UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 3, 2013
SUPERVALU INC.
(Exact name of registrant as specified in its charter)
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Delaware |
1–5418 |
41–0617000 |
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(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
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7075 Flying Cloud Drive |
55344 |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (952) 828-4000
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N/A |
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(Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment of Sam Duncan as President and Chief Executive Officer; Appointment of Wayne Sales as Executive Chairman.
(c)
On February 4, 2012, SUPERVALU INC. (“SUPERVALU”) announced that Sam K. Duncan has been appointed as President and Chief Executive Officer of SUPERVALU, effective February 4, 2012, and that the current President and Chief Executive Officer, Wayne C. Sales will cease to serve in those positions and will continue his employment as Executive Chairman of SUPERVALU. A copy of the related press release is attached to this Current Report on Form 8-K as Exhibit 99.1.
Mr. Duncan, 61, most recently served from 2005 to 2011 as Chairman, CEO & President of OfficeMax, the third largest office supplies retailer in North America with over $7 billion in revenues and more than 1,000 stores in the United States, Mexico, Puerto Rico and the US Virgin Islands. In addition to retail, Mr. Duncan also oversaw the company’s business-to-business sales and service divisions in Canada, Australia and New Zealand. Prior to joining OfficeMax, Mr. Duncan served from 2002 to 2005 as President and CEO of ShopKo Stores, a $3 billion Midwest retailer. In both these leadership roles, Duncan successfully led publicly traded companies through growth and financial improvement efforts, resulting in stronger organizations and improved shareholder value. Mr. Duncan has an extensive background in the grocery industry. He began his career at Albertsons as a courtesy clerk at the age of 15. During the next 19 years, he held various positions of increasing responsibility with Albertsons before moving to Fred Meyer, a division of Kroger, in 1992 as Vice President of Grocery. He was eventually appointed President of the Fred Meyer division. Duncan also served from 1998 to 2001 as President of Ralph’s Supermarket, one of the largest food retailers in Southern California.
Mr. Sales, 63, has served as President and Chief Executive Officer of SUPERVALU since July 29, 2012. Mr. Sales has also served as a Director of SUPERVALU since 2006 and Chairman of the Board of Directors of SUPERVALU since 2010 (serving as Non-Executive Chairman of the Board from 2010 to 2012). He is the retired Vice-Chairman of Canadian Tire Corporation Limited, a retail, financial services and petroleum company, which he led as President and Chief Executive Officer from 2000 to 2006. 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, until recently he served 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, and as a Director and Chair of the Nominating/Governance Committee of Discovery Air Inc., a specialty aviation company.
(e)
Amendment to the Duncan Letter Agreement
As previously disclosed on a Form 8-K filed by SUPERVALU with the Securities and Exchange Commission on January 14, 2013, SUPERVALU entered into a letter agreement with Mr. Duncan that provides for the terms of his future employment as President and Chief Executive Officer of SUPERVALU on January 10, 2013 (the “Duncan Letter Agreement”). In connection with appointing Mr. Duncan as President and Chief Executive Officer of SUPERVALU, SUPERVALU and Mr. Duncan entered into a letter amending the Duncan Letter Agreement with SUPERVALU on February 3, 2013 (the “Duncan Amendment Letter”), clarifying that his Commencement Date (for purposes of the Duncan Letter Agreement) will be February 4, 2013, rather than upon the closing of the transactions contemplated by the Tender Offer Agreement by and between Symphony Investors, LLC, SUPERVALU and Cerberus Capital Management, L.P., dated as of January 10, 2013 (the “TOA”). The amendment to the Letter Agreement also clarifies that Mr. Duncan’s duties as President and Chief Executive Officer of SUPERVALU will not include supervising and being responsible for the consummation of the transactions described in (x) the Stock Purchase Agreement by and among AB Acquisition LLC, SUPERVALU and New Albertson’s, Inc., dated as of January 10, 2013 (the “SPA”), and (y) the TOA. The compensation arrangements for Mr. Duncan set forth in the Duncan Letter Agreement will remain the same (other than the timing of the initial equity grant of stock options to acquire 1,500,000 shares of SUPERVALU common stock (the “Initial Option Grant”), which will occur as soon as practicable following the new Commencement Date). As provided in the Duncan Letter Agreement, the Initial Option Grant will vest in three equal installments on each of the first three anniversaries of the date of grant, subject to Mr. Duncan’s continued employment through the applicable vesting date, with accelerated vesting if the per share price of SUPERVALU common stock exceeds two times the per share exercise price of the Initial Option Grant for 20 consecutive trading days (and Mr. Duncan remains employed through the date of such vesting).
Amendment to the Sales Letter Agreement
In connection with ceasing to be President and Chief Executive of SUPERVALU and continuing as Executive Chairman of SUPERVALU, Mr. Sales entered into a letter agreement with SUPERVALU, dated as of February 3, 2013 (the “Sales Amendment Letter”), amending the letter agreement that he entered into with SUPERVALU on August 2, 2012 (the “Sales Letter Agreement”). The Sales Amendment Letter provides that all references to “President and Chief Executive Officer” in the Sales Letter Agreement be replaced with “Executive Chairman” and provides that Mr. Sales will continue to supervise and be responsible for the consummation of the transactions described in the SPA and the TOA.
Mr. Sales also agreed to waive his rights under the Sales Letter Agreement to receive a lump sum payment equal to target bonus for fiscal years 2014 and 2015 (which would be equal to $2 million in the aggregate) upon a termination of employment by SUPERVALU without “cause” (as defined in the Sales Letter Agreement) and to reduce the lump sum payment that he would receive in lieu of the stock unit and performance share grants scheduled to be made to Mr. Sales on July 29, 2013 if he is terminated without cause prior to such date from $2.2 million to $1.5 million. In the aggregate, Mr. Sales is agreeing to waive $2.7 million in lump sum payments that he is otherwise entitled to receive in connection with the termination of his employment without cause. The change in titles on February 4, 2013 will not be deemed to be a termination of employment and will not trigger any severance obligations under the Sales Letter Agreement; however, the removal of Mr. Sales as Executive Chairman in connection with the completion of the transactions contemplated by the TOA will trigger such severance obligations. In addition, the Sales Amendment Letter provides that SUPERVALU may further reduce the payments thereunder if such reduction would avoid excise taxes under Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended, and result in a better after-tax outcome for Mr. Sales.
A copy of the Duncan Amendment Letter and the Sales Amendment Letter are filed herewith as Exhibits 10.1 and 10.2, respectively, and are incorporated herein by reference. The foregoing description of each of the Duncan Amendment Letter and the Sales Amendment Letter is each qualified in its entirety by reference to the full text of the applicable letter.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit Number |
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Description
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10.1
10.2
99.1
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Letter Agreement Amendment, dated as of February 3, 2013, between SUPERVALU INC. and Sam K. Duncan
Letter Agreement Amendment, dated as of February 3, 2013, between SUPERVALU INC. and Wayne C. Sales
Press Release issued by SUPERVALU INC., dated February 4, 2013
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: February 4, 2013
| SUPERVALU INC. | |
| By: | /s/ Todd N. Sheldon |
| Name: | Todd N. Sheldon |
| Title: |
Senior Vice President, General Counsel |
EXHIBIT INDEX
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Exhibit Number |
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Description
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10.1
10.2
99.1
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Letter Agreement Amendment, dated, February 3, 2013 between SUPERVALU INC. and Sam K. Duncan
Letter Agreement Amendment, dated, February 3, 2013 between SUPERVALU INC. and Wayne C. Sales
Press Release issued by SUPERVALU INC., dated February 4, 2013
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EXHIBIT 10.1
[SUPERVALU Letterhead]
Corporate Offices
PO Box 990
Minneapolis, MN 55440
(952) 828-4000
February 3, 2013
Sam Duncan
8612 NW 21st Avenue
Vancouver, WA 98665
Dear Sam:
This letter amends the letter agreement that you entered into with SUPERVALU INC (the “Company”), dated as of January 10, 2013 (the “Letter Agreement”).
The Letter Agreement shall be amended as follows:
1. The last two sentences of the first paragraph of the Letter Agreement are hereby deleted in their entirety and replaced by the following:
“This letter agreement will become effective on February 4, 2013 (the “Commencement Date”).”
2. The first sentence of the section with the heading “Term” is hereby deleted in its entirety and replaced by the following:
“This letter agreement shall have a three-year term, beginning on the Commencement Date and ending on the third anniversary of the Commencement Date, unless terminated earlier by either party at any time and for any reason (the “Term”).”
3. The first sentence of the section with the heading “Positions and Duties” is hereby amended to add the following proviso at the end thereof:
“; provided that, your duties shall not include supervising and being responsible for the consummation of the transactions described in (x) the Stock Purchase Agreement by and among AB Acquisition LLC, the Company and New Albertson’s, Inc., dated as of January 10, 2013 and (y) the Tender Offer Agreement by and between Symphony Investors, LLC, the Company and Cerberus Capital Management, L.P., dated as of January 10, 2013.”
Sam Duncan
February 3, 2013
Page 2
4. The second to last sentence of the section with the heading “Positions and Duties” is hereby deleted in its entirety and replaced by the following:
“In addition, the Board will take such action as may be necessary to appoint or elect you as a member of the Board as soon as practicable following the appointment of the two Additional Directors (as defined in the Tender Offer Agreement, by and between Symphony Investors LLC and the Company, dated as of January 10, 2013 (the “Tender Offer Agreement”)).”
“For each fiscal year that you are employed during the Term, the Company will grant you annual equity awards in the form of stock options and/or performance shares at the same time as annual equity awards are granted to similarly situated executives of the Company if you remain employed with the Company on such grant date, with the grant date fair value, allocation between stock options and performance shares, performance metrics and other terms and conditions to be determined by the Board or the Compensation Committee (as constituted following the Commencement Date).”
6. This letter shall in all respects be interpreted, enforced and governed by the laws of the State of Minnesota.
7. Except as expressly amended hereby, the Letter Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects by the parties to the Letter Agreement.
[Remainder of Page Intentionally Left Blank]
If the foregoing accurately expresses our mutual understanding, please execute the enclosed copy of this letter in the space provided below, and return to the undersigned.
Sincerely,
/s/ Susan E. Engel
Susan E. Engel, Chair, Leadership Development
and Compensation Committee
AGREED AND ACCEPTED:
/s/ Sam Duncan
SAM DUNCAN
EXHIBIT 10.2
[SUPERVALU Letterhead]
Corporate Offices
PO Box 990
Minneapolis, MN 55440
(952) 828-4000
February 3, 2013
Wayne C. Sales
Dear Wayne:
This will confirm our agreement that, as of February 4, 2013, you will cease to serve as President and Chief Executive Officer of SUPERVALU INC (the “Company”) and you will instead be employed as the Executive Chairman of the Company. In your role as Executive Chairman of the Company, you will continue to report directly to the Company’s Board of Directors (the “Board”) and be entitled to receive the compensation and benefits set forth in the letter agreement by and between you and the Company, dated as of August 2, 2012 (the “Letter Agreement”). You will have such duties as are assigned to you by the Board consistent with the role of Executive Chairman, including without limitation supervising and being responsible for the consummation of the transactions described in (i) the Stock Purchase Agreement by and among AB Acquisition LLC, the Company and New Albertson’s, Inc., dated as of January 10, 2013 and (ii) the Tender Offer Agreement by and between Symphony Investors, LLC, the Company and Cerberus Capital Management, L.P., dated as of January 10, 2013.
You and the Company acknowledge and agree that the change in your title will have no effect on the terms and conditions of the Letter Agreement, other than:
1. The first sentence of the Letter Agreement is hereby amended to read in its entirety as follows:
We are pleased to outline the terms of your employment in the position of (i) from July 29, 2012 through February 3, 2013, President and Chief Executive Officer of SUPERVALU INC (the “Company”), and (ii) on and following February 4, 2013, Executive Chairman of the Company.
2. The third sentence under the heading “Cash Bonus” is hereby amended to read in its entirety as follows:
If you are terminated by the Company without Cause (as defined herein), you will (i) be paid, in a lump sum no later than fourteen days following your termination, the minimum bonus in respect of the Company’s fiscal year ending February 23, 2013, if not previously paid, and (ii) forfeit your right to any amounts relating to the bonuses described in clauses (A) and (B) above (with the target bonus amounts that you will be forfeiting being equal to $1,500,000 and $500,000, respectively), in each case to the extent such bonus has not been previously paid.
3. The first sentence under the heading “Stock Unit Grants” and the first sentence under the heading “Performance Share Grants” are each amended by replacing the words “Chief Executive Officer” with the words “Executive Chairman.”
4. The first sentence under the heading “Reimbursement of Expenses/Commuting” is amended by adding the words “or Executive Chairman” immediately following the words “Chief Executive Officer.”
5. The reference under the heading “Termination of Employment” to “$2,200,000” is hereby replaced with “$1,500,000.”
6. The first sentence under the heading “Non-Employee Director Compensation” is amended by adding the words “or Executive Chairman” immediately following the words “Chief Executive Officer,” and the second sentence under the same heading is amended by adding the words “and Executive Chairman” immediately following the words “Chief Executive Officer.”
7. The first sentence under the heading “Other Directorships” is amended by adding the words “and Executive Chairman” immediately following the words “Chief Executive Officer.”
8. A new section with the heading “280G Considerations” is hereby added to the Letter Agreement after the section with the heading “Severability” and such new section shall read as follows:
280G Considerations: Anything in this letter agreement to the contrary notwithstanding, if it is determined by a nationally recognized firm of certified public accountants (the “Accounting Firm”) that any payment or distribution by the Company to you or for your benefit, whether paid or payable or distributed or distributable pursuant to the terms of this letter agreement or otherwise, would be subject to the Excise Tax (as defined below) imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being “contingent on a change in ownership or control” of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such Excise Tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the “Excise Tax”), then if a reduction in the amount of payments under this letter agreement (including any amounts relating to equity awards granted pursuant to this letter agreement) sufficient to avoid the Excise Tax would result in an increase in the total amount of all payments that you would retain, net of all applicable taxes, then and only then, the payments due under this letter agreement (including any amounts relating to equity awards granted pursuant to this letter agreement) shall be further reduced to the amount that, when considered with all payments taken into account under Section 280G of the Code is one dollar ($1.00) less than the smallest sum that would subject you to the Excise Tax. If a reduction in the payments under this letter agreement is necessary, such reduction will be applied in a manner consistent with the requirements of Section 409A of the Code (to the extent any of the amounts being reduced are nonqualified deferred compensation within the meaning of Section 409A of the Code). All fees and expenses of the Accounting Firm shall be borne solely by the Company.
This letter shall in all respects be interpreted, enforced and governed by the laws of the State of Minnesota. Except as expressly amended hereby, the Letter Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects by the parties to the Letter Agreement.
If the foregoing accurately expresses our mutual understanding, please execute the enclosed copy of this letter in the space provided below, and return to the undersigned.
Sincerely,
/s/ Susan E. Engel
Susan E. Engel, Chair, Leadership Development
and Compensation Committee
AGREED AND ACCEPTED:
/s/ Wayne C. Sales
WAYNE C. SALES
EXHIBIT 99.1
SUPERVALU BOARD OF DIRECTORS INSTALLS SAM DUNCAN AS PRESIDENT AND CHIEF EXECUTIVE OFFICER
Duncan assumes executive role effective immediately; Wayne Sales to remain Executive Chairman of the Board until closing of pending transaction
MINNEAPOLIS, February 4, 2013 — SUPERVALU (NYSE: SVU) today announced that Sam K. Duncan will become president and chief executive officer, effective immediately. In this role he succeeds Wayne Sales, who has served as the Company’s president and chief executive officer since July 2012. Last month, SUPERVALU announced an agreement with AB Acquisition LLC to sell five of its retail banners as well as enter into an agreement with Symphony Investors LLC to conduct a tender offer for up to 30 percent of SUPERVALU’s outstanding common stock at a purchase price of $4.00 per share in cash. Both AB Acquisition LLC and Symphony Investors LLC are Cerberus Capital Management-led entities. SUPERVALU had previously announced that Mr. Duncan would assume the role of president and chief executive officer upon closing of the transaction. Mr. Sales oversaw Supervalu’s review of strategic alternatives, and as Executive Chairman, will continue to have oversight over the completion of the transaction. At the closing of the transaction, Robert Miller, current President and CEO of Albertsons LLC, will become SUPERVALU’s non-executive Chairman.
“Sam is a talented and respected executive with a wealth of industry experience,” said Mr. Sales. “The Board decided to install Sam as President and Chief Executive Officer before the completion of our previously announced transaction so he can start refining and where appropriate implement plans for the business. I fully support this decision and look forward to working with Sam to ensure a smooth transition.”
Commenting on his appointment Mr. Duncan said, “Following January’s announcement, I have visited stores, spoken with many of our independent retailers and Save-a-Lot licensees, and met many team members. These activities have reinforced my belief that SUPERVALU has a bright future; and I’m excited to start putting in place plans to improve our results and increase shareholder value.”
Mr. Duncan, 61, most recently served from 2005-2011 as Chairman, CEO and President of OfficeMax, the third-largest office supplies retailer in North America with over $7 billion in revenues and more than 1,000 stores in the United States, Mexico, Puerto Rico & the US Virgin Islands. Prior to joining OfficeMax, Mr. Duncan served from 2002-2005 as President and CEO of ShopKo Stores, a $3 billion Midwest retailer. In these roles, Duncan successfully led publicly-traded companies though growth and financial improvement efforts, resulting in stronger organizations and improved shareholder value. He has over 40 years experience in the retail industry, including nearly 30 years with Albertsons and Kroger in positions of increasing responsibility.
As part of today’s announcement, SUPERVALU also reaffirmed that the closing of the previously announced sale and tender offer process is expected to occur the week of March 18th.
About SUPERVALU INC.
SUPERVALU INC. is one of the largest companies in the U.S. grocery channel with annual sales of approximately $35 billion. SUPERVALU serves customers across the United States through a network of approximately 4,350 stores composed of 1,068 traditional retail stores, including 778 in-store pharmacies; 1,329 Save-A-Lot stores, of which 946 are operated by licensee owners; and 1,950 independent stores serviced primarily by the Company's food distribution business. SUPERVALU has approximately 125,000 employees. For more information about SUPERVALU visit www.supervalu.com.
CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
Except for the historical and factual information contained herein, the matters set forth in this news release, particularly those pertaining to SUPERVALU’s expectations, guidance, or future operating results, and other statements identified by words such as "estimates," "expects," "projects," "plans," and similar expressions are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including competition, ability to execute initiatives, substantial indebtedness, impact of economic conditions, labor relations issues, escalating costs of providing employee benefits, regulatory matters, food and drug safety issues, self-insurance, legal and administrative proceedings, information technology, severe weather, natural disasters and adverse climate changes, the continuing review of goodwill and other intangible assets, accounting matters and other risk factors relating to our business or industry as detailed from time to time in SUPERVALU's reports filed with the SEC. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this news release. Unless legally required, SUPERVALU undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Additionally, this communication is neither an offer to purchase nor a solicitation of an offer to sell any shares of the common stock of the Company. This presentation is for informational purposes only. Symphony Investors LLC has filed a tender offer statement on Schedule TO, including an offer to purchase, a letter of transmittal and related documents,and the Company has filed a statement on Schedule 14D-9 with respect to the tender offer, with the Securities and Exchange Commission (SEC). Shareholders should read those materials carefully because they contain important information, including the various terms and conditions of the tender offer. Shareholders may obtain a free copy of these documents and other documents filed by the Company with the SEC at the website maintained by the SEC at www.sec.gov. In addition, shareholders may obtain a free copy of these documents by contacting the Company’s Investor Relations department at 7075 Flying Cloud Drive, Eden Prairie, Minnesota 55344, (952) 828-4000.
Investor Contact
Steve Bloomquist
952-828-4144
steve.j.bloomquist@supervalu.com
Media Contact
Mike Siemienas
952-828-4245
mike.siemienas@supervalu.com