SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Supervalu, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
LOGO
SUPERVALU INC.
NOTICE OF 1995 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 28, 1995
TO THE STOCKHOLDERS OF SUPERVALU INC.:
Notice is hereby given that the Annual Meeting of Stockholders of SUPERVALU
INC. (the "Company") will be held on Wednesday, June 28, 1995, at 10:30 a.m.,
local time, at The Minneapolis Convention Center, 1301 Second Avenue South,
Minneapolis, Minnesota 55403 for the following purposes:
. to elect four directors of the Company;
. to vote on ratification of the appointment of Deloitte & Touche LLP to
audit the books and accounts of the Company for the fiscal year ending
February 24, 1996;
. to consider a stockholder proposal; and
. to transact such other business as may properly come before the meeting.
Common and Preferred Stockholders of record at the close of business on May
5, 1995, are entitled to one vote for each share held of record at that time.
IMPORTANT: We hope you will be able to attend the meeting in person and you
are cordially invited to attend. If you expect to attend the meeting, please
check the appropriate box on the proxy card when you return your proxy. NOTE
THAT THIS YEAR'S ANNUAL MEETING IS AT THE MINNEAPOLIS CONVENTION CENTER.
Parking is available in the Plaza municipal parking ramp and the Orchestral
Hall ramp located across the street from The Minneapolis Convention Center. A
map showing the location of the Convention Center and designated parking areas
is included on the enclosed Proxy card. If you need special assistance because
of a disability, please contact the Corporate Secretary at P.O. Box 990,
Minneapolis, MN 55440.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND RETURN YOUR
PROXY PROMPTLY. It is important that all stockholders, however small their
holdings, execute, date and return the proxy, utilizing the enclosed envelope
to which no postage need be affixed if mailed in the United States.
BY ORDER OF THE BOARD OF DIRECTORS
TERESA H. JOHNSON
Secretary
May 25, 1995
SUPERVALU INC.
P.O. BOX 990
MINNEAPOLIS, MINNESOTA 55440
PROXY STATEMENT
This Proxy Statement is furnished for solicitation by the Board of Directors
of SUPERVALU INC. (hereinafter referred to as the "Company") of proxies in the
enclosed form from holders of Common and Preferred Stock to be voted at the
Annual Meeting of Stockholders to be held on June 28, 1995, at 10:30 a.m.,
local time, at The Minneapolis Convention Center, 1301 Second Avenue South,
Minneapolis, Minnesota 55403 and at any adjournment of the meeting. This Proxy
Statement and accompanying form of proxy will be first mailed or given to
stockholders on or about May 25, 1995.
The cost of soliciting proxies will be borne by the Company. Arrangements
will be made with brokerage houses, custodians, nominees and other fiduciaries
to send proxy material to their principals, and the Company will reimburse them
for their expenses. In addition to solicitation by mail, certain officers and
directors of the Company, who will receive no compensation for their services
other than their regular salaries, may solicit proxies by telephone, telegraph
and personally. The Company has also retained Georgeson & Company, Inc. to
assist in the solicitation of proxies for an estimated fee of $10,000 plus out-
of-pocket expenses.
The Company has two classes of capital stock outstanding: Common Stock, par
value $1 per share, and Preferred Stock, no par value. The holders of Common
Stock and Preferred Stock of record at the close of business on May 5, 1995,
are entitled to vote at the meeting. Holders of Common Stock and Preferred
Stock are entitled to one vote for each share held of record, voting together
as one class, on each proposal being voted upon 69,085,185 shares of Common
Stock and 5,876 shares of Preferred Stock are eligible to vote at the meeting.
Shares of Common Stock and Preferred Stock represented by proxies in the form
solicited will be voted in the manner directed by the holder of such shares,
and, if no direction is made, such shares will be voted for the election of the
nominees for director named in this Proxy Statement, and for the proposal to
appoint Deloitte & Touche LLP as the auditors for the 1996 fiscal year; such
shares will be voted against the stockholder proposal in item 3. If an executed
proxy card is returned and the stockholder has voted "abstain" on any matter
(or "withhold authority" as to the election of any director), the shares
represented by such proxy will be considered present at the meeting for
purposes of determining a quorum and for purposes of calculating the vote, but
will not be considered to have been voted in favor of such matter. If an
executed proxy is returned by a broker holding shares in street name which
indicates that the broker does not have discretionary authority as to certain
shares to vote on one or more matters, such shares will be considered present
at the meeting for purposes of determining a quorum, but will not be considered
to be represented at the meeting for purposes of calculating the vote with
respect to such matters. A stockholder may revoke his or her proxy at any time
before it is voted by written notice to the Secretary, or by filing with the
Secretary another proxy bearing a later date, or by appearing and voting at the
meeting. The affirmative vote of a majority of the shares of Common Stock and
Preferred Stock entitled to vote, present in person or by proxy at the 1995
Annual Meeting of Stockholders and voting together as one class, will be
necessary for the election of directors and the approval of each other matter
submitted to the stockholders for approval at the Annual Meeting.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the only persons
or groups known to the Company as of April 1, 1995, to be the beneficial owner
of more than 5% of its Common Stock.
AMOUNT AND
NAME AND ADDRESS OF NATURE OF PERCENT
BENEFICIAL HOLDER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
INVESCO PLC 7,064,200 (1) 9.9% (3)
11 Devonshire Square
London, EC2M 4YR
England
FMR Corp. 6,743,338 (2) 9.43%(4)
82 Devonshire Street
Boston, MA 02109
--------
(1) Based on information in a Schedule 13G Report dated February 10, 1995,
delivered to the Company and indicating that INVESCO PLC and certain of its
subsidiaries are the beneficial owners of 7,064,200 shares of Common Stock
and possess shared voting and dispositive power with respect to such
shares.
(2) Based on information in a Schedule 13G Report dated February 13, 1995,
delivered to the Company and indicating that FMR Corp. and certain of its
subsidiaries are beneficial owners of 6,743,338 shares of Common Stock and
possess sole dispositive power with respect to all such shares and sole
voting power with respect to 259,771 of such shares.
(3) As of February 10, 1995.
(4) As of February 13, 1995.
2
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information, as of March 24, 1995, concerning
beneficial ownership of the Company's Common Stock by each director and
nominee, by each of the executive officers named in the Summary Compensation
Table on page 8, and by all directors and executive officers as a group. The
definition of beneficial ownership for proxy statement purposes includes shares
over which a person has sole or shared voting power, and shares over which a
person has sole or shared dispositive power, whether or not a person has any
economic interest in the shares.
AMOUNT AND NATURE OPTIONS
NAME OF OF BENEFICIAL EXERCISABLE WITHIN PERCENT OF
BENEFICIAL OWNER OWNERSHIP(1)(2) 60 DAYS(3) CLASS
---------------- ----------------- ------------------ ----------
Herman Cain 1,000 2,100 *
Stephen I. D'Agostino 800 2,100 *
Edwin C. Gage 15,700 2,100 *
Vernon H. Heath 2,000 2,100 *
William A. Hodder 1,400 900 *
Garnett L. Keith, Jr. 2,000 2,100 *
Richard L. Knowlton 1,000 -0- *
Richard D. McCormick 1,669 2,100 *
Harriet Perlmutter 6,700 2,100 *
Carole F. St. Mark 1,700 900 *
Winston R. Wallin 1,000 2,100 *
Michael W. Wright 215,184 222,268 *
Charles M. Lillis -0- -0- *
Laurence L. Anderson 54,410 95,502 *
Phillip A. Dabill 42,189 77,734 *
Jeffrey C. Girard 11,011 72,750 *
Jeffrey Noddle 24,945 84,467 *
All directors and
executive officers
as a group
(30 persons) 477,785 947,757 (3)
--------
* Less than 1%.
(1) Includes 21,200 shares held by or for children of Mr. Wright, as to which
shares he disclaims beneficial ownership; and 8,000 shares held in a
retirement trust for Mr. Wright.
(2) The persons listed have sole voting and investment power with respect to
the shares listed except the following persons have shared voting and
investment power: Ms. Perlmutter: 1,500 shares; Mr. McCormick: 735 shares;
Mr. Wright: 21,776 shares; Mr. Gage: 4,000 shares; and Mr. Anderson: 15,855
shares.
(3) All directors and executive officers as a group (30 persons) beneficially
owned 1,425,542 shares of the outstanding Common Stock constituting
approximately 2% of the outstanding Common Stock of the Company as of March
24, 1995. Options exercisable within 60 days are deemed beneficially owned.
3
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock to file with the
Securities and Exchange Commission (the "Commission") initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. The Company believes that during the fiscal year
ended February 25, 1995, its directors, executive officers, and holders of more
than 10% of the Company's Common Stock complied with all Section 16(a) filing
requirements. In making these statements, the Company has relied upon the
written representations of its directors and executive officers.
ELECTION OF DIRECTORS
(ITEM 1)
Pursuant to the Bylaws of the Company, the Board is divided into three
classes with the number of directors to be divided as equally as possible among
the three classes. Directors are elected for staggered terms of three years.
The Bylaws of the Company also provide that in the event of any vacancy on the
Board of Directors occurring during the year, the vacant directorship may be
filled by the vote of the remaining directors until the next Annual Meeting, at
which time the stockholders shall elect a director to fill the balance of the
unexpired term or the term established by the Board pursuant to the Bylaws.
Herman Cain, Stephen D'Agostino, Charles M. Lillis and Michael W. Wright are
nominated for three-year terms expiring in 1998. There are currently 12 members
of the Board of Directors.
The Board of Directors is informed that each of the four nominees is willing
to serve as a director; however, if any nominee is unable to serve or for good
cause will not serve, the proxy may be voted for such other person as the
proxies shall, in their discretion, determine.
The following sets forth information, as of March 17, 1995, concerning the
four nominees for election as directors of the Company and as to the eight
directors of the Company whose terms of office will continue after the Annual
Meeting.
NOMINEES FOR ELECTION AS DIRECTORS FOR
TERMS EXPIRING AT THE ANNUAL MEETING IN 1998
HERMAN CAIN, age 49; President and Chief Executive Officer of Godfather's
Pizza, Inc. (a company engaged in the operation and franchising of pizza
restaurants) since 1986. Mr. Cain was elected a director of the Company in
1991. He is also a director of Whirlpool Corporation, Federal Reserve Bank of
Kansas City and Utilicorp United, Inc.
STEPHEN I. D'AGOSTINO, age 61; Chairman of D'Agostino Investments (an
investment management company) since 1992. From 1988 to 1992, he was Chairman
of Lord Capital Corporation (an investment management company). Mr. D'Agostino
was elected a director of the Company in 1983. He is also a director of
Catalina Marketing Corp. and Kysor Industrial Corporation.
CHARLES M. LILLIS, age 53; Executive Vice President of U S WEST, Inc. (a
diversified multimedia communications company) since 1987, and President and
Chief Executive Officer of U S WEST Media Group, a newly created division of U
S WEST, Inc., since April 1995. Mr. Lillis is also a director of Commercial
Federal Bank Corp.
MICHAEL W. WRIGHT, age 56; Chairman of the Board, President, and Chief
Executive Officer of the Company since 1982. Mr. Wright was elected a director
of the Company in 1977. He is also a director of Honeywell Inc., The Musicland
Group, Inc., ShopKo Stores, Inc. and Norwest Corporation.
4
DIRECTORS WHOSE TERMS EXPIRE
AT THE ANNUAL MEETING IN 1997
VERNON H. HEATH, age 66; Chairman of the Board of Rosemount Office Systems,
Inc. (an office furnishings company) since October, 1994. Mr. Heath was
Chairman of the Board of Rosemount Inc. (a company engaged in the manufacture
of measurement and control instrumentation) from 1991 to February, 1994. From
1968 to 1991, he was Chairman and Chief Executive Officer of that company. Mr.
Heath was elected a director of the Company in 1982. He is also a director of
Medtronic, Inc. and The Tennant Company.
WILLIAM A. HODDER, age 63; Chairman, Chief Executive Officer and a Director
of Donaldson Company, Inc. (a manufacturer of filtration and noise abatement
equipment) since 1984. Mr. Hodder was elected a director of the Company in
1990. He is also a director of Norwest Corporation, The Tennant Company and
ReliaStar Financial Corp.
HARRIET PERLMUTTER, age 63; Trustee of the Papermill Playhouse (The State
Theatre of New Jersey). Ms. Perlmutter was elected a director of the Company in
1978.
WINSTON R. WALLIN, age 69; Chairman of the Board and a director of Medtronic,
Inc. (a manufacturer of therapeutic medical devices). Mr. Wallin has been a
director of Medtronic since 1978 and Chairman since 1986. From 1985 to his
retirement in 1991, Mr. Wallin was President and Chief Executive Officer of
that company. Mr. Wallin was elected a director of the Company in 1991. He is
also a director of Bemis Company.
DIRECTORS WHOSE TERMS EXPIRE
AT THE ANNUAL MEETING IN 1996
EDWIN C. GAGE, age 54; Chairman and Chief Executive Officer of GAGE Marketing
Group, LLC (an integrated marketing services company) since 1991. Mr. Gage was
President and Chief Executive Officer of Carlson Companies, Inc. (a diversified
services company principally engaged in hotel, restaurant, travel services and
incentives businesses) from 1989 to 1991, and from 1984 to 1989 he was
President and Chief Operating Officer of that company. Mr. Gage was elected a
director of the Company in 1986. He is also a director of Fingerhut Companies,
Inc.
GARNETT L. KEITH, JR., age 59; Vice Chairman of The Prudential Insurance
Company of America (an insurance company) since 1984. Mr. Keith was elected a
director of the Company in 1984. He is also a director of Pan-Holding Societe
Anonyme.
RICHARD L. KNOWLTON, age 62; Chairman of the Board of Hormel Foods
Corporation (a food manufacturing company) since 1984. From 1979 to 1992 Mr.
Knowlton was President and from 1981 to 1992 also served as Chief Executive
Officer of that company. He is also a director of ReliaStar Financial Corp,
First Bank System, Inc. and a member of the Board of Trustees, Mayo Foundation.
Mr. Knowlton was elected a director of the Company in 1994.
CAROLE F. ST. MARK, age 52; President and Chief Executive Officer of Pitney
Bowes Business Services, a division of Pitney Bowes, Inc. (a company engaged in
the production and supply of business and business-related products) since
1994. From 1990 to 1994, Ms. St. Mark was President of Pitney Bowes Logistics
Systems and Business Services, from 1988 to 1990, she was President of the
Business Supplies and Services Division, and from 1985 to 1988 she was Vice
President, Corporate Planning & Development of Pitney Bowes, Inc. Ms. St. Mark
was elected a director of the Company in 1989.
5
MEETINGS AND COMMITTEES
OF THE BOARD OF DIRECTORS
The Board of Directors held seven meetings during the last full fiscal year
of the Company. Each incumbent director attended 75 percent or more of the
aggregate of (i) the total number of meetings of the Board and (ii) the total
number of meetings held by all Committees on which such director served.
The Company has an Audit Committee consisting of five directors who are not
employees of the Company: Mr. Keith (Chairperson), Mr. D'Agostino, Mr. Heath,
Mr. Knowlton and Ms. Perlmutter. Two meetings of the Committee were held during
the last fiscal year. The Audit Committee recommends to the full Board of
Directors the selection of independent auditors, reviews the activities and
reports of the independent auditors, monitors the internal audit controls of
the Company, and has such other duties as may be provided by the Board of
Directors.
The Company has an Executive Personnel and Compensation Committee consisting
of six directors who are not employees of the Company: Mr. Gage (Chairperson),
Mr. Cain, Mr. Hodder, Mr. McCormick, Ms. St. Mark and Mr. Wallin. Three
meetings of the Committee were held during the last fiscal year and the
Committee also took one action by Unanimous Written Consent. The Committee is
responsible for reviewing, approving and reporting to the Board of Directors on
(i) compensation of corporate officers, (ii) adopting and changing major
Company compensation programs, and (iii) election recommendations for corporate
officers and succession planning. The Committee also grants stock options,
stock appreciation rights, and awards under the Company's Executive Incentive
Bonus Plan, Long-Term Incentive Plan, 1993 Stock Plan, and the Annual Cash
Bonus Plan for Designated Corporate Officers.
The Company has a Director Affairs Committee consisting of six members of the
Board of Directors: Mr. Hodder (Chairperson), Mr. Heath, Ms. Perlmutter, Ms.
St. Mark, Mr. Wallin and Mr. Wright. The Committee met two times during the
last fiscal year. The Committee is responsible for recommending to the Board of
Directors (i) nominees for election to the Board of Directors of the Company,
and (ii) policies and procedures for the Board of Directors. The Committee
considers candidates for Board membership suggested by directors, officers, or
stockholders of the Company and makes an evaluation of each candidate.
Stockholders may suggest candidates for consideration by the Committee by
submitting the candidate's name to the Secretary of the Company. Any
stockholder wishing to nominate a candidate to be considered by the Committee
must furnish a certificate of nomination signed by the stockholder setting
forth the name, address and qualifications of the nominee and the nominee's
written consent to be named in the proxy statement and to serve as a director
if nominated and elected. To be considered by the Committee, any certificate of
nomination for nominees to be elected at the 1996 Annual Meeting of
Stockholders must be received by the Company on or before April 28, 1996. The
Committee will evaluate each candidate and make its recommendation to the full
Board of Directors.
Stockholders may nominate persons for election to the Board of Directors, at
an annual meeting of stockholders, by timely notice in proper written form to
the Secretary of the Company. The Company's Bylaws provide that to be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Company not less than 60 days nor more than 90 days
prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
advanced by more than 30 days or delayed by more than 60 days from such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the 90th day prior to such annual meeting and not later than
the close of business on the later of the 60th day prior to such annual meeting
or the 10th day following the day on which public announcement of the date of
such meeting is first made. To be in proper form, the stockholder's notice
shall set forth in writing (a) as to each person whom the stockholder proposes
to nominate for election or reelection as a director, all information relating
to such person that is required to be disclosed in solicitations of
6
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act, including, without
limitation, such person's written consent to be named in the proxy statement as
a nominee and to serving as a director if elected; and (b) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination is made (i) the name and address of such stockholder, as they
appear on the Company's books, and of such beneficial owner, and (ii) the class
and number of shares of the Company that are owned beneficially and of record
by such stockholder and such beneficial owner. However, in the event that the
number of directors to be elected to the Board of Directors of the Company is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by the
Company at least 70 days prior to the first anniversary of the preceding year's
annual meeting, a stockholder's notice shall also be considered timely, but
only with respect to nominees for any new positions created by such increase,
if it shall be delivered to the Secretary at the principal executive offices of
the Company not later than the close of business on the 10th day following the
day on which such public announcement is first made by the Company. "Public
announcement" shall mean disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news service or in
a document publicly filed by the Company with the Commission pursuant to
Sections 13, 14, or 15(d) of the Exchange Act.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company or one of its subsidiaries do not
receive additional remuneration as directors. Directors who are not employees
receive directors' retainer fees as follows: a retainer of $20,000 per year
plus $1,300 for each Board meeting attended and $700 for each Committee meeting
attended. Committee chairpersons receive an additional $300 for each Committee
meeting attended, and an additional annual retainer in the following amounts:
Audit Committee: $2,000; Executive Personnel and Compensation Committee:
$3,000; and Finance and Director Affairs Committees: $1,000.
Non-employee directors may elect to defer payment of their directors' fees
under a Deferred Compensation Plan, until they no longer serve as a director;
the accrued amounts in each account are credited quarterly with eleven percent
per annum simple interest until payment is made from the plan. In addition,
directors may elect to defer payment of their directors' fees under the
Company's Executive Deferred Compensation Plans; depending on the date the
election to defer was made, amounts deferred under such plans accrue interest
at either four percent over the average rate for the twelve months preceding
the beginning of each plan year of Moody's Corporate Bond Yield Average-Monthly
Average Corporates as published by Moody's Investors Service, Inc., or 120% of
the ten year rolling average of ten year U. S. Treasury Notes.
Under the Company's 1983 Employee Stock Option Plan, each non-employee
director serving on the Board of Directors on June 30, 1992 was granted an
option on that date to purchase 3,000 shares of Common Stock and each non-
employee director first elected or appointed to the Board of Directors after
June 30, 1992 and during the term of the plan will be granted, as of the date
of such election or appointment, an option to purchase 3,000 shares of Common
Stock. Accordingly, if elected to the Board, Mr. Lillis will receive an option
to purchase 3,000 shares of Company Common Stock on June 28, 1995. After the
initial grant to each non-employee director, each such director will be granted
during the term of the plan, as of each even-numbered anniversary of the date
of such initial grant to such director, if such director's term of office
continues after such anniversary date, an option to purchase 3,000 shares of
Common Stock. All options granted or to be granted to non-employee directors
have an exercise price equal to the fair market value of the shares on the date
of grant, and become exercisable in installments over a period of three years
from the date of grant.
7
The Directors' Retirement Program provides that non-employee directors, who
have served at least four years, will receive an annual retirement fee equal to
the annual Board retainer fee in effect on the retirement date. This fee will
be payable for the number of years of a director's Board service, not to exceed
ten years. Payments will commence when the director leaves the Board or reaches
age 55, whichever is later. The Program also provides that non-employee
directors who leave the Board for any reason following a Change of Control of
the Company will receive an annual fee equal to the annual retainer fee for
active directors on the date of leaving; the annual fee is payable for the
lesser of the number of years of Board service as a non-employee director or
ten years, but not less than four years. A former director participating in the
Retirement Program must be available to management for consultation services
and not engage in any activity directly competitive to the Company's business.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation for
services in all capacities to the Company and its subsidiaries for each of the
last three fiscal years of the Company's Chief Executive Officer and the other
four most highly compensated executive officers in fiscal 1995.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------- ------------------------
OTHER SECURITIES ALL
NAME ANNUAL RESTRICTED UNDERLYING OTHER
AND COMPEN- STOCK OPTIONS/ COMPEN-
PRINCIPAL SALARY BONUS SATION AWARDS SARS SATION
POSITION YEAR ($) ($) ($) ($)(1)(2) (#)(5) ($)(6)
--------- ---- -------- -------- ------- ---------- ---------- -------
MICHAEL W. WRIGHT 1995 $780,000 $ 0 $ 7,292 $ 0 50,000 $6,120
Chairman, President and 1994 675,000 801,900 9,433 0 42,792 5,846
Chief Executive Officer 1993 675,000 810,000 11,102 1,088,438(3) 29,558 3,492
LAURENCE L. ANDERSON 1995 387,000 19,350 2,569 321,250(4) 25,000 6,120
Executive Vice 1994 365,000 352,737 13,593 0 20,629 5,846
President 1993 299,877 258,222 6,614 342,656(3) 59,550 3,492
PHILLIP A. DABILL 1995 338,000 16,900 1,633 0 18,750 6,120
Executive Vice 1994 325,000 305,825 8,097 0 15,000 5,846
President 1993 287,154 238,848 5,722 342,656(3) 29,196 3,492
JEFFREY C. GIRARD 1995 340,000 17,000 1,872 0 18,750 6,120
Executive Vice 1994 325,000 309,075 8,775 0 17,250 5,846
President and Chief 1993 287,154 238,848 4,583 338,625(3) 17,250 3,492
Financial Officer
JEFFREY NODDLE 1995 327,003 16,350 4,443 0 18,750 6,120
Executive Vice 1994 310,000 294,810 8,705 0 15,000 5,846
President 1993 275,462 228,687 5,152 330,563(3) 27,217 3,492
--------
(1) As of February 25, 1995, the number and fair market value of all shares of
restricted stock held by the named officers were as follows: for Mr.
Wright: 16,875 shares, $435,586; for Mr. Anderson: 15,313 shares, $395,267;
for Mr. Dabill: 5,313 shares, $137,193; for Mr. Girard: 5,250 shares,
$135,516; for Mr. Noddle: 5,125 shares, $132,289.
(2) For the purposes of this table, shares are valued based on the closing
price of the Company's Common Stock on the date of grant. Dividends are
paid on all shares of restricted stock.
8
(3) The amounts reflected for fiscal 1993 represent the value of shares of
restricted stock earned under the Long-Term Incentive Plan based on the
achievement of a designated level of return on equity for the two year
period ended February 27, 1993. The number of shares awarded in 1993 was:
33,750 shares for Mr. Wright; 10,625 shares for Mr. Anderson; 10,625 shares
for Mr. Dabill; 10,500 shares for Mr. Girard and 10,250 shares for Mr.
Noddle. One-half of such shares vested and restrictions were removed on
each of February 28, 1994 and February 28, 1995.
(4) In fiscal 1995, Mr. Anderson received a special award of 10,000 shares of
restricted stock.
(5) For fiscal 1993, all options granted to Mr. Wright, 23,050 options granted
to Mr. Anderson, 14,857 options granted to Mr. Dabill and 12,717 options
granted to Mr. Noddle were restoration options (also referred to as
"reload" options). A limited stock appreciation right has been granted in
tandem with each option reported in the table. Each such right is
exercisable for cash in lieu of such option only upon a Change of Control.
(6) Amounts of All Other Compensation are the amounts contributed during the
fiscal year by the Company under the Pre-Tax Savings and Profit Sharing
(401k) Plan.
9
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on grants of stock options and stock
appreciation rights for fiscal 1995 to the named executive officers.
INDIVIDUAL GRANTS
---------------------------------------------- POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK
SECURITIES TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS/SARS EXERCISE FOR OPTION TERM PRIOR COLUMNS
OPTIONS/SARS GRANTED TO OR BASE ($)(2) ANNUALIZED(2)(3)
GRANTED EMPLOYEES IN PRICE EXPIRATION ------------------- ----------------
NAME (#)(1) FISCAL YEAR ($/SHARE) DATE 5% 10% 5% 10%
---- ------------ ------------ -------- ---------- -------- ---------- ------- --------
Michael W. Wright....... 50,000 5.7% $31.125 6/27/04 $978,717 $2,480,262 $97,872 $248,025
Laurence L. Anderson.... 25,000 2.9% $32.50 4/11/04 510,977 1,294,916 51,098 129,492
Phillip A. Dabill....... 18,750 2.1% $32.50 4/11/04 383,233 971,187 38,323 97,119
Jeffrey C. Girard....... 18,750 2.1% $32.50 4/11/04 383,233 971,187 38,323 97,119
Jeffrey Noddle.......... 18,750 2.1% $32.50 4/11/04 383,233 971,187 38,323 97,119
Total potential realizable value for the five officers who received stock
option grants is $2,639,393 and $6,688,739, respectively, under the 5% and 10%
stock price growth assumptions. The term of all grants shown in the table is 10
years. Assuming 5% and 10% stock price growth over a period of 10 years
commencing April 13, 1994, the increase in total stockholder value from stock
price appreciation alone for all shares outstanding on that date would be
$1,472,885,960 and $3,732,656,200, respectively.
-------
(1) 20% of all options are exercisable upon grant and an additional 20% become
exercisable on each of the next four anniversary dates of grant, except
that all options become fully exercisable upon a Change of Control. The
exercise price may be paid by delivery of already-owned shares, and tax
withholding obligations related to exercise may be paid by delivery of
already-owned shares or offset of the underlying shares. A "restoration"
option (also referred to as a "reload" option) may be granted when the
payment of the exercise price of another option (the "Base Option") is made
by delivery of the Company's Common Stock; each restoration option is for
the number of shares of Common Stock tendered as payment for the exercise
price and withheld for tax purposes, upon exercise of the Base Option. The
exercise price of each restoration option is the fair market value of the
Company's Common Stock on the date of grant. Each restoration option is
exercisable in full on the date of grant, and will expire on the same date
as the Base Option. All options reported in the table are entitled to
restoration options. A limited stock appreciation right has been granted in
tandem with each option reported in the table, and is exercisable for cash
in lieu of such option only upon a Change of Control.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Company and overall market conditions. There can be no
assurance that the amounts reflected in this table will be achieved.
(3) Computed by dividing potential realizable value at the assumed annual rates
of stock price appreciation by the term of the option.
10
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information on option exercises in fiscal 1995
by the named executive officers and the value of such officers' unexercised
options/SARs at fiscal year end (February 25, 1995).
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
ACQUIRED OPTIONS/SARS AT FISCAL THE-MONEY OPTIONS/SARS AT
ON YEAR-END (#) FISCAL YEAR-END ($)
EXERCISE VALUE ------------------------- -------------------------
NAME (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- --------------- ----------- ------------- ----------- -------------
Michael W. Wright....... 778 $6,251 222,268 65,676 $298,172 0
Laurence L. Anderson.... 0 -- 81,776 49,278 13,495 0
Phillip A. Dabill....... 0 -- 66,384 31,475 36,017 0
Jeffrey C. Girard....... 0 -- 59,800 35,700 63 0
Jeffrey Noddle.......... 0 -- 73,117 33,775 33,528 0
--------
(1) The value received is in the form of stock ownership as none of such shares
acquired upon exercise by the named executive officer have been sold.
LONG TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
NUMBER OF SHARES, UNITS PERFORMANCE OR OTHER
NAME OR OTHER RIGHTS(1) PERIOD UNTIL MATURATION OR PAYOUT
---- ----------------------- ---------------------------------
Michael W. Wright....... 18,615 3 years
Laurence L. Anderson ... 7,422 3 years
Phillip A. Dabill....... 6,483 3 years
Jeffrey C. Girard ...... 6,522 3 years
Jeffrey Noddle ......... 6,252 3 years
--------
(1) Awards are of stock units, each of which represents the right to receive
one share of restricted stock upon achievement of specified performance
objectives. Stock units will be converted to restricted stock based on the
Company's total cumulative return to stockholders ("TSR") for the three
year period consisting of fiscal 1995, 1996 and 1997 compared to the TSR of
the twelve company peer group identified on page 18 ("Peer Group"). No
stock units will be converted to restricted stock if the Company ranks
below the median of the Peer Group based on TSR; 50% of the stock units
would be earned if the Company ranks at the median; 100% of the stock units
would be earned if the Company ranks at the 75th percentile and 150% of the
stock units would be earned if the Company ranks at the 100th percentile
(i.e., the highest ranking) relative to the Peer Group based on TSR. If the
Company ranks between the above levels, the percent of stock units
converting to restricted stock will be extrapolated accordingly. Shares of
restricted stock issued upon conversion of stock units would vest at the
end of fiscal 1998 provided the named officer continues in the employ of
the Company. No dividends are paid on stock units. Dividends are paid on
all shares of restricted stock that are issued.
11
PENSION PLANS
The following table sets forth various estimated maximum annual benefits
which would become payable upon retirement at age 65 under the combination of
the Company's tax-qualified defined benefit retirement plan, the Non-qualified
Supplemental Executive Retirement Plan (or, if applicable, the Excess Benefits
Plan) maintained for certain highly compensated employees, and the "Retirement
Benefit Plan Account" of the Company's deferred compensation plans, to
participants in the final average pay and years of credited service categories
indicated. The table does not reflect the $120,000 per year limitation on
annual benefits payable from the plans imposed by Section 415 of the Code, nor
the $150,000 per year limitation on compensation included in final annual
average pay imposed by Section 401(a)(17) of the Code; the Company's Non-
qualified Supplemental Executive Retirement Plan and Excess Benefits Plan allow
payment of additional benefits so that retiring employees may receive, in the
aggregate, the benefits they would have been entitled to receive had such Code
Sections not imposed maximum limitations.
YEARS OF SERVICE(1)
FINAL ANNUAL ---------------------------------------------------------------
AVERAGE PAY(2) 15 20 25 30
-------------- -------- -------- -------- --------
$ 250,000 $ 55,875 $ 74,500 $ 93,125 $111,750
450,000 103,875 138,500 173,125 207,750
650,000 151,875 202,500 253,125 303,750
850,000 199,875 266,500 333,125 399,750
1,350,000 319,875 423,500 526,125 625,750
1,800,000 427,875 567,500 705,125 841,750
--------
(1) The above calculations of annual benefits estimated to be payable upon
normal retirement are computed using the straight-life annuity method and
are necessarily based upon certain assumptions, including (a) that the
employee remains in the employ of the Company or a subsidiary until the
normal retirement age of 65 (although retirement is permitted at age 62
without benefit reduction because of age); and (b) that the Company's
present retirement plans remain in force until the retirement date.
Benefits under such plans are not reduced by the participant's Social
Security benefit.
(2) Includes salary and bonus.
As to each of the individuals named in the Summary Compensation Table above,
their final annual average pay and credited years of service under the plans as
of February 25, 1995 were as follows: Mr. Wright: $1,298,050, 18 years; Mr.
Anderson: $547,354, 20.3 years; Mr. Dabill: $505,440, 32.6 years; Mr. Girard:
$545,509, 4.5 years; and Mr. Noddle: $486,780, 18.8 years.
SEVERANCE AGREEMENTS,
CHANGE-IN-CONTROL ARRANGEMENTS
AND EMPLOYMENT AGREEMENT
The Company has entered into change of control severance agreements (the
"Severance Agreements") with officers of the Company, including those
identified in the Summary Compensation Table above. The Severance Agreements
provide that, if, within two years after a Change of Control (as defined
therein), the Company terminates the individual's employment other than for
Cause (as defined therein) or disability, or the individual terminates his or
her employment for Good Reason (as defined therein), then the individual will
be entitled to a lump-sum cash payment equal to (1) a multiple of one, two or
three times the individual's annual base salary, plus (2) a multiple of one,
two or three times his or her average annual bonus for the three fiscal years
immediately preceding the date of termination. Such multiple is three for Mr.
Wright; two for Mr. Anderson, Mr. Dabill, Mr. Girard and Mr. Noddle; and one or
two for all other officers of the Company. Each individual would also receive
his or
12
her salary through the date of termination, all other amounts owed to the
individual at the date of termination under the Company's benefit plans, and a
lump-sum retirement benefit equal to the difference between (a) the actuarial
equivalent of the benefit the individual would receive under the Company's
retirement plans if he or she remained employed by the Company at the
compensation level provided by the Severance Agreement for a one, two or three
year period following the date of termination, and (b) the actuarial equivalent
of the benefit to which the individual is otherwise then entitled under the
Company's retirement plans. In addition, under such circumstances, the
individual will be entitled to continued medical coverage, including family
coverage, for a one, two or three year period after the date of termination.
Mr. Wright's Severance Agreement provides that any termination by him during
the 30-day period immediately after the six-month anniversary of the Change of
Control will be considered to be for Good Reason. The Severance Agreements
contain provisions designed to deal with the golden parachute tax rules. These
provisions would decrease the severance benefits owed to the individual, but
only if the result is to give the individual a larger after-tax benefit than if
the payments are not reduced. The individual is permitted to elect which
payments would be reduced.
Certain of the Company's benefit plans and related agreements contain
provisions intended to preserve the economic benefits conferred thereby in the
event of a Change of Control (as defined in such plans or agreements).
Outstanding stock options, as well as performance shares and restricted stock
awards, become fully vested upon a Change of Control. Outstanding stock
appreciation rights also become exercisable upon a Change of Control, allowing
the holder to receive cash instead of exercising the related stock option.
Amounts payable under the Executive Deferred Compensation Plans are to be
maintained following a Change of Control and may be increased by 130% to deal
with the golden parachute tax rules. The Company's retirement plans provide for
full vesting if employment terminates under specified circumstances following a
Change of Control, and preserve any excess plan assets for five years following
a Change of Control for the benefit of plan participants at the time of a
Change of Control.
The Company has established an irrevocable grantor trust under which the
Company may set aside funds in the future at the Board of Directors' discretion
(except that if a Change of Control, as defined therein, occurs with respect to
the Company, such setting aside of funds shall occur automatically) to satisfy
the Company's obligations under certain of its retirement, deferred
compensation and other benefit plans. The participants in those plans do not
have any preferred claim on the trust assets, which remain subject to the
claims of the Company's creditors. If any funds set aside in the trust are
insufficient to pay amounts due to beneficiaries of the trust, then the Company
will be liable for those amounts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Gage, Hodder, McCormick, Cain, Wallin and Ms. St. Mark served on the
Executive Personnel and Compensation Committee during fiscal 1995.
Mr. Gage and certain family members, as trustees for revocable trusts, are
general partners, among others, of Carlson Real Estate Company, a limited
partnership which leases a retail supermarket in Shakopee, Minnesota, to the
Company for a term ending in 2008, with options to renew. The annual rental is
$199,000, increasing to $224,000 in 1998 and $232,000 in 2003, which the
Company believes to be a fair market rental. The leased premises are subleased
by the Company to an independent retail supermarket operator.
13
REPORT OF EXECUTIVE PERSONNEL
AND COMPENSATION COMMITTEE
The Executive Personnel and Compensation Committee of the Board of Directors
(the "Committee"), composed entirely of independent non-employee directors, has
implemented a comprehensive Executive Compensation Program within the Company.
The Committee has structured this program to serve the interests of
stockholders by providing compensation to executive officers in direct
proportion to their responsibilities and efforts as these impact the objectives
of the Company. The program consists of both cash and stock elements, with the
majority of executive officers' total compensation value in the form of
variable compensation tied to Company performance and stock price performance.
The Company's Executive Compensation Program is based on the following
principles:
1. The program will enable the Company to attract, retain and motivate the
key executives necessary for the Company's current and long-term
success.
2. Compensation plans are designed to support the Company's long range
business strategy.
3. Executive compensation is linked to corporate performance and attainment
of designated strategic objectives.
4. A significant portion of executive gain is tied to the enhancement of
stockholder value.
5. The Committee exercises independent judgment and approval authority with
respect to the Executive Compensation Program and the awards made under
the Program.
The structure of the Company's Executive Compensation Program is based on a
market comparison of compensation for equivalent positions in industries from
which the Company draws executive talent as well as a position evaluation
designed to achieve internal equity based on job responsibility. The Company's
primary market comparison for compensation is the 12 companies comprising the
composite peer group for the comparative performance graph on page 18 plus
three additional non-grocery distribution companies, all adjusted for size
based primarily on market capitalization (collectively the "Compensation Peer
Group"). The Company engaged outside consulting firms to perform this market
comparison in each of the past three years. The market comparison performed in
1991 was the basis for designing the Company's current compensation structure,
which has a mix of fixed to variable compensation and short-term to long-term
incentive potential approximating the mix within the Compensation Peer Group.
The 1992, 1993 and 1994 market comparisons were performed to ensure that the
target dollar values of the various plan components as well as targeted total
compensation approximated those within the Compensation Peer Group. In addition
to a review of compensation plan design and compensation levels relative to the
Compensation Peer Group, the Committee also reviews the Company's performance
on a number of key financial measures relative to the Compensation Peer Group
plus selected other industry companies.
The variable compensation components of the program are designed so that
executives' total compensation will be above that of the Compensation Peer
Group when Company performance is superior, and below that of the Compensation
Peer Group when performance is below industry norms. This fluctuation in
compensation value is increased by the substantial use of stock in the program
(as described in more detail in the remainder of this report), so that total
compensation will significantly increase or decrease in direct relation to
increases or decreases in the price of the Company's stock.
The application of the above stated principles is described in the following
sections which summarize the major components of the Company's Executive
Compensation Program, including factors and criteria upon which compensation
was awarded to the Company's Chief Executive Officer for fiscal 1995.
14
BASE SALARIES
The base salary levels for executive officers are determined from a position
evaluation process designed to achieve internal equity based on job
responsibility, and by reference to base salary levels in industries from which
the Company draws executive talent as analyzed by an outside compensation
consulting firm. The Company's salary structure is based on the median salary
levels of companies in these industries which are similar in size to the
Company. Actual salaries may be set above or below this median depending on
individual job performance and experience.
The Committee annually reviews and approves all salary increases for
executive officers other than the CEO. Increases for these executives are
proposed to the Committee by the CEO based on financial results and a
qualitative assessment of performance. After discussion, the Committee makes a
final determination of any salary increases.
The Chairman of the Committee conducts an annual formal performance
evaluation of the CEO based on written input from all Board members. The
following factors are considered in this performance evaluation: financial
results, strategic planning, leadership, customer service, succession planning,
human resource management/EEO, communications, external relations and Board
interface. Salary adjustments for the CEO are currently made every other year.
In fiscal 1995, Mr. Wright's base salary was increased $105,000 from $675,000
to $780,000. This was the first increase in his base salary since June 1992 and
reflects the expanded scope of the position due to the acquisition and
successful merger of Wetterau Incorporated in late 1992, as well as the record
earnings performance for the 1994 fiscal year.
ANNUAL INCENTIVE
All of the Company's executive officers are eligible to receive an annual
cash bonus designed to motivate these executives to meet or exceed individual
and financial goals which support the Company's business plans as these are
translated into annual performance measures. Specifically, the annual bonus
plan for executive officers is designed to stimulate and reward growth in
Company earnings. The Committee assigns eligible executives target bonus levels
which approximate the bonus opportunity for comparable positions within the
Compensation Peer Group. Among executive officers, these range from 20% of
annual base salary to 60% of annual base salary for the CEO. These target bonus
levels have been in effect for several years, and normally change only when an
individual enters a new position. Ninety percent of this award potential (100%
in the case of the CEO) is tied to the Company's net profit performance. The
remaining ten percent for executives other than the CEO is based on a
subjective evaluation of performance relative to personal objectives. Bonus
payments increase, and can go above target levels, as net profit growth meets
and exceeds the annual rate of profit growth targeted by the Board in advance
of the fiscal year. In no event can the amount paid as annual incentive bonus
exceed two times the target bonus level of the position.
For fiscal 1995, all bonuses to the five named executive officers were paid
under the Annual Cash Bonus Plan for Designated Corporate Officers which was
administered by the Committee. This Plan, as approved by stockholders, is
intended to qualify compensation paid thereunder as "qualified performance
based compensation" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), so that the
Company may claim federal income tax deductions for payments made under the
Plan. For fiscal 1995, the only bonus awards paid under this Plan are shown in
the "Bonus" column of the Summary Compensation Table on page 8.
LONG-TERM INCENTIVE COMPENSATION
The Company has implemented, with stockholder approval, a Long-Term Incentive
Plan and Stock Option Plans. Together, these plans tie a significant portion of
the executives' total compensation to long term results. The Executive
Compensation Program is structured so that the overall value of the long term
incentive potential approximates that of the Compensation Peer Group. The
Committee has structured these long term plans so that there is approximately
equal value between the awards under the Long-Term Incentive Plan and the
grants under the Stock Option Plans.
15
Long-Term Incentive Plan. The Plan empowers the Committee to select Plan
participants, approve awards under the Plan, and in general, interpret and
administer the Plan. In fiscal 1995, the Committee granted executive officers
and division presidents performance shares with a value equal to a fixed
percent of the participant's base salary plus target annual bonus. These
percentages are set at a level which is expected to produce a value, when
combined with the value of stock options, approximately equal to the long term
compensation potential of the Compensation Peer Group. Awards under the Plan
cover the three-year period consisting of fiscal 1995-fiscal 1997. For
corporate officers, half of any award depends on annual performance for each of
the three years in the three year period relative to a return on invested
capital objective. The other half of the award potential is dependent on the
Company's total stockholder return performance for the entire three year period
relative to the group of companies comprising the performance graph peer group
on page 18. This design aligns more of the executives' compensation with
stockholder return, specifically as this stockholder return relates to the peer
group disclosed in the proxy statement. Award value is dependent on both
corporate ROIC performance and total shareholder return (which determines the
number of shares earned) and stock price (which determines the value of the
shares earned). If an award is earned, performance shares are converted to
restricted stock with a one to two year requirement of further employment, so
that termination before the restrictions lapse, or a decrease in the stock
price, will result in forfeiture of the award or diminishment in its value.
This provides a continuing incentive for executives to remain with the Company
and focus on stockholder value after the award has actually been earned. The
Committee determined minimum, target and maximum payout amounts for each
participant based on fiscal 1995 corporate ROIC performance for officers, and
corporate ROIC and division return on capital employed ("ROCE") performance for
division presidents. Application of the criteria set forth in the awards under
the Plan for fiscal 1995 resulted in Division Presidents earning an aggregate
of 22,653 shares of restricted stock based on division performance criteria. No
restricted shares were earned by corporate officers for fiscal 1995.
Stock Option Plans. The Committee believes that executive gain tied to stock
price appreciation is the most effective way of aligning executive and
stockholder interests. The Company historically has utilized stock options to
accomplish this objective, but in 1992 also established stock ownership targets
for executive officers. These two programs together cause executives to view
themselves as owners with a meaningful equity stake in the business over the
long term.
Under the Company's stock option plans, the Committee grants stock options to
key employees. The Committee has established grant guidelines intended to
produce a value which, when combined with the value of Long-Term Incentive Plan
awards, approximately equals the long term compensation potential of the
Compensation Peer Group. The Committee also considers subjective factors in
determining grant size; grants are not automatically tied to a formula or the
optionee's position in the Company. Poor corporate, division or individual
performance will impact the size of an optionee's grant. In addition, current
ownership of stock is a consideration in the size of option grants for officers
and division presidents. That is, minimal ownership can result in future grants
being reduced in size. Based on the stock grant guidelines and the subjective
factors described above, grant recommendations are developed, reviewed by the
CEO and presented to the Committee for final approval.
The Committee awarded Mr. Wright grants of stock options in fiscal 1995 which
were based on the criteria described above and the performance review process
described in the section on base salary.
Stock options are designed to align executive gain with stockholder gain, and
for that reason options are granted with an exercise price equal to the market
price of the Company's stock on the date of grant. To maintain executives'
carried interest in Company stock, the Company implemented in 1992, following
stockholder approval, a restoration stock option program (commonly referred to
as a reload option program) which provides that stock surrendered to exercise
an option would be replaced with a new option grant exercisable at the then
current market price for the remainder of the option term.
16
Restricted Stock. In fiscal 1995, the Committee approved special awards of
restricted shares to two executive officers in recognition of their
exceptional performance in the management and transition of Wetterau
operations to those of the Company. Each of the restricted stock awards vests
over a designated period of time from the date of grant provided the officer
remains in the employ of the Company.
STOCK OWNERSHIP GUIDELINES
Stock ownership guidelines for executive officers were established in 1992
so that these executives would face the same downside risk, in addition to
upside potential, as stockholders experience. Executives are expected to show
significant progress toward reaching these ownership goals. The goal for the
Chief Executive Officer is six times annual base salary excluding vested and
unexercised stock options. Mr. Wright currently exceeds the ownership goal for
the CEO.
POLICY REGARDING TAX DEDUCTION FOR COMPENSATION UNDER INTERNAL REVENUE CODE
SECTION 162(M)
Section 162(m) of the Internal Revenue Code prohibits the Company from
deducting executive compensation in excess of $1 million for the five
executive officers named in the Summary Compensation Table, unless certain
conditions are met. Last year, the Company proposed and the stockholders
approved, an annual incentive plan which met the required conditions and
preserved the tax deductions for compensation paid under the plan. The
Committee will make every reasonable effort to continue to preserve this tax
deduction consistent with the Executive Compensation Program principles stated
at the beginning of this report.
CONCLUSION
The Committee believes that the caliber and motivation of executive
management is fundamentally important to the Company's performance. The
Committee plays a very active role in ensuring that the compensation
principles stated previously are being met by the Company's compensation
plans. Independent compensation consultants have assisted the Committee in
designing these plans, assessing the effectiveness of the overall program, and
comparing the value of these programs and the Company's performance to
relevant peer companies. Program value is reviewed by individual component and
in the aggregate, with special attention given to the mix of fixed and
variable compensation, and short-term and long-term award potential. At the
top executive levels of the Company, 55-65 percent of total compensation is
variable in nature (that is, dependent on performance results) with the
majority of such variable compensation tied to long term performance. Both
stock price appreciation and financial factors related to this appreciation,
such as earnings growth (in the annual bonus plan) and return on invested
capital (in the Long-Term Incentive Plan) determine the variable compensation.
This is intended to result in total compensation being above industry averages
when performance is superior, and being below competitive levels when
performance is below expected levels or the Company stock fails to appreciate.
The Committee believes that the Executive Compensation Program has been a
substantial contributor toward motivating executives to focus on the creation
of stockholder value.
Respectfully submitted,
Edwin C. Gage, Chairman Richard D. McCormick
Herman Cain Carole F. St. Mark
William A. Hodder Winston R. Wallin
17
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock for the last five fiscal years with that of the S&P 500
Stock Index and a group of peer companies in the wholesale and retail grocery
industries (assuming the investment of $100 in each vehicle on February 28,
1990 and the reinvestment of all dividends on a quarterly basis). The stock
price performance shown on the graph below is not necessarily indicative of
future price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
SUPERVALU INC., S&P 500 STOCK INDEX AND COMPOSITE PEER GROUP(1)
[STOCK PERFORMANCE GRAPH APPEARS HERE]
1990 1991 1992 1993 1994 1995
---- ------ ------ ------ ------ ------
SUPERVALU 100 96.51 100.55 128.65 151.23 108.82
S&P 500 100 114.57 132.86 146.93 159.08 170.70
Peer Group 100 118.37 115.36 121.73 117.06 112.07
(1) The composite peer group is comprised of the following food wholesalers and
food retailers: Albertson's, Inc., American Stores Company, Fleming
Companies, Inc., Food Lion, Inc., Great Atlantic & Pacific Tea, The Kroger
Company, Nash Finch Company, Richfood Holdings Inc., Safeway Inc., Super
Food Services, Inc., Super Rite Foods and The Vons Companies, Inc. The
returns of the peer group companies were weighted based on their respective
market capitalization and on the relative percentage of the Company's
operating profit realized from wholesale and retail food operations
(excluding restructuring charges) for each year. The performance graph
indicates results calculated to the last business day in February each
year.
18
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 2)
The Board of Directors, upon recommendation of its Audit Committee, has
appointed Deloitte & Touche LLP to audit the books and accounts of the Company
and its subsidiaries for the fiscal year ending February 24, 1996 and is
seeking the ratification of this appointment by the stockholders.
A partner of Deloitte & Touche LLP is expected to be present at the Annual
Meeting with the opportunity to make a statement if he or she desires to do so,
and is expected to be available to respond to appropriate questions.
STOCKHOLDER PROPOSAL
(ITEM 3)
A stockholder (name and address and Common Stock holdings of proponent will
be supplied upon oral or written request to the Secretary of the Corporation)
has submitted the following proposal for action at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
Stockholder Proposal
RESOLVED: That the stockholders of SUPERVALU INC. (the "Company" or
"SUPERVALU") request the Board of Directors to redeem the preferred share
purchase rights issued in 1989 unless such issuance is approved by the
affirmative vote of a majority of the outstanding shares at a meeting of the
stockholders to be held as soon as may be practicable.
Supporting Statement of the Stockholder
On April 12, 1989 the Board of Directors of SUPERVALU declared, without
stockholder approval, a dividend of preferred share purchase rights ("rights").
We strongly believe that such rights are a type of anti-takeover device,
commonly known as a poison pill, which injures stockholders by reducing
management accountability and adversely affecting stockholder value.
The stockholders of the Company believe the terms of the rights are designed
to discourage or thwart an unwanted takeover of the Company. While management
and the Board of Directors should have appropriate tools to ensure that all
stockholders benefit from any proposal to acquire the Company, the stockholders
do not believe that the future possibility of a takeover justifies unilateral
implementation of such a poison pill.
Rather, we believe that it is the stockholders who should have the right to
vote on the necessity of such a powerful tool which could be used to entrench
existing management. Rights plans like the Company's have become increasingly
unpopular in recent years.
The negative effects of poison pill rights plans on the trading value of
companies' stock have been the subject of extensive research. A 1986 study
(covering 245 companies adopting poison pills between 1983 and July 1986) by
the Office of the Chief Economist of the U.S. Securities and Exchange
Commission on the effect of poison pills on the wealth of target stockholders
states that "empirical tests, taken together, show that poison pills are
harmful to target stockholders, on net." Another, more recent study by
Professor Michael Ryngaert published in 1988 (covering 380 companies adopting
poison pills in the period 1982-1986) singled out rights plans such as the one
authorized by the Company for their negative effect on stockholder value.
19
At SUPERVALU's 1994 Annual Meeting of Stockholders, over 59% of the voting
shares approved a similar stockholder proposal. Nevertheless, SUPERVALU
rejected this majority opinion by subsequently failing to implement the
proposal.
We believe that a substantial number of stockholders continue to support the
elimination of SUPERVALU's poison pill, or at the very least, the opportunity
for stockholders to vote on such an important corporate governance practice
that can have a significantly adverse impact stockholder value.
It is our continuing belief that the Company's unilateral and undeniably
undemocratic adoption of a rights plan is unjustified and that the continued
existence of such plan is not in the best interest of stockholders. We
therefore resubmit this stockholder proposal and request for the second time
that SUPERVALU either redeem or put to a stockholder vote the preferred stock
purchase rights.
WE URGE YOU TO VOTE FOR THIS RESOLUTION
----------------
Company's Statement in Opposition to Proposal
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL
FOR THE FOLLOWING REASONS:
The Preferred Share Purchase Rights Plan (the "Rights Plan") was adopted by
the Board of Directors in 1989 to protect the Company's stockholders against
certain abusive takeover practices prevalent in the marketplace and to ensure
that all stockholders are treated fairly and equally. The overriding objective
of the Board of Directors in adopting the Rights Plan was, and continues to be,
the preservation and maximization of the Company's value for all stockholders.
The Board believes that the Rights Plan is a sound and reasonable means of
protecting against unfair and abusive takeover practices and is both
appropriately within its discretion and an essential exercise of its fiduciary
obligations to the stockholders. The Board also believes that many stockholders
have come to recognize the effectiveness of these plans in protecting and
enhancing value for all stockholders.
The Rights Plan does not preclude a prospective bidder from making an offer
for the Company. Moreover, the Rights Plan is not intended to prevent a
takeover of the Company nor would it do so. The Rights Plan is intended to give
the Board sufficient time, if presented with an offer to acquire the Company,
to evaluate the offer and any possible alternatives and to take those steps
that the Board believes would be necessary to maximize the value that can be
achieved for all stockholders.
The Rights Plan is designed to encourage any prospective bidder for the
Company to negotiate with the Company's Board. The Board believes that its
ability to negotiate effectively with a potential acquiror on behalf of all
stockholders is significantly greater than that of the stockholders
individually. A bidder who chooses to bypass the Board is pursuing his own
interests and is not concerned with the interests of the other stockholders. In
this regard, it is important to remember that hostile acquirors are interested
in buying a company as cheaply as they can. Without the Rights Plan, the
Company could find itself negotiating with the acquiror from a defensive
posture rather than at arm's-length. While a bidder may make an offer for the
Company's stock which is in excess of the stock's current market price, without
such negotiations the premium offered may not reflect the long-term value of
the Company.
The Board strongly disagrees with the view that rights plans deter legitimate
acquisition proposals from being made or depress the price of the stock of
corporations adopting them. Since 1986, at least 52 companies which had rights
plans have been acquired or were parties to agreements to be acquired,
20
including 37 companies which were acquired after receiving an unsolicited bid.
Furthermore, in 31 of the 37 acquisitions of companies with rights plans that
were initiated by unsolicited bids, the prices ultimately received by
stockholders exceeded the initial bids and did so by an average premium to the
initial bid of more than 20%.(1)
Studies by Georgeson & Company, Inc., a leading investor communications firm,
have concluded that "[rights plans] do not prevent takeovers nor do they
diminish the value of a company's stock." These studies also indicated that
"companies with [rights plans] receive premiums 69% higher in takeover contests
than companies without [rights plans]."
FOR THE FOREGOING REASONS, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE "AGAINST" THIS PROPOSAL.
--------
(1) Based on data obtained from Securities Data Corporation and other industry
sources.
PROPOSALS OF STOCKHOLDERS FOR 1996 ANNUAL MEETING
All proposals of stockholders intended to be presented at the Company's 1996
Annual Stockholder Meeting pursuant to the Securities Exchange Act of 1934 must
be received by the Company at its executive offices on or before January 26,
1996, to be included in the proxy statement for that meeting.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters which may
come before the meeting. However, if any matters other than those referred to
above should properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote such proxy in accordance with their
discretion.
BY ORDER OF THE BOARD OF DIRECTORS
TERESA H. JOHNSON
Secretary
Dated: May 25, 1995
21
LOGO
LOGO
Printed with soy
based inks on
recycled
paper containing at least 10% fibers from
paper recycled by
consumers.
--------------------------------------------------------------------------------
================================================================================
--------------------------------------------------------------------------------
SUPERVALU INC.
11840 VALLEY VIEW ROAD
EDEN PRAIRIE, MINNESOTA 55344
1995 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
The undersigned hereby appoints Michael W. Wright and Teresa H. Johnson, and
each of them, the undersigned's agent and proxy, with power of substitution to
vote as the undersigned's proxy in accordance with the specifications appearing
below, and, in their discretion, upon all other matters that may properly come
before the Annual Meeting of Stockholders of SUPERVALU INC., a Delaware
corporation, to be held on Wednesday, June 28, 1995 at 10:30 a.m., local time,
or any adjournment or adjournments thereof, according to the number of votes
that the undersigned would be entitled to vote if the undersigned were
personally present at said meeting, and hereby revoking all former proxies.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY ITEM.
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS,
PLEASE SIGN THE REVERSE SIDE; NO BOXES NEED TO BE CHECKED.
-------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE: Please mark comment/address box on reverse side.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE.)
-------------------------------------------------------------------------
--------------------------------------------------------------------------------
SUPERVALU INC.
ANNUAL MEETING OF STOCKHOLDERS
JUNE 28, 1995
MINNEAPOLIS CONVENTION CENTER
1301 SECOND AVENUE SOUTH
MINNEAPOLIS, MN 55403
Free parking for the Annual Meeting of Stockholders is available in the Plaza
Parking Ramp and the Orchestra Hall Ramp. Upon entering either ramp, take a
parking ticket, sign your name on the back and tell the attendant you are
attending SUPERVALU's Annual Meeting.
A map of the parking facilities is shown on the reverse side of this card.
The Annual Meeting will begin at 10:30 a.m. in Ballroom A in the Minneapolis
Convention Center. Refreshments will be available before and after the Annual
Meeting in Ballroom B.
--------------------------------------------------------------------------------
[X] Please mark your votes as this
-------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR
ELECTION OF DIRECTORS AND FOR THE PROPOSAL IN ITEM 2.
-------------------------------------------------------------------
ITEM 1--ELECTION OF DIRECTORS
NOMINEES: HERMAN CAIN, STEPHEN D'AGOSTINO, CHARLES LILLIS, MICHAEL WRIGHT
FOR WITHHELD
ALL FOR ALL
[_] [_]
TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME IN
THE SPACE PROVIDED.
--------------------------------------------------------------------------------
ITEM 2--PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY
FOR AGAINST ABSTAIN
[_] [_] [_]
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE STOCKHOLDER PROPOSAL IN
ITEM 3.
--------------------------------------------------------------------------------
ITEM 3--STOCKHOLDER PROPOSAL RELATING TO THE COMPANY'S PREFERRED SHARE PURCHASE
RIGHTS
FOR AGAINST ABSTAIN
[_] [_] [_]
I PLAN TO ATTEND THE ANNUAL MEETING. NUMBER OF STOCKHOLDERS ATTENDING:______ [_]
COMMENTS/ADDRESS CHANGE
Please mark this box if you have written comments/address change on the [_]
reverse side.
-------------------------------------------------------------------------------
EVEN IF YOU ARE PLANNING TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND MAIL THE PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY BE REPRESENTED
AT THE MEETING.
-------------------------------------------------------------------------------
Date ___________________________________________________________________________
Signature(s) ___________________________________________________________________
--------------------------------------------------------------------------------
PLEASE DATE AND SIGN ABOVE exactly as name appears, indicating, if appropriate,
official position or capacity. If co-owners, both should sign.
--------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
RETURN PROXY CARD IN ENCLOSED ENVELOPE AFTER COMPLETING, SIGNING AND DATING
[LOGO OF MINNEAPOLIS CONVENTION CENTER PARKING & SKYWAY SYSTEM APPEARS HERE]
--------------------------------------------------------------------------------
================================================================================
--------------------------------------------------------------------------------
SUPERVALU INC. EMPLOYEE STOCK OWNERSHIP PLAN
CONFIDENTIAL VOTING INSTRUCTIONS TO NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, TRUSTEE
SUPERVALU INC.
11840 VALLEY VIEW ROAD
EDEN PRAIRIE, MINNESOTA 55344
1995 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
I hereby direct that the voting rights pertaining to the stock of SUPERVALU
INC. held by the SUPERVALU INC. Employee Stock Ownership Plan Trust and
allocable to my accounts under the above plan shall be exercised at the 1995
Annual Meeting of Stockholders to be held on Wednesday, June 28, 1995 at 10:30
a.m., local time, or any adjournment or adjournments thereof, in accordance
with the specifications appearing below, and in the Trustee's discretion, upon
all other matters that may properly come before said Meeting of Stockholders.
The undersigned hereby acknowledges receipt of the Proxy Statement for the
meeting.
THIS VOTING INSTRUCTION CARD IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
--------------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE: Please mark comment/address box on reverse side.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE.)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SUPERVALU INC.
ANNUAL MEETING OF STOCKHOLDERS
JUNE 28, 1995
MINNEAPOLIS CONVENTION CENTER
1301 SECOND AVENUE SOUTH
MINNEAPOLIS, MN 55403
Free parking for the Annual Meeting of Stockholders is available in the Plaza
Parking Ramp and the Orchestra Hall Ramp. Upon entering either ramp, take a
parking ticket, sign your name on the back and tell the attendant you are
attending SUPERVALU's Annual Meeting.
A map of the parking facilities is shown on the reverse side of this card.
The Annual Meeting will begin at 10:30 a.m. in Ballroom A in the Minneapolis
Convention Center. Refreshments will be available before and after the Annual
Meeting in Ballroom B.
--------------------------------------------------------------------------------
[X] Please mark your votes as this
-------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR
ELECTION OF DIRECTORS AND FOR THE PROPOSAL IN ITEM 2.
-------------------------------------------------------------------
ITEM 1--ELECTION OF DIRECTORS
NOMINEES: HERMAN CAIN, STEPHEN D'AGOSTINO, CHARLES LILLIS, MICHAEL WRIGHT
FOR WITHHELD
ALL FOR ALL
[_] [_]
TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME IN
THE SPACE PROVIDED.
--------------------------------------------------------------------------------
ITEM 2--PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY
FOR AGAINST ABSTAIN
[_] [_] [_]
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE STOCKHOLDER PROPOSAL IN
ITEM 3.
--------------------------------------------------------------------------------
ITEM 3--STOCKHOLDER PROPOSAL RELATING TO THE COMPANY'S PREFERRED SHARE PURCHASE
RIGHTS
FOR AGAINST ABSTAIN
[_] [_] [_]
I PLAN TO ATTEND THE ANNUAL MEETING. NUMBER OF STOCKHOLDERS ATTENDING:______ [_]
COMMENTS/ADDRESS CHANGE
Please mark this box if you have written comments/address change on the [_]
reverse side.
--------------------------------------------------------------------------------
THIS INSTRUCTION CARD MUST BE RETURNED TO NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, TRUSTEE. THE TRUSTEE WILL TABULATE THE INSTRUCTIONS FROM ALL
PARTICIPANTS, WILL DETERMINE THE RATIO OF VOTES FOR AND AGAINST EACH PROPOSAL,
AND WILL THEN VOTE ALL SHARES HELD IN THE TRUST ACCORDING TO THE RATIO
DETERMINED.
--------------------------------------------------------------------------------
Date ___________________________________________________________________________
Signature(s) ___________________________________________________________________
--------------------------------------------------------------------------------
The signature(s) should be exactly as the name(s) appear printed above. If
there are co-owners, both must sign.
--------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
RETURN PROXY CARD IN ENCLOSED ENVELOPE AFTER COMPLETING, SIGNING AND DATING
[LOGO OF MINNEAPOLIS CONVENTION CENTER PARKING & SKYWAY SYSTEM]