<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 26, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _______
Commission file number: 1-5418
SUPERVALU INC.
(Exact name of registrant as specified in its charter)
Delaware 41-0617000
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11840 Valley View Road
Eden Prairie, Minnesota
(Address of principal 55344
executive offices) (Zip Code)
Registrant's telephone number, including area code: (952) 828-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $1.00 New York Stock Exchange
per share
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
-----
[Cover page 1 of 2 pages]
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of April 1, 2000 was approximately $2,467,981,870 (based upon the
closing price of Registrant's Common Stock on the New York Stock Exchange on
March 31, 2000).
Number of shares of $1.00 par value Common Stock outstanding as of April 1,
2000: 131,469,651
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive Proxy Statement filed for Registrant's 2000
Annual Meeting of Stockholders are incorporated into Part III, as specifically
set forth in Part III.
[Cover page 2 of 2 pages]
<PAGE>
PART I
------
ITEM 1. BUSINESS
- ------ --------
General Development
-------------------
SUPERVALU is the nation's 10th largest supermarket retailer and
largest food distributor based on revenues. SUPERVALU conducts its
retail operations under three principal store formats: price
superstores, under such retail banners as Cub Foods, Shop `n Save,
Shoppers Food Warehouse, Metro and biggs; limited assortment stores,
under the retail banner Save-A-Lot; and combination food and drug
stores, under such retail banners as, Farm Fresh, Laneco, Hornbachers
and Scott's Foods. SUPERVALU also sells food and non-food products at
wholesale throughout the United States to retail food stores, mass
merchants and through other logistics arrangements. As of the close of
the fiscal year, the Company conducted its retail operations through
1,117 retail food stores, including 662 licensed limited assortment
stores. In addition, as of the close of the fiscal year, the Company
was affiliated with 6,100 retail food stores in 48 states as the
primary supplier of approximately 3,500 stores and a partial supplier
of approximately 2,600 stores.
SUPERVALU continues to focus on its retail food and food distribution
operations. SUPERVALU's plans include growing its retail operations
through new store development and acquisitions, and increasing
efficiencies in its food distribution operations while participating
in the consolidation of the food distribution industry. On August 31,
1999, SUPERVALU acquired all of the outstanding common stock of
Richfood Holdings, Inc. ("Richfood"), a major food retailer and
distributor operating primarily in the Mid-Atlantic region of the
United States. The transaction, valued at approximately $1.5 billion,
including the assumption of $685 million of Richfood debt, added 102
retail food stores and a distribution network to provide a platform to
expand its operations in the Mid-Atlantic. During fiscal 2000, the
Company also added 72 retail stores through new store development and
other acquisitions, including 32 licensed limited assortment stores.
In addition, SUPERVALU commenced operations of a new regional
distribution facility for fast moving products, in Minneapolis,
Minnesota. On May 22, 1999, the Company sold Hazelwood Farms Bakeries,
a non-strategic asset, in a transaction that resulted in $248.2
million of after-tax cash proceeds.
SUPERVALU INC., a Delaware corporation, was organized in 1925 as the
successor to two wholesale grocery firms established in the 1870's.
The Company's principal executive offices are located at 11840 Valley
View Road, Eden Prairie, Minnesota 55344 (Telephone: 952-828-4000).
Unless the discussion in this Annual Report on Form 10-K indicates
otherwise, all references to the "Company," "SUPERVALU" or
"Registrant" relate to SUPERVALU INC. and its majority-owned
subsidiaries.
Additional description of the Company's business is found in Part II,
Item 7 and Item 7A of this report.
Financial Information About Industry Segments
---------------------------------------------
In fiscal 2000, the Company changed the way it reports its operating
segments in order to align its financial results with the strategic
focus of the Company. Retail food operations include results of food
stores owned and limited assortment stores licensed by the Company.
Distribution segment results include sales to affiliated food stores,
mass merchants, and other logistics arrangements. The financial
information about the Company's industry segments for the three years
ended February 26, 2000 is found in a separate section of this report
on page F-5. The information for the 1999 and 1998 fiscal years has
been restated from the prior years' presentation in order to conform
to the fiscal 2000 presentation.
3
<PAGE>
Retail Food Operations
----------------------
Overview. At February 26, 2000, the Company conducted its retail
--------
operations through a total of 1,117 retail food stores, including 662
licensed limited assortment stores, under its principal retail formats
that include price superstores, limited assortment and combination
food and drug. These diverse formats enable the Company to operate in
a variety of markets under widely differing competitive circumstances.
Price Superstores. The Company's price superstore format focus is on
-----------------
providing value to SUPERVALU customers while offering a convenient one
stop shopping opportunity. Most of the Company's price superstores
offer traditional dry grocery departments, along with strong
departments for perishables. Our price superstores carry over 30,000
items, and generally range in size from 45,000 to 100,000 square feet
with an average size of approximately 68,000 square feet.
At fiscal year end, the Company owned and operated 194 price
superstores, 108 of which include pharmacies, under the Cub Foods,
Shop 'n Save, Shoppers Food Warehouse, Metro and biggs' banners in 14
states. An additional 50 stores are franchised to independent
retailers. The Company anticipates opening approximately 20 new price
superstores in fiscal 2001.
Private label products are a relatively new focus of SUPERVALU's price
superstore format. The Company is in the process of developing
proprietary name branded product. Currently, there are approximately
1,300 items under the Cub Foods brand, and the Company intends on
further expanding this offering of products.
Limited Assortment. The Company operates limited assortment stores
------------------
under the banner of Save-A-Lot. The Company believes Save-A-Lot is the
nation's leading limited assortment food retailer. Save-A-Lot limited
assortment stores typically are approximately 15,000 square feet in
size, and stock approximately 1,200 higher volume items that focus on
a single size for each product sold. At a Save-A-Lot store, the
majority of the products offered for sale are created or control
branded product. The specifications for the Save-A-Lot created or
controlled branded product emphasize quality and characteristics that
the Company believes are comparable to national brands. The Company's
attention to the packaging of Save-A-Lot products has resulted in the
Company registering a number of its custom labels.
At fiscal year end, there were 838 limited assortment stores located
in 33 states, of which 662 were licensed, which are supplied from 12
Save-A-Lot distribution centers. The Company projects adding
approximately 120-160 Save-A-Lot stores in fiscal 2001, including
approximately 70-90 licensed stores.
Combination Food and Drug. The Company's combination food and drug
-------------------------
store format combines a traditional drug store that includes a
pharmacy, with a grocery store that has a variety of specialty
departments, that may include floral, seafood, expanded health and
beauty care, video rental, cosmetics, photo finishing, delicatessen,
bakery, and in-store bank. The combination food and drug format offers
traditional dry grocery departments along with strong fresh food
departments. A typical combination food and drug store carries
approximately 40,000 items, and generally ranges in size from 30,000
to 65,000 square feet with an average size of approximately 48,000
square feet.
At fiscal year-end, the Company operated 85 combination food and drug
stores under the Farm Fresh, Laneco, Hornbachers' and Scott's Foods
banners.
4
<PAGE>
Food Distribution Operations
----------------------------
Overview. SUPERVALU sells food and non-food products at wholesale and
--------
offers a variety of retail support services. At February 26, 2000, the
Company was affiliated with approximately 3,500 stores as their
primary supplier (in addition to the Company's price superstores and
combination food and drug retail stores) and approximately 2,600
additional stores as a partial supplier. SUPERVALU's food distribution
customers are located in 48 states, and range in size from small
convenience stores to 200,000 square foot supercenters. Such customers
include single and multiple store independent operators, regional and
national chains, as well as mass merchants and on-line grocers. In
September, 1999, SUPERVALU entered into a supply agreement with Kmart
Corporation to distribute and replenish an incremental $2.3 billion of
Kmart's grocery related distribution volume annually to 1,350
locations. As of the fiscal year end, no other single customer
represented more than two percent (2%) of the Company's total sales.
Products Supplied. The Company offers and supplies its distribution
-----------------
customers with a wide variety and selection of food and non-food
products, including groceries, meats, dairy products, frozen foods,
fresh fruits and vegetables, health and beauty aids, paper products,
cleaning supplies, tobacco products, and small household and clothing
items. Such products include national and regional brands and the
Company's own lines of private label products. The Company has no
significant long-term purchase obligations and considers that it has
adequate and alternative sources of supply for most of its purchased
products.
SUPERVALU offers three tiers of private label products to its
customers: premium product under the private label PREFERRED
SELECTION, first quality product under such private labels as CUB,
FLAVORITE, HOME BEST, IGA, RICHFOOD, VALU CHOICE and economy product
under such private labels as SHOPPERS VALUE and BI-RITE. SUPERVALU
supplies private label merchandise over a broad range of products
included in every department in the store. These products are produced
to the Company's specifications by many suppliers.
Distribution of Merchandise. Deliveries to retail stores are made from
---------------------------
the Company's distribution centers by Company-owned trucks, third
party independent trucking companies or customer-owned trucks. In
addition, many types of meats, dairy products, bakery and other
products purchased from the Company are delivered directly by
suppliers to retail stores under programs established by the Company.
The Company has implemented a multi-tiered distribution system to
create a national logistics network composed of seven marketing
regions comprised of 36 wholesale distribution facilities plus two
"upstream" regional distribution facilities in Anniston, Alabama and
Oglesby, Illinois which handle general merchandise and health and
beauty care products. A new "fast moving product" regional
distribution center opened in the summer of 1999 in Minneapolis,
Minnesota. The Company believes that its multi-tiered distribution
network increases buying scale, improves operating efficiencies and
lowers cost of operations.
Services Supplied. In addition to supplying merchandise, the Company
-----------------
also offers its food distribution customers a wide variety of support
services, including category management, merchandising assistance,
private label program support, store management assistance,
accounting, store design and construction, site selection, strategic
and business planning, consumer and market research, and personnel
training. Also, certain Company subsidiaries operate as insurance
agencies and provide comprehensive insurance programs to the Company's
food distribution customers.
The Company may provide financial assistance to retail stores served,
including the acquisition, leasing and subleasing of store properties,
the making of direct loans, and providing guarantees or other forms of
financing. In general, loans made by the Company to independent
retailers are secured by liens on inventory and/or equipment, by
personal guarantees and other security. When the Company subleases
store properties to retailers, the rentals are generally as high or
higher than those paid by the Company.
5
<PAGE>
Trademarks
----------
The Company offers its customers the opportunity to franchise a
concept or license a servicemark. This program helps the customer
compete by providing, as part of the franchise or license program, a
complete business concept, group advertising, private label products
and other benefits. The Company is the franchisor or licensor of
certain servicemarks such as CUB FOODS, SAVE-A-LOT, COUNTY MARKET,
SHOP `N SAVE, NEW MARKET, SUPERVALU, IGA, FOODLAND and SUPERVALU FOOD
& DRUG. The Company registers a substantial number of its
trademarks/servicemarks in the United States Patent and Trademark
Office, including many of its private label product trademarks and
servicemarks. See "Retail Food Operations - Price Superstore" and " -
Limited Assortment," and "Food Distribution Operations - Products
Supplied". The Company considers certain of its trademarks and
servicemarks to be of material importance to its business and actively
defends and enforces such trademarks and servicemarks.
Competition
-----------
The Company's retail food and food distribution businesses are highly
competitive and characterized by low profit margins. The Company
believes that the success of its retail food and food distribution
businesses is dependent upon the ability of the Company's retail food
operations and the independent retail food stores with whom it is
affiliated as a supplier, to compete successfully with other retail
food stores in a consolidating market. Principal competition comes
from local, regional, and national chains under a variety of formats
(i.e. supercenters, supermarkets, limited assortment stores,
membership warehouse clubs, convenience stores, various formats
selling prepared foods, and specialty and discount retailers), as well
as from independent food stores. The Company believes that the
principal competitive factors that face its owned stores as well as
the stores owned by independent retailers it supplies include: the
location and image of the store; the price, quality, and variety of
product; and the quality and consistency of service. In recent years,
a number of companies have emerged that operate retail food and
distribution businesses that allow consumers to shop from and receive
delivery to their homes using electronic ordering systems. The Company
is a supplier to several companies that utilize this business concept.
At the food distribution level, the Company competes directly with a
number of food wholesalers. The Company believes it competes in this
supply chain on the basis of product price, quality and assortment,
schedule and reliability of deliveries, the range and quality of
services provided, service fees, and the location of the store sites
and distribution facilities.
Employees
---------
At February 26, 2000, the Company had approximately 80,000 employees.
Approximately 29,900 employees are covered by collective bargaining
agreements. During fiscal 2000, 21 agreements covering 4,100 employees
were re-negotiated without any work stoppage. In fiscal 2001, 19
contracts covering approximately 2,800 employees will expire. The
Company believes that it has generally good relationships with its
employees.
Investments
-----------
The Company has ownership interests in business ventures related to
its retail food segment, which include investments in Winco Foods,
Inc. and Super Discount Markets, Inc. The results of these investments
are accounted for using the equity method. The aggregate carrying
amount of these investments is less than two percent (2%) of total
assets.
6
<PAGE>
Cautionary Statements for Purposes of the Safe Harbor Provisions of
-------------------------------------------------------------------
the Private Securities Litigation Reform Act of 1995
----------------------------------------------------
Any statements in this report regarding SUPERVALU's outlook for its
businesses and their respective markets, such as projections of future
performance, statements of management's plans and objectives,
forecasts of market trends and other matters, are forward-looking
statements based of management's assumptions and beliefs. Such
statements may be identified by such words or phrases as "will likely
result," "are expected to," "will continue," "outlook," "is
anticipated," "estimate," "project," "management believes" or similar
expressions. Such forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ
materially from those discussed in such forward-looking statements and
no assurance can be given that the results in any forward-looking
statement will be achieved. For these statements, SUPERVALU claims the
protection of the safe harbor for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995.
The following is a summary of certain factors, the results of which
could cause SUPERVALU's future results to differ materially from those
expressed in any forward-looking statements contained in this report:
(1) the impact of changing economic or business conditions;
(2) competitive practices in the retail and food distribution
industries;
(3) the nature and extent of the consolidation of the retail food and
food distribution industries;
(4) the ability of the Company to attract and retain customers for its
food distribution operations, and control food distribution costs;
(5) the ability of the Company to grow through acquisition and
assimilate the acquired entities;
(6) the ability of the Company to continue to recruit, train and
retain quality franchise, licensed and corporate retail store
operators;
(7) the availability of favorable credit and trade terms;
(8) food price changes; and
(9) other risk factors inherent in the food wholesaling and retail
businesses.
Please refer to Exhibit 99.1 of this report, as filed with the
Securities and Exchange Commission, and subsequent reports filed with
the Commission, for a more detailed discussion of these and other
factors that could cause SUPERVALU's actual results in future periods
to differ materially from those projected in such forward-looking
statements.
7
<PAGE>
ITEM 2. PROPERTIES
------ ----------
Retail Food Operations
----------------------
The following table is a summary of the corporate retail stores
operated by the Company under its principal retail formats as of
February 26, 2000:
<TABLE>
<CAPTION>
Square Square
Footage Footage
Location and Number Owned Leased
Retail Format Banners of Corporate Stores (Approximate) (Approximate)
- ------------- ------- --------------------- ------------- ------------
<S> <C> <C> <C> <C>
Price Superstore Cub Foods/1/ Colorado (10), Illinois 3,018,000 2,665,000
(25), Indiana (10), Iowa
(2), Minnesota (24),
Wisconsin (10)
Shop `n Save Illinois (14), Missouri
(18), Pennsylvania (20) 404,000 2,191,000
bigg's Colorado (1), Indiana (1),
Kentucky (1), Ohio (7) 158,000 1,227,000
Metro Delaware (1), Maryland (18) -0- 1,018,910
Shoppers Food Maryland (18), Virginia (18) -0- 1,776,863
Warehouse
Limited Assortment Save-A-Lot/2/ Arkansas (6), California (22), 130,000 2,369,000
Connecticut (4), Delaware (5),
Florida (43), Illinois (1),
Maryland (6), Massachusetts (5),
Mississippi (3), Missouri (6),
New Jersey (6), Ohio (16),
Pennsylvania (20), Rhode Island
(3), Tennessee (4), Texas (18),
Virginia (8)
Combination
Food and Drug
Farm Fresh Virginia (38) 29,296 1,641,280
Laneco New Jersey (4), Pennsylvania (12) 144,000 1,162,000
Hornbachers Minnesota (1), North Dakota (4) 95,000 113,000
Scott's Food Indiana (19) 178,000 780,750
- -------------------------
</TABLE>
/1/ Excludes 54 Cub Foods stores that are franchised by independent
retailers.
/2/ Excludes 662 Save-A-Lot stores that are licensed by independent
retailers.
The retail food stores that are leased by the Company generally
have a term of 5-25 years plus renewal options.
8
<PAGE>
Food Distribution Operations
----------------------------
The following table lists the principal location and approximate size of
the Company's principal distribution centers and office space utilized in
the Company's food distribution operations as of February 26, 2000:
<TABLE>
<CAPTION>
Square Square
Footage Footage
Owned Leased
Region or Division Location and Number of Distribution Centers (Approximate) (Approximate)
- -------------------- ---------------------------------------------- ------------- -------------
<S> <C> <C> <C>
Central Region Indiana (1), Kentucky (1), Ohio (1)
Pennsylvania (3), West Virginia (1) 3,594,000 438,000
Midwest Region Illinois (2), Missouri (3), Wisconsin (2) 2,832,600 1,120,500
Northern Region Iowa (1), Minnesota (1) , North Dakota (2) 3,531,950 0
New England Region Connecticut (1), Maine (1), Massachusetts (1), 1,040,400 650,000
New Hampshire (1), Rhode Island (1)
Northwest Region Colorado (1), Montana (2), Washington (2) 2,603,000 124,000
Southeast Region Alabama (2), Florida (1), Georgia (1), 1,975,000 1,290,000
Louisiana (1), Mississippi (1)
Richfood Region Maryland (1), Pennsylvania (5), Virginia (3) 4,339,900 780,200
Save-A-Lot California (1), Florida (1), Georgia (1), 1,303,000 1,290,264
Kentucky (1), Maryland (1), Michigan (1),
Missouri (2), New York (1), Ohio (1),
Tennessee (1), Texas (1)
</TABLE>
_______________
Additional Property
-------------------
The Company's principal executive offices are located in a 180,000 square
foot corporate headquarters facility located in Eden Prairie, Minnesota,
a western suburb of Minneapolis, Minnesota. This headquarters facility
is located on a 140 acre site owned by the Company.
Additional information on the Company's properties is found in another
section of this report on pages F-15 through F-17 in the Note captioned
"Leases" of Notes to the Company's Consolidated Financial Statements.
Management of the Company believes its physical facilities and equipment
are adequate for the Company's present needs and businesses.
9
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
------ -----------------
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business of the
Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------ ---------------------------------------------------
There was no matter submitted during the fourth quarter of fiscal
year 2000 to a vote of the security holders of the Registrant.
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The following table provides certain information concerning the executive
officers of the Company as of April 15, 2000.
<TABLE>
<CAPTION>
Year Elected
to Present Other Positions Recently Held
Name Age Present Position Position With the Company
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael W. Wright 61 Director, Chairman of the Board, 1982
President and Chief Executive
Officer
David L. Boehnen 53 Executive Vice President 1997 Senior Vice President, Law and
External Relations, 1991 - 1997
William J. Bolton 53 Executive Vice President; and 1997
President and Chief Operating
Officer - Retail Food Companies
Pamela K. Knous 46 Executive Vice President, Chief 1997
Financial Officer
Jeffrey Noddle 53 Executive Vice President; and 1995 Executive Vice President, Marketing,
President and Chief Operating 1992-1995
Officer - Wholesale Food Companies
Robert W. Borlik 51 Senior Vice President, Chief 1999
Information Officer
Kim M. Erickson 46 Senior Vice President, Strategic 1998 Senior Vice President, Finance and
Planning and Treasurer Treasurer, 1997 - 1998; Vice
President and Treasurer, 1995-1997
Michael Frank 41 Senior Vice President, 1999
Merchandising, Retail Food
Companies
Gregory C. Heying 51 Senior Vice President, 1994
Distribution
J. Andrew Herring 41 Senior Vice President, Corporate 1999 Vice President, Corporate
Development and External Relations Development and External Relations,
1998-1999
Michael L. Jackson 47 Senior Vice President, 1999 President, Northwest Region,
Operations, Retail Food Companies 1995-1999
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Year Elected
to Present Other Positions Recently Held
Name Age Present Position Position With the Company
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
W. O'Neill McDonald 56 Senior Vice President, Wholesale 1998 President, Midwest Region,
Foods 1995-1998; President, Great Lakes
Division, 1992-1995
Ronald C. Tortelli 53 Senior Vice President, Human 1988
Resources
Leland J. Dake 43 Vice President, Wholesale 1998 Vice President, Corporate Category
Merchandising Management, 1995-1998; Director,
Corporate Category Management, 1993-
1995
Stephen P. Kilgriff 58 Vice President, Legal Services 2000 Associate General Counsel,
1996-2000, Litigation Director,
1993-1996
E. Wayne Shives 58 Vice President, Employee Relations 1993
Sherry M. Smith 38 Vice President, Controller, 1998 Assistant Corporate Controller,
Corporate 1996-1998; Director, Finance and
Accounting/Advantage, 1995-1996;
Director, Financial Reporting,
1993-1995
</TABLE>
The term of office of each executive officer is from one annual
meeting of the directors until the next annual meeting of directors or
until a successor for each is elected. There are no arrangements or
understandings between any of the executive officers of the Registrant
and any other person (not an officer or director of the Registrant
acting as such) pursuant to which any of the executive officers were
selected as an officer of the Registrant. There are no immediate
family relationships between or among any of the executive officers of
the Company.
Each of the executive officers of the Company has been in the employ
of the Company or its subsidiaries for more than five years, except
for William J. Bolton, Pamela K. Knous, Robert W. Borlik, Kim M.
Erickson, Michael Frank and J. Andrew Herring.
Mr. Bolton was elected Executive Vice President and President and
Chief Operating Officer, Retail Food Companies in October 1997. Mr.
Bolton was Chairman and Chief Executive Officer of Bruno's, Inc. (a
retail grocery company) from 1995 to 1997; Chief Operating Officer -
Markets at American Stores, Inc. (a retail grocery company) from
February 1995 to August 1995; and Executive Vice President of American
Stores, Inc. and General Manager of Jewel Osco (Chicago) from February
1994 to February 1995. On February 2, 1998, Bruno's, Inc. and its
subsidiaries each filed a voluntary petition for reorganization under
Chapter 11 of Title 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware.
Ms. Knous was elected Executive Vice President and Chief Financial
Officer of the Company in September 1997. From December 1995 to 1997,
Ms. Knous was Executive Vice President, Chief Financial Officer and
Treasurer of The Vons Companies, Inc. ("Vons", a retail grocery
company); from May 1995 to December 1995 she was Executive Vice
President and Chief Financial Officer of Vons; and from July 1994 to
May 1995 she served as Senior Vice President and Chief Financial
Officer of Vons.
11
<PAGE>
Mr. Borlik was elected Senior Vice President, Chief Information
Officer in April 1999. From 1995 to 1999, Mr. Borlik was Vice
President, Information Services, of Northwest Airlines, Inc. (an air
transportation company and subsidiary of Northwest Airlines
Corporation), and from 1992 to 1995 he was Managing Director,
Marketing and Customer Service Planning, Process Engineering, Training
and Automation of Northwest Airlines, Inc.
Ms. Erickson was elected Senior Vice President, Strategic Planning and
Treasurer of the Company in March 1998. From March 1997 through March
1998 she was Senior Vice President, Finance, and Treasurer of the
Company; from August 1995 through March 1997 she was Vice President
and Treasurer of the Company; and from January 1992 through August
1995 she was Vice President and Treasurer of International Multifoods
Corporation (a food service distribution and manufacturing company).
Mr. Frank was elected Senior Vice President, Merchandising, Retail
Food Companies, in March 1999. From 1997 to 1999, Mr. Frank was Senior
Vice President, Sales and Merchandising, of Rainbow Foods (a retail
grocery company and division of Fleming Companies, Inc.). From 1995 to
1997, he was Vice President, Merchandising, of Ralph's Grocery Company
(a retail grocery company), and from 1994 to 1995, he was Director,
Merchandising, of Ralph's Grocery Company.
Mr. Herring was elected Senior Vice President, Corporate Development
and External Relations of the Company in April 1999. From February
1998 to April 1999, Mr. Herring was Vice President, Corporate
Development and External Relations of the Company, and prior to that
time, he was with the law firm of Dorsey & Whitney, LLP for
approximately eleven years, the last seven as a partner.
12
<PAGE>
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
- ------ -----------------------------------------------------
STOCKHOLDER MATTERS
-------------------
The Company's common stock is listed on the New York Stock Exchange
under the symbol SVU. As of April 1, 2000, there were 131,469,651
shares of common stock outstanding. At that date, there were 7,559
stockholders of record, excluding individual participants in security
position listings. The information called for by Item 5 as to sales
price for the Company's common stock on a quarterly basis during the
last two fiscal years and dividend information is found under the
heading "Common Stock Price" in Part II, Item 7 below. The information
called for by Item 5 as to restrictions on the payment of dividends by
the Registrant is found in a separate section of this report on page
F-15 in the Note captioned "Notes Receivable" of the Notes to
Consolidated Financial Statements.
During the fiscal year ended February 26, 2000, the Company issued
50,500 shares of unregistered restricted common stock as stock bonuses
to certain employees. The issuance of such shares did not constitute a
"sale" within the meaning of Section 2(3) of the Securities Act of
1933, as amended.
ITEM 6. SELECTED FINANCIAL DATA
- ------ -----------------------
The information called for by Item 6 is found in a separate section of
this report on page F-1 See "Index of Selected Financial Data,
Financial Statements and Schedules."
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------ -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
FINANCIAL REVIEW
RESULTS OF OPERATIONS
In fiscal 2000, the company achieved record sales of $20.3 billion compared to
$17.4 billion last year. Net earnings for fiscal 2000 were $242.9 million, and
diluted earnings per share were $1.87. After excluding the net gain from the
sale of Hazelwood Farms Bakeries and from restructuring and other charges,
fiscal 2000 net earnings were $232.0 million, and diluted earnings per share
were $1.78. The results of operations include the impact from the Richfood
acquisition and the results of its operations from August 31, 1999. Net earnings
for fiscal 1999 were $191.3 million, and diluted earnings per share were $1.57.
The following table sets forth items from the company's Consolidated Statements
of Earnings:
Fiscal Year Ended
<TABLE>
<CAPTION>
(In millions) February 26, February 27, February 28,
2000 1999 1998
(52 weeks) (52 weeks) (53 weeks)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $20,339.1 100.0% $17,420.5 100.0% $17,201.4 100.0%
Cost of sales 18,111.3 89.0 15,620.1 89.7 15,430.7 89.7
Selling and admin expenses 1,705.0 8.4 1,382.2 7.9 1,365.3 7.9
Gain on sale of Hazelwood Farms 163.6 (0.8) - - - -
Restructuring and other charges 103.6 0.5 - - - -
Interest expense 154.5 0.8 124.1 0.7 133.6 0.8
Interest income 19.1 (0.1) 22.2 (0.1) 19.6 (0.1)
Equity in earnings and gain on sale
of ShopKo - - - - 93.4 (0.5)
- --------------------------------------------------------------------------------------------------------
Earnings before income taxes 447.4 2.2 316.2 1.8 384.8 2.2
Income taxes 204.5 1.0 124.9 0.7 154.0 0.9
- --------------------------------------------------------------------------------------------------------
Net earnings $ 242.9 1.2% $ 191.3 1.1% $ 230.8 1.3%
========================================================================================================
</TABLE>
Comparison of fifty-two weeks ended February 26, 2000 ("2000") with fifty-two
weeks ended February 27, 1999 ("1999"):
Net sales for 2000 increased 16.8 percent from 1999, positively impacted by a
27.8 percent increase in retail food sales and a 10.5 percent increase in food
distribution sales.
Retail food sales were favorable in 2000 compared to 1999 primarily due to the
mid-year Richfood acquisition and store growth. Fiscal 2000 store activity,
including licensed units, resulted in 117 stores acquired, 115 stores opened and
58 stores closed or sold for a total of 1,117 stores at year end, an increase of
18.5 percent over the prior year. Same-store sales were essentially flat,
impacted by low inflation, cannibalization in certain markets and competitive
activities. Food distribution sales increases in 2000 were primarily due to the
mid-year addition of nearly 800 new customers from the Richfood acquisition and
the new supply agreement with the Kmart Corporation.
Gross profit as a percentage of net sales was 11.0 percent, up 0.7 percent from
last year. The increase was primarily due to the Richfood acquisition, which
increased the proportion of the higher margin retail food business of the
company. Retail food gross profit margin for 2000 increased from last year
primarily due to higher margins associated with the Richfood retail markets.
Food distribution gross profit margins were down slightly, primarily due to the
sale of Hazelwood Farms Bakeries, which had higher margins, partially offset by
the addition of Richfood, which had higher margins as well.
14
<PAGE>
Selling and administrative expenses were 8.4 percent of net sales for 2000
compared to 7.9 percent of sales last year. The increase was primarily due to
the growing proportion of the company's retail business, which operates at a
higher selling and administrative expense as a percentage of net sales than the
food distribution business. Retail food selling and administrative expenses as
a percentage of net sales increased, primarily reflecting higher labor and
occupancy costs associated with the Richfood retail food markets. The food
distribution business had lower selling and administrative expenses as a
percentage of net sales due to the lower expense levels of the Richfood food
distribution operations, the sale of Hazelwood Farm Bakeries, which had higher
selling and administrative expenses, and lower expenses due to restructuring
activities.
The company's pre-tax operating earnings (earnings before interest, restructure
charges, gain on sale of Hazelwood Farms and taxes) increased to $522.8 million
in 2000 compared with $418.2 million in 1999, a 25.0 percent increase. Operating
earnings before depreciation and amortization increased to $799.8 million in
2000, compared with $651.7 million in 1999, a 22.7 percent increase. Retail food
operating earnings increased 29.8 percent to $340.7 million in 2000 from $262.4
million in 1999. The increase in retail operating earnings was due to increased
sales. Food distribution operating earnings increased 19.9 percent in 2000 to
$223.4 million from $186.3 million in 1999, primarily due to higher sales from
the Richfood acquisition, cost reduction initiatives and additional sales due to
the Kmart supply agreement.
In the first quarter of 2000, the company sold Hazelwood Farms Bakeries, which
resulted in a pre-tax gain of $163.7 million. The company had identified
Hazelwood Farms Bakeries as a non-strategic asset to be liquidated to allow the
redeployment of capital. The transaction resulted in $248.2 million of after-tax
cash proceeds.
In the first quarter of 2000, the company recorded one-time, pre-tax
restructuring and other charges of $103.6 million as a result of an extensive
review to reduce costs and enhance efficiency. Included in this total is $9.6
million for asset impairment costs. The charge by segment was $19.4 million for
retail and $84.2 million for food distribution. The restructuring charges
include costs for facility consolidation, non-core store disposals, and
rationalization of redundant and certain decentralized administrative functions.
A total of $13.3 million was utilized against the restructuring reserve during
2000.
The facility consolidation and non-core store disposal charges represent costs
to exit certain distribution centers and stores. Included in the charges are
costs such as markdown of assets from net book value to estimated selling price,
subsidized lease costs for leased properties at current estimated market rates,
and severance and related benefits to be paid to terminated employees. The
rationalization of redundant and certain decentralized administrative functions
represents severance and related benefits such as outplacement, counseling and
medical coverage to be paid to terminated employees.
During the second quarter of fiscal 2000, the company acquired Richfood and
signed the Kmart supply agreement. Due to these significant changes in the
business, the company reevaluated the restructure activities in the fourth
quarter as well as the timeline to complete those activities. This resulted in
the facility consolidation charge increasing from $47.2 million to $55.3
million. The non-core store disposal charge decreased from $41.8 million to
$39.8 million. The infrastructure realignment charge decreased from $14.6
million to $8.5 million due to a number of voluntary terminations and higher
attrition. As a result of the restructuring, the company expects approximately
2,100 employees to be terminated, 586 of which were terminated in 2000. The
company expects to complete these activities by the end of fiscal 2001.
Interest expense increased to $154.5 million in 2000, compared with $124.1
million in 1999, reflecting increased borrowings due to the Richfood acquisition
in August 1999. Interest income decreased to $19.1 million in 2000 compared
with $22.2 million in 1999.
The effective tax rate was 45.7 percent in 2000 compared with 39.5 percent in
1999. The higher effective tax rate was primarily the result of the gain on the
sale of Hazelwood Farms Bakeries and the Richfood
15
<PAGE>
acquisition. Excluding the impact of the gain on the sale of Hazelwood Farms
Bakeries, the effective tax rate was approximately 40.1 percent.
Net earnings were $242.9 million or $1.87 per share - diluted in 2000 compared
with 1999 net earnings of $191.3 million or $1.57 per share - diluted.
Excluding the gain on the sale of Hazelwood Farms Bakeries and restructuring and
other charges, 2000 net earnings were $232.0 million or $1.78 per share -
diluted. Weighted average shares - diluted increased to 130.1 million in 2000
compared with last year's 122.0 million. The increase was primarily due to
approximately 19.7 million shares issued in the second quarter of fiscal 2000 in
connection with the Richfood acquisition.
Comparison of fifty-two weeks ended February 27, 1999 ("1999") with fifty-three
weeks ended February 28, 1998 ("1998"):
Net sales for 1999 increased 1.3 percent from 1998. On a comparable 52-week
basis, sales increased 3.1 percent, positively impacted by an 10.2 percent
increase in retail food sales, partially offset by a .4 percent decrease in food
distribution sales. Sales gains were achieved despite the low inflationary
environment.
Retail food sales were favorable in 1999 compared to 1998 primarily due to new
store openings and acquisitions totaling 168 stores in 1999, which includes
licensed units. Same-store sales increased 1.5 percent. Food distribution sales
decreased slightly in 1999.
Gross profit as a percentage of net sales was 10.3 percent in 1999, essentially
unchanged from 1998. Retail food and food distribution gross profit margins for
1999 were comparable to 1998.
Selling and administrative expenses as a percentage of net sales were 7.9
percent in 1999, essentially unchanged from 1998. Retail food selling and
administrative expenses as a percent of net sales were comparable to 1998. Food
distribution selling and administrative expenses as a percentage of net sales
increased slightly in 1999 primarily due to increased wages and related costs
which included the startup of a new regional distribution facility in the
Midwest.
The company's pre-tax operating earnings (earnings before interest, equity in
earnings and gain on sale of ShopKo, and taxes) increased to $418.2 million in
1999 compared with $405.4 million in 1998, a 3.1 percent increase. Operating
earnings before depreciation and amortization increased to $651.7 million in
1999, compared with $635.5 million in 1998, a 2.5 percent increase. Retail food
operating earnings increased 14.2 percent to $262.4 million in 1999 from $229.8
million in 1998. The increase in retail operating earnings was due to increased
sales and selling and administrative expense controls. Food distribution
operating earnings decreased 9.1 percent in 1999 to $186.3 million from $204.8
million in 1998, primarily from the increase in selling and administrative
expenses.
Interest expense decreased to $124.1 million in 1999, compared with $133.6
million in 1998, reflecting lower average interest rates and borrowings.
Interest income increased to $22.2 million in 1999, compared with $19.6 million
in 1998, primarily due to increased retailer financing.
On July 2, 1997, the company exited its 46 percent investment in ShopKo through
two simultaneous and cross-conditional transactions: selling 8,174,387 shares
back to ShopKo for an aggregate price of $150 million and a secondary public
offering of all remaining shares. The transactions resulted in proceeds of $305
million and a pretax gain of $90.0 million. Due to the sale there were no
equity in earnings recorded in 1999 compared with $3.3 million or $.03 per share
- - diluted in 1998.
The effective tax rate was 39.5 percent in 1999 compared with 40.0 percent in
1998.
Net earnings were $191.3 million or $1.57 per share - diluted in 1999 compared
with 1998 net earnings of $230.8 million or $1.82 per share - diluted.
Excluding the gain on the sale of ShopKo, 1998 net earnings
16
<PAGE>
were $177.1 million or $1.40 per share - diluted. Weighted average shares -
diluted decreased to 122.0 million in 1999 compared with 126.6 million in 1998.
LIQUIDITY
Net cash from operations was $341.2 million in 2000, $559.9 million in 1999 and
$392.9 million in 1998. An increase in working capital investment primarily due
to the new $2.3 billion annual supply agreement with Kmart caused the decrease
in 2000. This decrease was partially offset by an increase in net earnings.
Cash used in investing activities was $534.5 million in 2000 and $321.4 million
in 1999, while $74.3 million of cash was generated in 1998. The increase in
cash used in investing activities in 2000 was primarily due to the $443 million
cash portion of the Richfood acquisition as well as increased capital
expenditures, offset in part by proceeds from the sale of Hazelwood Farms
Bakeries. In 2000, SUPERVALU opened 16 new price superstores, 28 owned limited
assortment stores and the distribution facility for fast moving product in
Minneapolis. In 1999, the company opened six new price superstores and 19 owned
limited assortment stores.
Cash flow from financing activities was $196.6 million in 2000 primarily due to
borrowings related to the Richfood acquisition. Cash used for financing
activities was $237.1 million in 1999 and $467.7 million in 1998. In 1999, cash
was primarily used to reduce debt and in 1998 it was used mainly to purchase
stock for the treasury.
Management expects that the company will continue to replenish operating assets
and reduce aggregate debt with internally-generated funds. The company has
adequate short-term and long-term financing capabilities to fund its capital
expenditures plan and acquisitions as the opportunities arise. SUPERVALU will
continue to use short-term and long-term debt as a supplement to internally
generated funds to finance its activities. Maturities of debt issued will
depend on management's views with respect to the relative attractiveness of
interest rates at the time of issuance.
On August 31, 1999, the company acquired, in a merger, all of the outstanding
common stock of Richfood. The company issued approximately 19.7 million shares
of SUPERVALU common stock with a market value of approximately $443 million and
paid $443 million in cash for the common stock of Richfood. The company repaid
approximately $394 million of outstanding Richfood debt. To finance the
acquisition and repay the Richfood debt the company used cash, a portion of the
proceeds from the issuance of $350 million of 7 7/8 percent notes due 2009 and
proceeds from the issuance of commercial paper. Subsequent to the acquisition
the company issued $250 million of 7 5/8 percent notes due 2004 and used the
proceeds to reduce commercial paper outstanding. One-time charges related to the
merger of $10 million to $15 million after tax are expected within the first
twelve months following the close.
In December 1999, the Board of Directors authorized a stock repurchase program
of up to $140 million of the company's common stock. During 2000 the company
repurchased 5.9 million shares at a cost of $104.8 million. As of March 1, the
company purchased an additional 2.0 million shares for a total cost of $140.0
million.
A $400 million revolving credit agreement, with rates tied to LIBOR plus .180 to
.275 percent, is in place and expires in October 2002. In August 1999, the
company executed a 364 day, $300 million revolving credit agreement with rates
tied to LIBOR plus .310 to .535 percent. These revolving credit agreements are
available for general corporate purposes and to support the company's commercial
paper program. There were no drawings on the revolving credit agreements during
fiscal 2000. During fiscal 2000, $10.5 million of letters of credit were issued
under the revolving credit agreement with $40.5 million outstanding as of
February 26, 2000. Total commercial paper outstanding as of the end of fiscal
2000 was $574.0 million.
17
<PAGE>
SUPERVALU's capital budget for fiscal 2001, which includes leases, is $550
million compared with $539 million for fiscal 2000. In addition, the company
spent approximately $41 million on retail acquisitions in addition to the
Richfood acquisition. The capital budget for 2001 anticipates cash spending of
$436 million, plus another $114 million for capital leases. Approximately $400
million of the fiscal 2001 budget is slated for use in the company's retail food
business. The budget provides for approximately 20 new price superstores and 60
new limited assortment stores. The balance of the fiscal 2001 capital budget
relates to distribution maintenance capital and information technology related
items. In addition, the company is prepared to provide up to $100 million to
support store development and financing for the company's independent retailers.
Certain retailer financing activities do not require new cash outlays because
they are leases or guarantees.
These capital spending activities are not expected to result in an increase in
the company's debt-to-total-capital ratio as internal cash flow is expected to
substantially support spending requirements. Because of the opportunistic
nature of acquisitions, only acquisition activity that is committed to is
included in the capital budget. The capital budget does include amounts for
projects which are subject to change and for which firm commitments have not
been made.
Cash dividends declared during fiscal 2000 totaled 53.75 cents per common share,
an increase of 1.9 percent over the 52.75 cents per share declared in fiscal
1999. This was the 63rd year of consecutive cash dividends and the 28th year of
successive annual increases. The company's dividend policy will continue to
emphasize a high level of earnings retention for growth.
COMMON STOCK PRICE
SUPERVALU's common stock is listed on the New York Stock Exchange under the
symbol SVU. At year-end, there were 7,566 shareholders of record compared with
6,860 at the end of fiscal 1999.
<TABLE>
<CAPTION>
Common Stock Dividends Per
Price Range Share
Fiscal Quarter 2000 1999 2000 1999
- ------------------------------------------------------------------------------------------------------------------
High Low High Low
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $25 3/4 $19 $24 5/8 $20 6/16 $ .1325 $.1300
Second 26 5/16 21 1/8 25 1/32 20 5/16 .1350 .1325
Third 22 3/8 18 1/16 28 7/16 21 1/2 .1350 .1325
Fourth 20 3/16 15 3/4 28 3/4 24 1/8 .1350 .1325
- ------------------------------------------------------------------------------------------------------------------
Year $26 5/16 $15 3/4 $28 3/4 $20 5/16 $ .5375 $.5275
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Dividend payment dates are on or about the 15th day of March, June, September
and December, subject to the Board of Directors' approval.
NEW ACCOUNTING STANDARDS
Revenue Recognition
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 - Revenue Recognition ("SAB No.101"). SAB No. 101 provides
guidance on recognition, presentation, and disclosure of revenue in financial
statements.
Accounting for Derivative Instruments and Hedging Activities
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" was issued in June 1998. This statement
establishes comprehensive accounting and reporting standards for derivative
instruments and hedging activities.
18
<PAGE>
The provisions for SAB No. 101 are effective for fiscal 2001, and for SFAS No.
133 they are effective for fiscal 2002. The company has not yet determined the
impact, if any, these new standards may have on the company's consolidated
financial position or results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
SUPERVALU is exposed to market pricing risk consisting of interest rate risk
related to debt obligations outstanding, its investment in notes receivable, and
derivatives employed to hedge interest rate changes on variable and fixed rate
debt. The company does not have any material foreign currency or commodity
contract exposure. The company does not use financial instruments or
derivatives for any trading or other speculative purposes.
SUPERVALU manages interest rate risk through the strategic use of fixed and
variable rate debt and, to a limited extent, derivative financial instruments.
Variable interest rate debt (commercial paper, bank loans, industrial revenue
bonds and other variable rate interest rate debt) is utilized to help maintain
liquidity and finance business operations. Long term debt with fixed interest
rates is used to assist in managing debt maturities and to diversify sources of
debt capital.
SUPERVALU carries notes receivable because, in the normal course of business,
the company makes long-term loans to certain retail customers (see "Notes
Receivable" in the notes to the consolidated financial statements). The notes
generally bear fixed interest rates negotiated with each retail customer. The
market value of the fixed rate notes is subject to change due to fluctuations in
market interest rates.
The table below provides information about the company's derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates, including notes receivable, debt obligations and interest rate
swaps. For debt obligations, the table presents principal cash flows and
related weighted average interest rates by expected maturity dates. For notes
receivable, the table presents the expected collection of principal cash flows
and weighted average interest rates by expected maturity dates. For interest
rate swaps, the table presents notional amounts and weighted average interest
rates by expected (contractual) maturity dates. Notional amounts are used to
calculate the contractual payments to be exchanged under the contract.
19
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
(In millions, except rates) Summary of Financial Instruments
- ---------------------------------------------------------------------------------------------------------------------
Aggregate maturities of principal by fiscal year
February 27, February 26,
1999 2000
Fair Value 2001 2002 2003 2004 2005 Thereafter
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Notes receivable with fixed
interest rates
Principal receivable $ 57.3 $ 107.3 19.8 13.1 12.7 8.8 7.7 45.2
Average variable rate
receivable 8.7% 7.9% 7.9% 8.3% 8.7% 8.3% 8.3% 7.5%
Debt with variable interest rates
Principal payable 263.0 741.6 667.3 1.8 - 9.0 - 63.5
Average variable rate payable 4.8% 5.7% Variable
Debt with fixed interest rates
Principal payable 875.8 1,397.6 76.9 9.2 309.5 8.9 433.6 573.7
Average fixed rate payable 7.7% 7.8% 6.9% 8.9% 7.8% 9.0% 7.7% 7.9%
Variable-to-Fixed rate swap
Amount receivable (payable) (15.3) 1.5 - - - 57.9 - 100.0 (not payable)
Average fixed rate payable 7.4% 6.8% 6.8% 6.8% 6.8% 7.3% 7.4% 7.4%
Average variable rate
receivable 5.0% 6.1% Based on LIBOR
Fixed-to-Variable rate swap
Amount receivable 14.8 8.7 - - 100.0 (not payable)
Average variable rate payable 5.0% 6.1% Based on LIBOR
Average fixed rate receivable 8.9% 8.9% 8.9% 8.9% 8.9%
</TABLE>
Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995
The information in this Annual Report includes forward-looking statements.
Important risks and uncertainties that could cause actual results to differ
materially from those discussed in such forward looking statements, including
the impact of changing economic or business conditions, the impact of
competition, the nature and extent of the consolidation of the retail food and
food distribution industries, the ability to attract and retain customers for
the company's food distribution operations and to control food distribution
costs, the ability of SUPERVALU to grow through acquisition and assimilate
acquired entities, the availability of favorable credit and trade terms, food
price changes, other risk factors inherent in the food wholesaling and retail
businesses and other factors discussed from time to time in reports filed by the
company with the Securities and Exchange Commission, are detailed in Exhibit
99.1 to this report; other risks or uncertainties may be detailed from time to
time in the company's future Securities and Exchange Commission filings.
20
<PAGE>
ITEM 7.A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
- --------- ---------------------------------------------------------
The information called for by Item 7A is found under the heading of
"Quantitative and Qualitative Disclosure About Market Risk" under
Part II, Item 7 above.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
The information called for by Item 8 is found in a separate section
of this report on pages F-1 through F-28. See "Index of Selected
Financial Data, Financial Statements and Schedules."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not applicable.
21
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
The information called for by Item 10, as to (a) Directors of the
Registrant and (b) compliance with Section 16(a) of the Securities and
Exchange Act of 1934, is incorporated by reference to the Registrant's
definitive Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A in connection with the
Registrant's 2000 Annual Meeting of Stockholders under the heading
"Election of Directors (Item 1)," and under the heading "Section 16(a)
Beneficial Ownership Reporting Compliance." Certain information
regarding executive officers is included in Part I immediately
following Item 4 above.
ITEM 11. EXECUTIVE COMPENSATION
- ------- ----------------------
The information called for by Item 11 is incorporated by reference to
the Registrant's definitive Proxy Statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A in
connection with the Registrant's 2000 Annual Meeting of Stockholders
under the headings "Compensation of Directors," "Compensation of
Executive Officers," "Option/SAR Grants in Last Fiscal Year,"
"Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-
End Option/SAR Values," "Long-Term Incentive Plans - Awards in Last
Fiscal Year," "Pension Plans," and "Change in Control Agreements," and
under the heading "Compensation Committee Interlocks and Insider
Participation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------- --------------------------------------------------------------
The information called for by Item 12 is incorporated by reference to
the Registrant's definitive Proxy Statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A in
connection with the Registrant's 2000 Annual Meeting of Stockholders
under the headings "Security Ownership of Certain Beneficial Owners"
and "Security Ownership of Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
The information called for by Item 13 is incorporated by reference to
the Registrant's definitive Proxy Statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A in
connection with the Registrant's 2000 Annual Meeting of Stockholders
under the heading "Compensation Committee Interlocks and Insider
Participation."
22
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------- ---------------------------------------------------------------
(a) 1. Financial Statements:
The consolidated financial statements of the Registrant listed
in the accompanying "Index of Selected Financial Data,
Financial Statements and Schedules" together with the reports
of KPMG LLP, independent auditors, and Deloitte & Touche LLP,
former independent auditors, are filed as part of this report.
2. Financial Statement Schedules:
The consolidated financial statement schedule of the
Registrant listed in the accompanying "Index of Selected
Financial Data, Financial Statements and Schedules" together
with the reports of KPMG LLP, independent auditors, and
Deloitte & Touche LLP, former independent auditors, are filed
as part of this report.
3. Exhibits:
(3)(i) Articles of Incorporation.
3.1. Restated Certificate of Incorporation is
incorporated by reference to Exhibit (3)(i) to
the Registrant's Annual Report on Form 10-K for
the year ended February 26, 1994.
(3)(ii) Bylaws.
3.2. Restated Bylaws, as amended, is incorporated by
reference to Exhibit (3) to the Registrant's
Quarterly Report for the quarterly period (12
weeks) ended September 12, 1998.
(4) Instruments defining the rights of security holders,
including indentures:
4.1. Indenture dated as of July 1, 1987 between the
Registrant and Bankers Trust Company, as
Trustee, relating to certain outstanding debt
securities of the Registrant, is incorporated by
reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-3, Registration
No. 33-52422.
4.2. First Supplemental Indenture dated as of August
1, 1990 between the Registrant and Bankers Trust
Company, as Trustee, to Indenture dated as of
July 1, 1987 between the Registrant and Bankers
Trust Company, as Trustee, is incorporated by
reference to Exhibit 4.2 to the Registrant's
Registration Statement on Form S-3, Registration
No. 33-52422.
4.3. Second Supplemental Indenture dated as of
October 1, 1992 between the Registrant and
Bankers Trust Company, as Trustee, to Indenture
dated as of July 1, 1987 between the Registrant
and Bankers Trust Company, as Trustee, is
incorporated by reference to Exhibit 4.1 to the
Registrant's Form 8-K Report dated November 13,
1992.
4.4. Third Supplemental Indenture dated as of
September 1, 1995 between the Registrant and
Bankers Trust Company, as Trustee, to Indenture
23
<PAGE>
dated as of July 1, 1987 between the Registrant and
Bankers Trust Company, as Trustee, is incorporated
by reference to Exhibit 4.1 to the Registrant's Form
8-K Report dated October 2, 1995.
4.5 Fourth Supplemental Indenture dated as of August 4,
1999, between the Registrant and Bankers Trust
Company, as Trustee, to Indenture dated as of July
1, 1987 between the Registrant and Bankers Trust
Company, as Trustee, is incorporated by reference to
Exhibit 4.2 to the Registrant's Quarterly Report on
Form 10-Q for the quarterly period (16 weeks) ended
September 11, 1999.
4.6 Fifth Supplemental Indenture dated as of September
17, 1999, between the Registrant and Bankers Trust
Company, as Trustee, to Indenture dated as of July
1, 1987 between the Registrant and Bankers Trust
Company, as Trustee, is incorporated by reference to
Exhibit 4.3 to the Registrant's Quarterly Report on
Form 10-Q for the quarterly period (16 weeks) ended
September 11, 1999.
4.7. Letter of Representations dated November 12, 1992
between the Registrant, Bankers Trust Company, as
Trustee, and The Depository Trust Company relating
to certain outstanding debt securities of the
Registrant, is incorporated by reference to Exhibit
4.5 to the Registrant's Form 8-K Report dated
November 13, 1992.
4.8. Credit Agreement dated as of October 8, 1997, among
the Registrant, the Lenders named therein and
Bankers Trust Company, as Agent, is incorporated by
reference to Exhibit 10(a) to the Registrant's
Quarterly Report on Form 10-Q for the quarterly
period (12 weeks) ended November 29, 1997.
4.9 Letter Amendment, dated as of August 20, 1999, to
the Credit Agreement dated as of October 8, 1997
among the Registrant, the Lenders named therein and
Bankers Trust Company, as Agent is incorporated by
reference to Exhibit 4.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarterly
period (16 weeks) ended September 11, 1999.
4.10 Rights Agreement between the Registrant and Norwest
Bank Minnesota, N.A., as Rights Agent, dated as of
April 12, 2000, including as Exhibit B the forms of
Rights Certificate and Election to Exercise, is
incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated April
17, 2000.
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 the Registrant and its
subsidiaries are not filed and, in lieu thereof, the
Registrant agrees to furnish copies thereof to the
Securities and Exchange Commission upon request.
(10) Material Contracts:
10.1. SUPERVALU INC. 1993 Stock Plan, as amended, is
incorporated by reference to Exhibit 10.1 to the
Registrant's Annual Report on Form 10-K for the
year ended February 27, 1999. *
24
<PAGE>
10.2. SUPERVALU INC. 1978 Stock Appreciation Rights Plan,
as amended, is incorporated by reference to Exhibit
(10)c. to Registrant's Annual Report on Form 10-K
for the year ended February 25, 1989.*
10.3. SUPERVALU INC. Executive Incentive Bonus Plan is
incorporated by reference to Exhibit (10)c. to
Registrant's Annual Report on Form 10-K for the
year ended February 22, 1997. *
10.4. SUPERVALU INC. Directors Deferred Compensation Plan
for Non-Employee Directors, as amended, is
incorporated by reference to Exhibit (10)g. to the
Registrant's Quarterly Report on Form 10-Q for the
quarterly period (12 weeks) ended September 12,
1998. *
10.5. SUPERVALU INC. 1983 Employee Stock Option Plan, as
amended, is incorporated by reference to Exhibit
(10)a. to Registrant's Quarterly Report on Form 10-
Q for the quarterly period (12 weeks) ended
September 12, 1998. *
10.6. SUPERVALU INC. 1989 Stock Appreciation Rights Plan
is incorporated by reference to Exhibit (10)g. to
Registrant's Annual Report on Form 10-K for the
year ended February 25, 1989.*
10.7. SUPERVALU INC. ERISA Excess Plan Restatement, as
amended.*
10.8. SUPERVALU INC. Deferred Compensation Plan is
incorporated by reference to Exhibit (10)i. to
Registrant's Annual Report on Form 10-K for the
year ended February 23, 1991.*
10.9. SUPERVALU INC. Executive Deferred Compensation Plan
as amended and Executive Deferred Compensation Plan
II are incorporated by reference to Exhibit (10)c.
to Registrant's Quarterly Report on Form 10-Q for
the quarterly period (12 weeks) ended September 12,
1998.*
10.10. Amendments to the SUPERVALU INC. Deferred
Compensation Plan and the SUPERVALU INC. Executive
Deferred Compensation Plan II are incorporated by
reference to Exhibit (10)c. to Registrant's
Quarterly Report on Form 10-Q for the quarterly
period (12 weeks) ended September 7, 1996.*
10.11. Form of Agreement used in connection with
Registrant's Executive Post-Retirement Survivor
Benefit Program, is incorporated by reference to
Exhibit (10)i. to Registrant's Quarterly Report on
Form 10-Q for the quarterly period (12 weeks) ended
September 12, 1998.*
10.12. Form of Change of Control Severance Agreements
entered into with certain officers of the
Registrant, is incorporated by reference to Exhibit
10.12 to the Registrant's Annual Report on Form 10-
K for the year ended February 27, 1999. *
10.13. Amended and Restated SUPERVALU INC. Grantor Trust,
is incorporated by reference to Exhibit (10)d. to
the Registrant's Quarterly Report on Form 10-Q for
the quarterly period (12 weeks) ended September 12,
1998.*
25
<PAGE>
10.14. SUPERVALU INC. Directors Retirement Program, as amended,
is incorporated by reference to Exhibit (10)e. to the
Registrant's Quarterly Report on Form 10-Q for the
quarterly period (12 weeks) ended September 12, 1998.*
10.15. SUPERVALU INC. Non-Qualified Supplemental Executive
Retirement Plan is incorporated by reference to Exhibit
(10)r. to Registrant's Form 10-K Report for the year
ended February 24, 1990.*
10.16. First Amendment to SUPERVALU INC. Non-Qualified
Supplemental Executive Retirement Plan is incorporated by
reference to Exhibit (10)a. to Registrant's Quarterly
Report on Form 10-Q for the quarterly period (12 weeks)
ended September 7, 1996.*
10.17. Second Amendment to SUPERVALU INC. Non-Qualified
Supplemental Executive Retirement Plan is incorporated by
reference to Exhibit (10)r. to Registrant's Form 10-K
Report for the year ended February 28, 1998.*
10.18. Third Amendment to SUPERVALU INC. Non-Qualified
Supplemental Executive Retirement Plan is incorporated by
reference to Exhibit (10)h. to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period (12 weeks)
ended September 12, 1998.*
10.19. SUPERVALU INC. Long-Term Incentive Plan, as amended, is
incorporated by reference to Exhibit (10)b. to the
Registrant's Quarterly Report on Form 10-Q for the
quarterly period (12 weeks) ended September 12, 1998.*
10.20. SUPERVALU INC. Bonus Plan for Designated Corporate
Officers is incorporated by reference to Exhibit (10)t.
to Registrant's Annual Report on Form 10-K for the year
ended February 26, 1994
10.21. SUPERVALU INC. Non-Employee Directors Deferred Stock
Plan, as amended.*
10.22. SUPERVALU INC. 1997 Stock Plan, as amended.*
10.23. Supplemental Retirement Agreement for William J. Bolton,
is incorporated by reference to Exhibit 10.23 to the
Registrant's Annual Report on Form 10-K for the year
ended February 27, 1999. *
10.24 Split Dollar Life Insurance Agreement for Michael W.
Wright and Collateral Assignment of Policy .*
10.25 SUPERVALU/Richfood Stock Incentive Plan.*
* Indicates management contracts, compensatory plans or arrangements
required to be filed pursuant to Item 601(b)(10)(iii)(A) of Regulation
S-K
26
<PAGE>
(12) Statement re Computation of Ratios.
12.1. Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of the Registrant.
21.1. List of Subsidiaries of the Registrant.
(23) Consents of Experts and Counsel.
23.1. Consent of KPMG LLP
23.2. Consent of Deloitte & Touche LLP
(24) Power of Attorney.
24.1. Power of Attorney.
(27) Financial Data Schedule.
27.1. Financial Data Schedule.
(99) Additional Exhibits.
99.1 Cautionary Statements pursuant to the Securities
Litigation Reform Act.
(b) Reports on Form 8-K:
During the fourth fiscal quarter of the fiscal year ended
February 26, 2000, the Company filed a report on Form 8-K dated
December 17, 1999, with respect to the extension of its exchange
offer for its outstanding unregistered 7-7/8% Notes due 2009 and
7-5/8% Notes due 2004 to allow the remaining holders of the
unregistered notes to participate in the exchange offer.
27
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SUPERVALU INC.
(Registrant)
DATE: April 26, 2000 By: /s/ Michael W. Wright
------------------------------
Michael W. Wright
Chairman of the Board;
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C>
/s/ Michael W. Wright Chairman of the Board; President; April 26, 2000
- ------------------------------ Chief Executive Officer; and
Michael W. Wright Director (principal executive
officer)
/s/ Pamela K. Knous Executive Vice President and April 26, 2000
- ------------------------------ Chief Financial Officer (principal
Pamela K. Knous financial and accounting officer)
/s/ Lawrence A. Del Santo* Director
- ------------------------------
Lawrence A. Del Santo
/s/ Susan E. Engel* Director
- ------------------------------
Susan E. Engel
/s/ Edwin C. Gage* Director
- ------------------------------
Edwin C. Gage
/s/ William A. Hodder* Director
- ------------------------------
William A. Hodder
/s/ Garnett L. Keith, Jr.* Director
- ------------------------------
Garnett L. Keith, Jr.
/s/ Richard L. Knowlton* Director
- ------------------------------
Richard L. Knowlton
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
/s/ Charles M. Lillis* Director
- ------------------------------
Charles M. Lillis
/s/ Harriet Perlmutter* Director
- ------------------------------
Harriet Perlmutter
/s/ Steven S. Rogers* Director
- ------------------------------
Steven S. Rogers
/s/ Carole F. St. Mark* Director
- ------------------------------
Carole F. St. Mark
</TABLE>
*Executed this 26th day of April, 2000, on behalf of the indicated
Directors by Michael W. Wright, duly appointed Attorney-in-Fact.
/s/ Michael W. Wright
---------------------
Michael W. Wright
Attorney-in-Fact
29
<PAGE>
SUPERVALU INC.
Annual Report on Form 10-K
Items 6, 8 and 14(a)
Index of Selected Financial Data and Financial Statements and Schedules
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
Selected Financial Data: Page
- ----------------------- ----
<S> <C>
Five Year Financial and Operating Summary F-2
Financial Statements:
- --------------------
Independent Auditors' Report of KPMG LLP F-3
Independent Auditors' Report of Deloitte & Touche LLP F-4
Consolidated composition of net sales and operating earnings for each of the F-5
three years ended February 26, 2000, February 27, 1999 and February 28, 1998
Consolidated statements of earnings for each of the three years ended F-6
February 26, 2000, February 27, 1999 and February 28, 1998
Consolidated balance sheets as of February 26, 2000 and February 27, 1999 F-7- F-8
Consolidated statements of stockholders' equity for each of the three years F-9
ended February 26, 2000, February 27, 1999 and February 28, 1998
Consolidated statements of cash flows for each of the three years F-10
ended February 26, 2000, February 27, 1999 and February 28, 1998
Notes to consolidated financial statements F-11- F-24
Unaudited quarterly financial information F-25
Financial Schedules:
- -------------------
Independent Auditors' Report of KPMG LLP F-26
Independent Auditors' Report of Deloitte & Touche LLP F-27
Schedule II: Valuation and qualifying accounts F-28
</TABLE>
All other schedules are omitted because they are not applicable or not
required.
F-1
<PAGE>
<TABLE>
<CAPTION>
FIVE YEAR FINANCIAL AND OPERATING SUMMARY
- ----------------------------------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- ----------------------------------------------------------------------------------------------------------------------------------
2000 (b) 1999 1998 (f) 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Earnings Data (a)(e)
Net sales $20,339,079 $17,420,507 $17,201,378 $16,551,902 $16,486,321
Cost of sales 18,111,296 15,620,127 15,430,642 14,885,249 14,906,602
Selling and administrative expense 1,705,003 1,382,212 1,365,327 1,286,121 1,212,967
Gain on sale of Hazelwood Farms Bakeries (163,662) - - - -
Restructuring and other charges 103,596 - - - -
Interest, net 135,392 101,907 113,993 120,695 116,678
Equity in earnings and gain on sale of ShopKo - - 93,364 20,675 17,618
Earnings before taxes 447,454 316,261 384,780 280,512 267,692
Provision for income taxes 204,513 124,923 154,023 105,468 101,259
Net earnings 242,941 191,338 230,757 175,044 166,433
Net earnings per common share-diluted 1.87 1.57 1.82 1.30 1.21
- ----------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data (a)
Inventories (FIFO) $ 1,626,087 $ 1,195,217 $ 1,247,429 $ 1,221,344 $ 1,158,028
Working capital (c) (196,348) 188,000 286,800 361,260 355,124
Net property, plant and equipment 2,168,210 1,699,024 1,589,601 1,648,524 1,600,166
Total assets 6,495,353 4,265,949 4,093,010 4,283,326 4,183,503
Long-term debt (d) 1,953,741 1,246,269 1,260,728 1,420,591 1,445,562
Stockholders' equity 1,821,479 1,305,639 1,201,905 1,307,423 1,216,176
---------------------------------------------------------------------------------------------------------------------------------
Other Statistics (a)(e)
Earnings as a percent of net sales 1.19 % 1.10 % 1.34 % 1.06 % 1.01%
Return on average stockholders' equity 14.92 % 15.24 % 18.49 % 13.89 % 13.96%
Book value per common share $ 13.53 $ 10.82 $ 9.94 $ 9.73 $ 8.97
Current ratio (c) .92:1 1.12:1 1.20:1 1.26:1 1.27:1
Debt to capital ratio 60 % 55 % 57 % 56 % 57%
Dividends declared per common share $ .53 3/4 $ .52 3/4 $ .51 1/2 $ .49 3/4 $ .48 1/2
Weighted average common shares
outstanding-diluted 130,090 121,961 126,550 134,954 136,984
Depreciation and amortization $ 277,062 $ 233,523 $ 230,082 $ 232,071 $ 219,084
EBITDA $ 799,842 $ 651,691 $ 638,821 $ 633,278 $ 603,454
Capital expenditures, excluding retailer
financing $ 539,264 $ 346,390 $ 279,768 $ 285,939 $ 271,456
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(a) Fiscal 1998 contains 53 weeks; all other years include 52 weeks. Dollars in
thousands except per share and percentage data.
(b) Net earnings include a net gain of $10.9 million or $.08 per share-diluted
from the gain on sale of Hazelwood Farms Bakeries and from restructuring
and other charges. All statistics except EBITDA include these
transactions.
(c) Working capital and current ratio are calculated after adding back the LIFO
reserve.
(d) Total long-term debt includes long-term debt and long-term obligations
under capital leases.
(e) Information adjusted to include stock split in Fiscal 1999.
(f) Net earnings include a net gain on the sale of ShopKo of $53.7 million
($.42 per share-diluted). All statistics except EBITDA include this
transaction.
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
SUPERVALU INC.
Eden Prairie, Minnesota
We have audited the accompanying consolidated balance sheets of SUPERVALU INC.
and subsidiaries as of February 26, 2000 and February 27, 1999, and the related
statements of earnings, stockholders' equity and cash flows for the fiscal years
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. The financial statements
of SUPERVALU INC. for the year ended February 28, 1998, were audited by other
auditors whose report expressed an unqualified opinion on those statements.
We conducted our audits in accordance with auditing standards in the United
States of America. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
SUPERVALU INC. and subsidiaries as of February 26, 2000 and February 27, 1999,
and the results of their operations and their cash flows for the fiscal years
then ended, in conformity with accounting principles generally accepted in the
United States of America.
/s/ KPMG LLP
Minneapolis Minnesota
April 4, 2000
F-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
SUPERVALU INC.
Board of Directors and Stockholders
Eden Prairie, Minnesota
We have audited the accompanying consolidated statements of earnings,
stockholders' equity and cash flows for the year ended February 28, 1998 of
SUPERVALU INC. and subsidiaries. These consolidated financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations of SUPERVALU INC.
and subsidiaries and their cash flows for the year in the period ended February
28, 1998, in conformity with accounting principles generally accepted in the
United States of America.
/s/ Deloitte & Touche, LLP
Minneapolis, Minnesota
April 6, 1998 (April 24, 2000 as
to Industry Segment Information)
F-4
<PAGE>
CONSOLIDATED COMPOSITION OF NET SALES AND OPERATING EARNINGS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- -------------------------------------------------------------------------------------------------------
The following table sets forth, for each of the last three fiscal years, the composition of the
company's net sales and operating earnings.
- -------------------------------------------------------------------------------------------------------
(In thousands, except percent data) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------
Net sales
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail food $ 8,069,767 $ 6,312,882 $ 5,837,000
39.7 % 36.2 % 33.9 %
Food distribution 12,269,312 11,107,625 11,364,378
60.3 % 63.8 % 66.1 %
Total net sales $20,339,079 $ 17,420,507 $17,201,378
100.0 % 100.0 % 100.0 %
- -------------------------------------------------------------------------------------------------------
Operating earnings
- -------------------------------------------------------------------------------------------------------
Retail food $ 340,707 $ 262,426 $ 229,802
Food distribution 223,429 186,291 204,842
Gain on sale 163,662 - -
Restructuring and other charges (103,596) - -
---------------------------------------------------------------
Total operating earnings 624,202 448,717 434,644
Interest expense, net (135,392) (101,907) (113,993)
General corporate expenses (41,356) (30,549) (29,235)
---------------------------------------------------------------
Earnings before equity in earnings
of ShopKo and gain on sale of
ShopKo and income taxes 447,454 316,261 291,416
Equity in earnings and gain
on sale of ShopKo - - 93,364
---------------------------------------------------------------
Earnings before income taxes $ 447,454 $ 316,261 $ 384,780
- -------------------------------------------------------------------------------------------------------
Identifiable assets
- -------------------------------------------------------------------------------------------------------
Retail food 3,077,134 $ 1,658,858 $ 1,253,869
Food distribution 3,408,866 2,597,216 2,828,754
Corporate 9,353 9,875 10,387
---------------------------------------------------------------
Total $ 6,495,353 $ 4,265,949 $ 4,093,010
- -------------------------------------------------------------------------------------------------------
Depreciation and amortization
- -------------------------------------------------------------------------------------------------------
Retail food $ 149,574 $ 108,770 $ 103,122
Food distribution 124,161 122,822 124,639
Corporate 3,327 1,931 2,321
---------------------------------------------------------------
Total $ 277,062 $ 233,523 $ 230,082
- -------------------------------------------------------------------------------------------------------
Capital expenditures
- -------------------------------------------------------------------------------------------------------
Retail food $ 352,428 $ 198,299 $ 84,009
Food distribution 180,968 143,337 192,547
Corporate 5,868 4,754 3,212
---------------------------------------------------------------
Total $ 539,264 $ 346,390 $ 279,768
- -------------------------------------------------------------------------------------------------------
</TABLE>
Industry segment operating earnings were computed as total revenue less
associated operating expenses, which exclude general corporate expenses, net
interest expense and income taxes.
Identifiable assets are those assets of the company directly associated with the
industry segments.
See notes following the Five Year Financial and Operating Summary and notes to
the consolidated financial statements.
F-5
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) Fiscal Year Ended
- ----------------------------------------------------------------------------------------------------------------------------------
February 26, February 27, February 28,
2000 1999 1998
(52 weeks) (52 weeks) (53 weeks)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 20,339,079 $ 17,420,507 $ 17,201,378
Costs and expenses
Cost of sales 18,111,296 15,620,127 15,430,642
Selling and administrative expenses 1,705,003 1,382,212 1,365,327
Gain on sale (163,662) - -
Restructuring and other charges 103,596 - -
Interest
Interest expense 154,482 124,111 133,619
Interest income 19,090 22,204 19,626
- ----------------------------------------------------------------------------------------------------------------------------------
Interest expense, net 135,392 101,907 113,993
- ----------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 19,891,625 17,104,246 16,909,962
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings before equity in earnings and gain
on sale of ShopKo and income taxes 447,454 316,261 291,416
Equity in earnings and gain on sale of ShopKo - - 93,364
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 447,454 316,261 384,780
Provision for income taxes
Current 225,554 108,403 131,343
Deferred (21,041) 16,520 22,680
- ----------------------------------------------------------------------------------------------------------------------------------
Income tax expense 204,513 124,923 154,023
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 242,941 $ 191,338 $ 230,757
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding
Diluted 130,090 121,961 126,550
Basic 129,162 120,376 125,326
Net earnings per common share - diluted $ 1.87 $ 1.57 $ 1.82
Net earnings per common share - basic $ 1.88 $ 1.59 $ 1.84
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- ---------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) February 26, 2000 February 27, 1999
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash $ 10,920 $ 7,608
Receivables, less allowance for losses of $30,399 in 2000
and $18,983 in 1999 562,448 410,799
Inventories 1,490,454 1,067,837
Other current assets 113,817 96,283
- ---------------------------------------------------------------------------------------------------------------------------------
Total current assets 2,177,639 1,582,527
- ---------------------------------------------------------------------------------------------------------------------------------
Long-term notes receivable 86,914 48,697
Long-term investment in direct financing leases 92,310 112,576
Property, plant and equipment
Land 155,501 139,120
Buildings 1,037,398 990,331
Property under construction 50,381 26,601
Leasehold improvements 239,400 167,122
Equipment 1,486,850 1,245,134
Assets under capital leases 508,119 352,104
- ---------------------------------------------------------------------------------------------------------------------------------
3,477,649 2,920,412
Less accumulated depreciation and amortization
Owned property, plant and equipment 1,227,218 1,156,921
Assets under capital leases 82,221 64,467
- ---------------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 2,168,210 1,699,024
- ---------------------------------------------------------------------------------------------------------------------------------
Goodwill 1,608,580 567,890
Other assets 361,700 255,235
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $ 6,495,353 $ 4,265,949
- ---------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
February 26, February 27,
2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities
Notes payable $ 576,513 $ 89,157
Accounts payable 1,430,312 981,961
Accrued vacation, compensation and benefits 128,875 96,161
Current maturities of long-term debt 170,381 208,913
Current obligations under capital leases 29,901 24,015
Other current liabilities 173,638 121,700
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 2,509,620 1,521,907
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term debt 1,408,858 835,485
Long-term obligations under capital leases 544,883 410,784
Deferred income taxes 3,306 54,096
Other liabilities 207,207 138,038
Commitments and contingencies - -
Stockholders' equity
Preferred stock, no par value: Authorized 1,000 shares
Shares issued and outstanding, 0 in 2000 and 6 in 1999 ($1,000 - 5,908
stated value)
Common stock, $1.00 par value: Authorized 400,000 shares
Shares issued, 150,670 in 2000 and 1999 150,670 150,670
Capital in excess of par value 132,226 -
Retained earnings 1,847,371 1,673,382
Treasury stock, at cost, shares 16,008 in 2000 and 30,561 in 1999 (308,788) (524,321)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,821,479 1,305,639
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 6,495,353 $ 4,265,949
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-8
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
SUPERVALU INC. and Subsidiaries
- --------------------------------------------------------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
Capital in
Preferred Common Excess of Treasury Retained
Stock Stock Par Value Stock Earnings Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT
FEBRUARY 22, 1997 $ 5,908 $ 150,670 $ 99 $ (231,871) $ 1,382,617 $ 1,307,423
Net earnings - - - - 230,757 230,757
Sales of common stock
under option plans - - (4,123) 51,623 - 47,500
Cash dividends declared
on common stock -
$.515 per share - - - - (63,678) (63,678)
Compensation under employee
incentive plans - - 6,951 11,289 - 18,240
Purchase of shares for treasury - - - (338,337) - (338,337)
- ------------------------------------------------------------------------------------------------------------------------
BALANCES AT
FEBRUARY 28, 1998 5,908 150,670 2,927 (507,296) 1,549,696 1,201,905
Net earnings - - - - 191,338 191,338
Sales of common stock
under option plans - - (5,902) 35,497 (3,667) 25,928
Cash dividends declared
on common stock -
$.5275 per share - - - - (63,985) (63,985)
Compensation under employee
incentive plans - - 1,057 10,914 - 11,971
Treasury shares exchanged for
acquisition - - 1,918 2,167 - 4,085
Purchase of shares for treasury - - - (65,603) - (65,603)
- ------------------------------------------------------------------------------------------------------------------------
BALANCES AT
FEBRUARY 27, 1999 5,908 150,670 - (524,321) 1,673,382 1,305,639
Net earnings - - - - 242,941 242,941
Sales of common stock
under option plans - - (5,181) 10,738 - 5,557
Cash dividends declared
on common stock -
$.5375 per share - - - - (68,952) (68,952)
Compensation under employee
incentive plans - - (1,802) 9,408 - 7,606
Treasury shares exchanged for
acquisitions - - 139,209 318,293 - 457,502
Redemption of Preferred Stock (5,908) (5,908)
Purchase of shares for treasury - - - (122,906) - (122,906)
- ------------------------------------------------------------------------------------------------------------------------
BALANCES AT
FEBRUARY 26, 2000 $ - $ 150,670 $ 132,226 $ (308,788) $ 1,847,371 $ 1,821,479
========================================================================================================================
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
SUPERVALU INC. and Subsidiaries
- ---------------------------------------------------------------------------------------------------------------
(In thousands) Fiscal Year Ended
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
February 26, February 27, February 28,
2000 1999 1998
(52 weeks) (52 weeks) (53 weeks)
- ---------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net earnings $ 242,941 $ 191,338 $ 230,757
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Equity in earnings and gain on sale of ShopKo - - (93,364)
Depreciation and amortization 277,062 233,523 230,082
LIFO (income) expense 8,253 (3,889) 2,403
Provision for losses on receivables 9,895 10,150 5,791
Gain on sale of assets (163,662) - -
Restructuring and other charges 103,596 - -
Deferred income taxes (21,041) 16,520 22,680
Other adjustments, net 2,032 64 (3,476)
Changes in assets and liabilities, excluding effect
from acquisitions:
Receivables (58,887) (20,558) (29,905)
Inventories (195,192) 80,466 (25,700)
Accounts payable 61,997 14,623 38,453
Other assets and liabilities 74,178 37,703 15,214
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 341,172 559,940 392,935
- --------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Additions to long-term notes receivable (55,162) (51,455) (77,779)
Proceeds received on long-term notes receivable 52,101 95,172 39,966
Proceeds from sale of assets 374,714 64,658 395,322
Purchase of property, plant and equipment (407,947) (240,363) (230,910)
Business acquisitions, net of cash acquired (480,502) (165,797) (23,523)
Other investing activities (17,704) (23,578) (28,742)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (534,500) (321,363) 74,334
- ---------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net increase (decrease) in checks outstanding, net of 23,529 15,958 (23,924)
deposits
Net issuance (reduction) of short-term notes payable 472,670 (61,439) 14,730
Proceeds from issuance of long-term debt 594,485 207,155 15,592
Repayment of long-term debt (672,303) (260,928) (84,595)
Reduction of obligations under capital leases (28,376) (24,945) (24,055)
Proceeds from the sale of common stock under option 2,381 16,747 37,736
plans
Redemption of preferred stock (5,908) - -
Dividends paid (66,932) (64,014) (64,855)
Payment for purchase of treasury stock (122,906) (65,603) (338,337)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 196,640 (237,069) (467,708)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 3,312 1,508 (439)
Cash at beginning of year 7,608 6,100 6,539
- ---------------------------------------------------------------------------------------------------------------
Cash at end of year $ 10,920 $ 7,608 $ 6,100
===============================================================================================================
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPERVALU INC. and Subsidiaries
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of the company and
all its subsidiaries. All significant inter-company accounts and transactions
have been eliminated.
Revenue and Income Recognition:
Revenues and income from product sales are recognized at the point of sale for
retail food and upon shipment of the product for food distribution. Revenues and
income from services rendered are recognized immediately after such services
have been provided.
Inventories:
Inventories are stated at the lower of cost or market. Cost is determined
through use of the last-in, first-out method (LIFO) for a major portion of
consolidated inventories: 75.4 percent for fiscal 2000 and 71.6 percent for
fiscal 1999. The first-in, first-out method (FIFO) is used to determine cost for
remaining inventories which are principally perishable products. Market is
replacement value. If the FIFO method had been used to determine cost of
inventories for which the LIFO method is used, the company's inventories would
have been higher by approximately $135.6 million at February 26, 2000 and $127.4
million at February 27, 1999.
Property, Plant and Equipment:
Property, plant and equipment are carried at cost. Depreciation, as well as
amortization of assets under capital leases, is based on the estimated useful
lives of the assets using the straight-line method. Estimated useful lives
generally are 10 to 40 years for buildings and major improvements; 3 to 10 years
for equipment; and the shorter of the term of the lease or expected life for
leasehold improvements. Interest on property under construction of $4.8, $3.0
and $1.9 million was capitalized in fiscal years 2000, 1999 and 1998,
respectively.
Goodwill:
Amounts paid in excess of the fair value of acquired net assets are amortized on
a straight-line basis. The recoverability of goodwill is assessed by determining
whether the goodwill balance can be recovered through projected undiscounted
cash flows and operating results over its remaining life. Impairment of the
asset would be recognized when it is probable that such future undiscounted cash
flows will be less than the carrying value of the asset. As of February 26,
2000, $1.6 billion of goodwill is being amortized over 40 years. The remaining
goodwill is being amortized over 15 to 20 years. Goodwill is shown net of
accumulated amortization of $130.0 and $107.2 million for fiscal 2000 and 1999,
respectively.
Financial Instruments:
The company, from time to time, utilizes interest rate caps, collars and swaps
to manage interest costs and reduce exposure to interest rate changes. The
difference between amounts to be paid or received is accrued and recognized over
the life of such contracts which have various expiration dates through 2022.
Fair Value Disclosures of Financial Instruments:
The estimated fair value of notes receivable approximates the net carrying value
at February 26, 2000 and February 27, 1999. Notes receivable are valued based on
comparisons to publicly traded debt instruments of similar credit quality.
The estimated fair market value of the company's long-term debt (including
current maturities) was less than the carrying value by approximately $1.2
million at February 26, 2000 and exceeded the carrying value by approximately
$34 million at February 27, 1999. The estimated fair value was based on market
quotes where available, discounted cash flows and market yields for similar
instruments. The estimated fair market value of the company's commercial paper
outstanding as of February 26, 2000 and February 27, 1999 approximates the
carrying value.
F-11
<PAGE>
Advertising Costs:
Advertising costs are expensed as incurred.
Stock-based Compensation:
The company uses the "intrinsic value-based method" for measuring the cost of
compensation paid in company common stock. This method defines the company's
cost as the excess of the stock's market value at the time of the grant over the
amount that the employee is required to pay.
Net Earnings Per Share:
Basic earnings per share (EPS) is calculated using income available to common
shareholders divided by the weighted average of common shares outstanding during
the year. Diluted EPS is similar to Basic EPS except that the weighted average
of common shares outstanding is increased to include the number of additional
common shares that would have been outstanding if the dilutive potential common
shares, such as options, had been issued.
Use of Estimates:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications:
Certain reclassifications have been made to prior years' consolidated financial
statements to conform to 2000 presentation. These reclassifications did not
affect results of operations as previously reported.
RICHFOOD ACQUISITION
On August 31, 1999, the company acquired, in a merger, all of the outstanding
common stock of Richfood Holdings, Inc. ("Richfood"), a major food retailer and
distributor operating primarily in the Mid-Atlantic region of the United States.
The acquisition was accounted for as a purchase. The company issued
approximately 19.7 million shares of SUPERVALU common stock with a market value
of approximately $443 million, paid $443 million in cash for the common stock of
Richfood and assumed approximately $685 million of debt in conjunction with the
acquisition. In addition, the company repaid approximately $394 million of
outstanding Richfood debt, leaving approximately $291 million outstanding
immediately after the acquisition. The allocation of the consideration paid for
Richfood to the consolidated assets and liabilities is based on estimates of
their respective fair values. The excess of the purchase price over the fair
value of net assets acquired of approximately $1.1 billion is being amortized on
a straight line basis over 40 years. The results of Richfood's operations from
August 31, 1999 have been included in the company's financial statements.
Unaudited pro forma consolidated results of continuing operations, as though the
companies had been combined at the beginning of the periods presented, are as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) February 26, 2000 February 27, 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 22,309,061 $21,178,846
Net earnings $ 261,406 (a) $ 207,887 (b)
Net earnings per common share - diluted $ 1.87 (a) $ 1.47 (b)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Amounts include a net gain of $10.9 million or $.08 per share-diluted from
the gain on the sale of Hazelwood Farms Bakeries and from restructuring and
other charges.
(b) Amounts include a restructuring charge taken by Richfood of $14.5 million
or $.10 per share-diluted in their fourth quarter ended May 1998.
F-12
<PAGE>
RESTRUCTURING AND OTHER CHARGES
In the first quarter of fiscal 2000, the company recorded one-time pre-tax
restructuring and other charges of $103.6 million as a result of an extensive
review to reduce costs and enhance efficiency. Included in this total is $9.6
million for asset impairment costs. The restructuring charges include costs for
facility consolidation, non-core store disposal, and rationalization of
redundant and certain decentralized administrative functions.
The facility consolidation and non-core store disposal charges represent costs
to exit certain distribution centers and stores. Included in the charges are
costs such as markdown of assets from net book value to estimated selling price,
subsidized lease costs for leased properties at current estimated market rates,
and severance and related benefits to be paid to terminated employees.
The rationalization of redundant and certain decentralized administrative
functions represents severance and related benefits such as outplacement,
counseling and medical coverage to be paid to terminated employees.
During the second quarter of fiscal 2000, the company acquired Richfood and
signed the Kmart supply agreement. Due to these significant changes in the
business, the company reevaluated the restructure activities in the fourth
quarter as well as the timeline to complete. This resulted in an increase to the
facility consolidation charge of $8.0 million. The non-core store disposal
charge decreased $1.9 million. The infrastructure realignment charge decreased
$6.1 million due to a number of voluntary terminations and higher than expected
attrition. The company expects to complete these activities by the end of fiscal
2001. Details of the restructuring activity follow.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Original
Pretax Fiscal 2000 Balance
(In thousands, except for employees) Charge Activity Adjustment Feb. 26, 2000
- ------------------------------------------------------------------------------------------------------
<S> <C>
Facility consolidation $ 47,226 $ 10,722 $ 8,046 $ 44,550
Non-core store disposal 41,778 10,528 (1,924) 29,326
Infrastructure realignment 14,592 1,679 (6,122) 6,791
- ------------------------------------------------------------------------------------------------------
Total restructure and other charges $103,596 $ 22,929 -- $ 80,667
- ------------------------------------------------------------------------------------------------------
Employees 2,517 586 (418) 1,513
- ------------------------------------------------------------------------------------------------------
</TABLE>
NOTES RECEIVABLE
Notes receivable arise from financing activities with affiliated retail food
customers. Loans to affiliated retailers, as well as trade accounts receivable,
are primarily collateralized by the retailers' inventory, equipment and
fixtures. The notes range in length from 1 to 10 years with the average being 7
years, and may be non-interest bearing or bear interest at rates ranging from 5
to 11 percent.
Included in current receivables are notes receivable due within one year
totaling $20.4 and $8.6 million at February 26, 2000 and February 27, 1999,
respectively.
F-13
<PAGE>
DEBT
- ----
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
(In thousands, February 26, February 27,
except payment data) 2000 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
7.625%-8.875% promissory notes $1,000,000 $ 400,000
Semi-annual interest payments of
$39.5 million; due fiscal 2003 to 2023
9.75% senior notes, $168,850 face amount 181,485 -
Semi-annual interest payments of
$8.2 million; due fiscal 2005
6.23%-6.69% medium-term notes 161,000 161,000
semi-annual interest payments of
$5.3 million; due fiscal 2001 to 2007
7.25% promissory notes - 150,000
semi-annual interest payments of
$5.4 million; due fiscal 2000
Variable rate three month LIBOR plus 1% 88,513 123,655
Variable rate to 7.125% industrial revenue bonds 80,712 80,898
8.28%-9.96% promissory notes; 50,757 55,438
due fiscal 2001 to 2010
8.875% promissory notes - 45,000
semi-annual interest payments of
$2.0 million; due fiscal 2000
Other debt 16,772 28,407
- ------------------------------------------------------------------------------------------------------------
1,579,239 1,044,398
Less current maturities 170,381 208,913
- ------------------------------------------------------------------------------------------------------------
Long-term debt $1,408,858 $ 835,485
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Aggregate maturities of long-term debt during the next five fiscal years are:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
(In thousands)
- ------------------------------------------------------------------------------------------------------------
<S> <C>
2001 $ 170,381
2002 11,008
2003 309,510
2004 17,925
2005 433,589
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The company has a $400 million revolving credit agreement that expires in
October 2002 along with a $300 million 364-day revolving credit agreement
executed in August 1999. The company pays an annual facility fee of .09 percent
for both credit agreements. The revolving credit agreements are available for
general corporate purposes and to support the company's commercial paper
program. There were no drawings on the revolving credit agreements during fiscal
2000 and 1999. During fiscal 2000, $10.5 million of letters of credit were
issued under the $400 million revolving credit agreement with $40.5 million
outstanding as of February 26, 2000 and $30 million as of February 27, 1999. As
of February 26, 2000 and February 27, 1999, total commercial paper outstanding
was $574 million and $60 million, respectively. The weighted-average interest
rate on short-term borrowings outstanding was 5.8 percent at February 26, 2000
and 5.1 percent at February 27, 1999. The company periodically enters into
interest rate swaps to manage exposure to interest rate changes.
F-14
<PAGE>
On August 4, 1999 and September 17, 1999, the company issued $350 million of 10
year 7.875 percent notes and $250 million of 5 year 7.625 percent notes,
respectively. Proceeds from the notes were used to finance the acquisition of
Richfood and reduce commercial paper outstanding.
The debt agreements contain various covenants including maximum permitted
leverage. Under the most restrictive covenants, retained earnings of
approximately $158 million were available at year-end for payment of cash
dividends.
LEASES
- ------
Capital and operating leases:
The company leases certain retail food stores, food distribution warehouses and
office facilities. Many of these leases include renewal options, and to a
limited extent, include options to purchase. Amortization of assets under
capital leases was $27.0, $19.6 and $17.9 million in fiscal 2000, 1999 and 1998,
respectively.
Future minimum obligations under capital leases in effect at February 26, 2000
are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(In thousands) Lease
Fiscal Year Obligations
- ------------------------------------------------------------------------------------------
<S> <C>
2001 $60,084
2002 59,204
2003 58,682
2004 57,833
2005 57,413
Later 525,987
- ------------------------------------------------------------------------------------------
Total future minimum obligations 819,203
Less interest 341,442
- ------------------------------------------------------------------------------------------
Present value of net future minimum obligations 477,761
Less current portion 22,196
- ------------------------------------------------------------------------------------------
Long-term obligations $455,565
- ------------------------------------------------------------------------------------------
</TABLE>
The present values of future minimum obligations shown are calculated based on
interest rates ranging from 6.7 percent to 13.8 percent, with a weighted average
of 8.3 percent, determined to be applicable at the inception of the leases.
F-15
<PAGE>
In addition to its capital leases, the company is obligated under operating
leases, primarily for buildings, warehouse and computer equipment. Future
minimum obligations under operating leases in effect at February 26, 2000 are as
follows:
<TABLE>
<CAPTION>
(In thousands) Lease
Fiscal Year Obligations
- ------------------------------------------------------------------------------------
<S> <C>
2001 $112,609
2002 102,226
2003 90,684
2004 75,958
2005 65,200
Later 360,521
- ------------------------------------------------------------------------------------
Total future minimum obligations $807,198
- ------------------------------------------------------------------------------------
</TABLE>
Total rent expense, net of sublease income, relating to all operating leases
with terms greater than one year was $61.5, $44.4 and $40.0 million in fiscal
2000, 1999 and 1998, respectively.
Future minimum receivables under operating leases and subleases in effect at
February 26, 2000 are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(In thousands) Owned Leased
Fiscal Year Property Property Total
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
2001 $ 2,489 $24,479 $26,968
2002 2,383 21,434 23,817
2003 2,314 18,899 21,213
2004 1,891 15,781 17,672
2005 1,684 11,537 13,221
Later 4,948 43,224 48,172
- -------------------------------------------------------------------------------------
Total future minimum receivables $15,709 $135,354 $151,063
- -------------------------------------------------------------------------------------
</TABLE>
Owned property under operating leases is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(In thousands) February 26, February 27,
2000 1999
- -------------------------------------------------------------------------------------
<S> <C> <C>
Land, buildings and equipment $ 37,240 $ 41,033
Less accumulated depreciation 19,238 12,678
- -------------------------------------------------------------------------------------
Net land, buildings and equipment $ 18,002 $ 28,355
- -------------------------------------------------------------------------------------
</TABLE>
F-16
<PAGE>
Direct financing leases:
Under direct financing capital leases, the company leases buildings on behalf of
independent retailers with terms ranging from 5 to 25 years. Future minimum
rentals to be received under direct financing leases and related future minimum
obligations under capital leases in effect at February 26, 2000 are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(In thousands) Direct Financing Capital Lease
Fiscal Year Lease Receivables Obligations
- ------------------------------------------------------------------------------------------
<S> <C> <C>
2001 $16,478 $15,286
2002 15,638 14,529
2003 14,634 13,607
2004 13,347 12,439
2005 12,126 11,425
Later 94,425 89,361
- ------------------------------------------------------------------------------------------
Total minimum lease payments 166,648 156,647
Less unearned income 66,710 -
Less interest - 59,624
- ------------------------------------------------------------------------------------------
Present value of net minimum lease payments 99,938 97,023
Less current portion 7,628 7,705
- ------------------------------------------------------------------------------------------
Long-term portion $92,310 $89,318
- ------------------------------------------------------------------------------------------
</TABLE>
INCOME TAXES
- ------------
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
(In thousands) 2000 1999 1998
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $187,788 $ 90,166 $109,550
State 38,245 18,528 22,161
Tax credits (479) (291) (368)
Deferred
Restructuring and other charges (31,678) 0 15,550
Other 10,637 16,520 7,130
- ----------------------------------------------------------------------------------
Total provision $204,513 $124,923 $154,023
- ----------------------------------------------------------------------------------
</TABLE>
F-17
<PAGE>
The difference between the actual tax provision and the tax provision computed
by applying the statutory Federal income tax rate to earnings before taxes is
attributable to the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(In thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal taxes based on
statutory rate $156,609 $110,691 $134,680
State income taxes, net of
federal benefit 19,196 13,568 16,508
Nondeductible goodwill 11,118 6,236 6,248
Asset sale basis difference 24,238 - -
Other (6,648) (5,572) (3,413)
- -------------------------------------------------------------------------------------
Total provision $204,513 $124,923 $154,023
- -------------------------------------------------------------------------------------
</TABLE>
Temporary differences which give rise to significant portions of the net
deferred tax asset (liability) as of February 26, 2000 and February 27, 1999 are
as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(In thousands) 2000 1999
- -------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Depreciation and amortization $ 51,268 $ 20,819
Restructuring and other charges 41,452 11,188
Net operating loss from acquired
subsidiaries 56,784 19,111
Provision for obligations to be settled
in future periods 169,359 126,809
Inventory 13,073 14,079
Other 14,719 10,224
- -------------------------------------------------------------------------------------
Total deferred tax assets 346,655 202,230
- -------------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation and amortization (121,458) (85,660)
Acquired assets adjustment to fair values (24,430) (55,518)
Accelerated tax deductions for benefits
to be paid in future periods (104,807) (65,698)
Other (43,408) (18,003)
- -------------------------------------------------------------------------------------
Total deferred tax liabilities (294,103) (224,879)
- -------------------------------------------------------------------------------------
Net deferred tax asset (liability) $ 52,552 $ (22,649)
- -------------------------------------------------------------------------------------
</TABLE>
The company acquired net operating loss (NOL) carryforwards of $166.7 million
for tax purposes which expire beginning in 2001 and continuing through 2018.
Temporary differences attributable to obligations consist primarily of accrued
postretirement benefits and vacation pay, and other expenses which are not
deductible for income tax purposes until paid. There was no valuation allowance
recorded in fiscal 2000 because it is more likely than not that all deferred tax
assets will be realized.
F-18
<PAGE>
SUPPLEMENTAL CASH FLOW INFORMATION
The company's non-cash investing and financing activities were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(In thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Leased asset additions
and related obligation $ 131,316 $ 106,027 $ 39,072
Acquisitions:
Fair value of assets acquired 1,951,004 196,591 28,114
Cash paid 481,861 166,731 23,570
Common stock issued 457,502 - -
- -------------------------------------------------------------------------------------
Liabilities assumed $1,011,641 $ 29,860 $ 4,544
- -------------------------------------------------------------------------------------
</TABLE>
Payments for interest and income taxes were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(In thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest (net of amount capitalized) $141,434 $127,505 $134,645
Income taxes 245,177 99,686 142,829
- -------------------------------------------------------------------------------------
</TABLE>
STOCK OPTION PLANS
The company's 1997 and 1993 stock option plans allow the granting of
non-qualified stock options and incentive stock options to key salaried
executive employees at prices not less than 100 percent of fair market value,
determined by averaging the open and close price on the date of grant. The
company's 1983 plan no longer allows granting of stock options, but outstanding
options remain to be exercised. In February 2000, and April 1998 and 1997, the
Board of Directors reserved an additional 3.0, 2.6 and 4.0 million shares,
respectively, to be issued for stock option plans. The plans provide that the
Board of Directors or the Executive Personnel and Compensation Committee of the
Board may determine at the time of granting whether each option granted will be
a non-qualified or incentive stock option under the Internal Revenue Code. The
term of each option will be determined by the Board of Directors or the
Committee, but shall not be for more than 10 years from the date of grant.
Options may be exercised in installments or otherwise, as the Board of Directors
or the Committee may determine. On August 31, 1999 the company acquired
Richfood, and in connection therewith assumed all outstanding options and shares
available for grant related to existing Richfood stock option plans, based on
the exchange factor set forth in the merger agreement.
F-19
<PAGE>
Changes in the options were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Shares Weighted Average
(In thousands) Price per Share
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, February 22, 1997 10,056 $14.46
Granted 2,796 17.52
Exercised (4,102) 14.00
Canceled and forfeited (372)
- ----------------------------------------------------------------------------------------------
Outstanding, February 28, 1998 8,378 15.67
Granted 2,377 23.74
Exercised (2,487) 14.98
Canceled and forfeited (352)
- ----------------------------------------------------------------------------------------------
Outstanding, February 27, 1999 7,916 18.26
Richfood acquisition 1,030 24.30
Granted 3,458 28.73
Exercised (562) 14.76
Canceled and forfeited (100)
- ----------------------------------------------------------------------------------------------
Outstanding, February 26, 2000 11,742 $22.01
- ----------------------------------------------------------------------------------------------
</TABLE>
The outstanding stock options at February 26, 2000 have exercise prices ranging
from $5.31 to $40.00 and a weighted average remaining contractual life of 6.7
years. Options to purchase 6.8 and 4.9 million shares were exercisable at
February 26, 2000, and February 27, 1999, respectively. These options have a
weighted average exercise price of $19.05 and $17.81, respectively. Option
shares available for grant were 4.9 and 3.0 million at February 26, 2000, and
February 27, 1999, respectively. The company has reserved 16.8 million shares,
in aggregate, for the plans.
As of February 26, 2000, limited stock appreciation rights have been granted and
are outstanding under the 1978 and 1989 Stock Appreciation Rights Plans, and the
1993 Stock Plan. Such rights relate to options granted to purchase 2.6 million
shares of common stock and are exercisable only upon a "change of control."
No compensation cost has been recognized for options issued under the Stock
Option Plans because the exercise price of all options granted was not less than
100 percent of fair market value of the common stock on the date of grant. Had
compensation cost for the stock options issued been determined based on the fair
value at the grant date, consistent with provisions of SFAS No. 123, "Accounting
for Stock Based Compensation," the Company's 2000, 1999 and 1998 net income and
earnings per share would have been changed to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 2000 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings
As reported $ 242,941 $ 191,338 $ 230,757
Pro forma 237,381 185,951 227,896
Earnings per share - diluted
As reported $1.87 $ 1.57 $1.82
Pro forma 1.82 1.52 1.80
</TABLE>
F-20
<PAGE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions and results:
<TABLE>
<CAPTION>
Assumptions 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend yield 2.00% 1.99% 2.69%
Risk free interest rate 6.57% 5.27% 5.62%
Expected life 5 years 4 years 5 years
Expected volatility 21.97% 19.33% 18.21%
Estimated fair value of options granted per share $ 6.20 $ 4.62 $ 3.39
</TABLE>
TREASURY STOCK PURCHASE PROGRAM
In August 1996, the Board of Directors authorized a treasury stock purchase
program under which the company is authorized to repurchase up to 10.0 million
shares for reissuance upon the exercise of employee stock options and for other
compensation programs utilizing the company's stock. In fiscal 1999, the company
repurchased 2.6 million shares at an average cost of $24.77 under the August
1996 program. In December 1999, the Board of Directors authorized a treasury
stock purchase program under which the company is authorized to purchase up to
$140.0 million of the company's common stock. In fiscal 2000, the company
repurchased .8 million shares at an average cost of $22.66 under the August 1996
program and 5.9 million shares at an average cost of $17.86 under the December
1999 program. Subsequent to year-end, the company completed the repurchase under
the December 1999 program with an additional 2.0 million shares for a total cost
of $140.0 million.
EARNINGS PER SHARE
The following table reflects the calculation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings per share - basic
Income available to common shareholders $242,941 $191,338 $230,757
Weighted average shares outstanding 129,162 120,376 125,326
Earnings per share - basic $1.88 $1.59 $1.84
Earnings per share - diluted
Income available to common shareholders $242,941 $191,338 $230,757
Weighted average shares outstanding 129,162 120,376 125,326
Dilutive impact of options outstanding 928 1,585 1,224
-------- -------- --------
Weighted average shares and potential dilutive
shares outstanding 130,090 121,961 126,550
Earnings per share - diluted $1.87 $1.57 $1.82
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
F-21
<PAGE>
COMMITMENTS AND CONTINGENCIES
The company has guaranteed mortgage loan and other debt obligations of $17.2
million. The company has also guaranteed the leases and fixture financing loans
of various affiliated retailers with a present value of $132.5 and $18.9
million, respectively. The company has provided limited recourse to purchasers
of notes receivable from affiliated retailers with outstanding note balances of
$71.4 and $76.3 million, at fiscal 2000 and 1999; $16.5 and $32.3 million of
which the company has contingent liability for at February 26, 2000 and February
27, 1999, respectively. The company has also entered into note repurchase
agreements with various lenders totaling $7.3 million under which certain events
require the company to repurchase collateralized loans.
The company is a party to various legal proceedings arising from the normal
course of business activities, none of which in management's opinion, is
expected to have a material adverse impact on the company's consolidated results
of operations or consolidated financial position.
RETIREMENT PLANS
Substantially all non-union employees of the company and its subsidiaries are
covered by various contributory and non-contributory pension or profit sharing
plans. The company also participates in several multi-employer plans providing
defined benefits to union employees under the provisions of collective
bargaining agreements.
Contributions under the defined contribution profit sharing plans are determined
at the discretion of the Board of Directors and were $1.5, $2.2 and $1.9 million
for fiscal 2000, 1999 and 1998, respectively.
Amounts charged to union pension expense were $39.3, $37.9 and $37.4 million for
fiscal 2000, 1999 and 1998, respectively.
Benefit calculations for the company's defined benefit pension plan are based on
years of service and the participants' highest compensation during five
consecutive years of employment. Annual payments to the pension trust fund are
determined in compliance with the Employee Retirement Income Security Act
(ERISA). Plan assets are held in trust and invested in separately managed
accounts and publicly traded mutual funds holding both equity and fixed income
securities.
In addition to providing pension benefits, the company provides certain health
care and life insurance benefits for retired employees. Employees become
eligible for these benefits upon meeting certain age and service requirements.
F-22
<PAGE>
The following tables set forth the change in benefit obligation and plan assets,
a reconciliation of the accrued benefit costs and total benefit cost for the
fiscal year for the company's defined benefit pension plans and other
postretirement plans:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
(In thousands) February 26, February 27, February 26, February 27,
2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at
beginning of year $ 321,693 $281,665 $ 74,315 $ 60,705
Acquisitions 56,700 -- --
Service cost 15,991 12,916 2,040 1,750
Interest cost 23,657 20,638 4,915 4,895
Actuarial loss (gain) (22,304) 18,595 (5,910) 10,574
Benefits paid (16,583) (12,121) (3,299) (3,609)
- --------------------------------------------------------------------------------------------------------------------
Benefit obligation
at end of year $ 379,154 $321,693 $ 72,061 $ 74,315
====================================================================================================================
CHANGE IN PLAN ASSETS
Fair value of plan assets at
beginning of year $ 284,767 $260,028 $ -- $ --
Acquisitions 81,300 -- -- --
Actual return on plan assets 33,484 26,829 -- --
Company contributions 9,406 10,031 3,299 3,609
Plan participants' contributions -- -- 2,319 1,829
Benefits paid (16,583) (12,121) (5,618) (5,438)
- --------------------------------------------------------------------------------------------------------------------
Fair value of plan assets
at end of year $ 392,374 $284,767 $ -- $ --
====================================================================================================================
RECONCILIATION OF (ACCRUED COST)
Funded status $ 13,220 $(36,926) $(72,061) $(74,315)
Accrued contribution 3,230 -- -- --
Unrecognized net loss 10,406 34,335 10,052 16,471
Unrecognized prior service cost (783) (971) (1,435) (1,697)
Unrecognized net obligation -- 95 -- --
- --------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost $ 26,073 $( 3,467) $(63,444) $(59,541)
====================================================================================================================
<CAPTION>
Pension Benefits Other Benefits
(in thousands) 2000 1999 1998 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
NET BENEFIT COSTS FOR THE FISCAL YEAR
Service cost $ 15,991 $ 12,916 $ 12,668 $2,040 $1,750 $1,850
Interest cost 23,657 20,638 19,545 4,915 4,895 4,182
Expected return on plan assets (31,928) (25,634) (23,020) -- -- --
Amortization of:
Unrecognized net loss 192 2 499 509 362 --
Unrecognized prior service cost (187) (72) 246 (262) (262) (262)
Unrecognized net obligation 63 152 172 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net benefit costs for the fiscal year $ 7,788 $ 8,002 $ 10,110 $7,202 $6,745 $5,770
=================================================================================================================================
</TABLE>
F-23
<PAGE>
For both the pension and the postretirement benefit calculations, the
weighted-average discount rate used was 7.75 percent and 6.85 percent for fiscal
2000 and 1999, respectively, the expected return on plan assets used was 10.0
percent for both fiscal 2000 and 1999, and the rate of compensation increase was
4.0 percent and 3.5 percent for fiscal 2000 and 1999, respectively.
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation for both fiscal 2000 and 1999 was 9 percent
decreasing to 6 percent by fiscal 2001. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example, a one
percent increase in the trend rate would increase the accumulated postretirement
benefit obligation by $8.4 and $8.7 million in fiscal 2000 and 1999,
respectively, and the net periodic cost by $1.0 and $0.9 million for fiscal 2000
and 1999, respectively. In contrast, a one percent decrease in the trend rate
would decrease the accumulated postretirement benefit obligation by $6.4 and
$6.6 million in fiscal 2000 and 1999 respectively, and the net periodic cost by
$0.8 and $0.7 million in fiscal 2000 and 1999, respectively.
The company also maintains non-contributory, unfunded pension plans to provide
certain employees with pension benefits in excess of limits imposed by federal
tax law. The projected benefit obligation of the unfunded plans was $19.0 and
$15.0 million at February 26, 2000 and February 27, 1999, respectively. The
accumulated benefit obligation of these plans totaled $15.2 and $11.9 million at
February 26, 2000 and February 27, 1999, respectively. Net periodic pension cost
was $3.5, $2.4, $2.3 million for 2000, 1999, and 1998, respectively.
INDUSTRY SEGMENT INFORMATION
In fiscal 2000, the company changed the way it reports its operating segments in
order to align its financial results with the strategic focus of the company.
The information for 1999 and 1998 has been restated from the prior years'
presentation in order to conform to the 2000 presentation. Retail food
operations include results of food stores owned and limited assortment stores
licensed by the company. Distribution segment results include sales to
affiliated food stores, mass merchants, and other logistics arrangements.
Identifiable assets and capital expenditures are those assets and expenditures
directly associated with the segments' physical locations.
Information concerning the company's continuing operations by business segment
for the years ended February 26, 2000, February 27, 1999 and February 28, 1998
is contained on page F-5.
SUBSEQUENT EVENT (UNAUDITED)
The company announced that the Board of Directors adopted a Shareholder Rights
Plan under which one preferred stock purchase right will be distributed for each
outstanding share of common stock on April 24, 2000. The rights, which expire on
April 12, 2010, are exercisable only under certain conditions, and may be
redeemed by the Board of Directors for $0.01 per right. The plan contains a
three-year independent director evaluation provision whereby a committee of the
company's independent directors will review the plan at least once every three
years. The rights become exercisable, with certain exceptions, after a person or
group acquires beneficial ownership of 15 percent or more of the outstanding
voting stock of the company.
F-24
<PAGE>
<TABLE>
<CAPTION>
Unaudited Quarterly Financial Information
Quarterly unaudited financial information for SUPERVALU INC. and subsidiaries is as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) Fiscal Year (52 Weeks) Ended February 26, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth Year
(16 wks) (12 wks) (12 wks) (12 wks) (52 wks)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $5,289,720 $4,145,775 $5,361,732 $5,541,852 $20,339,079
Gross profit 542,823 448,186 581,706 655,068 2,227,783
Net earnings 66,721 45,482 58,654 72,084 242,941
Net earnings per common share-diluted .55 .37 .42 .52 1.87
Dividends declared per common share .1325 .1350 .1350 .1350 .5375
Weighted average shares-diluted 120,769 123,682 140,469 138,545 130,090
====================================================================================================================================
Fiscal Year (52 Weeks) Ended February 27, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth Year
(16 wks) (12 wks) (12 wks) (12 wks) (52 wks)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $5,202,576 $3,937,318 $4,079,696 $4,200,917 $17,420,507
Gross profit 518,821 402,767 413,763 465,029 1,800,380
Net earnings 51,798 39,900 45,260 54,380 191,338
Net earnings per common share-diluted .42 .33 .37 .45 1.57
Dividends declared per common share .1300 .1325 .1325 .1325 .5275
Weighted average shares-diluted 122,144 122,178 121,861 121,602 121,961
====================================================================================================================================
</TABLE>
Note: Results for Fiscal 2000 include a net gain of $10.9 million or $.08 per
share-diluted from the gain on the sale of Hazelwood Farms Bakeries and
from restructuring and other charges.
F-25
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
SUPERVALU INC:
Under date of April 4, 2000, we reported on the consolidated balance sheets of
SUPERVALU INC. and subsidiaries as of February 26, 2000, and February 27, 1999,
and the related consolidated statements of earnings, stockholders' equity, and
cash flows for the fiscal years then ended, which are included in the annual
report on Form 10-K for the 2000 fiscal year. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related consolidated financial statement schedule as listed in the accompanying
index. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
/s/ KPMG LLP
Minneapolis, Minnesota
April 4, 2000
F-26
<PAGE>
INDEPENDENT AUDITORS' REPORT
SUPERVALU INC.
Board of Directors and Stockholders
Eden Prairie, Minnesota
We have audited the consolidated financial statements of SUPERVALU INC. (the
Company) and subsidiaries for the year in the period ended February 28, 1998 and
have issued our report thereon dated April 6, 1998 (April 24, 2000 as to
Industry Segment Information). Such financial statements and report are included
in your 2000 Annual Report on Form 10-K. Our audits also included the financial
statement schedule of SUPERVALU INC. and subsidiaries, listed in Item 14. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule for the year ended February 28, 1998, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
April 6, 1998
F-27
<PAGE>
SUPERVALU INC. and Subsidiaries
SCHEDULE II - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
--------------------------------- --------------- ------------- ------------ --------------
Balance at Balance at
beginning end
Description of year Additions Deductions of year
--------------------------------- --------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended:
February 26, 2000 $18,983,000 17,380,000 (A) 5,964,000 (B) $30,399,000
February 27, 1999 13,415,000 10,150,000 4,582,000 (B) 18,983,000
February 28, 1998 17,806,000 5,791,000 10,182,000 (B) 13,415,000
</TABLE>
(A) Includes $7.5 million for accounts of companies acquired.
(B) Balance consists of accounts determined to be uncollectible and charged
against reserves, net of collection on accounts previously charged off.
F-28
<PAGE>
EXHIBIT INDEX
-------------
SUPERVALU INC.
ANNUAL REPORT ON FORM 10-K
EXHIBIT NUMBER EXHIBIT
-------------- -------
*3.1. Restated Certificate of Incorporation.
*3.2. Restated Bylaws, as amended.
*4.1. Indenture dated as of July 1, 1987 between the Registrant and
Bankers Trust Company, as Trustee, relating to certain
outstanding debt securities of the Registrant.
*4.2. First Supplemental Indenture dated as of August 1, 1990
between the Registrant and Bankers Trust Company, as Trustee,
to Indenture dated as of July 1, 1987 between the Registrant
and Bankers Trust Company, as Trustee.
*4.3. Second Supplemental Indenture dated as of October 1, 1992
between the Registrant and Bankers Trust Company, as Trustee,
to Indenture dated as of July 1, 1987 between the Registrant
and Bankers Trust Company, as Trustee.
*4.4. Third Supplemental Indenture dated as of September 1, 1995
between the Registrant and Bankers Trust Company, as Trustee,
to Indenture dated as of July 1, 1987 between the Registrant
and Bankers Trust Company, as Trustee.
*4.5. Fourth Supplemental Indenture dated as of August 4, 1999
between the Registrant and Bankers Trust Company, as Trustee,
to Indenture dated as of July 1, 1987 between the Registrant
and Bankers Trust Company, as Trustee.
*4.6. Fifth Supplemental Indenture dated as of September 1, 1999
between the Registrant and Bankers Trust Company, as Trustee,
to Indenture dated as of July 1, 1987 between the Registrant
and Bankers Trust Company, as Trustee.
*4.7. Letter of Representations dated November 12, 1992 between the
Registrant, Bankers Trust Company, as Trustee, and The
Depository Trust Company relating to certain outstanding debt
securities of the Registrant.
*4.8. Credit Agreement dated as of October 8, 1997 among the
Registrant, the Lenders named therein and Bankers Trust
Company, as Agent.
*4.9 Letter Amendment dated as of August 20, 1999 to the Credit
Agreement dated as of October 8, 1997 among the Registrant,
the Lenders named therein and Bankers Trust Company, as Agent.
*4.10. Rights Agreement between the Registrant and Norwest Bank
Minnesota, N.A., as Rights Agent, dated as of April 12, 2000,
including as Exhibit B the forms of Rights Certificate and
Election to Exercise.
*10.1. SUPERVALU INC. 1993 Stock Plan, as amended.
*10.2. SUPERVALU INC. 1978 Stock Appreciation Rights Plan, as
amended.
i
<PAGE>
*10.3. SUPERVALU INC. Executive Incentive Bonus Plan.
*10.4. SUPERVALU INC. Directors Deferred Compensation Plan for Non-
Employee Directors, as amended.
*10.5. SUPERVALU INC. 1983 Employee Stock Option Plan, as amended.
*10.6. SUPERVALU INC. 1989 Stock Appreciation Rights Plan.
10.7. SUPERVALU INC. ERISA Excess Plan Restatement, as amended.
*10.8. SUPERVALU INC. Deferred Compensation Plan.
*10.9. SUPERVALU INC. Executive Deferred Compensation Plan as amended
and Executive Deferred Compensation Plan II.
*10.10. Amendments to the SUPERVALU INC. Deferred Compensation Plan
and the SUPERVALU INC. Executive Deferred Compensation Plan
II.
*10.11. Form of Agreement used in connection with Registrant's
Executive Post-Retirement Survivor Benefit Program.
*10.12. Form of Change of Control Severance Agreements entered into
with certain officers of the Registrant.
*10.13. Amended and Restated SUPERVALU INC. Grantor Trust dated as of
August 3, 1998.
*10.14. SUPERVALU INC. Directors Retirement Program, as amended.
*10.15. SUPERVALU INC. Non-Qualified Supplemental Executive Retirement
Plan.
*10.16. First Amendment to SUPERVALU INC. Non-Qualified Supplemental
Executive Retirement Plan.
*10.17. Second Amendment to SUPERVALU INC. Non-Qualified Supplemental
Executive Retirement Plan.
*10.18. Third Amendment to SUPERVALU INC. Non-Qualified Supplemental
Executive Retirement Plan.
*10.19. SUPERVALU INC. Long-Term Incentive Plan, as amended.
*10.20. SUPERVALU INC. Bonus Plan for Designated Corporate Officers.
10.21. SUPERVALU INC. Non-Employee Directors Deferred Stock Plan, as
amended.
10.22. SUPERVALU INC. 1997 Stock Plan, as amended.
*10.23. Supplemental Retirement Agreement for William J. Bolton.
10.24. Split Dollar Life Insurance Agreement for Michael W. Wright
and Collateral Assignment of Policy.
ii
<PAGE>
10.25. SUPERVALU/Richfood Stock Incentive Plan.
12.1. Ratio of Earnings to Fixed Charges.
*16.1. Letter from Deloitte & Touche LLP to the Securities and
Exchange Commission dated May 8, 1998.
21.1. Subsidiaries of the Registrant.
23.1. Consent of KPMG LLP.
23.2. Consent of Deloitte & Touche LLP.
24.1. Power of Attorney.
27.1. Financial Data Schedules.
99.1 Cautionary Statements Pursuant to the Securities Litigation
Reform Act.
_________________
* Incorporated by Reference
iii
<PAGE>
EXHIBIT 10.7
Working Copy
SUPER VALU STORES, INC.
EXCESS BENEFITS PLAN
(1989 Restatement)
First Effective February 24, 1985
As Amended and Restated Effective February 28, 1987
And
As Amended and Restated Effective February 26, 1989
AND
As Amended By
The FIRST AMENDMENT Adopted and Effective June 30, 1998
Note: Material added or modified by the First Amendment is shown in italics.
Modified section numbers are not generally shown in italics.
- --------------------------------------------------------------------------------
This Working Copy has been compiled from the original Plan documents and
amendments for the convenience of those charged with administration of the Plan.
This Working Copy has not been approved, ratified or executed by the company,
its board, its officers or any committee. This Working Copy is not, therefore,
an official legal document under which the Plan is maintained. Certain
questions, particularly questions relating to the effectiveness of amendments,
can only be resolved by referring to the original Plan documents and amendments.
<PAGE>
SUPER VALU STORES, INC.
EXCESS BENEFITS PLAN
(1989 Restatement)
WHEREAS, This corporation and certain subsidiaries of this corporation have
heretofore adopted and currently maintain a defined benefit pension plan known
as the Super Valu Stores, Inc. Retirement Plan (hereinafter the "Retirement
Plan") and several defined contribution profit sharing plans (hereinafter
collectively the "Profit Sharing Plans") for the purpose of developing
retirement benefits for employees; and
WHEREAS, The Retirement Plan and the Profit Sharing Plans are subject to
the Employee Retirement Income Security Act of 1974, as amended (hereinafter
"ERISA") and they are intended to qualify under section 401(a) of the Internal
Revenue Code of 1954, as amended (hereinafter the "Code"); and
WHEREAS, By operation of section 401(a) of the Code, benefits which may
be paid under the Retirement Plan and allocations which may be made under the
Profit Sharing Plans are restricted so that they do not exceed certain maximum
limitations established under section 415 of the Code; and
WHEREAS, For benefits accruing under the Retirement Plan and Profit Sharing
Plans during plan years beginning after December 31, 1988, the maximum amount of
annual compensation which may be taken into account for any employee may not
exceed a fixed dollar amount which is established under section 401(a)(17) of
the Code; and
WHEREAS, Changes in the Retirement Plan accrued benefit formula were
required to be made effective February 26, 1989, to keep the Retirement Plan in
compliance with section 401(1) of the Code and these changes had the effect of
reducing the expected benefits which certain employees might have expected to
realize if the Retirement Plan formulas had not been changed; and
WHEREAS, ERISA authorizes the establishment of an unfunded, nonqualified
plan of deferred compensation maintained by an employer solely for the purpose
of providing benefits for employees which are in excess of the limitations on
benefits and allocations imposed on qualified plans by section 415 of the Code;
and
WHEREAS, ERISA also authorizes the establishment of an unfunded,
nonqualified plan maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees;
and
WHEREAS, Effective February 24, 1985, this corporation did establish a
nonqualified plan known as the "Super Valu Stores, Inc. Excess Benefit Plan" and
did amend and
<PAGE>
restate the same effective February 28, 1987, in a document known as the "Super
Valu Stores, Inc. Excess Benefit Plan (1987 Restatement)"; and
WHEREAS, It is in the interest of this corporation to provide the full
benefits promised to certain employees under the Retirement Plan and to make the
full allocations for certain employees under the Profit Sharing Plans without
regard to the limitations on benefits and allocations imposed by section 415 of
the Code and without regard to the compensation limitation imposed by section
401 (a)(1 7) of the Code and that an unfunded nonqualified deferred compensation
plan be maintained for this and other purposes; -
NOW THEREFORE, This corporation does hereby amend and restate the
previously established "Super Valu Stores, Inc. Excess Benefit Plan (1987
Restatement)" and amend it to incorporate features of an unfunded, nonqualified
deferred compensation plan, the terms and conditions of which are as follows:
1. Plan Name. This plan shall be referred to as the SUPER VALU STORES, INC.
EXCESS BENEFITS PLAN (1989 Restatement) (hereinafter the "Plan").
2. Participating Employees.
2.1. General Rules. The individuals eligible to participate in and receive
benefits under the Plan are those of Super Valu Stores, Inc. and its
subsidiaries who, on or after February 24, 1985:
(i) are participating employees in the Retirement Plan or a Profit Sharing
Plan, or both; and
(ii) are actively employed by Super Valu Stores, Inc. or one of its
subsidiaries; and
(iii) are affirmatively selected for participation in this Plan by the
Compensation Committee of the Board of Directors.
2.2. Specific Exclusions. Notwithstanding anything apparently to the
contrary in this Plan or in any written communication, summary, resolution or
document or oral communication, no individual shall be a participating employee
in this Plan, develop benefits under this Plan or be entitled to receive
benefits under tl-~s Plan (either for himself or his survivors) unless such
individual is a member of a select group of management or highly compensated
employees (as that expression is used in ERISA). If a court of competent
jurisdiction, any representative of the U.S. Department of Labor or any other
governmental, regulatory or similar body makes any direct or indirect, formal or
informal, determination that an individual is not a member of a select group of
management or highly compensated employees (as that expression is used in
ERISA), such individual shall not be (and shall not have ever been) a
participating employee in this Plan at any time. If any person not so defined
has been erroneously treated as a participating employee in this Plan, upon
discovery of such error such person's erroneous participation shall immediately
terminate ab initio and upon demand
-2-
<PAGE>
such person shall be obligated to reimburse Super Valu Stores, Inc. for all
amounts erroneously paid to him or her.
3. Benefit for Retirement Plan Participating Employees.
3.1. General Amount. Except to the extent provided otherwise in Section
3.5, this Plan shall pay to participating employees the excess, if any, of
(i) the amount that would have been payable under the Retirement Plan if
such benefit had been determined without regard to the benefit
limitations under section 415 of the Code and without regard to the
compensation limitation of section 401(a)(17) of the Code, over
(ii) the amount actually paid from the Retirement Plan.
3.2. Form. Except as provided in paragraph 6 below, this benefit (minus the
withholding and payroll taxes which must be deducted therefrom) shall be paid to
the participating employee directly from the general assets Super Valu Stores,
Inc. in such one of the following Actuarially Equivalent forms as the
participating employee shall have elected in writing not later than October 1,
1990:
(i) a single lump sum;
(ii) a series of five (5) equal annual installments;
(iii) a series of ten (10) equal annual installments;
(iv) a single life annuity (also known as a Basic Pension);
(v) a joint and 50% to surviving spouse annuity;
(vi) a joint and 67% to surviving spouse annuity; or
(vii) a joint and 100% to surviving spouse annuity.
Actuarially Equivalent value shall be determined by reference to the rules and
factors in effect under the Retirement Plan at the time the benefit is first
payable. Benefits payable to a surviving spouse shall be paid only to the
person, if any, who was the participating employee's surviving spouse at the
time of the Termination of Employment. If there is no such surviving spouse at
such time, all elections of forms paying benefits to a surviving spouse shall be
deemed to be elections of a single life annuity (or Basic Pension) form. Amounts
payable to the participating
-3-
<PAGE>
or installment form which are not paid at the participating employee's death
shall be paid to the participating employee's estate.
3.3. Time. The payment shall be made (in the case of a single lump sum) or
commenced (in the case of installments or an annuity) at whichever of the
following dates as the participating employee shall have elected in writing
delivered to the Committee not later than October 1, 1990:
(i) within thirty (30) days after the participating employee shall have
had a Termination of Employment;
(ii) during the March following the date the participating employee shall
have had a Termination of Employment;
(iii) during the March following the date the participating employee shall
have attained age sixty-two (62) years or had a Termination of
Employment, if later;
(iv) during the March following the date the participating employee shall
have attained age sixty-five (65) years or had a Termination of
Employment, if later.
3.4. Default. If for any reason a participating employee shall have failed
to make a timely written designation of form and time for distribution
(including reasons beyond the control of the participating employee), the
distribution shall be made in a single lump sum during the March fol.lowing the
date the participating employee shall have had a Termination of Employment. If
the Participant shall have not filed an application for a benefit within five
(5) years after his Normal Retirement Date (or his Termination of Employment, if
later), such benefit shall be permanently and irrevocably forfeited.
3.5. Special Benefit. In lieu of all benefits described in Section 3.1 and
Section 5 there shall be paid to (and with respect to) participating employees
who:
(i) were born before March 1, 1952; and
(ii) have not less than fifteen (15) years of Credited Service with Super
Valu Stores, Inc. and its subsidiaries under the Retirement Plan at
termination of employment; and
(iii) are "highly compensated employees" as defined in Code section 414(q)
at the time of their termination of employment; and
(iv) were actively employed by Super Valu Stores, Inc. and participating
in the Retirement Plan on February 26, 1989,
only the benefits, if any, described in the separate nonqualified plan document
titled as the SUPER VALU STORES, INC. NONQUALIF~IED SUPPLEMENTAL EXECUTWE
RETIREMENT PLAN.
-4-
<PAGE>
Notwithstanding anything apparently to the contrary such persons shall not be
entitled to participate in or develop benefits under or receive benefits from
this Plan.
4. Benefit For Profit Sharing Plan Participating Employees. This Plan shall
provide for participating employees as defined in Section 2.1, the excess, if
any, of:
(i) the amount which would have been allocated for the participating
employee under the Profit Sharing Plans if such allocation had been
determined without regard to the allocation limitations under section
415 of the Code and- without regard to the compensation limitatiorvof
section 401(a)(17) of the Code, over
(ii) the amount actually allocated for the participating employee under the
Profit Sharing ZD Plans after taking into account the allocation
limitations under section 415 of the Code and the compensation
limitation of section 401(a)(17) of the Code.
This benefit shall be credited to an account for the participating employee
under the Super Valu Stores, Inc. Deferred Compensation Plan at the same time as
the contribution would have been made for the participating employee if it had
been made under the Profit Sharing Plan. Provided, however, if the participating
employee is not fully (100%) vested under the Profit Sharing Plan at that time
of contribution, the contribution shall not be credited under Super Valu Stores,
Inc. Deferred Contribution Plan until such time as the participating employee is
fully (100%) vested under the Profit Sharing Plan. All matters concerning
distribution of this benefit from the Super Valu Stores, Inc. Deferred
Compensation Plan to the participating employee or survivors of the
participating employee shall be governed under the terms and provisions of the
Super Valu Stores, Inc. Deferred Compensation Plan including that plan's accrual
of interest provisions (and not this document or the Profit Sharing Plans'
documents).
5. Benefit to Retirement Plan Beneficiaries.
5.1. Amount. There shall be paid under this Plan and to the surviving
spouse or other joint or contingent annuitant or beneficiary of a participating
employee as defined in Section 2.1 (subject to the exclusion in Section 3.5),
the excess, if any, of.
(i) the amount which would have been payable under the Retirement Plan if
such benefit had been determined without regard to the benefit
limitations of section 415 of the Code and without regard to the
compensation limitation of section 401(a)(17) of the Code, over
(ii) the amount actually paid from the Retirement Plan.
5.2. Form. Except as provided in paragraph 6 below, this benefit (minus the
withholding and payroll taxes which must be deducted therefrom) shall be paid to
such person directly from the general assets of Super Valu Stores, Inc. in such
one of the following Actuarially Equivalent forms
-5-
<PAGE>
as the participating employee shall have elected in writing delivered to the
Committee not later than October 1, 1990:
(i) a single lump sum;
(ii) a series of five (5) annual installments;
(iii) a series of ten (10) annual installments;
(iv) a single life annuity (for, the life of the joint annuitant only).
Actuarially Equivalent value shall be deten-nined by reference to the rules and
factors in effect under the Retirement Plan at the time the benefit is first
payable. Benefits payable to a surviving spouse shall be paid only to the
person, if any, who was the participating employee's surviving spouse at the
time of the Termination of Employment. If there is no such surviving spouse at
such Termination of Employment, all elections of forms paying benefits to a
surviving spouse shall be deemed to be elections of a single life annuity (or
Basic Pension) form. Benefits payable in a lump sum or installment form that
have not been paid at the death of the Beneficiary shall be payable to the
Beneficiary's estate.
5.3. Time. The payment shall be made (in the case of a single lump sum) or
commenced (in the case of installments or an annuity) at whichever of the
following dates as the participating employee shall have elected in writing
delivered to the Committee not later than October 1, 1990:
(i) within thirty (30) days after the participating employee shall have
died;
(ii) during the March following the date the participating employee shall
have died;
(iii) during the March following the date the participating employee shall
have attained age sixty-two (62) years or died if later;
(iv) during the March following the date the participating employee shall
have attained age sixty-five (65) years or died if later.
5.4. Default. If for any reason a participating employee shall have failed
to make such a timely written designation of form and time for distribution
(including reasons beyond the control of the participating employee), the
distribution shall be made in a single lump sum during the March following the
date the participating employee shall have died. No spouse, former spouse,
designated Joint Annuitant or Beneficiary shall have any right to participate in
the Participant's selection of the time or the form of benefit or the
designation of a Joint Annuitant or Beneficiary or the changing of the same. If
the Participant shall have not filed an application for a benefit within five
(5) years after his Normal Retirement Date (or his Termination of Employment, if
later), such benefit shall be permanently and irrevocably forfeited.
-6-
<PAGE>
6. Commutation of Retirement Plan Excess Benefits. At the election of the
Compensation Conunittee of the Board of Directors of Super Valu Stores, Inc. (or
its authorized agent), and for the purpose of minimizing employer payroll or
other taxes due on benefits payable under this Plan with respect to the
Retirement Plan, the Compensation Committee may commute the value of benefits
payable to or with respect to participating employee at the time of the
retirement, quit, discharge, death or other termination of employment of the
participating employee. The commuted single sum of the value so determined shall
be calculated by reference to the interest and mortality factors then in effect
under the Retirement Plan with respect to which the commuted benefits are paid.
The commuted single sum value shall then be -transferred to the Super Valu
Stores, Inc. Deferred Compensation Plan as of the date of commutation for
payment in accordance with the terms of that plan. If the Compensation
Corrunittee elects to commute Retirement Plan benefits payable to or with
respect to a participating employee, the Compensation Committee shall cause the
participating employee or other person to whom such benefits are payable to be
immediately notified in writing of that commutation.
7. Funding. All benefits payable under this Plan shall be paid exclusively from
the general assets of Super Valu Stores, Inc. and no fund or trust shall be
established apart from the general assets of such corporation for this purpose
nor shall any assets or property be segregated or set apart from such
corporation's general assets for the purposes of funding this Plan.
8. General Matters. This Plan shall not alter, enlarge or diminish any person's
employment rights or obligations or rights or obligations under a Retirement
Plan or a Profit Sharing Plan. The Compensation Committee of the Board of
Directors of Super Valu Stores, Inc. may amend this Plan prospectively,
retroactively, or both, at any time and for any reason deemed sufficient by it
without notice to any person affected by this Plan and may likewise terminate
or curtail the benefits of this Plan both with regard to persons expecting to
receive benefits hereunder in the future and persons already receiving benefits
at the time of such action. Super Valu Stores, Inc. shall be the Plan
Administrator of this Plan.
9. Forfeiture of Benefits. All unpaid benefits under this Plan, including
without limiting the generality of the foregoing, undistributed accruals
attributable to this Plan which are developed under the Super Valu Stores, Inc.
Deferred Compensation Plan, shall be forfeited upon the determination by the
Compensation Committee of the Board of Directors of Super Valu Stores, Inc. that
the participating employee, either before or after termination of employment:
(i) has engaged in a felonious, fraudulent or other activity resulting in
harm to Super Valu Stores, Inc. or a subsidiary;
(ii) has divulged to a competitor any confidential information, or trade
information, or 0 trade secrets of Super Valu Stores, Inc. or a
subsidiary; or
(iii) has provided Super Valu Stores, Inc. or a subsidiary with materially
false reports concerning his business interests or employment; or
-7-
<PAGE>
(iv) has made materially false representations which are relied upon by
Super Valu Stores, Inc. or a subsidiary in furnishing information to
shareholders, stock exchange or the Securities and Exchange
Commission; or
(v) has maintained an undisclosed, unauthorized and material conflict of
interest in the discharge of the duties owed by the participating
employee to Super Valu Stores, Inc. or a subsidiary; or
(vi) has engaged in conduct causing a serious violation of state or
federal law by Super Valu Stores, Inc. or a subsidiary; or
(vii) has engaged in the theft of assets or funds of Super Valu Stores,
Inc. or a subsidiary; or
(viii) has engaged in fraud or dishonesty toward Super Valu Stores, Inc. or
a subsidiary which is admitted or judicially proven; or
(ix) has been convicted of any crime which directly or indirectly arose
out of his employment relationship with Super Valu Stores, Inc. or a
subsidiary or materially affected his ability to discharge the duties
of his employment with Super Valu Stores, Inc. or a subsidiary; or
(x) has during his employment or for a period of two years after the
termination of his employment engaged in any employment or
self-employment with a competitor of Super Valu Stores, Inc. or a
subsidiary within the geographical area which is then served by Super
Valu Stores, Inc. or the subsidiary.
10. Claims Procedure. An application for benefits under Section 3, 4, 5 or 6
shall be considered as a claim for the purposes of this section.
10.1. Original Claim. Any employee, former employee, joint annuitant or
beneficiary of such employee or former employee may, if he so desires, file with
the Compensation Committee of the Board of Directors of Super Valu Stores, Inc.
a written claim for benefits under the Plan. Within ninety (90) days after the
filing of such a claim, the Compensation Committee shall notify the claimant in
writing whether his claim is upheld or denied in whole or in part or shall
furnish the claimant a written notice describing specific special circumstances
requiring a specified amount of additional time (but not more than one hundred
eighty days from the date the claim was filed) to reach a decision on the claim.
If the claim is denied in whole or in part, the Compensation Committee shall
state in writing:
(a) the specific reasons for the denial;
-8-
<PAGE>
(b) the specific references to the pertinent provisions of this Plan
Statement on which the denial is based;
(c) a description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(d) an explanation of the claims review procedure set forth in this
section.
10.2. Claims Review Procedure. Within sixty (60) days after receipt of
notice that his claim has been denied in whole or in part, the claimant may file
with the Compensation Conunittee a written request for a review and may, in
conjunction therewith, submit written issues and comments. Within sixty (60)
days after the filing of such a request for review, the Compensation Committee
shall notify the claimant in writing whether, upon review, the claim was upheld
or denied in whole or in part or shall furnish the claimant a written notice
describing specific special circumstances requiring a specified amount of
additional time (but not more than one hundred twenty days from the date the
request for review was filed) to reach a decision on the request for review.
10.3. General Rules.
(a) No inquiry or question shall be deemed to be a claim or a request for
a review of a denied claim unless made in accordance with the claims
procedure. The Compensation Committee may require that any claim for
benefits and any request for a review of a denied claim be filed on
forms to be furnished by the Compensation Committee upon request.
(b) All decisions on claims and on requests for a review of denied claims
shall be made by the Compensation Committee.
(c) The Compensation Committee may, in its discretion, hold one or more
hearings on a claim or a request for a review of a denied claim.
(d) Claimants may be represented by a lawyer or other representative (at
their own expense), but the Compensation Committee reserves the right
to require the claimant to furnish written authorization. A claimant's
representative shall be entitled to copies of all notices given to the
claimant.
(e) The decision of the Compensation Committee on a claim and on a request
for a review of a denied claim shall be served on the claimant in
writing. If a decision or notice is not received by a claimant within
the time specified, the claim or request for a review of a denied
claim shall be deemed to have been denied.
-9-
<PAGE>
(f) Prior to filing a claim or a request for a review of a denied claim,
the claimant or his representative shall have a reasonable opportunity
to review a copy of this Plan Statement and all other pertinent
documents in the possession of the Employer and the Compensation
Committee.
11. Construction. This Plan is adopted with the understanding that it is in part
an unfunded excess benefit plan within the meaning of Section 3(36) ERISA and is
in part an unfunded plan maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees as provided in sections 201(2), 301(3) and 401(a)(1) of ERISA. Each
provision hereof shall.be interpreted and administered accordingly.
Unless a contrary intention is clearly expressed herein, terms defined in
the Retirement Plan and used in this Plan shall have the meanings assigned in
the Retirement Plan insofar as this Plan is developing benefits by reference to
the Retirement Plan. Unless a contrary intention is clearly expressed herein,
terms defined in a Profit Sharing Plan and used in this Plan shall have the
meanings assigned in the Profit Sharing Plan insofar as this Plan is developing
benefits by reference to such Profit Sharing Plan.
It is specifically contemplated that the Retirement Plan and the Profit
Sharing Plans will, from time to time, be amended and possibly terminated. All
such amendments and ten-ninations shall be given effect under this Plan (it
being expressly intended that this Plan shall not freeze or lock in the benefit
structures of such plans as they exist at the adoption of this Plan or upon the
commencement of participation by any participating employee).
This Plan is adopted in the State of Nfinnesota and shall be construed and
enforced according to the laws of that State to the extent such laws are not
preempted by federal law.
This Plan will not provide any excess benefits with respect to any stock
bonus plan, employee stock ownership plan or PAYSOP. This Plan shall be
construed to prevent the duplication of benefits provided under any other plan
or arrangement, whether qualified or nonqualified, funded or unfunded, to the
extent that such other benefits are provided directly or indirectly by the
Employer.
================================================================================
First Amendment-Effective June 30, 1998
12. Change in Control.
12.1. Special Definitions. A "Change of Control" shall be deemed to have
occurred upon any of thefollowing events:
(i) the acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the
-10-
<PAGE>
================================================================================
"Exchange Act")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either (A)
the then outstanding shares of common stock of the Company or (B) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors;
provided, however, thatfor purposes of this subsection (i), the
following acquisitions shall not constitute a Change of Control, (A)
any acquisition directly from the Company or (B) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained
by the Company of any corporation controlled by the Company; or
(ii) the consummation of any merger or other business combination of the
Company, sale or lease of the Company's assets or combination of
the foregoing transactions (the "Transactions") other than a
Transaction immediately following which the shareholders of the
Company and any trustee orfiduciary of any Company employee benefit
plan immediately prior to the Transaction own at least 60% of the
voting power, directly or indirectly, of (A) the surviving corporation
in any such merger or other business combination; (B) the purchaser or
lessee of the Company's assets; or (C) both the surviving corporation
and the purchaser or lessee in the event of any combination of
Transactions; or
(iii) within any 24 month period, the persons who were directors
immediately before the beginning of such period (the "Incumbent
Directors ") shall cease (for any reason other than death) to
constitute at least a majority of the Board or the board of directors
of a successor to the Company. For this purpose, any director who was
not a director at the beginning of such period shall be deemed to be
an Incumbent Director if such director was elected to the Board by, or
on the recommendation of or with the approval of, at least
three-fourths of the directors who then qualified as Incumbent
Directors (so long as such director was not nominated by a person who
has expressed an intent to effect a Change of Control or engage in a
proxy or other control contest); or
(iv) such other event or transaction as the Board shall determine
constitutes a Change in Control.
12.2. Amendment. Notwithstanding any other provision of the Plan, during
thefive (5) years following a change in control, the provisions of the Plan may
not be amended if any amendment would adversely affect the rights, expectancies
or benefits provided by the Plan (as in effect immediately prior to the change
in control), of any Participant, Beneficiary or other person entitled to
payments under the Plan.
================================================================================
-11-
<PAGE>
Exhibit 10.21
SUPERVALU INC.
NON-EMPLOYEE DIRECTORS DEFERRED STOCK PLAN
1. Purpose. The purpose of the SUPERVALU INC. Non-Employee Directors
-------
Deferred Stock Plan (the "Plan") is to further strengthen the alignment of
interests between members of the Board of Directors (the "Board") of SUPERVALU
INC. (the "Company") who are not employees of the Company (the "Participants")
and the Company's stockholders through the increased ownership by Participants
of shares of the Company's common stock, par value $1.00 per share ("Common
Stock"). This will be accomplished by (i) providing to Participants deferred
compensation in the form of the right to receive shares of Common Stock for
services rendered in their capacity as directors, and (ii) allowing Participants
to elect voluntarily to defer all or a portion of their fees for services as
members of the Board pursuant to the Plan in exchange for the right to receive
shares of Common Stock valued at 110% of the cash fees otherwise payable.
2. Eligibility. Each member of the Board of Directors of the Company who
-----------
is not an employee of the Company or of any subsidiary of the Company shall be
eligible to participate in the Plan.
3. Formula Share Award. Effective on July 1, or the first business day
-------------------
thereafter in each year (the "Award Date"), the Company shall award each
Participant who shall continue to serve on the Board following the Award Date,
as a credit to the Participant's account under the Plan (the "Deferred Stock
Account"), that number of shares (rounded to the nearest one-hundredth share) of
Common Stock, having an aggregate fair market value on the Award Date of Fifteen
Thousand Dollars ($20,000) (the "Award"). The Award shall be in addition to any
cash retainer, stock options, or other remuneration received by the Participant
for services rendered as a director. If, after receiving an Award, the
Participant shall cease to serve on the Board prior to the Company's next annual
meeting, for any reason other than death or permanent disability, then such
Participant's Deferred Stock Account shall be reduced by (i) that number of
shares equal to 1/12 of the Award for each full calendar month during which the
Participant did not serve as a director of the Company, plus (ii) any dividends
paid on that number of shares of Common Stock specified in (i) above during the
period that the Participant did not serve as a director of the Company.
4. Election to Defer Cash Compensation. A Participant may elect to
-----------------------------------
defer, in the form of a credit to the Participant's Deferred Stock Account all
or a portion of the annual cash retainer, meeting fees for attendance at
meetings of the Board and its committees, committee chairperson retainers, and
any other fees and retainers ("Compensation") otherwise payable to the director
in cash during the period following the effective date of the deferral election.
Such deferral election shall be made pursuant to Section 5.
5. Manner of Making Deferral Election. A Participant may elect to
----------------------------------
defer Compensation pursuant to the Plan by filing, no later than December 31 of
each year (or by such other date as the Committee shall determine), an
irrevocable election with the Corporate Secretary on a form provided for that
purpose ("Deferral Election"). The Deferral Election shall be effective with
respect to Compensation payable on or after July 1 of the following year unless
the Participant shall revoke or change the election by means of a subsequent
Deferral Election in writing that takes effect on the date specified therein but
in no event earlier than six (6) months (or such other period as the Committee,
as defined in Section 17, shall determine) after the subsequent Deferral
Election is received by the Company. The Deferral Election form shall specify
an amount to be deferred expressed as a dollar amount or as a percentage of the
Participant's Compensation otherwise payable in cash for the director's
services.
6. Credits to Deferred Stock Account for Elective Deferrals. On the
--------------------------------------------------------
first day of each calendar quarter (the "Credit Date"), a Participant shall
receive a credit to his or her Deferred Stock
<PAGE>
Account. The amount of the credit shall be the number of shares of Common Stock
(rounded to the nearest one-hundredth of a share) determined by dividing an
amount equal to 110% of the Participant's Compensation payable on the Credit
Date and specified for deferral pursuant to Section 5 hereof, by the fair market
value on the Credit Date of a share of Common Stock.
7. Fair Market Value. The fair market value of shares of Common Stock as
-----------------
of a given date for all purposes of the Plan, shall be the closing sale price
per share of Common Stock as reported on the consolidated tape of the New York
Stock Exchange on the relevant date or, if the New York Stock Exchange is closed
on such day, then the day closest to such date on which it was open.
8. Dividend Credit. Each time a dividend is paid on the Common Stock, the
---------------
Participant shall receive a credit to his or her Deferred Stock Account equal to
that number of shares of Common Stock (rounded to the nearest one-hundredth of a
share) having a fair market value on the dividend payment date equal to the
amount of the dividend payable on the number of shares credited to the
Participant's Deferred Stock Account on the dividend record date.
9. Maximum Number of Shares to be Credited Under the Plan. Subject to
------------------------------------------------------
adjustment as provided in Section 10, the maximum number of shares of Common
Stock that may be credited under the Plan is 500,000 shares.
10. Adjustments for Certain Changes in Capitalization. If the Company
-------------------------------------------------
shall at any time increase or decrease the number of its outstanding shares of
Common Stock or change in any way the rights and privileges of such shares by
means of the payment of a stock dividend or any other distribution upon such
shares payable in Common Stock, or through a stock split, subdivision,
consolidation, combination, reclassification, or recapitalization involving the
Common Stock, then the numbers, rights, and privileges of the shares credited
under the Plan shall be increased, decreased, or changed in like manner as if
such shares had been issued and outstanding, fully paid, and nonassessable at
the time of such occurrence.
11. Deferral Payment Election. At the time of making the Deferral
-------------------------
Election, each Participant shall also complete a deferral payment election
specifying one of the payment options described in Section 12 and 13, and the
year in which amounts credited to the Participant's Deferred Stock Account shall
be paid in a lump sum pursuant to Section 12, or in which installment payments
shall commence pursuant to Section 13. The Participant may change the deferral
payment election by means of a subsequent deferral payment election in writing
that will take effect (i) immediately upon receipt for deferrals credited after
the date the Company receives such subsequent deferral payment election and (ii)
at the beginning of the second calendar year following the date of the revised
deferral payment election for deferrals previously credited to the Participant's
Deferred Stock Account.
12. Payment of Deferred Stock Accounts in a Lump Sum. Unless a
------------------------------------------------
Participant elects to receive payment of his or her Deferred Stock Account in
installments as described in Section 13, credits to a Participant's Deferred
Stock Account shall be payable in full on January 10 of the year following the
Participant's termination of service on the Board (or the first business day
thereafter) or such other date as elected by the Participant pursuant to Section
11. All payments shall be made in shares of Common Stock plus cash in lieu of
any fractional share. Notwithstanding the foregoing, in the event of a Change
of Control (as defined in Section 19), credits to a Participant's Deferred Stock
Account as of the business day immediately prior to the effective date of the
transaction constituting the Change of Control shall be paid in full to the
Participant or the Participant's beneficiary or estate, as the case may be, in
whole shares of Common Stock (together with cash in lieu of a fractional share)
on such date.
13. Payment of Deferred Stock Accounts in Installments. A Participant may
--------------------------------------------------
elect to have his or her Deferred Stock Account paid in annual installments
following termination of service as a director or at such other time as elected
by the Participant pursuant to Section 11. All payments shall be made in shares
of Common Stock plus cash in lieu of any fractional share. All installment
payments shall be made
2
<PAGE>
annually on January 10 of each year (or the first business day thereafter). The
amount of each installment payment shall be computed as the number of shares
credited to the Participant's Deferred Stock Account on the Computation Date,
multiplied by a fraction, the numerator of which is one and the denominator of
which is the total number of installments elected (not to exceed fifteen) minus
the number of installments previously paid. Amounts paid prior to the final
installment payment shall be rounded to the nearest whole number of shares; the
final installment payment shall be for the whole number of shares then credited
to the Participant's Deferred Stock Account, together with cash in lieu of any
fractional shares. Notwithstanding the foregoing, in the event of a Change of
Control (as defined in Section 19), credits to a Participant's Deferred Stock
Account as of the business day immediately prior to the effective date of the
transaction constituting the Change of Control shall be paid in full to the
Participant or the Participant's beneficiary or estate, as the case may be, in
whole shares of Common Stock (together with cash in lieu of a fractional share)
on such date.
14. Death of Participant. If a Participant dies before receiving all
--------------------
payments to which he or she is entitled under the Plan, payment shall be made in
accordance with the Participant's designation of a beneficiary on a form
provided for that purpose and delivered to and accepted by the Committee (as
hereinafter defined) or, in the absence of a valid designation or if the
designated beneficiary does not survive the Participant, to such Participant's
estate.
15. Nonassignability. No right to receive payments under the Plan nor any
----------------
shares of Common Stock credited to a Participant's Deferred Stock Account shall
be assignable or transferable by a Participant other than by will or the laws of
descent and distribution. The designation of a beneficiary by a Participant
pursuant to Section 14 does not constitute a transfer.
16. Participants Are General Creditors of the Company. Benefits due under
-------------------------------------------------
this Plan shall be funded out of the general funds of the Company. The
Participants and beneficiaries thereof shall be general, unsecured creditors of
the Company with respect to any payments to be made pursuant to the Plan and
shall not have any preferred interest by way of trust, escrow, lien or otherwise
in any specific assets of the Company. If the Company shall, in fact, elect to
set aside monies or other assets to meet its obligations hereunder (there being
no obligation to do so), whether in a grantor's trust or otherwise, the same
shall, nevertheless, be regarded as a part of the general assets of the company
subject to the claims of its general creditors, and neither any Participant nor
any beneficiary of any Participant shall have a legal, beneficial, or security
interest therein.
17. Administration. The Plan shall be administered by a committee (the
--------------
"Committee") of three or more individuals appointed by the Board to administer
the Plan. The members of the Committee must be members of, and shall serve at
the discretion of, the Board. The members of the Committee shall be
"disinterested persons" as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Act"), or any successor rule or definition adopted
by the Securities and Exchange Commission ("Rule 16b-3"), if, in the opinion of
counsel for the Company, the absence of "disinterested" administrators would
adversely impact the availability of the exemption from Section 16(b) of the Act
provided by Rule 16b-3 for any Participant's acquisition of Common Stock under
the Plan.
Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to construe and interpret the Plan; to establish, amend and
rescind appropriate rules and regulations relating to the Plan; to administer
the Plan; and to take all such steps and make all such determinations in
connection with the Plan as it may deem necessary or advisable to carry out the
provisions and intent of the Plan. All determinations of the Committee shall be
made by a majority of its members, and its determinations shall be final and
conclusive for all purposes and upon all persons, including, but without
limitation, the Company, the Committee, the Participants and their respective
successors in interest.
18. Amendment and Termination. The Board may at any time terminate,
-------------------------
suspend, or amend this Plan; provided, however, that the provisions of Sections
2 and 3 may not be amended more than once in every six months other than to
comport with changes in the Internal Revenue Code, ERISA,
3
<PAGE>
or the rules thereunder. No such action shall deprive any Participant of any
benefits to which he or she would have been entitled under the Plan if
termination of the Participant's service as a director had occurred on the day
prior to the date such action was taken, unless agreed to by the Participant.
19. Change of Control. "Change of Control" means any one of the following
-----------------
events:
(a) the acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of Common Stock (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the Company
(ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and (iii) of
subsection (c) hereof; or
(b) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then constituting the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) approval by the shareholders of the Company of a reorganization, merger
or consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the Board of Directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.
20. Effective Date. The effective date of the Plan shall be the date of
--------------
approval of the Plan by the Company's stockholders.
4
<PAGE>
Exhibit 10.22
SUPERVALU INC.
1997 STOCK PLAN
Section 1. Purpose.
- -------------------
The purpose of the Plan is to promote the interests of the Company and its
stockholders by aiding the Company in attracting and retaining employees, to
offer such employees incentives to put forth maximum efforts for the success of
the Company's business and to afford such employee an opportunity to acquire a
proprietary interest in the Company.
Section 2. Definitions.
- -----------------------
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly
through one or more intermediaries, is controlled by the Company and (ii) any
entity in which the Company has a significant equity interest, in each case as
determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Performance Award, or Other Stock-Based
Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any regulations promulgated thereunder.
(e) "Committee" shall mean a committee of the Company designated by
the Board of Directors of the Company to administer the Plan, which shall
consist of members appointed from time to time by the Board of Directors.
(f) "Company" shall mean SUPERVALU INC., a Delaware corporation, and
any successor corporation.
(g) "Eligible Person" shall mean any employee, consultant or
independent contractor providing services to the Company or any Affiliate who
the Committee determines to be an Eligible Person. An officer or director of the
Company or any Affiliate that is subject to Section 16 of the Securities
Exchange Act of 1934, as amended, or any successor rule or regulation, shall not
be an Eligible Person.
(h) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee. Notwithstanding the foregoing,
unless otherwise determined by the Committee, the Fair Market Value of Shares on
a given date for purposes of the Plan shall be the average of the opening and
closing sale price of the Shares as reported on the New York Stock Exchange on
such date or, if such Exchange is not open for trading on such date, on the day
closest to such date when such Exchange is open for trading.
(i) "Option" shall mean an option granted under Section 6(a) of the
Plan that shall not be an incentive stock option within the meaning of Section
422 of the Code or any successor provision and shall include Restoration
Options.
(j) "Other Stock-Based Award" shall mean any right granted under
Section 6(f) of the Plan.
<PAGE>
(k) "Participant" shall mean an Eligible Person designated to be granted
an Award under the Plan.
(l) "Performance Award" shall mean any right granted under Section 6(e) of
the Plan.
(m) "Person" shall mean any individual, corporation, partnership,
association or trust.
(n) "Plan" shall mean this 1997 Stock Plan, as amended from time to time.
(o) "Restoration Option" shall mean any Option granted under Section 6(b)
of the Plan.
(p) "Restricted Stock" shall mean any Share granted under Section 6(d) of
the Plan.
(q) "Restricted Stock Unit" shall mean any unit granted under Section 6(d)
of the Plan evidencing the right to receive a Share (or a cash payment
equal to the Fair Market Value of a Share) at some future date.
(r) "Shares" shall mean shares of Common Stock, $1.00 par value, of the
Company or such other securities or property as may become subject to
Awards pursuant to an adjustment made under Section 4(c) of the Plan.
(s) "Stock Appreciation Right" shall mean any right granted under Section
6(c) of the Plan.
Section 3. Administration.
- --------------------------
(a) Power and Authority of the Committee. The Plan shall be administered
------------------------------------
by the Committee. Subject to the express provisions of the Plan and to
applicable law, the Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Awards to be granted
to each Participant under the Plan; (iii) determine the number of Shares to be
covered by (or with respect to which payments, rights or other matters are to be
calculated in connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and conditions
of any Award or Award Agreement and accelerate the exercisability of Options or
the lapse of restrictions relating to Restricted Stock, Restricted Stock Units
or other Awards; (vi) determine whether, to what extent and under what
circumstances Awards may be exercised in cash, Shares, other securities, other
Awards or other property, or canceled, forfeited or suspended; (vii) determine
whether, to what extent and under what circumstances cash, Shares, other
securities, other Awards, other property and other amounts payable with respect
to an Award under the Plan shall be deferred either automatically or at the
election of the holder thereof or the Committee; (viii) interpret and administer
the Plan and any instrument or agreement relating to, or Award made under, the
Plan; (ix) establish, amend, suspend or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (x) make any other determination and take any other action that
the Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Award shall be within the sole discretion of the Committee, may be
made at any time and shall be final, conclusive and binding upon any
Participant, any holder or beneficiary of any Award and any employee of the
Company or any Affiliate.
(b) Delegation. The Committee may delegate its powers and duties under the
----------
Plan to one or more officers of the Company or any Affiliate or a committee of
such officers, subject to such terms, conditions and limitations as the
Committee may establish in its sole discretion.
(c) Power and Authority of the Board of Directors. Notwithstanding
---------------------------------------------
anything to the contrary contained herein, the Board of Directors may, at any
time and from time to time, without any further action of the Committee,
exercise the powers and duties of the Committee under the Plan.
2
<PAGE>
Section 4. Shares Available for Awards.
- ---------------------------------------
(a) Shares Available. Subject to adjustment as provided in Section
----------------
4(c), the aggregate number of Shares which may be issued under all Awards under
the Plan shall be 7,000,000 (subject to further adjustment upon certain changes
in the Company's capitalization as described below). Shares to be issued under
the Plan shall be Shares reacquired and held in the treasury of the Company. If
any Shares covered by an Award or to which an Award relates are not purchased or
are forfeited, or if an Award otherwise terminates without delivery of any
Shares, then the number of Shares counted against the aggregate number of Shares
available under the Plan with respect to such Award, to the extent of any such
forfeiture or termination, shall again be available for granting Awards under
the Plan.
(b) Accounting for Awards. For purposes of this Section 4, if an
---------------------
Award entitles the holder thereof to receive or purchase Shares, the number of
Shares covered by such Award or to which such Award relates shall be counted on
the date of grant of such Award against the aggregate number of Shares available
for granting Awards under the Plan.
(c) Adjustments. In the event that the Committee shall determine
-----------
that any dividend or other distribution (whether in the form of cash, Shares,
other securities or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and type of Shares (or other securities or other property) which
thereafter may be made the subject of Awards, (ii) the number and type of Shares
(or other securities or other property) subject to outstanding Awards and (iii)
the purchase or exercise price with respect to any Award; provided, however,
-------- -------
that the number of Shares covered by any Award or to which such Award relates
shall always be a whole number.
Section 5. Eligibility.
- -----------------------
Any Eligible Person shall be eligible to be designated a Participant. In
determining which Eligible Persons shall receive an Award and the terms of any
Award, the Committee may take into account the nature of the services rendered
by the respective Eligible Persons, their present and potential contributions to
the success of the Company or such other factors as the Committee, in its
discretion, shall deem relevant.
Section 6. Awards.
- ------------------
(a) Options. The Committee is hereby authorized to grant Options to
-------
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable
--------------
under an Option shall be determined by the Committee; provided, however,
-------- -------
that such purchase price shall not be less than 100% of the Fair Market
Value of a Share on the date of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by the
-----------
Committee.
(iii) Time and Method of Exercise. The Committee shall determine
---------------------------
the time or times at which an Option may be exercised in whole or in part and
the method or methods by which, and the form or forms (including, without
limitation, cash, Shares, promissory notes, other securities, other Awards or
other property, or any combination thereof, having a Fair Market Value on the
exercise date equal to the relevant exercise price) in which, payment of the
exercise price with respect thereto may be made or deemed to have been made.
3
<PAGE>
(b) Restoration Options. The Committee may grant Restoration Options,
-------------------
separately or together with an Option, pursuant to which, subject to the terms
and conditions established by the Committee and any applicable law, the
Participant would be granted a new Option when the payment of the exercise price
of the non-qualified stock option to which such Restoration Option relates is
made by the delivery or withholding of Shares pursuant to the relevant
provisions of the plan or agreement relating to such non-qualified stock option.
The new Option shall give the holder the right to purchase the number of Shares
not exceeding the sum of (A) the number of Shares so provided as consideration
upon the exercise of the previously granted non-qualified stock option to which
such Restoration Option relates and (B) the number of Shares, if any, tendered
or withheld as payment of the amount to be withheld under applicable tax laws in
connection with the exercise of the non-qualified stock option to which such
Restoration Option relates pursuant to the relevant provisions of the plan or
agreement relating to such non-qualified stock option. Restoration Options may
be granted with respect to Options previously granted under the Plan or any
other stock option plan of the Company, and may be granted in connection with
any Option granted under the Plan or any other stock option plan of the Company
at the time of such grant; provided, however, that Restoration Options may only
-------- -------
be granted to Eligible Persons.
(c) Stock Appreciation Rights. The Committee is hereby authorized to
-------------------------
grant Stock Appreciation Rights to Participants subject to the terms of the Plan
and any applicable Award Agreement. A Stock Appreciation Right granted under the
Plan shall confer on the holder thereof a right to receive upon exercise thereof
the excess of (i) the Fair Market Value of one Share on the date of exercise
(or, if the Committee shall so determine, at any time during a specified period
before or after the date of exercise) over (ii) the grant price of the Stock
Appreciation Right as specified by the Committee, which price shall not be less
than 100% of the Fair Market Value of one Share on the date of grant of the
Stock Appreciation Right. Subject to the terms of the Plan and any applicable
Award Agreement, the grant price, term, methods of exercise, dates of exercise,
methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate.
(d) Restricted Stock and Restricted Stock Units. The Committee is
-------------------------------------------
hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units
to Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) Restrictions. Shares of Restricted Stock and Restricted
------------
Stock Units shall be subject to such restrictions as the Committee may
impose (including, without limitation, any limitation on the right to vote
a Share of Restricted Stock or the right to receive any dividend or other
right or property with respect thereto), which restrictions may lapse
separately or in combination at such time or times, in such installments or
otherwise as the Committee may deem appropriate.
(ii) Stock Certificates. Any Restricted Stock granted under the
------------------
Plan shall be evidenced by issuance of a stock certificate or certificates,
which certificate or certificates shall be held by the Company. Such
certificate or certificates shall be registered in the name of the
Participant and shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock. In the
case of Restricted Stock Units, no Shares shall be issued at the time such
Awards are granted.
(iii) Forfeiture; Delivery of Shares. Except as otherwise
------------------------------
determined by the Committee, upon termination of employment (as determined
under criteria established by the Committee) during the applicable
restriction period, all Shares of Restricted Stock and all Restricted Stock
Units at such time subject to restriction shall be forfeited and reacquired
by the Company; provided, however, that the Committee may, when it finds
that a waiver would be in the best interest of the Company, waive in whole
or in part any or all remaining restrictions with respect to Shares of
Restricted Stock or Restricted Stock Units. Any Share representing
Restricted Stock that is no longer subject to restrictions shall be
delivered to the holder thereof promptly after the applicable restrictions
lapse or are waived. Upon the lapse or waiver of restrictions and the
restricted period
4
<PAGE>
relating to Restricted Stock Units evidencing the right to receive Shares,
such Shares shall be issued and delivered to the holders of the Restricted
Stock Units.
(e) Performance Awards. The Committee is hereby authorized to grant
------------------
Performance Awards to Participants subject to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan (i) may
be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities, other Awards or other property and (ii)
shall confer on the holder thereof the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan and
any applicable Award Agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted, the amount of any payment or transfer to be made
pursuant to any Performance Award and any other terms and conditions of any
Performance Award shall be determined by the Committee.
(f) Other Stock-Based Awards. The Committee is hereby authorized to
grant to Participants such other Awards that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or related to,
Shares (including, without limitation, securities convertible into Shares), as
are deemed by the Committee to be consistent with the purpose of the Plan;
provided, however, that such grants must comply with applicable law.
- -------- -------
Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of such Awards. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms (including without limitation,
cash, Shares, promissory notes, other securities, other Awards or other property
or any combination thereof), as the Committee shall determine, the value of
which consideration, as established by the Committee, shall not be less than
100% of the Fair Market Value of such Shares or other securities as of the date
such purchase right is granted.
(g) General.
-------
(i) No Cash Consideration for Awards. Awards shall be granted
--------------------------------
for no cash consideration or for such minimal cash consideration as may be
required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may,
--------------------------------------------
in the discretion of the Committee, be granted either alone or in addition
to, in tandem with or in substitution for any other Award or any award
granted under any plan of the Company or any Affiliate other than the Plan.
Awards granted in addition to or in tandem with other Awards or in addition
to or in tandem with awards granted under any such other plan of the
Company or any Affiliate may be granted either at the same time as or at a
different time from the grant of such other Awards or awards.
(iii) Forms of Payment under Awards. Subject to the terms of the
-----------------------------
Plan and of any applicable Award Agreement, payments or transfers to be
made by the Company or an Affiliate upon the grant, exercise or payment of
an Award may be made in such form or forms as the Committee shall determine
(including, without limitation, cash, Shares, promissory notes, other
securities, other Awards or other property or any combination thereof), and
may be made in a single payment or transfer, in installments or on a
deferred basis, in each case in accordance with rules and procedures
established by the Committee. Such rules and procedures may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments.
(iv) Limits on Transfer of Awards. Unless otherwise determined
----------------------------
by the Committee: (a) no Award and no right under any such Award shall be
transferable by a Participant otherwise than by will or by the laws of
descent and distribution; provided, however, that, if so determined by the
-------- -------
Committee, a Participant may, in the manner established by the Committee,
designate a beneficiary or beneficiaries to exercise the rights of the
Participant and receive any
5
<PAGE>
property distributable with respect to any Award upon the death of the
Participant; (b) each Award or right under any Award shall be exercisable
during the Participant's lifetime only by the Participant or, if
permissible under applicable law, by the Participant's guardian or legal
representative; and (c) no Award or right under any such Award may be
pledged, alienated, attached or otherwise encumbered, and any purported
pledge, alienation, attachment or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.
(v) Term of Awards. The term of each Award shall be for such
--------------
period as may be determined by the Committee.
(vi) Restrictions; Securities Exchange Listing. All certificates
-----------------------------------------
for Shares or other securities delivered under the Plan pursuant to any
Award or the exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under the Plan
or the rules, regulations and other requirements of the Securities and
Exchange Commission and any applicable federal or state securities laws,
and the Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions. If the
Shares or other securities are traded on a securities exchange, the Company
shall not be required to deliver any Shares or other securities covered by
an Award unless and until such Shares or other securities have been
admitted for trading on such securities exchange.
Section 7. Amendment and Termination; Adjustments.
- --------------------------------------------------
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may
----------------------
amend, alter, suspend, discontinue or terminate the Plan.
(b) Amendments to Awards. The Committee may waive any conditions of
--------------------
or rights of the Company under any outstanding Award, prospectively or
retroactively. The Committee may not amend, alter, suspend, discontinue or
terminate any outstanding Award, prospectively or retroactively, without the
consent of the Participant or holder or beneficiary thereof, except as otherwise
herein provided.
(c) Correction of Defects, Omissions and Inconsistencies. The
----------------------------------------------------
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect.
Section 8. Income Tax Withholding.
- ----------------------------------
In order to comply with all applicable federal or state income tax laws or
regulations, the Company may take such action as it deems appropriate to ensure
that all applicable federal or state payroll, withholding, income or other
taxes, which are the sole and absolute responsibility of a Participant, are
withheld or collected from such Participant. In order to assist a Participant in
paying all or a portion of the federal and state taxes to be withheld or
collected upon exercise or receipt of (or the lapse of restrictions relating to)
an Award, the Committee, in its discretion and subject to such additional terms
and conditions as it may adopt, may permit the Participant to satisfy such tax
obligation by (i) electing to have the Company withhold a portion of the Shares
otherwise to be delivered upon exercise or receipt of (or the lapse of
restrictions relating to) such Award with a Fair Market Value equal to the
amount of such taxes or (ii) delivering to the Company Shares other than Shares
issuable upon exercise or receipt of (or the lapse of restrictions relating to)
such Award with a Fair Market Value equal to the amount of such taxes. The
election, if any, must be made on or before the date that the amount of tax to
be withheld is determined.
6
<PAGE>
Section 9. General Provisions.
- ------------------------------
(a) No Rights to Awards. No Eligible Person, Participant or other
-------------------
Person shall have any claim to be granted any Award under the Plan, and there is
no obligation for uniformity of treatment of Eligible Persons, Participants or
holders or beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to any Participant or with respect to
different Participants.
(b) Award Agreements. No Participant will have rights under an Award
----------------
granted to such Participant unless and until an Award Agreement shall have been
duly executed on behalf of the Company.
(c) No Limit on Other Compensation Arrangements. Nothing contained in
-------------------------------------------
the Plan shall prevent the Company or any Affiliate from adopting or continuing
in effect other or additional compensation arrangements, and such arrangements
may be either generally applicable or applicable only in specific cases.
(d) No Right to Employment. The grant of an Award shall not be
----------------------
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate, nor will it affect in any way the right of the Company
or an Affiliate to terminate such employment at any time, with or without cause.
In addition, the Company or an Affiliate may at any time dismiss a Participant
from employment free from any liability or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award Agreement.
(e) Governing Law. The validity, construction and effect of the Plan
-------------
or any Award, and any rules and regulations relating to the Plan or any Award,
shall be determined in accordance with the laws of the State of Minnesota.
(f) Severability. If any provision of the Plan or any Award is or
------------
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction
or would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full
force and effect.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall
------------------------
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(h) No Fractional Shares. No fractional Shares shall be issued or
--------------------
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of
--------
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
Section 10. Effective Date of the Plan.
- ---------------------------------------
The Plan shall be effective as of April 9, 1997.
7
<PAGE>
Section 11. Term of the Plan.
- -----------------------------
Unless the Plan shall have been discontinued or terminated as provided in
Section 7(a), the Plan shall terminate on April 9, 2007. No Award shall be
granted after the termination of the Plan. However, unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award theretofore
granted may extend beyond the termination of the Plan, and the authority of the
Committee provided for hereunder with respect to the Plan and any Awards, and
the authority of the Board of Directors of the Company to amend the Plan, shall
extend beyond the termination of the Plan.
Adopted as of 4/9/97
Amended 8/18/98 (two-for-one stock split)
Amended 3/14/00 (increase in shares available)
8
<PAGE>
EXHIBIT 10.24
SPLIT DOLLAR LIFE INSURANCE AGREEMENT
THIS AGREEMENT is made effective on July 6, 1998, between SUPERVALU INC., a
Delaware corporation (the "Corporation"), MICHAEL W. WRIGHT (the "Employee"),
and PHILLIP H. MARTIN and THOMAS 0. MOE, as Trustees of the MICHAEL W. WRIGHT
1997 GST FAMILY TRUST under Irrevocable Trust Agreement dated December 9, 1997,
with Michael W. Wright, as Donor, and not individually, (the "Owner"').
Recitals:
A. The Employee is currently employed by the Corporation as Chairman, Chief
Executive Officer and President.
B. The Employee wishes to provide life insurance protection for his family,
under a policy of life insurance, insuring his life and the life of his wife,
Judith M. Wright (collectively the "Insureds" and individually an "Insured").
C. The Owner owns a policy of life insurance (the "Policy") on the
Insureds, as shown on Exhibit A attached hereto. The insurance company issuing
the Policy is referred to as the "Insurer."
D. The Employee wishes to be assured that the premiums on the Policy will
be paid both presently and in the future, including such time after his
retirement from active service with the Corporation, or other termination of his
employment.
D. The Corporation is willing to assist the Owner in the payment of
premiums for the Policy as provided in this Agreement both presently and in the
<PAGE>
future, including such time after the Employee's retirement from active service
with the Corporation, or other termination of his employment, in recognition of
the valuable services heretofore performed for it by the Employee, in
consideration of the Employee's acceptance of a reduced benefit under the
Corporation's Enhanced SERP and as encouragement for his continued employment.
E. The Owner is the owner of the policy and, as such, possesses all
incidents of ownership in and to the Policy.
F. The Corporation wishes to have the Policy collaterally assigned to it by
the Owner to secure the repayment of the amounts which it will pay toward the
premiums on the Policy.
G. The parties intend that by such collateral assignment the Corporation
shall receive only the right to such repayment, with the Owner retaining all
other ownership rights in the Policy, as specified herein.
H. The parties intend this agreement to constitute a plan of split dollar
life insurance under Revenue Ruling 64-328, 1964-2 C.B. 11, as amplified by
Revenue Ruling 66-110, 1966-1 C.B. 12, Revenue Ruling 67-154, 1967-1 C.B. 11,
and Revenue Ruling 79-50, 1979-1 C.B. 138.
THEREFORE, for value received, the parties agree:
1. Premium Payments and Employee's Agreement. It is anticipated that the annual
aggregate premium payments on the Policy will be approximately $657,000 payable
over seven years. Until this Agreement is terminated, the Corporation or its
successors and the Owner shall make payments as provided in this section.
2
<PAGE>
a. Owner's Payments. Each year the Owner shall contribute to the
Corporation an amount equal to the annual economic benefit that would be
taxable as gross income to the Insureds for federal income tax purposes
with respect to the Policy but for the payment by the Owner of that amount.
For this purpose, the annual economic benefit shall be computed in
accordance with Revenue Ruling 64-328, 1964-2 C.B. 11, as amplified by
Revenue Ruling 66-110, 1966-1 C.B. 12, Revenue Ruling 67-154, 1967-1 C.B.
11, and Revenue Ruling 79-50, 1979-1 C.B. 138. The Corporation shall be
responsible for computing, or obtaining the computation of, the annual
economic benefit amount with respect to the Policy, and will advise the
Owner of the amounts payable by the Owner.
b. Corporation's Payments and Corporation's Interest in Policy. In
consideration for past services and the desire to encourage the employee to
remain in its employ, the Corporation shall timely pay all premiums on the
Policy. The Corporation shall also pay to the Insureds, as additional
compensation to the Employee for past services, regardless of whether the
Employee is otherwise employed by the Corporation, an amount equal to the
Owner's contribution to the Corporation as computed under Section La.
increased by that amount equal to the Insureds' additional income tax
liability attributable to the payment of such additional compensation by
the Corporation. For purposes of this Agreement, the "Corporation's
Interest" in the Policy is the amount equal to (I) the total premiums paid
by the Corporation on the Policy from the date of this Agreement to the
date as
3
<PAGE>
of which the Corporation's Interest is being determined, minus (II) the amount
contributed by the Owner pursuant to Section 1.a.
c. Employee's Agreement. In consideration of the Corporation's
Payments as set forth under Section 1.b., the Employee hereby agrees that,
so long as the Employee remains in the active employ of the Corporation,
the Employee will devote substantially all of his time, skill, diligence
and attention to the business of the Corporation, and will not actively
engage, either directly or indirectly, in any business or other activity
which is or may be deemed to be in any way competitive with or adverse to
the best interests of the corporation.
2. 0wnership of the Policy. The Owner is the sole owner and beneficiary of the
Policy. In consideration of the Corporation's payment of premiums as provided in
Section 1.b., and as collateral security for the payment of the Corporation's
Interest in the Policy, as provided in Section 1.b., the Owner hereby
collaterally assigns the Policy to the Corporation. To evidence that collateral
assignment, the Owner and the Corporation shall execute and file with the
Insurer a Collateral Assignment of Policy in the form of Exhibit B attached
hereto or in such other form as may be acceptable to the parties and to the
Insurer. In the event of any conflict between this Agreement and any Collateral
Assignment, as between the Corporation and the Owner, the terms of this
Agreement shall control. The parties agree that benefits under the Policy may be
paid by the Insurer either by separate checks to the Corporation and Owner, or
by a joint check. In the latter instance, the Owner and
4
<PAGE>
the Corporation agree that the benefits shall be divided as provided in this
Agreement.
3. Policy Roll-Out. It is the understanding of all parties that the increases in
the cash value of the Policy will eventually be sufficient to maintain the
policy in effect without the payment of any additional premiums on the Policy.
After such time as the cash value of the Policy is sufficient to pay the
Corporation's Interest while continuing the policy in effect on the lives of the
Insureds without the payment of any additional premiums on the Policy as
reasonably determined by an actuary mutually acceptable to the Corporation and
the Owner, the cash value in the Policy equal to the Corporation's Interest
shall be paid to the Corporation (the "Policy Roll-Out"). It is anticipated that
the Policy Roll-Out will occur at approximately the Policy anniversary date in
2013.
4. Termination of this Agreement.
a. Events of Termination. This Agreement shall terminate as to the Policy
upon the happening of any of the following events:
i. Full payment to the Corporation of the Corporation's Interest in
the Policy, whether under the Policy Roll-Out set forth in Section 3 or
otherwise; or
ii. Death of the second to die of the Insureds.
Under no circumstances shall this Agreement terminate solely by reason of the
Employee ceasing to be employed by the Corporation.
b. Rights Upon Termination. Upon the termination of this Agreement:
i. The obligation of the Corporation to pay premiums on the Policy
shall cease; and
5
<PAGE>
ii. If this Agreement terminates under Item ii. of Section 4.a., the
Corporation shall receive, out of the death proceeds of the Policy, or out
of other assets of the Owner at the option of the Owner, an amount equal to
the Corporation's Interest in the Policy, and the balance of the death
proceeds shall be payable to the beneficiary designated by the Owner.
iii. Upon the full payment to the Corporation of an amount equal to
the Corporation"s Interest in the Policy, the Corporation shall release the
Collateral Assignment provided for in Section 2 with respect to the Policy.
iv. Notwithstanding any provision hereof to the contrary, in the event
that, for any reason whatsoever, no death benefit is payable under the
Policy upon the death of the Employee and in lieu thereof the Insured
refunds all or any part of the premiums for the Policy, the Corporation and
the Owner shall have the unqualified right to share in such refunded
premiums based on the respective cumulative contributions thereto under
Section 1.
5. Limitation on Owner's Rights in Policy. Except as otherwise provided herein,
the Owner shall not sell, assign, transfer, borrow against, surrender or cancel
the Policy or change the investment elections or options under the Policy,
without, in any such case, the express written consent of the Corporation.
6. The Insurer. The Insurer shall only be bound by the provisions of the Policy
issued by the Insurer. Any payments made or actions taken by the Insurer in
accordance with the Policy issued by it shall fully discharge the Insurer from
liability.
6
<PAGE>
7. Assignment. The Owner may not assign the Owner's rights and obligations under
this Agreement without the consent of the Corporation, which consent shall not
be unreasonably withheld. The Corporation may assign its rights and obligations
under this Agreement only to the Owner or the Owner's nominee, or to .any other
assignee with the written consent of the Owner. If a party assigns all of its
rights and obligations under this Agreement in accordance with this section,
then the assignee shall be substituted for the assignor as a party under this
Agreement. This Agreement shall inure to the benefit of and be binding upon the
successors to the Corporation.
8. Named Fiduciary. The Corporation is hereby designated as the named fiduciary
under this Agreement. The named fiduciary shall have the authority to control
and manage the operation and administration of this Agreement, and it shall be
responsible for establishing and carrying out a funding policy and method
consistent with the objectives of this Agreement.
9. Determination of Benefits, Claims Procedure and Administration.
a. Claim. A p erson who believes that he or she is being denied a benefit
to which he or she is entitled under this Agreement (hereinafter referred to as
a "Claimant") may file a written request for such benefit with the Corporation,
setting forth the claim. The request must be addressed to the president of the
Corporation at its then principal place of business.
b. Claim Decision. Upon receipt of a claim, the Corporation shall advise
the Claimant that a reply will be forthcoming within ninety (90) days and shall,
in
7
<PAGE>
fact, deliver such reply within such period. The Corporation may, however,
extend the reply period for an additional ninety (90) days for reasonable cause.
c. Claim Denial. If the claim is denied in whole or in part, the
Corporation shall adopt a written opinion, using language calculated to be
understood by the claimant, setting forth:
i. The specific reason or reasons for such denial;
ii. The specific reference to pertinent provisions of this Agreement
on which such denial is based;
iii. A description of any additional material or information necessary
for the Claimant to perfect his or her claim and an explanation of why such
material or such information is necessary;
iv. Appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review; and
v. The time limits for requesting a review under Section 9.d. and for
review under Section 9.e. hereof.
d. Request for Review. Within sixty (60) days after the receipt by the
claimant of the written opinion described above, the Claimant may request in
writing that the Secretary of the Corporation review the determination of the
Corporation. Such request must be addressed to the Secretary of the Corporation,
at its then principal place of business. The Claimant or his or her duly
authorized representative may, but need not, review the pertinent documents and
submit issues and comments in writing for consideration by the Corporation. If
the
8
<PAGE>
Claimant does not request a review of the Corporation's determination by the
Secretary of the Corporation within such sixty (60) day period, he shall be
barred and estopped from challenging the Corporation's determination.
e. Review of Decision. Within sixty (60) days after the Secretary's receipt
of a request for review, he or she will review the Corporation's determination.
After considering all materials presented by the Claimant, the Secretary will
render a written opinion, written in a manner calculated to be understood by the
Claimant, setting forth the specific reasons for the decision and containing
specific references to the pertinent provisions of this Agreement on which the
decision is based. If special circumstances require that the sixty (60) day time
period be extended, the Secretary will so notify the Claimant and will render
the decision as soon as possible, but no later than one hundred twenty (120)
days after receipt of the request for review.
10. Amendment. This Agreement may be amended by, but only by, a written
instrument signed by each of the parties.
11. Binding Effect. This Agreement shall be binding upon, and shall inure to the
benefit of, the Corporation, the Employee and the Owner and their respective
heirs and representatives, successors and permitted assigns.
12. Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
9
<PAGE>
13. Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original, and such counterparts together shall
constitute one instrument.
14. Mediation/Arbitration. Any controversy, claim or dispute of whatever .nature
arising between the parties, including those arising out of or relating to any
agreement between the parties or the breach, termination, enforceability, scope
or validity thereof, whether such claim existed prior to or arises on or after
the date hereof (a "Dispute"), shall be resolved by mediation or, failing
mediation, by binding arbitration. The agreement to mediate and arbitrate
contained in this Section shall continue in full force and effect despite the
expiration, rescission or termination of this Agreement.
a. Mediation. Neither party shall commence an arbitration proceeding
pursuant to the provisions set forth below unless such party shall first give a
written notice (a "Dispute Notice") to the other party setting forth the nature
of the Dispute. The parties shall attempt in good faith to resolve the Dispute
by mediation under the CPR Institute for Dispute Resolution ("CPR") Model
Mediation Procedure for Business Disputes in effect at the time of this
Agreement. If the parties cannot agree on the selection of a mediator within 20
days after receipt of the Dispute Notice, the mediator will be selected in
accordance with the CPR Procedure.
b. Arbitration. If the Dispute has not been resolved by mediation as
provided above within 60 days after receipt of the Dispute Notice, or if a party
fails to participate in a mediation, then the Dispute all be determined by
binding arbitration
10
<PAGE>
in Minneapolis, Minnesota. The arbitration shall be conducted in accordance with
such rules as may be agreed upon by the parties, or failing agreement within 30
days after arbitration is demanded, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") in effect on
the date hereof, subject to any modifications contained in this Agreement. The
Dispute shall be determined by one arbitrator, except that if the Dispute
involves an amount in excess of $1,000,000 (exclusive of interest and costs),
three arbitrators shall be appointed.
Persons eligible to serve as arbitrators shall be members of the AAA Large,
Complex Case Panel or a CPR Panel of Distinguished Neutrals, or who have
professional credentials similar to those persons listed on such AAA or CPR
panels. The arbitrator(s) shall base the award on the applicable law and
judicial precedent which would apply if the Dispute were decided by a United
States District Judge, and the arbitrator(s) shall have no authority to render
an award which is inconsistent therewith. The award shall be in writing and
include the findings of fact and conclusions of law upon which it is based.
Unless the parties agree otherwise, discovery will be limited to an
exchange of directly relevant documents. Depositions will not be taken except as
needed in lieu of a live appearance or upon mutual agreement of the parties. The
arbitrator(s) shall resolve any discovery disputes. The arbitrator(s) and
counsel of record will have the power of subpoena process as provided by law.
The parties
11
<PAGE>
knowingly and voluntarily waive their rights to have any Dispute tried and
adjudicated by a judge or a jury.
The arbitration shall be governed by the substantive laws of the State of
Minnesota without regard to conflicts-of-law rules, and by the arbitration law
of the Federal Arbitration Act (Title 9, U.S. Code). Judgment upon the award
rendered may be entered in any court having jurisdiction. Notwithstanding the
foregoing, upon the application by either party to a court for an order
confirming, modifying or vacating the award, the court shall have the power to
review whether, as a matter of law based on the findings of fact determined by
the arbitrator(s), the award should be confirmed, modified or vacated in order
to correct any errors of law made by the arbitrator(s). In order to effectuate
such judicial review limited to issues of law, the parties agree (and shall
stipulate to the court) that the findings of fact made by the arbitrator(s)
shall be final and binding on the parties and shall serve as the facts to be
submitted to and relied upon by the court in determining the extent to which the
award should be confirmed, modified or vacated.
Except as otherwise required by law, the parties and the arbitrator(s)
agree to keep confidential and not disclose to third parties any information or
documents obtained in connection with the arbitration process, including the
resolution of the Dispute. If either party fails to proceed with arbitration as
provided in this Agreement, or unsuccessfully seeks to stay the arbitration, or
fails to comply with the arbitration award, or is unsuccessful in vacating or
modifying the award
12
<PAGE>
pursuant to a petition or application for judicial review, the other party shall
be entitled to be awarded costs, including reasonable attorney's fees, paid or
incurred in successfully compelling such arbitration or defending against the
attempt to stay, vacate or modify such arbitration award and/or successfully
defending or enforcing the award.
C. Remedies. Each party hereby waives any and all rights it may have to
receive exemplary or punitive damages with respect to any claim it may have
against the other party, it being agreed that no party shall be entitled to
receive money damages in excess of its actual compensatory damages,
notwithstanding any contrary provision contained in this Agreement or otherwise.
(The balance of this page left blank intentionally.)
13
<PAGE>
IN WITNESS WHEREOF, the parties have signed this agreement effective on the
date first above written.
"CORPORATION"
SUPERVALU INC., a
Delaware corporation
By: /s/ Ronald C. Tortelli
------------------------------
Name: Ronald C. Tortelli
----------------------------
Title: Sr. V.P. Human Resources
---------------------------
"EMPLOYEE"
/s/ Michael W. Wright
---------------------------------
Michael W. Wright
"OWNER"
/s/ Phillip H. Martin
---------------------------------
Phillip Martin
and
/s/ Thomas O. Moe
---------------------------------
Thomas 0. Moe
as Trustees of the MICHAEL W. WRIGHT 1997
GST FAMILY TRUST under Irrevocable Trust
Agreement dated December 9, 1997, with
Michael W. Wright as Donor
14
<PAGE>
EXHIBIT A
Description of Life Insurance Policy
Insurer: Policy number: Face amount:
The Manufacturers Life 57 386 955 $11,800,000
Insurance Company of America
<PAGE>
EXHIBIT B
FORM OF
COLLATERAL ASSIGNMENT OF POLICY
THIS ASSIGNMENT is made effective on July 6, 1998, by PHILLIP H. MARTIN and
THOMAS 0. MOE, as Trustees of the MICHAEL W. WRIGHT 1997 GST FAMILY TRUST under
Irrevocable Trust Agreement dated December 9, 1997, with Michael W. Wright as
Donor (the "Owner"), as Assignor, to SUPERVALU INC., a Delaware corporation, as
Assignee.
1. FOR VALUE RECEIVED, the Assignor hereby collaterally assigns to
Assignee, its successors and assigns, to the extent of the amounts defined in
and owing from time to time to the Assignee as the Corporation's Interest under
the terms of that certain Split Dollar Life Insurance Agreement dated July 6,
1998 (the "Agreement"), between Assignor and Assignee (the "Assignee's
Interest"), a copy of which is attached hereto, all right, title, and interest
in and to life insurance policy number 57 386 955 (the "Policy") issued by The
Manufacturers Life Insurance Company of America (the "Insurer") on the lives of
Michael W. Wright and Judith M. Wright (the "Insureds"), subject to all the
terms and conditions of the Policy (and any supplementary contracts issued in
connection therewith) and to all superior liens, if any, which the Insurer may
have against the Policy.
2. The Assignor and Assignee expressly agree that only the following
specific rights are included in this Assignment and may be exercised solely by
the Assignee:
(a) The right to receive, upon the surrender of the Policy by the
Assignor, an amount of the cash surrender proceeds equal to the amount of
the Assignee's Interest in the Policy; and
(b) The right to receive, upon the death of the second to die of the
Insureds, an amount of the net proceeds of the Policy equal to the amount
of the Assignee's Interest in the Policy.
3. The Assignee is prohibited from assigning its interest to anyone other
than as provided in the Agreement.
4. Except as specifically granted herein or as provided in the Agreement,
the Owner shall retain all incidents of ownership in the Policy.
5. The Assignee shall, upon request of the Assignor, forward the Policy to
the Insurer, without unreasonable delay, for endorsement of any designation or
change of beneficiary, any election of optional mode of settlement, or
<PAGE>
the exercise of any other right reserved by the Assignor, in all cases
consistent with the Agreement.
6. The Insurer shall be bound only by the provisions of, and endorsements
to, the Policy. The Insurer is not a party to the Agreement, and the Agreement
is not incorporated by reference into this Collateral Assignment other than as
to the payment provisions in section 4 of the Agreement and as specifically
provided herein. In the event of any conflict between the Agreement and this
Collateral Assignment, then as to the Insurer, the provisions of this
Collateral Assignment shall control. The Insurer is hereby authorized to
recognize the Assignee's claim to rights hereunder without investigating the
reason for any action taken by the Assignee, the validity or amount of any of
the rights of the Assignee under the Agreement, the existence of any default
thereunder, the giving of any notice, or the application to be made by the
Assignee of any proceeds paid by the Insurer to the Assignee pursuant to this
Collateral Assignment, and the sole signature of the Assignee shall be
sufficient for the exercise of any rights under the Policy assigned hereby, and
the sole receipt of the Assignee for any sums received by it shall be a full
discharge and release therefor to the Insurer.
7. This Assignment may be executed in multiple counterparts, each of which
shall be deemed an original, and such counterparts together shall constitute one
instrument.
IN WITNESS WHEREOF, the Assignor and Assignee have signed this Collateral
Assignment as of the date first written above.
(The balance of this page left blank intentionally.)
2
<PAGE>
"ASSIGNOR"
---------------------------------
Phillip H. Martin
and
---------------------------------
Thomas 0. Moe
as Trustees of the MICHAEL W.
WRIGHT 1997 GST FAMILY TRUST under
Irrevocable Trust Agreement dated
December 9, 1997, with Michael W.
Wright as Donor
"ASSIGNEE"
SUPERVALU INC., a
Delaware corporation
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
3
<PAGE>
COLLATERAL ASSIGNMENT OF POLICY
THIS ASSIGNMENT is made effective on July 6, 1998, by PHILLIP H. MARTIN and
THOMAS 0. MOE, as Trustees of the MICHAEL W. WRIGHT 1997 GST FAMILY TRUST under
Irrevocable Trust Agreement dated December 9, 1997, with Michael W. Wright as
Donor (Ibe "Owner"), as Assignor, to SUPERVALU INC., a Delaware corporation, as
Assignee.
1. FOR VALUE RECEIVED, the Assignor hereby collaterally assigns to
Assignee, its successors and assigns, to the extent of the amounts defined in
and owing from time to time to the Assignee as the Corporation's Interest under
the terms of that certain Split Dollar Life Insurance Agreement dated July 6,
1998 (the "Agreement"), between Assignor and Assignee (the "Assignee's
Interest"), a copy of which is attached hereto, all right, title, and interest
in and to life insurance policy number 57 386 955 (the "Policy") issued by The
Manufacturers Life Insurance Company of America (the "Insurer") on the lives of
Michael W. Wright and Judith M. Wright (the "Insureds"), subject to all the
terms and conditions of the Policy (and any supplementary contracts issued in
connection therewith) and to all superior liens, if any, which the Insurer may
have against the Policy.
2. The Assignor and Assignee expressly agree that only the following
specific rights are included in this Assignment and may be exercised solely by
the Assignee:
(a) The right to receive, upon the surrender of the Policy by the
Assignor, an amount of the cash surrender proceeds equal to the amount of
the Assignee's Interest in the Policy; and
(b) The right to receive, upon the death of the second to die of the
Insureds, an amount of the net proceeds of the Policy equal to the amount
of the Assignee's Interest in the Policy.
3. The Assignee is prohibited from assigning its interest to anyone other
than as provided in the Agreement.
4. Except as specifically granted herein or as provided in the Agreement,
the Owner shall retain all incidents of ownership in the Policy.
5. The Assignee shall, upon request of the Assignor, forward the Policy to
the Insurer, without unreasonable delay, for endorsement of any designation or
change of beneficiary, any election of optional mode of settlement, or the
exercise of any other right reserved by the Assignor, in all cases consistent
with the Agreement.
<PAGE>
6. The Insurer shall be bound only by the provisions of, and endorsements
to, the Policy. The Insurer is not a party to the Agreement, and the Agreement
is not incorporated by reference into this Collateral Assignment other than as
to the payment provisions in section 4 of the Agreement and as specifically
provided herein. In the event of any conflict between the Agreement and this
Collateral Assignment, then as to the Insurer, the provisions of this Collateral
Assignment shall control. The Insurer is hereby authorized to recognize the
Assignee's claim to rights hereunder without investigating the reason for any
action taken by the Assignee, the validity or amount of any of the rights of
the Assignee under the Agreement, the existence of any default thereunder, the
giving of any notice, or the application to be made by the Assignee of any
proceeds paid by the Insurer to the Assignee pursuant to this Collateral
Assignment, and the sole signature of the Assignee shall be sufficient for the
exercise of any rights under the Policy assigned hereby, and the sole receipt of
the Assignee for any sums received by it shall be a full discharge and release
therefor to the Insurer.
7. This Assignment may be executed in multiple counterparts, each of which
shall be deemed an original, and such counterparts together shall constitute one
instrument.
IN WITNESS WHEREOF, the Assignor and Assignee have signed this Collateral
Assignment as of the date first written above.
(The balance of this page left blank intentionally.)
2
<PAGE>
"ASSIGNOR"
/s/ Phillip H. Martin
---------------------------------
Phillip H. Martin
and
/s/ Thomas O. Moe
---------------------------------
Thomas 0. Moe
as Trustees of the MICHAEL W.
WRIGHT 1997 GST FAMILY TRUST under
Irrevocable Trust Agreement dated
December 9, 1997, with Michael W.
Wright as Donor
"ASSIGNEE"
SUPERVALU INC., a
Delaware corporation
By: /s/ Ronald C. Tortelli
------------------------------
Name: Ronald C. Tortelli
----------------------------
Title: Sr. V.P. Human Resources
---------------------------
3
<PAGE>
Exhibit 10.25
SUPERVALU/Richfood Stock Incentive Plan
(formerly the Richfood, Inc. Omnibus Stock Incentive Plan
(as assumed by SUPERVALU INC.))
Amended and Restated
Effective October 13, 1999
INTRODUCTION
------------
The Richfood Holdings, Inc. Omnibus Stock Incentive Plan (the "Plan")
was adopted by the Board of Directors of Richfood Holdings, Inc. on March 7,
1991 and was approved by shareholders at the 1991 annual meeting. The Plan
authorized the grant of Options, SARs and Stock Awards.
The Plan was amended and restated effective November 4, 1993. The
amendments adopted at that time (1) clarified the definition of Common Stock,
(2) revised the manner in which the option price and withholding tax obligations
may be settled, and (3) clarified that immediately vested and transferable Stock
Awards may be granted under the Plan.
The Plan was further amended and restated effective June 13, 1996,
subject to the approval of shareholders. The amendments (1) increased the
number of shares that may be issued under the Plan, (2) included provisions that
will permit the award of "performance based compensation" under Section 162(m)
of the Internal Revenue Code of 1986, as amended, and (3) clarified the
provisions regarding the grant of Performance Shares under the Plan.
The Plan was further amended, effective July 29, 1997, subject to the
approval of shareholders at the 1997 annual meeting. The Plan was further
amended and restated on October 13, 1999 in connection with SUPERVALU's
acquisition of Richfood Holdings, Inc. on August 31, 1999. The amendments (1)
reflected SUPERVALU's assumption of the Plan and (2) eliminated the cashless
exercise option whereby shares were withheld or the shares otherwise issuable
were reduced. The terms of the Plan stated herein will govern awards granted on
and after October 13, 1999.
ARTICLE I
DEFINITIONS
-----------
1.01 Affiliate means any "subsidiary" or "parent" corporation (within the
---------
meaning of Section 424 of the Code) of the Company.
1.02 Agreement means a written agreement (including any consent, amendment
---------
or supplement thereto) between the Company and a Participant specifying the
terms and conditions of an award of Performance Shares, or an Option, SAR or
Stock Award granted to such Participant.
-1-
<PAGE>
1.03 Board means the Board of Directors of SUPERVALU.
-----
1.04 Committee means the Executive Personnel and Compensation Committee of
---------
the Board.
1.05 Common Stock means the common stock, $1.00 par value of SUPERVALU.
------------
1.06 Company means Richfood Holdings, Inc.
-------
1.07 Corresponding SAR means an SAR that is granted in relation to a
-----------------
particular Option and that can be exercised only upon the surrender to the
Company, unexercised, of that portion of the Option to which the SAR relates.
1.08 Fair Market Value means, on any given date, the average of the
-----------------
opening and closing sale prices of a share of Common Stock as reported on the
New York Stock Exchange on such date or, if such exchange is not open for
trading on such date, on the day closest to such date when such exchange is open
for trading. Notwithstanding the foregoing, with respect solely to grants made
under the Plan prior to August 31, 1999, "Fair Market Value" shall be determined
using the last sale price of a share of Common Stock rather than the average of
the opening and closing sale prices.
1.09 Initial Value means, with respect to an SAR, the Fair Market Value of
-------------
one share of Common Stock on the date of grant, as set forth in the Agreement.
1.10 Option means a stock option that entitles the holder to purchase from
------
SUPERVALU a stated number of shares of Common Stock at the price set forth in
the holder's Agreement.
1.11 Participant means an employee of the Company or an Affiliate,
-----------
including an employee who is a member of the Board, who satisfies the
requirements of Article IV and is selected by the Committee to receive an award
of Performance Shares, an Option, a SAR or a Stock Award or a combination
thereof.
1.12 Performance Shares means an award which, in accordance with and
------------------
subject to an Agreement, will entitle the Participant to receive a Stock Award,
a payment of cash or a combination thereof.
1.13 Plan means the SUPERVALU/Richfood Stock Incentive Plan (formerly the
----
Richfood, Inc. Omnibus Stock Incentive Plan (as assumed by SUPERVALU INC.)).
1.14 Restricted Stock means shares of Common Stock that are
----------------
nontransferable or subject to a substantial risk of forfeiture or both and that
the Committee may grant to a Participant pursuant to a Stock Award. Shares of
Common Stock shall cease to be Restricted Stock when, in accordance with the
terms of the applicable Agreement, they become transferable and free of a
substantial risk of forfeiture.
-2-
<PAGE>
1.15 SAR means a stock appreciation right that entitles the holder to
---
receive, with respect to each share of Common Stock encompassed by the exercise
of such SAR, the amount determined by the Committee and specified in the
holder's Agreement. In the absence of such a determination, the holder shall be
entitled to receive, with respect to each share of Common Stock encompassed by
the exercise of such SAR, the excess of the Fair Market Value on the date of
exercise over the Initial Value. References to "SARs" include both
Corresponding SARs and SARs granted independently of Options, unless the context
requires otherwise.
1.16 Stock Award means Common Stock awarded to a Participant under Article
-----------
X (including an award of Restricted Stock) or in full or partial settlement of
an award of Performance Shares.
1.17 SUPERVALU means SUPERVALU INC., a Delaware corporation.
---------
ARTICLE II
PURPOSES
--------
The Plan is intended to assist the Company and its Affiliates in
recruiting and retaining employees with ability and initiative by enabling
employees to participate in its future success and to associate their interests
with those of the Company and its Affiliates. The Plan authorizes the award of
Performance Shares and the grant of Stock Awards, SARs, Options qualifying under
Section 422 of the Code ("incentive stock options") and Options not so
qualifying. No Option that is intended to be an incentive stock option shall be
invalid for failure to qualify as an incentive stock option. The proceeds
received by SUPERVALU from the sale of Common Stock pursuant to the Plan shall
be used for general corporate purposes.
ARTICLE III
ADMINISTRATION
--------------
Except as provided in this Article III, the Plan shall be
administered by the Committee. The Committee shall have authority to award
Performance Shares and to grant Options, SARs and Stock Awards upon such terms
(not inconsistent with the provisions of the Plan) as the Committee may consider
appropriate. Such terms may include conditions (in addition to those contained
in the Plan) on the exercisability of all or any part of an Option or SAR or on
the transferability or forfeitability of Performance Shares or a Stock Award.
Notwithstanding any such conditions, the Committee may, in its discretion,
accelerate the time at which any Option or SAR may be exercised, the time at
which an award of Performance Shares may be earned or the time at which
Restricted Stock may become transferable or nonforfeitable. In addition, the
Committee shall have complete authority to interpret all provisions of the Plan;
to prescribe the form of Agreements; to adopt, amend and rescind rules and
regulations pertaining to the administration of the Plan; and to make all other
determinations necessary or advisable for the administration of the Plan. The
express grant in the Plan of any specific power to the Committee shall not be
construed as limiting any power or authority of the Committee. Any decision
made, or action taken, by the Committee or in connection with the administration
of the Plan shall be final and conclusive. No member of the Committee shall be
liable for any act
-3-
<PAGE>
done in good faith with respect to the Plan or any Agreement, Option, SAR, Stock
Award or an award of Performance Shares. All expenses of administering the Plan
shall be borne by SUPERVALU.
The Committee, in its discretion, may delegate to one or more officers
of the Company or its Affiliates all or part of the Committee's authority and
duties with respect to grants and awards to individuals who are not subject to
the reporting and other provisions of Section 16 of the Securities Exchange Act
of 1934, as in effect from time to time. In the event of such delegation, and
as to matters encompassed by the delegation, references in the Plan to the
Committee shall be interpreted as a reference to the Committee's delegate or
delegates. The Committee may revoke or amend the terms of a delegation at any
time but such action shall not invalidate any prior actions of the Committee's
delegate or delegates that were consistent with the terms of the Plan.
ARTICLE IV
ELIGIBILITY
-----------
4.01 General. Any employee of the Company or an Affiliate (including a
-------
corporation that becomes an Affiliate after the adoption of the Plan) is
eligible to participate in the Plan if the Committee, in its sole discretion,
determines that such person has contributed significantly or can be expected to
contribute significantly to the profits or growth of the Company or an
Affiliate. Directors of the Company or an Affiliate who are employees of the
Company or an Affiliate may be selected to participate in the Plan. A person
who is a member of the Committee may not be awarded Performance Shares or
granted Options, SARs or Stock Awards under the Plan.
4.02 Grants. The Committee will designate individuals to whom Performance
------
Shares are to be awarded and to whom Options, SARs and Stock Awards are to be
granted and will specify the number of shares of Common Stock subject to each
award or grant. An Option may be granted with or without a related SAR. An SAR
may be granted with or without a related Option. Each award of Performance
Shares and all Options, SARs and Stock Awards granted under the Plan shall be
evidenced by Agreements which shall be subject to applicable provisions of the
Plan and to such other provisions as the Committee may adopt. No Participant
may be granted incentive stock options or related SARs (under all incentive
stock option plans of the Company and its Affiliates) that are first exercisable
in any calendar year for stock having an aggregate Fair Market Value (determined
as of the date of grant) exceeding $100,000. The preceding annual limitation
shall not apply with respect to Options that are not incentive stock options.
ARTICLE V
STOCK SUBJECT TO PLAN
---------------------
Upon the award of shares of Common Stock pursuant to a Stock Award,
the Company may issue authorized Common Stock. Upon the exercise of any Option
or SAR, the Company may deliver to the Participant (or the Participant's broker
if the Participant so directs) authorized Common Stock. The maximum aggregate
number of shares of Common Stock that may be issued under the Plan with respect
to Stock Awards, Options, SARs and Performance
-4-
<PAGE>
Shares granted on or after October 13, 1999, is 2,076,684 shares, subject to
adjustment as provided in Article XII. If an Option or SAR is terminated, in
whole or in part, for any reason other than its exercise, the number of shares
of Common Stock allocated to the Option or SAR or portion thereof may be
reallocated to other Options, SARs, Stock Awards and awards of Performance
Shares to be granted under the Plan. If an award of Performance Shares is
forfeited, in whole or in part, without the issuance of a Stock Award, the
number of shares of Common Stock allocated to the award of Performance Shares or
a portion thereof may be reallocated to other Options, SARs, Stock Awards and
Performance Shares to be granted under the Plan.
ARTICLE VI
AWARDS OF OPTIONS AND SARS
--------------------------
In accordance with the provisions of Article IV, the Committee will
designate each individual to whom an Option or SAR is to be granted and will
specify the number of shares of Common Stock covered by such grants.
Notwithstanding the preceding sentence, no individual may, in any calendar year,
be granted (1) Options covering more than 112,500 shares of Common Stock, (2)
Corresponding SARs covering more than 112,500 shares of Common Stock, or (3)
SARs granted independently of Options covering more than 37,500 shares of Common
Stock. For purposes of this Article VI, an Option and Corresponding SAR shall
be treated as a single grant.
ARTICLE VII
OPTION PRICE
------------
The price per share for Common Stock purchased on the exercise of an
Option shall be determined by the Committee on the date of grant; provided,
however, that the price per share for Common Stock purchased on the exercise of
any Option shall not be less than fifty percent (50%) of the Fair Market Value
on the date the Option is granted and provided further that the price per share
for Common Stock purchased on the exercise of any Option that is an incentive
stock option shall not be less than the Fair Market Value on the date the Option
is granted.
ARTICLE VIII
EXERCISE OF OPTIONS AND SARS
----------------------------
8.01 Maximum Option or SAR Period. The maximum period in which an Option
----------------------------
or SAR may be exercised shall be determined by the Committee on the date of
grant, except that no Option or SAR shall be exercisable after the expiration of
ten years from the date the Option or SAR was granted. The terms of any Option
or SAR may provide that it is exercisable for a period less than such maximum
period.
8.02 Nontransferability. Any Option or SAR granted under the Plan shall be
------------------
nontransferable except by will or by the laws of descent and distribution. In
the event of any such transfer, the Option and any Corresponding SAR that
relates to such Option must be transferred to the same person(s). During the
lifetime of the Participant to whom the Option or SAR is granted, the Option or
SAR may be exercised only by the Participant. No right or
-5-
<PAGE>
interest of a Participant in any Option or SAR shall be liable for, or subject
to, any lien, obligation or liability of such Participant.
8.03 Employee Status. For purposes of determining the applicability of
---------------
Section 422 of the Code (relating to incentive stock options), or in the event
that the terms of any Option or SAR provide that it may be exercised only during
employment or within a specified period of time after termination of employment,
the Committee may decide to what extent leaves of absence for governmental or
military service, illness, temporary disability or other reasons shall not be
deemed interruptions of continuous employment.
8.04 Performance Objectives. The Committee may prescribe that an Option or
----------------------
SAR is exercisable only to the extent that certain performance objectives are
attained. Such performance objectives may be based on the Company's, an
Affiliate's or an operating unit's return on equity, earnings per share, total
earnings, earnings growth, total sales, sales growth, return on capital or
return on assets or based on Fair Market Value. If the Committee, on the date of
the award, prescribes that an Option or SAR shall become exercisable only upon
the attainment of performance objectives stated with respect to one or more of
the foregoing criteria, the Option or SAR shall become exercisable only to the
extent the Committee certifies that such objectives have been achieved.
ARTICLE IX
METHOD OF EXERCISE
------------------
9.01 Exercise. Subject to the provisions of Articles VII and VIII, an
--------
Option or SAR may be exercised in whole at any time or in part from time to time
at such times and in compliance with such requirements as the Committee shall
determine; provided, however, that a Corresponding SAR that is related to an
incentive stock option may be exercised only to the extent that the related
Option is exercisable and when the Fair Market Value exceeds the option price of
the related Option. An Option or SAR granted under the Plan may be exercised
with respect to any number of whole shares less than the full number of shares
for which the Option or SAR could be exercised. A partial exercise of an Option
or SAR shall not affect the right to exercise the Option or SAR from time to
time in accordance with the Plan and the applicable Agreement with respect to
remaining shares subject to the Option or related to the SAR. The exercise of
either an Option or Corresponding SAR shall result in the termination of the
other to the extent of the number of shares with respect to which the Option or
Corresponding SAR is exercised.
9.02 Payment. Unless otherwise provided by the Agreement, payment of the
-------
Option price shall be made in cash or a cash equivalent acceptable to the
Committee. Payment of all or part of the Option price also may be made by
surrendering shares of Common Stock to SUPERVALU. If Common Stock is used to
pay all or part of the Option price, the sum of the cash and cash equivalent and
the Fair Market Value (determined as of the day preceding the date of exercise)
of the shares surrendered must not be less than the Option price of the shares
for which the Option is being exercised.
-6-
<PAGE>
9.03 Installment Payment. If the Agreement so provides, and if the
-------------------
Participant is employed by the Company or an Affiliate on the date the Option is
exercised, payment of all or part of the Option price may be made in
installments. In that event, the Participant shall pay not less than ten
percent (10%) of the Option price of the shares acquired upon the exercise of an
Option. If the Agreement so provides, payment of such portion of the Option
price may be made in cash, a cash equivalent or by surrendering shares of Common
Stock to the Company. If Common Stock is used to pay part of the Option price,
the amount deemed to be paid with Common Stock shall be the Fair Market Value
(determined as of the day preceding the date of exercise) of the shares
surrendered.
In the event that payment of all or part of the Option price is made
in installments, the Company shall lend the Participant an amount equal to not
more than ninety percent (90%) of the Option price of the shares acquired by the
exercise of the Option. This amount shall be evidenced by the Participant's
promissory note and shall be payable in not more than five equal annual
installments, unless the amount of the loan exceeds the maximum loan value for
the shares purchased, which value shall be established from time to time by
regulations of the Board of Governors of the Federal Reserve System. In that
event, the note shall be payable in equal quarterly installments over a period
of time not to exceed five years. The Committee, however, may vary such terms
and make such other provisions concerning the unpaid balance of such purchase
price in the case of hardship, subsequent termination of employment, absence on
military or government service or subsequent death of the Participant as in its
discretion are necessary or advisable in order to protect the Company or
SUPERVALU, promote the purposes of the Plan and comply with regulations of the
Board of Governors of the Federal Reserve System relating to securities credit
transactions.
The Participant shall pay interest on the unpaid balance at the
minimum rate necessary to avoid imputed interest or original issue discount
under the Code. All shares purchased with cash borrowed from the Company shall
be pledged to the Company as security for the repayment thereof. In the
discretion of the Committee, shares of stock may be released from such pledge
proportionately as payments on the note (together with interest) are made,
provided the release of such shares complies with the regulations of the Federal
Reserve System relating to securities credit transactions then applicable.
While shares are so pledged, and so long as there has been no default in the
installment payments, such shares shall remain registered in the name of the
Participant, and he shall have the right to vote such shares and to receive all
dividends thereon.
9.04 Determination of Payment of Cash and/or Common Stock Upon Exercise of
---------------------------------------------------------------------
SAR. At the Committee's discretion, the amount payable as a result of the
- ---
exercise of a SAR may be settled in cash, Common Stock, or a combination of cash
and Common Stock. No fractional shares shall be deliverable upon the exercise
of a SAR but a cash payment will be made in lieu thereof.
9.05 Shareholder Rights. No Participant shall have any rights as a
------------------
stockholder with respect to shares subject to an Option or SAR until the date of
exercise of such Option or SAR.
-7-
<PAGE>
ARTICLE X
STOCK AWARDS
------------
10.01 Awards. In accordance with the provisions of Article IV, the
------
Committee will designate each individual to whom a Stock Award is to be made and
will specify the number of shares of Common Stock covered by such award;
provided, however, that no Participant may receive Stock Awards in any calendar
year for more than 37,500 shares of Common Stock. The preceding sentence shall
not limit the issuance of Stock Awards in settlement of Performance Share
awards.
10.02 Vesting. The Committee, on the date of the award, may, but shall
-------
not be required to, prescribe that a Participant's rights in the Stock Award
shall be forfeitable or otherwise restricted for a period of time set forth in
the Agreement. By way of example and not of limitation, the restrictions may
postpone transferability of the shares until the attainment of performance
objectives prescribed by the Committee or may provide that the shares will be
forfeited if the Participant separates from the service of the Company and its
Affiliates before the expiration of a stated term.
10.03 Performance Objectives. In accordance with Section 10.02, the
----------------------
Committee may prescribe that Stock Awards will become vested or transferable or
both based on objectives stated with respect to the Company's, an Affiliate's or
an operating unit's return on equity, earnings per share, total earnings,
earnings growth, total sales, sales growth, return on capital or return on
assets or based on Fair Market Value. If the Committee, on the date of the
award, prescribes that a Stock Award shall become nonforfeitable and
transferable only upon the attainment of performance objectives stated with
respect to one or more of the foregoing criteria, the shares subject to such
Stock Award shall become nonforfeitable and transferable only to the extent the
Committee certifies that such objectives have been achieved.
10.04. Shareholder Rights. In accordance with the terms of the Agreement,
------------------
a Participant will have all rights of a shareholder with respect to the Common
Stock covered by a Stock Award, including the right to receive dividends and
vote the shares; provided, however, that (a) a Participant may not sell,
transfer, pledge, exchange, hypothecate or otherwise dispose of Restricted
Stock, (b) the Company shall retain custody of the certificates evidencing
shares of Restricted Stock, and (c) the Participant shall deliver to the Company
a stock power, endorsed in blank, with respect to each award of Restricted
Stock. The limitations set forth in the preceding sentence shall not apply
after the Restricted Stock is, in accordance with the terms of the applicable
Agreement, transferable and no longer forfeitable.
-8-
<PAGE>
ARTICLE XI
AWARD OF PERFORMANCE SHARES
---------------------------
11.01. Award. In accordance with the provisions of Article IV, the
-----
Committee will designate individuals to whom an award of Performance Shares is
to be granted and will specify the number of shares of Common Stock covered by
such award; provided, however, that no Participant may receive Performance share
awards in any calendar year for more than 37,500 shares of common Stock.
11.02. Earning the Award. The Committee, on the date of the grant of an
-----------------
award, may prescribe that the Performance shares, or a portion thereof, will be
earned according to the terms of the applicable Agreement. By way of example
and not of limitation, the Agreement may specify that Performance Shares shall
be earned only upon the Participant's completion of a specified period of
employment with the Company or an Affiliate or upon the attainment of stated
performance objectives or goals. Such performance objectives or goals may be
based on the Company's, an Affiliate's or an operating unit's return on equity,
earnings per share, total earnings, earnings growth, total sales, sales growth,
return on capital, return on assets, or Fair Market Value. If the Committee, on
the date of the award, prescribes that Performance Shares shall be earned only
upon the attainment of performance objectives stated with respect to o ne or
more of the foregoing criteria, such Performance Shares shall be earned only to
the extent the Committee certifies that such objectives have been achieved.
11.03. Settlement. In the Committee's discretion, the amount payable when
----------
an award of Performance Shares is earned may be settled in cash, by the grant of
a Stock Award or a combination of cash and a Stock Award. A fractional share
shall not be deliverable when a Performance Share is settled, but a cash payment
will be made in lieu thereof.
11.04. Shareholder Rights. No Participant shall, as a result of receiving
------------------
an award of Performance Shares, have any rights as a shareholder until and to
the extent that the award of Performance Shares is earned and a Stock Award is
made. A Participant may not sell, transfer, pledge, exchange, hypothecate or
otherwise dispose of an award of Performance Shares or the right to receive
Common Stock thereunder other than by will or the laws of descent and
distribution. After and to the extent that an award of Performance Shares is
settled with a Stock Award, a Participant will have all the rights of a
shareholder as described in Plan section 11.03.
ARTICLE XII
ADJUSTMENT UPON CHANGE IN COMMON STOCK
--------------------------------------
The maximum number of shares that may be issued pursuant to
Options, SARs and Stock Awards under this Plan and the individual limits on the
award of Options, SARs, Stock Awards and Performance Shares in a calendar year
shall be proportionately adjusted, and the terms of outstanding awards of
Performance Shares, Options, SARs and Stock Awards shall be adjusted, as the
Committee shall determine to be equitably required in the event that the Company
(1) effects one or more stock dividends, stock split-ups, subdivisions or
consolidations of shares or (2) engages in a transaction to which Section 424 of
the Code applies. Any determination made under this Article XI by the Committee
shall be final and conclusive.
-9-
<PAGE>
The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
maximum number of shares that may be issued pursuant to Options, SARs and Stock
Awards under this Plan, the individual limits on the award of Options, SARs,
Stock Awards and Performance Shares in a calendar year or outstanding awards of
Performance Shares, Options, SARs or Stock Awards.
The Committee may award Performance Shares or grant Options, SARs
and Stock Awards in substitution for performance shares, stock awards, stock
options, stock appreciation rights or similar awards held by an individual who
becomes an employee of the Company or an Affiliate in connection with a
transaction described in the first paragraph of this Article XII.
Notwithstanding any provision of the Plan (other than the limitation of Article
V), the terms of such substituted award of Performance Shares, or grant of an
Option, SAR or Stock Award, shall be as the Committee, in its discretion,
determines is appropriate.
ARTICLE XIII
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
-----------------------------------------------------
No Option or SAR shall be exercisable, no Common Stock shall be
issued, no certificates for shares of Common Stock shall be delivered, and no
payment shall be made under this Plan except in compliance with all applicable
federal and state laws and regulations (including, without limitation,
withholding tax requirements), any listing agreement to which the Company is a
party, and the rules of all domestic stock exchanges on which the Company's
shares may be listed. The Company shall have the right to rely on an opinion of
its counsel as to such compliance. Any share certificate issued to evidence
Common Stock for which a Stock Award is granted or for which an Option or SAR is
exercised may bear such legends and statements as the Committee may deem
advisable to assure compliance with federal and state laws and regulations. No
Option or SAR shall be exercisable, no Stock Award shall be granted, no Common
Stock shall be issued, no certificate for shares shall be delivered and no
payment shall be made under this Plan until the Company has obtained such
consent or approval as the Committee may deem advisable from regulatory bodies
having jurisdiction over such matters.
ARTICLE XIV
GENERAL PROVISIONS
------------------
14.01. Effect on Employment. Neither the adoption of this Plan, its
--------------------
operation nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any individual any right to continue in the employ or
service of the Company or an Affiliate or in any way affect any right and power
of the Company or an Affiliate to terminate the employment or service of any
individual at any time with or without assigning a reason therefor.
-10-
<PAGE>
14.02. Unfunded Plan. The Plan, insofar as it provides for awards or
-------------
grants, shall be unfunded, and the Company shall not be required to segregate
any assets that may at any time be represented by awards or grants under this
Plan. Any liability of the Company to any person with respect to any award or
grant under this Plan shall be based solely upon any contractual obligations
that may be created pursuant to this Plan. No such obligation of the Company
shall be deemed to be secured by any pledge of, or other encumbrance on, any
property of the Company.
14.03. Disposition of Stock. A Participant shall notify the Committee of
--------------------
any sale or other disposition of Common Stock acquired pursuant to an Option
that was an incentive stock option if such sale or disposition occurs (a) within
two (2) years of the grant of an Option or (b) within one (1) year of the
issuance of the Common Stock to the Participant. Such notice shall be in
writing and directed to the Secretary of SUPERVALU.
14.04. Withholding Taxes. Each Participant shall be responsible for
-----------------
satisfying any income and employment tax withholding obligations attributable to
participation in the Plan. Unless otherwise provided by the Agreement, any such
withholding tax obligations may be satisfied in cash (including from any cash
payable in settlement of an award of Performance Shares or an SAR) or a cash
equivalent acceptable to the Committee. Any withholding tax obligations may
also be satisfied by surrendering shares of Common Stock to the Company, by
withholding or reducing the number of shares of Common Stock otherwise issuable
to the Participant upon the exercise of an Option or SAR, the settlement of an
award of Performance Shares or the grant or vesting of a Stock Award, or by any
other method as may be approved by the Committee. If shares of Common Stock are
used to pay all or part of such withholding tax obligation, the Fair Market
Value of the shares surrendered, withheld or reduced shall be determined as of
the day preceding the date the Option or SAR is exercised, the Restricted stock
vests or the Performance Shares are earned, as applicable.
14.05. Rules of Construction. Headings are given to the articles and
---------------------
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
ARTICLE XV
AMENDMENT
---------
The Board may amend or terminate this Plan from time to time;
provided, however, that no amendment may become effective until shareholder
approval is obtained if (1) the amendment materially increases the aggregate
number of shares of common Stock that may be issued under the Plan, (2) the
amendment materially changes the class of individuals eligible to become
Participants or (3) the amendment materially increases the benefits that may be
provided under the Plan. No amendment shall, without a Participant's consent,
adversely affect any rights of such Participant under any outstanding award of
Performance Shares or any Option, SAR or Stock Award outstanding at the time
such amendment is made.
-11-
<PAGE>
ARTICLE XVI
DURATION OF PLAN
----------------
No Performance Shares may be awarded and no Option, SAR or Stock
Award may be granted under this Plan after March 6, 2006. Awards of Performance
Shares and Options, SARs and Stock Awards granted on or before that date shall
remain valid in accordance with their terms.
ARTICLE XVII
INCENTIVE AWARDS
----------------
17.01. Awards. The Committee shall designate Participants to whom
------
Incentive Awards shall be made. All Incentive Awards shall be determined
exclusively by the Committee under procedures established by the committee;
provided, however, that in any calendar year, no Participant may receive an
Incentive Award exceeding $1 million.
17.01. Earning an Award. The Committee, at the time an Incentive Award is
----------------
made, shall specify the terms and conditions that govern the award. Such terms
and conditions may include, by way of example and not of limitation,
requirements that the Participant complete a specified period of employment with
the Company or an Affiliate or that the Company, an Affiliate, an operating unit
or the Participant attain stated objectives or goals as a prerequisite to
payment under an Incentive Award. Such performance objectives or goals may be
based on one or more of the Company's, an Affiliate's or an operating unit's
gross, operating net earnings before or after taxes, return on equity, return on
capital, return on sales, return on assets or net assets, earnings per share,
cash flow per share, book value per share, earnings growth, sales growth, volume
growth, cash flow (as defined by the Committee), Fair Market Value, share price
or total shareholder return, market share, economic value added, market value
added, productivity, legal of expenses, qualify, safety, customer satisfaction,
total sales, total earnings or peer group comparisons of any of the
aforementioned objectives. Such goals may be set for a one-year period or a
longer period. If the Committee, on the date of an award, prescribes that the
Incentive Award shall be earned only upon the attainment of performance
objectives stated with respect to one or more of the foregoing criteria, such
Incentive Award shall be earned only to the extent that the Committee certifies
that such objectives or objectives have been achieved. The Committee, at the
time an Incentive Award is made, shall also specify when amounts shall be
payable under the Incentive Award and whether amounts shall be payable in the
event of the Participant's death, disability, retirement or a change of control.
Except with respect to those Participants who are covered employees
(as determined under Code Section 162(m)(3)) and notwithstanding any other
provision of the Plan, the Committee, in its discretion may adjust the terms,
conditions or other requirements applicable to Incentive Awards and may increase
or decrease the amounts otherwise payable under an Incentive Award, to reflect
unusual or extraordinary transactions or events. The Committee may make such
adjustments with respect to one or more Participants, with respect to all
Participants as to Incentive Awards made during a particular year or with
respect to all outstanding Incentive Awards.
-12-
<PAGE>
17.03 Settlement. In the Committee's discretion, the amount payable when
----------
an Incentive Award is earned may be settled in cash, by the issuance of Common
Stock or a combination of cash and Common Stock. A fractional share shall not
be deliverable when an Incentive Award is settled, but a cash payment shall be
made in lieu thereof.
17.04. Shareholder Rights. No Participants shall, as a result of
------------------
receiving an Incentive Award, have any rights as a shareholder of SUPERVALU
until and then only to the extent that the Incentive Award is earned and Common
Stock is distributed. A Participant may not sell, transfer, pledge, exchange,
hypothecate or otherwise dispose of an Incentive Award or the rights to receive
Common Stock thereunder other than by will or the laws of descent and
distribution. After and to the extent that an Incentive Award is settled in
Common Stock, a Participant will have all the rights of a shareholder of
SUPERVALU.
17.05. Administration. The Committee shall construe and administer the
--------------
Plan, including this Article XVII relating to Incentive Awards, as if the term
"Incentive Award" had been included in all Plan provisions of general
application in a manner similar to the term Performance Shares. For example,
shares of Common Stock issued pursuant to Incentive Awards shall reduce the
aggregate number of shares of Common Stock that may be issued under the Plan in
accordance with Article V. As provided in Article III, the Committee's
authority to interpret the Plan in this regard shall be absolute.
-13-
<PAGE>
EXHIBIT 12.1
SUPERVALU INC. and Subsidiaries
Ratio of Earnings to Fixed Charges
For Fiscal Years Ended
<TABLE>
<CAPTION>
(In thousands, except ratios) 2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings before income taxes $ 447,454 $ 316,261 $ 384,780 $ 280,512 $ 267,692
Less undistributed earnings of less than
fifty percent owned affiliates (6,605) (5,943) (7,388) (15,813) (11,136)
--------- --------- --------- --------- ---------
Earnings before income taxes 440,849 310,318 377,392 264,699 256,556
Interest expense 154,482 124,111 133,619 136,831 140,150
Interest on operating leases 23,838 18,574 18,010 16,950 17,059
--------- --------- --------- --------- ---------
$ 619,169 $ 453,003 $ 529,021 $ 418,480 $ 413,765
========= ========= ========= ========= =========
Total fixed charges 178,320 142,685 151,629 153,781 157,209
========= ========= ========= ========= =========
Ratio of earnings to fixed charges 3.47 3.17 3.49 2.72 2.63
========= ========= ========= ========= =========
</TABLE>
<PAGE>
EXHIBIT 21.1
SUPERVALU INC.
Subsidiaries
As of March 15, 2000
(All are Subsidiary Corporations 100% Owned Directly or Indirectly, Except as
Noted)
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING
JURISDICTION SECURITIES OWNED BY
OF ORGANIZATION IMMEDIATE PARENT
--------------- ----------------
<S> <C> <C>
SUPERVALU INC.
Blaine North 1996 L.L.C. Delaware Limited Liability Company 70%
Bloomington 1998 L.L.C. Minnesota Limited Liability Company 40%
Burnsville 1998 L.L.C. Minnesota Limited Liability Company 77.5%
Diamond Lake 1994 L.L.C. Delaware Limited Liability Company 25%
Fridley 1998 L.L.C. Minnesota Limited Liability Company 74.5%
J. M. Jones Equipment Company Delaware 100%
Keltsch Bros., Inc. Indiana 100%
Maplewood East 1996 L.L.C. Delaware Limited Liability Company 70%
Max Club, Inc. Minnesota 100%
Monticello 1998 L.L.C. Minnesota Limited Liability Company 90%
NAFTA Industries Consolidated, Inc. Texas 51%
NAFTA Industries, Ltd. Texas Limited Partnership 51%
International Data, LLC Indiana Limited Liability Company 50%
NC&T Supermarkets, Inc. Ohio 100%
Nevada Bond Investment Corp. I Nevada 100%
Planmark Architecture of Oregon, P.C. Oregon 100%
Planmark, Inc. Minnesota 100%
Plymouth 1998 L.L.C. Minnesota Limited Liability Company 62.5%
Preferred Products, Inc. Minnesota 100%
Richfood Holdings, Inc. Delaware 100%
FF Acquisition LLC Virginia Limited Liability Company 100%
Market Funding, Inc. Delaware 100%
Market Transportation Services, Inc. Delaware 100%
Penn Perishables, Inc. Virginia 100%
Retail Licensing Corporation Delaware 100%
GV Holdings, Inc. Delaware 100%
Great Valu LLC Virginia Limited Liability Company 100%
Richfood, Inc. Virginia 100%
GWM Holdings, Inc. Virginia 100%
MFFL, Inc. Virginia 100%
Market Brands, Inc. Delaware 100%
Market Improvement Corporation Virginia 100%
Market Insurance Agency, Inc. Virginia 100%
Market Leasing Company Virginia 100%
Maryland Retail Services, Inc. Virginia 100%
Retail Funding Corporation, Inc. Virginia 100%
Rich-Temps, Inc. Virginia 100%
Rotelle, Inc. Pennsylvania 100%
Penn Brands, Inc. Delaware 100%
Rotelle Management, Inc. Pennsylvania 100%
Spring House Leasing, Inc. Pennsylvania 100%
Super Rite Foods, Inc. Delaware 100%
Foodarama Incorporated Delaware 100%
Foodarama, Inc. Maryland 100%
Foodarama Group, Inc. Maryland 100%
Midway Markets of Delaware, Inc. Delaware 100%
Food-A-Rama G.U., Inc. Maryland 100%
Oxon Run, Inc. 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING
JURISDICTION SECURITIES OWNED BY
OF ORGANIZATION IMMEDIATE PARENT
--------------- ----------------
<S> <C> <C>
SRF Subsidiary Corporation Delaware 100%
Richfood Procurement LLC Virginia Limited Liability Company 100%
Dart Group Corporation Delaware 100%
Bridgeview Warehouse LLC Delaware Limited Liability Company 100%
75/th/ Avenue Headquarters LLC Delaware Limited Liability Company 100%
Cabot Morgan Real Estate Company Delaware 100%
Dart Group Financial Corporation Delaware 100%
Discount Books East, Inc. Delaware 100%
Pennsy Warehouse Leasing Corporation Maryland 100%
Pennsy Drive Warehouses LLC Delaware 100%
California Ontario Warehouse LLC Delaware Limited Liability Company 100%
SFW Holding Corp. Delaware 100%
Shoppers Food Warehouse Corporation Delaware 100%
RBC Corporation Maryland 100%
SFW DC Corp. District of Columbia 100%
SFW Investment Corporation Delaware 100%
Risk Planners Agency of Ohio, Inc. Ohio 100%
Risk Planners of Mississippi, Inc. Mississippi 100%
Risk Planners of Pennsylvania, Inc. Pennsylvania 100%
Risk Planners, Inc. Minnesota 100%
Risk Planners of Illinois, Inc. Illinois 100%
Risk Planners of Montana, Inc. Montana 100%
Risk Planners of Washington, Inc. Washington 100%
RSI-SUPERVALU, Inc. Minnesota 100%
Shakopee 1997 L.L.C. Delaware Limited Liability Company 25%
Silver Lake 1996 L.L.C. Delaware Limited Liability Company 51%
SUPERVALU Finance, Inc. Minnesota 100%
SUPERVALU Management Corp. Minnesota 100%
SUPERVALU Pharmacies, Inc. Minnesota 100%
SUPERVALU Receivables, Inc. Delaware 100%
SUPERVALU Transportation, Inc. Minnesota 100%
SUVACO Insurance International, Ltd. Islands of Bermuda 100%
Sweet Life Products Co., Inc. New York 75%
Valu Ventures, Inc. Minnesota 100%
Valu Ventures 2, Inc. Minnesota 100%
SUPERVALU Terre Haute Limited Partnership Indiana Limited Partnership 100%
Western Dairy Distributors, Inc. Colorado 100%
Supermarket Operators of America Inc. Delaware 100%
Advantage Logistics - Midwest, Inc. Delaware 100%
Advantage Logistics - Southeast, Inc. Alabama 100%
Clyde Evans Markets, Inc. Ohio 100%
Scott's Food Stores, Inc. Indiana 100%
SV Ventures* Indiana General Partnership 50%
SUPERVALU Holdings, Inc. Missouri 100%
Airway Redevelopment Corporation Missouri 100%
Augsburger's, Inc. Indiana 100%
Butson's Enterprises, Inc. New Hampshire 100%
Butson's Enterprises of Vermont, Inc. Vermont 100%
Keatherly, Inc. New Hampshire 100%
Peoples Market, Incorporated New Hampshire 100%
Violette's Supermarkets, Inc. New Hampshire 100%
East Main Development, Inc. Rhode Island 100%
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF VOTING
JURISDICTION SECURITIES OWNED BY
OF ORGANIZATION IMMEDIATE PARENT
--------------- ----------------
<S> <C> <C>
GM Distributing, Inc. California 100%
John Alden Industries, Inc. Rhode Island 100%
Livonia Holding Company, Inc. Michigan 100%
Foodland Distributors Michigan General Partnership 50%
Mohr Developers, Inc. Missouri 100%
Mohr Distributors of Litchfield, Inc. Illinois 100%
Moran Foods, Inc. Missouri 100%
Save-A-Lot Food Stores, Inc. Missouri 100%
Lot 18 Redevelopment Corp. Missouri 100%
Rostraver Township L.L.C. Pennsylvania 85%
Rostraver Township Pennsylvania Limited Partnership 1%
Rostraver Township Pennsylvania Limited Partnership 84.15%
Shop 'N Save Warehouse Foods, Inc. Missouri 100%
Shop `N Save St. Louis, Inc. Missouri 100%
WSI Satellite, Inc. Missouri 100%
SUPERVALU Holdings - PA LLC Pennsylvania 100%
SV Markets, Inc. Ohio 100%
SV Ventures* Indiana General Partnership 50%
SVH Holding, Inc. Delaware 100%
SVH Realty, Inc. Delaware 100%
Total Insurance Marketing Enterprises, Inc. Pennsylvania 100%
Ultra Foods, Inc. New Jersey 100%
Verona Road Associates, Inc. Pennsylvania 100%
WC&V Supermarkets, Inc. Vermont 100%
Wetterau Finance Co. Missouri 100%
Wetterau Insurance Co. Ltd. Bermuda 100%
</TABLE>
* SV Ventures is a general partnership between SUPERVALU Holdings, Inc. and
Scott's Food Stores, Inc. each of which holds a 50% interest. Both general
partners are direct subsidiaries of Supermarket Operators of America, Inc.
-3-
<PAGE>
Exhibit 23.1
Independent Auditors' Consent
The Board of Directors
SUPERVALU INC:
We consent to incorporation by reference in the registration statements No. 33-
28310, No. 33-16934, No. 2-56896, No. 33-50071, No. 333-10151, No. 333-24813,
No. 333-61365, No. 333-72851, No.333-89157, No. 333-32354 and No. 333-32356 on
Form S-8 and No. 33-56415 and No. 333-94965 on Form S-3 of SUPERVALU INC. of our
reports dated April 4, 2000, relating to the consolidated balance sheets of
SUPERVALU INC. and subsidiaries as of February 26, 2000 and February 27, 1999,
and the related consolidated statements of earnings, stockholders' equity, and
cash flows for the years then ended, and the related schedule, which reports
appear in the 2000 annual report on Form 10-K of SUPERVALU INC.
/s/ KPMG LLP
Minneapolis, Minnesota
April 26, 2000
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-28310, No. 33-16934, No. 2-56896, No. 33-50071, No. 333-10151, No. 333-24813,
No. 333-72851, No. 333-61365, No. 333-89157, No. 333-32354, No. 333-32356 and on
Form S-8 and No. 33-56415 and No. 333-94965 on Form S-3 of our reports dated
April 6, 1998 (April 24, 2000 as to Industry Segment Information), appearing in
or incorporated by reference in this Annual Report on Form 10-K of SUPERVALU
INC. for the year ended February 26, 2000.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
May 1, 2000
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Michael W. Wright, David L. Boehnen and John P. Breedlove, and each of them, the
undersigned's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in such person's name,
place and stead, in any and all capacities (including the undersigned's capacity
as Director and/or Principal Executive Officer, principal Financial Officer,
principal Accounting Officer or any other officer of SUPERVALU INC.), to sign
SUPERVALU's Annual Report on Form 10-K to be filed pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, for the fiscal year
ended February 26, 2000, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in or about the premises, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed as of the 12th
day of April, 2000, by the following persons:
/s/ Lawrence A. Del Santo /s/ Charles M. Lillis
- ----------------------------- --------------------------------
Lawrence A. Del Santo Charles M. Lillis
/s/ Susan E. Engel /s/ Harriet Perlmutter
- ----------------------------- --------------------------------
Susan E. Engel Harriet Perlmutter
/s/ Edwin C. Gage /s/ Steven S. Rogers
- ----------------------------- --------------------------------
Edwin C. Gage Steven S. Rogers
/s/ William A. Hodder /s/ Carole F. St. Mark
- ----------------------------- --------------------------------
William A. Hodder Carole F. St. Mark
/s/ Garnett L. Keith /s/ Michael W. Wright
- ----------------------------- --------------------------------
Garnett L. Keith Michael W. Wright
/s/ Richard L. Knowlton /s/ Pamela K. Knous
- ----------------------------- --------------------------------
Richard L. Knowlton Pamela K. Knous
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF FEBRUARY 25, 2000 AND THE CONSOLIDATED
STATEMENT OF EARNINGS FOR THE 52 WEEKS ENDED FEBRUARY 26, 2000 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-26-2000
<PERIOD-START> FEB-28-1999
<PERIOD-END> FEB-26-2000
<CASH> 10,920
<SECURITIES> 0
<RECEIVABLES> 592,847
<ALLOWANCES> (30,399)
<INVENTORY> 1,490,454
<CURRENT-ASSETS> 2,177,639
<PP&E> 3,616,302
<DEPRECIATION> (1,462,290)
<TOTAL-ASSETS> 6,495,353
<CURRENT-LIABILITIES> 2,509,620
<BONDS> 1,953,741
0
0
<COMMON> 150,670
<OTHER-SE> 1,670,809
<TOTAL-LIABILITY-AND-EQUITY> 6,495,353
<SALES> 20,339,079
<TOTAL-REVENUES> 20,339,079
<CGS> 18,111,296
<TOTAL-COSTS> 18,111,296
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9,895
<INTEREST-EXPENSE> 154,482
<INCOME-PRETAX> 447,454
<INCOME-TAX> 204,513
<INCOME-CONTINUING> 242,941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 242,941
<EPS-BASIC> 1.88
<EPS-DILUTED> 1.87
</TABLE>
<PAGE>
EXHIBIT 99.1
Cautionary Statements for Purposes of the Safe Harbor Provisions
of the Securities Litigation Reform Act
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 ("Act"), SUPERVALU INC. (the "Company") is filing
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in forward-
looking statements made by, or on behalf of the Company. When used in this
Annual Report on Form 10-K for the fiscal year ended February 26, 2000 and in
future filings by the Company with the Securities and Exchange Commission, in
the Company's press releases, other communications, and in oral statements made
by or with the approval of an authorized executive officer, the words or phrases
"will likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project", "believe" or similar expressions are intended to identify
forward-looking statements within the meaning of the Act. The following
cautionary statements are for use as a reference to a readily available written
document in connection with forward looking statements as defined in the Act.
These factors are in addition to any other cautionary statements, written or
oral, which may be made or referred to in connection with any such forward-
looking statement.
Retail Business Risks
The Company's retail segment faces risks which may prevent the Company from
maintaining or increasing retail sales and earnings including: competition from
other retail chains, supercenters, non-traditional competitors, and emerging
alternative formats; operating risks of certain strategically important retail
operations; the potential disruption from labor disputes; and adverse impact
from the entry of other retail chains, supercenters and non-traditional or
emerging competitors into markets where the Company has a retail concentration.
Wholesale Business Risks
The Company's sales and earnings in its food distribution operations are
dependent on: (i) the Company's ability to attract new customers and retain
existing customers, such as Kmart Corporation; (ii) the success of its customers
in competing with other retail chains, supercenters, and non-traditional
competitors; and (iii) its ability to control costs. While the Company believes
that its efforts will enable it to attain its goals, certain factors could
adversely impact the Company's results, including: decline of sales to its
independent retailer customer base due to competition and other factors; loss of
corporate retail sales due to increased competition and other risks detailed
more fully below; consolidations of retailers or competitors; increased self-
distribution by chain retailers; increase in operating costs; increase in credit
risk associated with open accounts and financing activities with independent
retailers; the potential disruption from labor disputes; the possibility that
the Company will incur additional costs and expenses due to further
rationalization or consolidation of distribution centers; entry of new or non-
traditional distribution systems into the industry; possible delays or increased
costs in implementing its initiatives; and possible loss of retailer customers
who are not compatible with such changes.
Risks of Expansion and Acquisitions
The Company intends to continue to grow its retail and wholesale businesses in
part through acquisitions. Expansion is subject to a number of risks, including
the adequacy of the Company's capital resources; the location of suitable store
or distribution center sites and the negotiation of acceptable lease terms;
ability to hire, train and integrate employees; and possible costs and other
risks of integrating or adapting operational systems. In addition, acquisitions
involve a number of special risks, including: making
1
<PAGE>
acquisitions at acceptable rates of return; the diversion of management's
attention to assimilation of the operations and personnel of the acquired
business; potential adverse short-term effects on the Company's operating
results; and amortization of acquired intangible assets.
Liquidity
Management expects that the Company will continue to replenish operating assets
and reduce aggregate debt with internally generated funds and capital leases
unless additional funds are necessary to complete acquisitions. If capital
spending significantly exceeds anticipated capital needs, additional funding
could be required from other sources. In addition, acquisitions could affect
the Company's borrowing costs and future financial flexibility.
Litigation
While the Company believes that it is currently not subject to any material
litigation, the costs and other effects of legal and administrative cases and
proceedings and settlements are impossible to predict with certainty. The
current environment for litigation involving food wholesalers may increase the
risk of litigation being commenced against the Company. The Company would incur
the costs of defending any such litigation whether or not any claim had merit.
The foregoing should not be construed as exhaustive and the Company disclaims
any obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
2
