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PROXY STATEMENT TABLE OF CONTENTS
Table of Contents
TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under §240.14a-12 |
SUPERVALU INC. | ||||
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held Tuesday, July 17, 2012
The Annual Meeting of Stockholders of SUPERVALU INC. will be held on Tuesday, July 17, 2012, at 10:30 a.m., local time, at Sheraton Westport Lakeside Chalet, 191 Westport Plaza, St. Louis, Missouri 63146 and on the Internet at www.proxyvote.com or www.virtualshareholdermeeting.com/svu, for the following purposes:
The Board of Directors has fixed the close of business on May 22, 2012 as the record date for the purpose of determining stockholders who are entitled to notice of and to vote at the meeting. Holders of SUPERVALU's common stock are entitled to one vote for each share held of record on the record date.
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 by mail or follow the instructions on your proxy card to vote and confirm your attendance by telephone or Internet.
PLEASE NOTE THAT YOU WILL NEED PROOF
THAT YOU OWN SUPERVALU STOCK TO BE ADMITTED TO THE MEETING
Record stockholder: If your shares are registered directly in your name, please bring proof of stock ownership.
Shares held in street name by a broker or a bank: If your shares are held for your account in the name of a broker, bank or other nominee, please bring a current brokerage statement, letter from your stockbroker or other proof of stock ownership to the meeting.
If you are unable to attend the Annual Meeting of Stockholders in person, you may attend and participate in the meeting via the Internet, including submitting questions, at www.proxyvote.com or
www.virtualshareholdermeeting.com/svu. Instructions on how to participate and demonstrate proof of stock ownership are posted at www.proxyvote.com.
If you need special assistance because of a disability, please contact the Corporate Secretary's office, by mail at P.O. Box 990, Minneapolis, Minnesota 55440 or by telephone at (952) 828-4000.
BY ORDER OF THE BOARD OF DIRECTORS | ||
Todd N. Sheldon Senior Vice President, General Counsel and Corporate Secretary |
June [ ], 2012
ATTENDING THE ANNUAL MEETING OF STOCKHOLDERS
Attending and participating via the Internet
PROXY STATEMENT TABLE OF CONTENTS
The Board of Directors of SUPERVALU INC. is soliciting proxies for use at the 2012 Annual Meeting of Stockholders to be held on Tuesday, July 17, 2012, at 10:30 a.m., Central Time, at Sheraton Westport Lakeside Chalet, St. Louis, Missouri, 63146 and on the Internet at www.proxyvote.com or www.virtualshareholdermeeting/svu, and at any adjournment or postponement of the meeting. The proxy materials were either made available to you over the Internet or mailed to you beginning on or about June 7, 2012.
SUPERVALU has one class of capital stock outstanding, common stock. The holders of common stock are entitled to one vote for each share held. As of May 22, 2012, the record date for the meeting, [ ] shares of common stock were outstanding and are eligible to vote at the meeting.
Vote Required and Method of Counting Votes
You may vote "FOR," "AGAINST" or "ABSTAIN" on Items 1 through 8 described below. If you submit your proxy, but abstain from voting, your shares will be counted as present at the meeting for the purpose of determining a quorum.
If you hold your shares in street name and do not provide voting instructions to your broker, they will be counted as present at the meeting for the purpose of determining a quorum and may be voted on Item 2 (Ratification of the Appointment of the Independent Registered Public Accountants) at the discretion of your broker. If you hold your shares in street name, it is critical that you cast your vote if you want it to count for Item 1 (Election of Directors), Item 3 (Advisory Vote on Executive Compensation), Item 4 (Approval of the SUPERVALU INC 2012 Stock Plan), Item 5 (Approval of the Amendment of the. SUPERVALU INC. Directors' Deferred Compensation Plan), Item 6 (Approval of the Amendment to the Restated Certificate of Incorporation to reduce the supermajority voting thresholds), Item 7 (Approval of the Amendment to the Restated Bylaws to reduce the supermajority voting thresholds) and Item 8 (Approval of the Amendment to the Restated Certificate of Incorporation to change the par value of the common stock). If you hold your shares in street name and you do not indicate how you want your shares voted in the election of directors and on Items 3 through 8, your bank or broker is not allowed to vote those shares on your behalf on a discretionary basis. Thus, if you hold your shares in street name and you do not instruct your bank or broker how to vote in the election of directors and on Items 3 through 8, no votes will be cast on your behalf.
The following is an explanation of the vote required for each of the items to be voted on.
Item 1. Election of Directors. Each director nominee receiving a majority of the votes cast will be elected as a director. This means that the number of shares voted "FOR" a director nominee must exceed the number of votes cast "AGAINST" that director nominee in order for that nominee to be elected as a director. If, however, the number of nominees exceeds the number of directors to be elected (a situation we do not anticipate), the directors shall be elected by a plurality of the shares present in person or by proxy at the meeting and entitled to vote on the election of directors. A plurality means that the 11 director nominees that receive the highest number of votes cast will be elected. In either event, shares not present at the meeting and shares voting "ABSTAIN" have no effect on the election of directors.
Item 2. Ratification of the Appointment of the Independent Registered Public Accountants. The affirmative vote of a majority of the shares of common stock, present and entitled to vote at the meeting is required for the approval of this proposal. If you submit your proxy but abstain from voting, your shares will be counted as present at the meeting for the purpose of calculating the vote on this
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proposal. Shares voting "ABSTAIN" on this proposal have the same effect as a vote against this proposal.
Item 3. Advisory Vote on Executive Compensation. The affirmative vote of a majority of the shares of common stock, present and entitled to vote at the meeting is required for the approval of this proposal. If you submit your proxy but abstain from voting, your shares will be counted as present at the meeting for the purpose of calculating the vote on this proposal. Shares voting "ABSTAIN" on this proposal have the same effect as a vote against this proposal.
Item 4. Approval of the SUPERVALU INC. 2012 Stock Plan. The affirmative vote of a majority of the shares of common stock, present and entitled to vote at the meeting is required for the approval of this proposal. If you submit your proxy but abstain from voting, your shares will be counted as present at the meeting for the purpose of calculating the vote on this proposal. Shares voting "ABSTAIN" on this proposal have the same effect as a vote against this proposal.
Item 5. Approval of the amendment of the SUPERVALU INC. Directors' Deferred Compensation Plan. The affirmative vote of a majority of the shares of common stock, present and entitled to vote at the meeting is required for the approval of this proposal. If you submit your proxy but abstain from voting, your shares will be counted as present at the meeting for the purpose of calculating the vote on this proposal. Shares voting "ABSTAIN" on this proposal have the same effect as a vote against this proposal.
Item 6. Approval of the amendment to the Restated Certificate of Incorporation to reduce the supermajority voting thresholds. The affirmative vote of (i) at least 75% of the outstanding shares of common stock entitled to vote and (ii) at least a majority of the outstanding shares entitled to vote, exclusive of all shares of common stock beneficially owned, directly or indirectly, by any corporation, person or entity, which was, as of the record date, the beneficial owner, directly or indirectly, of 5% or more of the outstanding shares entitled to vote, is required for the approval of this proposal. Shares not voting and shares voting "ABSTAIN" on this proposal have the same effect as a vote against this proposal.
Item 7. Approval of the amendment to the Restated Bylaws to reduce the supermajority voting thresholds. The affirmative vote of at least 75% of the shares of common stock entitled to vote is required for the approval of this proposal. Shares not voting and shares voting "ABSTAIN" on this proposal have the same effect as a vote against this proposal.
Item 8. Approval of the amendment to the Restated Certificate of Incorporation to change the par value of the common stock. The affirmative vote of a majority of the outstanding shares of common stock entitled to vote is required for the approval of this proposal. Shares not voting and shares voting "ABSTAIN" on this proposal have the same effect as a vote against this proposal.
YOUR VOTE IS VERY IMPORTANT. Whether or not you expect to attend the meeting in person or via the Internet, please submit your proxy vote in one of the following ways:
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It is important that all stockholders vote. If you submit a proxy by mail, telephone or Internet without indicating how you want to vote, your shares will be voted as recommended by the Board of Directors.
If you plan to attend the Annual Meeting in person or via the Internet, you will need to provide proof that you own SUPERVALU stock in order to be admitted to the meeting.
If you vote in person or via the Internet at the meeting, your vote will replace any votes you previously submitted by proxy.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the only persons or groups known to us as of May [ ], 2012, to be the beneficial owners of more than five percent of SUPERVALU common stock.
Name and Address of Beneficial Owner
|
Amount and Nature of Beneficial Ownership |
Percent of Class |
|||||
---|---|---|---|---|---|---|---|
(1) FMR LLC |
14,922,240 | 7.03 | % | ||||
(2) The Vanguard Group, Inc. |
14,771,689 |
6.96 |
% |
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(3) State Street Corporation |
13,963,544 |
6.6 |
% |
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(4) BlackRock, Inc. |
11,628,653 |
5.48 |
% |
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(5) LSV Asset Management |
10,897,054 |
5.14 |
% |
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common stock, with shared voting power and shared dispositive power as to 13,963,544 of such shares.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of May 10, 2012 concerning beneficial ownership of SUPERVALU's common stock by each director and director nominee, for each of the executive officers named in the Summary Compensation Table (the "Named Executive Officers") and for all of our 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 or dispositive power, whether or not a person has any economic interest in the shares. The definition also includes shares that a person has a right to acquire currently or within 60 days.
Name of Beneficial Owner
|
Amount and Nature of Beneficial Ownership(1)(2) |
Percent of Class |
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---|---|---|---|---|---|---|---|
Donald R. Chappel |
60,944 | * | |||||
Irwin S. Cohen |
85,851 | * | |||||
Ronald E. Daly |
81,920 | * | |||||
Susan E. Engel |
107,931 | * | |||||
Philip L. Francis |
112,085 | * | |||||
Craig R. Herkert |
942,779 | * | |||||
Edwin C. Gage |
108,371 | * | |||||
Steven S. Rogers |
86,997 | * | |||||
Matthew E. Rubel |
43,160 | * | |||||
Wayne C. Sales |
118,386 | * | |||||
Kathi P. Seifert |
68,989 | * | |||||
Sherry M. Smith |
252,720 | * | |||||
Janel S. Haugarth |
369,008 | * | |||||
Peter J. Van Helden |
272,737 | * | |||||
J. Andrew Herring |
230,169 | * | |||||
All directors and executive officers as a group (22 persons) |
3,500,711 | 1.6 | % |
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MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors held 5 regular meetings and 2 special meetings during the last fiscal year. Each director attended at least 75 percent of the meetings of the Board and its committees on which the director served.
The Board maintains four standing committees: Audit, Corporate Governance and Nominating, Finance and Leadership Development and Compensation, each of which has a separate written charter that is available on SUPERVALU's website at http://www.supervalu.com. Click on the tab "Site Map" and then the caption "Corporate Governance" under the heading "About Us."
Membership on the Audit, Corporate Governance and Nominating and Leadership Development and Compensation Committees is limited to non-employee directors. The Board of Directors has determined that all of its non-employee directors, and therefore each member of the Audit, Corporate Governance and Nominating and Leadership Development and Compensation Committees, are independent directors under the New York Stock Exchange ("NYSE") listing standards. The Board has also determined that all non-employee director nominees are independent under the NYSE listing standards and the rules of the Securities and Exchange Commission (the "SEC").
The non-employee directors of the Company are Donald R. Chappel, Irwin S. Cohen, Ronald E. Daly, Susan E. Engel, Philip L. Francis, Edwin C. Gage, Steven S. Rogers, Matthew E. Rubel, Wayne C. Sales and Kathi P. Seifert.
The following directors served on the Audit Committee in fiscal 2012: Irwin S. Cohen (Chairperson), Donald R. Chappel, Philip L. Francis, Steven S. Rogers and Kathi P. Seifert. The Board has determined that all members of the Audit Committee are financially literate under the NYSE listing standards and that Irwin S. Cohen, Donald R. Chappel and Philip L. Francis qualify as "audit committee financial experts" under the NYSE listing standards and the rules of the SEC. The Audit Committee met 4 times during the last fiscal year.
The primary responsibilities of the Audit Committee are to assist the Board of Directors in:
Corporate Governance and Nominating Committee
The following directors served on the Corporate Governance and Nominating Committee in fiscal 2012: Wayne C. Sales, Ronald E. Daly, Philip L. Francis, Edwin C. Gage and Steven S. Rogers. Mr. Sales served as Chairperson of the Corporate Governance and Nominating Committee until January 9, 2012 when the Board of Directors revised the Board's Governance Principles to require that the Non-Executive Chairman of the Board and the Chairperson of the Corporate Governance and Nominating Committee be held by different directors. Because Mr. Sales is currently serving as Non-Executive Chairman of the Board, he resigned as Chairperson of the Corporate Governance and Nominating Committee on January 9, 2012 and Mr. Rogers was appointed Chairperson of the committee. The Corporate Governance and Nominating Committee met 4 times during the last fiscal year.
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The mission of the Corporate Governance and Nominating Committee is to recommend a framework to assist the Board in fulfilling its corporate governance responsibilities. In carrying out its mission, the Corporate Governance and Nominating Committee establishes and regularly reviews the Board's policies and procedures, which provide:
In addition, the Corporate Governance and Nominating Committee has the responsibility to:
For a description of the Corporate Governance and Nominating Committee's processes and procedures for the consideration and determination of director compensation, see "Director Compensation."
The following directors served on the Finance Committee in fiscal 2012: Charles M. Lillis, Donald R. Chappel, Irwin S. Cohen, Susan E. Engel and Matthew E. Rubel. Mr. Lillis served as Chairperson of the Finance Committee until his retirement from the Board effective as of July 26, 2011. Following Mr. Lillis' retirement, Mr. Chappel served as Chairperson of the Finance Committee. The Finance Committee met 4 times during the last fiscal year.
The primary responsibilities of the Finance Committee are to review our financial structure, policies and future financial plans and to make recommendations concerning them to the Board. In carrying out these responsibilities, the Finance Committee periodically reviews:
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Leadership Development and Compensation Committee
The following directors served on the Leadership Development and Compensation Committee in fiscal 2012: Susan E. Engel (Chairperson), Ronald E. Daly, Edwin C. Gage, Charles M. Lillis, Matthew E. Rubel and Kathi P. Seifert. Mr. Lillis served on the Leadership Development and Compensation Committee until his retirement from the Board effective as of July 26, 2011. The Leadership Development and Compensation Committee met 5 times during the last fiscal year.
The primary responsibilities of the Leadership Development and Compensation Committee are to:
For a description of the Leadership Development and Compensation Committee's processes and procedures for the consideration and determination of executive compensation, see "Compensation Discussion and Analysis."
In order to help our stockholders better understand our Board practices, we are including the following description of current practices. The Corporate Governance and Nominating Committee periodically reviews these practices.
The Board determines the best board leadership structure for SUPERVALU from time to time. The Board believes that it is not in the best interest of the Company or our stockholders to have an inflexible rule regarding whether the offices of Chairman and CEO must be separate. When a vacancy occurs in the office of either the Chairman or the CEO, the Board will consider the specific characteristics and circumstances existing at that time and will determine whether the role of Chairman should be separate from that of the CEO and, if the roles are separate, whether the Chairman should be selected from the independent directors or from management.
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In 2010, the Board determined that it was in the best interest of the Company to separate the positions of CEO and Chairman and to elect a Non-Executive Chairman. Wayne C. Sales was elected to that role following the 2010 Annual Meeting of Stockholders, assuming his continued service on the Board of Directors. It is expected that Mr. Sales will serve as the Non-Executive Chairman for a two-year term, contingent upon re-election to the Board of Directors. At the end of that two-year term, the Board will reevaluate its leadership structure. The Board believes this leadership structure affords the Company an effective combination of internal and external experience, continuity and independence that will serve the Board and the Company well. Mr. Sales' term will end at the 2012 annual meeting. The Board will consider renewing Mr. Sales' term in advance of the 2012 Annual Meeting.
Evaluation of Board Performance
In order to continue to evaluate and improve the effectiveness of the Board, under the guidance of the Corporate Governance and Nominating Committee, our Board annually evaluates the Board's performance as a whole. The evaluation process includes a survey of the individual views of all directors, a summary of which is then shared with the Board. The Board conducted an evaluation in fiscal 2012 with the assistance of an outside consultant in which each director was evaluated on ten competencies as a way to improve each director's performance. A similar evaluation process is expected to occur following the 2012 Annual Meeting of Stockholders and biannually thereafter. Each active Board Committee also evaluates its own performance annually.
As provided by our bylaws, the Board of Directors shall consist of not less than 10, nor more than 15 directors. The exact number of directors shall be determined from time to time by resolution adopted by a majority of the whole Board of Directors or of the holders of at least 75% of the stock of the Corporation entitled to vote, considered for the purpose as one class. The Board believes that the size of the Board should accommodate the objectives of effective discussion and decision-making and adequate staffing of Board committees.
The Board of Directors currently consists of 11 members and we anticipate it will continue to consist of 11 members following the 2012 Annual Meeting of Stockholders.
The Board believes that a substantial majority of its members should be independent, non-employee directors. It is the Board's policy that no more than two members of the Board will be employees of SUPERVALU. These management members will include the CEO and up to one additional person whose duties and responsibilities identify them as a top management individual of SUPERVALU. Only one member of the Board, Craig R. Herkert, is or will be an employee of SUPERVALU, assuming all nominees are elected. The Board has determined that all non-employee directors and all non-employee director nominees meet the requirements for independence under the NYSE listing standards.
The Board has determined that in order for directors to fulfill their duties as directors, there should be a limit on the number of public company boards on which each director may serve. Currently, no director can serve on more than five public company boards, including our Board. Additionally, any director that also serves as a chief executive officer generally should not serve on more than three public company boards, including our Board, in addition to their employer's board. Pursuant to this policy, service on the board of a parent and its wholly owned subsidiary counts as a
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single board. Positions held as of October 2011 in excess of these limits may be maintained unless the Board determines that it impairs a director's service on the Board.
It is Board policy that non-employee directors retire at the annual meeting following the date they attain the age of 74 and that non-employee directors elected after February 27, 1994 may serve a maximum term of 15 years. Directors who change the occupation they held when initially elected to the Board are expected to offer to resign from the Board. At that time, the Corporate Governance and Nominating Committee will review the continuation of Board membership under these new circumstances and make a recommendation to the full Board.
The Board also has adopted a policy that requires employee directors, including the CEO, to retire from the Board at the time of a change in their status as an officer of SUPERVALU or separation from SUPERVALU.
The Corporate Governance and Nominating Committee is the standing committee responsible for determining the slate of director nominees for election by stockholders. The Corporate Governance and Nominating Committee considers and evaluates potential Board candidates based on the criteria set forth below and makes its recommendation to the full Board. The criteria applied to director candidates stress independence, integrity, experience and sound judgment in areas relevant to our business, financial acumen, interpersonal skills, a proven record of accomplishment, a willingness to commit sufficient time to the Board, the ability to challenge and stimulate management and diversity. The Corporate Governance and Nominating Committee views diversity in its broadest sense, which includes gender, ethnicity, education, experience and leadership qualities. The Corporate Governance and Nominating Committee will use the same process and criteria for evaluating all nominees, regardless of whether the nominee is submitted by a stockholder or by some other source.
Directors and management are encouraged to submit the name of any candidate they believe to be qualified to serve on the Board, together with background information on the candidate, to the Chairperson of the Corporate Governance and Nominating Committee. In accordance with procedures set forth in our bylaws, stockholders may propose, and the Corporate Governance and Nominating Committee will consider, nominees for election to the Board of Directors by giving timely written notice to the Corporate Secretary, which for this Proxy must have been received at our principal executive offices no later than the close of business on March 28, 2012 and no earlier than February 27, 2012. Any such notice must include the name of the nominee, a biographical sketch and resume, contact information and such other background materials on such nominee as the Corporate Governance and Nominating Committee may request.
Executive Sessions of Outside Directors
Non-employee directors generally meet together as a group, without the CEO or any other employees in attendance, during each Board meeting. The Non-Executive Chairman presides over each executive session of the Board.
In 2010, our Board established the position of Non-Executive Chairman and elected Mr. Sales to serve in that role. The primary responsibilities of our Non-Executive Chairman include:
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Board's Role in Risk Oversight
The Board takes an active role in risk oversight related to the Company both as a full Board and through its Committees. The Board meets in executive session, without Mr. Herkert present, after each regularly scheduled Board meeting to, among other things, assess the quality of the meetings and to provide its observations to Mr. Herkert.
In addition, the Company conducts an annual enterprise wide risk assessment. A formal report is delivered to the Audit Committee, the chair of which provides a synopsis to the Board. Risk assessment updates are provided if required. The objectives for the risk assessment process include: (i) facilitating the NYSE governance requirement that the Audit Committee discuss policies around risk assessment and risk management; (ii) developing a defined list of key risks to be shared with the Audit Committee, Board and senior management; (iii) determining whether there are risks that require additional or higher priority mitigation efforts; (iv) facilitating discussion of the risk factors to be included in Item 1A of the Company's Annual Report on Form 10-K and (v) guiding the development of the internal audit plans.
The Company has historically maintained a prudent and appropriately risk-balanced approach to its incentive compensation programs to ensure that such programs promote the long-term interests of our stockholders and do not contribute to unnecessary risk-taking, and will continue to do so. The Company, through its Leadership Development and Compensation Committee ("Committee"), regularly engages in a process to evaluate whether its executive and broad-based compensation programs contribute to unnecessary risk-taking and has concluded that the risks arising from these programs are not reasonably likely to have a material adverse effect on the Company. The Committee directly engages its compensation consultant, Towers Watson, to assist the Committee in its evaluation. In accordance with the Committee's direction, Towers Watson performs a compensation risk assessment of the Company's executive and broad-based compensation programs and makes an independent report to the Committee. The risk assessment completed by Towers Watson in fiscal 2012 concluded that the Company's executive and broad-based compensation programs do not present any area of significant risk, noting that the plans are well-aligned with the Committee's compensation design principles and that individual business units do not pose a significant risk to the overall enterprise given the interdependence of key business units and the management of cross-enterprise risks. Additionally, the Committee noted in its evaluation that the Company has implemented a clawback policy and maintains stock ownership guidelines for its directors and officers, each of which further supports the risk-balanced approach to incentive compensation.
Attendance at Stockholder Meetings
The Board does not have a formal policy regarding director attendance at the Annual Meeting of Stockholders. However, all directors are strongly encouraged to attend the meeting. All of the incumbent directors attended the 2011 Annual Meeting of Stockholders.
Non-employee directors are required to acquire and own SUPERVALU common stock with a fair market value of five times a director's annual retainer within five years after the director is first elected.
The Board maintains a formal statement of Governance Principles that sets forth the corporate governance practices for SUPERVALU. The Governance Principles are available on our website at
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http://www.supervalu.com. Click on the tab "Site Map" and then the caption "Corporate Governance" under the heading "About Us."
Policy and Procedures Regarding Transactions with Related Persons
The Board of Directors of the Company has adopted a Policy and Procedures Regarding Transactions with Related Persons. This policy delegates to the Audit Committee responsibility for reviewing, approving or ratifying transactions with "related persons" that are required to be disclosed under the rules of the SEC. Under the policy, a "related person" includes any of the directors or executive officers of the Company, certain stockholders and their immediate families. The policy applies to transactions where the Company is a participant, a related person will have a direct or indirect material interest and the amount involved exceeds $120,000. Under the policy, management of the Company is responsible for disclosing to the Audit Committee all material information related to any covered transaction in order to give the Audit Committee an opportunity to authorize, approve or ratify the covered transaction based upon its determination that the covered transaction is fair and reasonable and on terms no less favorable to the Company than could be obtained in a comparable arm's length transaction with an unrelated third party. A copy of the Policy and Procedures Regarding Transactions with Related Persons is available on SUPERVALU's website at http://www.supervalu.com. Click on the tab "Site Map" and then the caption "Corporate Governance" under the heading "About Us."
Other Matters Relating to Directors
Susan E. Engel, one of our directors, served as chairwoman and chief executive officer of Lenox Group Inc., a tabletop, giftware and collectibles company, from November 1996 until she retired in January 2007. In November 2008, Lenox Group filed a voluntary petition for relief under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York.
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ELECTION OF DIRECTORS (ITEM 1)
Directors are elected for a term of one year. If a vacancy exists or occurs 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 elect a director to fill the vacancy. There are currently 11 members of the Board.
Our bylaws require directors to be elected by the majority of the votes cast with respect to such director in uncontested elections. A majority of the votes cast means that the number of shares voted "FOR" a director must exceed the number of votes cast "AGAINST" that director. In a contested election, a situation in which the number of nominees exceeds the number of directors to be elected, the standard for election of directors will be a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. A plurality means that the nominees receiving the highest number of votes cast will be elected.
If a nominee who is serving as a director is not elected at the Annual Meeting, under Delaware law the director would continue to serve on the Board as a "holdover director." However, under our bylaws, any director who fails to be elected must offer to tender his or her resignation to the Board of Directors. The Corporate Governance and Nominating Committee will then make a recommendation to the Board whether to accept or reject the resignation, or whether other action should be taken. The Board of Directors will act on the Corporate Governance and Nominating Committee's recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date the election results are certified. The director who tenders his or her resignation will not participate in the Board's decision. If a nominee who was not already serving as a director is not elected at the Annual Meeting, under Delaware law that nominee would not become a director and would not serve on the Board of Directors as a "holdover director."
Donald R. Chappel, Irwin S. Cohen, Ronald E. Daly, Susan E. Engel, Philip L. Francis, Edwin C. Gage, Craig R. Herkert, Steven S. Rogers, Matthew E. Rubel, Wayne C. Sales and Kathi P. Seifert are nominated for one-year terms expiring in 2013. The Board of Directors has been informed that each nominee 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 another person as the persons named on the proxies decide.
The following sets forth information, as of May 22, 2012, concerning the 11 nominees whose terms of office will continue after the Annual Meeting, based on the current composition of the Board.
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NOMINEES FOR ELECTION AS DIRECTORS AT THE ANNUAL MEETING
FOR A ONE-YEAR TERM EXPIRING IN 2013
DONALD. R. CHAPPEL, age 61 Mr. Chappel, a director of SUPERVALU since 2010, serves as Senior Vice President and Chief Financial Officer of The Williams Companies, Inc., a position he has held since April 2003. Mr. Chappel also serves as Chief Financial Officer and a director of Williams Partners GP LLC, the general partner of Williams Partners L.P. Mr. Chappel was Chief Financial Officer, from August 2007, and a director, from January 2008, of Williams Pipeline GP LLC, the general partner of Williams Pipeline Partners L.P., until its merger with Williams Partners L.P. in August 2010. Prior to joining Williams, Mr. Chappel held various financial, administrative, and operational leadership positions. Among his many qualifications, Mr. Chappel brings significant experience in finance and accounting as a senior finance executive of several large public companies. Mr. Chappel is included in Institutional Investor magazine's Best CFOs listing for 2012, 2011, 2010, 2008, 2007, and 2006. Mr. Chappel also serves as a director of The Children's Hospital Foundation at St. Francis and of Family & Children's Services of Oklahoma. |
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IRWIN S. COHEN, age 71 Mr. Cohen, a director of SUPERVALU since 2003, is a Retired Partner of Deloitte & Touche LLP, a professional services firm, providing audit, tax, financial advisory and consulting services. Mr. Cohen, who joined Deloitte in 1962 and became a partner in 1972, served as the Global Managing Partner of the Consumer Products, Retail and Services Practice of Deloitte from 1997 to 2003. Mr. Cohen also founded and led Deloitte's Consumer Products, Retail and Services Practice as it grew to serve over 100 countries in Europe, Asia Pacific and the Americas. Mr. Cohen brings considerable experience in retail and accounting as a result of his experience with Deloitte. Mr. Cohen is also a Director and Chair of the Audit Committee of Stein Mart Inc., a discount fashion retailer with sales in excess of $1 billion. In addition, he serves on the Board of several private and not-for-profit companies and is a Senior Advisor to Peter J. Solomon Company. |
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RONALD E. DALY, age 65 Mr. Daly, a director of SUPERVALU since 2003, is the former Chief Executive Officer and President of Océ USA Holding, Inc., a subsidiary of Océ N.V., a supplier of digital document management technology and services. Mr. Daly held that position from 2002 to 2004. Prior to that, Mr. Daly spent 38 years with RR Donnelley, holding various positions in operations, eventually becoming the president of its largest business unit. Among many qualifications, Mr. Daly brings significant experience in business strategy as a senior executive of large companies, as well as significant supply chain and technology experience. Mr. Daly is also a director of United States Cellular Corporation, the nation's fifth-largest, full-service wireless carrier. In addition, Mr. Daly also serves on four non-profit boards, including AARP, a nonprofit, nonpartisan organization. |
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SUSAN E. ENGEL, age 65 Ms. Engel, a director of SUPERVALU since 1999, is the Chief Executive Officer of Portero Luxury, Inc., an internet retailer of luxury pre-owned and vintage personal accessories. Prior to joining Portero Luxury in 2009, Ms. Engel served as Chairwoman and CEO of Lenox Group Inc. (the successor to Department 56, Inc.), a designer and marketer of tabletop, giftware and collectible products from 1996 until she retired in January 2007. Among many qualifications, Ms. Engel brings significant consulting and retail experience, including as a senior executive of a public company. Ms. Engel is also a director of Wells Fargo & Company, a diversified financial services company with $1.2 trillion in assets. |
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PHILIP L. FRANCIS, age 65 Mr. Francis, a director of SUPERVALU since 2006, retired as the Executive Chairman of PetSmart, Inc., a specialty retailer of services and solutions for pets in 2012. Mr. Francis transitioned to the role of Executive Chairman in 2009, following his retirement as Chief Executive Officer at PetSmart, a position he held from 1999 to 2009. Prior to joining PetSmart, Mr. Francis was the President and CEO of Shaw's Supermarkets. Among many qualifications, Mr. Francis brings significant retail industry experience, as well as experience in business strategy as a senior executive of a large public company. Mr. Francis continues to be a director of PetSmart. He is also a director of CareFusion Corporation, which is a leading, global medical device company created through the spinoff of Cardinal Health Inc.'s clinical and medical products businesses. From 2006 to 2009, Mr. Francis was a director of Cardinal Health, Inc. |
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EDWIN C. GAGE, age 71 Mr. Gage, a director of SUPERVALU since 1986, is the Chairman of GAGE Marketing Group, L.L.C., an integrated marketing services company, which he founded in 1991. Prior to that, Mr. Gage served as the President, COO and CEO of Carlson Companies, Inc., which is one of the largest travel and hospitality companies in the world. Among many qualifications, Mr. Gage brings significant experience in marketing and business strategy as a senior executive of a large company. Mr. Gage also serves on the Board of several private and not-for-profit companies. |
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CRAIG R. HERKERT, age 52 Mr. Herkert, a director of SUPERVALU since 2009, was named the Company's Chief Executive Officer and President in 2009. Prior to joining SUPERVALU, Mr. Herkert served from 2004 to 2009 as the President and Chief Executive Officer of the Americas for Wal-Mart Stores, Inc., an operator of retail stores. He also served as the Executive Vice President of Wal-Mart International from 2000 to 2003, following his promotion from Senior Vice President and Chief Operating Officer in 2003. In addition to his experience leading the Company, Mr. Herkert brings years of retail experience to our Board. |
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STEVEN S. ROGERS, age 54 Mr. Rogers, a director of SUPERVALU since 1998, is the Gordon and Llura Gund Family Distinguished Professor of Entrepreneurship at the Kellogg School of Management at Northwestern University. He joined the faculty of Kellogg in 1995. Prior to his teaching career, Mr. Rogers owned and operated two manufacturing firms and one retail operations firm and worked as a consultant with Bain & Company. Among many qualifications, Mr. Rogers brings significant experience in corporate entrepreneurship and entrepreneurial finance. Mr. Rogers is also a director of Oakmark Mutual FundsHarris Associates, an asset management firm with over $60 billion under management, S.C. Johnson & Son, Inc., a manufacturer of household cleaning, personal care and insecticide products, and W.S. Darley & Company, manufacturer and distributor of fire engines and equipment. He was a board member of Amcore Financial, Inc. until 2011, Bally Total Fitness until 2007 and Duquesne Light Holdings, Inc. until 2006. In addition, he is active with many non-profit corporations. |
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MATTHEW E. RUBEL, age 54 Mr. Rubel, a director of SUPERVALU since 2010, serves as a Senior Advisor with TPG Capital, a leading global private investment firm with $49 billion of capital under management. Until 2011 Mr. Rubel was the Chairman, President and Chief Executive Officer of Collective Brands, Inc., the holding company for Payless ShoeSource, Collective Brands Performance + Lifestyle Group and Collective Licensing International and a leader in lifestyle, fashion and performance brands for footwear and related accessories. Mr. Rubel joined Collective Brands in 2005 as Chief Executive Officer and President. Among many qualifications, Mr. Rubel brings significant retail and branding experience and experience as a chief executive officer of a large public company, including managing a significant business transformation. From 2005 until 2011, Mr. Rubel was a director of Collective Brands, Inc., and from 2006 to 2008, Mr. Rubel was a director of Furniture Brands International, Inc., a company that designs, manufactures, sources and sells home furnishings. |
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WAYNE C. SALES, age 62 Mr. Sales, a director of SUPERVALU since 2006 and Non-Executive Chairman of the Board since 2010, retired as the Vice-Chairman of Canadian Tire Corporation Limited, a retail, financial services and petroleum company. Mr. Sales served as Vice-Chairman of Canadian Tire until 2007, following his tenure as President and Chief Executive Officer, a position that he held from 2000 to 2006. Under Mr. Sales' leadership, Canadian Tire's retail sales increased nearly $2 billion. Among many qualifications, Mr. Sales brings significant experience in retail marketing, merchandising, supply chain and financial services as chief executive officer of a large retail and financial services company. Mr. Sales is also a director and Chair of the Compensation Committee of Tim Hortons Inc., which is the fourth largest publicly-traded quick service restaurant chain in North America based on market capitalization. Additionally, he serves as a director and Chair of the Compensation Committee of Georgia Gulf Corp, a leading, integrated North American manufacturer of chemicals and vinyl-based building and home improvement products. Mr. Sales also serves as a director and chair of the Nominating/Governance Committee of Discovery Air Inc., a specialty aviation company. |
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KATHI P. SEIFERT, age 63 Ms. Seifert, a director of SUPERVALU since 2006, retired as Executive Vice President for the Kimberly-Clark Corporation, a global health and hygiene product manufacturing company, after 26 years of service. Ms. Seifert held the position of Executive Vice President there from 1999 to 2004. Among many qualifications, Ms. Seifert brings significant consumer product goods and sales and marketing experience. Ms. Seifert is also a director of Appleton Papers, Inc., which produces carbonless, thermal, security and performance packaging products; Eli Lilly and Company, which discovers, develops, manufactures and sells pharmaceutical products; Lexmark International, Inc., which provides businesses of all sizes with a broad range of printing and imaging products, solutions and services; and Revlon, Inc., a worldwide cosmetics and beauty care products company. |
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The Corporate Governance and Nominating Committee reviews the compensation of our directors on a periodic basis. Based upon its review, the Corporate Governance and Nominating Committee makes recommendations to the Board of Directors. Annual compensation for non-employee directors is comprised of the following components: cash compensation, consisting of an annual retainer and committee retainer, and equity compensation, consisting of an annual deferred retainer payable in SUPERVALU common stock. In addition, non-employee directors may receive stock options from time to time. Each of these components is described in more detail below.
Annual Board/Committee Chairperson Retainer
Non-employee directors receive an annual cash retainer of $80,000 per year. The Non-Executive Chairman receives an additional annual cash retainer of $75,000. In addition, the Chairperson of each Board committee receives the following annual retainer: Audit Committee Chairperson and Leadership Development and Compensation Committee Chairperson, $25,000; Corporate Governance and Nominating Committee Chairperson and Finance Committee Chairperson, $20,000. Also, each non-employee director committee member receives the following annual retainer for each committee served on: Audit Committee, $15,000, Leadership Development and Compensation Committee, $15,000, Corporate Governance and Nominating Committee, $10,000 and Finance Committee, $10,000.
Annual Deferred Stock Retainer
We also compensate each non-employee director by providing them with $100,000 in SUPERVALU common stock as soon as administratively practicable after each annual meeting of stockholders and upon the completion of any then-existing black-out period. We credit non-employee directors' accounts in the form of SUPERVALU common stock that is credited in share units to the SUPERVALU INC. Directors' Deferred Compensation Plan (2009 Restatement) (the "Directors' Deferred Compensation Plan") described below. The number of shares credited to each director's account is based upon the price of the Company's common stock on the date the shares are credited. In fiscal 2012, as a result of the evaluation of director compensation conducted by Towers Watson, the Board's outside compensation consultants, the Board decided to eliminate the annual stock option awards to non-employee directors and to increase the amount of the annual deferred stock retainer from $60,000 to $100,000, to reflect competitive practice. Because of this determination, in January 2012 each non-employee director received an additional deferred stock retainer in an amount of $40,000.
Effective June 27, 1996, our Directors Retirement Program was discontinued and benefits previously earned by directors were frozen. A non-employee director elected to our Board prior to June 27, 1996, will receive an annual payment of $20,000 per year for the number of years of Board service prior to June 27, 1996, but for not more than ten years of such service, after such director ceases to be a member of the Board. Directors first elected to the Board after June 27, 1996, do not participate in the Directors Retirement Program. As a result of this benefit, Mr. Gage is entitled to an aggregate of $200,000 (payable in annual installments of $20,000) following his resignation from the Board. Mr. Lillis was entitled to an aggregate of $20,000 following his resignation from the Board and received payment of such amount upon his retirement from the Board effective as of July 26, 2011.
Directors may elect to defer payment of their retainer and committee fees under the Directors' Deferred Compensation Plan. Under the Directors' Deferred Compensation Plan, a non-employee
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director may elect to have payment of all or a portion of the director's fees deferred and credited to a deferred stock account or into a deferred cash account. If a director chooses to defer fees into a deferred stock account, SUPERVALU then credits the director's account with an additional amount equal to 10 percent of the amount of fees the director has elected to defer and contributes the total amount in the director's account to a grantor ("rabbi") trust that uses the amount to purchase shares of SUPERVALU common stock, which are then allocated to an account for the director under the trust. Each director is entitled to direct the trustee to vote all shares allocated to the director's account in the trust. The common stock in each director's deferred stock account will be distributed to the director after the director leaves the Board, in accordance with the directors' payment election. Until that time, the trust assets remain subject to the claims of our creditors. Dividends paid on the shares of common stock held in each of the directors' accounts are used to purchase additional shares for these accounts each quarter. If a director chooses to defer all or a portion of fees into a deferred cash account, interest is payable on the amount of deferred cash compensation at an annual rate equal to the twelve-month rolling average of Moody's Corporate Average Bond Index for the twelve-month period ending in the month of October preceding the first day of the calendar year. Payment in cash is made from the cash account after the director leaves the Board, in accordance with the directors' payment election. For a description of the proposed amendment to the Directors' Deferred Compensation Plan, see "Approval of the Amendment of the SUPERVALU INC. Directors' Deferred Compensation Plan (Item 5)".
Non-employee directors are reimbursed for expenses (including costs of travel, food and lodging) incurred in attending Board, committee and stockholder meetings. While travel to such meetings may include the use of the Company aircraft, if available or appropriate under the circumstances, the directors generally use commercial air service. Directors are also reimbursed for participation in director education programs in the amount of $7,500 for each director, plus expenses, to be used every two years. Because most travel arrangements for non-employee directors' attendance at Board, committee and stockholder meetings were made by the Company, reimbursements for any non-employee director did not exceed the $10,000 threshold in fiscal 2012 and thus are not included in the "Director Compensation for Fiscal 2012" table below.
From time to time, spouses may also join non-employee directors on the Company aircraft when a non-employee director is traveling to or from a Board, committee or stockholder meeting or any other meeting of the Company where such non-employee director is invited to do so by the CEO. This travel may result in the non-employee director recognizing income for tax purposes. The Company does not reimburse the non-employee director for the taxes incurred in connection with such income.
Non-employee directors are eligible to use the Company aircraft for personal purposes to the extent that the Company aircraft is already traveling on Company business or at the direction of the CEO and there is available space for such non-employee director. Any such personal use of the Company aircraft may result in the non-employee director recognizing income for tax purposes, and the Company does not reimburse the non-employee directors for any taxes incurred in connection with such personal use.
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DIRECTOR COMPENSATION FOR FISCAL 2012
Name(1)
|
Fees Earned or Paid In Cash(2) |
Stock Awards(3) |
Option Awards(4) |
All Other Compensation(5) |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Donald R. Chappel |
$ | 125,000 | $ | 112,500 | $ | | $ | | $ | 237,500 | ||||||
Irwin Cohen |
130,000 | 109,100 | | | 239,100 | |||||||||||
Ronald E. Daly |
105,000 | 105,250 | | | 210,250 | |||||||||||
Susan E. Engel |
130,000 | 100,000 | | | 230,000 | |||||||||||
Philip L. Francis |
105,000 | 110,500 | | | 215,500 | |||||||||||
Edwin C. Gage |
105,000 | 100,000 | | | 205,000 | |||||||||||
Steven S. Rogers |
105,000 | 100,000 | | | 205,000 | |||||||||||
Matthew E. Rubel |
105,000 | 105,250 | | | 210,250 | |||||||||||
Wayne C. Sales |
185,000 | 118,500 | | | 303,500 | |||||||||||
Kathi P. Seifert |
110,000 | 100,000 | | | 210,000 |
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COMPENSATION DISCUSSION AND ANALYSIS
The Leadership Development and Compensation Committee (the "Committee") of the Board of Directors oversees the design and administration of our executive compensation programs, including those for the named executive officers identified in the Summary Compensation Table on page [ ] (the "NEOs"). Our executive compensation programs are designed to:
Fiscal year 2012 marked the first full fiscal year of our business transformation. In order to support our strategic initiatives, the Company is funding price reductions to increase value for our customers. These initial investments will position the Company to create shareholder value over the long-term. However, these initial investments did reduce fiscal 2012 financial results (both goals at the beginning of the year and actual performance at the end of the year).
Performance Measure
|
Threshold | Target | Maximum | Actual Results | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
EPS |
$ | 1.20 | $ | 1.42 | $ | 1.64 | $ | 1.25 | * | ||||
Same Store Sales |
(2.5 | )% | (1.5 | )% | 0.0 | % | (2.8 | )% | |||||
Cash Flow |
$ | 475 million | $ | 550 million | $ | 650 million | $ | 526 million | |||||
Funding |
$ | 296.9 million | $ | 336.6 million | $ | 384.7 million | $ | 304.7 million |
These results also presented challenges relative to the Company's stock price. Total shareholder return was negative during fiscal year 2012 (stock price opened at $8.63 and closed at $6.65).
However, the Company's strategy is intended to provide a platform for future improved profitability and profitable revenue growth. We are confident that this will translate into shareholder value creation over time.
As we continue to execute on the business transformation strategy, the compensation decisions in fiscal year 2012 are aligned with the long-term nature of our initiatives and the actual performance results, specifically:
Given the significant weight on the performance-based elements of compensation, target total direct compensation opportunities increased from year to year in recognition of the challenging environment. However, actual amounts realized were below target.
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|
Target Total Compensation | |
|
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 to 2011 % Change |
Actual Total Compensation FY 2012 |
Actual 2012 as a % of Target 2012 |
|||||||||||||
Executive
|
FY 2011 | FY 2012 | ||||||||||||||
Herkert |
$ | 4,137,300 | $ | 4,267,847 | (1) | 3 | % | $ | 2,375,170 | 56 | % | |||||
Smith(2) |
$ | 1,401,476 | $ | 1,714,271 | 22 | % | $ | 960,381 | 56 | % | ||||||
Haugarth |
$ | 1,312,411 | $ | 1,764,271 | 34 | % | $ | 1,076,350 | 61 | % | ||||||
Van Helden |
$ | 1,341,476 | $ | 1,614,271 | 20 | % | $ | 747,082 | 46 | % | ||||||
Herring(2) |
$ | 1,241,476 | $ | 1,514,271 | 22 | % | $ | 807,565 | 53 | % |
Target compensation reflects base salary, target bonus and target long-term incentive compensation grant date fair value calculated in accordance with FASB ASC 718 opportunities for each position.
Actual total compensation reflects actual base salary earned, actual bonus earned for the fiscal year and the gross value of equity vested during the fiscal year other than retention awards.
The actual total compensation differs from the amounts reflected in the Summary Compensation Table primarily because the Summary Compensation Table reflects a variety of other elements of compensation, such as, perquisites, changes in pension value and earnings on deferred compensation.
The decisions made by the Committee reflect the Company's executive compensation philosophy and are consistent with the business strategy and the creation of shareholder value.
At the 2011 Annual Meeting of Stockholders, stockholders voted to approve, on an advisory basis, the compensation of our named executive officers, as described in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure set forth in our proxy statement for the 2011 Annual Meeting of Stockholders. The vote "For" approval of the compensation of our named executive officers was 93.54% of the shares voted. In addition, consistent with the stockholders' preference expressed in voting at the 2011 Annual Meeting of Stockholders, the Board of Directors determined that an advisory vote on the compensation of SUPERVALU's named executive officers will be conducted every year, and, therefore, is included in this proxy statement for the 2012 Annual Meeting. See "Advisory Vote on Executive Compensation (Item 3)" below.
The Committee took into account the result of the stockholder vote in determining executive compensation policies and decisions since the 2011 Annual Meeting of Stockholders. The Committee viewed the vote as a strong expression of the stockholders' general satisfaction with our current executive compensation programs. While the Committee considered this stockholder satisfaction in determining to continue executive compensation programs, decisions regarding incremental changes in the compensation programs and individual compensation were made in consideration of the Company's performance, current economic conditions and the Company's business transformation results, as described in more detail below.
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The remainder of the Compensation Discussion and Analysis discusses SUPERVALU pay-for-performance culture, each element of compensation individually, the competitive benchmarking and governance approach and finally the Company's other reward elements (e.g., retirement benefits).
Our executive compensation programs are structured to provide a mix of fixed and variable compensation, with variable compensation delivered via short-term and long-term incentives that help to align the priorities and actions of executives with the interests of our stockholders. Therefore, a significant portion (65 to 80 percent in fiscal 2012) of targeted compensation is performance-based.
The variable components of the compensation program are designed so that our executives' total compensation will be above the median of our competitive market when our results are above the target levels of performance established by the Committee and below the median of our competitive market when our results fall below this targeted performance. These target performance levels are established based on both internal standards and external comparisons. This relative fluctuation in compensation value increases or decreases by the significant use of equity-based components in the program. Therefore, actual total compensation realized, as compared to established targets, will significantly increase or decrease in direct correlation to our stock price. Significant use of equity-based components, especially the new MYPA awards (described in more detail below), along with stringent ownership and retention requirements (described below), ensures alignment of executive compensation with stockholder value.
For fiscal 2012, the principal elements of our executive compensation program consisted of base salary, annual incentive and long-term equity incentives in the form of MYPA performance awards. The table below illustrates how these primary components of target executive compensation are allocated between performance and non-performance based components, how performance-based compensation
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is allocated between annual and long-term components and how total compensation is allocated between cash and equity components. For our NEOs in fiscal 2012 that target allocation was as follows:
|
2012 Fiscal Year Compensation Mix (Base Salary, Annual Incentive Opportunity and Long-Term Equity Incentive Opportunity)(1) |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Percent of Total Compensation That is: |
Percent of Performance-Based Total Compensation That is: |
Percent of Total Compensation That is: |
||||||||||||||||
Name
|
Performance- Based(2) |
Not Performance- Based(3) |
Annual(4) | Long- Term(5) |
Cash Based(6) |
Equity- Based(7) |
|||||||||||||
Craig R. Herkert |
80 | % | 20 | % | 37 | % | 63 | % | 35 | % | 65 | % | |||||||
Sherry M. Smith |
65 | 35 | 54 | 46 | 53 | 47 | |||||||||||||
Janel S. Haugarth |
65 | 35 | 55 | 45 | 53 | 47 | |||||||||||||
Peter J. Van Helden |
66 | 34 | 52 | 48 | 51 | 49 | |||||||||||||
J. Andrew Herring |
67 | 33 | 49 | 51 | 50 | 50 |
The Committee believes that this compensation mix aligns with the Company's compensation philosophy of pay-for-performance because:
SUPERVALU provides the NEOs and other executives with an annual base salary that is not subject to performance risk. Salary levels for our NEOs are based on individual performance and experience, job responsibility, internal equity and salary levels that take into consideration the
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competitive market. For fiscal 2012, the Committee determined that, as part of its focus on pay-for-performance, base salaries for NEOs and certain other officers would only be increased in cases where the incumbent assumed additional responsibilities or was significantly below market. Ms. Smith received a market adjustment increase of $20,000 in base salary bringing her salary to $600,000.
In General. SUPERVALU provides its NEOs and other executives an annual incentive opportunity in order to align executive compensation with the achievement of SUPERVALU financial goals that support our business plans.
The Committee establishes annual minimum, target and maximum award opportunities expressed as a percentage of base salary paid during the fiscal year. For fiscal 2012, annual incentive opportunities for the NEOs ranged from 100 percent to 150 percent (for the CEO) of base salary paid for the year, at target levels of performance, up to a possible range of 200 percent to 300 percent (for the CEO) of base salary for performance meeting or exceeding the maximum performance level.
Performance Measures and Objectives. For fiscal 2012, the Committee determined that the annual incentive bonus plan would remain consistent with the Company's compensation philosophy of emphasizing pay-for-performance, alignment with stockholders and retention, but added additional performance measures to recognize the achievement of certain short-term goals and incentivize the NEOs to focus on specific business transformation goals. In addition, the Committee determined that the annual incentive bonuses, if earned, would be paid out one-half (50 percent) in and one-half (50 percent) in restricted stock issued under the Company's 2007 Stock Plan with the restricted stock vesting in two annual installments of 50 percent each, commencing one year after the grant date.
For fiscal 2012, the Committee selected for each of our NEOs, three business metrics to measure the success of the business (four in the case of the CEO). Two of the three metrics (Corporate Earnings per Share and Corporate Same Stores Sales) were the same for each of the NEOs. The third metric was individualized for each NEO to reflect a strategic priority that was part of their responsibility. The fiscal 2012 performance metrics for our annual incentive plan are summarized below.
The goals that the Committee establishes for the metrics noted above are intended to encourage our executives to meet or exceed operational goals. The minimum-level goals can be characterized as "stretch but attainable," meaning that based on historical performance, although attainment of this performance level is uncertain, it can reasonably be anticipated that minimum performance may be achieved, while the target and maximum goals represent increasingly challenging and aggressive levels
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of performance. In setting the performance level for each metric, the Committee looked at the Company's historical financial performance, its financial plan for the upcoming year and our business transformation plan.
For fiscal 2012, the Corporate Earnings Per Share performance goals under our annual incentive plan were as follows:
Performance Level
|
Corporate Earnings Per Share |
Percent of Target Award Payout |
|||||
---|---|---|---|---|---|---|---|
Maximum |
$ | 1.64 | 200 | % | |||
Target |
$ | 1.42 | 100 | % | |||
Minimum |
$ | 1.20 | 50 | % |
For fiscal 2012, Corporate Same Store Sales performance goals under our annual incentive plan were as follows:
Performance Level
|
Corporate Same Store Sales |
Percent of Target Award Payout |
|||||
---|---|---|---|---|---|---|---|
Maximum |
0.00 | % | 200 | % | |||
Target |
(1.50 | )% | 100 | % | |||
Minimum |
(2.50 | )% | 50 | % |
For fiscal 2012, Corporate Cash Flow performance goals under our annual incentive plan were as follows:
Performance Level
|
Corporate Cash Flow ($ in Millions) |
Percent of Target Award Payout |
|||||
---|---|---|---|---|---|---|---|
Maximum |
$ | 650 | 200 | % | |||
Target |
$ | 550 | 100 | % | |||
Minimum |
$ | 475 | 50 | % |
Corporate Cash Flow is generally defined by the Committee to be earnings before interest, taxes, depreciation and amortization (EBITDA) plus one-time transaction costs related to store closures and stock option expense, less interest, dividends, taxes and capital expenditures, net of proceeds from routine asset sales.
For fiscal 2012, the Total Business Transformation Funding performance goals under our annual incentive plan were as follows:
Performance Level
|
Corporate Total Funding ($ in Millions) |
Percent of Target Award Payout |
|||||
---|---|---|---|---|---|---|---|
Maximum |
$ | 384.7 | 200 | % | |||
Target |
$ | 336.6 | 100 | % | |||
Minimum |
$ | 296.9 | 50 | % |
For fiscal 2012, Retail Transformation Funding performance goals under our annual incentive plan were as follows:
Performance Level
|
Retail Funding ($ in Millions) |
Percent of Target Award Payout |
|||||
---|---|---|---|---|---|---|---|
Maximum |
$ | 84.0 | 200 | % | |||
Target |
$ | 73.5 | 100 | % | |||
Minimum |
$ | 64.8 | 50 | % |
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For fiscal 2012, Merchandise Transformation Funding performance goals under our annual incentive plan were as follows:
Performance Level
|
Merchandise Funding ($ in Millions) |
Percent of Target Award Payout |
|||||
---|---|---|---|---|---|---|---|
Maximum |
$ | 300.7 | 200 | % | |||
Target |
$ | 263.1 | 100 | % | |||
Minimum |
$ | 232.1 | 50 | % |
While each of the components of the annual incentive plan can pay out independently of one another, the Committee imposed an earnings per share floor of $1.20 before any of the performance objectives pay out for NEOs.
Discretionary Adjustments. The Committee reviews the quality of the Company's performance and determines the extent to which performance goals under the annual incentive plan are met in April of each year, after completion of the Company's financial statements. In making this determination, the Committee may apply discretion such that the numbers used for our annual incentive performance goals may differ from the numbers reported in the Company's financial statements. In applying this discretion, the Committee may exclude all or a portion of both the positive or negative effect of external events that are outside the control of our executives, such as natural disasters, litigation or changes in accounting or taxation standards. These adjustments may also exclude all or a portion of both the positive or negative effect of unusual or significant strategic events that are within the control of our executives, but that are undertaken with an expectation of improving our long-term financial performance, including restructurings, acquisitions or divestitures. For fiscal 2012, the Committee exercised its discretion to adjust corporate net earnings to exclude the impact of non-cash goodwill and intangible asset impairment charges of $1,292.2 million after-tax and $12.8 million of severance related costs. As a result, earnings per share increased from a reported loss of ($4.91) to $1.25 and therefore a 71.7% payout was achieved under the earning per share component of the annual bonus plan for the named executive officers.
Actual Award Payments. Based on the actual performance under the fiscal 2012 performance measures, the following payments were made to our NEOs:
|
2012 Payment | 2011 Payment | |||||
---|---|---|---|---|---|---|---|
Craig R. Herkert |
$ | 728,790 | $ | 0 | |||
Sherry M. Smith |
$ | 365,766 | $ | 0 | |||
Janel S. Haugarth |
$ | 451,350 | $ | 0 | |||
Peter J. Van Helden |
$ | 197,082 | $ | 0 | |||
J. Andrew Herring |
$ | 307,565 | $ | 0 |
The fiscal 2012 annual incentive was paid 50 percent in cash and 50 percent in shares of restricted stock that will vest in two annual installments of 50 percent each, commencing one year after the date of grant, provided that the NEO continues to be employed by the Company on those dates, or earlier for certain involuntary terminations under the Executive and Officer Severance Plan
Annual Discretionary Bonus Pool. An annual discretionary bonus pool exists from which our CEO may make discretionary cash awards to the NEOs and other corporate officers (other than himself) in recognition of their extraordinary achievements during any given fiscal year. Awards from the pool may not exceed $1,000,000 in the aggregate or $100,000 to any one individual during any fiscal year and any discretionary bonus to a Section 16 officer requires Committee approval before payment. For fiscal 2012, there were no discretionary awards to any NEO.
30
In General. In fiscal 2012, the Committee implemented a new long-term incentive program, known as multi-year performance awards or MYPA, which aligns rewards with the achievement of the Company's business transformation strategy and increased stockholder value. The new design is intended to ensure that the leadership team is focused on achieving results under the business transformation strategy as quickly as possible. The new program, which is described below, replaced the Company's prior long-term incentive program and the use of stock options for fiscal 2012.
MYPA. In April 2011, the Committee approved new MYPA awards for the fiscal 2012-2014 performance period. This program rewards associates for improvements in the Company's market capitalization over the performance period. Under the MYPA program, approximately 800 participants were awarded a percentage interest in the increase in market capitalization, if any, created over the three-year performance period beginning February 27, 2011 (the first day of the Company's fiscal 2012 year) and ending February 22, 2014 (the last day of the Company's fiscal 2014 year). The payout due to a participant will be determined by multiplying the participant's award percentage times the increase in market capitalization over the three-year performance period. The increase in market capitalization is calculated by multiplying the increase in the Company's stock price over the performance period times 212,200,000 shares. The beginning stock price used for the fiscal 2012-2014 awards was set at $11.00, which represented the closing price of the Company's stock, rounded to the nearest quarter of a dollar, as of April 21, 2011. The ending stock price will be equal to the average of the closing stock price for the 20 trading days following the release of fourth quarter earnings for fiscal 2014 rounded to the nearest quarter of a dollar. The maximum amount of the increase in the stock price considered under the fiscal 2012-2014 award is capped at $25.00. The maximum amount of the increase in market capitalization that may be paid to the 800 participants is 4.8 percent. At the end of the three-year period, the amount due to a participant will be paid one-half (50 percent) in cash and one-half (50 percent) in shares of SUPERVALU common stock at the then current market price without further restriction. The program provides for an alternative performance-based payout opportunity equal to 25 percent of the target award value if greater than the market increase in capitalization award, provided $5.7 billion or more of EBITDA is generated over the three-year performance period. The Committee believes that the three-year measurement period aligns with the estimated time to realize the business transformation currently underway at the Company.
For the fiscal 2012-2014 performance period, the Committee granted MYPA awards to the NEOs with the following percentage share of the increase in market capitalization over the performance period:
Name
|
Award Percentage of the Increase in Market Capitalization |
|||
---|---|---|---|---|
Craig R. Herkert |
0.42076 | % | ||
Sherry M. Smith |
0.10098 | % | ||
Janel S. Haugarth |
0.10098 | % | ||
Peter J. Van Helden |
0.10098 | % | ||
J. Andrew Herring |
0.10098 | % |
The following table sets forth the total value of the opportunity under the MYPA awards for each of the NEOs for the fiscal 2012-2014 performance period. The threshold (minimum) award value is based on the Company achieving an increase in market price of its common stock to $11.25, which is the minimum change in stock price for which a participant would receive a payout opportunity. The threshold (minimum) award value would translate into an increase in market capitalization of $53,000,000. The target award value is based on the Company achieving an increase in market price of its common stock to $18.00. The target award value would translate into an increase in market capitalization of $1,485,400,000.
31
The maximum award is based on the Company achieving a $25.00 increase in the market price of its common stock (to trade at $36.00 per share) over the three year period. The maximum award would translate into an increase in market capitalization of $5,305,000,000. The award amounts reflect the total value of the common stock and cash that comprise the award and assume that the NEOs are still employed by the Company at the time the award is paid out.
Name
|
Total Value of Threshold Award (Market price = $11.25 per share) |
Total Value of Target Award (Market price = $18.00 per share) |
Total Value of Maximum Award Market Cap Increase (Market price = $36.00 per share) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Craig R. Herkert |
$ | 223,213 | $ | 6,249,969 | $ | 22,321,318 | ||||
Sherry M. Smith |
$ | 53,570 | $ | 1,499,957 | $ | 5,356,989 | ||||
Janel S. Haugarth |
$ | 53,570 | $ | 1,499,957 | $ | 5,356,989 | ||||
Peter J. Van Helden |
$ | 53,570 | $ | 1,499,957 | $ | 5,356,989 | ||||
Andrew J. Herring |
$ | 53,570 | $ | 1,499,957 | $ | 5,356,989 |
In the event of an executive's qualified retirement, death or disability during the performance period of the fiscal 2012-2014 MYPA awards, the Committee has determined that such executive will be entitled to receive a prorated award for the portion of the performance period for which they participated in the program if the Committee determines that the performance metrics required for an award to be earned are achieved at the end of the performance period.
Competitive Market. The Company seeks to offer its executives compensation opportunities targeted at the median of the competitive market. In assessing competitiveness, the Committee reviews compensation information from a peer group, as well as compensation information available from third-party surveys. This information is used to inform the Committee of competitive pay practices, including the relative mix among elements of compensation. This information is also used to determine, as a point of reference for each NEO, a midpoint (or median) within the competitive compensation range, for base salary, annual incentive, long-term equity incentive and the total of these elements.
The Committee also recognizes that comparative pay assessments have inherent limitations, due to the lack of precise comparability of executive positions between companies, as well as the companies themselves. As a result, the competitive medians are used only as a guide and are not the sole determinative factor in making compensation decisions for the NEOs. In exercising its judgment, the Committee looks beyond the competitive market data and considers individual job responsibilities, individual performance, experience, compensation history, internal comparisons and compensation at former employers (in the case of new hires) and Company performance.
For fiscal 2012, our competitive comparison group consisted of the following 25 retail and distribution companies:
AmerisourceBergen Corporation | Kohl's Corporation | Sears Holdings Corporation | ||
Best Buy Co. Inc. | The Kroger Co. | Staples, Inc. | ||
Cardinal Health, Inc. | Lowe's Companies, Inc. | Sysco Corporation | ||
Costco Wholesale Corporation | Macy's, Inc. | Target Corporation | ||
CVS Caremark Corporation | McKesson Corporation | The TJX Companies, Inc. | ||
Dollar General Corporation | Office Depot, Inc. | Wal-Mart Stores, Inc. | ||
The Gap, Inc. | Publix Super Markets, Inc. | Walgreen Co. | ||
The Home Depot, Inc. | Rite Aid Corporation | |||
J.C. Penney Company, Inc. | Safeway Inc. |
32
The 25-company competitive comparison group approved by the Committee and disclosed above was reviewed during fiscal 2012 by our compensation consultant, Towers Watson, with input from the Committee, and was selected from U.S.-based companies based on revenue, size and industry.
Generally, the Committee will maintain the continuity of the companies within the competitive comparison group from year to year; however, changes in the composition of the group may occur as companies enter or exit the publicly-traded marketplace, as the relative size of the companies in the comparison group changes or as business conditions warrant change. For fiscal 2012, the Committee changed the composition of the peer group from the prior fiscal year to remove AutoNation, Inc. and to add Dollar General Corporation because it believed that this was in line with the Company's strategy related to the Save-A-Lot banner.
The Committee reviewed this list for fiscal 2013 and determined that AmerisourceBergen Corporation, Cardinal Health, Inc. and McKesson Corporation should be removed. The Committee added Big Lots Inc., Ruddick Corp. and Whole Foods Market, Inc. which the Committee believes are a better fit from an industry, revenue and market capitalization perspective.
The third-party compensation surveys used by the Committee provide data on similarly sized organizations based on revenue and industry. In fiscal 2012, the Committee looked at third-party retail, wholesale and general industry surveys conducted by Towers Watson. Those surveys were the Towers Watson Executive Compensation Database, the Towers Watson Retail/Wholesale Executive Compensation Database and the Towers Watson Industry Report on Top Management CompensationRetail/Wholesale Sector.
Compensation Process. Compensation for our NEOs other than the CEO is reviewed and approved by the Committee on an annual basis. As part of that review, the Committee takes into consideration competitive market analyses and the recommendations of our human resources staff, the compensation consultants and the CEO. The Committee will review periodically the relationship of target compensation levels for each NEO relative to the compensation target for the CEO. In addition, the Committee periodically will review internal equity relationships for comparable positions across peer companies.
For the CEO, the Committee prepares compensation recommendations for ultimate review and approval by the Board of Directors, with the CEO abstaining from such review and approval. In making its compensation recommendations regarding our CEO, the Committee takes into consideration the Board of Directors' annual performance evaluation of our CEO, internal equity relationships, competitive market analyses for other chief executive officers based on publicly available information and information provided by our human resources staff and compensation consultant. Recommendations with respect to compensation of our CEO are not shared with the CEO during this process.
For fiscal 2012, the review for all executives was conducted by the Committee in April 2011 at the Committee's regular meeting.
Compensation Consultant. The Committee has the authority to retain outside compensation consultants to assist in the evaluation of executive compensation or to otherwise advise the Committee. The Committee directs the work of such consultants, and decisions regarding compensation of our NEOs are ultimately made by the Committee and, in the case of our CEO, by the Board.
The Committee retained Towers Watson as its compensation consultant to assist the Committee with its evaluation and assessment of executive compensation and director compensation. The compensation consultant also assisted the Committee with the review of its self-selected comparison group used for purposes of benchmarking compensation levels and relative mix for fiscal 2012.
33
In fiscal 2010, the Committee adopted a policy whereby any consulting work done by Towers Watson with expected billings in excess of $25,000, excluding work for the Committee, is subject to pre-approval by the Committee. For fiscal 2012, the aggregate amount of fees for additional services, not including consulting related to broad-based plans, provided by Towers Watson did not exceed $120,000.
Executive Change of Control Policy
SUPERVALU's objective is to provide NEOs and other executives with protection under a market competitive change of control severance agreement. The Committee believes that this benefit helps to maintain the impartiality and objectivity of our executives in the event of a change of control situation so that our stockholders' interests are protected. The Committee reviews this change-of-control policy periodically to address whether these protections are consistent with those provided in our competitive market and to be in compliance with federal tax rules affecting nonqualified deferred compensation.
In fiscal 2010, the Committee approved a new form of change of control agreement and severance plan, after making a determination that certain changes were needed to bring the Company's program in line with the Committee's philosophy and current market trends. As a result of the Committee's review, benefits paid out to executives pursuant to a change of control would be reduced from benefits available under previous change of control agreements.
The current change of control agreement is summarized below:
Agreement Provision
|
Description | |
---|---|---|
Severance Triggers | Involuntary termination without "cause", as defined below, or voluntary resignation for "good reason", as defined below, within 2 years following a change of control, or in anticipation of a change of control. |
|
|
"Good reason" is defined as a reduction in base salary or target annual incentive, duties and responsibilities that are materially and adversely diminished, forced relocation of more than 45 miles, failure to provide for assumption of agreement or material breach of the agreement by the Company. |
|
|
"Cause" is defined as continued failure to perform duties, conviction of a felony, conduct materially and demonstrably injurious to the Company, material act of personal dishonesty that results in substantial personal enrichment or material violation of certain Company policies. |
|
Severance Benefits |
3 times for the CEO and 2 times for the other NEOs, of base salary and target annual incentive, plus welfare benefits continuation. |
|
|
Earned but unpaid salary and accrued vacation and annual bonus plan and long-term incentive plan amounts due but not yet paid. |
|
|
Pro rata annual incentive for year of termination. |
|
|
Accelerated vesting of all nonvested equity awards at change of control. |
|
|
"Best net" reduction of compensation to avoid excise tax. |
|
Covenants |
Non-disclosure of confidential information, non-competition, non-solicitation of employees, non-solicitation of existing or prospective customers, vendors and suppliers, return of property and non-disparagement covenants. |
34
In fiscal 2010, the Committee approved the Executive & Officer Severance Pay Plan, which provides for severance benefits for NEOs who are notified on or after May 2, 2009 that their employment is involuntarily terminated without cause, subject to certain exclusions. In January 2012, the Company amended this plan to include the new MYPA program as a long-term incentive plan and to address the new payout opportunity under the annual incentive plan that is made one-half (50 percent) in cash and one-half (50 percent) in restricted stock. The severance plan in effect as of the end of fiscal 2012 is summarized below:
Agreement Provision
|
Description | |
---|---|---|
Severance Triggers | Involuntary termination without cause, subject to certain exclusions. |
|
|
"Cause" is defined as continued failure to perform duties, conviction of a felony, conduct materially and demonstrably injurious to the Company, personal dishonesty that results in substantial personal enrichment or failure to comply with certain Company policies. |
|
Severance Benefits |
2 times for the CEO and 1.5 times for the other NEOs of annual base salary at time of termination. |
|
|
2 times for the CEO and 1.5 times for the other NEOs of the average of the performance results (expressed as a percentage) used to determine the NEOs' bonus amounts under the annual bonus plan for the preceding three years (or all bonus amounts, if the NEO has been employed fewer than three years), multiplied by the NEO's current target bonus amount. |
|
|
Pro rata annual incentive, including the portion paid in stock, and payments for each long-term incentive plan cycle, including the MYPA, not completed as of the termination date. |
|
|
Reimbursement for COBRA coverage for medical and dental insurance. |
|
|
Repayment of severance benefits received by a NEO who the Company wishes to rehire in any capacity within six months of the termination date. |
|
|
Requires execution of a release acceptable to the Company. |
Under the Company's Executive Deferred Compensation Plan (2008 Statement), eligible executives may elect to defer on a pre-tax basis up to 50 percent of base salary and may elect to defer up to 100 percent of annual incentive compensation during the plan year. The program allows executives to save for retirement on a tax-deferred basis. Under this unfunded plan, amounts deferred by the executive accumulate on a tax-deferred basis and are credited at an effective annual interest rate equal to Moody's Corporate Bond Index, set as of October 1 of the preceding year. The Executive Deferred Compensation Plan also provides for additional make-up contributions that are credited to the participant's account in the Executive Deferred Compensation Plan.
Consistent with our overall compensation philosophy, SUPERVALU maintains a retirement plan for certain non-union employees under which a maximum of $195,000 per year in annual benefits may be paid upon retirement based on limitations imposed by Section 415 of the Internal Revenue Code (the "Code"). Effective December 31, 2007, this plan was closed to new participants and service crediting for existing participants was discontinued. Compensation crediting will be discontinued
35
effective December 31, 2012, at which time, accrued benefits for all participants will be frozen. In addition, SUPERVALU maintains a non-qualified supplemental executive retirement plan and a non-qualified excess benefit plan for certain highly-compensated employees, including certain of the NEOs, that allow for the payment of additional benefits so that such retiring employees may receive, in the aggregate, at least the benefits they would have been entitled to receive if the Code did not impose maximum limitations. Our retirement plans are described in more detail following the Pension Benefits Table under "Executive Compensation."
SUPERVALU provides post-retirement death benefits for certain designated retired executive officers, which would include those NEOs that meet the retirement definition of termination at or after age 55 with 10 or more years of service. Currently, Ms. Haugarth meets the retirement definition mentioned above. The death benefit is fixed at an amount approximately equal to, on an after-tax basis, 140 percent of an eligible executive's final base salary. The benefits may be funded through life insurance policies owned by SUPERVALU. Ms. Haugarth and Mr. Van Helden are the only NEOs eligible to participate. No new participants are eligible to receive these benefits.
For all employees who participate in the SUPERVALU STAR 401(k) Plan, including NEOs, the Company makes a matching contribution of $1 for every $1 the participant contributes, up to the first four percent of pay and $0.50 for each $1 the participant contributes on the next two percent of pay. The Company may also make additional profit-sharing contributions, at the discretion of the Company's management, of up to a maximum of three percent of the eligible participant's compensation.
The Company provides limited post-retirement medical benefits for some of its employees, including certain executive officers who met the eligibility requirements of the plan before it was closed to new participants in 2002. Based on years of service, the Company will pay a percentage based on years of service of retiree medical and pharmacy premiums for certain employees who retire at age 55 or older with ten or more years of service. The only NEOs who are eligible under this plan are Ms. Smith (currently at 30%) and Ms. Haugarth (currently at 60%). At and after age 65, the benefit is converted to a Health Reimbursement Account arrangement subject to a maximum annual benefit of up to $1700 for each of the retiree and their spouse"
SUPERVALU provides our NEOs and other executives with a limited perquisites program. This limited perquisites program is consistent with the Committee's focus on performance-based compensation. The Committee will continue to review this perquisites program periodically.
The Company continues to reimburse executives for an annual physical to encourage executives to be physically healthy, such that executives can better focus on the business affairs of the Company. Similarly, providing our CEO with limited personal use of the Company's aircraft encourages and allows the CEO to make travel arrangements that maximize the efficient use of limited personal time, and allow more time to focus on the Company's business for the benefit of the Company's stockholders. The Company does not provide a gross-up to cover the individual income tax incurred when the corporate aircraft is used for personal purposes.
36
For fiscal 2012, SUPERVALU provided the following executive benefits and perquisites to our NEOs:
Executive Benefit
|
Description | |
---|---|---|
Post-Retirement Death Benefit Coverage | A death benefit of 140 percent of the executive's final base salary paid to the beneficiary. |
|
|
Current participants have been grandfathered into this program; no new enrollment has been allowed since fiscal 2008. |
|
Personal Aircraft Usage |
Limited to Mr. Herkert and his family. |
|
|
Up to 30 hours of personal travel per year at the expense of the Company. |
|
|
No tax gross-up to cover the individual income tax on personal travel. |
|
Executive Physicals |
Annual reimbursement for the full cost of an executive physical. |
Executive Stock Ownership and Retention Program
SUPERVALU has an executive stock ownership and retention program for our NEOs and other executives so that these executives will experience the same downside risk and upside potential as our stockholders experience. The current ownership requirements for our executives, including the NEOs, are as follows:
Position
|
Multiple of Base Salary | |
---|---|---|
Chief Executive Officer |
5 times | |
Chief Financial Officer |
4 times | |
Executive Vice Presidents |
3 times | |
Corporate Senior Vice Presidents & Presidents |
2 times | |
Group Vice Presidents & Vice Presidents |
1 times |
For purposes of complying with our Executive Stock Ownership and Retention Program, stock is considered owned if the shares are owned outright, if the shares are owned by immediate family members or legal entities established for their benefit, and if the shares are in the form of unvested restricted stock. Outstanding unexercised stock options are not considered owned for purposes of our program. Our NEOs and other executives may not pledge owned shares as security or enter into any risk hedging arrangements.
Prior to achieving their ownership objective, executives are required to retain shares equal to 100 percent of the net after-tax profit received from stock option exercises or the vesting of restricted stock. After they meet their ownership goal, NEOs and other executives are required to retain shares equal to 50 percent of the net after-tax profit received from stock option exercises or the vesting of restricted stock. This 50 percent retention requirement can be satisfied on either an individual basis for each stock option exercise or restricted stock vesting event, or on a cumulative basis by aggregating all shares held from the exercise of stock options or the vesting of restricted stock from the date the executive first met our stock ownership requirement.
In fiscal 2012, all of our NEOs were in compliance with our program.
In addition, the Company's policies prohibit certain employees, including all NEOs, from engaging in short sales, hedging and trading in put and call options, with respect to the Company's securities.
37
To reflect sound governance and be consistent with market practice, in February 2011, the Committee approved a recoupment policy for executive officers of the Company. Specifically, the recoupment (or "clawback") policy allows for recovery of the following compensation elements:
This policy applies in the event there is an accounting restatement due to the material noncompliance under any financial reporting requirements which results in performance-based compensation that would have been a lower amount if it had been calculated based on such restated results.
Section 162(m) of the Code limits the deductibility of compensation paid to certain of the NEOs to $1 million annually. Compensation that is "qualified performance-based compensation" generally is not subject to the $1 million deduction limit. Thus, amounts paid under our bonus plans, grants of stock options and MYPA awards will generally be fully deductible for tax purposes. Salary and restricted stock awards are subject to the Section 162(m) $1 million deduction limit. We consider the tax deductibility of any element of executive compensation as a factor in our overall compensation program. It is our intent to qualify all compensation paid to our top executives, where practicable under our compensation policies, for deductibility under the Section 162(m) limits in order to maximize our income tax deductions. However, the Committee may approve compensation that may not qualify for the compensation deduction if, in light of all applicable circumstances, it would be in our best interest for such compensation to be paid.
The Committee approved a $75,000 increase in base salary for Mr. Herkert, his first pay increase since he was hired three years ago, reflecting the Board's confidence in the turnaround strategy he has developed and is executing. The base salaries for the other NEOs were not increased.
The Committee simplified the fiscal 2013 annual incentive plan to focus on operating earnings and sales with a 50/50 weighting between the two metrics. Specifically, 50 percent of each NEOs bonus will be based on consolidated earnings before interest and taxes and 50 percent will be based on a combination of ID Sales or Independent Segment Sales included in their area of responsibility. The fiscal 2013 annual incentive will continue to be paid 50 percent in cash and 50 percent in shares of restricted stock that will vest in two annual installments of 50 percent each, commencing one year after the date of grant, provided that the NEO continues to be employed by the Company on those dates, or earlier for certain involuntary terminations under the Executive and Officer Severance Plan.
The Committee also approved a multi-year performance award program for the fiscal 2013-2015 performance period. This program is designed to reward associates for increasing the market value of the Company's stock price over the performance period. Under the program, approximately 725 participants were awarded 4,652,568 stock appreciation rights ("SARs") under the Company's 2007 Stock Plan with a grant date of May 1, 2012 and a grant price of $5.77 which was equal to the closing market price of the Company's common stock on the NYSE on May 1, 2012 (the "Grant Price"). The SARs will vest in full on May 1, 2015 and will be settled in shares of the Company's common stock which will have no further restrictions. The number of shares that may be issued under these awards will be determined based on the difference between the closing market price of the Company's common stock on May 1, 2015 and the Grant Price, multiplied by the number of units subject to the award.
38
REPORT OF THE LEADERSHIP DEVELOPMENT AND COMPENSATION COMMITTEE
The Leadership Development and Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Respectfully submitted,
Susan
E. Engel, Chairperson
Ronald E. Daly
Edwin C. Gage
Matthew E. Rubel
Kathi P. Seifert
39
The following tables and accompanying narrative disclosure should be read in conjunction with the "Compensation Discussion and Analysis," which sets forth the objectives of SUPERVALU's executive compensation and benefit program.
Name and Principal Position
|
Year | Salary(1) ($) |
Bonus ($) |
Stock Awards(3) ($) |
Option Awards(2) ($) |
Non- Equity Incentive Plan Compensation(3) ($) |
Change in Pension Value and Non- Qualified Deferred Compensation Earnings(4) ($) |
All Other Compensation(5) ($) |
Total ($) |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Craig R. Herkert |
2012 | $ | 850,000 | $ | $ | 364,395 | $ | 2,142,847 | $ | 364,395 | $ | $ | 74,978 | $ | 3,796,615 | |||||||||||||
Chief Executive Officer |
2011 | 850,000 | | | 2,012,300 | | | 108,535 | 2,970,835 | |||||||||||||||||||
and President(6) |
2010 | 653,846 | | 6,781,654 | 2,000,004 | 398,183 | | 956,325 | 10,790,012 | |||||||||||||||||||
Sherry M. Smith |
2012 |
594,615 |
182,883 |
514,271 |
182,883 |
316,570 |
14,567 |
1,805,789 |
||||||||||||||||||||
Executive Vice President |
2011 | 502,478 | | 169,350 | 120,738 | | 125,484 | 15,280 | 933,330 | |||||||||||||||||||
and Chief Financial Officer |
||||||||||||||||||||||||||||
Janel S. Haugarth |
2012 |
625,000 |
225,675 |
514,271 |
225,675 |
708,297 |
14,125 |
2,313,043 |
||||||||||||||||||||
Executive Vice President, |
2011 | 535,468 | 100,000 | | 241,476 | | 442,324 | 24,414 | 1,343,682 | |||||||||||||||||||
Merchandising and Logistics |
2010 | 521,540 | | 858,160 | 298,388 | 258,480 | 860,601 | 12,526 | 2,809,695 | |||||||||||||||||||
Peter J. Van Helden(7) |
2012 |
550,000 |
98,541 |
514,271 |
98,541 |
54,736 |
16,434 |
1,332,523 |
||||||||||||||||||||
Executive Vice President Retail Operations |
||||||||||||||||||||||||||||
J. Andrew Herring |
2012 |
500,000 |
153,783 |
514,271 |
153,783 |
119,367 |
13,731 |
1,454,935 |
||||||||||||||||||||
Executive Vice President Real Estate, Market Development and Legal |
Name
|
401(k) Contributions |
Life Insurance(a) |
All Other Misc Comp(b) |
Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Craig R. Herkert |
$ | 15,192 | $ | 2,208 | $ | 57,578 | (c) | $ | 74,978 | ||||
Sherry M. Smith |
12,164 | 1,503 | 900 | 14,567 | |||||||||
Janel S. Haugarth |
7,178 | 2,967 | 3,980 | 14,125 | |||||||||
Peter J. Van Helden |
11,867 | 1,380 | 3,187 | 16,434 | |||||||||
J. Andrew Herring |
12,489 | 1,242 | 0 | 13,731 |
40
contribution to her HSA. For Ms. Haugarth, this amount represents $3,080 for her executive physical and $900 in employer contribution to her HSA. For Mr. Van Helden, this amount represents $2,287 for his executive physical and $900 in employer contribution to his HSA.
TOTAL REALIZED COMPENSATION TABLE
To supplement the SEC required disclosure in the Summary Compensation Table set forth above, we have included the following additional table which shows "Total Realized Compensation" representing the total compensation realized by each named executive officer in each of the years shown. Total compensation as calculated under the SEC rules and, as shown in the Summary Compensation Table, includes several items that are driven by accounting and actuarial assumptions, which are not necessarily reflective of compensation actually realized by the named executive officer in a particular year.
Name and Principal Position
|
Year | Total Realized Compensation(1) |
Summary Compensation Table Total |
Realized Compensation as a % of Reported Compensation |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Craig R. Herkert, |
2012 | $ | 1,783,268 | $ | 3,796,615 | 47 | % | ||||||
Chief Executive Officer and President |
2011 | $ | 2,502,743 | $ | 2,970,835 | 84 | % | ||||||
|
2010 | $ | 1,774,480 | $ | 10,790,012 | 16 | % | ||||||
Sherry M. Smith, |
2012 |
$ |
614,433 |
$ |
1,805,789 |
34 |
% |
||||||
Executive Vice President and Chief Financial Officer |
2011 | $ | 601,229 | $ | 933,330 | 64 | % | ||||||
Janel S. Haugarth, |
2012 |
$ |
1,047,825 |
$ |
2,313,043 |
45 |
% |
||||||
Executive Vice President, Merchandising and Logistics |
2011 | $ | 932,362 | $ | 1,343,682 | 69 | % | ||||||
|
2010 | $ | 1,107,893 | $ | 2,809,695 | 39 | % | ||||||
Peter J. Van Helden, |
2012 |
$ |
566,434 |
$ |
1,332,523 |
43 |
% |
||||||
Executive Vice President, Retail Operations |
|||||||||||||
J. Andrew Herring, |
2012 |
$ |
513,730 |
$ |
1,454,935 |
35 |
% |
||||||
Executive Vice President Real Estate, Market Development and Legal |
41
reflects any bonus earned for the applicable years (regardless of when paid). See the narrative and notes accompanying the 2012 Summary Compensation Table set forth on page .
|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) |
Estimated Future Payouts Under Equity Incentive Plan Awards(2) |
|||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name
|
Grant Date |
Approval Date |
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold ($) |
Target ($) |
Maximum ($) |
|||||||||||||||||
Craig R. Herkert |
4/22/2011 | 4/12/2011 | $ | 637,500 | $ | 1,275,000 | $ | 2,550,000 | $ | 223,213 | $ | 6,249,969 | $ | 22,321,318 | |||||||||||
Sherry M. Smith |
4/22/2011 | 4/12/2011 | 300,000 | 600,000 | 1,200,000 | 53,570 | 1,499,957 | 5,356,989 | |||||||||||||||||
Janel S. Haugarth |
4/22/2011 | 4/12/2011 | 312,500 | 625,000 | 1,250,000 | 53,570 | 1,499,957 | 5,356,989 | |||||||||||||||||
Peter J. Van Helden |
4/22/2011 | 4/12/2011 | 275,000 | 550,000 | 1,100,000 | 53,570 | 1,499,957 | 5,356,989 | |||||||||||||||||
J. Andrew Herring |
4/22/2011 | 4/12/2011 | 250,000 | 500,000 | 1,000,000 | 53,570 | 1,499,957 | 5,356,989 |
42
OUTSTANDING EQUITY AWARDS AT FEBRUARY 25, 2012
|
Option Awards | Stock Awards | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name
|
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock Held that have not Vested(15) |
Market Value of Shares or Units of Stock that have not Vested ($) |
|||||||||||||
Craig R. Herkert |
125,000 | (1) | 375,000 | (1) | $ | 12.68 | 6/4/2017 | ||||||||||||
|
241,091 | (2) | 160,726 | (2) | $ | 15.90 | 5/26/2016 | 157,234 | (3) | $ | 1,045,606.10 | ||||||||
Totals: |
366,091 | 535,726 | 157,234 | $ | 1,045,606.10 | ||||||||||||||
Sherry M. Smith |
7,500 |
(1) |
22,500 |
(1) |
$ |
12.68 |
6/4/2017 |
||||||||||||
|
18,000 | (4) | 12,000 | (4) | $ | 16.07 | 5/28/2016 | ||||||||||||
|
24,000 | (5) | 6,000 | (5) | $ | 35.00 | 5/28/2015 | ||||||||||||
|
30,000 | (7) | $ | 43.59 | 4/20/14 | ||||||||||||||
|
25,000 | (11) | $ | 29.90 | 4/7/2014 | 15,000 | $ | 99,750 | |||||||||||
|
27,500 | (9) | $ | 29.18 | 4/20/2013 | ||||||||||||||
|
5,586 | (14) | $ | 31.57 | 4/9/2013 | ||||||||||||||
|
3,999 | (12) | $ | 15.90 | 4/9/2013 | ||||||||||||||
|
2,670 | (14) | $ | 35.05 | 4/9/2013 | ||||||||||||||
|
2,777 | (14) | $ | 35.48 | 4/9/2013 | ||||||||||||||
|
2,647 | (14) | $ | 35.48 | 4/10/2012 | ||||||||||||||
|
10,651 | (14) | $ | 35.05 | 4/10/2012 | ||||||||||||||
|
27,500 | (10) | $ | 33.46 | 4/6/2012 | ||||||||||||||
Totals: |
187,830 | 40,500 | (1) | 15,000 | $ | 99,750 | |||||||||||||
Janel S. Haugarth |
15,000 |
(1) |
45,000 |
(1) |
$ |
12.68 |
6/4/2017 |
||||||||||||
|
18,000 | (4) | 12,000 | (4) | $ | 16.07 | 5/28/2016 | ||||||||||||
|
44,000 | (5) | 11,000 | (5) | $ | 35.00 | 5/28/2015 | ||||||||||||
|
50,000 | (7) | $ | 43.59 | 4/20/2014 | ||||||||||||||
|
1,832 | (14) | $ | 43.59 | 4/9/2014 | ||||||||||||||
|
12,619 | (14) | $ | 43.59 | 4/7/2014 | ||||||||||||||
|
4,000 | (11) | $ | 29.90 | 4/7/2014 | ||||||||||||||
|
30,000 | (9) | $ | 29.18 | 4/20/2013 | ||||||||||||||
|
6,703 | (14) | $ | 28.83 | 4/9/2013 | ||||||||||||||
|
2,265 | (13) | $ | 28.83 | 4/9/2013 | ||||||||||||||
|
30,000 | (13) | $ | 33.56 | 7/18/2012 | ||||||||||||||
|
2,408 | (14) | $ | 36.31 | 4/10/2012 | ||||||||||||||
|
9,608 | (14) | $ | 35.47 | 4/10/2012 | ||||||||||||||
|
20,000 | (10) | $ | 33.46 | 4/6/2012 | ||||||||||||||
Totals: |
246,435 | 68,000 | |||||||||||||||||
J Andrew Herring |
15,000 |
(1) |
45,000 |
(1) |
$ |
12.68 |
6/4/2017 |
||||||||||||
|
15,000 | (4) | 10,000 | (4) | $ | 16.07 | 5/28/2016 | ||||||||||||
|
17,600 | (6) | 4,400 | (15) | $ | 35.00 | 5/28/2015 | ||||||||||||
|
25,000 | (7) | $ | 43.59 | 4/20/2014 | ||||||||||||||
|
4,000 | (11) | $ | 29.90 | 4/7/2014 | ||||||||||||||
|
12,186 | (14) | $ | 46.30 | 4/7/2014 | ||||||||||||||
|
25,000 | (9) | $ | 29.18 | 4/20/2013 | ||||||||||||||
|
8,313 | (14) | $ | 35.47 | 4/9/2013 | ||||||||||||||
|
4,991 | (14) | $ | 46.30 | 4/9/2013 | ||||||||||||||
|
27,063 | (14) | $ | 46.30 | 4/10/2012 | ||||||||||||||
|
20,000 | (10) | $ | 33.46 | 4/6/2012 | ||||||||||||||
Totals: |
174,153 | 59,400 |
43
|
Option Awards | Stock Awards | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name
|
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock Held that have not Vested(15) |
Market Value of Shares or Units of Stock that have not Vested ($) |
|||||||||||||
Peter J. Van Helden |
15,000 | (1) | 45,000 | (1) | $ | 12.68 | 6/4/2017 | ||||||||||||
|
15,000 | (4) | 10,000 | (4) | $ | 16.07 | 5/28/2016 | ||||||||||||
|
40,000 | (5) | 10,000 | (5) | $ | 35.00 | 5/28/2015 | ||||||||||||
|
13,046 | (16) | $ | 26.96 | 12/16/2014 | ||||||||||||||
|
50,000 | (7) | $ | 43.59 | 4/20/2014 | ||||||||||||||
|
21,743 | (16) | $ | 23.35 | 12/5/2013 | ||||||||||||||
|
21,743 | (16) | $ | 25.28 | 12/9/2012 | ||||||||||||||
Totals: |
176,532 | 65,000 |
44
option is granted for the number of shares tendered as payment for the exercise price and tax withholding obligation, has a per share exercise price equal to the fair market value of a share of the Company's common stock on the date of grant, is exercisable in full on the date of grant and expires on the same date as the original option.
45
OPTION EXERCISES AND STOCK VESTED FOR FISCAL 2012
|
Option Awards | Stock Awards | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name
|
Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise ($) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting(1) ($) |
|||||||||
Craig R. Herkert |
| | 78,616 | $ | 796,380 | ||||||||
Sherry M. Smith |
| | | | |||||||||
Janel S. Haugarth |
| | 40,000 | $ | 405,200 | ||||||||
Peter J. Van Helden |
| | | | |||||||||
J. Andrew Herring |
| | | |
46
Name
|
Plan Name(1) | Number of Years Credited Service (#)(2) |
Present Value of Accumulated Benefit(3) ($) |
Payments During Last Fiscal Year ($) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Craig R. Herkert |
| | | | ||||||||
Sherry M. Smith(4) |
Qualified Retirement Plan |
20.17 |
$ |
491,690 |
|
|||||||
|
Excess Benefits Plan | 20.17 | $ | 601,826 | | |||||||
|
EDCP | 20.17 | $ | 38,036 | | |||||||
Janel Haugarth(5) |
Qualified Retirement Plan |
30.0 |
$ |
978,784 |
|
|||||||
|
Excess Benefits Plan | 30.0 | $ | 2,481,649 | | |||||||
|
EDCP | 30.0 | $ | 172,595 | | |||||||
J. Andrew Herring(6) |
Qualified Retirement Plan |
9.92 |
$ |
268,053 |
|
|||||||
|
Excess Benefits Plan | 9.92 | $ | 215,646 | | |||||||
|
EDCP | 9.92 | $ | 64,880 | | |||||||
Peter J. Van Helden |
Qualified Retirement Plan |
25.00 |
$ |
246,179 |
|
With respect to NEOs, Ms. Haugarth, Ms. Smith and Mr. Herring participate in the Qualified Retirement Plan and the Excess Benefits Plan. Mr. Van Helden participates in the Qualified Retirement Plan only. Mr. Herkert is not eligible to participate in the Qualified Retirement Plan, the SERP or the Excess Benefits Plan. The SERP and the Excess Benefits Plan were designed to restore the loss of qualified retirement plan benefits due to the Internal Revenue Service ("IRS") limits on compensation and benefits and, in addition, the SERP was designed to restore the loss of qualified retirement plan benefits due to a change in the formula required by statute in 1989. In addition, NEOs may also defer compensation under the EDCP as described in this Proxy Statement.
47
SUPERVALU INC. Retirement Plan
To participate in the Qualified Retirement Plan, an employee must have one year of service with the Company during which 1,000 hours of service were completed and be at least age 21. Union employees are not covered unless a collective bargaining agreement provides for coverage in the plan. Accrued benefits under the Qualified Retirement Plan are one percent of final average compensation times credited service (not to exceed 30 years) plus 0.4 percent of final average compensation in excess of covered compensation times credited years of service (not to exceed 30 years). Final average compensation is defined as the highest five consecutive complete plan years of compensation. Elements of compensation include base pay and bonus pay, less any deferrals under nonqualified deferred compensation plans. Credited service for years during which the participant completed at least 1,000 hours of service. Normal retirement is age 65. Accrued benefits are available unreduced at age 62 with 10 or more years of service. Early retirement is available at age 55 with 10 or more years of service. Early retirement reductions are four percent per year prior to age 62. Effective December 31, 2007, credited service was frozen under the Qualified Retirement Plan. However, vesting service will continue to be counted until separation and compensation will be recognized under the Qualified Retirement Plan through December 31, 2012.
There are six optional distribution forms under the Qualified Retirement Plan: single life annuity, which is payable for the lifetime of the participant only; 5, 10 and 15 year term certain annuities, which are payable for the lifetime of the participant with a guaranteed stream of benefits payable to the named beneficiary if the participant dies before the end of the guaranteed term; and 50 percent and 100 percent joint and survivor annuities, which are payable for the lifetime of the participant with the applicable percentage of the participant's annuity being paid to the surviving spouse or surviving joint annuitant for their lifetime. Lump sums are also available to certain limited participant groups. These distribution options are elected and payable at early or normal retirement.
Certain former Albertson's pension plans in which benefit accruals for all nonunion employees were previously frozen have been merged into the Qualified Retirement Plan. The frozen accrued benefits for merged participants are determined under the formulas in the merged plans, and distributions to such participants are made under the normal and optional distribution forms in the Qualified Retirement Plan.
SUPERVALU INC. Nonqualified Supplemental Executive Retirement Plan
The SERP was designed to restore the loss of qualified retirement plan benefits due to statutory limits on benefits and compensation in such plans and to restore the loss of any qualified retirement plan benefits due to the change in the benefit formula in that plan on February 26, 1989. Participation in this plan is limited to employees who satisfy the following requirements: (1) born before March 1, 1952; (2) have at least 15 years of credited service; (3) are a highly compensated employee (as defined under Section 414(q) of the Code) at separation; and (4) on February 26, 1989 were actively employed by SUPERVALU and were participants in the Qualified Retirement Plan. Accrued benefits are determined as the greater of the current qualified retirement plan benefit formula compared to the SERP formula of 1.7 percent of final average compensation times credited service (not to exceed 30 years) minus the sum of (A) 0.1 percent of final average compensation in excess of $75,000 times credited service (not to exceed 30 years) and (B) 1/30th of the participant's approximate social security benefit times credited service (not to exceed 30 years) minus the dollar amount of the benefit payable from the Qualified Retirement Plan. Normal retirement is age 65. Accrued benefits are available unreduced at age 62 with 10 or more years of service. Early retirement is available at age 55 with 10 or more years of service. Early retirement reductions are four percent per year prior to age 62. Effective December 31, 2007, credited service was frozen under the Qualified Retirement Plan and, indirectly, under the SERP. However, vesting service will continue to be recognized until separation and
48
compensation will continue to be recognized under the Qualified Retirement Plan and, indirectly, under the SERP, through December 31, 2012.
There are nine basic distribution forms under the SERP: single life annuity, which is payable for the lifetime of the participant only; 10 and 15 year term certain and life annuities, which are payable for the lifetime of the participant with a guaranteed stream of benefits payable to the named beneficiary if the participant dies before the end of the guaranteed term; and 50 percent, 67 percent and 100 percent joint and survivor annuities, which are payable for the lifetime of the participant with the applicable percentage of the participant's annuity being paid to the surviving spouse or surviving joint annuitant for their lifetime; lump sum; and equal annual installments over a five or ten year period. Participants who do not file timely distribution elections receive payment in the form of a single lump sum.
Distribution of benefits occurs at the election of the participant: (a) within 30 days of separation from service; (b) during the month of March following separation from service; (c) during the month of March following the later of age 55 or separation from service; (d) during the month of March following the later of age 62 or separation from service; (e) during the month of March following the later of age 65 or separation from service; or (f) within 30 days following the later of a specific date or separation from service. Participants who do not file a timely election will receive distribution during the March following separation from service. If distribution is being made to a "key employee," as defined by the IRS, the portion of the participant's benefit attributable to benefits accrued after December 31, 2004, will be delayed for six months following separation from service. A "key employee" is determined by the definition provided by the IRS.
SUPERVALU INC. Excess Benefits Plan
The Excess Benefits Plan was designed solely to restore the loss of qualified retirement plan benefits due to statutory limits on benefits and compensation in such plans. Participation in this plan is limited to employees who satisfy the following requirements: (1) have a benefit in a qualified plan that is reduced by statutory limits; (2) are not covered under the SERP; and (3) are selected for participation by the Leadership Development and Compensation Committee. Accrued benefits are the additional amount that would have been paid from the qualified plan but for the statutory limits. Normal retirement is age 65. Accrued benefits are available unreduced at age 62 with 10 or more years of service. Early retirement is available at age 55 with 10 or more years of service. Early retirement reductions are four percent per year prior to age 62. Effective December 31, 2007, credited service was frozen under the Qualified Retirement Plan and, indirectly, under the Excess Benefits Plan. However, vesting service will continue to be recognized until separation and compensation will continue to be recognized under the Qualified Retirement Plan and, indirectly, under the Excess Benefits Plan, through December 31, 2012.
There are seven basic distribution forms under the Excess Benefits Plan: single life annuity, which is payable for the lifetime of the participant only; 50 percent, 67 percent and 100 percent joint and survivor annuities, which are payable for the lifetime of the participant with the applicable percentage of the participant's annuity being paid to the surviving spouse or surviving joint annuitant for their lifetime; lump sum; and annual installments over a five or ten year period. Participants who do not file timely distribution elections receive payment in the form of a single lump sum.
Distribution of benefits occurs at the election of the participant: (a) within 30 days of separation from service; (b) during the month of March following separation from service; (c) during the month of March following the later of age 62 or separation of service; or (d) during the month of March following the later of age 65 or separation from service. Participants who do not file a timely election will receive distribution during the March following separation from service. If distribution is being made to a "key employee," the portion of the participant's benefit attributable to benefits accrued after December 31, 2004, will be delayed for six months following separation of service. A "key employee" is determined by the definition provided by the IRS.
49
SUPERVALU INC. Executive Deferred Compensation Plan (Pension Make-Up Benefit)
Executives who defer the receipt of pay under the EDCP may have reduced qualified defined benefit retirement plan benefits and related non-qualified supplemental retirement benefits. To make up this loss in defined benefit retirement plan benefits, the EDCP contains a make-up provision to determine and to pay an amount representing the additional benefit that would have been payable under those plans if there had been no deferrals under the EDCP. This make-up benefit is determined by commuting this additional benefit to a lump sum that is deposited in the participant's EDCP account at retirement and then distributed during March in the following plan year as a single payment. For this make-up computation, accrued benefits are determined using the Qualified Retirement Plan benefit formula as if there had been no reductions in final average pay due to deferrals. Effective December 31, 2007, credited service was frozen under the Qualified Retirement Plan and, indirectly, under this make-up provision of the EDCP. However, additional vesting service continues to be counted until separation and compensation continues to be recognized under the Qualified Retirement Plan and, indirectly, under this make-up provision of the EDCP, through December 31, 2012. If a distribution is to be made to a "key employee", the portion of the benefit attributable to deferral after December 31, 2004, will be delayed for six months following separation from service. A "key employee" is determined by the definition provided by the IRS.
NONQUALIFIED DEFERRED COMPENSATION(1)
SUPERVALU INC. Executive Deferred Compensation Plan
In addition to the "make-up" feature described previously, the EDCP provides that an eligible executive can elect to defer between 5 and 50 percent of base salary and between 5 and 100 percent of annual incentive compensation. A new deferral election can be made before the beginning of each calendar year and is effective for that calendar year as to base salary and for the fiscal year that begins in that calendar year as to incentive compensation. The amount deferred for a year is credited to an unfunded bookkeeping account for that year and that account is credited from time to time with interest at a rate determined by reference to Moody's Corporate Average Bond Index for the year ending in the October preceding the calendar year. With each deferral election, the employee also makes an election of (i) whether the account for that year will be distributed in a lump sum or in 5, 10 or 15 annual installments and (ii) the time when distribution of that year's account will be paid in a lump sum or commenced in installments (either a specified date or upon separation from service). SUPERVALU may, in its discretion, credit additional amounts to a participant's account. If distribution is to be made to a "key employee," the portion of the benefit attributable to deferral after December 31, 2004, will be delayed for six months following separation from service. Subject to limited exceptions, all amounts are 100 percent nonforfeitable at all times. A "key employee" is determined by the definition provided by the IRS.
Name
|
Executive Contributions in Last Fiscal Year ($)(2) |
Registrant Contributions in Last Fiscal Year ($)(3) |
Aggregate Earnings in Last Fiscal Year ($)(4) |
Aggregate Withdrawals/ Distributions ($) |
Aggregate Balance at Last Fiscal Year End ($) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Craig R. Herkert |
$ | 372,692 | $ | 27,924 | $ | 43,185 | $ | | $ | 1,007,442 | ||||||
Sherry M. Smith |
$ | 34,327 | $ | 18,056 | $ | 5,763 | $ | 18,910 | $ | 145,462 | ||||||
Janel S. Haugarth |
$ | 4,808 | $ | 24,808 | $ | 40,336 | $ | | $ | 795,034 | ||||||
Peter J. Van Helden |
$ | 55,000 | $ | 15,653 | $ | 16,647 | $ | | $ | 518,281 | ||||||
J. Andrew Herring |
$ | 33,462 | $ | 12,843 | $ | 54,365 | $ | | $ | 1,056,539 |
50
amounts credited from the registrant and aggregate earnings are not included in the Summary Compensation Table.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
The tables below reflect the amount of compensation that would be paid to each of the NEOs in the event of termination of such executive's employment under several different circumstances. The amounts shown assume that such termination was effective as of the last day of the last completed fiscal year, and thus includes amounts earned through such time and are estimates of the amounts that would be paid out to the executives upon their termination. The actual amounts to be paid out can only be determined at the time of such executive's separation from SUPERVALU.
Potential Payments and Benefits upon Termination Absent a Change of Control
The first column of the table below sets forth the payments to which each NEO would be entitled, other than accrued but unpaid base salary and any benefits payable or provided under broad-based employee benefit plans and programs, in the event of a qualified retirement or due to long-term disability. The second column of the table reflects payments that would be due in the event of the NEO's termination of employment due to death prior to a change of control of SUPERVALU. In any of these events, we are not obligated to provide any special severance payments, health or welfare benefits or tax gross-ups to the NEO. Ms. Haugarth meets the age and service requirements for retirement and, therefore, accelerated vesting of equity awards would occur upon death, disability or retirement. Mr. Herkert, Ms. Smith, Mr. Van Helden and Mr. Herring do not meet the requirements for retirement and, therefore, accelerated vesting of equity awards would not occur upon death, disability or retirement.
The third column of the table below sets forth the lump sum payment to which each NEO would be entitled in the event they are involuntarily terminated without cause, subject to certain exclusions, pursuant to the Executive & Officer Severance Pay Plan, which are described under "Compensation Discussion and AnalysisExecutive Severance Plan." The lump sum cash payment is equal to a multiple of the NEO's annual base salary and the average of the performance results (expressed as a percentage) used to determine the NEO's bonus amounts under the annual bonus plan for the preceding three years (or all bonus amounts if the NEO has been employed fewer than three years), multiplied by the NEO's current target bonus amount, as well as an uninterrupted bonus cycle payment. The severance multiple is two times for the CEO and 1.5 times for other NEOs. The NEOs are also entitled to reimbursement for COBRA coverage for medical and dental insurance. Additionally, a NEO must repay severance benefits received pursuant to the Executive & Officer
51
Severance Pay Plan if the Company rehires them in any capacity within six months of the termination date.
Name
|
Retirement/ Disability |
Death | Termination Without Cause(1) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Craig R. Herkert |
$ | 728,790 | $ | 728,790 | $ | 2,869,266 | ||||
Sherry M. Smith |
365,766 | 365,766 | 1,494,990 | |||||||
Janel S. Haugarth |
451,350 | 1,326,350 | 1,667,552 | |||||||
Peter J. Van Helden(2) |
197,082 | 197,082 | 1,140,276 | |||||||
J. Andrew Herring |
307,565 | 307,565 | 1,252,752 |
Potential Payments and Benefits upon Termination Following, or in Connection with, a Change of Control
SUPERVALU Change of Control Agreements
We have entered into change of control agreements with certain of our executives and other employees, including all of the NEOs.
Our change of control agreements entitle the NEOs to receive a lump sum cash payment if the executive's employment is terminated (other than for cause or disability, as defined in the agreements) within two years after or in anticipation of a change of control (as defined in the agreements). See "Compensation Discussion and AnalysisExecutive Change of Control Policy" for additional details.
The lump sum cash payment is equal to a multiple of the NEO's annual base salary, target bonus and an interrupted bonus cycle payment. The severance multiple is three times for the CEO and two times for the other NEOs. The NEO would also be entitled to continued family medical, dental and life insurance coverage until the earlier of the end of the separation period or the commencement of comparable coverage with a subsequent employer. If so requested, outplacement services shall be provided by a professional outplacement provider at a cost to the Company of not more than $25,000. Each agreement includes a covenant not to compete with SUPERVALU.
A change of control generally includes the occurrence of any of the following events or circumstances:
Cause generally means the willful and continued failure of the officer to substantially perform his or her duties, the conviction of a felony, the willful engaging in gross misconduct that is materially and
52
demonstrably injurious to SUPERVALU or personal dishonesty that results in substantial personal enrichment. Good reason generally means the annual base salary or highest annual bonus are reduced, the duties and responsibilities or the program of incentive compensation are materially and adversely diminished, the forced relocation of more than 45 miles or the significant increase in travel obligations, the failure to provide for the assumption of the agreement by any successor entity.
SUPERVALU Equity Compensation Plans
Several of our compensation and benefit plans contain provisions for enhanced benefits upon a change of control of SUPERVALU. These enhanced benefits include immediate vesting of stock options, performance stock units, restricted stock and restricted stock unit awards upon a change of control, or in the case of such equity awards granted after May 2010, if employment terminates under specified circumstances within two years of a change of control. The NEOs and other executive officers also hold limited stock appreciation rights ("SARs"), granted in tandem with stock options that would become immediately exercisable upon a change of control, and allow the executive to receive cash for the bargain element in the related stock option. The MYPA award agreement for the fiscal 2012-2014 performance cycle also contains change in control provisions, which provide for the use of a prorated EBITDA amount and an adjusted change of control market capitalization for purposes of calculating any award amounts earned should a change in control occur prior to the end of the performance period. Under our executive deferred compensation plans, benefits payable upon termination may be increased by 30 percent to compensate the NEO for any excise tax liability incurred following a change of control. Our retirement plans provide for full vesting if employment terminates under specified circumstances within two years following a change of control. Additionally, the Qualified Retirement Plan provides that if it is terminated within five years following a change of control, any excess plan assets will not revert to the Company and will be used for the benefit of certain plan participants.
We may set aside funds in an irrevocable grantor trust to satisfy our obligations arising from certain of our benefit plans. Funds will be set aside in the trust automatically upon a change of control. The trust assets would remain subject to the claims of our creditors.
The table below sets forth the amounts each NEO would be entitled to receive, other than accrued but unpaid base salary and any benefits payable or provided under broad-based employee benefit plans and programs, in the event of a termination of their employment by SUPERVALU, without cause or by the NEO, for good reason, following or in anticipation of a change of control of SUPERVALU. The amounts shown assume that the termination or change of control was effective as of February 24, 2012, the last business day of the fiscal year. These amounts do not include pension benefits described in the Pension Benefits Table and the other retirement benefits described following the Pension Benefits Table.
|
Craig R. Herkert |
Sherry M. Smith |
Janel S. Haugarth |
Peter J. Van Helden |
J. Andrew Herring |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Base salary |
$ | 2,550,000 | $ | 1,200,000 | $ | 1,250,000 | $ | 1,100,000 | $ | 1,000,000 | ||||||
Bonus |
3,825,000 | 1,200,000 | 1,250,000 | 1,100,000 | 1,000,000 | |||||||||||
Interrupted Bonus Cycle |
1,275,000 | 600,000 | 625,000 | 550,000 | 500,000 | |||||||||||
Accelerated vesting of equity awards(1) |
| | | | | |||||||||||
Health and Welfare benefits |
98,182 | 113,225 | 112,822 | 56,825 | 73,418 | |||||||||||
Outplacement services |
25,000 | 25,000 | 25,000 | 25,000 | 25,000 | |||||||||||
Total |
$ | 7,773,182 | $ | 3,138,225 | $ | 3,262,822 | $ | 2,831,825 | $ | 2,598,418 |
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All of the members of the Audit Committee are independent directors under the NYSE listing standards and the rules of the SEC. In addition, the Board has determined that all members of the Audit Committee are financially literate under the NYSE listing standards and that each of Mr. Chappel, Mr. Cohen and Mr. Francis qualifies as an "audit committee financial expert" under the rules of the SEC.
The Audit Committee operates under a written charter adopted by the Board of Directors, which is evaluated annually. The charter of the Audit Committee is available on SUPERVALU's website at http://www.supervalu.com. Click on the tab "Site Map" and then the caption "Corporate Governance" under the heading "About Us." The Audit Committee selects, evaluates and, where deemed appropriate, replaces SUPERVALU's independent registered public accountants. The Audit Committee also pre-approves all audit services, engagement fees and terms, and all permitted non-audit engagements, except for certain de minimus amounts.
Management is responsible for SUPERVALU's internal controls and the financial reporting process. SUPERVALU's independent registered public accountants are responsible for performing an audit of SUPERVALU's consolidated financial statements and the effectiveness of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). The Audit Committee's responsibility is to monitor and oversee these processes.
In this context, the Audit Committee has reviewed SUPERVALU's audited financial statements for fiscal 2012 and has met and held discussions with management and KPMG LLP ("KPMG"), the independent registered public accountants. Management represented to the Audit Committee that SUPERVALU's consolidated financial statements for fiscal 2012 were prepared in accordance with accounting principles generally accepted in the United States of America, and the Audit Committee discussed the consolidated financial statements with KPMG. The Audit Committee also discussed with KPMG the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380) as adopted by the Public Accounting Oversight Board in Rule 3200T.
The Audit Committee received the written disclosures and letter from KPMG required by the applicable requirements of the Public Company Accounting Oversight Board regarding KPMG's communications with the Audit Committee concerning its independence, and the Audit Committee discussed with KPMG the accounting firm's independence.
Based upon the Audit Committee's discussions with management and KPMG and the Audit Committee's review of the representation of management and the report of KPMG to the Audit Committee, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in SUPERVALU's Annual Report on Form 10-K for the fiscal year ended February 25, 2012, filed with the SEC.
The Audit Committee also considered whether non-audit services provided by KPMG during fiscal 2012 were compatible with maintaining their independence and concluded that such non-audit services did not affect their independence.
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Respectfully submitted, | |
|
Irwin S. Cohen, Chairperson Donald R. Chappel Philip L. Francis Steven S. Rogers Kathi P. Seifert |
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INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS' FEES
The Audit Committee has a formal policy concerning the approval of audit and non-audit services to be provided by SUPERVALU's independent registered public accountants. A copy of this policy can be found in the Audit Committee's charter which is available on SUPERVALU's website at http://www.supervalu.com. Click on the tab "Site Map" and then the caption "Corporate Governance" under the heading "About Us." The policy requires that the Audit Committee pre-approve all audit services, engagement fees and terms and all permitted non-audit engagements, subject to the de minimus exceptions permitted pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Chairperson of the Audit Committee is authorized to grant such pre-approvals in the event there is a need for such approvals prior to the next full Audit Committee meeting, provided all such pre-approvals are then reported to the full Audit Committee at its next scheduled meeting.
During fiscal 2012 and 2011, KPMG provided various audit, audit-related and tax services to SUPERVALU. The Audit Committee pre-approved all audit services, audit-related services and tax services provided by KPMG in fiscal 2012 and 2011. The following table presents fees for professional services charged by KPMG to SUPERVALU by type and amount for fiscal 2012 and 2011.
|
2012(2) | 2011(3) | |||||
---|---|---|---|---|---|---|---|
|
($ in thousands) |
||||||
Audit fees |
$ | 2,407 | $ | 2,690 | |||
Audit-related fees(1) |
551 | 985 | |||||
Total audit and audit-related fees |
$ | 2,958 | 3,675 | ||||
Tax fees |
| | |||||
All other fees |
| | |||||
Total fees |
$ | 2,958 | $ | 3,675 |
RATIFICATION OF THE APPOINTMENT OF THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS (ITEM 2)
The Audit Committee of our Board of Directors is directly responsible for the appointment, compensation, retention and oversight of the independent external audit firm retained to audit SUPERVALU's financial statements. The Audit Committee has appointed KPMG as SUPERVALU's independent external registered public accountants for the fiscal year ending February 23, 2013. KPMG has been retained as SUPERVALU's external auditor continuously since fiscal 1999. The Audit Committee is responsible for the audit fee negotiations associated with the retention of KPMG. In order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent external audit form. Further, in conjunction with the mandated rotation of the auditing firm's lead engagement partner, the Audit Committee and its chairperson are directly involved in the selection of KPMG's new lead engagement partner. The members of the Audit Committee and our Board of Directors believe that the continued retention of KPMG to serve as SUPERVALU's independent external auditor is in the best interests of our stockholders.
Stockholder ratification of the appointment of KPMG as our independent registered public accountants is not required by our bylaws or otherwise. However, the Board of Directors is submitting
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the appointment of KPMG to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether or not to retain that firm. Even if the appointment is ratified, the Audit Committee, which is solely responsible for appointing and terminating our independent registered public accountants, may in its discretion, direct the appointment of different independent registered public accountants at any time during the year if it determines that such a change would be in the best interests of SUPERVALU and its stockholders.
A representative of KPMG will be present at the Annual Meeting with the opportunity to make a statement and to respond to questions.
The Board of Directors recommends a vote "FOR" the ratification of the appointment of KPMG LLP as independent registered public accountants.
ADVISORY VOTE ON EXECUTIVE COMPENSATION (ITEM 3)
As required by the Exchange Act, at the 2011 Annual Meeting of Stockholders, we provided the stockholders with an advisory vote on the frequency of conducting an advisory vote on the compensation of our NEOs. Consistent with the stockholders' preference expressed in voting at the 2011 Annual Meeting of Stockholders, the Board of Directors determined that an advisory vote on the compensation of SUPERVALU's executive officers will be conducted every year. Therefore, we are providing stockholders with an advisory (nonbinding) vote on the compensation of our NEOs as disclosed in this Proxy Statement in accordance with the SEC's rules.
As described in detail under the heading "Compensation Discussion and AnalysisExecutive Summary," our executive compensation programs are designed to align compensation with long-term stockholder value and the execution of strategic business imperatives and ensure that the majority of compensation opportunities are a result of pay-for-performance. Please read the "Compensation Discussion and Analysis" for additional details about the Company's executive compensation programs, including information about the compensation of our NEOs for fiscal 2012.
The Company is presenting the following proposal, which gives stockholders the opportunity to endorse or not endorse our pay program for NEOs by voting for or against the following resolution (a "say-on-pay" vote). While the vote on the resolution is advisory in nature and therefore will not bind us to take any particular action, the Board of Directors intends to carefully consider the stockholder vote resulting from the proposal in making future decisions regarding the Company's compensation programs.
"RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Company's Named Executive Officers, as disclosed in the Compensation Discussion and Analysis, the tabular disclosure regarding such compensation, and the related narrative executive compensation disclosures contained in the Proxy Statement."
The Board of Directors recommends a vote "FOR" approval of the compensation of the Company's NEOs, as disclosed in this Proxy Statement.
APPROVAL OF THE SUPERVALU INC. 2012 STOCK INCENTIVE PLAN (ITEM 4)
In April 2012, the Board of Directors adopted, subject to stockholder approval, the SUPERVALU INC. 2012 Stock Plan (the "2012 Stock Plan"). The purpose of the 2012 Stock Plan is to promote the interests of SUPERVALU and our stockholders by aiding us in attracting and retaining employees, officers, consultants, independent contractors, advisors and non-employee Directors who we expect will contribute to our future success. The 2012 Stock Plan will allow us to provide participants with incentives to maximize their efforts on behalf of SUPERVALU through stock-based awards that
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provide them with opportunities for stock ownership, further aligning the interests of participants with SUPERVALU's stockholders.
We currently award stock-based compensation, including stock options, restricted stock and performance stock units under the SUPERVALU INC. 2007 Stock Plan. As of February 25, 2012, there were 18,935,317 shares subject to stock options outstanding with a weighted average exercise price of $28.902 and a weighted average remaining term of 2.64 years. We also have 444,405 shares of full-value awards outstanding (restricted stock awards and restricted stock units). As of June 1, 2012, we estimate that approximately [ ] shares remained available for future awards under this plan, assuming that outstanding performance-based awards are paid out at target. No further awards will be made pursuant to our 2007 Stock Plan following stockholder approval of the 2012 Stock Plan.
The Board of Directors believes that stock-based compensation is essential in attracting, retaining and recruiting highly qualified officers, employees and non-employee Directors. As discussed below, the 2012 Stock Plan will allow for the continued use of stock-based compensation and will permit us significant flexibility in determining the types and specific terms of awards made to participants. This flexibility will allow us to make future awards based on then-current objectives for aligning compensation with stockholder value.
The following is a summary of the material terms of the 2012 Stock Plan and is qualified in its entirety by reference to the 2012 Stock Plan. A copy of the 2012 Stock Plan is attached as Appendix A to this proxy statement.
The Leadership Development and Compensation Committee (the "Committee") will administer the 2012 Stock Plan and will have full power and authority to determine when and to whom awards will be granted, and the type, amount, form of payment and other terms and conditions of each award, consistent with the provisions of the 2012 Stock Plan. In addition, the Committee can specify whether, and under what circumstances, awards to be received under the 2012 Stock Plan or amounts payable under such awards may be deferred automatically or at the election of either the holder of the award or the Committee. Subject to the provisions of the 2012 Stock Plan, the Committee may amend the terms and conditions, or accelerate the exercisability, or lapse the restrictions, of an outstanding award. No action may be taken by the Committee to amend, alter, suspend, discontinue or terminate any outstanding award, prospectively or retroactively, that would adversely affect the right of the holder of an award without the consent of the holder. The Committee has authority to interpret the 2012 Stock Plan and establish rules and regulations for the administration of the 2012 Stock Plan.
The Committee may delegate its powers under the 2012 Stock Plan to one or more of our officers or Directors, except that the Committee may not delegate its powers and duties under the plan with regard to executive officers or Directors who are subject to Section 16 of the Exchange Act, or in a way that would violate Section 162(m) of the Code or contravene Section 157 of the Delaware General Corporation Law. The Board of Directors may also exercise the powers of the Committee at any time, so long as its actions would not violate Rule 16b-3 promulgated by the SEC under the Exchange Act or Section 162(m) of the Code.
Any employee, officer, consultant, independent contractor, advisor or non-employee Director providing services to us or any of our affiliates, who is selected by the Committee, is eligible to receive an award under the 2012 Stock Plan, provided that such eligible participant is a natural person. As of February 25, 2012, approximately 129,800 employees, officers, consultants, independent contractors, advisors and non-employee Directors were eligible as a class to be selected by the Committee to receive awards under the 2012 Stock Plan.
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The Committee may grant awards to eligible persons who are foreign nationals, are located outside of the United States, are U.S. citizens or resident aliens on global assignments in foreign nations, are compensated from a payroll maintained outside of the United States or are otherwise subject to (or could cause SUPERVALU to be subject to) legal or regulatory provisions of countries or jurisdictions outside of the United States, on terms and conditions different from those specified in the 2012 Stock Plan, which, in the judgment of the Committee, are necessary or desirable to foster and promote achievement of the purposes of the 2012 Stock Plan. In this regard, the Committee may make modifications, amendments, procedures or subplans necessary or advisable to comply with such legal or regulatory provisions.
The aggregate number of shares of our common stock that may be issued under all stock-based awards made under the 2012 Stock Plan will be 36,500,000. No person that may be a "covered person" within the meaning of Section 162(m) of the Code (a "covered person") may be granted under the 2012 Stock Plan in any calendar year, options, stock appreciation rights or any other awards, the value of which is based solely on an increase in the value of our common stock after the date of grant of the award and which is intended to represent "qualified performance-based compensation" within the meaning of Section 162(m) of the Code ("qualified performance-based compensation"), for more than 2,000,000 shares in the aggregate, or if the award is payable in cash, for an amount greater than the fair market value of 2,000,000 shares at the time of payment. In addition, no covered person may be granted performance awards denominated in shares under the 2012 Stock Plan which are intended to represent qualified performance-based compensation, including performance awards, restricted stock and restricted stock units, for more than 2,000,000 shares in the aggregate in any calendar year. The maximum amount payable pursuant to all performance awards denominated in cash under the 2012 Stock Plan which are intended to represent qualified performance-based compensation to any covered person in the aggregate in any calendar year will be $10,000,000 in value, whether payable in cash, shares or other property. Awards will only be granted to consultants and advisors in compliance with Rule 405 of the Securities Act of 1933, as amended.
The Committee will adjust the number of shares and share limits described above in the case of a stock dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares, issuance of warrants or other rights or other similar corporate transaction or event that affects shares of our common stock, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be provided under the 2012 Stock Plan. However, the number of shares covered by an award or to which an award relates following such adjustment will always be a whole number. Such adjustment will be made by the Committee or the Board of Directors and its determination in that respect will be final, binding and conclusive.
If an award entitles the holder to receive or purchase shares of our common stock, the number of shares covered by such award or to which the award relates will be counted on the date of grant of the award against the aggregate number of shares available for awards under the 2012 Stock Plan as follows:
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be reduced by [2.63] shares for each share covered by such award or to which such award relates;
If an award terminates, is forfeited or is cancelled without the issuance of any shares, or if any shares covered by an award or to which an award relates are not issued for any other reason, then the number of shares counted against the aggregate number of shares available under the 2012 Stock Plan with respect to the award, to the extent of any such termination, forfeiture, cancellation or other event, will again be available for granting awards under the 2012 Stock Plan. If shares of restricted stock are forfeited or otherwise reacquired by us prior to vesting, whether or not dividends have been paid on such shares, then the number of shares counted against the aggregate number of shares available under the 2012 Stock Plan with respect to the restricted stock award, to the extent of any such forfeiture or reacquisition by us, will again be available for granting awards under the 2012 Stock Plan. Shares that are withheld in full or partial payment to us of the purchase or exercise price relating to the award or in connection with the satisfaction of tax obligations relating to any award will not be available for granting awards under the 2012 Stock Plan. Additionally, if a non-qualified stock option is net exercised as permitted under the 2012 Stock Plan, the number of shares counted against the aggregate number of shares available under the 2012 Stock Plan with respect to the award will be the gross amount of shares subject to the award.
Types of Awards and Terms and Conditions
The 2012 Stock Plan permits the granting of:
Awards may be granted alone, in addition to, in combination with or in substitution for, any other award granted under the 2012 Stock Plan or any other compensation plan. Awards can be granted for no cash consideration or for any cash or other consideration as may be determined by the Committee or as required by applicable law. Awards may provide that upon the grant or exercise thereof, the holder will receive cash, shares of our common stock, other securities or property, or any combination of these in a single payment, installments or on a deferred basis. The exercise price per share under any stock option and the grant price of any SAR may not be less than the fair market value of our common stock on the date of grant of such option or SAR except to satisfy legal requirements of foreign jurisdictions or if the award is in substitution for an award previously granted by an entity acquired by us. Determinations of fair market value under the 2012 Stock Plan will be made in accordance with methods and procedures established by the Committee. The term of awards may not be longer than 10 years from the date of grant.
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Stock Options. The holder of an option will be entitled to purchase a number of shares of our common stock at a specified exercise price during a specified time period, all as determined by the Committee. The option exercise price may be payable either in cash or, at the discretion of the Committee, in other securities or other property having a fair market value on the exercise date equal to the exercise price. The Committee may, in its discretion, permit non-qualified stock options to be net exercised.
Stock Appreciation Rights. The holder of an SAR is entitled to receive the excess of the fair market value (calculated as of the exercise date or, at the Committee's discretion, as of any time during a specified period before or after the exercise date) of a specified number of shares of our common stock over the grant price of the SAR. SARs vest and become exercisable in accordance with a vesting schedule established by the Committee.
Restricted Stock and Restricted Stock Units. The holder of restricted stock will own shares of our common stock subject to restrictions imposed by the Committee (including, for example, restrictions on the right to vote the restricted shares or to receive any dividends with respect to the shares) for a specified time period determined by the Committee. The holder of restricted stock units will have the right, subject to any restrictions imposed by the Committee, to receive shares of our common stock, or a cash payment equal to the fair market value of those shares, at some future date determined by the Committee. The Committee may permit accelerated vesting in certain events, including the participant's death, disability, termination, retirement, or a change of control of SUPERVALU. If the participant's employment or service as a Director terminates during the vesting period for any other reason, the restricted stock and restricted stock units will be forfeited, unless the Committee determines that it would be in our best interest to waive the remaining restrictions, except if otherwise provided in the award agreement.
Dividend Equivalents. The holder of a dividend equivalent will be entitled to receive payments (in cash, shares of our common stock, other securities or other property) equivalent to the amount of cash dividends paid by us to our stockholders, with respect to the number of shares determined by the Committee. Dividend equivalents will be subject to other terms and conditions determined by the Committee, but the Committee may not grant dividend equivalents in connection with grants of options or SARs.
Performance Awards. The Committee may grant performance awards under the 2012 Stock Plan. A performance award may be denominated or payable in cash, stock (including restricted stock and restricted stock units), other securities, other awards or other property, and confers on the holder the right to receive payments, in whole or in part, upon the achievement of one or more performance goals during a performance period as established by the Committee. 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 will be determined by the Committee. Performance awards that are granted to participants who may be covered persons and that are intended to be qualified performance-based compensation, to the extent required by Section 162(m) of the Code, must be conditioned solely on the achievement of one or more objective performance goals established by the Committee within the time prescribed by Section 162(m) of the Code, and must otherwise comply with the requirements of Section 162(m) of the Code.
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Performance Goals for performance awards that are granted to participants who may be covered employees and that are intended to be qualified performance-based compensation must be based solely on one or more of the following business criteria: sales (including identical store sales), revenue, costs, expenses, earnings (including one or more of net profit after tax, gross profit, operating profit, earnings before interest and taxes ("EBIT"), earnings before interest, taxes, depreciation and amortization ("EBITDA") and net earnings), EBIT or EBITDA as a percentage of net sales, earnings per share (basic or diluted), earnings per share from continuing operations, operating income, pre-tax income, operating income margin, net income, margins (including one or more of gross, operating and net income margins), ratios (including one or more of price to earnings, debt to assets, debt to net assets and ratios regarding liquidity, solvency, fiscal capacity, productivity or risk), returns (including one or more of return on actual or proforma assets, net assets, equity, investment, capital and net capital employed), stockholder return (including total stockholder return relative to an index or peer group), stock price, market capitalization, cash generation, cash flow (including, without limitation, operating cash flow, free cash flow and cash flow return on equity), unit volume, working capital, market share, cost reductions, budget comparisons, sales or profitability of an identifiable business unit or product, economic profit or value added, number of customers, workforce satisfaction and diversity goals, environmental health and safety goals, employee retention, customer satisfaction, implementation or completion of key projects and strategic plan development and implementation. The measure of performance may be set by reference to an absolute standard or a comparison to specified companies or groups of companies, or other external measures. The measures may relate to SUPERVALU, one or more of our subsidiaries or one or more of our divisions or units, product lines or product categories or any combination of these. Subject to compliance with Section 162(m) of the Code, when the Committee established performance criteria, it may provide for the adjustment for charges related to an event or occurrence which the Committee determines is appropriate for adjustment, including asset write-downs; litigation or claim judgments or settlements; changes in tax law, accounting principles or other such laws or provisions affecting reported results; severance, contract termination and other costs related to exiting certain business activities; acquisitions; gains or losses from the disposition of businesses or assets or from the early extinguishment of debt; and unusual, extraordinary or nonrecurring events.
Stock Awards. The Committee may grant unrestricted shares of our common stock, subject to terms and conditions determined by the Committee and the limitations in the 2012 Stock Plan.
Other Stock-Based Awards. The Committee is also authorized to grant other types of awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to our common stock, subject to terms and conditions determined by the Committee and the limitations in the 2012 Stock Plan.
Duration, Termination and Amendment
No awards may be made after ten years from the earlier of the date of adoption of the 2012 Stock Plan by the Board of Directors, the date of stockholder approval or any earlier date of discontinuation or termination established pursuant to the 2012 Stock Plan, although no performance award intended to be qualified performance-based compensation will be granted under the 2012 Stock Plan after the fifth year following the year in which stockholders approved the performance goals unless and until the performance goals are reapproved by the stockholders. However, unless otherwise expressly provided in an applicable award agreement, any award granted under the 2012 Stock Plan prior to expiration may extend beyond the expiration of the 2012 Stock Plan through the award's normal expiration date.
The Board of Directors may amend, alter, suspend, discontinue or terminate the 2012 Stock Plan at any time, although stockholder approval must be obtained for any amendment to the 2012 Stock Plan that would increase the number of shares of our common stock available under the 2012 Stock Plan, increase the award limits under the 2012 Stock Plan, permit awards of options or SARs at a price
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less than fair market value, permit repricing of options or SARs, or cause Section 162(m) of the Code to become unavailable with respect to the 2012 Stock Plan. Stockholder approval is also required for any action that requires stockholder approval under the rules and regulations of the SEC, the New York Stock Exchange or any other securities exchange that are applicable to us.
Clawback or Recoupment of Awards
All awards under the 2012 Stock Plan will be subject to forfeiture or other penalties pursuant to SUPERVALU's Clawback Policy, as amended from time to time, and forfeiture and/or penalty conditions determined by the Committee and set forth in the award agreement.
Notwithstanding contrary provisions in the 2012 Stock Plan or any award agreement, SUPERVALU has the authority to establish any "blackout" period that it deems necessary or advisable with respect to any and all awards.
Prohibition on Repricing Awards
Without the approval of our stockholders, the Committee will not reprice, adjust or amend the exercise price of any options or the grant price of any SAR previously awarded, whether through amendment, cancellation and replacement grant or any other means, except in connection with a stock dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares, issuance of warrants or other rights or other similar corporate transaction or event that affects shares of our common stock, in order to prevent dilution or enlargement of the benefits, or potential benefits intended to be provided under the 2012 Stock Plan.
Unless otherwise provided by the Committee, any award other than stock awards under the 2012 Stock Plan and any right under any award may only be transferred by will or by the laws of descent and distribution or by transfer of an award back to SUPERVALU, including the transfer of an award (but not any stock option) to SUPERVALU in connection with a deferral election under any of our deferred compensation plans. Incentive stock options may only be transferred by will or by the laws of descent and distribution. No award other than stock awards or right under any award may be pledged, alienated, attached or otherwise encumbered and any purported pledge, alienation, attachment or encumbrance will be void and unenforceable against us.
Federal Income Tax Consequences
Grant of Options and SARs. The grant of a stock option (either an incentive stock option or a non-qualified stock option) or SAR is not expected to result in any taxable income for the recipient.
Exercise of Incentive Stock Options. Upon the exercise of an incentive stock option, no taxable income is realized by the optionee for purposes of regular income tax. However, the optionee may be required to recognize income for purposes of the alternative minimum tax ("AMT"). If stock is issued to the optionee pursuant to the exercise of an incentive stock option, and if no disqualifying disposition of such shares is made by such award holder within two years after the date of grant or within one year after the transfer of such shares to such award holder, then (1) upon the sale of such shares, any amount realized in excess of the option price will be taxed to such optionee as a long-term capital gain and any loss sustained will be a long-term capital loss, and (2) we will not be entitled to a deduction for federal income tax purposes.
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If the stock acquired upon the exercise of an incentive stock option is disposed of prior to the expiration of either holding period described above, generally (1) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at exercise (or, if less, the amount realized on the disposition of such shares) over the option price paid for such shares, and (2) we will be entitled to deduct such amount for federal income tax purposes if the amount represents an ordinary and necessary business expense. Any further gain (or loss) realized by the optionee will be taxed as short-term or long-term capital gain (or loss), as the case may be, and will not result in any deduction by us.
Exercise of Non-Qualified Stock Options and SARs. Upon exercising a non-qualified stock option, the optionee must recognize ordinary income equal to the excess of the fair market value of the shares of common stock acquired on the date of exercise over the exercise price, and we generally will be entitled at that time to an income tax deduction for the same amount. Upon exercising a SAR, the amount of any cash received and the fair market value on the exercise date of any shares of common stock received are taxable to the recipient as ordinary income and generally are deductible by us.
The tax consequence upon a disposition of shares acquired through the exercise of a non-qualified stock option or SAR will depend on how long the shares have been held. Generally, there will be no tax consequence to SUPERVALU in connection with the disposition of shares acquired under a non-qualified stock option or SAR.
Restricted Stock. Recipients of grants of restricted stock generally will be required to include as taxable ordinary income the fair market value of the restricted stock at the time it is no longer subject to a substantial risk of forfeiture. However, an award holder who makes an 83(b) election within 30 days of the date of grant of the restricted stock will incur taxable ordinary income on the date of grant equal to the fair market value of such shares of restricted stock (determined without regard to forfeiture restrictions). With respect to the sale of shares after the forfeiture restrictions have expired, the holding period to determine whether the award recipient has long-term or short-term capital gain or loss generally begins when the restrictions expire, and the tax basis for such shares will generally be based on the fair market value of the shares on that date. However, if the award holder made an 83(b) election as described above, the holding period commences on the date of such election, and the tax basis will be equal to the fair market value of the shares on the date of the election (determined without regard to the forfeiture restrictions on the shares). Dividends, if any, that are paid or accrued while the restricted stock is subject to a substantial risk of forfeiture will also be taxed as ordinary income. We will be entitled to an income tax deduction equal to amounts the award holder includes in ordinary income at the time of such income inclusion.
Restricted Stock Units, Performance Awards and Dividend Equivalents. Recipients of grants of restricted stock units, performance awards or dividend equivalents (collectively, "deferred awards") will not incur any federal income tax liability at the time the awards are granted. Award holders will recognize ordinary income equal to (a) the amount of cash received under the terms of the award or, as applicable, (b) the fair market value of the shares received (determined as of the date of receipt) under the terms of the award. Dividend equivalents received with respect to any deferred award will also be taxed as ordinary income. Cash or shares to be received pursuant to a deferred award generally become payable when applicable forfeiture restrictions lapse; provided, however, that, if the terms of the award so provide, payment may be delayed until a later date to the extent permitted under applicable tax laws. We will be entitled to an income tax deduction for any amounts included by the award holder as ordinary income. For awards that are payable in shares, participant's tax basis is equal to the fair market value of the shares at the time the shares become payable. Upon the sale of the shares, appreciation (or depreciation) after the shares are paid is treated as either short-term or long-term capital gain (or loss) depending on how long the shares have been held.
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Other Stock Grants. As to other grants of shares of our common stock made under the 2012 Stock Plan not subject to a substantial risk of forfeiture, the holder of the award must recognize ordinary income equal to the excess of (i) the fair market value of the shares received (determined as of the date of receipt) over (ii) the amount (if any) paid for the shares by the holder of the award. SUPERVALU generally will be entitled at that time to an income tax deduction for the same amount.
Income Tax Deduction. Subject to the usual rules concerning reasonable compensation, including our obligation to withhold or otherwise collect certain income and payroll taxes, and assuming that, as expected, stock options, SARs and other performance awards paid under the 2012 Stock Plan are qualified performance-based compensation, we generally will be entitled to a corresponding income tax deduction at the time a participant recognizes ordinary income from awards made under the 2012 Stock Plan.
Delivery of Shares for Tax Obligation. Under the 2012 Stock Plan, the Committee may permit participants receiving or exercising awards, subject to the discretion of the Committee and upon such terms and conditions as it may impose, to deliver shares of our common stock (either shares received upon the receipt or exercise of the award or shares previously owned by the participant) to us to satisfy federal and state tax obligations.
Section 409A of the Internal Revenue Code. The Committee will administer and interpret the 2012 Stock Plan and all award agreements in a manner consistent with the intent to satisfy the requirements of Section 409A of the Code to avoid any adverse tax results thereunder to a holder of an award. If any provision of the 2012 Stock Plan or any award agreement would result in such adverse consequences, the Committee may amend that provision or take other necessary action to avoid any adverse tax results, and no such action will be deemed to impair or otherwise adversely affect the rights of any holder of an award under the 2012 Stock Plan.
Special Rules for Executive Officers and Directors Subject to Section 16 of the Exchange Act. Special rules may apply to individuals subject to Section 16 of the Exchange Act. In particular, shares received through exercise or payout of a non-qualified option, an incentive stock option (for purposes of the AMT only), a SAR or a restricted stock unit, and any shares of restricted stock that vest, may be treated as restricted property for purposes of Section 83 of the Code if the recipient has had a non-exempt acquisition of shares of our stock within the six months prior to the exercise, payout or vesting. Accordingly, the amount of any ordinary income recognized and the amount of our income tax deduction will be determined as of the end of that period unless a special election is made by the recipient pursuant to Section 83(b) of the Code (as described above under restricted stock) to recognize income as of the date the shares are received.
No benefits or amounts have been granted, awarded or received under the 2012 Stock Plan that were subject to stockholder approval. In addition, the Committee in its sole discretion will determine the number and types of awards that will be granted under the 2012 Stock Plan. Thus, it is not possible to determine the benefits that will be received by eligible participants if the 2012 Stock Plan were to be approved by our stockholders. The closing price of a share of our common stock, as reported on the NYSE on May 22, 2012, was $[ ].
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Equity Compensation Plan Information
The following table sets forth information as of February 25, 2012 about SUPERVALU's common stock that may be issued under all of its equity compensation plans:
Plan Category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
|
(a) |
(b) |
(c) |
|||||||
Equity compensation plans approved by security holders(1) |
16,928,979 | (2)(3) | $ | 28.79 | (2)(3)(4) | 21,300,956 | (5) | |||
Equity compensation plans not approved by security holders(6) |
1,665,421 |
30.01 |
|
|||||||
Total |
18,594,400 | $ | 28.90 | 21,300,956 | (7) | |||||
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1997 Stock Plan. The Board of Directors adopted the 1997 Stock Plan on April 9, 1997 to provide for the granting of non-qualified stock options, restoration options, stock appreciation rights, restricted stock, restricted stock units and performance awards to key employees of SUPERVALU or any of its subsidiaries. A total of 10,800,000 shares were authorized for awards under the 1997 Stock Plan. The Board of Directors amended this plan in each of August 18, 1998, March 14, 2000 and April 10, 2002. The 1997 Stock Plan expired on April 9, 2007 and, therefore, no further awards may be granted under the 1997 Stock Plan. Stock options covering a total of 1,665,421 shares remained outstanding under the 1997 Stock Plan as of February 25, 2012. All employees, consultants or independent contractors providing services to SUPERVALU, other than officers or directors of SUPERVALU or any of its affiliates who are subject to Section 16 of the Exchange Act, were eligible to participate in the 1997 Stock Plan. The Board of Directors administers the 1997 Stock Plan and has discretion to set the terms of all awards made under the 1997 Stock Plan, except as otherwise expressly provided in the 1997 Stock Plan. Options granted under the 1997 Stock Plan may not have an exercise price less than 100 percent of the fair market value of SUPERVALU's common stock on the date of the grant. Unless the Board of Directors otherwise specifies, restricted stock and restricted stock units will be forfeited and reacquired by SUPERVALU if an employee is terminated.
The Board of Directors recommends a vote "FOR" approval of the 2012 Stock Plan.
APPROVAL OF THE AMENDMENT OF THE SUPERVALU INC. DIRECTORS'
DEFERRED COMPENSATION PLAN (ITEM 5)
In April 2012, the Board of Directors adopted, subject to stockholder approval, an amendment to the SUPERVALU INC. Directors' Deferred Compensation Plan (the "DDCP"), to increase the number of shares of our common stock available for issuance under the DDCP by 3,000,000 shares, from 1,000,000 shares to 4,000,000 shares, and to make certain administrative changes, including the following: (i) excluding non-employee Directors who were former employees of SUPERVALU from participating in the DDCP, (ii) updating the timing of the annual deferred stock retainers credited to new and existing non-employee Directors and (iii) providing for the crediting of supplemental deferred stock retainers.
The DDCP resulted from the merger in 2009 of two separate plans that provided for the deferral of Director compensation: (i) the SUPERVALU INC. Deferred Compensation Plan for Non-Employee Directors, established effective June 27, 1996 for the purpose of allowing non-employee Directors to defer cash compensation for payment to them in cash after they ceased serving as a Director, and (ii) the SUPERVALU INC. Non-Employee Directors Deferred Stock Plan, established effective February 14, 1996 for the purpose of allowing the Company to make conditional book-entry awards of common stock, and allowing non-employee Directors to defer cash compensation, for payment to them in common stock or cash after they ceased serving as a Director. The SUPERVALU INC. Non-Employee Directors Deferred Stock Plan was approved by the Company's stockholders on June 27, 1996, and provided for up to 1,000,000 shares (as adjusted under the terms of the plan for the two-for-one stock split effective August 18, 1998). As of March 16, 2012, approximately 214,559 shares remained available under the DDCP.
The remaining amount of shares available under the DDCP is insufficient to enable the Company to continue operation of the DDCP. We believe the DDCP is beneficial to SUPERVALU and our stockholders in enabling us to attract, retain and recruit highly qualified non-employee Directors and to provide them with opportunities for stock ownership, further aligning the interests of participants with SUPERVALU's stockholders.
The following is a summary of the material terms of the DDCP and is qualified in its entirety by reference to the DDCP. A copy of the DDCP, as amended, is attached as Appendix B to this proxy statement, and the amended language is marked in bold to show changes.
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The DDCP allows eligible non-employee Directors to elect to defer all or a portion of the compensation payable to them for service on our Board of Directors into unfunded bookkeeping accounts for payment to them in cash and/or common stock after they cease serving as a Director. The DDCP also allows us to make conditional awards of unfunded, book-entry common stock to eligible non-employee Directors as compensation for their service as Directors with payment to be made to them in cash or common stock after they cease serving as a Director. Under the DDCP, Director compensation and conditional awards may be deferred until termination of service as a Director or, subject to certain restrictions, such later date as may be specified by the Director.
The DDCP is administered by the Corporate Governance and Nominating Committee of the Board of Directors.
Any Director who is not currently, and was not formerly, an employee of SUPERVALU is eligible to participate in the DDCP. All of our current Directors, except for Mr. Herkert, are eligible to participate in the DDCP.
The maximum number of shares that may be credited under the DDCP as amended will be 4,000,000 shares. The numbers, rights and privileges of shares credited under the DDCP will be increased, decreased or changed consistent with any action by SUPERVALU to increase or decrease its outstanding common stock, change in any way the rights and privileges of its common stock by payment of a stock dividend or any other payment upon the shares payable in common stock or through a stock split, subdivision, consolidation, combination, reclassification or recapitalization involving the common stock.
An eligible non-employee Director will become a participant in the DDCP beginning on the first day on which the individual is a Director and is not at the same time an employee of SUPERVALU or any affiliate.
Participants must timely submit deferral elections to the plan administrator for each calendar year in which they participate in the DDCP indicating the amount of fees to be deferred, the portion of fees to be credited to the deferred cash account and the deferred stock account, and the form and timing of future payment. Future payments may be made in the form of a single lump sum or 15 or fewer annual installments, and at any time after the participant's termination as a Director or, subject to certain conditions, a specified future date. If an election is not timely submitted for any calendar year, no director fees will be deferred for that calendar year. If the participant's election is not clear as to time or form of payment, a single lump sum payment will be made in January after the calendar year in which the Director leaves the Board of Directors.
If a Director chooses to defer all or a portion of fees into a deferred cash account, interest is payable on the amount of deferred cash compensation at an annual rate equal to the twelve-month rolling average of Moody's Corporate Average Bond Index for the twelve-month period ending in the month of October preceding the first day of the calendar year. Payment in cash is made from the cash account after the Director leaves the Board of Directors, in accordance with the Directors' payment election.
If a Director chooses to defer fees into a deferred stock account, SUPERVALU then credits the Director's account with an additional amount equal to 10 percent of the amount of fees the Director
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has elected to defer and contributes the total amount in the Director's account to a grantor ("rabbi") trust that uses the amount to purchase shares of SUPERVALU common stock, which are then allocated to an account for the Director under the trust. Each Director is entitled to direct the trustee to vote all shares allocated to the Director's account in the trust. The common stock in each Director's deferred stock account will be distributed to the Director after the Director leaves the Board of Directors, in accordance with the Directors' payment election. Until that time, the trust assets remain subject to the claims of our creditors. Dividends paid on the shares of common stock held in each of the Directors' accounts are used to purchase additional shares for these accounts each quarter.
In addition to voluntary deferrals made by a Director, SUPERVALU may also award compensation to each Director in the form of a deferred stock retainer that is automatically deferred into Directors' deferred stock accounts in the DDCP. SUPERVALU determines the amount of the annual retainer (and any supplemental retainer), which is credited to Directors' deferred stock accounts. Annual retainers are credited once each calendar year as soon as administratively practicable following SUPERVALU's annual meeting of stockholders and after the end of any then-existing blackout period.
The deferred cash account and the deferred stock account of each participant are fully vested and nonforfeitable, except that if a participant leaves the Board of Directors, other than due to death or permanent disability, after a deferred stock retainer has been credited for service during the current fiscal year, the participant will forfeit the prorated portion of that deferred stock retainer which represents the number of full calendar months that the Director did not serve on the Board of Directors before the date of the next annual meeting of stockholders and any dividends credited on that number of shares.
Duration, Termination and Amendment
Prior to a change of control (as defined in the DDCP), the Corporate Governance and Nominating Committee may unilaterally amend, prospectively or retroactively, or terminate the DDCP at any time and for any reason it considers sufficient without notice to any person affected by the DDCP; however benefits payable to participants as of the amendment or termination date may not be diminished or delayed without consent of the participant. After a change in control, the Corporate Governance and Nominating Committee may unilaterally amend, prospectively or retroactively, or terminate the DDCP at any time and for any reason it considers sufficient without notice with respect to Directors who become participants after the date of the change of control; however, it may only amend or terminate the DDCP with respect to Directors who are participants on the date of the change of control if all benefits payable to Directors who were participants on the date of the change in control have been paid in full and eighty percent of the participants consent to the amendment or termination.
The Board of Directors recommends a vote "FOR" approval of the amendment to the Directors' Deferred Compensation Plan.
APPROVAL OF THE AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION
TO REDUCE THE SUPERMAJORITY VOTING THRESHOLDS (ITEM 6)
Reasons for Approval
In April 2012, the Board of Directors adopted, subject to stockholder approval, an amendment to the Restated Certificate of Incorporation to reduce the supermajority voting thresholds in Article Sixth, Section 1 and Section 5 from a standard of the affirmative vote of at least 75% of the outstanding shares to an affirmative vote of at least 662/3% of the outstanding shares.
The Board of Directors is committed to implementing and maintaining effective corporate governance policies and practices which ensure that SUPERVALU is governed with high standards of ethics, integrity and accountability and in the best interest of our stockholders. The supermajority voting provisions in the Restated Certificate of Incorporation are designed to protect our stockholders,
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including minority stockholders, by assuring that fundamental changes to SUPERVALU are not made without the approval of a substantial majority of our stockholders. While the Board of Directors believes that this protection is important and is in the best interests of SUPERVALU, it is also committed to ensuring the accountability of the Board of Directors to our stockholders.
In deciding to recommend the reduction of supermajority voting thresholds in the Restated Certificate of Incorporation, the Board of Directors considered the arguments in favor of and against continuation of supermajority voting provisions and gave careful consideration to stockholder views concerning this matter. The Board of Directors believes that lowering the supermajority voting thresholds in the Restated Certificate of Incorporation from at least 75% to at least 662/3% will enhance accountability to our stockholders while preserving the legitimate protections afforded by the supermajority voting provisions.
Proposed Amendment
For the approval of certain business combination transactions, Article Sixth, Section 1 of the Restated Certificate of Incorporation requires a vote of (i) at least 75% of the outstanding shares of the Company entitled to vote in the election of directors and (ii) at least a majority of the outstanding shares which are not owned by a beneficial owner of 5% or more of the outstanding shares of the Company entitled to vote in the election of directors. The proposed amendment would reduce the voting standard from the affirmative vote of at least 75% of the outstanding shares to the affirmative vote of at least 662/3% of the outstanding shares. If stockholders approve the amendment, Article Sixth, Section 1 of the Restated Certificate of Incorporation will be amended and restated as follows (marked in bold to show changes):
Special Vote for Certain Combinations. Except as otherwise expressly provided in Section 2 of this Article:
shall require the affirmative vote of the holders of
if, as of the record date for the determination of stockholders entitled to notice thereof and to vote thereon, such other corporation, person or entity is the beneficial owner, directly or indirectly, of 5% or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for the purposes of this Article as one class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified by law or in any agreement with any national securities exchange.
Article Sixth, Section 5 of the Restated Certificate of Incorporation provides that the amendment, alteration, change or repeal of Article Sixth of the Restated Certificate of Incorporation requires a vote
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of (i) at least 75% of the outstanding shares of the Company entitled to vote in the election of directors and (ii) at least a majority of the outstanding shares which are not owned by a beneficial owner of 5% or more of the outstanding shares of the Company entitled to vote in the election of directors. The proposed amendment would reduce the voting standard from the affirmative vote of at least 75% of the outstanding shares to the affirmative vote of at least 662/3% of the outstanding shares. If stockholders approve the amendment, Article Sixth, Section 5 of the Restated Certificate of Incorporation will be amended and restated as follows (marked in bold to show changes):
Amendment. Notwithstanding
any other provision of this Certificate of Incorporation, or the Bylaws (and in addition to any other vote that may be required by
law, this Certificate of Incorporation or the Bylaws), there shall be required to amend, alter, change, or repeal, directly or indirectly, this Article Sixth the affirmative vote of (i) at
least 662/3% 75% of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) and (ii) at least a majority of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (considered for this purpose as one class), exclusive of all voting stock of the Corporation beneficially owned, directly or
indirectly, by any corporation, person or entity which is, as of the record date for the determination of stockholders entitled to notice of such amendment, alteration, change or repeal and to vote
thereon, the beneficial owner, directly or indirectly, of 5% or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered
for this purpose as one class).
Vote Required
The affirmative vote of (i) at least 75% of the outstanding shares of common stock entitled to vote and (ii) at least a majority of the outstanding shares entitled to vote, exclusive of all shares of common stock beneficially owned, directly or indirectly, by any corporation, person or entity, which was, as of the record date, the beneficial owner, directly or indirectly, of 5% or more of the outstanding shares entitled to vote, is required for the approval of this proposal.
If approved, the amendment to the Restated Certificate of Incorporation will become effective upon the filing of the amendment with the Secretary of the State of Delaware, which the Company expects to file promptly after the Annual Meeting. If such approval is not received, the supermajority voting thresholds in Article Sixth, Section 1 and Section 5 of the Restated Certificate of Incorporation will remain unchanged.
The Board of Directors recommends a vote "FOR" the approval of the amendment to the Restated Certificate of Incorporation to reduce the supermajority voting thresholds.
APPROVAL OF THE AMENDMENT TO THE RESTATED BYLAWS
TO REDUCE THE SUPERMAJORITY VOTING THRESHOLDS (ITEM 7)
Reasons for Approval
In April 2012, the Board of Directors adopted, subject to stockholder approval, an amendment to the Restated Bylaws to reduce the supermajority voting thresholds in Article III, Section 3.02(a) and Section 3.02(e) from a standard of the affirmative vote of at least 75% of the outstanding shares to an affirmative vote of at least 662/3% of the outstanding shares.
The Board of Directors is committed to implementing and maintaining effective corporate governance policies and practices which ensure that SUPERVALU is governed with high standards of ethics, integrity and accountability and in the best interest of our stockholders. As is the case in the supermajority voting provisions in SUPERVALU's Restated Certificate of Incorporation described above in Item 6, the supermajority voting provisions in the Restated Bylaws are designed to protect our stockholders, including minority stockholders, by assuring that fundamental changes to the way in which SUPERVALU is governed are not made without the approval of a substantial majority of our stockholders. While the Board of Directors believes that this protection is important and is in the best
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interests of SUPERVALU, it is also committed to ensuring the accountability of the Board of Directors to our stockholders.
In deciding to recommend the reduction of supermajority voting thresholds in the Restated Bylaws, the Board of Directors considered the arguments in favor of and against continuation of supermajority voting provisions and gave careful consideration to stockholder views concerning this matter. The Board of Directors believes that lowering the supermajority voting thresholds in the Restated Bylaws from at least 75% to at least 662/3% will enhance accountability to our stockholders while preserving the legitimate protections afforded by the supermajority voting provisions.
Proposed Amendment
Article III, Section 3.02(a) of the Restated Bylaws provides that the number of directors on the SUPERVALU Board of Directors may be increased or decreased from time to time by resolution of a majority of the whole Board of Directors or by the holders of at least 75% of the stock of SUPERVALU entitled to vote. The proposed amendment would reduce the voting standard from the affirmative vote of at least 75% of the outstanding shares to the affirmative vote of at least 662/3% of the outstanding shares. If stockholders approve the amendment, Article III, Section 3.02(a) of the Restated Bylaws will be amended and restated as follows (marked in bold to show changes):
Number: The
Board of Directors shall consist of not less than 10, nor more than 15 directors. The exact number of directors shall be determined from time to time by resolution adopted by
a majority of the whole Board of Directors or of the holders of at least 662/3%
75% of the stock of the Corporation entitled to vote, considered for the purpose as one class.
Article III, Section 3.02(e) of the Restated Bylaws provides that Section 3.02 of the Restated Bylaws may not be amended or rescinded except by the vote of the holders of at least 75% of the stock of SUPERVALU entitled to vote or by a majority of the whole Board of Directors. The proposed amendment would reduce the voting standard from the affirmative vote of at least 75% of the outstanding shares to the affirmative vote of at least 662/3% of the outstanding shares. If stockholders approve the amendment, Article III, Section 3.02(e) of the Restated Bylaws will be amended and restated as follows (marked in bold to show changes):
Amendment: Notwithstanding
Article XI of these Bylaws, no provision of this Section 3.02 may be amended or rescinded except by the affirmative vote of the holders of at
least 662/3% 75% of the stock of the Corporation entitled to vote,
considered for the purpose as one class, or by a majority of the whole Board of Directors.
Vote Required
The affirmative vote of at least 75% of the shares of common stock entitled to vote is required for the approval of this proposal.
If approved, the amendment will become effective as of the date of the Annual Meeting. If such approval is not received, the supermajority voting thresholds in Article III, Section 3.02(a) and Section 3.02(e) of the Restated Bylaws will remain unchanged.
The Board of Directors recommends a vote "FOR" the approval of the amendment to the Restated Bylaws to reduce the supermajority voting thresholds.
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APPROVAL OF THE AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION TO CHANGE
THE PAR VALUE OF THE COMMON STOCK (ITEM 8)
Reasons for Approval
In May 2012, the Board of Directors adopted, subject to stockholder approval, an amendment to the Restated Certificate of Incorporation to change the par value of the Company's common stock from $1.00 per share to $0.01 per share.
The reduction in par value is intended to bring the par value of SUPERVALU's common stock in line with the par value of the common stock of many other public companies incorporated in Delaware. Historically, the concept of par value served to protect creditors and senior security holders by ensuring that a company received at least the par value as consideration for the issuance of stock. Over time, the concept of par value has lost much of its significance as lenders, creditors and other persons doing business with a corporation tend to rely on the total financial strength of the corporation as shown by its financial statements and earnings prospects and, especially in the case of financial institutions that lend money to a corporation, on contractual restrictions that establish financial requirements that the corporation must satisfy. As a result, many companies that incorporate today have a nominal par value or no par value.
The reduction in par value would provide the Board of Directors with the ability to reduce the Company's "capital" under the Delaware General Corporation Law to an amount not less than the par value of each share of common stock outstanding. This would increase the Company's "surplus" under the Delaware General Corporation Law available for the payment of dividends and the repurchase of common stock.
The reduction in par value of the Company's common stock would not change the number of authorized shares of common stock or preferred stock or affect the total number of shares of common stock currently outstanding. No shares of preferred stock are currently outstanding. The reduction in par value will have no effect on the rights of the holders of common stock or preferred stock, except for reducing the minimum amount per share the Company must receive upon the issuance of any additional shares of common stock.
Certificates representing shares of the Company's common stock, $1.00 par value, issued and outstanding prior to the effective date of filing of the amendment to the Restated Certificate of Incorporation will be deemed to represent the same number of shares of our common stock, $0.01 par value per share, as they did prior to such effective date. Existing certificates will not be exchanged for new certificates in connection with this amendment.
Proposed Amendment
Article Fourth, Section 1 of the Restated Certificate of Incorporation provides that the par value of the Company's common stock is $1.00 per share. The proposed amendment would change the par value of the Company's common stock from $1.00 per share to $0.01 per share. If stockholders approve the amendment, Article Fourth, Section 1 of the Restated Certificate of Incorporation will be amended and restated as follows (marked in bold to show changes):
Authorized
Classes of Stock. That the total number of shares of stock which this Corporation is authorized to issue is 401,000,000 shares, of which
400,000,000 shares of the par value of $0.01 $1.00 per share are designated Common
Stock and 1,000,000 shares of no par value are designated Preferred Stock (herein referred to as "Preferred Stock"). Shares of any class of stock of the Corporation may be
issued for such consideration and for such corporate purposes as the Board of Directors may from time to time determine.
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Vote Required
The affirmative vote of a majority of the outstanding shares of common stock entitled to vote is required for the approval of this proposal.
If approved, the amendment to the Restated Certificate of Incorporation will become effective upon the filing of the amendment with the Secretary of the State of Delaware, which the Company expects to file promptly after the Annual Meeting. If such approval is not received, the par value of the Common Stock will remain unchanged.
The Board of Directors recommends a vote "FOR" the approval of the amendment to the Restated Certificate of Incorporation to change the par value of the Common Stock.
The mailing address of our principal executive offices is: SUPERVALU INC., P.O. Box 990, Minneapolis, Minnesota 55440.
Stockholder Proposals for the 2013 Annual Meeting
In accordance with rules of the SEC, all proposals of stockholders that are requested to be included in SUPERVALU's Proxy Statement for the 2013 Annual Meeting of Stockholders must be received by the Corporate Secretary on or before February 7, 2013, 120 days before the one-year anniversary of the mailing date. In accordance with our bylaws, any other stockholder proposals to be presented at the 2013 Annual Meeting must be given in writing to the Corporate Secretary and received at our principal executive offices no later than the close of business on March 19, 2013 and no earlier than February 17, 2013. The proposal must contain specific information required by our bylaws, a copy of which is available on SUPERVALU's website at http://www.supervalu.com. Click on the tab "Site Map" and then the caption "Corporate Governance" under the heading "About Us."
Communications with the Board of Directors
Any interested parties who desire to communicate with the Board of Directors, the non-employee members of the Board of Directors or any individual member of the Board of Directors may do so by sending a letter addressed to the director or directors in care of the Corporate Secretary at the mailing address above. All such correspondence will be forwarded to the appropriate director or directors.
SUPERVALU has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions, and all other employees and non-employee directors. The Code of Ethics is available on SUPERVALU's website at http://www.supervalu.com. Click on the tab "Site Map" and then the caption "Corporate Governance" under the heading "About Us." Copies of the Code of Ethics are also available to any stockholder who submits a request to the Corporate Secretary at the mailing address above.
This solicitation of proxies is being made by SUPERVALU and we will pay the costs of such solicitation. We arrange with brokerage houses, custodians, nominees and other fiduciaries to send proxy materials to their principals and we reimburse them for their expenses in this regard. In addition to solicitation by mail, proxies may be solicited by our employees, by telephone or personally. No
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additional compensation will be paid for such employee solicitation. We also have retained Innisfree M&A Incorporated to assist in the solicitation of proxies for an estimated fee of $10,000 plus out-of-pocket expenses.
Section 16(a) Beneficial Ownership Reporting Compliance
The rules of the SEC require our directors, executive officers and holders of more than 10 percent of our common stock to file reports of stock ownership and changes in ownership with the SEC. Based on the Section 16 reports filed by our directors and executive officers and written representations of our directors and executive officers we believe there were no late or inaccurate filings for transactions occurring during fiscal 2012.
Only one copy of each of our Annual Report to Stockholders and this Proxy Statement has been sent to multiple stockholders who share the same address and last name, unless we have received contrary instructions from one or more of those stockholders. This procedure is referred to as "householding." We have been notified that certain intermediaries (brokers or banks) will also household proxy materials. We will deliver promptly, upon oral or written request, separate copies of the Annual Report and Proxy Statement to any stockholder at the same address. If you wish to receive separate copies of one or both of these documents, or if you do not wish to participate in householding in the future, you may write to our Corporate Secretary at SUPERVALU INC., P.O. Box 990, Minneapolis, Minnesota 55440, or call (952) 828-4000. You may contact your broker or bank to make a similar request. Stockholders sharing an address who now receive multiple copies of our Annual Report and Proxy Statement may request delivery of a single copy of each document by writing or calling us at the address or telephone number above or by contacting their broker or bank (provided the broker or bank has determined to household proxy materials).
Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be Held on July 17, 2012
Our Notice of Annual Meeting, Proxy Statement and Annual Report are available on SUPERVALU's website at http://materials.proxyvote.com/868536.
Requests for Copies of Annual Report
SUPERVALU will furnish to stockholders, without charge, a copy of its Annual Report on Form 10-K for the fiscal year ended February 25, 2012, as filed with the SEC upon receipt of a written request addressed to our Corporate Secretary at SUPERVALU INC., P.O. Box 990, Minneapolis, Minnesota 55440.
Owners of Shares Held in Street Name: Check the information provided to you in the proxy materials mailed to you by your bank or broker.
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July 17, 2012 Annual Meeting of Stockholders
Sheraton Westport Lakeside Chalet
191 Westport Plaza
St. Louis, MO 63146
The Annual Meeting will begin at 10:30 a.m., local time, at the Sheraton Westport Lakeside Chalet
SUPERVALU INC.
Annual Meeting of
Stockholders
July 17, 2012 at 10:30 a.m.
Please bring a current
brokerage statement, letter from your
stockbroker or other proof of stock
ownership to the meeting.
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SUPERVALU INC.
2012 STOCK PLAN
A-i
SUPERVALU INC.
2012 STOCK PLAN
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, officers, non-employee Directors, consultants, independent contractors and advisors capable of assuring the future success of the Company, to offer such persons incentives to put forth maximum efforts for the success of the Company's business and to compensate such persons through various stock-based and other arrangements and provide them with opportunities for stock ownership in the Company, thereby aligning the interests of such persons with the Company's stockholders.
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, Dividend Equivalent, Stock 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 an Award granted under the Plan. An Award Agreement may be in an electronic medium and need not be signed by a representative of the Company or the Participant. Each Award Agreement shall be subject to the applicable terms and conditions of the Plan and any other terms and conditions (not inconsistent with the Plan) determined by the Committee.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Change of Control" shall mean any of the following events for Awards granted under the Plan:
(i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (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, that for 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 or any corporation controlled by the Company;
(ii) the consummation of any merger or other business combination of the Company, sale or lease of all or substantially all of the Company's assets or combination of the foregoing transactions (the "Transactions") other than a Transaction immediately following which the stockholders of the Company and any trustee or fiduciary of any Company employee benefit plan immediately prior to the Transaction own at least sixty percent (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).
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.
(g) "Committee" shall mean the Leadership Development and Compensation Committee of the Board or any successor committee of the Board designated by the Board to administer the Plan. The Committee shall be comprised of not less than such number of Directors as shall be required to permit Awards granted under the Plan to qualify under Rule 16b-3, and each member of the Committee shall be a "non-employee director" within the meaning of Rule 16b-3 and an "outside director" within the meaning of Section 162(m). The Company expects to have the Plan administered in accordance with the requirements for the award of "qualified performance-based compensation" within the meaning of Section 162(m).
(h) "Company" shall mean SUPERVALU INC., a Delaware corporation, or any successor corporation.
(i) "Director" shall mean a member of the Board.
(j) "Dividend Equivalent" shall mean any right granted under Section 6(e) of the Plan.
(k) "Eligible Person" shall mean any employee, officer, non-employee Director, consultant, independent contractor or advisor providing services to the Company or any Affiliate who the Committee determines to be an Eligible Person. An Eligible Person must be a natural person.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(m) "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 a Share as of a given date for purposes of the Plan shall be, if the Shares are then listed on the New York Stock Exchange, the closing sale price of one Share on the New York Stock Exchange as reported on the consolidated transaction reporting system on such date or, if the New York Stock Exchange is not open for trading on such date, on the next date that the New York Stock Exchange is open for trading.
(n) "Incentive Stock Option" shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision.
(o) "Non-Qualified Stock Option" shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(p) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option.
(q) "Other Stock-Based Award" shall mean any right granted under Section 6(g) of the Plan.
(r) "Participant" shall mean an Eligible Person designated to be granted an Award under the Plan.
(s) "Performance Award" shall mean any right granted under Section 6(d) of the Plan.
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(t) "Performance Goal" shall mean one or more of the following performance goals, either individually, alternatively or in any combination: sales (including identical store sales), revenue, costs, expenses, earnings (including one or more of net profit after tax, gross profit, operating profit, earnings before interest and taxes ("EBIT"), earnings before interest, taxes, depreciation and amortization ("EBITDA") and net earnings), EBIT or EBITDA as a percent of net sales, earnings per share (basic or diluted), earnings per share from continuing operations, operating income, pre-tax income, operating income margin, net income, margins (including one or more of gross, operating and net income margins), ratios (including one or more of price to earnings, debt to assets, debt to net assets and ratios regarding liquidity, solvency, fiscal capacity, productivity or risk), returns (including one or more of return on actual or proforma assets, net assets, equity, investment, capital and net capital employed), stockholder return (including total stockholder return relative to an index or peer group), stock price, market capitalization, cash generation, cash flow (including, without limitation, operating cash flow, free cash flow and cash flow return on equity), unit volume, working capital, market share, cost reductions, budget comparisons, sales or profitability of an identifiable business unit or product, economic profit or value added, number of customers, workforce satisfaction and diversity goals, environmental health and safety goals, employee retention, customer satisfaction, implementation or completion of key projects and strategic plan development and implementation. Such goals may reflect absolute entity or business unit performance or a relative comparison to the performance of a peer group of entities or other external measure of the selected performance criteria. The foregoing measures may relate to the Company, one or more of its subsidiaries or one or more of its divisions or units, product lines or product categories or any combination of the foregoing. To the extent consistent with Section 162(m), the Committee may, when it establishes performance criteria, also provide for the adjustment for charges related to an event or occurrence which the Committee determines is appropriate for adjustment, including, but not limited to, any of the following events: asset write-downs; litigation or claim judgments or settlements; changes in tax law, accounting principles or other such laws or provisions affecting reported results; severance, contract termination and other costs related to exiting certain business activities; acquisitions; gains or losses from the disposition of businesses or assets or from the early extinguishment of debt; and unusual, extraordinary or nonrecurring events.
(u) "Person" shall mean any individual or entity, including a corporation, partnership, limited liability company, association, joint venture or trust.
(v) "Plan" shall mean the SUPERVALU INC. 2012 Stock Plan, as amended from time to time.
(w) "Restricted Stock" shall mean any Share granted under Section 6(c) of the Plan.
(x) "Restricted Stock Unit" shall mean any unit granted under Section 6(c) 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.
(y) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act or any successor rule or regulation.
(z) "Section 162(m)" shall mean Section 162(m) of the Code, or any successor provision, and the applicable Treasury Regulations promulgated thereunder.
(aa) "Section 409A" shall mean Section 409A of the Code, or any successor provision, and applicable Treasury Regulations and other applicable guidance thereunder.
(bb) "Securities Act" shall mean the Securities Act of 1933, as amended.
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(cc) "Share" or "Shares" shall mean a share or shares of common stock, $1.00 par value per share, 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.
(dd) "Specified Employee" shall mean a specified employee as defined in Section 409A(a)(2)(B) of the Code or applicable proposed or final regulations under Section 409A, determined in accordance with procedures established by the Company and applied uniformly with respect to all plans maintained by the Company that are subject to Section 409A.
(ee) "Stock Appreciation Right" shall mean any right granted under Section 6(b) of the Plan.
(ff) "Stock Award" shall mean any Share granted under Section 6(f) of the Plan.
(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 the method by which payments or other rights 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, provided, however, that, except as otherwise permitted in connection with an event as provided under Section 4(c) hereof, the Committee shall not reprice, adjust or amend the exercise price of Options or the grant price of Stock Appreciation Rights previously awarded to any Participant, whether through amendment, cancellation and replacement grant, or any other means; (vi) accelerate the exercisability of any Award or the lapse of any restrictions relating to any Award; (vii) 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; (viii) 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 of the Award or the Committee; (ix) interpret and administer the Plan and any instrument or agreement, including any Award Agreement, relating to the Plan; (x) 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; (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan; and (xii) adopt such modifications, rules, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of non-U.S. jurisdictions in which the Company or an Affiliate may operate, including, without limitation, establishing any special rules for Affiliates, Eligible Persons or Participants located in any particular country, in order to meet the objectives of the Plan and to ensure the viability of the intended benefits of Awards granted to Participants located in such non-United States jurisdictions. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award or Award Agreement 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 or Award Agreement, 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 or Directors of the Company, subject to such terms, conditions and
limitations as the Committee may establish in its sole discretion; provided, however, that the Committee shall not delegate its powers and duties under
the Plan (i) with regard to officers or directors of the Company or any Affiliate who are subject to Section 16 of the Exchange Act, (ii) in such a manner as would cause the
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Plan not to comply with the requirements of Section 162(m) or (iii) in such a manner as would contravene Section 157 of the Delaware General Corporation Law.
(c) Power and Authority of the Board. Notwithstanding anything to the contrary contained herein, the Board 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, unless the exercise of such powers and duties by the Board would cause the Plan not to comply with the requirements of
Rule 16b-3 or Section 162(m).
Section 4. Shares Available for Awards
(a) Shares Available. Subject to adjustment as provided in Section 4(c) of the Plan, the aggregate number of Shares that may be issued under all Awards under the Plan shall be 36,500,000. Shares to be issued under the Plan may be authorized but unissued Shares, treasury shares or Shares acquired in the open market or otherwise. If an Award terminates, is forfeited or is cancelled without the issuance of any Shares, or if any Shares covered by an Award or to which an Award relates are not issued for any other reason, 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 termination, forfeiture, cancellation or other event, shall again be available for granting Awards under the Plan. If Shares of Restricted Stock are forfeited or otherwise reacquired by the Company prior to vesting, whether or not dividends have been paid on such Shares, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award of Restricted Stock, to the extent of any such forfeiture or reacquisition by the Company, shall again be available for granting Awards under the Plan. Shares that are withheld in full or partial payment to the Company of the purchase or exercise price relating to any Award or in connection with the satisfaction of tax obligations relating to any Award shall not be available for granting Awards under the Plan. Additionally, if an Option is net exercised, as permitted by Section 6(a)(iii), the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award shall be the gross amount of Shares subject to the Award.
(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. With respect to Options, Stock
Appreciation Rights or any other Awards under the Plan the value of which Awards is based solely on an increase in the value of the Shares after the date of grant of such Awards, the number of Shares
available for Awards under the Plan shall be reduced by one Share for each Share covered by or payable under such Award or to which such Award relates. With respect to any Awards other than Options,
Stock Appreciation Rights or any other Awards under the Plan the value of which Awards is based solely on an increase in the value of the Shares after the date of grant of such Awards, the number of
Shares available for Awards under the Plan shall be reduced by [2.63] Shares for each Share covered by such Award or to which such Award relates. For Stock Appreciation Rights
settled in Shares upon exercise, the aggregate number of Shares with respect to which the Stock Appreciation Right is exercised, rather than the number of Shares actually issued upon exercise, shall
be counted against the number of Shares available for Awards under the Plan. Awards that do not entitle the holder thereof to receive or purchase Shares and Awards that are settled in cash shall not
be counted against the aggregate number of Shares available for Awards under the Plan.
(c) Adjustments. In the event 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
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an adjustment is necessary 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) that 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, (iii) the purchase price or exercise price with respect to any Award and (iv) the limitations contained in Section 4(d) of the Plan; provided, however, that the number of Shares covered by any Award or to which such Award relates shall always be a whole number. Such adjustment shall be made by the Committee or the Board, whose determination in that respect shall be final, binding and conclusive.
(d) Award Limitations Under the Plan.
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
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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. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full-time or part-time employees (which term as used herein includes, without limitation, officers and Directors who are also employees), and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a "subsidiary corporation" of the Company within the meaning of Section 424(f) of the Code or any successor provision.
(a) Options. The Committee is hereby authorized to grant Options to Eligible Persons 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:
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(b) Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Eligible Persons 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; provided, however, that the Committee may designate a per share grant price below Fair Market Value on the date of grant (A) to the extent necessary or appropriate, as determined by the Committee, to satisfy applicable legal or regulatory requirements of a foreign jurisdiction or (B) if the Stock Appreciation Right is granted in substitution for a stock appreciation right previously granted by an entity that is acquired by or merged with the Company or an Affiliate. 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; provided, however, that the term of each Stock Appreciation Right shall not be longer than 10 years from the date of grant. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units. The Committee is hereby authorized to grant an Award of Restricted Stock and Restricted Stock Units to Eligible Persons 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:
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Awards in certain events including, but not limited to, the Participant's death, disability, termination, retirement or a Change of Control.
(d) Performance Awards. The Committee is hereby authorized to grant Performance Awards to Eligible Persons 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 and Restricted Stock Units), 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 one or more performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan, 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. Performance Awards that are granted to Eligible Persons who may be "covered employees" under Section 162(m) and that are intended to be "qualified performance-based compensation" within the meaning of Section 162(m), to the extent required by Section 162(m), shall be conditioned solely on the achievement of one or more objective Performance Goals established by the Committee within the time prescribed by Section 162(m), and shall otherwise comply with the requirements of Section 162(m), as described below.
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the performance period (as scheduled in good faith at the time the Performance Goal is established) has elapsed.
(e) Dividend Equivalents. The Committee is hereby authorized to grant Dividend Equivalents to Eligible Persons under which the Participant shall be entitled to receive payments (in cash, Shares, other securities, other Awards or other property as determined in the discretion of the Committee) equivalent to the amount of cash dividends paid by the Company to holders of Shares with respect to a number of Shares determined by the Committee. Subject to the terms of the Plan and any applicable Award Agreement, such Dividend Equivalents may have such terms and conditions as the Committee shall determine. Notwithstanding the foregoing, the Committee may not grant Dividend Equivalents to Eligible Persons in connection with grants of Options or Stock Appreciation Rights to such Eligible Persons.
(f) Stock Awards. The Committee is hereby authorized to grant to Eligible Persons Shares without restrictions thereon, as deemed by the Committee to be consistent with the purpose of the Plan. Subject to the terms of the Plan and any applicable Award Agreement, such Stock Awards may have such terms and conditions as the Committee shall determine.
(g) Other Stock-Based Awards. The Committee is hereby authorized to grant to Eligible Persons 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. The Committee shall determine the terms and conditions of such Awards, subject to the terms of the Plan and any applicable Award Agreement. The consideration paid by the Participant may be paid by such method or methods and in such form or forms (including, without limitation, cash, Shares, other securities, other Awards or other property or any combination thereof), as the Committee shall determine.
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compensation" to a Participant under Section 409A and applicable guidance thereunder is otherwise payable or distributable to a Participant under the Plan or any Award Agreement solely by reason of the occurrence of a Change of Control or due to the Participant's disability or "separation from service" (as defined under Section 409A), such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance unless the Committee determines in good faith that (i) the circumstances giving rise to such Change of Control, disability or separation from service meet the definition of a change in ownership or control, disability or separation from service, as the case may be, in Section 409A(a)(2)(A) of the Code and applicable proposed or final regulations, or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A by reason of the short-term deferral exemption or otherwise. Any payment or distribution that otherwise would be made to a Participant who is a Specified Employee (as determined by the Committee in good faith) on account of separation from service may not be made before the date which is six months after the date of the Specified Employee's separation from service (or if earlier, upon the Specified Employee's death) unless the payment or distribution is exempt from the application of Section 409A by reason of the short-term deferral exemption or otherwise.
Section 7. Amendment and Termination; Corrections
(a) Amendments to the Plan. The Board may amend, alter, suspend, discontinue or terminate the Plan at any time; provided, however, that, notwithstanding any other provision of the Plan or any Award Agreement, prior approval of the stockholders of the Company shall be required for any amendment to the Plan that:
(b) Amendments to Awards. Subject to the provisions of the Plan, the Committee may waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively. Except as otherwise provided in the Plan, the Committee may amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, but no such action may adversely affect the rights of the holder of such Award without the consent of the Participant or holder or beneficiary thereof. The Company intends that Awards under the Plan shall satisfy the requirements of Section 409A to avoid any adverse tax results thereunder, and the Committee shall administer and interpret the Plan and all Award Agreements in a manner consistent with that intent. If any provision of the Plan or an Award Agreement would result in adverse tax consequences under Section 409A, the Committee may amend that provision (or take any other action reasonably necessary) to avoid any adverse tax results and no action taken to comply with Section 409A shall be deemed to impair or otherwise adversely affect the rights of any holder of an Award or beneficiary thereof.
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(c) Correction of Defects, Omissions and Inconsistencies.
The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award or Award Agreement in the manner and to the
extent it shall deem desirable to implement or maintain the effectiveness of the Plan.
Section 8. Income Tax Withholding
In order to comply with all applicable federal, state, local or foreign income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state, local or foreign 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 applicable 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 (a) 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 (b) 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.
(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 shall 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 and, if requested by the Company, signed by the Participant, or until such Award Agreement is delivered and accepted through an electronic medium in accordance with procedures established by
the Company.
(c) Plan Provisions Control. In the event that any provision
of an Award Agreement conflicts with or is inconsistent in any respect with the terms of the Plan as set forth herein or
subsequently amended, the terms of the Plan shall control.
(d) No Rights of Stockholders. Except with respect to
Restricted Stock and Stock Awards, neither a Participant nor the Participant's legal representative shall be, or have any of the rights and
privileges of, a stockholder of the Company with respect to any Shares issuable upon the exercise or payment of any Award, in whole or in part, unless and until such Shares have been issued.
(e) No Limit on Other Compensation Plans or Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation plans or
arrangements, and such plans or arrangements may be either generally applicable or applicable only in specific cases.
(f) No Right to Employment or Directorship. The grant of an Award shall not be construed as giving a Participant the right to be retained as an employee of the Company or any Affiliate, or the right to be
retained as a Director, nor will it affect in any way the right of the Company or an Affiliate to terminate a Participant's employment at any time, with or without cause, or remove a Director in
accordance with applicable law. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment, or remove a Director who is a Participant, free from any liability or
any
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claim under the Plan or any Award, unless otherwise expressly provided in the Plan or in any Award Agreement. By participating in the Plan, each Participant shall be deemed to have accepted all the conditions of the Plan and the terms and conditions of any rules and regulations adopted by the Committee and shall be fully bound thereby.
(g) Governing Law. The internal law, and not the law of conflicts, of
the State of Delaware shall govern all questions concerning the validity, construction and effect of the Plan
or any Award, and any rules and regulations relating to the Plan or any Award.
(h) 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.
(i) 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.
(j) Other Benefits. No compensation or benefit awarded to or realized
by any Participant under the Plan shall be included for the purpose of computing such Participant's compensation
or benefits under any pension, retirement, savings, profit sharing, group insurance, disability, severance, termination pay, welfare or other benefit plan of the Company, unless required by law or
otherwise provided by such other plan.
(k) 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 Share or whether such fractional Share or any rights thereto shall be canceled, terminated or otherwise eliminated.
(l) 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.
(m) Consultation With Professional Tax and Investment Advisors. The
holder of any Award granted hereunder acknowledges that the grant, exercise, vesting or any payment with respect to such an Award, and the sale or other
disposition of the Shares acquired pursuant to the Plan, may have tax consequences pursuant to the Code or under local, state or international tax laws. Such a holder further acknowledges that such
holder is relying solely and exclusively on the holder's own professional tax and investment advisors with respect to any and all such matters (and is not relying, in any manner, on the Company or any
of its employees or representatives). Finally, such a holder understands and agrees that any and all tax consequences resulting from the Award and its grant, exercise, vesting or any payment with
respect thereto, and the sale or other disposition of the Shares acquired pursuant to the Plan, is solely and exclusively the responsibility of such holder without any expectation or understanding
that the Company or any of its employees, representatives or Affiliates will pay or reimburse such holder for such taxes or other items.
(n) Foreign Employees and Foreign Law Considerations. The Committee
may grant Awards to Eligible Persons who are foreign nationals, who are located outside the United States, who are United States citizens or
resident aliens on global assignments in foreign nations, who are not compensated from a payroll maintained in the United States, or who are otherwise subject to (or could cause the
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Company to be subject to) legal or regulatory provisions of countries or jurisdictions outside the United States, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan, and, in furtherance of such purposes, the Committee may make such modifications, amendments, procedures, or subplans as may be necessary or advisable to comply with such legal or regulatory provisions.
(o) Blackout Periods. Notwithstanding any other provision of this
Plan or any Award or Award Agreement to the contrary, the Company shall have the authority to establish any "blackout"
period that the Company deems necessary or advisable with respect to any or all Awards.
Section 10. Clawback or Recoupment
All Awards under this Plan shall be subject to forfeiture or other penalties pursuant to the Company's Clawback Policy, as amended from time to time, and such forfeiture and/or penalty conditions or provisions as determined by the Committee and set forth in the applicable Award Agreement.
Section 11. Effective Date of the Plan; Effect on Prior Plan
The Plan shall be subject to approval by the stockholders of the Company at the annual meeting of stockholders of the Company to be held on July 17, 2012 and the Plan shall be effective as of the date of such stockholder approval. On and after the date of stockholder approval of the Plan, no awards shall be granted under the Company's 2007 Stock Plan, but all outstanding awards previously granted under the 2007 Stock Plan shall remain outstanding in accordance with the terms thereof.
No Award shall be granted under the Plan after (i) 10 years from the earlier of the date of adoption of the Plan by the Board or the date of stockholder approval or (ii) any earlier date of discontinuation or termination established pursuant to Section 7(a) of the Plan; provided, however, that in the case of a Performance Award intended to be "qualified performance-based compensation," no such Performance Award shall be granted under the Plan after the fifth year following the year in which stockholders approved the Performance Goals unless and until the Performance Goals are re-approved by the stockholders. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond such dates, and the authority of the Committee provided for hereunder with respect to the Plan and any Awards, and the authority of the Board to amend the Plan, shall extend beyond the termination of the Plan.
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SUPERVALU INC.
DIRECTORS' DEFERRED COMPENSATION PLAN
(2009 Statement)
Adopted
December 3, 2008
But Effective January 1, 2009
Amended July [ ], 2012
SUPERVALU INC.
DIRECTORS' DEFERRED COMPENSATION PLAN
(2009 Statement)
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SUPERVALU INC.
DIRECTORS' DEFERRED COMPENSATION PLAN
(2009 Statement)
SECTION 1
INTRODUCTION AND DEFINITIONS
1.1. New Plan Established.
1.1.1. Antecedents. Effective June 27, 1996, the Company created the "SUPERVALU INC. DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS" (the "Deferred Cash Plan") as a nonqualified, unfunded, elective deferred compensation plan for the purpose of allowing eligible non employee directors of the Company to defer the receipt of a portion of the remuneration which would otherwise have been paid to them into unfunded, interest bearing, accounts for payment to them in cash after they ceased performing services as a director. The Company also heretofore created the "SUPERVALU INC. NON-EMPLOYEE DIRECTORS DEFERRED STOCK PLAN" (the "Deferred Stock Plan") as a nonqualified, unfunded, deferred compensation plan for the purposes of (i) allowing the Company to make conditional awards of notional Common Stock to eligible non employee directors of the Company for payment to them in cash or in kind after they ceased to perform services as directors, and (ii) allowing eligible non employee directors of the Company to elect to defer the receipt of a portion of the remuneration which would otherwise have been paid to them into notional Common Stock for payment to them in cash or in kind after they ceased performing services as a director. Each has been amended from time to time in various respects.
1.1.2. New Plan Created. This Plan is not an amendment of the Deferred Cash Plan or the Deferred Stock Plan. It is, rather, a new nonqualified, unfunded, deferred compensation plan created for the purpose of (i) allowing eligible non-employee directors of the Company to elect to defer the receipt of a portion of the remuneration which would otherwise have been paid to them for their services as directors into unfunded, interest bearing, notional accounts for payment to them in cash after they cease performing services as a director, and (ii) allowing eligible non-employee directors of the Company to elect to defer the receipt of a portion of the remuneration which would otherwise have been paid to them for their services as directors into unfunded, notional Common Stock for payment to them in Common Stock after they cease performing services as a director, and (iii) allowing the Company to make conditional awards of unfunded, notional Common Stock to eligible non-employee directors of the Company as compensation for their services as directors for payment to them in Common Stock after they cease performing services as directors.
1.2. Unfunded Obligation. The obligation of the Company to make payments under this Plan constitutes only the unsecured (but legally enforceable) promise of the Company to make such
payments. No Participant shall have any lien, prior claim or other security interest in any property of the Company. The Company shall have no obligation to establish or maintain any fund, trust or account (other than a bookkeeping account or reserve) for the purpose of funding or paying the benefits promised under this Plan. If such a fund, trust or account is established, the property therein shall remain the sole and exclusive property of the Company. The Company shall be obligated to pay the benefits of this Plan out of its general assets.
1.3. Definitions. When the following terms are used herein with initial capital letters, they shall have the following meanings:
1.3.1. Accountsthe separate bookkeeping accounts representing the separate unfunded and unsecured general obligation of the Company established with respect to each Participant and to which is credited the amounts specified in Section 4, which shall vest or be forfeited as provided in Section 5 and from which payments will be made pursuant to Section 6. The following Accounts will be maintained under this Plan for Participants.
1.3.2. Affiliatea business entity which is affiliated in ownership with the Company that treated as a single employer under the rules of section 414(b) and (c) of the Code (applying an eighty percent common ownership standard).
1.3.3. Annual Feesthe annual cash retainer, meeting fees and all other cash compensation and remuneration (by whatever name called) payable to a Participant for his or her services as a member of the Board of Directors (excluding, however, stock option grants or amounts paid from this Plan or predecessors of this Plan). For the purposes of this Plan, Annual Fees shall be attributed to the period in which they are earned (that is, the period in which the services are performed that result in the Annual Fees) and not to the period in which they are paid.
1.3.4. Beneficiarya person designated by a Participant (or automatically by operation of the Plan Statement) to receive all or a part of the Participant's Accounts in the event of the Participant's death prior to full payment thereof. A person so designated is not a Beneficiary until the death of the Participant.
1.3.5. Board of Directorsthe board of directors of the Company.
1.3.6. Change of Controlany of the following events:
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"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 of the Company (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 acquisition 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
1.3.7. Codethe Internal Revenue Code of 1986, as amended (including, when the context requires, all regulations, interpretations and rulings issued thereunder).
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1.3.8. Common Stockthe Company's common stock, par value $1.00 per share.
1.3.9. CompanySUPERVALU INC., a Delaware corporation, or any successor thereto.
1.3.10. Corporate Governance and Nominating Committeethe Corporate Governance and Nominating Committee of the Board of Directors including any successor to such Corporate Governance and Nominating Committee by whatever name known.
1.3.11. Deferred Stock Retainerthe annual award of compensatory shares granted to members of the Board of Directors and automatically deferred into this Plan (or comparable prior plans) as provided in Section 4.1.2(b).
1.3.11 Director Affairs Committee the Director Affairs Committee of the Board of Directors including any successor
to such Director Affairs Committee by whatever name known.
1.3.12. Enrollment Windowa period designated from time to time by the Plan Administrator during which class year deferral elections and class year payment elections can be received with respect to services performed in the subsequent calendar year.
1.3.13. Fair Market Valuethe 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.
1.3.14. Interest Crediting Ratea rate, determined once for each calendar year, equal to the twelve-month rolling average of Moody's Corporate Average Bond Index for the twelve-month period ending in the month of October preceding the first day of the calendar year as determined by the Plan Administrator. Notwithstanding the foregoing, through December 31, 2008, the Interest Crediting Rate and the rules for crediting interest on amounts deferred under the Deferred Cash Plan during the years 2005, 2006, 2007 and 2008 and transferred to this Plan pursuant to Section 1.1.2(b) shall be the rate in effect under the rules and procedures of the Deferred Cash Plan.
1.3.15. Leadership Development and Compensation Committeethe Leadership Development and Compensation Committee of the Board of Directors including any successor to such Leadership Development and Compensation Committee by whatever name known.
1.3.16. Participanta non-employee director who becomes a Participant in this Plan in accordance with the provisions of Section 2, such that any non-employee director that was formerly an employee of the Company shall not be permitted to be a Participant. An individual who has become a Participant shall be considered to continue as a Participant in this Plan until the earlier of (i) the date the Participant no longer has any Account (that is, the Participant has received a payment of all of the Participant's Accounts and/or all Accounts have been forfeited as hereinafter provided), or (ii) the date of the Participant's death.
1.3.17. Planthe nonqualified, deferred compensation program maintained by Company established for the benefit of Participants eligible to participate therein, as set forth in the Plan Statement. (As used herein, "Plan" does not refer to the document pursuant to which this Plan is maintained. That document is referred to herein as the "Plan Statement"). The Plan shall be referred to as the "SUPERVALU INC. DEFERRED COMPENSATION PLAN FOR DIRECTORS."
1.3.18. Plan Administratorthe Company or, when affirmatively designated by the Corporate Governance and Nominating Committee Director Affairs Committee, some other
person or committee.
1.3.19. Plan Statementthis document entitled "SUPERVALU INC. DEFERRED COMPENSATION PLAN FOR DIRECTORS (2009 Statement)" as adopted by the Board of Directors of the Company effective as of January 1, 2009, as the same may be amended from time to time thereafter.
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1.3.20. Separation from Servicea complete severance of a Participant's relationship as a director of the Company and all Affiliates, if any, and as an independent contractor of the Company and all Affiliates, if any, for any reason other than death. A Participant may have a Separation from Service upon resignation as a director even if the Participant then becomes an employee. Separation from Service shall be construed to have a meaning consistent with the term "separation from service" as used and defined in section 409A of the Code.
1.4. Prior Rules. Generally, this Plan Statement governs all aspects of this Plan both as to amounts deferred after 2008 and amounts deferred after 2004 under the Deferred Cash Plan and transferred to this Plan incident to the creation of this Plan. Although this Plan Statement governs amounts deferred after 2004, it is recognized that this Plan Statement is being adopted in late 2008 and effective as of January 1, 2009, and that much relevant guidance under section 409A of the Code was not published until April 2007. It is therefore acknowledged and recognized that as a matter of practical necessity, many of the good faith and reasonable rules and practices that were effectively in place after 2004 and before this Plan Statement is adopted are not precisely those reflected in this Plan Statement but were a good faith interpretations of section 409A of the Code and the limited guidance published under section 409A of the Code. It is not the intent of the Company in adopting this Plan Statement that those rules and practices be questioned or that the Plan Administrator be obligated to retroactively conform them to this Plan Statement absent some conclusion that doing so is required as a matter of compliance with section 409A of the Code or other law. The rules in this Plan Statement are intended to be effective only as of January 1, 2009.
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An individual shall become a Participant in this Plan on the first day on which the individual is a member of the Board of Directors and is not at the same time an employee of the Company or any Affiliate. However, if the individual has previously been a participant in any other nonqualified deferred compensation plan sponsored by the Company or any Affiliate for the benefit of members of the Board of Directors, the individual shall become a Participant in this Plan on next succeeding January 1 on which the individual is a member of the Board of Directors and is not at the same time an employee of the Company or any Affiliate.
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PARTICIPANT ELECTIONS
3.1. Class Year Elections. Subject to the provisions for subsequent changes in class year payment elections, a Participant shall make a class year deferral election or a class year payment election or both with respect to each calendar year as follows.
3.1.1. Class Year Deferral Elections. Each person who is or may become a Participant for a calendar year may make a class year deferral election during the Enrollment Window preceding that calendar year.
3.1.2. Class Year Payment Elections. Each person who is or may become a Participant for a calendar year may make a class year payment election during the Enrollment Window for that calendar year to be effective with respect to amounts attributable to that calendar year. Each class year payment election shall designate the time and a form for the payment on a basis that is consistent with Section 6.1.
3.1.3. General Conditions. A class year deferral election and a class year payment election shall be effective only if actually received by the Plan Administrator during the Enrollment Window and may be modified at any time and any number of times during the Enrollment Window. Except as expressly provided below, the last such class year deferral election and class year payment election actually received during the Enrollment Window shall be irrevocable as of the end of the Enrollment Window. The class year deferral election and class year payment election shall contain such information as the Plan Administrator may require. The class year deferral election and class year payment election, if any, shall be made in writing upon forms furnished by the Plan Administrator and shall conform to such other procedural and substantive rules consistent with the foregoing as the Plan Administrator shall establish. Class year deferral elections and class year payment elections may be made electronically if and to the extent the Plan Administrator determines from time to time.
3.2. Election Upon Initial Participation. Notwithstanding the foregoing, in accordance with rules that are both consistent with the principles in Section 3.1 and the requirements of section 409A of the Code, the Plan Administrator may permit persons who are about to become Participants for the first time (and have never before been a participant in this Plan or any similar plan for directors) to make a class year deferral election and class year payment election, or both, at times other than during an Enrollment Window. The Plan Administrator's rules shall require at least the following.
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3.3. Subsequent Changes in Payment Elections. Notwithstanding the foregoing, after the close of the Election Window for a calendar year, a Participant shall be permitted to change a class year payment election that was affirmatively made or made by default for that calendar year if such election change is made in the manner prescribed by the Plan Administrator and if the following conditions are satisfied.
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4.1.2. Deferred Stock Accounts.
Such number of shares shall be determined and shall be credited as of the time or times when the Annual Fees would have been paid to the Participant but for the election to defer.
In the event that a new director is appointed to the Board of Directors other than at the annual meeting of stockholders, the Plan Administrator shall credit a Deferred Stock Retainer to the Deferred Stock Account of such new director Participant as of such date determined by the Board of Directors which shall be as soon as administratively practicable after the effective date of the new director's appointment and after the end of any then-existing Blackout Period. The amount of the Deferred Stock Retainer to be credited to such new director shall be equal to the annual Deferred Stock Retainer described above, prorated to reflect the actual number of weeks of the fiscal year that the new director served on the Board of Directors.
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Additionally, the Plan Administrator may credit a supplemental Deferred Stock Retainer to the Deferred Stock Account of each Participant who is then a director of the Company, as of such date and in such amount as shall be determined by the Board of Directors, provided that, the date of the Board of Director's determination and the date the amount is to be credited shall not occur during a Blackout Period.
For the purpose of this section, "Blackout Period" shall mean the period beginning ten business days prior to the end of each fiscal quarter or fiscal year and ending one full trading day after the public announcement of earnings for such quarter or year.
4.2.1. Taxes. The amount to be credited to each Account and the value of each Account shall be reduced by the amount of federal, state and local income tax and the amount of other taxes that are withheld or paid with respect to such credits and Account, if any.
4.2.2. Payments. Each Participant's Account shall be reduced (or the credits to the Account shall be reduced) by any amount paid to or with respect to the Participant as of the date as of which the payment is made.
4.3. Multiple Sub-Accounts. To the extent the Plan Administrator determines that it is necessary or useful to the administration of this Plan, the Plan Administrator may cause multiple Deferred Cash Accounts and Deferred Stock Accounts to be established for each Participant. To the extent the Plan Administrator determines that it is necessary or useful to the administration of Accounts under this Plan, the Plan Administrator shall adopt such other rules and policies supplemental to and consistent with the express terms of this Plan Statement as it believes appropriate.
4.4. Maximum Number of Shares.
4.4.1. Limitation. Subject to adjustment as
provided below, the maximum number of shares of Common Stock that may be credited under this Plan (including those credited under the "Supervalu Inc. Non-Employee Directors Deferred
Stock Plan" before it was merged with and into this Plan), is four million (4,000,000) shares five hundred thousand (500,000)
shares. To the extent that limitation would be exceeded, (i) the Annual Fees the Participant elected to defer into the Deferred Stock Account pursuant to Section 3.1.1 shall
instead be deferred into the Deferred Cash Account and (ii) the awards under Section 4.1.2(b) shall not be made.
4.4.2. Recapitalization. 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 payment 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.
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5.1. Vesting. Except as elsewhere specifically provided, the Deferred Cash Account and the Deferred Stock Account of each Participant shall be fully (100%) vested and nonforfeitable at all times.
5.2. Forfeiture for Early Termination. If, after
receiving a Deferred Stock Retainer credit to the Deferred Stock Account pursuant to Section 4.1.2(b), a the
Participant shall cease to serve on the Board of Directors prior to the Company's next annual meeting of stockholders for any reason other than death or permanent disability, then such
Participant's Deferred Stock Account shall be reduced by the sum of (i) that number of shares which is equal to one twelfth (1/12th) of
the shares awarded as of the prior July 1 for
each full calendar month during which the shall forfeit (i) the prorated portion of the Deferred Stock Retainer credited to such Participant at any time after
the prior annual meeting of stockholders pursuant to Section 4.1.2(b) that is calculated based on the number of full calendar months that such Participant
did not serve as a director of the Company after that July 1 and before the next annual meeting on the Board of
Directors after such shares were awarded, and (ii) any dividends credited on that number of shares specified in (i) above during the period that the Participant did not serve as a
director of the Company. For purposes of computing the Deferred Stock Retainer credits which shall be forfeited pursuant to this section, the monthly period shall start on the first day
of the month following the Participant's departure from the Board of Directors.
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PAYMENTS
6.1. Separation from Service Payments. Upon the occurrence of a Separation from Service effective as to a Participant, the Plan Administrator shall cause the Company to make or commence payment such Participant's Deferred Cash Account and Deferred Stock Account (reduced by the amount of any applicable payroll, withholding and other taxes, if any) at the time and in the form designated by the Participant in a class year payment election or subsequent payment election as the case may be. The Plan Administrator may require that the Participant complete various forms and furnish documentation to the Plan Administrator.
6.1.1. Form of Payment. In each class year payment election, a Participant may designate that payment of all amounts attributable to the calendar year for which it is made shall be paid to the Participant, if then living, in one of the following forms.
6.1.2. Time of Payment. In each class year payment election, a Participant may designate that payment shall be made (i.e., lump sum) or commenced (i.e., installments) to the Participant, if then living, under one of the following rules.
6.1.3. Default. If for any reason (including reasons beyond the control of the Participant) the class year payment election is not clearly and timely made to the contrary, it shall be deemed to have been an election that payment be made in a single lump sum during the month of January in the calendar year following the calendar year in which the Participant's Separation from Service occurs.
6.2. Payment Upon Death. If any payment is due under this Plan after the death of the Participant, it shall be paid to the Participant's Beneficiary (and not to the Participant's estate or any other person) as follows.
6.2.1. Continued Installments. If payment had commenced to the deceased Participant before his or her death in annual installments as specified above (i.e., the Participant had received at least one installment payment), payment to the Beneficiary shall be made in a series of annual installments payable over the remainder of the period.
6.2.2. Lump Sum. In all other circumstances payment shall be made to the Beneficiary in a single lump sum payment during the month of January in the calendar year following the calendar year in which the Participant dies.
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included in the amount to be paid to the Beneficiary (and shall not be paid to the Participant's estate).
6.3. Installment Amounts. The amount of each annual installment shall be determined by dividing the amount of the Account as of immediately preceding the date the installment is to be paid by the number of remaining installment payments to be made (including the payment being determined). A series of installment payments shall at all times and for all purposes be treated as an entitlement to a single payment.
6.4. Generally Applicable Rules. The rules of this Section 6.4 shall be applicable to all payments from this Plan.
6.4.1. Processing. The Plan Administrator may require that the Participant and each Beneficiary complete various forms and furnish documentation to the Plan Administrator. A failure to timely complete satisfy these requirements shall result in a forfeiture of payments that would have been due if the requirements had been satisfied in a timely manner.
6.4.2. Code §162(m) Delay. Notwithstanding the forgoing, payment will be delayed when the Company reasonably anticipates that the Company's federal income tax deduction with respect to such payment otherwise would be limited or eliminated by application of section 162(m) of the Code. The payment shall thereafter be made at the earliest date at which the Company reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of section 162(m) of the Code.
6.4.3. Six-Month Delay. Notwithstanding the forgoing, no payment shall be made to any Participant who is a specified employee on account of a Separation from Service until at least six (6) months following that Participant's Separation from Service. On the first business day following the expiration of that six (6) month period, all amounts, if any, that would have been paid during that six (6) months shall be paid to the Participant (adjusted for any interest accruing during that six-month delay) and thereafter all payments shall be made as if there had been no such delay.
6.4.4. No Spousal Rights. No spouse or surviving spouse of a Participant and no person designated to be a Beneficiary shall have any rights or interest in the benefits credited under this Plan including, but not limited to, the right to be the sole Beneficiary or to consent to the
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designation of Beneficiaries (or the changing of designated Beneficiaries) by the Participant. No spouse, former spouse, Beneficiary or other person shall have any right to participate in any Participant's designation of a time and form of payment.
6.4.5. Facility of Payment. In case of the legal disability, including minority, of an individual entitled to receive any payment under this Plan, payment shall be made, if the Plan Administrator shall be advised of the existence of such condition:
Any payment made in accordance with the foregoing provisions of this Section shall constitute a complete discharge of any liability or obligation of Plan and the Company therefore.
6.4.6. Payments in Cash and in Common Stock. All transactions in the Deferred Cash Account shall be recorded in U.S. dollars and all payments shall be made in U.S. dollars. Transactions in the Deferred Stock Account shall be recorded in U.S. dollars (and U.S. dollars in lieu of fractions shares) and all payments from the Deferred Stock Account shall be made in shares of Common Stock (and U.S. dollars in lieu of any fractional shares).
6.4.7. No Other Payment
Events. Payment shall not be made or accelerated upon a
of change of control, unforeseeable emergency or disability. Payment shall not be made at a specified date or dates.
6.5. Designation of Beneficiaries.
6.5.1. Right to Designate. Each Participant may designate, upon forms to be furnished by and filed with the Plan Administrator, one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified part of such Participant's Account in the event of such Participant's death. The Participant may change or revoke any such designation from time to time without notice to or consent from any spouse, Beneficiary or any other person. No such designation, change or revocation shall be effective unless executed by the Participant and received by the Plan Administrator during the Participant's lifetime. The Plan Administrator may establish rules for the use of electronic signatures.
6.5.2. Failure of Designation. If a Participant:
such Participant's Account, or the part thereof as to which such Participant's designation fails, as the case may be, shall be payable to the first class of the following classes of automatic
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Beneficiaries with a member surviving the Participant and (except in the case of surviving issue) in equal shares if there is more than one member in such class surviving the Participant:
Participant's
surviving spouse
Participant's surviving issue per stirpes and not per capita
Participant's surviving parents
Participant's surviving brothers and sisters
Representative of Participant's estate.
6.5.3. Disclaimers by Beneficiaries. A Beneficiary entitled to a payment of all or a portion of a deceased Participant's Account may disclaim an interest therein subject to the following requirements. To be eligible to disclaim, a Beneficiary must be a natural person, must not have received a payment of all or any portion of the Account at the time such disclaimer is executed and delivered, and must have attained at least age twenty-one (21) years as of the date of the Participant's death. Any disclaimer must be in writing and must be executed personally by the Beneficiary before a notary public. A disclaimer shall state that the Beneficiary's entire interest in the undistributed Account is disclaimed or shall specify what portion thereof is disclaimed. To be effective, an original executed copy of the disclaimer must be both executed and actually delivered to the Plan Administrator after the date of the Participant's death but not later than nine (9) months after the date of the Participant's death. A disclaimer shall be irrevocable when delivered to the Plan Administrator. A disclaimer shall be considered to be delivered to the Plan Administrator only when actually received by the Plan Administrator. The Plan Administrator shall be the sole judge of the content, interpretation and validity of a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary shall be considered not to have survived the Participant as to the interest disclaimed. A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of the provisions of Section 10.15 and shall not be considered to be an assignment or alienation of benefits in violation of federal law prohibiting the assignment or alienation of benefits under this Plan. No other form of attempted disclaimer shall be recognized by the Plan Administrator.
6.5.4. Definitions. When used herein and, unless the Participant has otherwise specified in the Participant's Beneficiary designation, when used in a Beneficiary designation, the following definitions and rules shall be applied.
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6.5.5. Special Rules. Unless the Participant has otherwise specified in the Participant's Beneficiary designation, the following rules shall apply:
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7.1. Hedging Investments. If the Company elects to finance all or a portion of the Company's costs in connection with this Plan through the purchase of life insurance or other investments, the Participant agrees, as a condition of participation in this Plan, to cooperate with the Plan Administrator in the purchase of such investment to any extent reasonably required by the Plan Administrator and relinquishes any claim the Participant or a Beneficiary might have to the proceeds of any such investment or any other rights or interests in such investment. If a Participant fails or refuses to cooperate, then notwithstanding any other provision of this Plan the Plan Administrator shall immediately and irrevocably terminate and forfeit the Participant's entitlement to benefits under this Plan.
7.2. Corporate Obligation. Neither the Company, nor the Corporate
Governance and Nominating Committee Director Affairs Committee, the Plan Administrator nor any of their directors,
officers, agents or directors in any way secure or guarantee the payment of any benefit or amount which may become due and payable hereunder to or with respect to any Participant. Each person entitled
or claiming to be entitled at any time to any benefit hereunder shall look solely to the assets of the Company for such payments as an unsecured general creditor. If, or to the extent that, Accounts
have been paid to or with respect to a present or former Participant and that payment purports to be the payment of a benefit hereunder, such former Participant or other person or persons, as the case
may be, shall have no further right or interest in the other assets of the Company in connection with this Plan. No person shall be under any liability or responsibility for failure to effect any of
the objectives or purposes of this Plan by reason of the insolvency of the Company.
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SECTION 8
AMENDMENT AND TERMINATION
8.1. Amendment and Termination.
8.1.1. Before a Change of Control. Prior to the occurrence of a Change of Control, the Corporate Governance and Nominating
Committee Director Affairs Committee may
unilaterally amend the Plan Statement 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 this Plan both with regard to persons then receiving benefits and persons expecting to receive benefits in the future;
provided, however, that:
8.1.2. After a Change of Control.
8.2. No Oral Amendments. No modification of the terms of the Plan Statement or termination of this Plan shall be
effective unless it is in writing and signed on behalf of the Corporate Governance and Nominating Committee Director Affairs
Committee by a person authorized to execute such writing. No oral representation concerning the interpretation or effect of the Plan Statement shall be
effective to amend the Plan Statement.
8.3. Plan Binding on Successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), by agreement, to expressly assume and agree to perform this Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.
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SECTION 9
DETERMINATIONSRULES AND REGULATIONS
9.1. Determinations. The Plan Administrator shall make such determinations as may be required from time to time in the administration of this Plan. The Plan Administrator shall have the discretionary authority and responsibility to interpret and construe the Plan Statement and to determine all factual and legal questions under this Plan, including but not limited to the entitlement of Participants and Beneficiaries, and the amounts of their respective interests. Each interested party may act and rely upon all information reported to them hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary.
9.2. Rules and Regulations. Any rule not in conflict or at variance with the provisions hereof may be adopted by the Plan Administrator.
9.3. Method of Executing Instruments. Information to
be supplied or written notices to be made or consents to be given by the Company, the Corporate Governance and Nominating Committee
Director Affairs Committee, the Plan Administrator or any other person pursuant to any provision of the Plan Statement may be signed in
the name of the Company, the Corporate Governance and Nominating Committee Director Affairs
Committee, the Plan Administrator or any other person by any officer or other person who has been authorized to make such certification or to give such
notices or consents.
9.4. Claims Procedure. Until modified by the Corporate Governance and Nominating Committee
Director Affairs Committee, the claim
and review procedures set forth in this Section shall be the mandatory claim and review procedures for the resolution of disputes and disposition of claims filed under the Plan. Any application for a
payment or withdrawal shall be considered as a claim for the purposes of this Section.
9.4.1. Initial Claim. An individual may,
subject to any applicable deadline, file with the Corporate Governance and Nominating Committee Director Affairs
Committee a written claim for benefits under the Plan in a form and manner prescribed by the Corporate Governance and
Nominating Committee Director Affairs Committee.
9.4.2. Notice of Initial Adverse Determination. A notice of an adverse determination shall set forth in a manner calculated to be understood by the claimant:
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9.4.3. Request for Review. Within sixty
(60) days after receipt of an initial adverse benefit determination notice, the claimant may file with the Corporate Governance and Nominating
Committee Director Affairs Committee a written request for a review of the adverse determination and may, in connection
therewith submit written comments,
documents, records and other information relating to the claim benefits. Any request for review of the initial adverse determination not filed within sixty (60) days after receipt of the
initial adverse determination notice shall be untimely.
9.4.4. Claim on Review. If the claim, upon
review, is denied in whole or in part, the Corporate Governance and Nominating Committee Director Affairs
Committee shall notify the claimant of the adverse benefit determination within sixty (60) days after receipt of such a request for review.
9.4.5. Notice of Adverse Determination for Claim on Review. A notice of an adverse determination for a claim on review shall set forth in a manner calculated to be understood by the claimant:
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9.5.1. Adoption of Rules. Any rule not in
conflict or at variance with the provisions hereof may be adopted by the Corporate Governance and Nominating Committee Director
Affairs Committee.
9.5.2. Specific Rules.
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course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination; (iii) demonstrates compliance with the administration processes and safeguards designed to ensure that the benefit claim determination was made in accordance with governing plan documents and that, where appropriate, the Plan provisions have been applied consistently with respect to similarly situated claimants; and (iv) constitutes a statement of policy or guidance with respect to the Plan concerning the denied treatment option or benefit for the claimant's diagnosis, without regard to whether such advice or statement was relied upon in making the benefit determination.
9.5.3. Limitations and Exhaustion.
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SECTION 10
PLAN ADMINISTRATION
10.1.1. Officers. Except as hereinafter provided, functions generally assigned to the Company and functions generally assigned to the Plan Administrator shall be discharged by its principal human resources officer of the Company unless delegated and allocated as provided herein.
10.1.2. Chief Executive Officer. Except as hereinafter provided, the Chief Executive Officer of the Company may delegate or redelegate and allocate and reallocate to one or more persons or to a committee of persons jointly or severally, and whether or not such persons are directors, officers or directors, such functions assigned to the Company generally hereunder as the Chief Executive Officer may from time to time deem advisable.
10.1.3. Board of Directors. Notwithstanding the foregoing, the Board of Directors shall have the exclusive authority, which may not be delegated except to a committee comprised solely of members of the Board of Directors, to amend the Plan Statement and to terminate this Plan.
10.2. Conflict of Interest. If any individual to whom authority has been delegated or redelegated hereunder shall also be a Participant in this Plan, such Participant shall have no authority with respect to any matter specially affecting such Participant's individual interest hereunder or the interest of a person superior to him or her in the organization (as distinguished from the interests of all Participants and Beneficiaries or a broad class of Participants and Beneficiaries), all such authority being reserved exclusively to other individuals as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant's individual capacity in connection with any such matter.
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11.1. ERISA Status. This Plan is adopted with the understanding that it is an unfunded plan maintained exclusively for the purpose of providing deferred compensation for persons none of whom are employees. Because this Plan does not benefit any employee, this Plan is not subject to Employee Retirement Income Security Act of 1974, as amended. Each provision shall be interpreted and administered accordingly.
11.2. IRC Status. This Plan is intended to be a nonqualified deferred compensation arrangement. The rules of section 401(a) et. seq. of the Code shall not apply to this Plan. This Plan is intended to comply with the requirements of section 409A of the Code and this Plan Statement shall be construed and administered accordingly. It is expressly intended that for purposes of section 409A of the Code this Plan be considered two account balance plans. The first consists of amounts deferred at the election of the Participant (i.e., amounts attributable to the voluntary deferrals into the Deferred Cash Account and/or the Deferred Stock Account). The second consists of amounts deferred other than at the election of the Company (i.e., amounts attributable to Deferred Stock Retainer awards into the Deferred Stock Account). Neither the Company nor any of its officers, directors, agents or affiliates shall be obligated, directly or indirectly, to any Participant or any other person for any taxes, penalties, interest or like amounts that may be imposed on the Participant or other person on account of any amounts due or paid under this Plan or on account of any failure to comply with any of such Code sections.
11.3. Effect on Other Plans. This Plan shall not alter, enlarge or diminish any person's employment rights or obligations or rights or obligations under any other qualified or nonqualified plan without regard to whether it is subject to section 409A of the Code. It is specifically contemplated that such other plans will, from time to time, be amended and terminated. Nothing in this Plan Statement shall be interpreted or relied upon as a basis to amend, modify, accelerate or defer, or otherwise change any credits to or payments that may be due from any other deferred compensation plan subject to section 409A of the Code.
11.4. Disqualification. Notwithstanding any other provision of the Plan Statement or any election or designation made under this Plan, any individual who feloniously and intentionally kills a Participant or Beneficiary shall be deemed for all purposes of this Plan and all elections and designations made under this Plan to have died before such Participant or Beneficiary. A final judgment of conviction of felonious and intentional killing is conclusive for this purpose. In the absence of a conviction of felonious and intentional killing, the Plan Administrator shall determine whether the killing was felonious and intentional for this purpose.
11.5. Rules of Document Construction.
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11.6. References to Laws. Any reference in the Plan Statement to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation unless, under the circumstances, it would be inappropriate to do so. The terms "spouse," "nonspouse," "married," "surviving spouse," and other similar terms shall be construed, interpreted and applied on a basis consistent with the federal statute known as the Defense of Marriage Act.
11.7. Receipt of Documents. If a form or document must be filed with or received by the Plan Administrator or other person (the "appropriate entity"), it must be actually received by the appropriate entity to be effective. The determination of whether or when a form or document has been received by the appropriate entity shall be made by the Plan Administrator on the basis of what documents are acknowledged by the appropriate entity to be in its actual possession without regard to a "mailbox rule" or similar rule of evidence. The absence of a document in the appropriate entity's records and files shall be conclusive and binding proof that the document was not received by the appropriate entity.
11.8. Effect on Director Status. Neither the terms of the Plan Statement nor the benefits under this Plan nor the continuance thereof shall be a term of the engagement of any director. The Company shall not be obliged to continue this Plan. The terms of this Plan shall not give any director the right to be retained in the service of the Company. This Plan is not and shall not be deemed to constitute a contract of employment between the Company and any director or other person, nor shall anything herein contained be deemed to give any director or other person any right to be retained in the Company's employ or in any way limit or restrict the Company's right or power to discharge any director or other person at any time and to treat him without regard to the effect which such treatment might have upon him as a Participant in this Plan.
11.9. Choice of Law. Except to the extent that federal law is controlling, this Plan Statement be construed and enforced in accordance with the laws of the State of Minnesota (without regard to conflict of laws principles).
11.10. Delegation. No person shall be liable for an act or omission of another person with regard to a responsibility that has been allocated to or delegated to such other person pursuant to the terms of the Plan Statement or pursuant to procedures set forth in the Plan Statement. Whenever any authority, function or responsibility is delegated from one person to another, the discretion possessed by the person making the delegation shall be fully assigned to the person receiving the delegation unless a contrary intention is clearly expressed in the delegation.
11.11. Tax Withholding. The Company (or any other person legally obligated to do so) shall withhold the amount of any federal, state or local income tax, payroll tax or other tax required to be withheld under applicable law with respect to any amount payable under this Plan. All benefits otherwise due hereunder shall be reduced by the amount to be withheld.
11.12. Expenses. All expenses of administering the benefits due under this Plan shall be borne by the Company. The Accounts of Participants shall not be charged for those expenses.
11.13. Service of Process. In the absence of any designation to the contrary by the Plan Administrator, the Secretary of the Plan Administrator is designated as the appropriate and exclusive
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agent for the receipt of service of process directed to this Plan in any legal proceeding, including arbitration, involving this Plan.
11.14. Spendthrift Provision. No Participant or Beneficiary shall have any interest in any Account which can be transferred nor shall any Participant or Beneficiary have any power to anticipate, alienate, dispose of, pledge or encumber the same while in the possession or control of the Company. The Plan Administrator shall not recognize any such effort to convey any interest under this Plan. No benefit payable under this Plan shall be subject to attachment, garnishment, execution following judgment or other legal process before actual payment to such person.
The power to designate Beneficiaries to receive the Account of a Participant in the event of such Participant's death shall not permit or be construed to permit such power or right to be exercised by the Participant so as thereby to anticipate, pledge, mortgage or encumber such Participant's Account or any part thereof, and any attempt of a Participant so to exercise said power in violation of this provision shall be of no force and effect and shall be disregarded by the Company.
This section shall not prevent the Plan Administrator from exercising, in its discretion, any of the applicable powers and options granted to it upon the occurrence of a Separation from Service, as such powers may be conferred upon it by any applicable provision hereof.
11.15. Certifications. Information to be supplied or written notices to be made or consents to be given by the Plan Administrator pursuant to any provision of this Plan may be signed in the name of the Plan Administrator by any officer who has been authorized to make such certification or to give such notices or consents.
11.16. Errors in Computations. Participants shall be obligated to furnish such information (including but not limited to current mailing addresses, social security numbers, marital status, dates of birth and the like) as the Plan Administrator may from time to time require for the effective and efficient administration of this Plan. The Plan Administrator shall not be liable or responsible for any error in the computation of any benefit payable to or with respect to any Participant resulting from any misstatement of fact made by the Participant or by or on behalf of any survivor to whom such benefit shall be payable, directly or indirectly, to the Plan Administrator, and used by the Plan Administrator in determining the benefit. The Plan Administrator shall not be obligated or required to increase the benefit payable to or with respect to such Participant which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Participant. However, the benefit of any Participant which is overstated by reason of any such misstatement or any other reason shall be reduced to the amount appropriate in view of the truth and the Plan Administrator may recover any prior overpayment and pursue all other remedies that may be available.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. Signature (Joint Owners) Date Date Signature [PLEASE SIGN WITHIN BOX] VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on July 16, 2012. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/svu You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on July 16, 2012. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. SUPERVALU INC. 7075 FLYING CLOUD DRIVE EDEN PRAIRIE, MN 55344 M47527-P27686-Z58002 SUPERVALU INC. The Board of Directors recommends you vote FOR the following proposals: For Against Abstain 1. Election of Directors Nominees: 1a. Donald R. Chappel For Against Abstain 1b. Irwin S. Cohen 1j. Wayne C. Sales 1c. Ronald E. Daly 1k. Kathi P. Seifert 1d. Susan E. Engel 2. Ratification of appointment of KPMG LLP as independent registered public accountants 1e. Philip L. Francis 3. To approve, by non-binding vote, the executive compensation as disclosed in the proxy statement 1f. Edwin C. Gage 1g. Craig R. Herkert 4. To approve the SUPERVALU INC. 2012 Stock Plan 5. To approve the amendment of the Directors' Deferred Compensation Plan 1h. Steven S. Rogers 6. To approve the amendment to the Restated Certificate of Incorporation to reduce the supermajority voting thresholds 1i. Matthew E. Rubel 7. To approve the amendment to the Restated Bylaws to reduce the supermajority voting thresholds For address changes and/or comments, please check this box and write them on the back where indicated. 8. To approve the amendment to the Restated Certificate of Incorporation to change the par value of the common stock Please indicate if you plan to attend this meeting. No Yes 9. To transact such other business as may properly come before the meeting or any adjournment thereof Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. |
ANNUAL MEETING OF STOCKHOLDERS July 17, 2012 10:30 a.m. Sheraton Westport Lakeside Chalet 191 Westport Plaza St. Louis, Missouri 63146 Please bring a current brokerage statement, letter from your stockbroker or other proof of stock ownership to the meeting. Refreshments will be available before the Meeting. This Proxy is solicited on behalf of the Board of Directors of the Company. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com. M47528-P27686-Z58002 This Proxy is solicited on behalf of the Board of Directors of the Company. As the stockholder named on this card, you hereby appoint Craig R. Herkert and Todd N. Sheldon, and each of them, as your proxy, with power of substitution, to vote the shares of SUPERVALU common stock at the Annual Meeting as directed on the reverse side. These proxies may also vote, in their discretion, upon all other matters that may properly come before the Annual Meeting, or any adjournment or adjournments thereof. The shares will be voted as if you were personally present at the Annual Meeting. All former proxies are revoked. If not otherwise specified, the shares will be voted as recommended by the Directors. Voting Instructions - You may vote by mail, telephone or Internet. Please follow the instructions on the reverse side of this card. SUPERVALU Employees - If you are a current or former employee of SUPERVALU and own shares of SUPERVALU common stock through a SUPERVALU employee benefit plan, the share ownership as of May 22, 2012 is shown on this card. Your vote will provide voting instructions to the trustees of the plans. If no instructions are given, the trustees will vote the shares pursuant to the terms of the plans, the trustee will vote shares as to which no directions are received in the same ratio as shares with respect to which directions have been received from other participants, unless contrary to applicable law. The voting deadline for participants in SUPERVALU employee benefit plans is at 12:00 a.m. Eastern Time on July 16, 2012. Householding - If you share the same address and last name as other SUPERVALU stockholders, only one copy of SUPERVALU's Annual Report and Proxy Statement has been mailed to your address. Proxy cards for each SUPERVALU stockholder residing at your address have been mailed under separate cover. Address Changes/Comments: (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side. |