the Company SEC
Reports complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with generally accepted
accounting principles ("GAAP") (except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated therein or in
the notes thereto) and fairly present in accordance with GAAP the consolidated
financial position of the Company and its consolidated Subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). The unaudited consolidated balance sheet of
the Company as of May 1, 1999, and the unaudited consolidated statements of
operations and cash flows of the Company for the fiscal year ended May 1,
1999, which have been provided by the Company to Parent were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except that footnotes are absent) and fairly present in accordance with GAAP
the consolidated financial position of the Company and its consolidated
Subsidiaries as at the date thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended
(subject to normal year-end audit adjustments which are not material). Except
as disclosed in the Company SEC Reports or as required by GAAP, the Company
has not, since May 2, 1998, made any change in the accounting practices or
policies applied in the preparation of financial statements. The books and
records of the Company and its Subsidiaries have been, and are being,
maintained in accordance with GAAP and other applicable legal and accounting
requirements.
3.6 No Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, except (a) liabilities or obligations
reflected in the Company SEC Reports filed prior to the date hereof and (b)
liabilities or obligations incurred in the ordinary course of business which
would not, individually or in the aggregate, have a Material Adverse Effect.
3.7 No Violation of Law. The businesses of the Company and its Subsidiaries
are not being conducted in violation of any Law (provided that no
representation or warranty is made in this Section 3.7 with respect to
Environmental Laws (as hereinafter defined)) except (a) as set forth in
Section 3.7 of the Disclosure Schedule and (b) for violations which would not,
individually or in the aggregate, have a Material Adverse Effect.
3.8 Title to Assets. Except as reflected in the Company SEC Reports, the
Company and its Subsidiaries own fee simple or valid leasehold (as the case
may be) title to the Real Estate and have valid title to their other tangible
assets and properties which they purport to own, free and clear of any and all
Liens, except for Permitted Liens. All Buildings and Equipment have been well
maintained and are in good and serviceable condition, normal wear and tear
excepted, except where the failure to be so maintained would not, individually
or in the aggregate, have a Material Adverse Effect.
3.9 Litigation. Except as set forth in the Company SEC Reports filed prior
to the date hereof or in Section 3.9 of the Disclosure Schedule, (a) there are
no actions, suits, claims (including worker's compensation claims), litigation
or other governmental or judicial proceedings or investigations or
arbitrations pending against the Company, its Subsidiaries or any of its
properties, assets or business, or, to the knowledge of the Company, any of
the Company's or any Subsidiary's current or former directors or officers or
any other Person whom the Company or any Subsidiary of the Company has agreed
to indemnify that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect; (b) as of the date hereof, there are no
actions, suits or proceedings pending or, to the knowledge of the Company,
threatened, against the Company relating to the
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transactions contemplated by the Transaction Agreements; and (c) there are no
outstanding orders, judgments, injunctions, awards or decrees of any
governmental entity against the Company, its Subsidiaries, any of its
properties, assets or businesses, or, to the knowledge of the Company, any of
the Company's or its Subsidiaries' current or former directors or officers or
any other Person whom the Company or any Subsidiary of the Company has agreed
to indemnify that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
3.10 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports filed with the SEC prior to the date of this Agreement or
set forth in Section 3.10 of the Disclosure Schedule, since May 2, 1998, (A)
none of the Company or any of its Subsidiaries has incurred any material
liability or obligation (indirect, direct or contingent), or entered into any
material oral or written agreement or other transaction, that is not in the
ordinary course of business or that would, individually or in the aggregate,
result in a Material Adverse Effect, except for any such changes or effects
resulting from this Agreement, the transactions contemplated hereby or the
announcement thereof; (B) the Company or any of its Subsidiaries has not
sustained any loss or interference with their business or properties from
fire, flood, windstorm, accident or other calamity (whether or not covered by
insurance) that would, individually or in the aggregate, have a Material
Adverse Effect; and (C) there has been no event, circumstance or development
that would, individually or in the aggregate, have a Material Adverse Effect,
except for any such changes or effects resulting from the Transaction
Agreements, the transactions contemplated hereby and thereby or the
announcement thereof. Except as disclosed in the Company SEC Reports filed
with the SEC prior to the date of this Agreement or set forth in Section 3.10
of the Disclosure Schedule, since May 1, 1999, there has been no action taken
by the Company or any of its Subsidiaries, that, if taken during the period
from the date of this Agreement through the Effective Time, would constitute a
breach of Section 5.1
3.11 Performance of Contracts. Each material Contract is in full force and
effect and constitutes the legal and binding obligation of the Company and, to
the knowledge of the Company, constitutes the legal and binding obligation of
the other parties thereto. Except as disclosed in Section 3.11 of the
Disclosure Schedule, there are no existing breaches or defaults by the Company
or, to the knowledge of the Company, any other party to a Contract under any
Contract the effect of which would, individually or in the aggregate,
constitute a Material Adverse Effect and, to the knowledge of the Company, no
event has occurred which, with the passage of time or the giving of notice or
both, could reasonably be expected to constitute such a breach or default.
3.12 ERISA
(a) With respect to each material Company Plan (as hereinafter defined),
the Company has made (or as soon as practicable will make) available to
Parent a true and correct copy of (i) the three most recent annual reports
(Form 5500) filed with the Internal Revenue Service ("IRS"), (ii) such
Company Plan document, (iii) each trust agreement, insurance contract or
administration agreement relating to such Company Plan, (iv) the most
recent summary plan description of each Company Plan for which a summary
plan description is required, (v) the most recent actuarial report or
valuation relating to each Company Plan subject to Title IV of ERISA, and
(vi) the most recent determination letter, if any, issued by the IRS with
respect to each Company Plan intended to be qualified under Section 401(a)
of the Code. Except as disclosed in Section 3.12 of the Disclosure
Schedule, and except for events or actions that would not, individually or
in the aggregate, have a Material Adverse Effect, (i) each Company Plan
complies with all applicable statutes and governmental rules and
regulations, including but not limited to ERISA, the Code and COBRA, (ii)
no "reportable event" (within the meaning of Section 4043 of ERISA) has
occurred with respect to any Company Plan, (iii) neither the Company nor
any of its ERISA Affiliates has withdrawn from any Multiemployer Plan (as
hereinafter defined), or instituted, or is currently considering taking,
any action to do so, (iv) no action has been taken, or is currently being
considered, to terminate any Company Plan subject to Title IV of ERISA, and
(v) the Company and its ERISA Affiliates have complied with the continued
medical coverage requirements of COBRA. Except as would not, individually
or in the aggregate, have a Material Adverse Effect, no Company Plan, nor
any trust created thereunder, has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived.
Except as
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disclosed in Section 3.12 of the Disclosure Schedule, with respect to any
Company Plan which is subject to Title IV of ERISA, the present value of
accrued benefit obligations, as determined in accordance with FAS 87 in
accordance with the actuarial assumptions used to prepare the most recent
reports of such Company Plan, did not exceed the fair market value of the
Plan assets as of the most recent valuation date for which an actuarial
report has been prepared, and the Company has no knowledge of any material
adverse change to such status.
(b) With respect to the Company Plans, except as disclosed in Section
3.12 of the Disclosure Schedule, no event has occurred in connection with
which the Company or any ERISA Affiliate would be subject to any liability,
other than for the payment of benefits made in the ordinary course of
business, under the terms of such Company Plans, ERISA, the Code or any
other applicable law which would have a Material Adverse Effect. Except as
disclosed in the Company SEC Reports filed prior to the date hereof or in
Section 3.12 of the Disclosure Schedule, with respect to any current or
former employee or contractor of the Company or its Subsidiaries,
consummation of the transactions contemplated by this Agreement shall not
result in the payment or provision of additional compensation or benefits
or accelerate the vesting, payment or funding of any compensation or
benefits. Except as disclosed in the Company SEC Reports filed prior to the
date hereof or in Section 3.12 of the Disclosure Schedule, no amounts
payable or provided by the Company or its Subsidiaries related to the
transactions contemplated by this Agreement will constitute "excess
parachute payments" within the meaning of Section 280G of the Code. Except
as disclosed in Section 3.12 of the Disclosure Schedule, Company Plans that
are intended to be qualified under Section 401(a) of the Code have been
determined by the IRS to be so qualified, or a timely application for such
determination is now pending, and to the knowledge of the Company, there is
no reason why any Company Plan is not so qualified in operation. Neither
the Company nor any of its ERISA Affiliates has been notified by any
Multiemployer Plan that such Multiemployer Plan is currently in
reorganization or insolvency under and within the meaning of Section 4241
or 4245 of ERISA or that such Multiemployer Plan intends to terminate or
has been terminated under Section 4041A of ERISA. Except as disclosed in
the Company SEC Reports filed prior to the date hereof or in Section 3.12
of the Disclosure Schedule, neither the Company nor any of its ERISA
Affiliates has any liability or obligation under any welfare plan to
provide benefits after termination of employment to any employee or
dependent other than as required by ERISA. There are no pending, or to the
knowledge of the Company, threatened claims, suits, audits or
investigations related to any Company Plan other than claims for benefits
in the ordinary course and other than claims, suits, audits or
investigations that would not, individually or in the aggregate, have a
Material Adverse Effect. As used herein, (i) "Company Plan" means a
"pension plan" (as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan)) or a "welfare plan" (as defined in Section 3(1) of
ERISA) established or maintained by the Company or any of its ERISA
Affiliates or as to which the Company or any of its ERISA Affiliates has
contributed in the last six years or otherwise may have any liability and
all other retirement, deferred compensation, severance, termination, change
in control, stock option, restricted stock or phantom stock plans, policies
or programs of the Company or its Subsidiaries, (ii) "Multiemployer Plan"
means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to
which the Company or any of its ERISA Affiliates is or has been obligated
to contribute in the last six years or otherwise may have any liability and
(iii) with respect to any Person, "ERISA Affiliate" means any trade or
business (whether or not incorporated) which is under common control or
would be considered a single employer with such Person pursuant to Section
414(b), (c), (m) or (o) of the Code and the regulations promulgated under
those sections or pursuant to Section 4001(b) of ERISA and the regulations
promulgated thereunder, including, without limitation, each of the
Company's Subsidiaries.
3.13 Taxes.
(a) Tax Returns. For all years for which the applicable statutory period
of limitation has not expired, the Company has timely and properly filed,
and will through the Closing Date timely and properly file, all material
federal, state, local and foreign tax returns (including but not limited to
income, franchise, sales, payroll, employee withholding and social security
and unemployment) which were or (in the case of returns not yet due but due
on or before the Closing Date, taking into account any valid extension of
the time for
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filing) will be required to be filed. The Company has paid all taxes
(including interest and penalties) and withholding amounts owed by it,
except where the failure to pay such taxes or withholding amounts would
not, individually or in the aggregate, have a Material Adverse Effect. No
material, unpaid tax deficiencies have been proposed or assessed against
the Company and no material tax deficiencies, whether paid or unpaid, have
been proposed or assessed against the Company since December 31, 1996. To
the knowledge of the Company, no issue has been raised in any prior tax
audit of the Company which, by application of the same or substantially the
same principles, could reasonably be expected upon a future tax audit of
the Company to result in a proposed material deficiency for any period.
Except as set forth in Section 3.13 of the Disclosure Schedule, the Company
is not liable for any taxes attributable to any other Person, whether by
reason of being a member of another affiliated group, being a party to a
tax sharing agreement, as a transferee or successor, or otherwise.
(b) Audits. Except as set forth in Section 3.13 of the Disclosure
Schedule, the Company has not consented to any extension of the statute of
limitation with respect to any open federal, state or local tax returns.
(c) Liens. Except as set forth in Section 3.13 of the Disclosure
Schedule, there are no tax Liens upon any property or assets of the Company
except for Liens for current taxes not yet due and payable.
(d) Deliveries. The Company has delivered to Parent correct and complete
copies of all material tax returns and reports of the Company filed for all
periods not barred by the applicable statute of limitations through the
Effective Time. Except as set forth in Section 3.13 of the Disclosure
Schedule, no examination or audit of any material tax return or report for
any period not barred by the applicable statute of limitations has
occurred, no such examination is in progress and, to the knowledge of the
Company, no such examination or audit is planned.
(e) Withholding Taxes. The Company has properly withheld and timely paid
substantially all withholding and employment taxes which it was required to
withhold and pay relating to salaries, compensation and other amounts
heretofore paid to its employees or other Persons. All Forms W-2 and 1099
required to be filed with respect thereto have been timely and properly
filed except where the failure to file would not, individually or in the
aggregate, have a Material Adverse Effect.
(f) Other Representations. The Company has not and will not make any
elections under Section 341(f) of the Code and, except as shown in Section
3.13 of the Disclosure Schedule, has and will not be subject to Section
280G of the Code.
3.14 Labor Matters. Except as set forth in Section 3.14 of the Disclosure
Schedule or in the Company SEC Reports filed prior to the date hereof, neither
the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement or labor contract. Except as set forth in Section 3.14 of
the Disclosure Schedule, neither the Company nor any of its Subsidiaries has
engaged in any unfair labor practice with respect to any person employed by or
otherwise performing services primarily for the Company or any of its
Subsidiaries (the "Company Business Personnel"), and there is no unfair labor
practice complaint or grievance against the Company or any of its Subsidiaries
by the National Labor Relations Board or any comparable state agency pending
or, to the Company's knowledge, threatened with respect to the Company
Business Personnel, except where such unfair labor practice, complaint or
grievance would not, individually or in the aggregate, have a Material Adverse
Effect. As of the date hereof, there is no labor strike, dispute, slowdown or
stoppage pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries which may interfere with the
respective business activities of the Company or any of its Subsidiaries,
except where such dispute, strike or work stoppage would not, individually or
in the aggregate, have a Material Adverse Effect. The Company and its
Subsidiaries are in material compliance with all labor, employment and wage
payment-related laws, regulations and rules.
3.15 Existing Permits. No action or proceeding is pending or, to the
knowledge of the Company, threatened that is reasonably likely to result in a
revocation, non-renewal, termination, suspension or other material impairment
of any material Existing Permits.
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3.16 Intangible Assets. Except as set forth in Section 3.16 of the
Disclosure Schedule, there are no material claims, demands or proceedings
instituted, pending or, to the knowledge of the Company, threatened by any
Person contesting or challenging the right of the Company or any of its
Subsidiaries to use any of its Intangible Assets. Each trademark registration,
service mark registration, copyright registration, patent and patent
application which is owned by the Company and any of its Subsidiaries has been
maintained in good standing except where the failure to so maintain would not,
individually or in the aggregate, have a Material Adverse Effect. The Company
and each of its Subsidiaries owns or possesses adequate licenses or other
rights to use all Intangible Assets necessary to conduct its business as now
conducted, except where the failure to own or possess such licenses could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The consummation of the Merger and the transactions
contemplated by this Agreement will not impair the validity, enforceability,
ownership or right of the Company and each of its Subsidiaries to use its
Intangible Assets except, in each case, where the impairment would not,
individually or in the aggregate, have a Material Adverse Effect.
3.17 Environmental Matters.
(a) Except as set forth in Section 3.17 of the Disclosure Schedule, the
Company is, and at all times has been, in full compliance with
Environmental Laws, except where the failure to be in compliance would not,
individually or in the aggregate, have a Material Adverse Effect. Except as
set forth in Section 3.17 of the Disclosure Schedule, and except as would
not otherwise, individually or in the aggregate, have a Material Adverse
Effect, the Company has not received any actual or proposed order, notice
or other communication (written or oral) from (i) any governmental body or
third party or (ii) the current or prior owner or operator of any property,
of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or threatened obligation to undertake
or bear the cost of any Environmental Claim with respect to any property or
assets (whether real, personal or mixed) in which the Company has had an
interest.
(b) Except as disclosed in Section 3.17 of the Disclosure Schedule or as
would not, individually or in the aggregate, have a Material Adverse
Effect, there are no pending or, to the knowledge of the Company,
threatened Environmental Claims, encumbrances, or other restrictions of any
nature, resulting from any liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any property and assets
(whether real, personal or mixed) in which the Company has or had an
interest.
(c) The Company has obtained all environmental, health and safety
permits and governmental authorizations (collectively, the "Environmental
Permits") required for its operations, and all such permits are in good
standing and the Company is in substantial compliance with all terms and
conditions of the Environmental Permits, except where the failure to obtain
or be in compliance with such Environmental Permits would not, individually
or in the aggregate, have a Material Adverse Effect.
3.18 Vote Required. The affirmative vote of the holders of more than two-
thirds of the shares of Company Common Stock entitled to vote with respect to
the Merger is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve the Merger, this Agreement and
the transactions contemplated hereby. The dissenter's rights provided in
Article 15 of the VSCA are not applicable to the Merger and not available to
holders of Company Common Stock in the Merger.
3.19 Disclosure Documents. None of the information supplied or to be
supplied by the Company in writing specifically for inclusion in (i) the Proxy
Statement/Prospectus, and (ii) the Registration Statement will, in the case of
the Proxy Statement/Prospectus, either at the time of mailing of the Proxy
Statement/Prospectus to Shareholders or at the time of the Shareholder
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading or will, in the case of the Registration Statement, either at
the time the Registration Statement is filed with the SEC or at the time the
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading
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except that no representation or warranty is made by the Company with respect
to the information supplied by Parent.
3.20 Opinion of Financial Advisor. The Company has received the opinion of
Donaldson, Lufkin & Jenrette Securities Corporation, its financial advisor, to
the effect that, as of June 9, 1999, the Merger Consideration to be received
in the Merger, based upon and subject to the assumptions and limitations set
forth in such opinion, by the Shareholders is fair to such Shareholders from a
financial point of view, a copy of which opinion has been delivered to Parent.
3.21 Certain Agreements. Except as set forth in Section 3.21 of the
Disclosure Schedule, the Company is not a party to any oral or written
agreement or plan, including any stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan, any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement. Except as
described in Section 3.21 of the Disclosure Schedule, the transactions
contemplated by this Agreement will not constitute a "change of control"
under, require the consent from or the giving of notice to any third party
pursuant to, or accelerate the vesting or repurchase rights under, the terms,
conditions or provisions of any material Contract.
3.22 Finders or Brokers. Except for Donaldson, Lufkin & Jenrette Securities
Corporation with respect to the Company, a copy of whose engagement agreement
has been or will be provided to Parent, neither the Company nor its
Subsidiaries has employed any investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who might
be entitled to any fee or any commission in connection with or upon
consummation of the transactions contemplated hereby.
3.23 Takeover Statutes. No restrictive provision of any "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover
statute or regulation (each a "Takeover Statute") or restrictive provision of
any applicable anti-takeover provision in the Company's articles of
incorporation and bylaws is applicable to the Company, the Company Common
Stock, the Merger or the other transactions contemplated by this Agreement
(including, without limitation, Article 14 of the VSCA).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company as
follows:
4.1 Due Incorporation. Each of Parent and Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, has the corporate power and authority to own its properties and
assets and to carry on its business as it is now being conducted and is duly
qualified to do business and is in good standing in each of the jurisdictions
in which the ownership of its properties or the conduct of its business
requires such qualification, except for jurisdictions in which the failure to
be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. Parent has delivered to the Company copies of the certificates
of incorporation and bylaws or other organizational documents of Parent,
Acquisition and each of Parent's material Subsidiaries. Such certificates of
incorporation and bylaws or other organizational documents are complete and
correct and in full force and effect, and none of Parent, Acquisition nor any
such Subsidiary is in violation of any of the provisions of their respective
certificates of incorporation, bylaws or similar organizational documents.
Each of Parent's Subsidiaries is a corporation duly organized, validly
existing and in good standing under the Laws of its jurisdiction of
incorporation or organization, has the corporate power and authority to own
its properties and assets and to carry on its business as it is now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which the
failure to be so
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qualified would not, individually or in the aggregate, have a Material Adverse
Effect. Acquisition has no Subsidiaries. Acquisition was formed solely for the
purpose of engaging in the transactions contemplated hereby and has not
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated hereby. Except as set forth on
Schedule 4.1 of the Parent Disclosure Schedule, all the outstanding shares of
capital stock of, or other ownership interests in, Parent's Subsidiaries are
duly authorized, validly issued, fully paid and non-assessable and are owned
by Parent, directly or indirectly, free and clear of all Liens, claims,
mortgages, encumbrances, pledges, security interests, equities or charges of
any kind. Other than the Subsidiaries, there are no other Persons in which
Parent owns, of record or beneficially, any direct or indirect equity or
similar interest or any right (contingent or otherwise) to acquire the same.
4.2 Capitalization.
(a) The authorized capital stock of the Parent consists of 200,000,000
shares of Parent Common Stock and 1,000,000 shares of preferred stock, no
par value ("Parent Preferred Stock"). As of June 7, 1999: (i) 119,759,837
shares of Parent Common Stock were issued and outstanding; (ii) 9,423,607
shares of Parent Common Stock were subject to outstanding options issued
pursuant to Parent's stock option plans ("Plans"), and 12,000,000 shares of
Parent Common Stock were reserved for issuance under the Plans; and (iii)
1,341 shares of Parent Preferred Stock were issued and outstanding. All the
outstanding shares of capital stock of Parent are duly authorized, validly
issued, fully paid and non-assessable. Except as disclosed in Parent's 1999
Proxy Statement and except as set forth above, other than the transactions
contemplated by this Agreement, (1) there are no shares of capital stock of
Parent authorized, issued or outstanding, (2) there are no authorized or
outstanding options, warrants, calls, preemptive rights, subscriptions or
other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of Parent or any of its
Subsidiaries, obligating Parent or any of its Subsidiaries to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or other equity interest in Parent or any of its Subsidiaries
or securities convertible into or exchangeable for such shares or equity
interests, or obligating Parent or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, subscription or other right,
agreement, arrangement or commitment and (3) there are no outstanding
contractual obligations of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares or other capital stock of Parent or
any of its Subsidiaries or to provide funds to make any investment (in the
form of a loan, capital contribution or otherwise) in any Subsidiary of
Parent or any other Person.
(b) The authorized capital stock of Acquisition consists of 1000 shares
of common stock, par value $0.01 per share, all of which are duly
authorized, validly issued, fully paid and nonassessable and free of any
pre-emptive rights in respect thereof and all of which are owned by Parent.
4.3 Authorization; Enforceability. Each of Parent and Acquisition has all
requisite corporate power and authority to enter into the Transaction
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of the Transaction
Agreements to which it is a party by Parent and Acquisition and the
consummation by Parent and Acquisition of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Parent and Acquisition, subject to the filing of the Articles of
Merger pursuant to the VSCA and the filing of the Certificate of Merger
pursuant to the DGCL. The Transaction Agreements to which it is a party have
been duly executed and delivered by each of Parent and Acquisition and
(assuming the valid authorizations, execution and delivery thereof by the
other parties thereto) each such Transaction Agreement constitutes the valid
and binding obligation of Parent and Acquisition enforceable against Parent
and Acquisition in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to or affecting creditors generally or by general
equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
4.4 No Violation or Conflict. Assuming all consents, approvals,
authorizations and other actions described in this Section 4.4 have been
obtained and all filings and obligations described in this Section 4.4 have
been made and except as set forth in Schedule 4.4 of the Parent Disclosure
Schedule, the execution and delivery of
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the Transaction Agreements do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof will not, conflict with, result in any violation of, or breach or
default (with or without notice or lapse of time, or both) under, or give to
others a right of termination, cancellation or acceleration of any material
obligation or the loss of a material benefit under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Parent or any of its Subsidiaries under, any provision
of (i) the articles of incorporation or bylaws of Parent, (ii) any provision
of the comparable charter or organizational documents of any of Parent's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage, lease,
indenture or other contract, agreement, instrument, permit, concession,
franchise or license applicable to Parent or any of its Subsidiaries, or (iv)
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clauses (ii), (iii) or (iv),
any such conflicts, violations, breaches, defaults, rights, liens, security
interests, charges or encumbrances that, individually or in the aggregate,
would not have a Material Adverse Effect, or adversely affect the consummation
of any of the transactions contemplated hereby or thereby. No filing,
notification or registration with, or authorization, consent or approval of,
any governmental entity is required by or with respect to Parent and
Acquisition or any of Parent's Subsidiaries in connection with the execution
and delivery of the Transaction Agreements by Parent and Acquisition or is
necessary for the consummation by Parent and Acquisition of the Merger and the
other transactions contemplated by the Transaction Agreements, except for (i)
in connection, or in compliance, with the provisions of the HSR Act, the
Securities Act and the Exchange Act, (ii) the filing of the Articles of Merger
with the SCC and the Certificate of Merger with the Secretary of State of the
State of Delaware, and the filing of appropriate documents with the relevant
authorities of other states in which Parent or any of its Subsidiaries is
qualified to do business, (iii) such filings and consents as may be required
under any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or by
the transactions contemplated by this Agreement, (iv) applicable requirements,
if any, of blue sky laws and the NYSE, and (v) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which
to be obtained or made would not, individually or in the aggregate, have a
Material Adverse Effect or adversely affect the consummation of any of the
transactions contemplated hereby or by any other Transaction Agreement.
4.5 SEC Documents and Other Reports. Parent has filed all required
documents with the SEC since February 22, 1997 (the "Parent SEC Reports"). As
of their respective dates, the Parent SEC Reports complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and, at the respective times they were filed, none of Parent
SEC Reports contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements (including, in each
case, any notes thereto) of Parent included in the Parent SEC Reports complied
as to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with GAAP (except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated therein or in
the notes thereto) and fairly present in accordance with GAAP the consolidated
financial position of Parent and its consolidated Subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the Parent SEC Reports
or as required by GAAP, Parent has not, since February 27, 1999, made any
change in the accounting practices or policies applied in the preparation of
financial statements. The books and records of Parent and its Subsidiaries
have been, and are being, maintained in accordance with GAAP and other
applicable legal and accounting requirements.
4.6 No Undisclosed Liabilities. Neither Parent nor any of its Subsidiaries
has any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, except (a) liabilities or obligations reflected in
Parent SEC Reports filed prior to the date hereof and (b) liabilities or
obligations incurred in the ordinary course of business which would not,
individually or in the aggregate, have a Material Adverse Effect.
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4.7 No Violation of Law. The businesses of Parent and its Subsidiaries are
not being conducted in violation of any Law except (a) as set forth in
Schedule 4.7 of the Parent Disclosure Schedule and (b) for violations which
would not, individually or in the aggregate, have a Material Adverse Effect.
4.8 Litigation. Except as set forth in Parent SEC Reports filed prior to
the date hereof or in Schedule 4.8 of the Parent Disclosure Schedule, (a)
there are no actions, suits, claims (including worker's compensation claims),
litigation or other governmental or judicial proceedings or investigations or
arbitrations pending against Parent, its Subsidiaries or any of their
properties, assets or business, or, to the knowledge of Parent, any of
Parent's or any Subsidiary's current or former directors or officers or any
other Person whom Parent or any Subsidiary of Parent has agreed to indemnify
that could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect; (b) as of the date hereof, there are no actions,
suits or proceedings pending or, to the knowledge of Parent, threatened,
against Parent relating to the transactions contemplated by the Transaction
Agreements; and (c) there are no outstanding orders, judgments, injunctions,
awards or decrees of any governmental entity against Parent, its Subsidiaries,
any of their properties, assets or businesses, or, to the knowledge of Parent,
any of Parent's or its Subsidiaries' current or former directors or officers
or any other Person whom Parent or any Subsidiary of Parent has agreed to
indemnify that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
4.9 Absence of Certain Changes or Events. Except as disclosed in the Parent
SEC Reports filed with the SEC prior to the date of this Agreement or set
forth in Schedule 4.9 of the Parent Disclosure Schedule, since February 27,
1999, (A) none of Parent or any of its Subsidiaries has incurred any material
liability or obligation (indirect, direct or contingent), or entered into any
material oral or written agreement or other transaction, that is not in the
ordinary course of business or that would, individually or in the aggregate,
result in a Material Adverse Effect, except for any such changes or effects
resulting from this Agreement, the transactions contemplated hereby or the
announcement thereof; (B) Parent or any of its Subsidiaries has not sustained
any loss or interference with their business or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by insurance)
that would, individually or in the aggregate, have a Material Adverse Effect;
and (C) there has been no event, circumstance or development that would,
individually or in the aggregate, have a Material Adverse Effect, except for
any such changes or effects resulting from the Transaction Agreements, the
transactions contemplated hereby or thereby or the announcement thereof.
4.10 Authorization of Parent Common Stock. Parent has taken all necessary
action to permit it to issue the number of shares of Parent Common Stock
required to be issued pursuant to Article 1. Parent Common Stock issued
pursuant to Article 1 hereof will, when issued, be duly authorized, validly
issued, fully paid and nonassessable and no Person will have any preemptive
right of subscription or purchase in respect thereof.
4.11 Brokers or Finders. Except for Merrill Lynch & Co. with respect to
Parent, a copy of whose engagement agreement has or will be provided to the
Company, neither Parent nor any of its Subsidiaries has employed any
investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to any fee or any
commission in connection with or upon consummation of the transactions
contemplated hereby.
4.12 Disclosure Documents. None of the information supplied or to be
supplied by Parent for inclusion in (i) the Proxy Statement/Prospectus, and
(ii) the Registration Statement will, in the case of the Proxy
Statement/Prospectus, either at the time of mailing of the Proxy
Statement/Prospectus to Shareholders or at the time of the Shareholder
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading or will, in the case of the Registration Statement, either at
the time the Registration Statement is filed with the SEC or at the time the
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading except that no representation or warranty is made by Parent with
respect to the information supplied by the Company.
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ARTICLE 5
COVENANTS
5.1 Conduct of Business by the Company. From and after the date of this
Agreement and until the earlier of the termination of this Agreement or the
Effective Time (unless the other party shall otherwise agree in writing and
except as otherwise contemplated by this Agreement), the Company will, and
will cause each of its Subsidiaries to, conduct its operations according to
its ordinary and usual course of business consistent with past practice and,
to the extent consistent therewith, use best efforts to preserve intact its
current business organizations, keep available the services of its current
officers and employees and preserve its relationships with customers,
suppliers, and others having business dealings with it. Without limiting the
generality of the foregoing, and except as otherwise permitted in this
Agreement or set forth on Section 5.1 of the Disclosure Schedule, prior to the
Effective Time, neither the Company nor its Subsidiaries will:
(a) except for shares to be issued or delivered pursuant to the Existing
Options, issue, deliver, sell, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, sale, disposition or pledge or other
encumbrance of (A) any additional shares of capital stock of any class, or
any securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for any shares of capital stock, or any rights,
warrants, options, calls, commitments or any other agreements of any
character to purchase or acquire any shares of capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of capital stock, or (B) any other
securities in respect of, in lieu of, or in substitution for, Company
Common Stock outstanding on the date hereof;
(b) amend its articles of incorporation or bylaws or alter through
merger, liquidation, reorganization, restructuring or in any other fashion
the corporate structure or ownership of any Subsidiary of the Company
(other than pursuant to the Merger) or split, combine, subdivide or
reclassify any Company Common Stock or declare, set aside for payment or
pay any dividend (except for regular quarterly dividends not in excess of
$.05 per share of Company Common Stock), or make any other actual,
constructive or deemed distribution in respect of any Company Common Stock
or otherwise make any payments to Shareholders in their capacity as such;
(c) make payments or distributions (other than normal salaries) to any
Affiliate of the Company, except for transactions in the ordinary course of
business upon commercially reasonable, arm's length terms;
(d) (i) enter into, accelerate, terminate, modify in any material
respect, or cancel any supply agreement having a term in excess of six
months or any lease or purchase contract relating to the creation,
expansion or acquisition of a new retail store, (ii) enter into,
accelerate, terminate, modify in any material respect, or cancel any other
Contract (other than purchase orders entered into in the ordinary course of
business with terms less than six months) involving amounts greater than
$750,000 and outside the ordinary course of business or (iii) knowingly do
any act or knowingly omit to do any act or, to the extent within the
Company's reasonable control, knowingly permit any act or omission to act,
which will cause a breach of any of the Contracts that would have a
Material Adverse Effect;
(e) (A) enter into or adopt any, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any Company Plan or
employment or consulting agreement, other than (A) as required by Law, or
(B) except as expressly contemplated by this Agreement; increase the
compensation payable or to become payable to its officers, employees, or
directors except for increases in salaries or wages or payments of bonuses
or other compensation in the ordinary course of business consistent with
past practice to employees of the Company or any of its Subsidiaries who
are not executive officers of the Company or any of its Subsidiaries or
grant any additional rights to severance or termination pay to, or enter
into any employment or severance agreement with, any director or officer of
the Company or any of its Subsidiaries, or establish, adopt, enter into or,
except as may be required to comply with applicable Law, amend or take
action in any such case in a manner so as to enhance or accelerate any
rights or benefits under, any labor, collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
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retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any director, officer or employee;
(f) make any material acquisition, by means of merger, consolidation or
otherwise, or material disposition (other than disposition of assets in the
ordinary course of business, consistent with past practice), of assets or
securities or authorize or make any individual capital expenditure (other
than the capital expenditures provided in the Company's capital expenditure
budget for fiscal year 2000 which has been previously provided to Parent)
in excess of $250,000; provided, however, that representatives of the
Company will consult on a regular basis with representatives of Parent with
respect to capital expenditures permitted by this clause (f) and its plans
with respect thereto;
(g) settle or compromise any material claims or litigation, except in
the ordinary and usual course of business;
(h) make any material change, other than in the ordinary course of
business and consistent with past practice or as required by applicable
Law, regulation or change in GAAP, in accounting policies or procedures
applied by the Company (including tax accounting policies and procedures);
(i) create, incur or assume any Indebtedness or make any Investment,
other than in the ordinary course of business;
(j) fail to maintain all of the Existing Insurance Policies (or policies
substantially equivalent thereto) in full force and effect, unless all
reasonable efforts to maintain the Existing Insurance Policies have been
undertaken;
(k) fail to preserve in all material respects its business organization
intact, to retain the services of the employees and to conduct business
with suppliers, customers, creditors and others having business
relationships with the Company in the best interests of the Company, unless
all commercially reasonable efforts consistent with the Company's past
practice to preserve, retain and conduct such organization, employees and
business have been undertaken;
(l) knowingly do any act or omit to do any act that would result in a
breach of any representation by the Company set forth in this Agreement; or
(m) authorize, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
5.2 Information Supplied. The Company and Parent each agrees, as to itself
and its Subsidiaries, that none of the information supplied or to be supplied
by it or its Subsidiaries in writing specifically for inclusion or
incorporation by reference in (i) the Registration Statement on Form S-4 (the
"Registration Statement") to be filed with the SEC by Parent in connection
with the issuance of shares of Parent Common Stock in the Merger (including
the proxy statement and prospectus (the "Proxy Statement/Prospectus")
constituting a part thereof) will, at the time the Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading and (ii) the Proxy
Statement/Prospectus and any amendment or supplement thereto will, at the date
of mailing to shareholders and at the time of the meeting of shareholders of
the Company to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
5.3 Shareholder Meeting. The Company will take, in accordance with
applicable law and its articles of incorporation and bylaws, all action
necessary to convene a meeting of holders of Company Common Stock (the
"Shareholder Meeting") as promptly as practicable after the Registration
Statement is declared effective to consider and vote upon the approval of this
Agreement. Except as provided in Section 8.1(c)(i) with respect to a
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Superior Proposal, the Company's board of directors shall recommend such
approval and shall take all lawful action to solicit such approval.
5.4 Filings; Approvals and Consents; Cooperation. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including
(i) the obtaining of all necessary actions or nonactions, waivers, consents
and approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities) and
the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any Governmental
Entity, (ii) the obtaining of all necessary consents, approvals or waivers
from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, investigating or challenging
this Agreement or the consummation of any of the transactions contemplated by
this Agreement, including seeking to have any stay or temporary restraining
order entered by any court or other Governmental Entity vacated or reversed
and (iv) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the
purposes of, this Agreement.
(b) Parent and the Company shall file as soon as practicable after the
date of this Agreement notifications under the HSR Act and shall respond as
promptly as practicable to all inquiries or requests received from the
Federal Trade Commission or the Antitrust Division of the Department of
Justice for additional information or documentation and shall respond as
promptly as practicable to all inquires and requests received from any
State Attorney General or other Governmental Entity in connection with
antitrust matters. The parties shall cooperate with each other in
connection with the making of all such filings or responses, including
providing copies of all such documents to the other party and its advisors
prior to filing or responding. Parent and Acquisition agree to use their
respective best efforts to avoid the entry of (or, if entered, to lift,
vacate or reverse) any order, decree, judgment or ruling of any court or
Governmental Entity restraining or preventing the consummation of the
Merger on the basis of any federal, state or local antitrust laws or
regulations, including by committing to or effecting (by consent decree,
hold separate order or otherwise) the sale or disposition of such assets of
Parent or the Company as may be required to avoid (or, if entered, to lift,
vacate or reverse) any such order, decree, judgment or ruling; provided,
however, that in no event shall Parent, Acquisition or the Company be
obligated under this Section 5.4 to take any action which is reasonably
likely to have a Material Adverse Effect on Parent, Acquisition or the
Company.
(c) As soon as practicable following the execution of this Agreement,
Parent and the Company shall promptly prepare, and the Company shall file
with the SEC the Proxy Statement/Prospectus as preliminary proxy materials
under the Exchange Act, and shall seek confidential treatment with respect
thereto. Parent and the Company shall cooperate to respond promptly to any
comments made by the SEC with respect thereto. Upon resolution of any SEC
comments with respect to the draft Proxy Statement/Prospectus, or at such
other time as may be mutually determined by the parties hereto, Parent
shall prepare and file the Registration Statement (including the then-
current draft of the Proxy Statement/Prospectus) with the SEC, and:
(i) Parent and the Company shall respond promptly to any comments
made by the SEC with respect thereto;
(ii) Parent and the Company shall use their respective best efforts
to cause the Registration Statement to become effective under the
Securities Act as soon as practicable, and the Company shall cause the
Proxy Statement/Prospectus to be mailed to the Shareholders at the
earliest practicable time after effectiveness of the Registration
Statement;
(iii) Parent shall promptly advise the Company (A) when the
Registration Statement becomes effective, (B) when, prior to the
Effective Time, any amendment to the Registration Statement shall be
filed or become effective, (C) of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and
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(D) of the receipt by Parent of any notification with respect to the
suspension of the registration or qualification of Parent Common Stock
for sale in any jurisdiction or the institution or threatening of any
proceeding for that purpose; and
(iv) Parent and the Company shall use their respective best efforts
to prevent the issuance of any such stop order and, if issued, to
obtain as soon as possible the withdrawal thereof.
(d) The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and shareholders and such other matters as may be
reasonably necessary or advisable in connection with the Proxy
Statement/Prospectus, the Registration Statement or any other statement,
filing, notice or applicable made by or on behalf of Parent, the Company or
any of their respective Subsidiaries to any third party and/or any
Governmental Entity in connection with the Merger and the transaction
contemplated by this Agreement.
(e) The Company and Parent each shall keep the other apprised of the
status of matters relating to completion of the transactions hereby,
including promptly furnishing the other with copies of any notice or other
communications received by Parent or the Company, as the case may be, or
any of their respective Subsidiaries, from any third party and/or any
Governmental Entity with respect to the Merger and the other transactions
contemplated by this Agreement.
5.5 Listing of Parent Common Stock. Parent shall use its best efforts to
cause the shares of Parent Common Stock to be issued in the Merger to be
approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
5.6 Affiliates. Prior to the Effective Time, the Company shall deliver to
Parent a list of names and addresses of those Persons who are, in the opinion
of the Company, as of the time of the Shareholder Meeting, "affiliates" of the
Company within the meaning of Rule 145 under the Securities Act. The Company
shall provide to Parent such information and documents as Parent shall
reasonably request for purposes of reviewing such list. There shall be added
to such list the names and addresses of any other Person subsequently
identified by either Parent or the Company as a Person who may be deemed to be
such an affiliate of the Company; provided, however, that no such Person
identified by Parent shall be added to the list of affiliates of the Company
if Parent shall receive from the Company, on or before the date of the
Shareholder Meeting, an opinion of counsel reasonably satisfactory to Parent
to the effect that such Person is not such an affiliate. The Company shall
seek to deliver or cause to be delivered to Parent, prior to the date of the
Shareholder Meeting, from each affiliate of the Company identified in the
foregoing list (as the same may be supplemented as aforesaid), a letter dated
as of the Closing Date substantially in the form attached as Exhibit 3 (the
"Affiliates Letter"). Parent shall not be required to maintain the
effectiveness of the Registration Statement or any other registration
statement under the Securities Act for the purposes of resale of Parent Common
Stock by such affiliates received in the Merger and the certificates
representing Parent Common Stock received by such affiliates shall bear a
customary legend regarding applicable Securities Act restrictions and the
provisions of this Section.
5.7 Takeover Statute. If any Takeover Statute is or may become applicable
to the Merger or the other transactions contemplated by this Agreement, each
of Parent and the Company and its board of directors shall grant such
approvals and take such actions as are necessary so that such transactions may
be consummated as promptly as practicable on the terms contemplated by this
Agreement or by the Merger and otherwise act to eliminate or minimize the
effects of such statute or regulation on such transactions.
5.8 Tax-Free Reorganization. Each of Parent, Acquisition and Company shall
use all reasonable efforts to cause the Merger to constitute a
"reorganization" within the meaning of Section 368(a) of the Code. Unless
otherwise required (and then only to the extent otherwise required) by a
"determination" (as defined in Section 1313(a)(1)) of the Code or by a similar
applicable provision of state or local income tax law, each party shall (i)
report the Merger on all tax returns and other filings as a reorganization
within the meaning of Section 368(a) of the Code and, (ii) not take any
position that is inconsistent with the characterization of the Merger as such
a reorganization in any audit, administrative proceeding, litigation or
otherwise.
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ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to consummate the Merger shall be subject
to the satisfaction prior to or at the Closing as hereinafter provided of the
following express conditions precedent, each of which may be waived in whole
or in part by the Company, Parent or Acquisition, as the case may be, to the
extent permitted by Law:
(a) Regulatory Approvals. Clearance from the appropriate agencies
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), shall have been obtained by the Company and Parent
or the waiting period thereby required shall have expired or been earlier
terminated.
(b) Approval of Shareholders. This Agreement, the Merger and the
transactions contemplated by this Agreement shall have received the
requisite approval and authorization of the Shareholders.
(c) Registration Statement. The Registration Statement shall have been
declared effective by the SEC under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceeding for that purpose shall have been
initiated by the SEC and not concluded or withdrawn.
(d) Listing of Parent Common Stock. The Parent Common Stock to be issued
in the Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
(e) Statutes, Court Orders. No statute, rule or regulation shall have
been enacted or promulgated by any governmental authority which prohibits,
restricts or makes illegal the consummation of the Merger; and there shall
be no order or injunction of a court of competent jurisdiction in effect
precluding or restricting consummation of the Merger.
6.2 Conditions to Parent's and Acquisition's Obligation to Effect the
Merger. The obligations of Parent and Acquisition to consummate the Merger are
further subject to
(a) Representations and Warranties of the Company. The representations
and warranties made by the Company in this Agreement shall be true and
correct (i) in all respects at and as of the Effective Time (as to
representations and warranties specifically qualified or limited by the
term "Material Adverse Effect," the word "material" and phrases of like
import), and (ii) in all material respects at and as of the Effective Time
(as to representations and warranties not qualified or limited by the term
"Material Adverse Effect," the word "material" and phrases of like import),
in each case with the same force and effect as though made at and as of the
Effective Time (except to the extent they relate to a specific date), the
Company shall have performed in all material respects all of its
obligations under this Agreement theretofore to be performed, and Parent
shall have received at the Effective Time a certificate of the Chief
Executive Officer and Chief Financial Officer of the Company to that
effect.
(b) No Material Adverse Change. During the period from the date of this
Agreement to the Closing Date, there shall not have occurred any Material
Adverse Effect with respect to the Company that continues to exist on the
Closing Date and as of the Effective Time.
(c) Tax Opinion. Parent shall have received the opinion of Skadden,
Arps, Slate, Meagher & Flom (Illinois), special counsel to Parent, dated
the Closing Date and in form and substance reasonably satisfactory to
Parent, to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state
of facts existing on the Closing Date, the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion, Skadden, Arps,
Slate, Meagher & Flom (Illinois) may require and rely upon (and may
incorporate by reference) representations and covenants, including those
contained in certificates of officers of Parent, Acquisition, the Company
and others.
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6.3 Conditions to the Company's Obligation to Effect the Merger. The
obligation of the Company to consummate the Merger shall be subject to the
satisfaction prior to or at the Closing as hereinafter provided of the
following express conditions precedent:
(a) Representations and Warranties of Parent and Acquisition. The
representations and warranties made by Parent and Acquisition in this
Agreement shall be true and correct (i) in all respects at and as of the
Effective Time (as to representations and warranties specifically qualified
or limited by the term "Material Adverse Effect," the word "material" and
phrases of like import), and (ii) in all material respects at and as of the
Effective Time (as to representations and warranties not qualified or
limited by the term "Material Adverse Effect," the word "material" and
phrases of like import), in each case with the same force and effect as
though made at and as of the Effective Time (except to the extent they
relate to a specific date), Parent and Acquisition shall have performed in
all material respects all of their respective obligations under this
Agreement theretofore to be performed, and the Company shall have received
at the Effective Time a certificate of the Chief Executive Officer and
Chief Financial Officer of Parent to that effect.
(b) Tax Opinion. The Company shall have received the opinion of Hunton &
Williams, counsel to the Company, dated the Closing Date and in form and
substance reasonably satisfactory to the Company, to the effect that, on
the basis of facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing on the
Closing Date, the Merger will be treated for federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinion, Hunton & Williams may require and rely upon (and
may incorporate by reference) representations and covenants, including
those contained in certificates of officers of Parent, Acquisition, the
Company and others.
ARTICLE 7
NO SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
7.1 No Survival of Representations and Warranties. The representations and
warranties made in this Agreement shall not survive beyond the Effective Time.
7.2 Directors' and Officers' Indemnification; Insurance.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to indemnify and hold harmless each person who is now, or has
been at any time prior to the date hereof, an officer, director, employee
or agent of the Company or any of its Subsidiaries (the "Indemnified
Parties") against any losses, claims, damages, judgments, settlements,
liabilities, costs or expenses (including, without limitation, reasonable
attorneys' fees and out-of-pocket expenses) incurred in connection with any
claim, action, suit, proceeding or investigation arising out of or
pertaining to acts or omissions, or alleged acts or omissions, by them in
their capacities as such occurring at or prior to the Effective Time,
whether asserted or claimed prior to, at or after the Effective Time
(including, without limitation, in connection with the Merger and the other
transactions contemplated by this Agreement), to the fullest extent that
the Company or such Subsidiaries would have been permitted, under
applicable law and the Articles of Incorporation or Bylaws of the Company
or the organizational documents of such Subsidiaries, each as in effect on
the date of this Agreement. In connection with the foregoing, Parent shall
cause the Surviving Corporation to advance expenses as incurred to the
fullest extent permitted under applicable Law upon receipt from the
Indemnified Party to whom expenses are advanced of any written undertaking
to repay such advances required under applicable Law. Parent shall cause
the Surviving Corporation to pay all reasonable expenses, including
reasonable attorneys' fees, that may be incurred by any Indemnified Party
in enforcing this Section 7.2. If the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person
and shall not be the continuing or surviving person or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person, then, and in each such
case, to the extent necessary, proper provision shall be made so that the
successors and assigns of the
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Surviving Corporation assume the obligations set forth in this Section 7.2.
The parties acknowledge and agree that to the extent that the Surviving
Corporation fails to comply with its indemnification obligations pursuant
to this Section 7.2, Parent shall indemnify and hold harmless each of the
Indemnified Parties to the same extent as the Surviving Corporation was
required to indemnify such Indemnified Parties hereunder.
(b) Unless otherwise required by Law, (i) at the Effective Time, the
Certificate of Incorporation and Bylaws of the Surviving Corporation shall
contain provisions providing for exculpation of director and officer
liability and indemnification by the Surviving Corporation of the
Indemnified Parties not less favorable to the Indemnified Parties than
those provisions providing for exculpation of director and officer
liability and indemnification by the Company of the Indemnified Parties
contained in the Articles of Incorporation and Bylaws of the Company as in
effect on the date of this Agreement, and (ii) for a period of five years
from the Effective Time, the Surviving Corporation and the Company's
Subsidiaries shall not amend, repeal or modify any such provisions
contained in their respective certificates of incorporation and bylaws, or
other organizational documents of such Subsidiaries, to reduce or adversely
affect the rights of the Indemnified Parties thereunder in respect of
actions or omissions by them occurring at or prior to the Effective Time.
(c) Parent shall cause the Surviving Corporation to purchase a three-
year extended reporting period endorsement ("reporting tail coverage")
under the Company's existing directors' and officers' liability insurance
coverage, provided that such reporting tail coverage shall extend the
director and officer liability coverage in force as of the date hereof from
the Effective Time on terms, that in all material respects, are no less
advantageous to the intended beneficiaries thereof than the existing
directors' and officers' liability insurance.
(d) This covenant is intended to be for the benefit of, and shall be
enforceable by, each of the Indemnified Parties and their respective heirs
and legal representatives.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement may be terminated and the transactions
contemplated by this Agreement may be abandoned at any time prior to the
Closing (whether before or after the approval of this Agreement by the
Shareholders), as follows:
(a) by mutual written agreement of Parent and the Company;
(b) by either of the Company or Parent:
(i) if the Effective Time shall not have occurred on or before
January 15, 2000; provided, however, that the right to terminate this
Agreement pursuant to this clause (i) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date;
(ii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action (which order, decree, ruling or
other action the parties hereto shall use all reasonable efforts to
lift), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such
order, decree or ruling or other action shall have become final and
non-appealable; or
(iii) if, at the Shareholder Meeting (including any adjournment or
postponement thereof) called pursuant to Section 5.3 hereof, the
requisite vote of the Shareholders of the Company shall not have been
obtained.
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(c) by the Company:
(i) if (a) the Company, based on the advice of outside legal counsel
to the Company that such action is consistent with the Board of
Director's fiduciary duties under applicable Law and the determination
by the Board of Directors of the Company in good faith that such action
is in the best interests of the Company and its shareholders, subject
to complying with the terms of this Agreement, is fully prepared to
enter into a binding written agreement concerning a transaction that
constitutes a Superior Proposal and the Company notifies Parent in
writing that it intends to enter into such an agreement, attaching the
most current version of such agreement to such notice, (b) Parent does
not make, within two business days of receipt of the Company's written
notification of its intention to enter into a binding agreement for a
Superior Proposal, an offer to enter into an amendment to this
Agreement such that the Board of Directors of the Company determines,
in good faith after consultation with its financial advisors, that this
Agreement as so amended is at least as favorable, from a financial
point of view, to the shareholders of the Company as the Superior
Proposal, (c) the Company prior to such termination pays to Parent in
immediately available funds any fees required to be paid pursuant to
Section 8.3 and (d) substantially simultaneously with such termination,
the Company enters into the binding written agreement referred to in
clause (a) above. The Company agrees (A) that it will not enter into a
binding agreement referred to in clause (a) above until at least the
third business day after it has provided the notice to Parent required
thereby and (B) to notify Parent promptly if its intention to enter
into a written agreement referred to in its notification shall change
at any time after giving such notification;
(ii) if Parent or Acquisition shall have breached in any material
respect any of their respective representations, warranties, covenants
or other agreements contained in this Agreement, which breach cannot be
or has not been cured, in all material respects, within 30 days after
the giving of written notice to Parent or Acquisition, as applicable;
or
(iii) if the Average Parent Price is less than $18.50 and the
Company provides written notice of termination to Parent prior to the
close of business on the second trading day following the Determination
Date unless (x) the Average Parent Price is equal to or greater than
$15.00 and (y) on or before the close of business on the third trading
day following its receipt of such written notice of termination from
the Company, Parent shall have delivered written notice to the Company
of its agreement to increase the percentage of Aggregate Merger
Consideration that shall be paid in cash such that the Aggregate Merger
Consideration shall consist of an aggregate number of shares of Parent
Common Stock used as Merger Consideration equal to 50% of Aggregate
Company Shares and the remainder in cash; provided, however, if the
amount of aggregate cash consideration set forth immediately above plus
the cash used in respect to the Company Stock Options under Section
1.10 would exceed the maximum amount permitted without preventing the
Merger from qualifying as a reorganization with the meaning of Section
368(a) of the Code as determined by the tax advisors of the Company and
Parent (the "Maximum Cash Amount"), then Parent may agree to provide
all Merger Consideration beyond the Maximum Cash Amount in Parent
Common Stock measured by the Average Parent Price.
(d) by Parent
(i) if prior to the consummation of the Merger, the Company shall
have breached any representation, warranty, covenant or other agreement
contained in this Agreement, which breach cannot be or has not been
cured, in all material respects, within 30 days after the giving of
written notice to the Company;
(ii) if, at any time prior to the Effective Time, the Board of
Directors of the Company shall have withdrawn or adversely modified its
approval or recommendation of this Agreement or failed to reconfirm its
recommendation of this Agreement within five business days after a
written request by Parent to do so; or
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(iii) if the Average Parent Price is less than $18.50 and Parent
provides written notice of termination to the Company prior to the
close of business on the second trading day following the Determination
Date.
8.2 Rights on Termination. In the event of termination and abandonment of
the Merger by any party pursuant to Section 8.1, written notice thereof shall
forthwith be given to the other parties and this Agreement shall terminate and
the Merger and the other transactions contemplated hereby shall be abandoned,
without further action by any of the parties hereto. If this Agreement is
terminated and the transactions contemplated hereby are not consummated
pursuant to Section 8.1 of this Agreement, this Agreement shall become void
and of no further force and effect, except for (a) the provisions of Section
2.1 relating to the obligation of Parent and Acquisition to keep confidential
and not to use certain information obtained from the Company and (b) the
provisions of Section 8.3 relating to the Company's obligations to make
certain payments to Parent.
8.3 Termination Fee Payable to Parent. Notwithstanding any provision to the
contrary contained herein, the Company shall immediately pay to Parent (x) the
amount of $27 million and (y) all reasonably documented out-of-pocket
expenses, not to exceed $3 million in the aggregate, reasonably incurred by
Parent and Acquisition in connection with this Agreement and the Merger if
this Agreement is terminated pursuant to Section 8.1(b)(iii), Section
8.1(c)(i), Section 8.1(d)(i) (if the breach thereof is due to the Company's
intentional or bad faith acts), or Section 8.1(d)(ii). The amount in (x) above
shall be paid concurrently with any such termination and the amount in (y)
above shall be paid within five (5) business days after receipt by the Company
of reasonably detailed evidence of the same. Upon receipt of such payments,
Parent shall not be entitled to and shall waive the right to seek damages or
other amounts or remedies from the Company for breach of, or otherwise in
connection with, this Agreement.
8.4 Other Remedies. Notwithstanding any provision to the contrary contained
herein, if this Agreement is terminated pursuant to Article 8 or otherwise by
the Company, on the one hand, or Parent or Acquisition, on the other hand, and
the non-terminating party is not entitled to receive the payments described in
Section 8.3 (as the case may be), then the non-terminating party shall be
entitled to pursue any available legal rights to recover actual damages,
including, without limitation, its reasonable costs and expenses incurred in
pursuing such recovery (including, without limitation, reasonable attorneys'
fees).
ARTICLE 9
MISCELLANEOUS
9.1 Expenses. Except as set forth in Section 8.3 hereof, if this Agreement
is not consummated, Parent and Acquisition, on the one hand, and the Company,
on the other hand, shall bear their respective legal fees and expenses.
9.2 Entire Agreement; Amendment. This Agreement and the documents referred
to in this Agreement and required to be delivered pursuant to this Agreement
constitute the entire agreement among the parties pertaining to the subject
matter of this Agreement, and (except as contemplated in Section 2.5 hereof)
supersede all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written, and
there are no warranties, representations or other agreements between the
parties in connection with the subject matter of this Agreement, except as
specifically set forth in this Agreement. No amendment, supplement,
modification, waiver or termination of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision of this Agreement, whether or not similar, nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
9.3 Governing Law. This Agreement shall be governed and construed (i) with
respect to the Merger, in accordance with the Laws of the Commonwealth of
Virginia and State of Delaware, as applicable, and (ii) with
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respect to all other transactions contemplated hereunder, in accordance with
the Laws of the Commonwealth of Virginia applicable to agreements made and to
be performed entirely within such State.
9.4 Assignment. Prior to the Closing, this Agreement may not be assigned by
any party hereto, except with the prior written consent of the other parties
hereto.
9.5 Notices. All communications or notices required or permitted by this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date personally delivered or sent by telephonic facsimile
transmission (with a copy via regular mail) or one day after sending via
nationally recognized overnight courier or five days after deposit in the
United States mail, certified or registered mail, postage prepaid, return
receipt requested, and addressed as follows, unless and until any of such
parties notifies the others in accordance with this Section of a change of
address:
If to Parent: SUPERVALU INC.
11840 Valleyview Road
Eden Prairie, MN 55344
Telephone: (612) 828-4000
Telecopy: (612) 828-4838
Attention: General Counsel
With a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker
Suite 2100
Chicago, Illinois 60606
Telephone: (312) 407-0700
Telecopy: (312) 407-0411
Attention: William R. Kunkel
If to the Company: Richfood Holdings, Inc.
4860 Cox Road, Suite 300
Glen Allen, VA 23060
Telephone: (804) 915-6000
Telecopy: (804) 915-6010
Attention: John E. Stokely
With a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
Telephone: (804) 788-8200
Telecopy: (804) 788-8218
Attention: Gary E. Thompson
9.6 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Article and
Section headings in this Agreement are inserted for convenience of reference
only and shall not constitute a part hereof.
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9.7 Interpretation. Unless the context requires otherwise, all words used
in this Agreement in the singular number shall extend to and include the
plural, all words in the plural number shall extend to and include the
singular, and all words in any gender shall extend to and include all genders.
9.8 Specific Performance. The parties agree that the assets and business of
the Company as a going concern constitute unique property and, accordingly,
each party shall be entitled, at its option and in addition to any other
remedies available as herein provided, to the remedy of specific performance
to effect the Merger as provided in this Agreement.
9.9 No Reliance. Except for Section 7.2, which is intended to be for the
benefit of the Indemnified Parties, and except for the parties to this
Agreement: (a) no Person is entitled to rely on any of the representations,
warranties and agreements of the parties contained in this Agreement; and (b)
the parties assume no liability to any Person because of any reliance on the
representations, warranties and agreements of the parties contained in this
Agreement.
9.10 Exhibits and Schedules. The Exhibits and Schedules are a part of this
Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to
such parts of this Agreement, unless the context shall otherwise require.
9.11 No Third Party Beneficiary. Except as provided pursuant to Section 7.2
hereof, the terms and provisions of this Agreement are intended solely for the
benefit of the parties hereto and their respective successors and assigns and
it is not the intention of the parties to confer third-party beneficiary
rights upon any other Person.
ARTICLE 10
DEFINITIONS
When used in this Agreement, and in addition to the other terms defined
herein, the following terms shall have the meanings specified:
10.1 Affiliate. "Affiliate" shall mean, in relation to any party hereto,
any entity directly or indirectly controlling, controlled by or under common
control with such party.
10.2 Agreement. "Agreement" shall mean this Agreement and Plan of Merger,
together with the Exhibits attached hereto and the Disclosure Schedule, as the
same may be amended from time to time in accordance with the terms hereof.
10.3 Buildings. "Buildings" shall mean all buildings, fixtures, structures
and improvements leased or owned by the Company or its Subsidiaries.
10.4 Contracts. "Contracts" shall mean all of the contracts, agreements and
obligations, written or oral, to which the Company is a party or by which the
Company or any of its assets are bound, including, without limitation, any
loan, bond, mortgage, indenture, lease, instrument, franchise or license.
10.5 Control. "Control" (including the terms "controlling," "controlled
by," and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, through the
ownership of voting securities or by contract.
10.6 DGCL. "DGCL" shall mean the General Corporation Law of the State of
Delaware.
10.7 Disclosure Schedule. "Disclosure Schedule" shall mean the Disclosure
Schedule delivered by the Company to the Parent pursuant to Section 2.2(a) of
this Agreement.
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10.8 Employees. "Employees" shall mean all of the employees of the Company.
10.9 Environmental Claim. "Environmental Claim" shall mean any and all
administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, Liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any Person alleging liability
(including, without limitation, liability for enforcement, investigatory
costs, cleanup costs, governmental response costs, removal costs, remedial
costs, natural resources damages, property damages, personal injuries, or
penalties) arising out of, based on or resulting from: (A) the presence or
environmental release of any Hazardous Materials at any parcel of real
property; or (B) circumstances forming the basis of any violation or alleged
violation, of any Environmental Law; or (C) any and all claims by any Person
seeking damages, contribution, indemnification, cost, recovery, compensation
or injunctive relief resulting from the presence or environmental release of
any Hazardous Materials.
10.10 Environmental Laws. "Environmental Laws" shall mean any federal,
state, local or foreign statute, Law, rule, ordinance, code, policy, rule of
common law and regulations relating to pollution or protection of human health
(excluding OSHA) or the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata),
including, without limitation, Laws and regulations relating to environmental
releases or threatened environmental releases of Hazardous Materials, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
10.11 Equipment. "Equipment" shall mean all machinery, equipment, boilers,
furniture, fixtures, motor vehicles, furnishings, parts, tools, office
equipment, computers and other items of tangible personal property owned or
used by the Company or its Subsidiaries.
10.12 ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be in effect from time to time.
10.13 Existing Insurance Policies. "Existing Insurance Policies" shall mean
all of the insurance policies currently in effect and owned by the Company.
10.14 Existing Liens. "Existing Liens" shall mean those Liens affecting any
of the assets or properties of the Company.
10.15 Existing Options. "Existing Options" shall mean any of the following
relating to any capital stock or other equity interest of the Company: (a)
options or warrants (whether vested or not) to purchase or other rights
(including registration rights), agreements, arrangements or commitments of
any character to which the Company is a party relating to the issued or
unissued capital stock or other equity or phantom equity interests of the
Company to grant, issue or sell any shares of the capital stock or other
equity or phantom equity interests of the Company by sale, lease, license or
otherwise; (b) rights to subscribe for or purchase any shares of the capital
stock or other equity or phantom equity interests of the Company; or (c)
Contracts with respect to any right to purchase, put or call any shares of the
capital stock or other equity or phantom equity interests of the Company.
10.16 Existing Permits. "Existing Permits" shall mean those permits,
licenses, approvals, qualifications, authorizations, and registrations
required by Law which the Company has or holds.
10.17 Governmental Entity. "Governmental Entity" shall mean any federal,
state, local or foreign court, arbitral tribunal, administrative agency or
commission or other governmental or regulatory authority or administrative
agency.
10.18 Hazardous Materials. "Hazardous Materials" shall mean: (A) any
petroleum or petroleum products, radioactive materials, asbestos in any form
that is friable, urea formaldehyde foam insulation, and transformers or other
equipment that contain dielectric fluid containing polychlorinated biphenyls
("PCBs") above regulated levels and radon gas; and (B) any chemicals,
materials or substances which are now defined as
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or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar import,
under any Environmental Law; and (C) any other chemical, material, substance
or waste, exposure to which is now prohibited, limited or regulated by any
governmental authority.
10.19 Indebtedness. "Indebtedness" shall mean all liabilities or
obligations of the Company, whether primary or secondary or absolute or
contingent, in excess of $500,000 as to any single item: (a) for borrowed
money; or (b) evidenced by notes, bonds, debentures or similar instruments; or
(c) secured by Liens on any assets of the Company.
10.20 Intangible Assets. "Intangible Assets" shall mean (a) any invention,
United States and foreign patents, pending patent applications, trade names,
trade dress, logos, corporate names, trademarks, service marks, trademark
registrations, service mark registrations, pending trademark applications,
pending service mark applications, registered copyrights, and pending
copyright applications, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith; (b) proprietary software; and (c) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals).
10.21 Investment. "Investment" by the Company shall mean (a) any transfer
or delivery of cash, stock or other property or value by the Company in
exchange for equity, debt, preferred stock, partnership interests,
participations or any other security of another Person; (b) any loan or
capital contribution to or in any other Person; (c) any guaranty of any
obligation to pay money to, or perform an obligation of, any other Person; and
(d) any investments in any property or assets other than properties and assets
acquired and used in the ordinary course of the business of the Company.
10.22 Knowledge. "Knowledge," as to the Company, shall mean the actual
knowledge of those officers of the Company identified in Section 10.22A of the
Disclosure Schedule, and "knowledge," as to the Parent and Acquisition, shall
mean the actual knowledge of those officers of Parent and Acquisition
identified in Section 10.22B of the Parent Disclosure Schedule.
10.23 Law. "Law" shall mean any foreign, federal, state or local
governmental law, rule, regulation or requirement, including any rules,
regulations and orders promulgated thereunder and any orders, decrees,
consents or judgments of any governmental regulatory agencies and courts
having the force of law, other than any Environmental Laws.
10.24 Lien. "Lien" shall mean, with respect to any asset (real, personal or
mixed): (a) any mortgage, pledge, lien, easement, lease, title defect or
imperfection or any other form of security interest, whether imposed by Law or
by Contract; and (b) the interest of a vendor or lessor under any conditional
sale agreement, financing lease or other title retention agreement relating to
such asset.
10.25 Material Adverse Effect. "Material Adverse Effect" shall mean a
material adverse effect on the business, financial condition , results of
operations, assets or liabilities of the Company and its Subsidiaries or
Parent and its Subsidiaries (including Acquisition), as applicable, each taken
as a whole, excluding any changes and effects resulting from general changes
in economic, market, regulatory or political conditions or changes in
conditions generally applicable to the industries in which the Company and its
Subsidiaries or Parent and its Subsidiaries, as applicable, are involved.
10.26 Merger. "Merger" shall mean the merger of Acquisition with and into
the Company pursuant to this Agreement.
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10.27 Parent Disclosure Schedule. "Parent Disclosure Schedule" shall mean
the Disclosure Schedule delivered by the Parent to the Company pursuant to
Section 2.2(a) of this Agreement.
10.28 Permitted Liens. "Permitted Liens" shall mean those of the Existing
Liens that do not materially detract from the value of the property or assets
of the Company taken as a whole subject thereto and do not materially impair
the business or operations of the Company taken as a whole and other Liens
incurred in the ordinary course of business of the Company that do not
materially detract from the value or impair the use of the specific property
to which such Lien relates.
10.29 Person. "Person" shall mean a natural person, corporation, limited
liability company, association, joint stock company, trust, partnership,
governmental entity, agency or branch or department thereof, or any other
legal entity.
10.30 Real Estate. "Real Estate" shall mean the parcels of real property
owned or leased by the Company or its Subsidiaries.
10.31 SEC. "SEC" shall mean the Securities and Exchange Commission.
10.32 Shareholders. "Shareholders" shall mean all Persons owning any shares
of Company Common Stock.
10.33 Subsidiary. "Subsidiary" shall mean any corporation, at least a
majority of the outstanding capital stock of which (or any class or classes,
however designated, having ordinary voting power for the election of at least
a majority of the board of directors of such corporation) shall at the time be
owned by the relevant Person directly or through one or more corporations
which are themselves Subsidiaries.
10.34 VSCA. "VSCA" shall mean the Virginia Stock Corporation Act.
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IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be duly executed as of the day and year first above written.
SUPERVALU INC.
By: /s/ Michael W. Wright
-------------------------------------
Name: Michael W. Wright
Title: Chairman, CEO & President
WINTER ACQUISITION, INC.
By: /s/ J. Andrew Herring
-------------------------------------
Name: J. Andrew Herring
Title: Senior Vice President
RICHFOOD HOLDINGS, INC.
By: /s/ John E. Stokely
-------------------------------------
Name: John E. Stokely
Title: Chairman, President & CEO
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[DLJ LETTERHEAD]
ANNEX B
July 29, 1999
Board of Directors
Richfood Holdings, Inc.
4860 Cox Road
Glen Allen, Virginia 23060
Dear Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Richfood Holdings, Inc. (the "Company") of the
Merger Consideration (as defined herein) to be received by such shareholders
pursuant to the terms of the Agreement and Plan of Merger, dated as of June 9,
1999 (the "Agreement"), by and among SUPERVALU INC. ("Parent"), Winter
Acquisition, Inc., a wholly owned subsidiary of Parent ("Acquisition"), and
the Company, pursuant to which the Company will be merged (the "Merger") with
and into Acquisition.
Pursuant to the Agreement, each share of common stock, without par value,
of the Company ("Company Common Stock") will be converted into the right to
receive, and become exchangeble for, at the election of the holder (i) $18.50
in cash (the "Cash Consideration") or (ii) the number of shares of common
stock, par value $1.00 per share, of Parent ("Parent Common Stock") equal to
the ratio determined by dividing $18.50 by the average of the per share last
sales prices, regular way rounded to four decimal points (the "Average Parent
Price"), of Parent Common Stock as reported on the New York Stock Exchange,
Inc. composite transactions reporting system for the twenty (20) consecutive
trading days ending on (and including) the seventh trading day prior to the
Closing Date (as defined in the Agreement) (the "Stock Consideration," and
together with the Cash Consideration, the "Merger Consideration"), provided
that the number of shares of Company Common Stock to be converted into the
right to receive Cash Consideration in the Merger (the "Cash Election Number")
and the number of shares of Company Common Stock to be converted into the
right to receive Stock Consideration in the Merger (the "Stock Election
Number") shall in each case be equal to fifty percent (50%) of the number of
shares of Company Common Stock issued and outstanding immediately prior to the
Closing Date. Under the Agreement, if the Average Parent Price is less than
$18.50, the Company and Parent will have the right to terminate the Agreement;
provided, however, that if the Average Parent Price is equal to or greater
than $15.00, the Company will not have such termination right if Parent
increases the portion of Merger Consideration payable in cash (to the fullest
extent consistent with treating the Merger as a reorganization under Section
368(a) of the Internal Revenue Code of 1986), and thereafter pays additional
shares of Parent Common Stock.
In arriving at our opinion, we have reviewed the Agreement. We also have
reviewed financial and other information that was publicly available or
furnished to us by the Company and Parent including information provided
during discussions with their respective management. Included in the
information provided during discussions with the respective managements were
certain financial projections of the Company for the period beginning May 2,
1999 and ending May 1, 2004 prepared by the management of the Company and
certain financial projections of Parent for the period beginning February 28,
1999 and ending February 24, 2001 prepared by the management of Parent. In
addition, we have compared certain financial and securities data of the
Company and Parent with various other companies whose securities are traded in
public markets, reviewed the historical stock prices and trading volumes of
the common stock of the Company and Parent, reviewed prices and premiums paid
in certain other business combinations and conducted such other financial
studies, analyses and investigations as we deemed appropriate for purposes of
this opinion.
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all of the
financial and other information that was available to us from public sources,
that was provided to us by the Company and Parent or their respective
representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have assumed that they have been
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the
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Company and Parent as to the future operating and financial performance of the
Company and Parent, respectively. We have not assumed any responsibility for
making an independent evaluation of any assets or liabilities or for making
any independent verification of any of the information reviewed by us. We have
relied as to certain legal matters on advice of counsel to the Company.
This opinion is being delivered to the Board of Directors of the Company
and may be relied upon by the Board of Directors in its evaluation of the
transactions contemplated by the Agreement. Our opinion is necessarily based
on economic, market, financial and other conditions as they exist on, and on
the information made available to us as of, the date of this letter. It should
be understood that, although subsequent developments may affect this opinion,
we do not have any obligation to update, revise or reaffirm this opinion. We
are expressing no opinion herein as to the prices at which the Parent Common
Stock will actually trade at any time. Our opinion does not address the
relative merits of the Merger and the other business strategies being
considered by the Company's Board of Directors, nor does it address the
Board's decision to proceed with the Merger. Our opinion does not constitute a
recommendation to any shareholder as to how such shareholder should vote on
the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. DLJ has
performed investment banking and other services for the Company in the past
and has been compensated for such services, including acting as financial
advisor in the Company's acquisition of Dart Group Corporation in May 1998.
Based upon and subject to the foregoing and such other factors as we deem
relevant, we are of the opinion that the Merger Consideration to be received
by the shareholders of the Company pursuant to the Agreement is fair to such
shareholders from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Mark W. Lanigan
-----------------------------
Mark W. Lanigan
Managing Director
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law contains detailed
provisions for indemnification of directors and officers of Delaware
corporations against expenses, judgments, fines and settlements in connection
with litigation.
Article Eighth of SUPERVALU's certificate of incorporation provides that a
director shall not be liable to SUPERVALU or its stockholders for monetary
damages for a breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to SUPERVALU or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under the Delaware
statutory provision making directors personally liable for unlawful dividends
or unlawful stock repurchases or redemptions, (iv) for any transaction for
which the director derived an improper personal benefit or (v) for any act or
omission occurring prior to the date when said Article Eighth became effective.
Article IX of SUPERVALU's bylaws and SUPERVALU's Directors' and Officers'
Liability Insurance Policy provide for indemnification of the directors and
officers of SUPERVALU against certain liabilities.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger dated June 9, 1999, by and among SUPERVALU
INC., Winter Acquisition, Inc. and Richfood Holdings, Inc. (Included in
Proxy Statement/Prospectus as Annex A.) SUPERVALU agrees to furnish a
supplemental copy of omitted schedules to the SEC upon request.
3.1 Restated Certificate of Incorporation of SUPERVALU. (Incorporated by
reference to Exhibit (3)(i) to SUPERVALU's Annual Report on Form 10-K
for the year ended February 26, 1994.)
3.2 Restated Bylaws of SUPERVALU. (Incorporated by reference to Exhibit (3)
to SUPERVALU's Quarterly Report for the quarterly period (12 weeks)
ended September 12, 1998.)
4.1 Indenture dated as of July 1, 1987 between SUPERVALU and Bankers Trust
Company, as Trustee, relating to certain outstanding debt securities of
SUPERVALU. (Incorporated by reference to Exhibit 4.1 to SUPERVALU's
Registration Statement on Form S-3, Registration No. 33-52422.)
4.2 First Supplemental Indenture dated as of August 1, 1990 between
SUPERVALU and Bankers Trust Company, as Trustee, to Indenture dated as
of July 1, 1987 between SUPERVALU and Bankers Trust Company, as Trustee.
(Incorporated by reference to Exhibit 4.2 to SUPERVALU's Registration
Statement on Form S-3, Registration No. 33-52422.)
4.3 Second Supplemental Indenture dated as of October 1, 1992, between
SUPERVALU and Bankers Trust Company, as Trustee, to Indenture dated as
of July 1, 1987 between SUPERVALU and Bankers Trust Company as Trustee.
(Incorporated by reference to Exhibit 4.1 to SUPERVALU's Current Report
on Form 8-K dated November 13, 1992.)
4.4 Letter of Representations dated November 12, 1992 between SUPERVALU,
Bankers Trust Company, as Trustee, and The Depository Trust Company
relating to certain outstanding debt securities of SUPERVALU.
(Incorporated by reference to Exhibit 4.5 to SUPERVALU's Current Report
on Form 8-K dated November 13, 1992.)
</TABLE>
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<TABLE>
<C> <S>
4.5 Third Supplemental Indenture dated as of September 1, 1995 between
SUPERVALU and Bankers Trust Company, as Trustee, to Indenture dated as
of July 1987 between SUPERVALU and Bankers Trust Company, as Trustee.
(Incorporated by reference to Exhibit 4.1 to SUPERVALU's Current Report
on Form 8-K dated October 2, 1995.)
4.6 Credit Agreement dated as of October 8, 1997 among SUPERVALU, the
Lenders named therein and Bankers trust Company, as Agent.
(Incorporated by reference to Exhibit (10)a to SUPERVALU's Quarterly
Report on Form 10-Q for the quarterly period (12 weeks) ended November
29, 1997. Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of
certain instruments defining the rights of holders of certain long-term
debt of SUPERVALU and its subsidiaries are not filed and, in lieu
thereof, SUPERVALU agrees to furnish copies thereof to the SEC upon
request.)
5.1 Opinion and consent of Dorsey & Whitney LLP as to legality of the
securities being registered.
12.1 Statement regarding computation of ratios.
23.1 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP (relating to financial statements of
SUPERVALU).
23.3 Consent of Deloitte & Touche LLP (relating to financial statements of
SUPERVALU).
23.4 Consent of Ernst & Young LLP (relating to financial statements of
Richfood).
23.5 Consent of Donaldson, Lufkin & Jenrette Securities Corporation
(relating to the fairness opinion to the board of directors of
Richfood).
24.1 Powers of Attorney.
99.1 Form of Proxy for Special Meeting of Shareholders of Richfood.
99.2 Form of Election Form/Letter of Transmittal.
99.3 Form of Memorandum to Participants in Richfood Benefit Plans.
</TABLE>
(b) Financial Statement Schedules.
None.
(c) Reports, Opinions and Appraisals.
None.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any
II-2
<PAGE>
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the SEC
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
SUPERVALU's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
SUPERVALU pursuant to its articles, bylaws or otherwise, SUPERVALU has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by SUPERVALU of expenses incurred or paid by a director, officer or
controlling person of SUPERVALU in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, SUPERVALU will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, SUPERVALU INC.
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis, State of
Minnesota, on July 29, 1999.
SUPERVALU INC.
By /s/ Michael W. Wright
-------------------------------------
Michael W. Wright
Chairman of the Board, President and
Chief Executive Officer
(principal executive officer) and
Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on July 29, 1999.
/s/ Michael W. Wright
- -------------------------------------
Michael W. Wright
Chairman of the Board, President and
Chief Executive Officer
(principal executive officer) and
Director
/s/ Pamela K. Knous
- -------------------------------------
Pamela K. Knous
Executive Vice President and
Chief Financial Officer
(principal financial and accounting
officer)
*
- -------------------------------------
Herman Cain
Director
*
- -------------------------------------
Richard L. Knowlton
Director
*
- -------------------------------------
Charles M. Lillis
Director
*
- -------------------------------------
Edwin C. Gage
Director
II-4
<PAGE>
*
- -------------------------------------
William A. Hodder
Director
*
- -------------------------------------
Garnett L. Keith, Jr.
Director
*
- -------------------------------------
Lawrence A. Del Santo
Director
*
- -------------------------------------
Harriet Perlmutter
Director
*
- -------------------------------------
Steven S. Rogers
Director
*
- -------------------------------------
Carole F. St. Mark
Director
*By: /s/ John P. Breedlove
---------------------------------
John P. Breedlove
Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
2.1 Agreement and Plan of Merger dated June 9, 1999, by and among
SUPERVALU INC., Winter Acquisition, Inc. and Richfood Holdings,
Inc. (Included in Proxy Statement/Prospectus as Annex A.)
SUPERVALU agrees to furnish a supplemental copy of omitted
schedules to the SEC upon request.
5.1 Opinion and consent of Dorsey & Whitney LLP as to legality of the
securities being registered.
12.1 Statement regarding computation of earnings.
23.1 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP (relating to financial statements
of SUPERVALU).
23.3 Consent of Deloitte & Touche LLP (relating to financial statements
of SUPERVALU).
23.4 Consent of Ernst & Young LLP (relating to financial statements of
Richfood).
23.5 Consent of Donaldson, Lufkin & Jenrette Securities Corporation
(relating to fairness opinion to the board of directors of
Richfood).
24.1 Powers of Attorney.
99.1 Form of Proxy for Special Meeting of Shareholders of Richfood.
99.2 Form of Election Form/Transmittal Letter.
99.3 Form of Memorandum to Participants in Richfood Benefit Plans.
</TABLE>
<PAGE>
Exhibit 5.1
-----------
[Letterhead of Dorsey & Whitney LLP]
SUPERVALU INC.
11840 Valley View Road
Eden Prairie, MN 55344
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel to SUPERVALU INC., a Delaware corporation (the
"Company"), in connection with a Registration Statement on Form S-4 (the
"Registration Statement") relating to the issuance by the Company of up to
29,436,115 shares (the "Shares") of Common Stock of the Company, par value $1.00
per share, that are to be issued in connection with the merger of Richfood
Holdings, Inc. with and into a subsidiary of the Company (the "Merger") pursuant
to the Agreement and Plan of Merger dated June 9, 1999 among SUPERVALU INC.,
Winter Acquisition, Inc. and Richfood Holdings, Inc. (the "Merger Agreement"),
all as described in the Registration Statement.
We have examined such documents and have reviewed such questions of law as
we have considered necessary and appropriate for the purposes of our opinions
set forth below. In rendering our opinions set forth below, we have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures and the conformity to authentic originals of all documents
submitted to us as copies. We also have assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all parties
to agreements or instruments relevant hereto other than the Company, that such
parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to our opinions, we have relied
upon certificates of officers of the Company and of public officials. We have
also assumed that the Shares will be issued in connection with the Merger in
accordance with the terms of the Merger Agreement and as described in the
Registration Statement.
<PAGE>
Based on the foregoing, we are of the opinion that the Shares to be issued
by the Company in the Merger have been duly authorized and, when issued in
accordance with the terms of the Merger Agreement and as described in the
Registration Statement, will be validly issued, fully paid and nonassessable.
Our opinions expressed above are limited to the Delaware General
Corporation Law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Dated: July 29, 1999
Very truly yours,
/s/ Dorsey & Whitney LLP
GLT
<PAGE>
Exhibit 12.1
SUPERVALU INC. and Subsidiaries
Ratio of Earnings to Fixed Charges
For Fiscal Quarters and Years Ended
<TABLE>
<CAPTION>
(in thousands, except ratios) 1st Qtr 2000 1st Qtr 2000* 1st Qtr 1999 1999 1998 1998* 1997
------------ ------------- ------------ --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings before income taxes $152,022 $92,154 $86,303 $316,261 $384,780 $294,746 $280,512
Less undistributed earnings of less than
fifty percent owned affiliates (1,636) (1,636) (837) (5,943) (7,388) (7,388) (15,813)
------------ ------------- ------------ --------- --------- ---------- ---------
Earnings before income taxes 150,584 90,518 85,466 310,318 377,392 287,358 264,699
Interest expense 35,570 35,570 38,322 124,111 133,619 133,619 136,831
Interest on operating leases 5,036 5,036 5,030 18,574 18,010 18,010 16,950
------------ ------------- ------------ --------- --------- ---------- ---------
$191,190 $131,124 128,818 $453,003 $529,021 $438,987 $418,480
============ ============= ============ ========= ========= ========== =========
Total fixed charges 40,606 40,606 43,352 142,685 151,629 151,629 153,781
============ ============= ============ ========= ========= ========== =========
Ratio of earnings to fixed charges 4.71 3.23 2.97 3.17 3.49 2.90 2.72
============ ============= ============ ========= ========= ========== =========
(in thousands, except ratios) 1996 1995 1995*
------------ ------------- ---------
<S> <C> <C> <C>
Earnings before income taxes $267,692 $15,925 $260,025
Less undistributed earnings of less than
fifty percent owned affiliates (11,136) (10,902) (10,902)
------------ ------------- ---------
Earnings before income taxes 256,556 5,023 249,123
Interest expense 140,150 135,383 135,383
Interest on operating leases 17,059 18,204 18,204
------------ ------------- ---------
$413,765 $158,610 $402,710
============ ============= =========
Total fixed charges 157,209 153,587 153,587
============ ============= =========
Ratio of earnings to fixed charges 2.63 1.03 2.62
============ ============= =========
</TABLE>
*excludes one-time items:
FY 2000 excludes gain on sale and restructuring and other charges of $60,066
FY 1998 excludes gain on sale of Shopko of $90,034
FY 1995 excludes restructuring and other charges of $244,100
<PAGE>
Exhibit 23.2
The Board of Directors
SUPERVALU INC.:
We consent to incorporation by reference in this registration statement of
SUPERVALU INC. on Form S-4 of our reports dated April 5, 1999, relating to the
consolidated balance sheet of SUPERVALU INC. and subsidiaries as of February
27, 1999, and the related consolidated statement of earnings, stockholders'
equity, and cash flows for the fiscal year then ended, and the related
schedules, which reports appear in the 1999 annual report on Form 10-K of
SUPERVALU INC., and to the reference to our firm under the heading "EXPERTS" in
this registration statement of SUPERVALU INC. on Form S-4.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
July 28, 1999
<PAGE>
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
SUPERVALU INC. on Form S- 4 of the reports of Deloitte & Touche dated April 6,
1998, appearing in and incorporated by reference in the Annual Report on Form
10-K of SUPERVALU INC. for the year ended February 27, 1999 and to the
reference to Deloitte & Touche LLP under the heading "Experts" in the
Registration Statement.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
July 28, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated June 15, 1999 on the consolidated financial statements
and schedule of Richfood Holdings, Inc. as of May 1, 1999 and May 2, 1998 and
for each of the three fiscal years in the period ended May 1, 1999, incorporated
by reference in the Joint Proxy Statement/Prospectus of SUPERVALU INC. and
Richfood Holdings, Inc. that is made a part of the Registration Statement (Form
S-4) and Prospectus of SUPERVALU INC. for the registration of shares of
SUPERVALU INC. common stock.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
July 28, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
We hereby consent to (i) the inclusion of our opinion letter, dated July
29, 1999, to the Board of Directors of Richfood Holdings, Inc. (the "Company")
as Annex B to the Proxy Statement/Prospectus of SUPERVALU INC. and the Company
relating to the merger of the Company with and into a wholly owned subsidiary of
SUPERVALU INC., and (ii) all references to Donaldson, Lufkin & Jenrette
Securities Corporation in the sections captioned "Summary -- Opinion of
Richfood's Financial Advisor" and "The Merger -- Background of the Merger,"
"--Reasons of Richfood for the Merger" and "--Opinion of Richfood's Financial
Advisor" of the Proxy Statement/Prospectus of SUPERVALU INC. and the Company
which forms a part of this Registration Statement on Form S-4. In giving such
consent, we do not admit that we come within the category of persons whose
consent is required under, and we do not admit that we are "experts" for
purposes of, the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Mark W. Lanigan
---------------------------------
Mark W. Lanigan
Managing Director
Los Angeles, California
July 29, 1999
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Michael W. Wright, David L. Boehnen, and
John P. Breedlove, and each of them, his or her true and lawful attorneys-in-
fact and agents, each acting alone, with full powers of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign a Registration Statement on Form S-4, and any and
all amendments (including post-effective amendments) thereto, relating to the
issuance of shares of Common Stock of SUPERVALU INC. pursuant to the Agreement
and Plan of Merger, by and among SUPERVALU INC., Winter Acquisition, Inc., and
Richfood Holdings, Inc., dated as of June 9, 1999, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto such attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on the 30th day
of June, 1999 by the following persons:
/s/ Michael W. Wright /s/ Carole F. St. Mark
- -------------------------- ------------------------------
Michael W. Wright Carole F. St. Mark
/s/ William A. Hodder /s/ Steven S. Rogers
- -------------------------- ------------------------------
William A. Hodder Steven S. Rogers
/s/ Herman Cain /s/ Harriet Perlmutter
- -------------------------- ------------------------------
Herman Cain Harriet Perlmutter
/s/ Richard L. Knowlton /s/ Lawrence A. Del Santo
- -------------------------- ------------------------------
Richard L. Knowlton Lawrence A. Del Santo
/s/ Charles M. Lillis /s/ Garnett L. Keith, Jr.
- -------------------------- ------------------------------
Charles M. Lillis Garnett L. Keith, Jr.
/s/ Edwin C. Gage
- --------------------------
Edwin C. Gage
<PAGE>
EXHIBIT 99.1
PROXY
RICHFOOD HOLDINGS, INC.
Richmond, Virginia 23060
PROXY VOTE AUTHORIZATION FOR RICHFOOD HOLDINGS, INC.
SPECIAL MEETING--AUGUST 31, 1999
This Proxy is Solicited on behalf of the Board of Directors
The undersigned hereby appoints John E. Stokely and John C. Belknap and each of
them proxies (and if the undersigned is a proxy, as substitute proxies) each
with the power to appoint his substitute, and hereby authorizes each of them to
represent and to vote, as designated below, all of the shares of Richfood common
stock held of record by the undersigned on July 27, 1999, at the special meeting
of shareholders to be held at 10:00 a.m. on August 31, 1999, or any adjournment
thereof.
(Continued and to be signed on reverse side.)
<PAGE>
[x] Please mark your vote as in this example.
- --------------------------------------------------------------------------------
The Board of Directors Unanimously Recommends a vote "FOR" the
following proposal:
- --------------------------------------------------------------------------------
1. To consider and vote upon a proposal to approve the Agreement and Plan of
Merger, dated as of June 9, 1999, among Richfood Holdings, Inc., SUPERVALU
INC. and a wholly owned subsidiary of SUPERVALU, providing for the merger of
Richfood with and into the subsidiary of SUPERVALU.
2. In their discretion, the proxies are authorized to vote upon such other
business and matters as may properly come before the Special Meeting or any
adjournments thereof.
FOR [_] AGAINST [_] ABSTAIN [_]
This Proxy is solicited by the Board of Directors. When properly executed, it
will be voted in the manner directed. If no direction is given, this Proxy will
be voted FOR the merger proposal.
Dated:
_______________________________,1999
Signature:
-----------------------------------
- ------------------------------------------------
Please sign exactly as name appears. When shares are held by joint tenants, only
one of such persons need sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized office. If a partnership, please sign in partnership name by
authorized person.
Please date, sign and mail your proxy card back as soon as possible!
<PAGE>
EXHIBIT 99.2
Form of Election/Letter of Transmittal
In connection with the merger of Richfood Holdings, Inc. ("Richfood") with
and into Winter Acquisition, Inc. ("Acquisition"), a wholly-owned subsidiary
of SUPERVALU INC. ("SUPERVALU"), this Form of Election/Letter of Transmittal
is to accompany certificates for shares of Richfood common stock, without par
value ("Shares"), when submitted pursuant to an election to receive, in
exchange for each Share, (i) $18.50 in cash (the "Cash Consideration") or (ii)
the number of shares of common stock, par value $1.00 per share, of SUPERVALU
(the "Stock Consideration," and together with the Cash Consideration, the
"Merger Consideration") equal to the ratio determined by dividing $18.50 by
the average trading price of SUPERVALU common stock during the 20-trading-day
period ending on the seventh trading day prior to the closing of the merger
(the "Average SUPERVALU Price") as specified in the Agreement and Plan of
Merger, dated as of June 9, 1999, among SUPERVALU, Acquisition and Richfood
(the "Merger Agreement").
The Exchange Agent for the merger is: Norwest Bank Minnesota, N.A.
By Mail: By Hand or Overnight Courier:
Norwest Bank Minnesota, N.A. Norwest Bank Minnesota, N.A.
Shareowner Services Reorganization Shareowner Services
Department 161 North Concord Exchange
P.O. Box 64858 South St. Paul, MN 55075
St. Paul, MN 55164-0858
DELIVERY OF THIS FORM OF ELECTION/LETTER OF TRANSMITTAL TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN
THIS FORM OF ELECTION/LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE
THE SUBSTITUTE FORM W-9 PROVIDED BELOW.
The information agent for the merger is:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, NY 10005
Call toll free: (800) 223-2064
Banks and brokers call collect: (212) 440-9800
PLEASE READ THE SPECIAL ELECTION INSTRUCTIONS AND THE GENERAL INSTRUCTIONS
IN THIS FORM OF ELECTION/LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING
THIS FORM OF ELECTION/LETTER OF TRANSMITTAL.
- --------------------------------------------------------------------------------
THE DEADLINE FOR SUBMITTING THIS FORM OF ELECTION/LETTER OF TRANSMITTAL TO
THE EXCHANGE AGENT, TOGETHER WITH YOUR SHARE CERTIFICATES (OR AFFIDAVITS AND
INDEMNIFICATION FOR LOST SHARE CERTIFICATES OR GUARANTEES OF DELIVERY OF
SHARE CERTIFICATES), IS 5:00 P.M., NEW YORK CITY TIME, ON THE BUSINESS DAY
THAT IS TWO TRADING DAYS PRIOR TO THE CLOSING OF THE MERGER (THE "ELECTION
DEADLINE"). The date of the closing of the merger will be publicly announced
in a news release delivered to the Dow Jones News Service as soon as
practicable, but in no event less than five trading days prior to the
closing.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
BOX A: ELECTION(S) AND DESCRIPTION OF RICHFOOD SHARES ENCLOSED
(See "Special Election Instructions" and General Instruction 13(1))
- ---------------------------------------------------------------------------------------------------------------------
Shares Submitted (Attach additional sheets if necessary)
- ---------------------------------------------------------------------------------------------------------------------
# of Shares
Represented by Cash Stock Non-
Name(s) and Address(es) of Registered Holder(s) Certificate (or Covered Election Election Election
(Please fill in, if blank, exactly as by a Guarantee of (# of (# of (# of
name(s) appear(s) on certificate(s)) Certificate # Delivery) Shares) Shares) Shares)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
Total # of Shares
- ---------------------------------------------------------------------------------------------------------------------
1. For the consequences of making a Stock Election, Cash Election or Non-Election see General Instruction 3.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[_] CHECK HERE IF THE ABOVE ELECTION REPRESENTS A REVOCATION OF ANY EARLIER
ELECTION.
[_] CHECK HERE IF ANY OF YOUR CERTIFICATES HAVE BEEN LOST, STOLEN OR DESTROYED
AND INDICATE THE NUMBER OF SHARES REPRESENTED THEREBY: ____________________.
Nominee record holders, which include a nominee, trustee or any other person
that holds shares in any capacity whatsoever on behalf of another person or
entity ("Nominees"), are directed to General Instruction 14 hereto and, if
submitting more than one election, must complete Box B below. Each record
holder submitting more than one election, other than a Nominee record holder
submitting more than one election, should indicate such holder's election(s)
in Box A above.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
BOX B: TO BE COMPLETED ONLY BY A NOMINEE, TRUSTEE OR ANY OTHER PERSON THAT HOLDS SHARES IN ANY
CAPACITY WHATSOEVER ON BEHALF OF MORE THAN ONE PERSON OR ENTITY.
---------------------------------------------------------------------------------------------------
If this Box B is completed, the undersigned, acting for itself and as nominee, trustee or in
another representative capacity on behalf of another person or entity, hereby submits the following
elections and attaches certificates for all Shares held of record.
- ---------------------------------------------------------------------------------------------------
Shares Submitted (Attach additional sheets if necessary,
numbering each additional election with consecutive numbers starting with "7")
- ---------------------------------------------------------------------------------------------------
Number of Shares Cash Election Stock Election Non-Election
Number of Election Subject to Election (Number of Shares) (Number of Shares) (Number of Shares)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1.
- ---------------------------------------------------------------------------------------------------
2.
- ---------------------------------------------------------------------------------------------------
3.
- ---------------------------------------------------------------------------------------------------
4.
- ---------------------------------------------------------------------------------------------------
5.
- ---------------------------------------------------------------------------------------------------
6.
</TABLE>
2
<PAGE>
SPECIAL ISSUANCE AND PAYMENT SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS (See General Instructions 5 and
(See General Instructions 5, 8, 10)
9, and 10)
To be completed ONLY if the cer-
To be completed ONLY if the cer- tificate representing the Stock
tificate representing the Stock Consideration and/or the check
Consideration and/or the check representing the Cash Considera-
representing the Cash Considera- tion or cash in lieu of frac-
tion or cash in lieu of frac- tional shares, as the case may
tional shares, as the case may be, is to be sent to someone
be, is to be issued in the name other than the undersigned or to
of someone other than the under- the undersigned at an address
signed. NOTE: THE PERSON NAMED IN other than that shown above in
THESE SPECIAL ISSUANCE AND PAY- Box A.
MENT INSTRUCTIONS MUST BE THE
PERSON WHO COMPLETES THE SUBSTI- Mail the certificate representing
TUTE FORM W-9. the Stock Consideration and/or
the check representing the Cash
Issue the certificate represent- Consideration or cash in lieu of
ing the Stock Consideration fractional shares to:
and/or the check representing the
Cash Consideration or cash in Name______________________________
lieu of fractional shares to: (Please Print)
Name _____________________________ Address __________________________
(Please Print)
__________________________________
Address __________________________ (Zip Code)
__________________________________ [_Check]this box if this is a
(Zip Code) permanent change of address.
__________________________________ If you complete this box, you
(Taxpayer Identification or will need a signature guarantee
Social Security Number) by an eligible institution. See
(See Substitute Form W-9 Below) General Instruction 5.
If you complete this box, you
will need a signature guarantee
by an eligible institution. See
General Instruction 5.
3
<PAGE>
SUBSTITUTE FORM W-9
(See General Instruction 11 and "Important Tax Information," below)
PAYER'S NAME: NORWEST BANK MINNESOTA, N.A.
- -------------------------------------------------------------------------------
Part 1 PLEASE PROVIDE YOUR Social Security Number
TIN IN THE BOX AT RIGHT AND or Taxpayer
CERTIFY BY SIGNING AND Identification Number
DATING BELOW.
SUBSTITUTE
Form W-9
Department of ----------------------
the Treasury --------------------------------------------------------
Internal Part 2 Awaiting TIN [_]
Revenue --------------------------------------------------------
Service CERTIFICATION UNDER THE PENALTIES OF PERJURY, I CER-
TIFY THAT (1) the number shown on this form is my
correct taxpayer identification number (or I am wait-
ing for a number to be issued to me) and (2) I am not
subject to backup withholding either because (a) I am
exempt from backup withholding, (b) I have not been
notified by the Internal Revenue Service that I am
subject to backup withholding as a result of the
failure to report all interest or dividends, or (c)
the Internal Revenue Service has notified me that I
am no longer subject to backup withholding.
Payer's Request for Taxpayer Identification Number (TIN)
Signature ______________ Date _______
You must cross out item (2) above if you have been
notified by the Internal Revenue Service that you are
currently subject to backup withholding because you
have failed to report all interest and dividends on
your tax return. However, if after being notified by
the IRS that you were subject to backup withholding,
you receive another notification from the IRS that
you are no longer subject to backup withholding, do
not cross out such item (2).
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31% OF
ANY CASH PAYMENTS MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2
OF THE SUBSTITUTE FORM W-9.
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either that (i) I have mailed or delivered
an application to receive a Taxpayer Identification Number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (ii) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a Taxpayer
Identification Number by the time of payment, 31% of all reportable
payments made to me will be withheld, but that such amounts will be
refunded to me if I then provide a Taxpayer Identification Number within
sixty (60) days.
Signature ____________________ Date ________
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SPECIAL ELECTION INSTRUCTIONS
The appropriate election(s) must be made in Box A (or, if a nominee, trustee
or other representative making multiple elections, Box B) above in order to
make a Stock Election, a Cash Election or a Non-Election with respect to each
Share represented by the Certificate(s) surrendered herewith.
Because of certain limitations on the amount of Cash Consideration and Stock
Consideration to be issued in the merger, there can be no assurance that each
Richfood Shareholder will receive the form of consideration which such
shareholder elects. If the elections result in an oversubscription of either
the Stock Consideration or the Cash Consideration, the procedures for
allocating cash and shares of SUPERVALU common stock set forth in the Merger
Agreement and described in the Proxy Statement/Prospectus will be followed by
the Exchange Agent. See "THE MERGER--Allocation Rules" in the Proxy
Statement/Prospectus and Instruction 3 hereto. ALL DECISIONS BY THE EXCHANGE
AGENT WITH RESPECT TO SUCH PROCESS SHALL BE FINAL AND BINDING.
ALL RICHFOOD SHAREHOLDERS WISHING TO MAKE A STOCK ELECTION OR A CASH
ELECTION MUST ENSURE THAT THE EXCHANGE AGENT RECEIVES A PROPERLY COMPLETED
FORM OF ELECTION/LETTER OF TRANSMITTAL PRIOR TO THE ELECTION DEADLINE. ALL
SHAREHOLDERS SUBMITTING FORMS OF ELECTION/LETTERS OF TRANSMITTAL AFTER SUCH
TIME WILL BE DEEMED TO HAVE MADE NO ELECTION, REGARDLESS OF THE ELECTION
SPECIFIED ON SUCH FORM. RICHFOOD SHAREHOLDERS WISHING TO MAKE NO ELECTION ARE
NOT REQUIRED TO SUBMIT THIS FORM OF ELECTION/LETTER OF TRANSMITTAL PRIOR TO
THE ELECTION DEADLINE OR PRIOR TO THE EFFECTIVE TIME OF THE MERGER, BUT SUCH
HOLDER'S CERTIFICATES MUST BE SURRENDERED IN ORDER TO RECEIVE THE MERGER
CONSIDERATION.
THE EXCHANGE AGENT RESERVES THE RIGHT TO DEEM THAT YOU HAVE CHECKED THE
"NON- ELECTION" BOX IF:
A. NO ELECTION CHOICE IS INDICATED IN BOX A (OR, IF A NOMINEE, TRUSTEE OR
OTHER REPRESENTATIVE MAKING MULTIPLE ELECTIONS, BOX B) ABOVE;
B. YOU FAIL TO FOLLOW THE INSTRUCTIONS ON THIS FORM OF ELECTION/LETTER OF
TRANSMITTAL (INCLUDING SUBMISSION OF YOUR CERTIFICATES) OR OTHERWISE FAIL
TO PROPERLY MAKE AN ELECTION; OR
C. A COMPLETED FORM OF ELECTION/LETTER OF TRANSMITTAL (INCLUDING
SUBMISSION OF YOUR CERTIFICATES) IS NOT ACTUALLY RECEIVED BY THE ELECTION
DEADLINE (OR IN ACCORDANCE WITH THE GUARANTEE PROVISIONS FOR LATE DELIVERY
OF CERTIFICATES).
In order to receive the Merger Consideration, this Form of Election/Letter
of Transmittal must be (i) completed and signed in the space provided below
and on the Substitute Form W-9 and (ii) mailed or delivered with your
Certificate(s) to the Exchange Agent at either of the addresses set forth
above. In order to properly make a Stock Election or Cash Election, these
actions must be taken in a timely fashion such that the Form of
Election/Letter of Transmittal is received by the Exchange Agent prior to the
Election Deadline.
The method of delivery of the Certificates and all other required documents
is at the election and risk of the shareholder; however, if the Certificates
are sent by mail, it is recommended that they be sent by registered mail,
appropriately insured, with return receipt requested.
Unless otherwise indicated above under "Special Issuance and Payment
Instructions," in exchange for the enclosed Certificates, the undersigned
requests issuance of the Merger Consideration to the undersigned. Similarly,
unless otherwise indicated above under "Special Delivery Instructions," the
undersigned requests that the Merger Consideration be mailed to the
undersigned at the address shown in Box A above. In the event that both the
"Special Delivery Instructions" and the "Special Issuance and Payment
Instructions" are completed, please issue the Merger Consideration in the name
of, and mail the Merger Consideration to, the person or entity so indicated at
the address so indicated. Appropriate signature guarantees have been included
with respect to Shares for which Special Issuance and Payment Instructions
have been given.
5
<PAGE>
CONSUMMATION OF THE MERGER IS SUBJECT TO THE SATISFACTION OF CERTAIN
CONDITIONS. NO PAYMENTS RELATED TO ANY SURRENDERED CERTIFICATES WILL BE MADE
PRIOR TO THE EFFECTIVE TIME.
In the event that the Merger Agreement is terminated, the Exchange Agent
will promptly return Certificates previously submitted with Forms of
Election/Letters of Transmittal. In such event, Shares held through The
Depository Trust Company are expected to be available for sale or transfer
promptly following such termination; however, Certificates representing Shares
held of record directly by the beneficial owners of such Shares will be
returned as promptly as practicable by first class, insured mail.
6
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE GENERAL INSTRUCTIONS
AND SPECIAL ELECTION INSTRUCTIONS SET FORTH IN THIS FORM OF ELECTION/LETTER OF
TRANSMITTAL CAREFULLY.
To Norwest Bank Minnesota, N.A.:
In connection with the merger, and pursuant to the Merger Agreement, the
undersigned hereby makes the election or elections set forth herein and
surrenders for cancellation to Norwest Bank Minnesota, N.A., as Exchange
Agent, certificates representing all of the undersigned's shares of Richfood
common stock (each such certificate, a "Certificate"), listed in Box A (or, if
held by a nominee, trustee or other representative making multiple elections,
in Box B) above in exchange for either (i) the right to receive $18.50 in cash
(a "Cash Election"), (ii) the right to receive the number of shares of common
stock, par value $1.00 per share, of SUPERVALU equal to the ratio determined
by dividing $18.50 by the Average SUPERVALU Price (a "Stock Election") or
(iii) the right to make no election (a "Non-Election") (shares of Richfood
common stock in respect of which a such a Non-Election is made, together with
shares in respect of which such an election is deemed to have been made
pursuant to the Merger Agreement, constituting "Non-Election Shares"), in
which case the undersigned will receive Merger Consideration determined
pursuant to the allocation procedures set forth in the Merger Agreement and
described in the proxy statement/prospectus delivered herewith (including all
documents incorporated therein, and as it may be amended from time to time,
the "Proxy Statement/Prospectus"). See "THE MERGER--Allocation Rules" in the
Proxy Statement/Prospectus. The Merger Agreement is included as Annex A to the
Proxy Statement/Prospectus.
It is understood that, pursuant to the Merger Agreement, the aggregate
number of shares of Richfood common stock to be converted into the right to
receive Stock Consideration and the aggregate number of shares of Richfood
common stock to be converted into the right to receive Cash Consideration will
in each case be equal to 50%, or an adjusted percentage under certain
circumstances, of the total number of shares of Richfood common stock issued
and outstanding immediately prior to the effective time of the merger (other
than "Excluded Shares," which are shares owned by SUPERVALU, Richfood or their
respective subsidiaries, except for shares held on behalf of third parties,
which will be cancelled). In the event that the aggregate proportion of shares
of Richfood common stock in respect of which Stock Elections and Cash
Elections are received (or deemed to have been received in respect of Non-
Election Shares) differs, in each case, from 50% or, if applicable, from the
adjusted percentages, of the total number of shares of Richfood common stock
issued and outstanding immediately prior to the effective time of the merger
(other than Excluded Shares), the aggregate Cash Consideration and Stock
Consideration will be subject to allocation and proration among Richfood
shareholders in accordance with procedures set forth in the Merger Agreement.
See "THE MERGER--Allocation Rules" in the Proxy Statement/Prospectus. In
addition, it is further understood that the Exchange Agent will pay cash in
lieu of any fractional shares of SUPERVALU common stock otherwise issuable in
connection with the merger as specified herein. Except as expressly provided
herein, capitalized terms shall have the meanings ascribed to them in the
Merger Agreement.
The undersigned understands that the elections referred to above are subject
to certain terms, conditions and limitations that are set forth in the Merger
Agreement, the General Instructions and Special Election Instructions hereto
(the "Instructions") and the Proxy Statement/Prospectus. Additional copies of
this Form of Election/Letter of Transmittal and the Proxy Statement/Prospectus
may be requested from the information agent, Georgeson & Company Inc., at the
address or phone number shown above. The filing of this Form of
Election/Letter of Transmittal with the Exchange Agent is acknowledgment of
the receipt of the Proxy Statement/Prospectus. The undersigned understands and
acknowledges that all questions as to the validity, form and eligibility of
any election and surrender of the Shares hereunder shall be determined by
SUPERVALU or, at SUPERVALU's discretion, by the Exchange Agent, and such
determination shall be final and binding.
The undersigned hereby represents and warrants that the undersigned is, as
of the date hereof, and will be, as of the effective time of the merger, the
registered holder of the Shares represented by the Certificate(s) surrendered
herewith, with good title to the above-described Shares and full power and
authority (i) to sell, assign and transfer such Shares, free and clear of all
liens, claims and encumbrances, and not subject to any adverse claims and (ii)
to make the election or elections set forth herein. The undersigned will, upon
request, execute any additional documents necessary or desirable to complete
the surrender and exchange of such Shares. The undersigned hereby irrevocably
appoints the Exchange Agent, as agent of the undersigned, to effect the
exchange pursuant to the Merger Agreement and the Instructions. All authority
conferred or
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<PAGE>
agreed to be conferred in the Form of Election/Letter of Transmittal shall be
binding upon the successors, assigns, heirs, executors, administrators and
legal representatives of the undersigned and shall not be affected by, and
shall survive, the death or incapacity of the undersigned.
The undersigned authorizes and instructs you, as Exchange Agent, to deliver
Certificates and receive on behalf of the undersigned, in exchange for Shares
represented thereby, any check for cash or any certificate for shares of
SUPERVALU common stock issuable in the merger pursuant to the Merger
Agreement. If the Certificate(s) is (are) not delivered herewith or by book-
entry transfer, there is furnished herewith (i) a guarantee of delivery of
such Certificate(s) from a member of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or
a commercial bank or trust company having an office in the United States
(provided below) in accordance with General Instruction 5 or (ii) an affidavit
and indemnification regarding the loss, theft or destruction of such
Certificate(s) reasonably acceptable to SUPERVALU in accordance with General
Instruction 12.
8
<PAGE>
SIGN HERE
IMPORTANT: ALSO COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 ON PAGE 4
Name(s): _________________________
---------------------------------- (Please print)
(Signature(s) of Owner(s)) Capacity (full title): ___________
---------------------------------- Address: _________________________
----------------------------------
Must be signed by registered (Zip Code)
holder(s) as name(s) appear(s) on ----------------------------------
stock certificate(s). If signed (Area Code and Telephone Number)
by a trustee, executor,
administrator, guardian,
attorney-in-fact, officer of a
corporation or other person
acting in a fiduciary or
representative capacity, the
capacity of the person signing
should be indicated. (See General
Instruction 8 hereto).
----------------------------------
(Taxpayer Identification or
Social Security Number)
Dated: ___________________________
SIGNATURE GUARANTEE
(REQUIRED ONLY IN CASE SPECIFIED IN GENERAL INSTRUCTION 5)
The undersigned hereby guarantees
the signature(s) which appear(s) ----------------------------------
on this Form of Election/Letter (Name of Eligible Institution
of Transmittal. Issuing Guarantee)
(Please Print)
Dated: _______________________
----------------------------------
(Fix Medallion Stamp Above)
THE EXCHANGE AGENT HAS BEEN INSTRUCTED NOT TO MAKE ANY EXCHANGE OF YOUR
SHARES UNTIL THIS FORM OF ELECTION/LETTER OF TRANSMITTAL HAS BEEN EXECUTED AND
DELIVERED TO THE EXCHANGE AGENT TOGETHER WITH YOUR STOCK CERTIFICATES.
IF YOUR CERTIFICATE(S) HAS (HAVE) BEEN LOST, STOLEN OR DESTROYED AND YOU
REQUIRE ASSISTANCE IN REPLACING IT (THEM), SEE GENERAL INSTRUCTION 12 BELOW.
YOU CANNOT SUBMIT AN EFFECTIVE FORM OF ELECTION/LETTER OF TRANSMITTAL WITHOUT
ATTACHING YOUR CERTIFICATES TO THIS FORM OF ELECTION/LETTER OF TRANSMITTAL OR
COMPLYING WITH THE GUARANTEE OR BOOK ENTRY TRANSFER PROVISIONS OR AS SET FORTH
IN GENERAL INSTRUCTION 1; THEREFORE, IF YOU WISH TO MAKE AN EFFECTIVE
ELECTION, IT IS CRITICAL THAT YOU ACT IMMEDIATELY.
Shareholders whose share certificates are not immediately available or who
cannot deliver their share certificates and all other documents required
hereby to the Exchange Agent prior to the Election Deadline, and who wish to
make an election, must do so pursuant to the procedures for lost share
certificates described in General Instruction 12 or the guaranteed delivery
procedures described in General Instruction 1.
9
<PAGE>
Information as to the federal income tax consequences of receiving Stock
Consideration or Cash Consideration in exchange for your Shares is set forth
under the caption "THE MERGER--Material Federal Income Tax Consequences" in
the proxy statement/prospectus furnished to you concurrently herewith. See
also the information on page 16 of this Form of Election/Letter of Transmittal
under the heading "Important Tax Information." You are urged, in addition, to
consult with your tax advisor.
NOTICE OF DELIVERY UNDER GUARANTEE (See General Instruction 1)
[_]CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): ___________________________________________
Window Ticket No. (if any): ________________________________________________
Date of Execution of Guarantee of Delivery: ________________________________
Name of Institution that Guaranteed Delivery: ______________________________
If delivered by book-entry transfer (assuming such procedure is available),
complete the following:
Depository Trust Company Account Transaction Code Number: _______
Number: _________________________________
DELIVERY BY BOOK-ENTRY TRANSFER (See General Instruction 1)
[_]CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
EXCHANGE AGENT'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY AND COMPLETE THE
FOLLOWING:
Name of Electing Institution: ______________________________________________
Depository Trust Company Account Number: ___________________________________
Transaction Code Number: ___________________________________________________
10
<PAGE>
GUARANTEE OF DELIVERY
If certificates for Shares are not available prior to the Election Deadline,
the following Guarantee may be completed by an Eligible Institution and the
election made herein will be valid if such certificates, together with a
completed Form of Election/Letter of Transmittal, are in fact delivered to the
Exchange Agent within three trading days after the date of execution hereof.
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or a correspondent in the
United States, hereby guarantees that, within three New York Stock Exchange
trading days from the date of this Form of Election/Letter of Transmittal,
certificates representing the Shares covered hereby in proper form for
transfer and any required documents, together with a completed Form of
Election/Letter of Transmittal, will be deposited by the undersigned with
the Exchange Agent. IF YOU COMPLETE THIS GUARANTEE OF DELIVERY, YOU WILL
NEED A SIGNATURE GUARANTEE BY AN ELIGIBLE INSTITUTION. SEE GENERAL
INSTRUCTION 5.
The undersigned acknowledges that it must deliver the Shares covered
hereby to the Exchange Agent within the time period set forth above and
that failure to do so could result in financial loss to the undersigned.
Dated: _____________________ -------------------------------------------
(Firm--Please Print)
Number of Shares: __________ -------------------------------------------
(Authorized Signature)
If Shares will be
delivered by book- -------------------------------------------
entry transfer,
provide the
Depository Trust
Company account
number: _____________
-------------------------------------------
(Address)
-------------------------------------------
(Area Code and Telephone Number)
11
<PAGE>
GENERAL INSTRUCTIONS
This Form of Election/Letter of Transmittal is to be completed and submitted
to the Exchange Agent prior to the Election Deadline by those Richfood
shareholders desiring to make a Stock Election, Cash Election or Non-Election.
All Richfood shareholders, including those making a Non-Election, must
surrender their Certificates to the Exchange Agent in order to receive the
Merger Consideration. Until a record holder's Certificates are received by the
Exchange Agent at one of the addresses set forth above, together with such
documents as the Exchange Agent may require, and until the same are processed
for exchange by the Exchange Agent, such holders will not receive any
certificates representing the Stock Consideration and/or the check
representing the Cash Consideration or cash in lieu of fractional shares (if
any) in exchange for their Certificates. No interest will accrue on the Cash
Consideration, the cash in lieu of fractional shares or such dividends. If
your Certificate(s) is (are) lost, stolen or destroyed, please refer to
General Instruction 12 below.
A HOLDER OF SHARES MUST MAKE THE APPROPRIATE ELECTION(S) IN BOX A (OR, IF A
NOMINEE, TRUSTEE OR OTHER REPRESENTATIVE MAKING MULTIPLE ELECTIONS, BOX B)
ABOVE TO MAKE AN EFFECTIVE STOCK ELECTION, CASH ELECTION OR NON-ELECTION.
Your election is subject to certain terms, conditions and limitations that
have been set out in the Merger Agreement and the Proxy Statement/Prospectus.
The Merger Agreement is included as Annex A to the Proxy Statement/Prospectus.
Additional copies of the Proxy Statement/Prospectus may be requested from the
information agent, Georgeson & Company Inc., at the address or phone number
shown above. The filing of this Form of Election/Letter of Transmittal with
the Exchange Agent is acknowledgment of the receipt of the Proxy
Statement/Prospectus.
1. Election Deadline. For any Stock Election, Cash Election or Non-Election
contained herein to be considered, this Form of Election/Letter of
Transmittal, properly completed, and the related Certificates must be received
by the Exchange Agent at one of the addresses shown above on this Form of
Election/Letter of Transmittal no later than 5:00 p.m., New York City time, on
the date of the Election Deadline. The date of the Election Deadline is the
business day that is two trading days prior to the closing of the merger. The
date of the closing of the merger will be announced in a news release
delivered to the Dow Jones News Service as soon as practicable, but in no
event less than five trading days prior to the closing.
Holders whose stock certificate(s) is (are) not immediately available or
holders who cannot complete the procedure for delivery by book-entry transfer
on a timely basis may deliver the Shares and may also make an effective
election by (a) completing Box A or B herein, having the box entitled
"Guarantee of Delivery" herein properly completed and duly executed with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message (as defined below)) and delivering such documents to the
Exchange Agent prior to the Election Deadline; and (b) delivering their
Certificates, in proper form for transfer, or a confirmation of a book-entry
transfer of such Shares, if such procedure is available, into the Exchange
Agent's account at one of the book-entry transfer facilities within three New
York Stock Exchange trading days after the date of execution hereof. In
addition, at the time the Certificate(s) (or the Shares pursuant to a book-
entry transfer) are delivered pursuant to the Guarantee of Delivery, the
guarantor must submit to the Exchange Agent another Form of Election/Letter of
Transmittal with only the section entitled "Notice of Delivery Under
Guarantee" properly completed (or must otherwise provide such information to
the Exchange Agent). If the guarantor fails to deliver the Certificate(s) (or
the Shares by book-entry transfer) in accordance with the guaranteed delivery
procedures contained herein, without limitation of any other recourse, any
purported election with respect to the Shares subject to such guarantee will
be void. The term "Agent's Message" means a message, transmitted by a book-
entry transfer facility to, and received by, the Exchange Agent and forming a
part of a book entry confirmation, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility delivering the Shares, that such participant has
received and agrees to be bound by the terms of this Form of Election/Letter
of Transmittal and that SUPERVALU may enforce such agreement against the
participant.
2. Revocation or Amendment of Form of Election/Letter of Transmittal. An
election may be revoked or amended, but only by written notice received by the
Exchange Agent prior to the Election Deadline. Any Certificate(s) representing
Shares that have been submitted to the Exchange Agent in connection with an
election shall be returned without charge to the holder thereof in the event
such election is revoked as aforesaid and such holder requests in writing the
return of such Certificate(s). Upon any such revocation, unless a duly
completed Form of Election/Letter of Transmittal is thereafter submitted in
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<PAGE>
accordance with the procedures set forth in the Proxy Statement/Prospectus,
such Shares shall be Non-Election Shares, as described therein.
3. Election Procedures/Allocation. As set forth in the Proxy
Statement/Prospectus, the number of shares of Richfood common stock to be
converted into the right to receive Cash Consideration in the merger, and the
number of shares of Richfood common stock to be converted into the right to
receive Stock Consideration in the merger, shall in each case be equal to
fifty percent (50%) of (i) the total number of shares of Richfood common stock
issued and outstanding immediately prior to the effective time of the merger
less (ii) the number of Excluded Shares. BECAUSE OF THE LIMITATIONS ON THE
NUMBER OF SHARES OF RICHFOOD COMMON STOCK TO BE CONVERTED INTO THE RIGHT TO
RECEIVE CASH CONSIDERATION AND STOCK CONSIDERATION UNDER THE ELECTION AND
ALLOCATION PROCEDURES DESCRIBED HEREIN, NO ASSURANCE CAN BE GIVEN THAT HOLDERS
OF RICHFOOD COMMON STOCK WILL RECEIVE THEIR REQUESTED FORM OF MERGER
CONSIDERATION.
4. No Fractional Interests. No certificate representing fractional shares of
SUPERVALU common stock will be issued. The Exchange Agent will remit cash
without interest in lieu of such fractional shares. No Richfood shareholder
shall be entitled to dividends, voting rights or any other rights in respect
of any fractional share.
5. Guarantee of Signatures. Signatures on this Form of Election/Letter of
Transmittal need not be guaranteed unless the "Special Issuance and Payment
Instructions" or "Special Delivery Instructions" box or the "Guarantee of
Delivery" section has been completed. In such event, signatures on this Form
of Election/Letter of Transmittal must be guaranteed by an eligible guarantor
institution pursuant to Rule 17Ad-15 promulgated under the Securities Exchange
Act of 1934, as amended (generally a member firm of the New York Stock
Exchange or any bank or trust company which is a member of the Medallion
Program). Public notaries cannot execute acceptable guarantees of signatures.
6. Delivery of Form of Election/Letter of Transmittal and Certificates. This
Form of Election/Letter of Transmittal, properly completed and duly executed,
together with the Certificate(s) representing the Shares, should be delivered
to the Exchange Agent at one of the addresses set forth above. The method of
delivery of the Certificates and all other required documents is at the
election and risk of the record holder of such Shares; however, if such
Certificates are sent by mail, it is recommended that they be sent by
registered mail, appropriately insured, with return receipt requested.
7. Inadequate Space. If the space provided herein is inadequate, the
Certificate numbers and the numbers of Shares represented thereby should be
listed on additional sheets and attached hereto.
8. Signatures on Election Form, Stock Powers and Endorsements.
(a) All signatures must correspond exactly with the name written on the face
of the Certificate(s) without alteration, variation or any change whatsoever.
(b) If the Certificate(s) surrendered is (are) held of record by two or more
joint owners, all such owners must sign this Form of Election/Letter of
Transmittal.
(c) If any surrendered Shares are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many
separate Forms of Election/Letters of Transmittal as there are different
registrations of Certificates.
(d) If this Form of Election/Letter of Transmittal is signed by a person(s)
other than the record holder(s) of the Certificates listed (other than as set
forth in paragraph (e) below), such Certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the record holder(s) appears on such Certificate.
(e) If this Form of Election/Letter of Transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation
or other person acting in a fiduciary or representative capacity and such
person is not the record holder of the accompanying Certificates, he or she
must indicate the capacity when signing and must submit proper evidence of his
authority to act.
9. Stock Transfer Taxes. In the event that any transfer or other taxes
become payable by reason of the issuance of the Merger Consideration in any
name other than that of the Richfood shareholder, such transferee or assignee
must pay such tax to the Exchange Agent or must establish to the satisfaction
of the Exchange Agent that such tax has been paid.
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<PAGE>
10. Special Issuance and Payment and Delivery Instructions. Indicate the
name and/or address of the person(s) to whom the Stock Consideration and/or
the check representing the Cash Consideration or cash in lieu of fractional
shares (if any) is to be issued and/or sent, if different from the name and/or
address of the person(s) signing this Form of Election/Letter of Transmittal.
11. Withholding. Each surrendering Richfood shareholder is required to
provide the Exchange Agent with such holder's correct Taxpayer Identification
Number ("TIN") on the Substitute Form W-9 and to certify whether such holder
is subject to backup withholding. The TIN that must be provided is that of the
Richfood shareholder with respect to the Certificate(s) surrendered herewith
or of the last transferee appearing on the transfers attached to or endorsed
on such Certificate(s) (or, if a check is made payable to another person as
provided in the box above entitled "Special Issuance and Payment
Instructions," then the TIN of such person). Failure to provide the
information on the Substitute Form W-9 may subject the surrendering
stockholder to 31% federal income tax withholding on payments made to such
surrendering holder with respect to the Shares and on future dividends paid by
SUPERVALU. A Richfood shareholder must cross out item (2) in the certification
box of Substitute Form W-9 if such holder has been notified by the IRS that
such holder is currently subject to backup withholding. The box in Part 2 of
the Substitute Form W-9 should be checked if the surrendering stockholder has
not been issued a TIN and has applied for a TIN or intends to apply for a TIN
in the near future. If the box in Part 2 is checked and the Exchange Agent is
not provided with a TIN within 60 days thereafter, SUPERVALU will withhold 31%
of all such payments and dividends until a TIN is provided to the Exchange
Agent. Foreign investors should consult their tax advisors regarding the need
to complete IRS Form W-8 and any other forms that may be required.
12. Lost, Stolen or Destroyed Certificates. You cannot submit an effective
Form of Election/Letter of Transmittal without attaching your Certificates to
this Form of Election/Letter of Transmittal. If your Certificate(s) has (have)
been lost, stolen or destroyed, you are urged to call the Exchange Agent toll-
free at (800) 380-1372 immediately to receive instructions as to the steps you
must take in order to effect an exchange of your Shares. In addition, the
Exchange Agent will provide you with a form of an affidavit and
indemnification regarding the loss, theft or destruction of your
Certificate(s) that is in form and substance reasonably acceptable to
SUPERVALU. Such form may be completed and submitted as an alternative to
attaching your Certificate(s) to this Form of Election/Letter of Transmittal.
You may be required to pay a fee to obtain a replacement for a certificate
that has been lost, stolen or destroyed.
13. Elections, Certificates and Share Allocations. Each Richfood shareholder
is entitled to make a Stock Election, a Cash Election and/or a Non-Election,
provided the Form of Election/Letter of Transmittal for any holder making such
election(s) is properly completed and received by the Exchange Agent prior to
the Election Deadline. All Richfood shareholders must complete Box A (or, if a
nominee, trustee or other representative making more than one election, Box B)
in order to receive the desired Merger Consideration. To properly complete Box
A (or, if a nominee, trustee or other representative making more than one
election, Box B), the number of each Certificate surrendered herewith must be
written in the column under the heading "Certificate Number," and the number
of Shares represented by each Certificate surrendered herewith in connection
with a specific election should be written in the appropriate column under the
heading "Number of Shares" beside each Certificate number. Shareholders
wishing to make more than one election may do so on one Form of
Election/Letter of Transmittal by specifying under the appropriate heading the
number of Shares for which a Stock Election, Cash Election or Non-Election is
desired, including multiple elections with respect to Shares represented by a
single Certificate. All shareholders, including those making a Non-Election,
must surrender their Certificates to the Exchange Agent in order to receive
the Merger Consideration. Richfood shareholders should see "Important Tax
Information" below for important tax consequences of various elections.
14. Holders Who are Nominees, Trustees or Other Representatives. Each holder
of record is entitled to make an election and submit a Form of Election/Letter
of Transmittal covering all Shares actually held of record by such holder.
Nominee record holders, which include nominees, trustees or any other person
that holds Shares in any capacity whatsoever on behalf of more than one person
or entity, are entitled to make an election for such nominee record holders as
well as an election on behalf of each beneficial owner of Shares held through
such nominee record holders, but such elections must be made on one Form of
Election/Letter of Transmittal. Beneficial owners who are not record holders
are not entitled to submit Forms of Election/Letters of Transmittal. Persons
submitting a Form of Election/Letter of Transmittal on behalf of a
14
<PAGE>
registered shareholder as trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or acting in another fiduciary or
representative capacity should refer to General Instruction 8 above.
15. Miscellaneous. Neither SUPERVALU nor the Exchange Agent is under any
duty to give notification of defects in any Form of Election/Letter of
Transmittal. SUPERVALU and the Exchange Agent shall not incur any liability
for failure to give such notification, and each of SUPERVALU and the Exchange
Agent has the absolute right to reject any and all Forms of Election/Letters
of Transmittal not in proper form or to waive any irregularities in any Form
of Election/Letter of Transmittal.
16. Information and Additional Copies. Information and additional copies of
this Form of Election/Letter of Transmittal may be obtained by telephoning the
information agent, Georgeson & Company Inc., toll free at (800) 223-2064.
15
<PAGE>
IMPORTANT TAX INFORMATION
Withholding. Under the federal income tax law, the Exchange Agent is
required to file a report with the IRS disclosing any payments of cash being
made to each holder of Certificates pursuant to the Merger Agreement and to
impose 31% backup withholding if required. If the correct certifications on
Substitute Form W-9 are not provided, a $50 penalty may be imposed by the IRS
and payments made for Shares may be subject to backup withholding of 31%.
Withholding is also required if the IRS notifies the recipient that such
recipient is subject to backup withholding as a result of a failure to report
interest and dividends.
In order to avoid backup withholding of federal income tax resulting from a
failure to provide a correct certification, a United States ("U.S.") citizen
or resident or other U.S. entity must, unless an exemption applies, provide
the Exchange Agent with his correct TIN on Substitute Form W-9 as set forth on
this Form of Election/Letter of Transmittal. See General Instruction 11. Such
person must certify under penalties of perjury that such number is correct and
that such holder is not otherwise subject to backup withholding. The TIN that
must be provided is that of the registered holder of the Certificate(s) or of
the last transferee appearing on the transfers attached to or endorsed on the
Certificate(s) (or, if a check is made payable to another person as provided
in the box entitled "Special Issuance and Payment Instructions," then the TIN
of such person). Foreign investors should consult their tax advisors regarding
the need to complete IRS Form W-8 and any other forms that may be required.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to backup withholding will be
reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained from the IRS.
Please read "Guidelines for Certification of Taxpayer Identification Number
(TIN) on Substitute Form W-9," set forth below, for additional important
information on how to complete the Substitute Form W-9.
Elections. As set forth in the Proxy Statement/Prospectus, the merger is
intended to qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax
purposes. Provided that the merger qualifies as a reorganization (1) neither
Richfood nor SUPERVALU will recognize any gain or loss for U.S. federal income
tax purposes as a result of the merger and (2) the U.S. federal income tax
consequences to a Richfood shareholder of the receipt of the Merger
Consideration in exchange for shares of Richfood common stock will depend on
whether the Merger Consideration such shareholder receives is composed of
shares of SUPERVALU common stock, cash or a combination of SUPERVALU common
stock and cash. In general, a Richfood shareholder will not recognize any gain
or loss as a result of the receipt of SUPERVALU common stock in exchange for
Richfood common stock, but will recognize gain, if any, with respect to any
cash received. Under the Merger Agreement, a Richfood shareholder may be
required to receive some cash even if he elects to receive only SUPERVALU
common stock, or to receive some SUPERVALU common stock even if he elects to
receive only cash.
Reporting Requirements. Income tax regulations require Richfood shareholders
to submit detailed information regarding the exchange of Richfood common stock
for the Merger Consideration with their federal income tax returns. In
addition, if a Richfood shareholder owns two or more "blocks" of Richfood
common stock, the determination of such shareholder's taxable gain and tax
basis for shares of SUPERVALU common stock may need to be computed separately
for each such block. Each Richfood shareholder should consult with his tax
advisor about such matters and other tax consequences of the merger in light
of his individual circumstances, including the application of any federal,
state, local or foreign law.
16
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER (TIN) ON SUBSTITUTE FORM W-9
(Section references are to the Internal Revenue Code)
Name
If you are an individual, you must generally provide the name shown on your
social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security
Administration of the name change, please enter your first name, the last name
shown on your social security card, and your new last name.
Obtaining a Number
If you don't have a taxpayer identification number ("TIN"), apply for one
immediately. To apply, obtain Form SS-5, Application for a Social Security
Card, from your local office of the Social Security Administration, or Form
SS-4, Application for Employer Identification Number, from your local Internal
Revenue Service (the "IRS") office.
Payees and Payments Exempt from Backup Withholding
The following is a list of payees exempt from backup withholding and for which
no information reporting is required:
(1) An organization exempt from tax under section 501(a), or an individual
retirement plan ("IRA"), or a custodial account under section 403(b)(7).
(2) The United States or any of its agencies or instrumentalities.
(3) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(4) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(5) An international organization or any of its agencies or
instrumentalities.
Other payees that may be exempt from backup withholding include:
(6) A corporation.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or
a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
For interest and dividends, all listed payees are exempt except item (9). For
broker transactions, payees listed in (1) through (13) and a person registered
under the Investment Advisers Act of 1940 who regularly acts as a broker are
exempt. Payments subject to reporting under sections 6041 and 6041A are
generally exempt from backup withholding only if made to payees described in
items (1) through (7), except the following payments made to a corporation and
reportable on Form 1099-MISC are not exempt from withholding:
. Medical and health care payments.
. Attorneys' fees.
. Payments for services paid by a federal executive agency.
Payments of dividends generally not subject to backup withholding include the
following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
that have at least one nonresident partner.
. Payments made by certain foreign organizations.
17
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER (TIN) ON SUBSTITUTE FORM W-9 (CONTINUED)
(Section references are to the Internal Revenue Code)
Payments of interest generally not subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payor's trade or business and you
have not provided your correct TIN to the payor.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A, and 6050N, and the regulations under those sections.
Privacy Act Notice.--Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid,
the acquisition or abandonment of secured property, or contributions you made
to an IRA. The IRS uses the numbers for identification purposes and to help
verify the accuracy of your tax return. You must provide your TIN whether or
not you are qualified to file a tax return. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a TIN to a payor. Certain penalties may also apply.
Penalties
(1) Failure to Furnish TIN.--If you fail to furnish your correct TIN to a
requester (the person asking you to furnish your TIN), you are subject to
a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to wilful neglect.
(2) Civil Penalty for False Information With Respect to Withholding.--If you
made a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
(3) Criminal Penalty for Falsifying Information.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE IRS.
18
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER (TIN) ON SUBSTITUTE FORM W-9 (CONTINUED)
(Section references are to the Internal Revenue Code)
Guidelines for Determining the Proper Identification Number to Give the
Payer.--Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payor.
<TABLE>
- --------------------------------------------------------------------------
<CAPTION>
Give the SOCIAL
SECURITY number
For this type of account: of --
- --------------------------------------------------------------------------
<C> <S>
1. Individual The individual
2. Two or more The actual owner of the account or, if combined
individuals (joint funds, the first individual on the account(1)
account)
3. Custodian account of The minor(2)
a minor (Uniform Gift
to Minors Act)
4. a. The usual The grantor-trustee(1)
revocable savings
trust (grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is not a
legal or valid trust
under State law
5. Sole proprietorship The owner(3)
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
- ------------------------------------------------
<CAPTION>
Give the EMPLOYER
IDENTIFICATION
For this type of account: number of--
- ------------------------------------------------
<C> <S>
6. Sole proprietorship The owner(3)
7. A valid trust, The legal entity(4)
estate, or pension
trust
8. Corporate The corporation
9. Associate, club, The organization
religious, charitable,
educational or other
tax-exempt
organization
10. Partnership The partnership
11. A broker or The broker or nominee
registered nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- -------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show your individual name. You may also enter your business name. You may
use your SSN or EIN.
(4) List first and circle the name of the valid trust, estate, or pension
trust. (Do not furnish the identifying number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
19
<PAGE>
Exhibit 99.3
RICHFOOD HOLDINGS, INC.
BENEFIT PLAN PARTICIPANTS
INFORMATION REGARDING VOTING AND ELECTIONS
TO: Participants in the Richfood Holdings, Inc. Savings and Stock Ownership
Plan; the Richfood of Pennsylvania Investment Opportunity Plan; the
Super Rite Foods, Inc. Investment Opportunity Plan and Trust for Retail
Union Employees; and the Farm Fresh, Inc. Retirement Savings Plan (each,
a "Plan," and collectively, the "Plans")
RE: Agreement and Plan of Merger, dated June 9, 1999, among SUPERVALU INC.
("SUPERVALU"), Winter Acquisition, Inc., a wholly owned subsidiary of
SUPERVALU, and Richfood Holdings, Inc. ("Richfood") (the "Merger
Agreement")
DATE: July 30, 1999
As described in the enclosed Proxy Statement/Prospectus, the Board of
Directors of Richfood Holdings, Inc. (the "Richfood Board") has adopted and
approved the Merger Agreement pursuant to which Richfood will merge with and
into a wholly owned subsidiary of SUPERVALU (the "Merger"), all on the terms
and subject to the conditions contained in the Merger Agreement. This
memorandum is being sent to you as a participant in one or more of the Plans.
As a beneficial owner of Richfood common stock (the "Common Stock") under one
or more of the Plans, you are generally treated as a shareholder with respect
to voting rights and also may express a preference regarding the form of
consideration the applicable Plan will receive on your behalf, assuming the
Merger is consummated.
The details of the Merger are described in the enclosed Proxy
Statement/Prospectus, the Merger Agreement, which is attached as Annex A to the
enclosed Proxy Statement/Prospectus, and this memorandum. Copies of the Proxy
Statement/Prospectus and the related Form of Election/Letter of Transmittal,
which are being sent to Richfood's shareholders generally, are enclosed for
your information. However, you may only use the enclosed Voting Fiduciary
Instruction Form to direct your vote and elect to receive for each share of
Common Stock that you beneficially own either (i) $18.50 in cash (the "Cash
Consideration") or (ii) the number of shares of common stock, par value $1.00
per share, of SUPERVALU (the "Stock Consideration") equal to the ratio
determined by dividing $18.50 by the average trading price of SUPERVALU common
stock during the 20 trading-day period ending on the seventh day prior to the
closing of the Merger as specified in the Merger Agreement.
The Plans are described in their respective Summary Plan Descriptions
("SPDs"). Please refer to each Plan's SPD for more information regarding the
Plan.
A special meeting of shareholders of Richfood (the "Special Meeting") has
been scheduled for 10:00 a.m. on August 31, 1999, to permit the shareholders of
Richfood to consider and to vote upon the Merger Agreement. Approval of the
Merger Agreement requires the affirmative vote of more than two-thirds of the
votes entitled to be cast at the Special Meeting by the holders of Common
Stock. Richfood has appointed Davenport & Company LLC as the independent named
fiduciary (the "Voting Fiduciary") with respect to Common Stock held by the
Plans. The Voting Fiduciary has sole responsibility to actually vote the shares
of Common Stock held pursuant to the Plans and under the associated trust
agreements. However, as a participant in one or more of the Plans, you have the
right to direct the trustees of the Plans as to the manner in which the shares
of Common Stock allocated to your accounts under the Plans are to be voted. If
you fail to provide voting instructions to the Voting Fiduciary prior to 5:00
p.m., New York City time, on August 27, 1999 (the "Voting/Election Deadline"),
or provide incorrect voting instructions, the Common Stock allocated to your
accounts under the Plans will be voted as the Voting Fiduciary, in its complete
discretion, determines is in the best interests of Plan participants. You are
strongly encouraged to vote all Common Stock allocated to your accounts under
the Plans.
<PAGE>
1. Voting Your Shares. If you wish to instruct the Voting Fiduciary to vote
all or part of the Common Stock allocated to your accounts under the Plans
either "FOR" or "AGAINST" the approval and adoption of the Merger Agreement, or
if you wish to instruct the Voting Fiduciary to "ABSTAIN" from voting such
shares, you must complete Item I of the enclosed Voting Fiduciary Instruction
Form and return it in the enclosed return envelope. Before deciding whether or
not to instruct the Voting Fiduciary to vote your shares either "FOR" or
"AGAINST" the Merger, or to "ABSTAIN" from voting such shares, please carefully
read the enclosed materials.
YOUR INSTRUCTIONS TO THE VOTING FIDUCIARY ON HOW TO VOTE THE COMMON STOCK
ALLOCATED TO YOUR ACCOUNTS UNDER THE PLANS WILL BE EFFECTIVE ONLY IF YOUR
PROPERLY COMPLETED VOTING FIDUCIARY INSTRUCTION FORM IS RECEIVED BY THE VOTING
FIDUCIARY AT THE ADDRESS SHOWN ON THE ENCLOSED RETURN ENVELOPE NO LATER THAN
5:00 P.M., NEW YORK CITY TIME, ON AUGUST 27, 1999. Voting Fiduciary Instruction
Forms that are received after this deadline, and Voting Fiduciary Instruction
Forms that are not properly completed, will not be accepted. Examples of
improperly completed Voting Fiduciary Instruction Forms include forms that are
not signed and forms that contain incorrect or incomplete information.
The label attached to the Voting Fiduciary Instruction Form identifies the
number of shares of Common Stock allocated to your accounts under the Plans as
of July 27, 1999, the record date for determining Richfood shareholders
entitled to receive notice of and to vote at the Special Meeting.
Voting instructions to the Voting Fiduciary will be deemed irrevocable,
unless withdrawn or modified by the Voting/Election Deadline. If you instruct
the Voting Fiduciary to vote or to abstain from voting the Common Stock
allocated to your accounts under the Plans, and you subsequently decide to
either change your instructions or to withdraw your instructions, you may do so
by either sending a new Voting Fiduciary Instruction Form to the Voting
Fiduciary, or by sending a notice of withdrawal to the Voting Fiduciary to
withdraw your voting instructions. The change in or withdrawal of your voting
instructions will be effective only if a notice of withdrawal or a new properly
completed Voting Fiduciary Instruction Form is received by the Voting Fiduciary
at or before the Voting/Election Deadline at the address set forth on the
enclosed return envelope.
2. Elections Generally. Under the terms of the Merger Agreement, all shares
of Common Stock will be exchanged for Cash Consideration and/or Stock
Consideration. The Voting Fiduciary is responsible for instructing Norwest
Bank, N.A., the exchange agent for the Merger (the "Exchange Agent"), as to the
type of consideration for which the shares of Common Stock held pursuant to the
Plans are to be exchanged. As a participant in one or more of the Plans, in
addition to being able to vote on the Merger, you also have the right to direct
the Voting Fiduciary as to whether each share of Common Stock allocated to your
accounts under the Plans is exchanged for Cash Consideration or Stock
Consideration.
If more than one share of Common Stock is allocated to your account(s) under
the Plans, you may elect to receive Cash Consideration (a "Cash Election") for
some shares and Stock Consideration (a "Stock Election") for other shares. In
addition to making a Cash Election and/or a Stock Election, you have the option
of making no election (a "Non-Election") as to one or more shares of Common
Stock allocated to your account(s) under the Plans ("Non-Election Shares").
Subject to the terms of the Merger Agreement and the limitations on the
aggregate merger consideration discussed below, all Non-Election Shares will be
exchanged as the Voting Fiduciary determines in its complete discretion. We
strongly encourage you to make an affirmative election as to all shares
allocated to your accounts under the Plans.
Pursuant to the Merger Agreement, the aggregate number of shares of Common
Stock to be converted into the right to receive Stock Consideration and the
aggregate number of shares of Common Stock to be converted into the right to
receive Cash Consideration will in each case be equal to 50%, or an adjusted
percentage under certain circumstances, of the total number of shares of Common
Stock issued and outstanding immediately prior to the effective time of the
merger (other than "Excluded Shares," which are shares owned by
2
<PAGE>
SUPERVALU, Richfood or their respective subsidiaries, except for shares held on
behalf of third parties, which will be cancelled). In the event that the
aggregate proportion of shares of Common Stock in respect of which Stock
Elections and Cash Elections are received (or deemed to have been received in
respect of Non-Election Shares) differs, in each case, from 50% or, if
applicable, from the adjusted percentages, of the total number of shares of
Common Stock issued and outstanding immediately prior to the effective time of
the Merger (other than Excluded Shares), the aggregate Cash Consideration and
Stock Consideration will be subject to allocation and proration among Richfood
shareholders in accordance with procedures set forth in the Merger Agreement.
See "THE MERGER--Allocation Rules" in the enclosed Proxy Statement/Prospectus.
No certificate representing fractional shares of SUPERVALU common stock will
be issued. Cash without interest will be remitted in lieu of such fractional
shares. No Plan Participant shall be entitled to dividends, voting rights or
any other rights in respect of any fractional share.
The elections referred to above are subject to certain terms, conditions and
limitations that are set forth in the Merger Agreement and the Proxy
Statement/Prospectus. The filing of the Voting Fiduciary Instruction Form with
the Voting Fiduciary is acknowledgment of the receipt of the Proxy
Statement/Prospectus. All questions as to the validity, form and eligibility of
any election shall be determined by the Voting Fiduciary and such determination
shall be final and binding.
3. Making an Election. Item II of the Voting Fiduciary Instruction Form
enclosed with this document allows you to instruct the Voting Fiduciary as to
whether you would prefer Cash Consideration and/or Stock Consideration for the
Common Stock allocated to your account(s) under the Plans. You must complete
and mail the Voting Fiduciary Instruction Form to the Voting Fiduciary in the
enclosed envelope prior to the Voting/Election Deadline for your instructions
to be valid. If you do not submit a completed form prior to the Voting/Election
Deadline, the shares allocated to your accounts will be treated as Non-Election
Shares and will be exchanged for cash and/or SUPERVALU common stock in
accordance with the decision of the Voting Fiduciary, as described above.
FOR ANY STOCK ELECTION, CASH ELECTION OR NON-ELECTION CONTAINED HEREIN TO BE
CONSIDERED VALID, THE VOTING FIDUCIARY INSTRUCTION FORM, PROPERLY COMPLETED,
MUST BE RECEIVED BY THE VOTING FIDUCIARY AT THE ADDRESS SHOWN ON THE ENCLOSED
RETURN ENVELOPE NO LATER THAN 5:00 P.M., NEW YORK CITY TIME, ON AUGUST 27,
1999.
An election may be revoked or amended, but only by written notice received
by the Voting Fiduciary prior to the Election Deadline. Upon any such
revocation, unless a duly completed election form is thereafter submitted in
accordance with the procedures set forth herein, the shares allocated to your
account(s) under the Plans shall be Non-Election Shares, and treated
accordingly.
BECAUSE OF CERTAIN LIMITATIONS ON THE NUMBER OF SHARES OF RICHFOOD COMMON
STOCK TO BE CONVERTED INTO THE RIGHT TO RECEIVE CASH CONSIDERATION AND STOCK
CONSIDERATION UNDER THE ELECTION AND ALLOCATION PROCEDURES DESCRIBED HEREIN, NO
ASSURANCE CAN BE GIVEN THAT PLAN PARTICIPANTS WILL RECEIVE THEIR REQUESTED FORM
OF MERGER CONSIDERATION. If the elections result in an oversubscription of
either the Stock Consideration or the Cash Consideration, the procedures for
allocating cash and shares of SUPERVALU common stock set forth in the Merger
Agreement and described in the Proxy Statement/Prospectus will be followed by
the Exchange Agent. See "THE MERGER--Allocation Rules" in the Proxy
Statement/Prospectus. ALL DECISIONS BY THE EXCHANGE AGENT WITH RESPECT TO SUCH
PROCESS SHALL BE FINAL AND BINDING.
Neither Richfood nor the Voting Fiduciary is under any duty to give
notification of defects in any Voting Fiduciary Instruction Form. Richfood and
the Voting Fiduciary shall not incur any liability for failure to give such
notification, and the Voting Fiduciary has the absolute right to reject any and
all Voting Fiduciary Instruction Forms not in proper form or to waive any
irregularities in any Voting Fiduciary Instruction Form.
3
<PAGE>
4. Tax Considerations. Because the Plans are "tax-qualified", you will not
experience any tax consequences as a result of the exchange of the Common Stock
allocated to your accounts under the Plans for either SUPERVALU common stock
and/or cash until you take a distribution from your accounts under the Plans.
However, in determining whether to elect to receive SUPERVALU common stock or
cash in exchange for the Common Stock allocated to your accounts under the
Plans, you should take into consideration a potentially significant tax benefit
relating to any "net unrealized appreciation" on the shares of Common Stock
allocated to your accounts under the Plans.
If you receive a distribution from one or more of the Plans that includes
shares of Common Stock (after the Merger, SUPERVALU common stock) that have
appreciated in value while held in the Plans, and the distribution qualifies as
a "lump sum distribution" (as defined below), the tax on all of the
appreciation experienced on the Common Stock (and the SUPERVALU common stock
that replaces it), which appreciation is known as "net unrealized
appreciation", may be deferred until you sell the common stock, i.e., you are
only taxed at the time of the distribution on the trustees' adjusted cost basis
in such shares. Under certain circumstances, it may even be possible to defer
the taxation of the otherwise taxable portion of such distribution. The net
unrealized appreciation on the stock would be equal to the fair market value of
the Richfood (or SUPERVALU) common stock on the day you receive the
distribution, less the trustees' adjusted cost basis of the shares. A
distribution from the Plans will be considered a "lump sum distribution" only
if all of the funds allocated to your accounts under the Plans are distributed
to you within one taxable year and you have attained age 59 1/2, separated from
service, or died.
If you elect to have the shares of Common Stock allocated to your accounts
under the Plans exchanged for SUPERVALU stock, the SUPERVALU stock thus
allocated to your accounts will retain the trustees' adjusted cost basis of the
Richfood shares that such stock is exchanged for. This will preserve the
potential tax benefit relating to the net unrealized appreciation on the Common
Stock allocated to your accounts. However, if you elect to have the Common
Stock allocated to your accounts under the Plans exchanged for cash, you will
lose any potential tax benefit relating to any net unrealized appreciation on
such Common Stock.
Please note that this summary is only intended to inform you of the
potential tax benefits relating to any net unrealized appreciation on the
Common Stock allocated to your accounts under the Plans. Although Richfood
believes that the tax consequences discussed above are accurate based on
current law, Richfood and the Voting Fiduciary are not in a position to give
and cannot give you legal or tax advice. Accordingly, you are encouraged to
consult your own tax and financial advisors about the best exchange option for
you and the related tax consequences.
5. Additional Information. Information and additional copies of this Voting
Fiduciary Instruction Form and the Proxy Statement/Prospectus may be obtained
by telephoning Davenport & Company LLC, toll free at (800) 895-2097. If you
have questions about any one of the Plans, please refer to the specific Plan's
SPD.
4
<PAGE>
RICHFOOD HOLDINGS, INC.
VOTING FIDUCIARY INSTRUCTION FORM
TO: THE VOTING FIDUCIARY FOR: THE RICHFOOD HOLDINGS, INC. SAVINGS AND STOCK
OWNERSHIP PLAN; THE RICHFOOD OF PENNSYLVANIA INVESTMENT OPPORTUNITY PLAN;
THE SUPER RITE FOODS, INC. INVESTMENT OPPORTUNITY PLAN AND TRUST FOR
RETAIL UNION EMPLOYEES; AND THE FARM FRESH, INC. RETIREMENT SAVINGS PLAN
(collectively, the "Plans")
Item I. Voting Instructions
With respect to the shares of common stock of Richfood Holdings, Inc.
("Richfood") represented by my interest in one or more of the Plans, I hereby
instruct you to vote as follows with respect to the following proposal at the
special meeting of Richfood shareholders to be held August 31, 1999, or any
adjournment thereof:
The proposal to approve the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of June 9, 1999, among Richfood Holdings, Inc.,
SUPERVALU INC. and a wholly owned subsidiary of SUPERVALU, providing for
the merger of Richfood with and into the subsidiary of SUPERVALU.
[_] FOR [_] AGAINST [_] ABSTAIN
Item II. Instructions For the Election to Exchange Shares of Richfood Common
Stock For Shares of SUPERVALU Common Stock and/or Cash
Pursuant to the Merger Agreement, please exchange on my behalf into cash
and/or SUPERVALU common stock as indicated below, the number of shares of
Richfood Common Stock indicated below held for my benefit under one or more of
the Plans:
I understand that the label that follows sets forth the number of shares of
Richfood common stock allocated to me under the Plans as of July 27, 1999.
Cash Election Stock Election Non-Election
(number of Richfood (number of Richfood (number of Richfood
shares) shares) shares)
_____________________________________
Signature
_____________________________________
Print Name
_______________________________, 1999
Date
[_] Check here if this election represents a revocation of an earlier election
Please complete this form and return it in the enclosed envelope to
Davenport & Company LLC, P.O. Box 85678, Richmond, Virginia 23286-9179.
