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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 24, 2018
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to              .
Commission file number: 1-5418
 
SVUGRAPHICA04.JPG
SUPERVALU INC.
(Exact name of registrant as specified in its charter)
 
DELAWARE
 
41-0617000
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
11840 VALLEY VIEW ROAD
EDEN PRAIRIE, MINNESOTA
 
55344
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (952) 828-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ý     No   ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ¨     No   ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ý     No   ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   x
 
Accelerated filer   ¨
 
Non-accelerated filer   ¨
 
Smaller reporting company   ¨
 
Emerging growth company   ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   ý
The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of September 8, 2017 was approximately $750,406,810 (based upon the closing price of registrant’s Common Stock on the New York Stock Exchange).
As of April 20, 2018 , there were 38,405,453 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant’s definitive Proxy Statement filed for the registrant’s 2018 Annual Meeting of Stockholders are incorporated by reference into Part III, as specifically set forth in Part III.
 

Table of Contents

SUPERVALU INC.
Annual Report on Form 10-K
TABLE OF CONTENTS
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CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE SECURITIES LITIGATION REFORM ACT
Any statements contained in this Annual Report on Form 10-K regarding the outlook for Supervalu’s businesses and their respective markets, such as projections of future performance, guidance, statements of Supervalu’s plans and objectives, forecasts of market trends and other matters, are forward-looking statements based on Supervalu’s assumptions and beliefs. Such statements may be identified by such words or phrases as “will likely result,” “are expected to,” “will continue,” “may continue,” “outlook,” “is anticipated,” “estimate,” “project,” “believes,” “intends” or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in such statements and no assurance can be given that the results in any forward-looking statement will be achieved. For these statements, Supervalu claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Any forward-looking statement speaks only as of the date on which it is made, and Supervalu disclaims any obligation to subsequently revise any forward-looking statement to reflect events or circumstances after such date or to reflect the occurrence of anticipated or unanticipated events.
Certain factors could cause Supervalu’s future results to differ materially from those expressed or implied in any forward-looking statements contained in this Annual Report on Form 10-K. These factors include the factors discussed in Part I, Item 1A of this Annual Report on Form 10-K under the heading “Risk Factors” and any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statements. Since it is not possible to foresee all such factors, these factors should not be considered as complete or exhaustive.
PART I
ITEM 1.     BUSINESS
SUPERVALU INC., a Delaware corporation, was organized in 1925 as the successor to two wholesale grocery firms established in the 1870s. Unless otherwise indicated, all references to “Supervalu,” “we,” “us,” “our,” “ourselves” and the “Company” in this Annual Report on Form 10-K relate to SUPERVALU INC. and its wholly and majority-owned subsidiaries. All dollar and share amounts in this Annual Report on Form 10-K are in millions, except per share data and where otherwise noted. Our fiscal years end on the last Saturday of February and contain either 52 or 53 weeks. All references to fiscal 2018 , 2017 and 2016 relate to the 52-week fiscal years ended February 24, 2018 , February 25, 2017 and February 27, 2016 , respectively. Our business is classified into two reportable segments: Wholesale and Retail.
Company Background
Our core business is the distribution of grocery and other products and provision of logistics and professional service solutions to retailers across the United States. Our Wholesale segment includes a network of 28 distribution centers covering approximately 21 million square feet from which we supply a broad assortment of over 175 thousand stock-keeping units (“SKUs”) to retailers, including independent retailers operating diverse formats, regional and national chains, including our corporate-owned retail stores, and military commissaries.
During fiscal 2018, we expanded our Wholesale capabilities and distribution network through the acquisition of Unified Grocers, Inc. (“Unified”) and Associated Grocers of Florida, Inc. (“AG Florida”). We now serve customers in nearly all U.S. states and internationally, including in the Caribbean, Central and South America, and Asia.
Our Wholesale business provides several sources of value enabling our customers to better serve their consumers. Our value proposition includes scale efficiencies in procurement, logistics, and merchandising; a broad assortment of products, including an industry-leading portfolio of private brands, ethnic and specialty offerings; and a suite of professional services offerings.
The continuing operations of our Retail segment includes 114 stores under the three banners of Cub Foods, Shoppers Food & Pharmacy and Hornbacher’s. We believe our Retail banners have strong local and regional brand recognition in the markets in which they operate. Our Retail segment leverages our Wholesale value proposition to offer consumers a shopping experience that includes an assortment of products and services at competitive prices through a network of well-maintained stores.
Strategic Transformation
We initiated a strategic transformation in 2016 to become the wholesale supplier of choice for grocery retailers across the United States, while also executing initiatives to deliver long-term shareholder value. Our strategic transformation has impacted each of our segments, including at our leadership level where we have appointed new Wholesale leadership to grow our business and drive operational improvements and synergistic integrations of our acquired businesses and new Retail leadership

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to make fundamental changes and further align retail initiatives with our wholesale operations. We expect to continue to execute on our transformation and value-enhancing initiatives.
Sales from our Wholesale operations represent approximately 80 percent of our aggregate annual net sales from continuing operations for our fourth quarter of fiscal 2018, when considering the pro forma sales from the Unified and AG Florida businesses that we acquired during fiscal 2018. This compares to approximately 44% in the fourth quarter of fiscal 2016.
To achieve our strategic transformation, we have executed and continue to execute on four strategic pillars:
•
Grow our Core Wholesale Business
◦
The addition of more than $5 billion in run-rate sales to grow our core Wholesale business to nearly $13 billion when annualizing the sales from Unified and AG Florida. These acquisitions plus the addition of significant new Wholesale customers, such as The Fresh Market, drove this growth in fiscal 2018.
◦
We made strategic capital investments of approximately $135 in fiscal 2018 toward the purchase and improvement of distribution warehouses, including Harrisburg, PA and Joliet, IL, to support the growth of our Wholesale business including our Market Centre division that supplies specialty and ethnic foods and non-food products, to solidify our East coast distribution and to enable further growth in certain key markets.
•
Optimize our Asset Base
◦
We entered into agreements to sell a majority of our Farm Fresh retail stores and pharmacy assets for a total of $53 in March 2018.
◦
We announced that we are pursuing the sale of our corporately owned and operated retail operations of Shop n’ Save (based in St. Louis) and Shop ‘n Save East (with stores in West Virginia, Maryland, Pennsylvania and Virginia) in April 2018. These operations along with Farm Fresh are now reported in discontinued operations.
◦
These three retail banners had generated combined losses in fiscal 2018 from operations and Adjusted EBITDA in each case prior to discontinued operations presentation, which previously included the impact of corporate and additional supply chain expense allocations, and other expense.
◦
We sold our minority interest in an entity that operates multiple franchised Cub Foods stores in the Minneapolis / St. Paul, Minnesota market in February 2018.
•
De-lever the Balance Sheet
◦
We completed the sale of Save-A-Lot for $1.3 billion in December 2016, significantly reducing our debt, fundamentally improving our balance sheet, eliminating high levels of capital expenditures for retail operations, and increasing flexibility and resources available to execute our wholesale growth strategy.
◦
We announced a sale leaseback transaction in April 2018 for eight of our distribution centers with expected gross proceeds of approximately $483 before costs and taxes which net proceeds will be used to further reduce outstanding debt and fundamentally improve our balance sheet.
•
Strategic and Opportunistic Mergers and Acquisitions
◦
We expanded our Wholesale business and distribution network on the West Coast through the acquisition of Unified on June 23, 2017, a business that had $3.7 billion of annual net sales, including Market Centre.
◦
We expanded our Wholesale business and distribution network in Florida through the acquisition of AG Florida on December 8, 2017, a business that had $0.6 billion in annual net sales, including international customers and specialty and ethnic foods to local wholesale customers.
◦
We have increased our expected run-rate cost synergies to approximately $95 to be achieved by the end of third year following the respective closings of the Unified and AG Florida transactions, of which we realized approximately $23 in fiscal 2018.
◦
We expect the food wholesale industry consolidation to continue and believe our strategy enables us to build upon the recent acquisitions of Unified and AG Florida to further grow and expand capabilities through merger and acquisition opportunities.
Wholesale
We organize and operate our Wholesale segment through three geographic regions: East, Central and West. In fiscal 2018 , our Wholesale network supplied 48 states, shipped internationally, served as a primary grocery supplier to approximately 3,323 stores, and served as a secondary grocery supplier to approximately 2,462 stores. Our Wholesale customers include single and multiple independent grocery store operators, regional chains and the military, many of which are long tenured customers. The following charts depict the mix of our Wholesale customers and the tenure of our top 25 Wholesale customers by net sales:

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F18SALESCHARTSA07.JPG
(1)
Unified’s net sales include domestic and international net sales of Unified for the 35 weeks ended February 24, 2018 . On a pro forma basis, Unified’s net sales would have been $3,715 if their sales results for the 16 weeks prior to the acquisition date had been included in our fiscal 2018 results.
(2)
AG Florida’s net sales include domestic and international net sales of AG Florida for the 11 weeks ended February 24, 2018 . On a pro forma basis, AG Florida’s net sales would have been $644 if their sales results for the 41 weeks prior to the acquisition date had been included in our fiscal 2018 results.
(3)
The 20+ Years tenure percentage for the top 25 customers decreased in fiscal 2018 from 68 percent in fiscal 2017 primarily attributable to organic sales growth from two recently affiliated large customers.
(4)
Wholesale primary stores is defined as a customer location that has received over a certain dollar threshold of Wholesale product for each of the last three fiscal periods in a given quarter and purchases two or more product groups.
We have established a national network of strategically located distribution centers utilizing a multi-tiered logistics system. The network includes facilities that carry slow turn or fast turn groceries, perishables, general merchandise and home, health and beauty care products. As of February 24, 2018 , the network was comprised of 28 distribution facilities, seven of which supply our own Retail stores in addition to stores of Wholesale customers. For financial reporting purposes, sales from our distribution centers to our own Retail stores are eliminated within the Wholesale segment. Deliveries to Retail stores are made from our distribution centers by our trucks, third-party independent trucking companies or customer-owned trucks.
We offer Wholesale customers a wide variety of food and non-food products, including national and regional brands, and our own extensive lines of private label products. We also offer a broad array of professional services that provide Wholesale customers with cost-effective and scalable solutions. These services include pass-through programs in which vendors provide services directly to our Wholesale customers, as well as services and solutions we develop and provide directly. Our services include retail store support, advertising, couponing, e-commerce, network and data hosting solutions, training and certifications classes, and administrative back-office solutions. The sales and operating results for these services are included within Wholesale.
As a logistics provider, efficiency is an important customer service measure. We optimize our facilities to implement leading warehouse technology, ranging from radio-frequency devices guiding selectors to mechanized facilities with completely automated order selection for dry groceries that help us deliver aisle-ready pallets to Wholesale customers. Our Wholesale segment also focuses on improving our supply chain to achieve labor and cost efficiencies.
The acquisitions of Unified and AG Florida have expanded our national supply network and distribution center footprint, as represented in the following map, which indicates the locations of our distribution centers, related wholesale primary stores and our own retail stores:

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WHOLESALENETWORKMAPA03.JPG
(1)
The above map approximates the total number of Wholesale primary stores we supply, and excludes certain international locations that do not classify as Wholesale primary stores.
Retail
We conduct the continuing operations of our Retail segment through a total of 114 stores, as of February 24, 2018 , primarily organized under the three retail grocery banners of Cub Foods, Shoppers Food & Pharmacy, and Hornbacher’s. Our Retail stores provide an extensive grocery offering and, depending on size, a variety of additional products, including general merchandise, home, health and beauty care, and pharmacy. We offer national and regional brands as well as our own private label products. Depending on the banner, a typical Retail store carries approximately 16,000 to 21,000 core SKUs and ranges in size from approximately 50,000 to 70,000 square feet.
We believe our Retail banners have strong local and regional brand recognition in the markets in which they operate. Our Retail continuing operations are supplied by seven distribution centers that are part of the Wholesale segment providing wholesale distribution to both our own Retail stores and stores of Wholesale customers.
During the fourth quarter of fiscal 2018, we announced the exit of our Farm Fresh banner and that we are pursuing the sale of certain of our corporately owned and operated retail operations consisting of Shop ‘n Save in the St. Louis, Missouri area (“Shop ‘n Save”) and our Shop ‘n Save stores located in Maryland, Pennsylvania and West Virginia (“Shop ‘n Save East”). These retail assets have been classified as held for sale and the historical results of operations, financial position and cash flows directly attributable to these operations are reported within discontinued operations in our Consolidated Financial Statements for all periods presented. Throughout this Annual Report on Form 10-K references to the Retail segment exclude these retail assets that are held for sale.
Sale of Save-A-Lot
On December 5, 2016, we completed the sale of Save-A-Lot to SAL Acquisition Corp (f/k/a Smith Acquisition Corp), an affiliate of Onex Partners Managers LP, for a purchase price of approximately $1.3 billion in cash. The sale of Save-A-Lot was completed pursuant to the terms of the Agreement and Plan of Merger, dated as of October 16, 2016 (“SAL Merger Agreement”), by and among SAL Acquisition Corp, SAL Merger Sub Corp (f/k/a Smith Merger Sub Corp), a newly formed wholly owned subsidiary of the SAL Acquisition Corp, Supervalu and Moran Foods, LLC (“Moran Foods”), a wholly owned subsidiary of Supervalu prior to the sale. Concurrently with entering into the SAL Merger Agreement, Supervalu and Moran Foods also entered into a Separation Agreement (the “Separation Agreement”) pursuant to which, among other things, the assets and liabilities of the Save-A-Lot business were transferred to and assumed by Moran Foods prior to the completion of the sale. The assets, liabilities, operating results, and cash flows of the Save-A-Lot business are reported within discontinued operations in the Consolidated Financial Statements for all periods presented.

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Corporate
In connection with the sale of Save-A-Lot on December 5, 2016, Supervalu and Moran Foods entered into a Services Agreement, pursuant to which we provide certain technical, human resources, finance and other operational services to Save-A-Lot for a term of five years, on the terms and subject to the conditions set forth therein. The initial annual base charge under the Services Agreement is $30, subject to adjustments.
We provide back-office administrative support services under the transition services agreements (“TSA”) with New Albertson’s, Inc. (“NAI”) and Albertson’s LLC (“Albertson’s”) and also provide services as needed to transition and wind down the TSA with NAI and Albertson’s. We anticipate our services to NAI and Albertson’s and our revenue under the TSA will end in September 2018, subject to limited extensions of services at NAI’s and Albertson’s election.
Products
We offer a wide variety of nationally advertised brand name and private-label products, including grocery (both perishable and nonperishable), general merchandise, home, health and beauty care, and pharmacy, which are sold through our Wholesale segment to Wholesale customers and through Supervalu-operated Retail stores to shoppers. We believe that we have adequate and alternative sources of supply for most of our purchased products.
The following table provides additional detail on the amounts and percentages of Net sales for each group of similar products sold in the Wholesale and Retail segments, and service agreement revenue in Corporate:
 
2018 
 (52 weeks)
 
2017 
 (52 weeks)
 
2016 
 (52 weeks)
Wholesale:
 
 
 
 
 
 
 
 
 
 
 
Nonperishable grocery products (1)
$
7,634

 
54
%
 
$
5,579

 
52
%
 
$
5,753

 
51
%
Perishable grocery products (2)
3,241

 
23

 
1,969

 
18

 
2,025

 
18

Services to wholesale customers and other
179

 
1

 
157

 
1

 
157

 
1

 
11,054

 
78
%
 
7,705

 
71
%
 
7,935

 
70
%
Retail:
 
 
 
 
 
 
 
 
 
 
 
Nonperishable grocery products (1)
$
1,612

 
12
%
 
$
1,663

 
15
%
 
$
1,731

 
15
%
Perishable grocery products (2)
1,002

 
7

 
1,026

 
9

 
1,072

 
10

Pharmacy products
302

 
2

 
312

 
3

 
316

 
3

Other
27

 
—

 
27

 
—

 
26

 
—

 
2,943

 
21
%
 
3,028

 
27
%
 
3,145

 
28
%
Corporate:
 
 
 
 
 
 
 
 
 
 
 
Service agreement revenue (3)
$
160

 
1
%
 
$
179

 
2
%
 
$
203

 
2
%
Net sales
$
14,157

 
100
%
 
$
10,912

 
100
%
 
$
11,283

 
100
%
(1)
Includes such items as dry goods, dairy, frozen foods, beverages, general merchandise, home, health and beauty care and candy
(2)
Includes such items as meat, produce, deli and bakery
(3)
Includes revenue under the Services Agreement with Save-A-Lot and the TSA with NAI and Albertson’s
Private-Label Products
Our private-label products are produced to our specification by many suppliers and compete in most categories. Private-label products include: the premium brands CULINARY CIRCLE ® and STOCKMAN AND DAKOTA ® , which offer unique, premium quality products in highly competitive categories; WILD HARVEST ® , which is free from over 140 undesirable ingredients; core brands ESSENTIAL EVERYDAY ® , EQUALINE ® , SPRINGFIELD ® , and category-specific brands ARCTIC SHORES SEAFOOD COMPANY ® , BABY BASICS ® , FARM STAND ® , STONE RIDGE CREAMERY ® , GOLDEN CRÈME ® and SUPER CHILL ® , which provide shoppers quality national brand equivalent products at a competitive price; and the value brands SHOPPER’S VALUE ® and SPECIAL VALUE ® , which offer budget conscious consumers quality alternatives to national brands at substantial savings.

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Trademarks
We offer Wholesale customers the opportunity to franchise a concept or license a service mark. These programs help our Wholesale customers compete by providing, as part of the franchise or license program, a complete business concept, group advertising, private-label products and other benefits. We are the franchisor or licensor of certain banner store service marks such as CUB FOODS ® , FESTIVAL FOODS ® , SENTRY, COUNTY MARKET ® , NEWMARKET ® , FOODLAND ® , JUBILEE ® and SUPERVALU ® . Additionally, we added SPRINGFIELD, GOLDEN CRÈME and SPECIAL VALUE banner service marks through the acquisition of Unified. In conjunction with our licensing and franchise arrangements, we maintain wholesale distribution agreements with our licensees and franchisees, primarily under the CUB FOODS ® , FESTIVAL FOODS ® , SENTRY ® and RAINBOW FOODS ® banners.
We file a substantial number of our trademarks/service marks with the United States Patent and Trademark Office, including for many of our private-label product brands. U.S. trademark and service mark registrations are for a term of ten years, and renewable every ten years as long as the trademark or service mark is used in the regular course of trade. We consider certain of our trademarks and service marks to be of material importance to our Wholesale and Retail segments and actively defend and enforce such trademarks and service marks. Solely for convenience, our trademarks, service marks or tradenames may appear in this Annual Report on Form 10-K without the corresponding ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent, our rights to such trademarks, service marks and tradenames.
Working Capital
Normal operating fluctuations in working capital balances can result in changes to cash flow from operations presented in the Consolidated Statements of Cash Flows that are not necessarily indicative of long-term operating trends. Our working capital needs are generally greater during the months leading up to high sales periods, such as the time period from prior to Thanksgiving through December. We typically finance these working capital needs with funds provided by operating activities and short-term borrowings. Inventories are managed primarily through demand forecasting and replenishing depleted inventories. There are no unusual industry practices or requirements relating to working capital.
Seasonality and Reporting Periods
Overall product sales are fairly balanced throughout the year, although demand for certain products of a seasonal nature may be influenced by holidays, changes in seasons or other annual events. Our first quarter consists of 16 weeks, while all of our other quarters consist of 12 weeks, and all of our quarters typically include a major holiday.
Competition
Our Wholesale and Retail segments each operate in highly competitive environments.
Wholesale competes directly with a number of traditional and specialty grocery wholesalers and retailers that maintain or develop self-distribution systems. We compete in this business on the basis of price, quality, assortment, schedule and reliability of deliveries and services, service fees and distribution facility locations.
We believe that our success is dependent upon the ability of the stores of our Wholesale customers, as well as our own stores, to compete successfully. We also compete to attract and maintain licensed and franchised operators to operate stores to which we provide wholesale distribution and services. This competition generally takes the form of alternative investment formats, such as a potential or existing licensee’s investment in fast food restaurants, dollar stores, specialty supermarkets, drug stores and other potential investments.
Principal competition for our Retail segment, as well as for our Wholesale customers, comes from traditional grocery retailers, including regional and national chains and independent grocery store operators, and non-traditional retailers, such as supercenters, membership warehouse clubs, specialty supermarkets, hard discount stores, dollar stores, online retailers, convenience stores, drug stores and restaurants. Our ability to differentiate ourselves from our competitors and create an attractive value proposition for our customers is dependent upon a combination of price, quality, customer service, convenience, e-commerce offerings, assortment, in-stock levels, brand perception, store location and conditions, in-store marketing and merchandising and promotional strategies.
Recent and ongoing consolidation within the grocery industry has resulted in, and is expected to continue to result in, increased competition, including from some competitors that have greater financial, marketing and other resources than us.

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Employees
As of February 24, 2018 , we had approximately 31,000 employees. Of our 31,000 employees, 8,000 relate to our retail banners classified as held for sale in discontinued operations, of which approximately 3,000 employees were covered by seven collective bargaining agreements. Approximately 17,000 employees are covered by 63 collective bargaining agreements. During fiscal 2018 , 23 collective bargaining agreements covering approximately 5,800 employees were renegotiated. As of February 24, 2018 , four collective bargaining agreements covering approximately 600 employees had already expired without their terms being renegotiated. Negotiations are expected to continue with the bargaining units representing the employees subject to those expired agreements. During fiscal 2019 , 15 collective bargaining agreements covering approximately 5,000 employees are scheduled to expire. The majority of employees covered by these expiring collective bargaining agreements are located in the Midwestern regions. We are focused on having competitive cost structures in each geographic region in which we operate while meeting our employees’ needs for attractive wages and affordable healthcare and retirement benefits. We believe we have generally good relations with our employees and with the labor unions that represent employees covered by collective bargaining agreements.
Where You Can Find More Information
Our principal executive offices are located at 11840 Valley View Road, Eden Prairie, Minnesota 55344 (Telephone: 952-828-4000). We make available free of charge at our Internet website ( www.supervalu.com ) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”). Information on our website is not deemed to be incorporated by reference into this Annual Report on Form 10-K. Supervalu will also provide its SEC filings free of charge upon written request to Investor Relations, SUPERVALU INC., P.O. Box 990, Minneapolis, MN 55440.
EXECUTIVE OFFICERS OF SUPERVALU INC.
The following table provides certain information concerning the executive officers of Supervalu as of April 24, 2018 .
Name
 
Age
 
Present Position
 
Calendar Year Elected to Present Position
 
Other Positions Recently Held with Supervalu
Mark Gross (1)
 
55
 
President and Chief Executive Officer
 
2016
 

Rob N. Woseth (2)
 
47
 
Executive Vice President and Chief Financial Officer
 
2018
 
Executive Vice President, Chief Strategy Officer, 2013-2018; and Interim Chief Financial Officer, 2017-2018
Randy G. Burdick (3)
 
60
 
Executive Vice President, Chief Information Officer
 
2013
 

Anne M. Dament (4)
 
51
 
Executive Vice President, Retail, Marketing and Private Brands
 
2017
 
Senior Vice President Retail, Merchandising and Marketing, January 2017-October 2017
Stuart D. McFarland (5)
 
40
 
Senior Vice President, General Counsel and Corporate Secretary
 
2017
 
Vice President, Associate General Counsel and Assistant Corporate Secretary, 2014-2017; Director and Associate General Counsel, 2013-2014, Senior Attorney, 2012-2013; and Attorney 2010-2012
Michael C. Stigers (6)
 
59
 
Executive Vice President, Wholesale
 
2015
 
President of Cub Foods, 2014-2015; President, Northern and Western Region of Wholesale, 2013-2014; President of Shaw’s, 2011-2013
James W. Weidenheimer (7)
 
59
 
Executive Vice President, Corporate Development and Chief Innovation Officer
 
2016
 


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(1)
Mark Gross was appointed President and Chief Executive Officer in February 2016. Prior to joining Supervalu, from 2006 to 2016 Mr. Gross served as President of Surry Investment Advisors LLC, an advisory firm that he founded to provide consulting services to grocery distributors and retailers with respect to strategic and operational matters. From 1997 to 2006, Mr. Gross held various positions at C&S Wholesale Grocers, Inc., a wholesale grocery distributor (“C&S”), including serving as Co-President of C&S’s overall operations from 2005 to 2006. Additionally, during his tenure with C&S, Mr. Gross served as Chief Financial Officer, General Counsel, and President of its affiliated retail grocery operations.
(2)
Rob N. Woseth was appointed Executive Vice President and Chief Financial Officer in February 2018. He served as Executive Vice President, Chief Strategy Officer from March 2013 to February 2018 and as Interim Chief Financial Officer from July 2017 to February 2018. Prior to joining Supervalu, Mr. Woseth served as Vice President Business Development and Strategy at Albertson’s LLC, a grocery company, from 2006 to 2013.
(3)
Randy G. Burdick was appointed Executive Vice President, Chief Information Officer in March 2013. Prior to joining Supervalu, Mr. Burdick served as Executive Vice President and Chief Information Officer at OfficeMax, an office supplies retailer, from 2005-2013.
(4)
Anne M. Dament was appointed Executive Vice President, Retail, Marketing and Private Brands, in November 2017. She served as Senior Vice President, Retail, Merchandising and Marketing from January 2017 to November 2017. Prior to joining Supervalu, Ms. Dament served as Senior Vice President, Merchandising at Target Corporation, a general merchandise retailer, from April 2015 to November 2016. Ms. Dament previously served as Vice President, Merchandising Solutions, from January 2009 to September 2012 and as Vice President, Services from September 2012 to April 2015 at PetSmart, Inc., a specialty retailer of services and solutions for pets.
(5)
Stuart D. McFarland was appointed Senior Vice President, General Counsel and Corporate Secretary in November 2017. He served as Vice President, Associate General Counsel and Assistant Corporate Secretary from July 2014 to November 2017, Director and Associate General Counsel from August 2013 to July 2014, Senior Attorney from October 2012 to August 2013, and Attorney from August 2010 to October 2012. Prior to joining Supervalu, Mr. McFarland was an associate at the law firm of Gibson, Dunn & Crutcher LLP in Los Angeles.
(6)
Michael C. Stigers was appointed Executive Vice President, Wholesale in December 2015. He served as President of Cub Foods from December 2014 to December 2015, President, Northern and Western Region of Wholesale, from 2013 to 2014, and President of Shaw’s, a retail banner that we formerly owned, from 2011 to 2013. Prior to joining Supervalu, Mr. Stigers served as President of PW Supermarkets, Inc., an operator of retail grocery supermarkets, from 2006 to 2010 and as Chief Executive Officer in 2010. In April 2011, creditors filed a petition for involuntary bankruptcy against PW Supermarkets in U.S. Bankruptcy Court, Northern District of California to force PW Supermarkets into a Chapter 7 liquidation. The bankruptcy case was transferred to the Oakland Division in October 2014 and remains pending in that court.
(7)
James W. Weidenheimer was appointed Executive Vice President, Corporate Development and Chief Innovation Officer in April 2016. Prior to joining Supervalu, Mr. Weidenheimer served as Senior Vice President of Corporate Development for C&S from 2008 to 2016, where Mr. Weidenheimer oversaw significant M&A activity and led the development of procurement and distribution outsourcing plans. From 1998 to 2008, Mr. Weidenheimer had operating responsibility for finance, treasury, procurement, facilities, internal audit, quality assurance and inventory control at C&S.
The term of office of each executive officer is from one annual meeting of the Board of Directors until the next annual meeting of the Board of Directors or until a successor is elected. There are no family relationships between or among any of our executive officers.
ITEM 1A.    RISK FACTORS
Various risks and uncertainties may affect our business. Any of the risks described below or elsewhere in this Annual Report on Form 10-K or our other SEC filings may have a material impact on our business, financial condition or results of operations.
Strategic and Operational Risks
We face intense competition.
The grocery business is intensely competitive, and the recent and ongoing consolidation within the grocery industry is expected to result in increased competition, including from some competitors that have greater financial, marketing and other resources than we do. The grocery industry is characterized by relatively small operating margins, and as competition in certain areas intensifies and as the industry continues to consolidate, our results of operations may be negatively impacted through a loss of sales and reductions in gross margins. See “Business-Competition” for a discussion of the competitive environment.
If we are unable to appropriately respond to competition and execute on our initiatives to improve our competitive position or profitability, and differentiate our offerings, our sales, financial condition and results of operations may be adversely affected.

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We are transforming our business and have engaged, and may continue to engage in, acquisitions and divestitures and other strategic initiatives, and may encounter difficulties integrating acquired businesses or divesting businesses or assets and may not realize the anticipated benefits of our acquisitions and divestitures.
We have engaged in, and expect to continue to pursue, strategic transactions and initiatives as we transform our business. Acquisitions and dispositions present significant challenges and risks relating to the integration of acquired businesses and the separation of disposed businesses. The risks include: (i) our due diligence reviews may not identify all of the material issues; (ii) we may incur unanticipated costs or expenses; (iii) we may not be able to integrate acquisitions with our operations or separate divested businesses and related obligations from our operations as planned; and (iv) we may not be able to realize anticipated reductions in costs attributable to divested businesses or assets. In addition, we may not realize the degree or timing of benefits or synergies we anticipate when we first enter into a transaction. There can be no assurances that we will manage acquisitions and dispositions or other strategic initiatives successfully, that strategic opportunities will be available to us on acceptable terms or at all, or that we will be able to consummate desired transactions. Any of the foregoing could materially adversely affect our competitive position, financial condition, results of operations or cash flows.
On June 23, 2017, we acquired Unified, a retailer-owned cooperative focused on wholesale grocery and specialty distribution on the West Coast of the United States. On December 8, 2017, we acquired AG Florida, a retailer-owned cooperative that distributes full lines of grocery and general merchandise to independent retailers, located primarily in South Florida, the Caribbean, Central and South America and Asia. The process of integrating both Unified and AG Florida may be disruptive to our business operations and may distract our management team from their day-to-day responsibilities. There can also be no assurance that we will be able to successfully integrate Unified and AG Florida to achieve the operational efficiencies, including synergistic and other benefits of the acquisitions, to expand Unified’s Market Centre division across the country or to effectively retain key employees and maintain and grow customer relationships.
On March 14, 2018, we announced our plan to exit our Farm Fresh banner and that we had entered into agreements to sell 21 of our 38 Farm Fresh stores. On April 24, 2018, we announced we are pursuing the sale of certain of our corporately owned and operated retail operations of Shop ‘n Save and Shop ‘n Save East. There can also be no assurance that we will be able to: (i) identify buyers for any or all of the remaining Farm Fresh stores on favorable terms or at all; (ii) consummate any strategic transactions for the Shop ’n Save and Shop ‘n Save East banners held for sale and now reported within discontinued operations; (iii) effectively retain employees and continue to conduct business at these stores; and (iv) effectively reduce liabilities and stranded costs associated with discontinued operations, including any surplus property and management of remaining obligations under real estate leases.
On April 24, 2018, we announced agreements for a sale leaseback transaction for eight of our distribution centers, totaling approximately six million square feet with expected gross proceeds of approximately $483 before costs and taxes. The transactions are subject to customary closing conditions and there can be no assurance that we will not need to modify the terms of the transactions or that the transactions will close on a timely basis or at all.
Our Wholesale distribution business could be adversely affected if we are not able to affiliate new customers, increase sales to existing customers or retain existing customers, or if our Wholesale customers fail to perform.
The profitability of our Wholesale segment is dependent upon sufficient volume to support our operating infrastructure, which is dependent on our ability to attract new customers, increase sales to existing customers and retain existing customers. The inability to attract new customers or the loss of existing customers to a competing wholesaler or due to closure, vertical integration by an existing customer converting to self-distribution, or industry consolidation may negatively impact our sales and operating margins.
Our success also relies in part on the financial success and cooperation of our Wholesale customers. These Wholesale customers manage their businesses independently and, therefore, are responsible for the day-to-day operation of their stores. They may not experience an acceptable level of sales or profitability, and our revenues and gross margins could be negatively affected as a result. We may also need to extend credit to our Wholesale customers, including through loans, market support or guarantees, and while we seek to obtain security interests and other credit support in connection with the financial accommodations we extend, such collateral may not be sufficient to cover our exposure. If sales trends or profitability worsen for Wholesale customers, their financial results may deteriorate, which could result in, among other things, lost business for us, delayed or reduced payments to us or defaults on payments or other liabilities owed by Wholesale customers to us, any of which could adversely impact our financial condition and results of operations, as well as our ability to grow our Wholesale business. In this regard, our Wholesale customers are affected by the same economic conditions, including food inflation and deflation, and competition that our Retail segment faces. The magnitude of these risks increases as the size of our Wholesale customers increases.

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Our inability to maintain or increase our operating margins could adversely affect our results of operations and the price of our stock.
As competition increases, the grocery industry consolidates and we attempt to affiliate larger Wholesale customers, we expect to continue to face pressure on our operating margins. If we are not able to continue to capture scale efficiencies and enhance our merchandise offerings, if we are not able to achieve our targeted synergies for our acquisitions of Unified and AG Florida or if we are not able to reduce our costs as we divest certain of our retail operations, we may not be able to achieve our goals with respect to operating margins. In addition, if we do not refine and improve our systems continually or if we are unable to effectively improve our systems without disruption including any migration to a cloud environment, we may not be able to reduce costs, increase sales and services, effectively manage inventory and procurement processes or effectively manage customer pricing plans. As a result, our operating margins may stagnate or decline, which could adversely affect the price of our stock.
Failure to affiliate new customers and retain existing customers for our professional services, or the failure to perform the services as required, could adversely impact our results of operations.
We provide numerous services to our Wholesale customers to support the operation of their businesses and stores. We have been working to leverage our experience, infrastructure and investments to engage new customers and expand the scope of services received by existing customers. If we are unable to successfully implement this strategy, including differentiating the quality and breadth of our services to customers, in a highly competitive and consolidating environment, or if we are unable to perform the services up to the customers’ expectations, our results of operations could be adversely impacted.
We have significant service relationships with Albertson’s, NAI and Save-A-Lot, and the wind-down of our relationships with Albertson’s and NAI (and any future wind down of Save-A-Lot) could adversely impact our results of operations.
We have provided significant support services to New Albertson’s, Inc. (“NAI”) and Albertson’s LLC (“Albertson’s”) since 2006 and to Save-A-Lot since we divested it in December 2016. We expect our services to NAI and Albertson’s will end in September 2018, subject to limited extensions of services at NAI’s and Albertson’s election. We will lose a significant amount of revenue and corresponding operating earnings as a result of this wind down. We have been executing on our plan to reduce costs, grow our sales and enhance our margins over the past several years, but we do not believe that we will be able to grow sales quickly enough, further eliminate costs or enhance margins to fully mitigate the lost revenue as the TSA unwinds. Failure to execute on our services offering and growth strategy, including making the necessary capital investments for that growth while managing additional cost reductions, could further adversely impact our results of operations. We are working closely with NAI and Albertson’s on the wind down but the execution of the wind down is dependent on NAI and Albertson’s.
We are also expecting in fiscal 2019 to exit the distribution center that we share with NAI and Albertson’s in Lancaster, PA. Our results of operations could be adversely impacted if we are not able to transition to our new distribution center in Harrisburg, PA in the manner and timeline anticipated.
Our large professional services agreements, including our agreement with Save-A-Lot, provide certain rights for the customers. The services agreement will typically include a fixed term but provide the customer certain termination rights, including in the event of our material breach, and may give the customer certain termination and monetary rights with respect to specified services or service categories in the event we do not perform to agreed-upon minimum levels of service. The services agreement will also generally require us to indemnify the customer against third-party claims arising out of the performance of the services under the agreement. Termination of services agreements, in whole or in part, and in particular the services agreement with Save-A-Lot and the wind-down of the services agreement with NAI and Albertson’s, could adversely affect our business or results of operations.
We may not be able to grow or maintain our levels of identical store sales.
We have experienced negative identical store sales in our Retail operations in certain recent periods. A variety of factors affect identical store sales and profitability, including in-store performance, consumer tastes, competition, current economic conditions, pricing, deflation or inflation, and weather conditions, and many of these factors are beyond our control and can be difficult to predict in advance. If our identical store sales continue to decline or fail to meet market expectations, our results of operations could be adversely affected and the price of our stock could decline.
Our indebtedness could decrease our financial and operational flexibility and our borrowing costs could increase.
Our credit facilities contain covenants that limit our ability to acquire assets, dispose of assets and use the proceeds thereof, create liens on property, incur or prepay indebtedness and pay dividends or repurchase stock, among other things and subject to certain exceptions. These covenants may affect our operating and financial flexibility and may require us to seek the consent of

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the lenders for certain transactions that we may wish to effect. There can be no assurances that we would be able to obtain such consent on favorable terms or at all. There can also be no assurances that we will be able to refinance our existing indebtedness on similar terms. Tightening of credit, reduced liquidity or volatility in the capital markets could result in diminished availability of credit and higher costs of borrowing, making it more difficult for us to obtain or amend debt financing on favorable terms. Additionally, if we fail to comply with any of our covenants or other restrictions, the related indebtedness (and other unrelated indebtedness) could become due and payable prior to its stated maturity and we may not be able to repay the indebtedness that becomes due. A default under our debt instruments may also significantly affect our ability to obtain additional or alternative financing. A significant portion of our debt portfolio has a variable interest rate component. Volatility in interest rates causes volatility in interest expense, potentially resulting in an adverse impact to earnings.
Increases in healthcare, pension and other costs under Supervalu’s and multiemployer benefit plans, or failure to maintain satisfactory labor relations, could adversely affect our financial condition and results of operations.
We provide health, defined benefit pension, defined contribution and other postretirement benefits to many of our employees and the costs of such benefits continue to increase. The amount of any increase depends on a number of different factors, many of which are beyond our control. These factors include governmental regulations such as The Patient Protection and Affordable Care Act, which has resulted in changes to the U.S. healthcare system and imposes mandatory types of coverage, reporting and other requirements; return on assets held in plans; changes in actuarial valuations, estimates, assumptions or calculations used to determine our benefit obligations for certain benefit plans, which require the use of significant estimates, including the discount rate, expected long-term rate of return on plan assets, mortality rates and the rates of increase in compensation and healthcare costs; for multiemployer plans, the outcome of collective bargaining and actions taken by trustees who manage the plans; and potential changes to applicable legislation or regulation. If we are unable to control these benefits and costs, we may experience increased operating costs, which may adversely affect our financial condition and results of operations.
Additionally, Company-sponsored plans and multiemployer pension plans are underfunded with the projected benefit obligations exceeding the fair value of those plans’ assets. Withdrawal liabilities from multiemployer plans could be material, and potential exposure to withdrawal liabilities could cause us to forgo or negatively impact our ability to enter into other business opportunities. Some of these plans have required rehabilitation plans or funding improvement plans, and we can give no assurances of the extent to which a rehabilitation plan or a funding improvement plan will improve the funded status of the plan. We expect that increases of unfunded liabilities of these plans would result in increased future payments by us and the other participating employers over the next few years. A significant increase to funding requirements could adversely affect our financial condition, results of operations or cash flows. The financial condition of these pension plans may also negatively impact our debt ratings, which may increase the cost of borrowing or adversely affect our ability to access one or more financial markets.
We are party to collective bargaining agreements that impose certain work rules and other restrictions on us that limit our flexibility in managing our business, cost structure and business strategies. See “Business-Employees” for information about the collective bargaining agreements. There can be no assurance that we will be able to negotiate the terms of expiring or expired agreements in a manner acceptable to us. Therefore, potential increases in operating costs, reduced operational flexibility or work disruptions from labor disputes, strikes or picketing could disrupt our businesses and adversely affect our financial condition and results of operations. Certain of our operations have employees who are non-union, and while we believe our employee relations are strong, there can be no assurance that these operations will not experience pressure from labor unions or become the target of campaigns to unionize.
Our success depends in part on the retention of our executive officers and key management, and our ability to hire and retain key personnel.
Our success depends on the experience, performance and skills of our executive officers, senior management and other key employees. Competition for skilled and experienced personnel is intense, and our future success will also depend on our ability to attract, incentivize and retain qualified personnel. Failure to attract, appropriately incentivize and retain qualified personnel could have an adverse effect on our operations. There can be no assurance that our executive succession planning, retention or hiring efforts will be successful.
Disruptions to our or third-party information technology systems, including cyber-attacks and security breaches, and the costs of maintaining secure and effective information technology systems could negatively affect our business and results of operations.
The efficient operation of our businesses is highly dependent on computer hardware and software systems, including customized information technology systems. Additionally, our businesses increasingly involve the receipt, storage and transmission of sensitive data, including personal information about our customers and employees and our proprietary business

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information, customers and vendors. We also share information with vendors. Information systems are vulnerable to not functioning as designed and to disruptions and security breaches by computer hackers and cyber terrorists.
In fiscal 2015, we experienced separate criminal intrusions into the portion of our computer network that processes payment card transactions for some of our owned and franchised retail food stores, including some of the associated stand-alone liquor stores. We have incurred and expect to incur costs and expenses related to these intrusions, and may also be adversely affected by claims from customers, financial institutions, payment card brands, Albertson’s and NAI for stores owned and operated by them that experienced related criminal intrusions, stockholders and others and by costly inquiries or enforcement actions on the part of regulatory authorities.
Although we continue to take actions to strengthen the security of our information technology systems, these measures and technology may not adequately anticipate or prevent security breaches in the future or we may not be able to timely implement these measures and technology. Cyber-attacks are rapidly evolving and becoming increasingly sophisticated and difficult to detect. The failure to promptly detect, determine the extent of and appropriately respond to and contain a significant data security attack or breach of our systems or any third-party systems used by us could have a material adverse impact on our business, financial condition and results of operations. We could also lose credibility with our customers and suffer damage to our reputation and future sales, including through negative publicity and social media. In addition, the unavailability of the information systems or failure of these systems or software to perform as anticipated for any reason and any inability to respond to, or recover from, such an event, could disrupt our business, impact our customers and could result in decreased performance, increased overhead costs and increased risk for liability, causing our business and results of operations to suffer.
As a merchant that accepts debit and credit cards for payment, we are subject to the Payment Card Industry Data Security Standard (“PCI DSS”), issued by the PCI Council. Additionally, we are subject to PCI DSS as a service provider, which is a business entity that is not a payment brand directly involved in the processing, storage or transmission of cardholder data. PCI DSS contains compliance guidelines and standards with regard to our security surrounding the physical and electronic storage, processing and transmission of individual cardholder data. By accepting debit cards for payment, we are also subject to compliance with American National Standards Institute data encryption standards and payment network security operating guidelines. The cost of complying with stricter privacy and information security laws, standards and guidelines, including evolving PCI DSS standards, and developing, maintaining and upgrading technology systems to address future advances in technology, could be significant and we could experience problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems. Failure to comply with such laws, standards and guidelines, or payment card industry standards such as accepting Europay, MasterCard and Visa (EMV) transactions, could have a material adverse impact on our business, financial condition and results of operations.
Changes in the military commissary system or decreases in governmental funding could negatively impact the sales and operating performance of our military business.
Our Wholesale segment sells and distributes grocery products to military commissaries and exchanges in the United States. The commissary system has experienced material changes as the Defense Commissary Agency has looked to reduce the level of governmental funding required for the system, including to lower prices from suppliers and to offer its own private-label products. The military food distribution industry already has narrow operating margins making economies of scale critical for distributors. These changes could have an adverse impact on the sales and operating performance of our military business. Additionally, our military business faces competition from large national and regional food distributors, as well as smaller food distributors, and the military commissaries and exchanges face competition from low-cost retailers.
Our insurance and self-insurance programs may not be adequate to cover future claims.
We use a combination of insurance and self-insurance to provide for potential liabilities for workers’ compensation, automobile and general liability, director and officer liability, property risk, cyber and privacy risks and employee healthcare benefits. We estimate the liabilities and required reserves associated with the risks we retain. Any such estimates and actuarial projection of losses is subject to a degree of variability. Among the causes of this variability are changes in benefit levels, medical fee schedules, medical utilization guidelines, vocation rehabilitation and apportionment and unpredictable external factors affecting inflation rates, discount rates, rising healthcare costs, litigation trends, legal interpretations, benefit level changes and actual claim settlement patterns. If the number or severity of claims for which we are self-insured increases, or we are required to accrue or pay additional amounts because the claims prove to be more severe than our original assessments, our financial condition and results of operations may be adversely affected.

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Impairment charges for long-lived assets or goodwill may adversely affect our financial condition and results of operations.
We monitor the recoverability of our long-lived assets, such as buildings and equipment, and evaluate their carrying value for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. We annually review goodwill to determine if impairment has occurred. Additionally, interim reviews are performed whenever events or changes in circumstances indicate that impairment may have occurred. If the testing performed indicates that impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the long-lived assets or goodwill and the fair value of long-lived assets and the implied fair value of the goodwill, respectively, in the period the determination is made. The testing of long-lived assets and goodwill for impairment requires us to make estimates that are subject to significant assumptions about our future revenue, profitability, cash flows, fair value of assets and liabilities, weighted average cost of capital, as well as other assumptions. Changes in these estimates, or changes in actual performance compared with these estimates, may affect the fair value of long-lived assets or goodwill, which may result in an impairment charge.
We cannot accurately predict the amount or timing of any impairment of assets. Should the value of long-lived assets or goodwill become impaired, our financial condition and results of operations may be adversely affected.
A potential proxy contest for the election of directors at our annual meeting could result in potential operational disruption, divert our resources and management’s attention and have an adverse effect on our business.
On March 20, 2018, Blackwells Capital LLC nominated six candidates for election to our Board of Directors at our 2018 annual meeting of stockholders. A contested election could require us to incur substantial legal and public relations fees and proxy solicitation expenses and divert management’s attention, and could result in potential operational disruption. Further, any perceived uncertainties as to our future direction and control could result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified employees and customers, any of which could adversely affect our business and operating results. Any perceived uncertainties could also adversely affect the price and volatility of our stock.
Our stock price is subject to market and other conditions and may be volatile.
The market price of our common stock may fluctuate significantly in response to a number of factors. These factors, some of which may be beyond our control, include the perceived prospects and actual operating results of our business; changes in estimates of our operating results by us, our analysts or investors; trading activity by our large stockholders; trading activity by sophisticated algorithms (high-frequency trading); our actual operating results relative to such estimates or expectations; actions or announcements by us or our competitors; litigation and judicial decisions; legislative or regulatory actions; and changes in general economic or market conditions. In addition, the stock market in general has from time to time experienced extreme price and volume fluctuations. These market fluctuations could reduce the market price of our common stock for reasons unrelated to our operating performance.
Economic Risks
Changes in commodity prices, including due to deflation or inflation, or worsening economic conditions could adversely impact our financial condition and operating results.
Prices for the commodities and supplies that we purchase can be volatile. We have recently experienced both deflation and inflation in commodities that we purchase for resale. Decreases in these input costs cause us to lower our prices and thereby reduce our revenues and gross margins. Continued deflation could adversely affect our operating results. Additionally, our operations are dependent on the availability of energy and fuel to store and transport products. While we have entered into contracts to purchase fuel, electricity and natural gas at fixed prices to satisfy a portion of our expected needs, an increase in these costs could adversely affect our results of operations. We have also invested in semitrailer trucks powered by compressed natural gas, which are subject to risks of defects, malfunctions and other damages.
The vast majority of our operations and customers are located in the United States, making our results highly dependent on U.S. economic conditions, including consumer confidence and spending habits. Further, a significant portion of our total sales for our Retail continuing operations is derived from stores located in Minnesota, North Dakota and the Washington D.C./Baltimore markets, resulting in further dependence on local economic conditions in these states. There can be no assurance that we will be able to identify and respond effectively to changing economic conditions and trends. Additionally, these economic conditions can increase our cost of sales and selling, general and administrative expenses, and otherwise adversely affect our results of operations.

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Severe weather and natural disasters may harm our business.
Severe weather conditions and natural disasters in areas in which we or our customers operate or from which we obtain products may adversely affect our financial condition and results of operations, including as a result of physical damage to our properties, closure of one or more of our or our customers’ stores, offices or distribution facilities, lack of an adequate work force in a market, temporary disruption in the supply of products, disruption in the transport of goods, delays in the delivery of goods to distribution centers or stores, a reduction in customer volume and a reduction in the availability of products. In addition, adverse climate conditions and adverse weather patterns, such as drought or flood, that impact growing conditions and the quantity and quality of crops yielded by food producers may adversely affect the availability or cost of certain products within the grocery supply chain.
Disruption to our supply chain and distribution network could have an adverse impact on our sales and results of operations.
Our sales and operating results could be adversely impacted if we are not able to provide goods and services in a timely and cost-effective manner. Factors that may disrupt our ability to maintain an uninterrupted supply chain and distribution network include adverse climate conditions, product recalls, crop conditions, availability of key commodities, regulatory actions, disruptions in technology, political or financial instability of suppliers, performance by outsourced service providers, transportation interruptions, labor supply or stoppages or vendor defaults or disputes, as well as other risk factors mentioned herein, any of which could also have an adverse effect on our sales and operating results.
Legal and Regulatory Risks
Our businesses are subject to laws and governmental regulations that could adversely impact our financial condition and results of operations.
Our businesses are subject to various federal, state and local laws, regulations and administrative practices that require us to comply with numerous provisions regulating areas such as environmental, health and sanitation standards, food safety, marketing of natural or organically produced food, facilities, pharmacies, equal employment opportunity, public accessibility, employee benefits, wages and hours worked and licensing for the sale of food, drugs, tobacco and alcoholic beverages, among others. For example:
Environmental, Health and Safety : Our operations are subject to extensive and increasingly stringent laws and regulations pertaining to the protection of the environment, including those relating to the discharge of materials into the environment, the disposal of food by-products, the handling, treatment and disposal of wastes, maintenance of refrigeration systems and remediation of soil and groundwater contamination. Compliance with existing or changing environmental and safety requirements, including more stringent limitations imposed or expected to be imposed in recently renewed or soon-to-be renewed environmental permits, may require capital expenditures.
Food Safety : There is increasing governmental scrutiny, regulations and public awareness regarding food quality and food and drug safety. We may be adversely affected if consumers lose confidence in the safety and quality of our food and drug products. Any events that give rise to actual or potential food contamination, drug contamination or food-borne illness or injury, or events that give rise to claims that our products are not of the quality or composition claimed to be, may result in product liability claims from individuals, consumers and governmental agencies, penalties and enforcement actions from government agencies, a loss of consumer confidence, harm to our reputation and could cause production and delivery disruptions, which may adversely affect our financial condition and results of operations. It may be necessary for us to recall unsafe, contaminated or defective products or we may recall products that we determine do not satisfy our quality standards. Recall costs and product liability claims can be material. While we generally seek contractual indemnification and insurance coverage from our suppliers, we might not be able to recover these significant costs from our suppliers.
Pharmacy : We are required to meet various security and operating standards and comply with the Controlled Substances Act and its accompanying regulations governing the sale, marketing, packaging, holding, record keeping and distribution of controlled substances. During the past several years, the United States healthcare industry has been subject to an increase in governmental regulation and audits at both the federal and state levels. For example, see Note 16-Commitments, Contingencies and Off-Balance Sheet Arrangements in Part II, Item 8 of this Annual Report on Form 10-K under the caption “Legal Proceedings” for a discussion of the administrative subpoena issued to us by the DEA requesting, among other things, information on our pharmacy policies and procedures generally, as well as the production of documents that are required to be kept and maintained by us pursuant to the Controlled Substances Act and its implementing regulations. Additionally, the Patient Protection and Affordable Care Act made several significant changes to Medicaid rebates and to reimbursement. One of these changes was to revise the definition of the Average Manufacturer Price, a pricing element common to most payment formulas, and the reimbursement formula for multi-source (i.e., generic) drugs. This change will affect our reimbursement. In addition,

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the Patient Protection and Affordable Care Act made other changes that affect the coverage and plan designs that are or will be provided by many of our health plan clients, including the requirement for health insurers to meet a minimum medical loss ratio to avoid having to pay rebates to enrollees. These Patient Protection and Affordable Care Act changes may not affect our business directly, but they could indirectly impact our services and/or business practices.
Wage Rates and Paid Leave : Changes in federal or state minimum wage and overtime laws or employee paid leave laws could cause us to incur additional wage costs, which could adversely affect our operating margins.
Foreign Operations : Our supplier base includes domestic and foreign suppliers. In addition, we have customers located outside the United States and the acquisition of AG Florida expands our Wholesale business to additional international customers. Accordingly, political or financial instability in these foreign countries, changes in U.S. and foreign relationships, laws and regulations affecting the importation and taxation of goods, including duties, tariffs and quotas, or changes in the enforcement of those laws and regulations could adversely impact our financial condition and results of operations. In addition, we are required to comply with laws and regulations governing export controls, and ethical, anti-bribery and similar business practices such as the Foreign Corrupt Practices Act. Additionally, foreign currency exchange rates and fluctuations may have an effect on our future costs or on future cash flows from our foreign operations, and could adversely affect our financial condition and results of operations.
Failure to comply with government laws and regulations or make capital expenditures required to maintain compliance with governmental laws and regulations may adversely impact our business operations and prospects for future growth and our ability to participate in federal and state healthcare programs and may also result in monetary liabilities, claims, fines, penalties or other sanctions and may adversely affect our business, financial condition and operating results. We cannot predict the nature of future laws, regulations, interpretations or applications, nor can we determine the effect that additional governmental regulations or administrative orders, when and if promulgated, or disparate federal, state and local regulatory schemes would have on our future business.
Our businesses may become subject to legal proceedings that may adversely affect our financial condition and results of operations.
Our businesses are subject to the risk of legal proceedings by employees, unions, consumers, customers, suppliers, stockholders, debt holders, governmental agencies or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation or proceeding. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend future litigation may be significant. There may also be adverse publicity associated with litigation that may decrease consumer confidence in our businesses, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may adversely affect our financial condition and results of operations. See also “Item 3 Legal Proceedings” below.
Efforts to reduce pharmacy reimbursement levels and alter healthcare financing practices may adversely affect our results of operations.
The continued efforts of health maintenance organizations, managed care organizations, pharmacy benefit managers, government entities and other third-party payors to reduce prescription drug costs and pharmacy reimbursement rates may impact our profitability. The increase in preferred pharmacy networks has also had a negative impact on pharmacy reimbursement rates. Preferred pharmacy networks have lower reimbursements rates and associated performance fees that drive down profitability. Any inability to offset increased costs or to modify our activities to lessen the impact could have an adverse effect on our results of operations.

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Changes in tax laws and resulting regulations could result in changes to our tax provisions or benefits and subject us to additional tax liabilities or reduce the value of our tax attributes, which in either case could materially adversely affect our financial condition.
We are subject to income and other taxes. Changes in applicable tax laws and regulations, such as the December 2017 enactment of Federal legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”), or their interpretation and application, including the possibility of retroactive effect and changes to state tax laws that may occur in response to the Tax Act, could affect our tax expense and profitability. In addition, the final determination of any tax audits or related litigation could be materially different from our historical income tax provision and accruals. Changes in our tax provision or benefit or an increase in our tax liability, whether due to changes in applicable laws and regulation, the interpretation or application thereof, or a final determination of tax audits or litigation, could materially adversely affect our financial performance.
We may be unable to adequately protect our intellectual property rights, which could harm our business.
We rely on a combination of trademark, service mark trade secret, copyright and domain name law and internal procedures and nondisclosure agreements to protect our intellectual property. We believe our trademarks, private-label products and domain names are valuable assets. However, our intellectual property rights may not be sufficient to distinguish our products and services from those of our competitors and to provide us with a competitive advantage. From time to time, third parties may use names, logos and slogans similar to ours, may apply to register trademarks or domain names similar to ours, and may infringe or otherwise violate our intellectual property rights. Our intellectual property rights may not be successfully asserted against such third parties or may be invalidated, circumvented or challenged. Asserting or defending our intellectual property rights could be time consuming and costly and could distract management’s attention and resources. If we are unable to prevent our competitors from using names, logos, slogans and domain names similar to ours, consumer confusion could result, the perception of our brands and products could be negatively affected, and our sales and profitability could suffer as a result. In addition, if our Wholesale customers receive negative publicity or fail to maintain the quality of the goods and services used in connection with our trademarks, our rights to, and the value of, our trademarks could potentially be harmed. Failure to protect our proprietary information could also have an adverse effect on our business.
We may also be subject to claims that our activities or the products we sell infringe, misappropriate or otherwise violate the intellectual property rights of others. Any such claims can be time consuming and costly to defend and may distract management’s attention and resources, even if the claims are without merit, and may prevent us from using our trademarks in certain geographies or in connection with certain products and services, any of which could adversely affect our business.
ITEM 1B.    UNRESOLVED STAFF COMMENTS
None.
ITEM 2.    PROPERTIES
Our properties are in good condition, well maintained and suitable to carry on our business. Substantially all of our owned and ground-leased real estate is subject to mortgages to secure our credit facilities. Additional information on our properties can be found in Part I, Item 1 of this Annual Report on Form 10-K.
Distribution Centers
We operate and manage our distribution centers by geographic region. The following table is a summary of our distribution centers as of February 24, 2018 .

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Distribution Center
 
Wholesale Region
 
Owned Square Footage (Approximate in thousands)
 
Leased Square Footage (Approximate in thousands)
 
Total Square Footage (Approximate in thousands)
Hopkins, MN
 
Central
 
1,847

 
—

 
1,847

Lancaster, PA (1)
 
East
 
—

 
—

 
1,559

Stockton, CA (2)(5)
 
West
 
990

 
312

 
1,302

Mechanicsville, VA
 
East
 
1,192

 
—

 
1,192

Seattle, WA (2)
 
West
 
—

 
960

 
960

Joliet, IL (5)
 
Central
 
949

 
—

 
949

Tacoma, WA
 
West
 
683

 
261

 
944

Milwaukie, OR (2)
 
West
 
923

 
—

 
923

Champaign, IL (5)
 
Central
 
893

 
—

 
893

Green Bay, WI (5)
 
Central
 
444

 
448

 
892

Fort Wayne, IN
 
Central
 
856

 
—

 
856

Commerce, CA (2)(5)
 
West
 
694

 
130

 
824

Quincy, FL
 
East
 
787

 
—

 
787

Pompano Beach, FL (3)(5)
 
East
 
779

 
—

 
779

Pittsburgh, PA
 
East
 
771

 
—

 
771

Harrisburg, PA (5)
 
East
 
754

 
—

 
754

Ocala, FL (3)
 
East
 
673

 
—

 
673

Anniston, AL
 
East
 
456

 
105

 
561

Indianola, MS
 
East
 
540

 
—

 
540

Stevens Point, WI
 
Central
 
431

 
—

 
431

Carlisle, PA
 
East
 
—

 
422

 
422

Fargo, ND
 
Central
 
324

 
—

 
324

Oglesby, IL (5)
 
Central
 
321

 
—

 
321

Santa Fe Springs, CA (2)
 
West
 
295

 
—

 
295

Billings, MT
 
Central
 
239

 
—

 
239

Anniston, AL
 
East
 
231

 
—

 
231

Bismarck, ND
 
Central
 
210

 
—

 
210

West Newell, IL
 
Central
 
174

 
—

 
174

Total continuing operations
 
 
 
16,456

 
2,638

 
20,653

St. Louis, MO (4)
 
n/a
 
547

 
—

 
547

Total
 
 
 
17,003

 
2,638

 
21,200

(1)
The Lancaster, PA distribution center is currently operated by Supervalu and the land and buildings are owned by NAI. We intend to transfer the operations (including equipment, inventory and employees) of Lancaster to our recently acquired distribution center located in Harrisburg, PA.
(2)
Property acquired through the Unified acquisition.
(3)
Property acquired through the AG Florida acquisition.
(4)
The St. Louis, MO distribution center is dedicated to providing products to our corporately owned and operated Shop ‘n Save retail stores. The distribution center and stores are now classified as held for sale and are reported as discontinued operations in the Consolidated Financial Statements.
(5)
On April 23, 2018, we entered into a series of agreements relating to the sale-leaseback of these distribution centers.

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Retail Stores
Retail operates and manages its properties by retail banner. The following table summarizes retail stores under each banner as of February 24, 2018 :
Retail Banner
 
Number of Stores
 
Primary Geographic Market Area
 
Owned Square Footage (Approximate in thousands)
 
Leased Square Footage (Approximate in thousands)
 
Total Square Footage (Approximate in thousands)
Cub Foods (1)
 
53

 
Minneapolis / St. Paul, Minnesota
 
1,108

 
2,461

 
3,569

Shoppers
 
52

 
Washington D.C. / Baltimore, Maryland
 
—

 
2,970

 
2,970

Hornbacher’s
 
8

 
Fargo, North Dakota
 
168

 
242

 
410

Rainbow (2)
 
1

 
Minneapolis / St. Paul, Minnesota
 
—

 
57

 
57

Total continuing operations
 
114

 
 
 
1,276

 
5,730

 
7,006

Shop ’n Save (3)
 
38

 
St. Louis, Missouri
 
371

 
1,774

 
2,145

Farm Fresh (3)
 
38

 
Virginia Beach, Virginia
 
56

 
1,823

 
1,879

Shop ’n Save East (3)
 
22

 
West Virginia, Maryland, Pennsylvania and Virginia
 
122

 
626

 
748

Total
 
212

 
 
 
1,825

 
9,953

 
11,778

(1)
Cub Foods stores include stores in which we have a controlling ownership interest, and excludes 27 franchised Cub Foods stores in which we have a minority interest or no interest.
(2)
Rainbow store count excludes one licensed Rainbow store.
(3)
These retail banners have been classified as held for sale and are reported within discontinued operations in the Consolidated Financial Statements.
Corporate
We had approximately 2 million building square feet of surplus retail stores and warehouses, 88 percent of which was leased, and approximately 2 million of owned vacant land as of February 24, 2018 .
We own approximately 345 thousand building square feet related to our principal executive offices in Eden Prairie, Minnesota and other facilities, and lease approximately 435 thousand building square feet related to other administrative offices.
In addition to our principal executive offices, we maintain a store support center in Boise, Idaho (which is owned by NAI and leased to us, but at which certain of our employees provide services to NAI and Albertson’s).
ITEM 3.    LEGAL PROCEEDINGS
We are subject to various lawsuits, claims and other legal matters that arise in the ordinary course of conducting business. In the opinion of management, based upon currently available facts, the likelihood that the ultimate outcome of any lawsuits, claims and other proceedings will have a material adverse effect on the overall results of our operations, cash flows or financial position is remote. See Note 16—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part II, Item 8 of this Annual Report on Form 10-K under the caption “Legal Proceedings” for a discussion of certain of our legal proceedings.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.    MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the New York Stock Exchange under the symbol SVU. As of April 20, 2018 , there were 9,215 stockholders of record.

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Common Stock Price
 
 
Common Stock Price Range (1)
 
 
2018
 
2017
Fiscal
 
High
 
Low
 
High
 
Low
First Quarter
 
$
31.29

 
$
20.51

 
$
43.19

 
$
30.87

Second Quarter
 
26.51

 
19.16

 
40.18

 
28.98

Third Quarter
 
22.36

 
14.55

 
38.43

 
28.56

Fourth Quarter
 
22.17

 
13.60

 
35.91

 
25.48

Year
 
$
31.29

 
$
13.60

 
$
43.19

 
$
25.48

(1)
Certain share prices have been restated to give effect to the 1-for-7 reverse stock split effective on August 1, 2017. Refer to Note 12—Net Earnings (Loss) Per Share in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding the reverse stock split.
Common Stock Dividends
We did not declare any dividends in fiscal 2018 or fiscal 2017 and have no current intent to pay dividends. We are limited in the aggregate amount of dividends that we may pay under the terms of our term loan facility (the “Secured Term Loan Facility”) and our $1,000 asset-based revolving credit facility (the “Revolving ABL Credit Facility”) and would need to meet certain conditions under these credit facilities before paying a dividend, as described in Note 9—Long-Term Debt in Part II, Item 8 of this Annual Report on Form 10-K. The payment of any future dividends is subject to the discretion of our Board of Directors and the requirements of Delaware law, and will depend on a variety of factors that our Board of Directors may deem relevant.
Purchases of Equity Securities
The following table provides information regarding our purchase of shares of our common stock for the periods indicated:
(in millions, except shares and per share amounts)
Period (1)
 
Total Number of Shares Purchased (2)
 
Average Price Paid Per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
First four weeks
 
 
 
 
 
 
 
 
December 3, 2017 to December 30, 2017
 
—

 
$
—

 
—

 
$
—

Second four weeks
 
 
 
 
 
 
 
 
December 31, 2017 to January 27, 2018
 
1,009

 
$
16.25

 
—

 
$
—

Third four weeks
 
 
 
 
 
 
 
 
January 28, 2018 to February 24, 2018
 
—

 
$
—

 
—

 
$
—

Totals
 
1,009

 
$
16.25

 
—

 
$
—

(1)
The reported periods conform to our fiscal calendar, which consists of thirteen 28-day periods. The fourth quarter of fiscal  2018  contains three 28-day periods.
(2)
These amounts represent the deemed surrender by participants in our compensatory stock plans of 1,009 shares of previously issued common stock. These amounts are in payment of the purchase price for shares acquired pursuant to the exercise of stock options and satisfaction of tax obligations arising from such exercises, as well as from the vesting of restricted stock awards granted under such plans.
Stock Performance Graph
The following graph compares the yearly change in total cumulative stockholder return on our common stock for the period from the end of fiscal 2013 to the end of fiscal 2018 to that of the Standard & Poor’s (“S&P”) SmallCap 600 and a group of peer companies in the grocery distribution and retail industries. The stock price performance shown below is not necessarily indicative of future performance.

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COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN AMONG
Supervalu, S&P SmallCap 600 and Peer Group (1)  
February 23, 2013 through February 24, 2018 (2)  
CHART-72043D3756805CB9BE5.JPG
Date
 
Supervalu
 
S&P SmallCap 600
 
Peer Group (3)
 
 
(in dollars)
February 22, 2013
 
$
100.00

 
$
100.00

 
$
100.00

February 21, 2014
 
$
158.44

 
$
129.35

 
$
115.61

February 27, 2015
 
$
256.62

 
$
142.03

 
$
131.88

February 26, 2016
 
$
128.05

 
$
129.37

 
$
136.98

February 24, 2017
 
$
101.82

 
$
175.58

 
$
172.70

February 23, 2018
 
$
50.92

 
$
197.38

 
$
190.09

(1)
Total return assuming $100 invested on February 22, 2013 and reinvestment of dividends on the day they were paid.
(2)
Our fiscal year ends on the last Saturday in February.
(3)
Our peer group consists of SpartanNash Corporation, United Natural Foods, Incorporated, Sysco Corporation and Ingles Incorporated.
The performance graph above is being furnished solely to accompany this Annual Report on Form 10-K pursuant to Item 201(e) of Regulation S-K, is not being filed for purposes of Section 18 of the Exchange Act and shall not be deemed soliciting material, and is not to be incorporated by reference into any filing of Supervalu, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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ITEM 6.    SELECTED FINANCIAL DATA
The following table sets forth our selected historical financial data for the past five years. The selected financial data presented below for fiscal 2018 reflect Unified’s and AG Florida’s financial information for fiscal 2018 since their acquisition dates as of June 23, 2017 and December 8, 2017, respectively, and reflect their stores supplied and operated as of the end of fiscal 2018. All periods presented have been recast, as applicable, to present the results of operations and financial position of Farm Fresh, Shop ‘n Save and Shop ‘n Save East being held for sale and reported within discontinued operations. See Note 18—Discontinued Operations in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
(Dollars and shares in millions,
except per share data and stores)
2018
 (52 weeks)
 
2017 
 (52 weeks)
 
2016 
 (52 weeks)
 
2015 
 (53 weeks)
 
2014 
 (52 weeks)
Results of Operations
 
 
 
 
 
 
 
 
 
Net sales
$
14,157

 
$
10,912

 
$
11,283

 
$
11,514

 
$
11,239

Operating earnings
193

 
195

 
241

 
164

 
168

Net earnings (loss) from continuing operations
49

 
35

 
49

 
(23
)
 
(133
)
Net earnings (loss) from continuing operations per share—
diluted (1)
$
1.25

 
$
0.81

 
$
1.06

 
$
(0.82
)
 
$
(3.86
)
Weighted average shares outstanding—diluted (1)
38

 
38

 
38

 
38

 
36

Financial Position
 
 
 
 
 
 
 
 
 
Total assets
$
4,387

 
$
3,580

 
$
4,370

 
$
4,434

 
$
4,283

Total debt and capital lease obligations
$
1,923

 
$
1,475

 
$
2,524

 
$
2,693

 
$
2,734

Stockholders’ equity (deficit)
$
505

 
$
376

 
$
(441
)
 
$
(646
)
 
$
(738
)
Other Statistics of Continuing Operations
 
 
 
 
 
 
 
 
 
Depreciation and amortization
$
197

 
$
173

 
$
175

 
$
186

 
$
198

Adjusted EBITDA (2)
$
436

 
$
418

 
$
434

 
$
426

 
$
399

Stores Supplied and Operated:
 
 
 
 
 
 
 
 
 
Wholesale primary stores (3)
3,323

 
1,902

 
1,796

 
1,825

 
1,819

Retail stores
114

 
115

 
117

 
111

 
106

Subtotal
3,437

 
2,017

 
1,913

 
1,936

 
1,925

Wholesale secondary stores (4)
2,462

 
244

 
232

 
208

 
424

Total number of stores
5,899

 
2,261

 
2,145

 
2,144

 
2,349

(1)
Per share and shares outstanding figures have been restated to give effect to the 1-for-7 reverse stock split effective on August 1, 2017. Refer to Note 12—Net Earnings (Loss) Per Share in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding the reverse stock split.
(2)
Adjusted EBITDA is a non-GAAP financial measure provided as a supplement to results of operations and related analysis, and should not be considered superior to, a substitute for or an alternative to any financial measure of performance prepared and presented in accordance with GAAP (defined below). Refer to the “Non-GAAP Financial Measures” section of Part II, Item 7 of this Annual Report on Form 10-K for a reconciliation to the applicable GAAP financial measure and additional information regarding our use of non-GAAP financial measures.
(3)
Wholesale primary stores is defined as a customer location that has received over a certain dollar threshold of Wholesale product for each of the last three fiscal periods in a given quarter and purchases two or more product groups.
(4)
Wholesale secondary stores is defined as a customer location that has received over a certain dollar threshold of Wholesale product for each of the last three fiscal periods in a given quarter but fails to meet the criteria to be a primary store. The acquisition of Unified increased the secondary store count substantially because of its smaller Wholesale customer store size and its distribution of one product group to customer stores.
Historical data is not necessarily indicative of our future results of operations or financial condition. See discussion of “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars and shares in millions, except per share data)
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the audited Consolidated Financial Statements and the information contained under the captions “Risk Factors” and “Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act” contained in this Annual Report on Form 10-K.
The results of operations, financial position and cash flows of three retail banners, formerly reported within the Retail segment, and Save-A-Lot are reported as discontinued operations for all periods presented. See Note 18—Discontinued Operations in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
EXECUTIVE OVERVIEW
Business Overview
As the largest public company grocery wholesaler in the United States, our core Wholesale business distributes grocery and other products and provides services to retailers across the United States. Our Wholesale business serves a diverse and dynamic customer base, including our Retail segment, that benefits from our scale efficiencies, broad product assortment including, an industry-leading portfolio of private brands and unique ethnic and specialty products, and services offering. We also operate three Retail banners in our continuing operations. Our business is classified into two reportable segments: Wholesale and Retail.
Strategic Business Transformation
We have been undergoing a strategic transformation since 2016 to become the wholesale supplier of choice for grocery retailers across the United States, while also executing initiatives to deliver long-term shareholder value. Our sale of Save-A-Lot for $1.3 billion in fiscal 2017 significantly reduced our debt, eliminated significant capital expenditures for Save-A-Lot’s retail business and provided flexibility and increased resources available to invest in our strategic business transformation. In fiscal 2018, we continued our strategic transformation by growing and investing in our Wholesale business through the acquisitions of Unified Grocers, Inc. (“Unified”) and Associated Grocers of Florida, Inc. (“AG Florida”) as well as new distribution centers in Harrisburg, PA and Joliet, IL. This growth of our Wholesale business and distribution network builds upon the value proposition we offer customers including creating greater scale and efficiencies, building capabilities and expanding our product assortment, and developing our value-added services.
Our ongoing transformation in fiscal 2018 was guided by our four strategic pillars:
•
Grow our Core Wholesale Business
◦
The addition of more than $5 billion in run-rate sales to grow our core Wholesale business to nearly $13 billion when annualizing the sales from Unified and AG Florida. These acquisitions plus the addition of significant new Wholesale customers, such as The Fresh Market, drove this growth in fiscal 2018.
◦
We made strategic capital investments of approximately $135 in fiscal 2018 toward the purchase and improvement of distribution warehouses, including Harrisburg, PA and Joliet, IL, to support the growth of our Wholesale business including our Market Centre division that supplies specialty and ethnic foods and non-food products, to solidify our East Coast distribution and to enable further growth in certain key markets.
•
Optimize our Asset Base
◦
We entered into agreements to sell a majority of our Farm Fresh retail stores and pharmacy assets for a total of $53 in March 2018.
◦
We announced that we are pursuing the sale of our corporately owned and operated retail operations of Shop n’ Save (based in St. Louis) and Shop ‘n Save East (with stores in West Virginia, Maryland, Pennsylvania and Virginia) in April 2018. These operations along with Farm Fresh are now reported in discontinued operations.
◦
These three retail banners had generated combined losses in fiscal 2018 from operations and Adjusted EBITDA in each case prior to discontinued operations presentation, which previously included the impact of corporate and additional supply chain expense allocations, and other expense.
◦
We sold our minority interest in an entity that operates multiple franchised Cub Foods stores in the Minneapolis / St. Paul, Minnesota market in February 2018.

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Table of Contents

•
De-lever the Balance Sheet
◦
We completed the sale of Save-A-Lot for $1.3 billion in December 2016, significantly reducing our debt, fundamentally improving our balance sheet, eliminating high levels of capital expenditures for retail operations, and increasing flexibility and resources available to execute our wholesale growth strategy.
◦
We announced a sale leaseback transaction in April 2018 for eight of our distribution centers with expected gross proceeds of approximately $483 before costs and taxes which net proceeds will be used to further reduce outstanding debt and fundamentally improve our balance sheet.
•
Strategic and Opportunistic Mergers and Acquisitions
◦
We expanded our Wholesale business and distribution network on the West Coast through the acquisition of Unified on June 23, 2017, a business that had $3.7 billion of annual net sales, including Market Centre.
◦
We expanded our Wholesale business and distribution network in Florida through the acquisition of AG Florida on December 8, 2017, a business that had $0.6 billion in annual net sales, including international customers and specialty and ethnic foods to local wholesale customers.
◦
We have increased our expected run-rate cost synergies to approximately $95 to be achieved by the end of third year following the respective closings of the Unified and AG Florida transactions, of which we realized approximately $23 in fiscal 2018.
◦
We expect the food wholesale industry consolidation to continue and believe our strategy enables us to build upon the recent acquisitions of Unified and AG Florida to further grow and expand capabilities through merger and acquisition opportunities.
The following charts illustrate management’s transformation of our business from retail operations to wholesale:
SUPERVALUINCNETSALESMIXA03.JPG
(1)
Total net sales of SUPERVALU INC. reflects the following: Wholesale represents our reportable Wholesale segment net sales; Retail represents the combination of our Retail reportable segment’s net sales and our net sales reported from three retail banners reported in discontinued operations; Corporate reflects our Corporate functions results as reported; and Save-A-Lot reflects the discontinued operations of the Save-A-Lot business until its disposal date in fiscal 2017 and remaining expenses of prior discontinued operations. Refer to Note 17—Segment Information and Note 18—Discontinued Operations within Part II, Item 8. of this Annual Report on Form 10-K for the underlying information used in these charts.
(2)
Wholesale net sales only reflect Unified’s and AG Florida’s results since their acquisition dates of June 23, 2017 and December 8, 2017, respectively.


25
Table of Contents

WHSSALESGROWTHA08.JPG
(1)
The information used in this chart was compiled from amounts disclosed in the Results of Operations section below and the Annual Report on Form 10-K for the fiscal year ended February 25, 2017.
(2)
Unified’s net sales reflect net sales since the acquisition date of June 23, 2017. On a pro forma basis, Unified’s net sales would have been $3,715 if its sales results for the 16 weeks in fiscal 2018 prior to the acquisition date had been included. AG Florida’s net sales reflect sales since the acquisition date of December 8, 2017. On a pro forma basis, AG Florida’s net sales would have been $644 if its sales results for the 41 weeks in fiscal 2018 prior to the acquisition date had been included. Pro Forma Fiscal 2018 includes 52-weeks of net sales from Unified and AG Florida, as if the acquisitions would have closed on the first day of the fiscal 2018.
Business Strategies and Initiatives
Wholesale:
•
Retaining existing customers by anticipating, listening to and meeting our customer needs and differentiating ourselves through our service levels, pricing, product offerings and professional services
•
Growing our business with existing customers by marketing our fresh product offerings, such as produce, our ethnic and specialty capabilities and our professional service offerings to help our customers compete and grow their business, including retail store support, advertising, couponing, e-commerce, network and data hosting solutions, training and certifications classes, and administrative back-office solutions
•
Affiliating new customers, including traditional and non-traditional formats, and aggressively pursuing external growth and market opportunities
•
Integrating and realizing synergies from the acquisitions of Unified and AG Florida, including optimizing our distribution network, leveraging combined procurement volume and expanding enhanced professional services offerings to acquired customers
•
Expanding the Market Centre product offerings into our supply chain and continuing to optimize our product offerings to anticipate and meet our customer’s needs
•
Improving the efficiency and optimization of our distribution network, real estate, information technology infrastructure and logistics, and scaling the use of trucking miles and warehouse capacity as we grow our wholesale business
•
Strengthening core merchandising and marketing programs, including leveraging our private-label programs, such as the Essential Everyday ® and Equaline ® labels, while marketing and adding depth to the Wild Harvest ® and Culinary Circle ® brands

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Table of Contents

Retail:
•
Driving profitable sales through competitive pricing and strong, event-based promotions, and enhancing merchandising displays and product offerings such as Quick & Easy meal solutions including meal kits and grab ‘n go options for Retail stores and Wholesale customers
•
Driving improved store performance, including reducing inventory shrink rates and levels of out-of-stocks, through standardizing certain store processes
•
Continued development and introduction of our private-label products, including organic products, by providing innovative products in multiple channels across Retail and Wholesale
•
Targeted and innovative capital investments in our continuing operations banners for new stores, relocations and store remodels
Corporate:
•
Continued management of overhead cost structure to ensure competitive pricing to customers
•
Providing high-quality administrative support services by enhancing service offerings and information technology systems
•
Leveraging our professional services capabilities to grow our services business
Recent Developments
Acquisitions of Associated Grocers of Florida, Inc. and Unified Grocers, Inc.
On December 8, 2017, we completed the acquisition of AG Florida pursuant to the terms of an Agreement and Plan of Merger dated October 17, 2017 (the “AG Merger Agreement”) by and among SUPERVALU INC., Gator Merger Sub, Inc., a then wholly owned subsidiary of SUPERVALU INC. (“AG Merger Sub”), and AG Florida. Prior to the transaction, AG Florida was a retailer-owned cooperative. AG Florida distributes full lines of grocery and general merchandise to independent retailers, primarily in South Florida, the Caribbean, Central and South America and Asia. Effective as of the closing of the transaction, AG Merger Sub merged with and into AG Florida with AG Florida surviving as a wholly owned subsidiary of Supervalu. The transaction was valued at $193 , comprised of $131 in cash for 100 percent of the outstanding stock of AG Florida plus the assumption and payoff of AG Florida’s net debt of $62 at closing.
On June 23, 2017, we completed the acquisition of Unified pursuant to the terms of an Agreement and Plan of Merger dated April 10, 2017 (the “Merger Agreement”) by and among SUPERVALU INC., West Acquisition Corporation, a then wholly owned subsidiary of SUPERVALU INC. (“Unified Merger Sub”), and Unified. Prior to the transaction, Unified was a cooperative owned by its retailer members. Effective as of the closing of the transaction, Unified Merger Sub merged with and into Unified with Unified surviving as a wholly owned subsidiary of Supervalu. The transaction was valued at $390 , comprised of $114 in cash for 100 percent of the outstanding stock of Unified plus the assumption and payoff of Unified’s net debt of $276 at closing.
The acquisitions of AG Florida and Unified are complementary to our wholesale business and they uniquely position us to serve a broader range of independent customers, offer a diverse array of value added services and further help our Wholesale customers to compete in an increasingly demanding grocery environment. In addition, these acquisitions provide opportunities across multiple geographies and are an important part of our ongoing growth effort, including international growth efforts and the expansion of Unified’s Market Centre division, a growing business providing specialty and ethnic products to independent customers.
Refer to Note 2—Business and Asset Acquisitions in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding the acquisitions of AG Florida and Unified.
Sale of Certain Farm Fresh Operations
On March 14, 2018, we announced our intention to exit the Farm Fresh banner and our entry into agreements to sell 21 of our 38 Farm Fresh retail stores and pharmacy assets for a total of $53, which we anticipate will result in a gain on the sale of these assets in the first quarter of fiscal 2019. The transactions are currently expected to close in May 2018, subject to customary closing conditions. We are working with a third party to liquidate the inventory at these Farm Fresh stores. We are continuing discussions and exploring potential transactions to sell the remaining Farm Fresh stores to current and prospective Wholesale customers and certain Farm Fresh employees.
Sale Leaseback Agreements
On April 23, 2018, we entered into a series of agreements relating to the sale of eight of our distribution centers for an aggregate purchase price, excluding taxes and closing costs, of approximately $483 . The estimated net proceeds after taxes and costs are expected to be approximately $445 . We intend to use the net proceeds to pay down outstanding debt. Subject to customary closing conditions, upon closing of the sale of the properties, we will enter into lease agreements for each of the properties for initial terms of 20 years with five five-year renewal options, that are expected to qualify for sale-leaseback accounting and be classified as

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operating leases. Any gain on the sale of these properties will be deferred and amortized over the term of the leases. The aggregate initial annual rent payment for the eight properties is expected to be approximately $31 with scheduled rent increases occurring generally every one or five years over the initial 20-year term. Of these eight transactions, which are subject to closing conditions, seven are expected to be completed during the first quarter and one is expected to be completed in the third quarter of fiscal 2019.
Retail Discontinued Operations
During the fourth quarter of fiscal 2018, we announced the exit of our Farm Fresh banner and that we are pursuing the sale of our corporately owned and operated retail operations consisting of Farm Fresh, Shop ‘n Save in the St. Louis, Missouri area (“Shop ‘n Save”) and Shop ‘n Save stores located in Maryland, Pennsylvania and West Virginia (“Shop ‘n Save East”). These retail assets have been classified as held for sale and the historical results of operations, financial position and cash flows directly attributable to these operations are now reported within discontinued operations in our Consolidated Financial Statements for all periods presented. Throughout this Annual Report on Form 10-K references to the Retail segment exclude these retail assets that are held for sale. The assets of these retail operations were recorded at their estimated fair value less costs to sell. No impairment charges were recorded as a result of the classification of these assets as held for sale because previous impairment charges have been recorded that have already written down the individual long-lived assets to their fair value.
U.S. Tax Reform
On December 22, 2017, the U.S. government enacted comprehensive tax legislation under the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including reducing the U.S. federal corporate tax rate from 35 percent to 21 percent, effective January 1, 2018. Shortly after the Tax Act was enacted, the SEC issued accounting guidance, which provides a one-year measurement period during which a company may complete its accounting for the impacts of the Tax Act. To the extent a company’s accounting for certain income tax effects of the Tax Act is incomplete, the company may determine a reasonable estimate for those effects and record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted.
As a result of the Tax Act, we recorded a discrete income tax expense of $31 million in fiscal 2018 associated with the remeasurement of deferred tax assets and liabilities as a result of the reduction in the U.S. federal corporate tax rate. We have not completed our accounting for the income tax effects of certain elements of the Tax Act, but recorded provisional adjustments based on reasonable estimates. Those estimates may be impacted by the need for further analysis and future clarification and guidance regarding available tax accounting methods and elections, state tax conformity to federal tax changes, and expected changes to U.S. Treasury regulations. These provisional estimates may materially change with further analysis and new federal guidance or state law changes. We anticipate these estimates will be finalized on or before the due date of our federal and state income tax returns.
Fiscal 2018 Overview
Continuing Operations Financial Highlights for Fiscal 2018 Compared to Fiscal 2017 :
•
Net sales were $14,157 , an increase of $3,245 or 29.7 percent , primarily due to sales from the acquired Unified business, higher sales from new Wholesale customers and stores and sales from the acquired AG Florida business, offset in part by lower sales due to stores no longer operated by customers, lower identical store sales in the Retail business, lower military sales, lower sales from closed Retail stores and lower service agreement revenue.
•
Gross profit was $1,451 , an increase of $56 or 4.0 percent . Wholesale gross profit increased $108 , which was partially offset by a decrease in Retail gross profit of $33 and a decrease in Corporate gross profit of $19 . The increase in Gross profit primarily reflects increases in gross margins from increased net sales including from the acquired Unified business, offset in part by higher Wholesale trucking costs and employee-related costs associated with higher sales volumes, and lower Retail gross margins from decreased sales.
•
Operating earnings were $193 , a decrease of $2 , which primarily reflects higher employee-related costs from the acquired Unified business, merger and integration costs and lower Retail gross margins, offset in part by lower pension settlement and goodwill impairment charges in fiscal 2017 and increases in gross profit discussed above and lower pension expense.
•
Interest expense, net was $132 , a decrease of $48 , primarily due to lower average outstanding debt balances.
•
Net earnings from continuing operations were $49 , an increase of $14 , and diluted net earnings per share from continuing operations increased $0.44 , in each case, primarily due to the items described above.
•
Net cash provided by operating activities of continuing operations was $139 , a decrease of $94 , due to higher levels of cash utilized in operating assets and liabilities, such as accounts payable and accrued liabilities, and inventories, which were offset in part by $60 of lower contributions to benefit plans.

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Table of Contents

•
Net cash used in investing activities of continuing operations was $494 , an increase of $345 , primarily due to cash paid to acquire Unified and AG Florida, and two distribution centers located in Harrisburg, PA and Joliet, IL, all in fiscal 2018.
•
Net cash provided by financing activities of continuing operations was $88 , compared to a use of cash of $1,107 , an increase in cash provided by financing activities of continuing operations of $1,195 , primarily due to the delayed draw under our term loan facility of $315, which was drawn down in full in fiscal 2018 for the purpose of consummating the acquisition of Unified, borrowings in fiscal 2018 of $127 compared to net payments of $138 in fiscal 2017 under the Revolving ABL Credit Facility, new loans in fiscal 2018 to finance the Harrisburg, PA distribution center acquisition and related improvements, and debt repayments of $99 made in fiscal 2017 that were not required in fiscal 2018. These items were partially offset by the repayment of acquired debt of $285 and $64 associated with the acquisitions of Unified and AG Florida, respectively.
Impact of Inflation and Deflation
We monitor product cost inflation and deflation and evaluate whether to absorb cost increases or decreases, or pass on pricing changes. We have experienced a mix of inflation and deflation across product categories within our business segments during fiscal 2018 .
In aggregate across all of our businesses and taking into account the mix of products, management estimates our businesses experienced single digit cost inflation in fiscal 2018 . The Wholesale and Retail business segments experienced cost inflation within the produce product category and inflation within the meat product categories. Cost inflation and deflation estimates are based on individual like items sold during the periods being compared.
Changes in merchandising, customer buying habits and competitive pressures create inherent difficulties in measuring the impact of inflation and deflation on Net sales and Gross profit. Absent any changes in units sold or the mix of units sold, deflation has the effect of decreasing sales.
Competitive Environment
The United States grocery business is highly competitive and management expects operating results will continue to be impacted by the effects of operating in a highly competitive and price-sensitive marketplace. Our Retail segment continues to be impacted by price competition, competitive store openings and a challenging sales and operating environment. This environment contributes to lower sales from identical retail stores, which impacts Gross profit and Operating earnings. These factors affecting the Retail segment are expected to impact fiscal 2019.
Services Agreements
We provide back-office administrative support services under transition services agreements (“TSA”) with New Albertson’s, Inc. (“NAI”) and Albertson’s LLC and also provide services as needed to transition and wind down the TSA with NAI and Albertson’s LLC. On October 17, 2017, we entered into a letter agreement with each of Albertson’s LLC and NAI pursuant to which the parties agreed that the TSA would expire on September 21, 2018 as to those services that we are providing to Albertson’s LLC and NAI. We will continue to provide transition and wind down services as previously agreed. In addition, we will provide services to Albertson’s LLC for one distribution center until at least October 2018, and NAI may notify us that it requires services for certain stores beyond September 21, 2018. The fees for these extended services, if any, will be the same per-store weekly fee (subject to a minimum fee) and the same weekly fee for the distribution center that Albertson’s LLC and NAI pay to us currently. The parties do not expect any of these services, or any of the transition and wind down services, to extend beyond April 2019. We also agreed that Albertson’s would no longer provide services to us after September 21, 2019. We expect the revenue under the TSA will be approximately $55 in fiscal 2019 and $0 in fiscal 2020. With this revenue decline, Adjusted EBITDA with respect to the TSA is expected to decline by up to $50 in fiscal 2019 and by up to another $40 in fiscal 2020.
In connection with the sale of Save-A-Lot on December 5, 2016, we entered into a services agreement (the “Services Agreement”) with Moran Foods, LLC (“Moran Foods”), the entity that operates the Save-A-Lot business. Pursuant to the Services Agreement, we provide certain technical, human resources, finance and other operational services to Save-A-Lot for a term of five years, on the terms and subject to the conditions set forth therein. The initial annual base charge under the Services Agreement is $30, subject to adjustments. Moran Foods may terminate the Services Agreement in the event of our material breach, if we breach our non-compete obligations under the Merger Agreement, if we are acquired by a third party that engages in a Competing Business (as defined in the Merger Agreement) or in the event of our bankruptcy or insolvency, in each case, subject to certain limitations set forth in the Services Agreement. In addition, Moran Foods may terminate certain services or service categories if we commit a breach that is material to the service category or if we fail to meet certain minimum specified service levels, in each case, subject to certain limitations set forth in the Services Agreement. We may terminate the Services Agreement in the event of Moran Foods’ material breach, for Moran Foods’ failure to make timely payment, for certain legal or

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Table of Contents

regulatory changes and in the event of Moran Foods’ bankruptcy or insolvency, in each case, subject to certain limitations set forth in the Services Agreement. The Services Agreement generally requires each party to indemnify the other party against third-party claims arising out of the performance of or the provision or receipt of services under the Services Agreement.
RESULTS OF OPERATIONS
Consolidated results of operations for fiscal 2018 , 2017 and 2016 are as follows:
 
2018 
 (52 weeks)
 
2017 
 (52 weeks)
 
2016 
 (52 weeks)
Net sales
$
14,157

 
100.0
 %
 
$
10,912

 
100.0
 %
 
$
11,283

 
100.0
 %
Cost of sales
12,706

 
89.7

 
9,517

 
87.2

 
9,812

 
87.0

Gross profit
1,451

 
10.3

 
1,395

 
12.8

 
1,471

 
13.0

Selling and administrative expenses
1,258

 
8.9

 
1,187

 
10.9

 
1,224

 
10.8

Goodwill and intangible asset impairment charges
—

 
—

 
13

 
0.1

 
6

 
0.1

Operating earnings
193

 
1.4

 
195

 
1.8

 
241

 
2.1

Interest expense, net
132

 
0.9

 
180

 
1.6

 
193

 
1.7

Equity in earnings of unconsolidated affiliates
(16
)
 
(0.1
)
 
(5
)
 
—

 
(5
)
 
—

Earnings from continuing operations before income taxes
77

 
0.5

 
20

 
0.2

 
53

 
0.5

Income tax provision (benefit)
28

 
0.2

 
(15
)
 
(0.1
)
 
4

 
—

Net earnings from continuing operations
49

 
0.3

 
35

 
0.3

 
49

 
0.4

(Loss) income from discontinued operations, net of tax
(3
)
 
—

 
619

 
5.7

 
137

 
1.2

Net earnings including noncontrolling interests
46

 
0.3

 
654

 
6.0

 
186

 
1.7

Less net earnings attributable to noncontrolling interests
(1
)
 
—

 
(4
)
 
—

 
(8
)
 
(0.1
)
Net earnings attributable to SUPERVALU INC.
$
45

 
0.3
 %
 
$
650

 
6.0
 %
 
$
178

 
1.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
Basic net earnings per share attributable to SUPERVALU INC.:
Continuing operations
$
1.25

 
 
 
$
0.82

 
 
 
$
1.08

 
 
Discontinued operations
$
(0.07
)
 
 
 
$
16.35

 
 
 
$
3.65

 
 
Basic net earnings per share
$
1.18

 
 
 
$
17.17

 
 
 
$
4.72

 
 
Diluted net earnings per share attributable to SUPERVALU INC.:
Continuing operations
$
1.25

 
 
 
$
0.81

 
 
 
$
1.06

 
 
Discontinued operations
$
(0.07
)
 
 
 
$
16.19

 
 
 
$
3.59

 
 
Diluted net earnings per share
$
1.18

 
 
 
$
17.00

 
 
 
$
4.66

 
 
The following discussion summarizes operating results for fiscal 2018 compared to fiscal 2017 , and fiscal 2017 compared to fiscal 2016 . References to last year refer to fiscal 2017 .
Net Sales
The following table outlines the composition of and variances in Net sales:
 
2018 
 (52 weeks)
 
2017 
 (52 weeks)
 
2016 
 (52 weeks)
 
2018 Change
 
2017 Change
Wholesale
$
11,054

 
$
7,705

 
$
7,935

 
$
3,349

 
$
(230
)
Retail
2,943

 
3,028

 
3,145

 
(85
)
 
(117
)
Corporate
160

 
179

 
203

 
(19
)
 
(24
)
Total Net sales
$
14,157

 
$
10,912

 
$
11,283

 
$
3,245

 
$
(371
)


30

The following tables reconcile the sales variances for each reportable segment:
Wholesale
2018 
 (52 weeks)
 
2017 
 (52 weeks)
Net sales from the prior fiscal year
$
7,705

 
$
7,935

Unified’s net sales since acquisition (1)
2,492

 
—

Increase in net sales to new customers (2)
952

 
277

AG Florida’s net sales since acquisition (3)
132

 
—

Increased net sales to new stores operated by existing customers (4)
85

 
141

Lower net sales to existing customer stores
(8
)
 
(84
)
Lower net sales due to stores no longer operated by customers (5)
(248
)
 
(514
)
Lower Military net sales
(49
)
 
(54
)
Other revenue
(7
)
 
4

Net sales for the current fiscal year
$
11,054

 
$
7,705

(1)
Unified’s net sales since the acquisition reflect net sales since the acquisition date of June 23, 2017. On a pro forma basis, Unified’s net sales would have been $3,715 if their sales results for the 16 weeks prior to the acquisition date had been included.
(2)
Increases in net sales to new customers are primarily attributable to the affiliations of nine larger new customers.
(3)
AG Florida’s net sales since the acquisition reflect sales since the acquisition date of December 8, 2017. On a pro forma basis, AG Florida’s net sales would have been $644 if their sales results for the 41 weeks prior to the acquisition date had been included.
(4)
Increased net sales to new stores operated by existing customers primarily reflect organic new store growth from existing customers.
(5)
Lower net sales due to stores no longer operated by customers primarily reflects sales lost as a result of the Marsh and Haggen bankruptcies, and store locations we no longer supply for existing customers.
Retail
2018 
 (52 weeks)
 
2017 
 (52 weeks)
Net sales from the prior fiscal year
3,028

 
3,145

Identical store sales of negative 2.5 percent and negative 5.0 percent, respectively (1)
(71
)
 
(144
)
Lower sales from closed stores
(30
)
 
(41
)
Increased sales from new stores
18

 
72

Other revenue
(2
)
 
(4
)
Net sales for the current fiscal year
2,943

 
3,028

(1)
Average basket size variance was 0.0 percent and negative 1.4 percent , respectively. Average customer count was negative 2.5 percent and negative 3.7 percent , respectively. Retail identical store sales are defined as net sales from stores operating for four full quarters, including store expansions and excluding fuel and announced planned store dispositions. Average basket size is defined based on average purchases and customer count is defined as the number of transactions, both over the same four full quarters, including store expansions and excluding fuel and planned store dispositions.
Corporate
In fiscal 2018, Corporate’s net sales decreased primarily due to $41 of lower fees under transition services agreements from a lower number of stores and distribution centers serviced, offset in part by $23 of higher sales from the professional services agreement with Save-A-Lot that began in December 2016.
In fiscal 2017, Corporate’s net sales decreased primarily due to $31 of lower fees under transition services agreements from a lower number of stores serviced, offset in part by $7 of higher sales from the professional services agreement with Save-A-Lot that began in December 2016.

31

Gross Profit
The following table outlines the composition of and variances in Gross profit, which are discussed in the paragraphs below:
 
2018 
 (52 weeks)
 
2017 
 (52 weeks)
 
2016 
 (52 weeks)
 
2018 Change
 
2017 Change
Wholesale
$
463

 
$
355

 
$
371

 
$
108

 
$
(16
)
% of Wholesale sales
4.2
%
 
4.6
%
 
4.7
%
 
(0.4
)%
 
(0.1
)%
Retail
828

 
861

 
897

 
(33
)
 
(36
)
% of Retail sales
28.1
%
 
28.4
%
 
28.5
%
 
(0.3
)%
 
(0.1
)%
Corporate
160

 
179

 
203

 
(19
)
 
(24
)
Total Gross profit
$
1,451

 
$
1,395

 
$
1,471

 
$
56

 
$
(76
)
% of total Net sales
10.3
%
 
12.8
%
 
13.0
%
 
(2.5
)%
 
(0.2
)%
Fiscal 2018 Compared to Fiscal 2017
Wholesale gross profit increased $108 , and decreased 40 basis points as a percentage of net sales. Wholesale’s gross profit for fiscal 2018 included $2 of merger and integration costs. When adjusted for this item, Wholesale’s gross profit increased $110 primarily due to $97 of higher gross margin from increased net sales, $67 of gross profit attributable to the acquired Unified business and $6 of higher gross profit attributable to the acquired AG Florida business (both including depreciation expense related to facilities valued in purchase accounting) , offset in part by $38 of increased trucking costs driven by higher sales volumes and increased third party trucking costs, and $18 of higher employee-related costs attributable to higher sales volumes . The acquired Unified business contributed an approximate 40 basis point decrease in Wholesale gross profit as a percent of Wholesale sales. The remaining decrease in Wholesale’s gross profit rate was attributable to the higher expenses noted above.
Retail gross profit decreased $33 , or 30 basis points as a percentage of net sales, Retail gross profit for fiscal 2017 included $1 of store closure charges and costs related to inventory write-downs. When adjusted for this item, Retail gross profit decreased $34, primarily due to $26 of lower gross margin from net decreased sales, with the remaining decrease primarily attributable to lower gross margins , offset by a LIFO credit in fiscal 2018 compared to fiscal 2017.
Corporate gross profit decreased $19 primarily due to a lower number of stores and distribution centers serviced under transition services agreements, net of fees earned under the professional services agreement with Save-A-Lot, discussed in the net sales variances above. The shared service center costs incurred to support back office functions related to the services agreements represent administrative overhead and are recorded in Selling and administrative expenses. We expect that revenues generated from existing transition services agreements with Albertson’s and NAI will result in lower Corporate net sales, gross profit and operating earnings in fiscal 2019 and 2020, as discussed in the Executive Overview section above.
Fiscal 2017 Compared to Fiscal 2016
Wholesale gross profit decreased $16 , or 10 basis points as a percentage of net sales, primarily due to $30 of lower gross margin from net decreased sales driven by lost customers, $18 of higher employee-related costs driven by higher distribution center labor rates and hours incurred and $4 of higher logistics costs, offset in part by $21 of higher vendor allowances, $6 of reduced costs from incremental vendor back-haul allowances and $3 of lower pension expense.
Retail gross profit decreased $36 , or 10 basis points as a percentage of net sales. Retail gross profit for fiscal 2017 included $1 of store closure charges and costs related to inventory write-downs. When adjusted for this item, Retail gross profit decreased $35 primarily due to $36 of lower gross margin from net decreased sales and $10 of lower gross margins including vendor allowances driven by strategic investments to lower prices to customers , offset in part by $8 of lower inventory shrink costs .
Corporate gross profit decreased $24 primarily due to a lower number of stores serviced under transition services agreements, net of fees earned under the professional services agreement with Save-A-Lot, discussed in the net sales variances above. The shared service center costs incurred to support back office functions related to the services agreements represent administrative overhead and are recorded in Selling and administrative expenses.

32

Selling and Administrative Expense s
Fiscal 2018 Compared to Fiscal 2017
Selling and administrative expenses for fiscal 2018 were $1,258 compared with $1,187 last year, an increase of $71 or 6.0 percent . Selling and administrative expenses for fiscal 2018 included net charges and costs of $41 , comprised of merger and integration costs of $35, a legal reserve charge of $9 , severance costs of $8 , store closure charges and costs of $3 and a non-cash asset impairment charge of $2, offset in part by a benefit plan termination gain of $8 , vendor legal settlement income of $5 and a gain on sale of property of $3 . Last year’s Selling and administrative expenses included net charges and costs of $34 , comprised of non-cash pension settlement charges of $42 and store closure charges and costs of $4, offset in part by a supply agreement termination fee of $9 , a sales and use tax refund of $2 and a severance benefit of $1 . When adjusted for these items, the remaining increase of $64 in Selling and administrative expenses is primarily due to $68 of higher employee-related costs driven by the acquired Unified business and higher incentive compensation, $12 of higher bad debt expense primarily related to lost Wholesale customers and $10 of higher occupancy costs driven primarily by the acquired Unified business, offset in part by $30 of lower pension expense.
Fiscal 2017 Compared to Fiscal 2016
Selling and administrative expenses for fiscal 2017 were $1,187 compared with $1,224 for fiscal 2016, a decrease of $37 or 3.0 percent . Selling and administrative expenses for fiscal 2017 included net charges and costs of $34 discussed in the paragraph above. Selling and administrative expenses for fiscal 2016 included net charges and costs of $12, comprised of store closure charges and costs of $6 and severance costs of $6. When adjusted for these items, the remaining decrease of $59 in Selling and administrative expenses is primarily due to $53 of lower pension expense, $9 of lower other operating costs and $7 of lower bad debt expense, offset in part by $13 of higher total employee costs driven by higher Retail employee costs and $4 of higher contracted services.
Goodwill and Intangible Asset Impairment Charges
During fiscal 2017, we conducted an interim impairment review of the carrying value of our reporting units in conjunction with our impairment review of Save-A-Lot’s goodwill and due to declines in sales and cash flows within Retail. The review indicated that the estimated fair value of the Wholesale reporting unit was substantially in excess of 100 percent of its carrying value. The review also indicated that the carrying value of the Retail reporting unit exceeded its estimated fair value, as determined utilizing the income approach and market approach. As a result, we performed the step 2 assessment and recorded a non-cash goodwill impairment charge of $13 in the Retail segment during the third quarter of fiscal 2017. The calculation of the impairment charge contains significant judgments and estimates including weighted average cost of capital, future revenue, profitability, cash flows and fair values of assets and liabilities.
During fiscal 2016, we received a notice pursuant to which we could exercise certain purchase options for facilities. As a result, we performed a review of the associated indefinite-lived intangible assets for impairment, which indicated the carrying value of the intangible assets exceeded its estimated value, and a non-cash intangible asset impairment charge of $6 was recorded within Wholesale.
Operating Earnings
The following table outlines the composition of and variances in Operating earnings, which are discussed in the paragraphs below:
 
2018 
 (52 weeks)
 
2017 
 (52 weeks)
 
2016 
 (52 weeks)
 
2018 Change
 
2017 Change
Wholesale
$
226

 
$
225

 
$
218

 
$
1

 
$
7

% of Wholesale sales
2.0
 %
 
2.9
 %
 
2.7
%
 
(0.9
)%
 
0.2
 %
Retail
(13
)
 
(3
)
 
66

 
(10
)
 
(69
)
% of Retail sales
(0.4
)%
 
(0.1
)%
 
2.1
%
 
(0.3
)%
 
(2.2
)%
Corporate
(20
)
 
(27
)
 
(43
)
 
7

 
16

Total Operating earnings
$
193

 
$
195

 
$
241

 
$
(2
)
 
$
(46
)
% of total Net sales
1.4
 %
 
1.8
 %
 
2.1
%
 
(0.4
)%
 
(0.3
)%

33

Fiscal 2018 Compared to Fiscal 2017
Wholesale operating earnings for fiscal 2018 increased $1 , and decreased 90 basis points as a percentage of net sales. Wholesale operating earnings for fiscal 2018 included net charges and costs of $10 , comprised of a legal reserve charge of $9 , severance costs of $4 and merger and integration costs of $2 , offset in part by vendor legal settlement income of $5 . Last year’s Wholesale operating earnings included a fee received from a supply agreement termination of $9 . When adjusted for these items, the remaining increase of $20 in Wholesale operating earnings is primarily due to $97 of higher gross margin from increased net sales, $67 of gross profit attributable to the acquired Unified business and $6 of higher gross profit attributable to the acquired AG Florida business (both including depreciation expense related to facilities valued in purchase accounting) , offset in part by $50 of increased administrative employee-related costs primarily due to the acquired Unified business, $38 of increased trucking costs driven by higher sales volumes and increased third party trucking costs, $18 of higher employee-related costs attributable to higher sales volumes, $14 of higher depreciation and amortization primarily included within Selling and administrative expenses, $14 of higher other occupancy costs primarily due to the acquired Unified business, $10 of higher bad debt expense and $7 of higher contracted services costs.
Retail operating earnings for fiscal 2018 decreased $10 , or 30 basis points as a percentage of net sales. Last year’s Retail operating earnings included a non-cash goodwill impairment charge of $13 and store closure charges and costs of $5 . When adjusted for these items, the remaining $28 decrease in Retail operating earnings is primarily due to $26 of lower gross margin from net decreased sales, with the remaining decrease primarily attributable to lower gross margins and $5 of higher employee-related costs, offset in part by $8 of lower depreciation and amortization.
Corporate operating loss for fiscal 2018 decreased $7 . Corporate operating loss for fiscal 2018 included merger and integration costs of $35 , severance costs of $4 , store closure charges and costs of $3 and an asset impairment charge of $2 , offset in part by benefit plan termination gain of $8 and a gain on sale of property of $3 . Last year’s Corporate operating loss included non-cash pension settlement charges of $42 , offset in part by a sales and use tax refund of $2 and a severance benefit of $1 . When adjusted for these items, the remaining $1 increase in Corporate operating earnings is primarily due to $18 of net lower fees earned under services agreements and $10 of higher employee-related costs, driven by incentive compensation, offset by $30 of lower pension expense.
Fiscal 2017 Compared to Fiscal 2016
Wholesale operating earnings for fiscal 2017 increased $7 , or 20 basis points as a percentage of net sales. Wholesale operating earnings for fiscal 2017 include a fee received from a supply agreement termination of $9. Wholesale operating earnings for fiscal 2016 included an intangible asset impairment charge of $6. When adjusted for these items, the remaining decrease of $8 in Wholesale operating earnings is primarily due to $30 of lower gross margin from net decreased sales driven by lost customers, $18 of higher employee-related costs driven by higher distribution center labor rates and hours incurred , offset in part by $21 of higher vendor allowances, $7 of lower bad debt expense and customer recoveries, $6 of favorable inventory reclamation, $6 of reduced costs from incremental vendor back-haul allowances and $3 of lower pension expense.
Retail operating earnings for fiscal 2017 decreased $69 , or 220 basis points as a percentage of net sales. Retail operating loss for fiscal 2017 included a non-cash goodwill impairment charge of $13 and store closure charges and costs of $5 . Retail operating earnings for fiscal 2016 included store closure charges and costs of $1 . When adjusted for these items, the remaining decrease in Retail operating earnings of $52 is primarily due to $36 of lower gross margin from net decreased sales , $12 of higher employee costs and $10 of lower gross margins including vendor allowances driven by strategic investments to lower prices to customers , offset in part by $8 of lower inventory shrink costs .
Corporate operating loss for fiscal 2017 decreased $16 . Corporate operating loss for fiscal 2017 included non-cash pension settlement charges of $42 , offset in part by a sales and use tax refund of $2 and a severance benefit of $1 . Corporate operating loss for fiscal 2016 included severance costs of $6 and store closure charges and costs of $5 . When adjusted for these items, the remaining increase in Corporate operating earnings of $44 is primarily due to $51 of lower pension expense, $9 of lower salary, wages and incentive compensation, $7 of lower infrastructure costs driven by information technology, $3 of lower bad debt expense and $3 of lower other operating expenses, offset in part by $24 of lower fees earned under services agreements discussed in Corporate net sales above and $6 of higher employee benefit costs.

34

Interest Expense, Net
 
2018 
 (52 weeks)
 
2017 
 (52 weeks)
 
2016 
 (52 weeks)
 
2018 Change
 
2017 Change
Interest expense on long-term debt, net of capitalized interest
$
98

 
$
124

 
$
142

 
$
(26
)
 
$
(18
)
Interest expense on capital lease obligations
18

 
18

 
18

 
—

 
—

Amortization of financing costs and discount
7

 
11

 
18

 
(4
)
 
(7
)
Other
7

 
10

 
7

 
(3
)
 
3

Unamortized financing charges
3

 
17

 
4

 
(14
)
 
13

Debt refinancing costs
2

 
2

 
6

 
—

 
(4
)
Interest income
(3
)
 
(2
)
 
(2
)
 
(1
)
 
—

Interest expense, net
$
132

 
$
180

 
$
193

 
$
(48
)
 
$
(13
)
When adjusted for unamortized financing charges and debt refinancing costs in both fiscal 2018 and last year, interest expense, net decreased $34 primarily due to lower average outstanding borrowings under our Secured Term Loan Facility as a result of the $832 required prepayments related to the sale of Save-A-Lot in the fourth quarter of fiscal 2017, offset in part by additional interest expense associated with the $315 of additional borrowings under the Secured Term Loan Facility to finance the acquisition of Unified.
When adjusted for unamortized financing charges and debt refinancing costs in both fiscal 2017 and 2016, interest expense, net decreased $22 primarily due to lower average outstanding debt balances.
Equity in Earnings of Unconsolidated Affiliates
In fiscal 2018, we received $14 as consideration for the sale of our equity interest in an entity that operated certain retail stores, which resulted in a gain of $13. In conjunction with the sale, we entered into long-term wholesale supply agreements to continue to supply these retail stores.
Income Tax Provision (Benefit)
Income tax provision on earnings from continuing operations for fiscal 2018 was $28 or 36.9 percent of earnings from continuing operations before income taxes, compared with an income tax (benefit) of $15 or a negative 74.4 percent of earnings from continuing operations before income taxes last year. The change in the effective tax rate is primarily due to higher pre-tax income in the current year, additional tax expense in fiscal 2018 due to the remeasurement of deferred tax items resulting from the Tax Cuts and Jobs Act, and adoption of ASU 2016-09, offset by a deferred income tax benefit related to the release of a valuation allowance due to anticipated capital gains on future sale lease back transactions and sale of discontinued operations, and by certain discrete tax benefits in fiscal 2017 related to pension settlement charges and goodwill impairment charges.
Income tax benefit on earnings from continuing operations for fiscal 2017 was $15 or a negative 74.4 percent of earnings from continuing operations before income taxes, compared with income tax expense of $4 or 6.5 percent of earnings from continuing operations before income taxes for fiscal 2016. The change in the effective tax rate is primarily due to lower pre-tax income in fiscal 2017, resulting in a greater rate impact from permanent tax items, as well as certain discrete tax benefits in fiscal 2017 related to the pension settlement charges and goodwill impairment charges.

35

Net Earnings from Continuing Operations
Net earnings from continuing operations for fiscal 2018 were $49 , compared with $35 last year. Net earnings from continuing operations for fiscal 2018 included after-tax costs and charges of $31, comprised of U.S. tax reform charges, merger and integration costs, a legal reserve charge, unamortized debt financing charges, severance costs, debt refinancing costs, store closure charges and costs and an asset impairment charge, offset in part by a deferred income tax benefit, a gain on sale of an investment, benefit plan income, vendor legal settlement income and a gain on sale of property. Net earnings from continuing operations for fiscal 2017 included after-tax costs and charges of $29, comprised of pension settlement charges, unamortized financing cost charges, a goodwill impairment charge, store closure charges and costs, and debt refinancing costs, offset in part by a deferred income tax benefit, a fee received from a supply agreement termination, a sales and use tax refund and a severance benefit. When adjusted for these items, the remaining $16 after-tax increase is due to the variances discussed in the Operating Earnings, Interest Expense, Net and Income Tax Provision (Benefit) sections above.
Net earnings from continuing operations for fiscal 2017 were $35 , compared with $49 in fiscal 2016. Net earnings from continuing operations for fiscal 2017 included after-tax costs and charges of $29, comprised of pension settlement charges, unamortized financing cost charges, a goodwill impairment charge, store closure charges and costs, and debt refinancing costs, offset in part by a deferred income tax benefit, a fee received from a supply agreement termination, a sales and use tax refund and a severance benefit. Net earnings from continuing operations for fiscal 2016 included after-tax costs and charges of $17, comprised of an intangible asset impairment charge, debt refinancing costs, store closure charges and costs, severance costs and unamortized financing cost charges. When adjusted for these items, the remaining $2 after-tax decrease is due to the variances discussed in the Operating Earnings, Interest Expense, Net and Income Tax Provision (Benefit) sections above.
(Loss) Income from Discontinued Operations, Net of Tax
Discontinued operations primarily include three retail banners, formerly reported within the Retail segment, and the Save-A-Lot business that was previously disclosed as a separate reporting segment of Supervalu. Discontinued operations related to Save-A-Lot have been adjusted for assets, liabilities, operating results, and cash flows of the Save-A-Lot business as provided under the SAL Merger Agreement and the Separation Agreement. Discontinued operations for the Farm Fresh, Shop ‘n Save and Shop ‘n Save East retail banners reflect the asset, liabilities, operating results and cash flows of the three banners that are being held for sale. In addition, discontinued operations include the results of operations and cash flows attributed to the assets and liabilities of the NAI business. Refer to Note 18—Discontinued Operations in the Notes to Consolidated Financial Statements for further information regarding these discontinued operations.
Fiscal 2018 Compared to Fiscal 2017
Net sales from discontinued operations for fiscal 2018 were $1,522 , compared with $5,097 last year. The decrease of $3,575 was primarily due to $3,529 of a decrease attributable to the sale of the Save-A-Lot business that occurred in the fourth quarter of fiscal 2017, with the remaining decrease of $46 primarily due to negative identical store sales in two of our retail banners that are held for sale, offset in part by higher sales from acquired stores in our third retail banner that is held for sale.
Operating loss from discontinued operations for fiscal 2018 was $28 , compared with operating earnings from discontinued operations of $696 last year. Fiscal 2018 included asset impairment charges of $47 . Last year’s operating earnings from discontinued operations included a pre-tax gain on sale of $637 , an asset impairment charge of $41 and goodwill impairment charges of $39 . The remaining decrease of $120 is primarily due to lower earnings from a partial fiscal year of operations in fiscal 2017 for Save-A-Lot operations and lower gross margins from the three retail banners.
Loss from discontinued operations, net of tax for fiscal 2018 was $3 , compared with income from discontinued operations, net of tax of $619 last year. Last year’s income from discontinued operations includes an after-tax gain on sale of $577 , which includes a tax benefit from the utilization of capital loss carryforwards and the release of valuation allowances of approximately $244 . The remaining decrease of $45 was due to the after-tax impact of the operating earnings variances discussed above and the applicable tax provision, which included certain tax matters.
Retail Asset Impairments
Our impairment assessments conducted in fiscal 2018 and 2017 covered all retail banners included within discontinued operations. Our impairment assessments resulted in impairment charges for each retail banner classified within discontinued operations. As of the end of fiscal 2018, each retail banner placed into discontinued operations had been impaired, with each of the individual assets being written down to their fair value.

36

In fiscal 2018, two retail asset groups, which consisted of two separate retail banners, indicated a decline in their results of operations and cash flow projections of these two retail asset groups declined compared to prior projections. As a result, the two retail asset groups were selected for an undiscounted cash flow review. Both of these retail asset groups failed the long-lived asset recoverability test. Accordingly, a fair value assessment using the income approach was performed over each retail asset group’s long-lived assets. The carrying value of the assets within the two retail asset groups were determined to exceed their estimated fair value. In fiscal 2018, we recorded long-lived asset impairment charges that reduced the aggregate long-lived asset carrying values of these asset groups from $115 to their fair value of $68 , resulting in impairment charges of $47 .
In fiscal 2017, we performed an interim impairment review of certain retail geographic market asset groups in conjunction with our impairment review of goodwill and due to declines in sales and cash flows. The review indicated that there was no impairment for our long-lived assets within the asset groups. During the fourth quarter of fiscal 2017, the results of operations and cash flows of certain retail asset groups continued to decline, and as a result, revised projected financial information was used in the fourth quarter asset impairment review, which resulted in one of the Retail asset groups failing its step 1 long-lived asset recoverability test. Accordingly, a fair value assessment was performed over one retail banner’s long-lived assets. The carrying value of the assets within this asset group exceeded the estimated fair value and was reduced until all long-lived assets were recorded at the lower of their carrying value or fair value, resulting in an impairment charge of  $41 .
Fiscal 2017 Compared to Fiscal 2016
Net sales from discontinued operations for fiscal 2017 were $5,097 , compared with $6,245 for fiscal 2016. The decrease of $1,148 was primarily due to the sale of the Save-A-Lot that business occurred on the first business day of the fourth quarter of fiscal 2017 (December 5, 2016), resulting in a partial fiscal year of operations in fiscal 2017. Net sales from discontinued operations decreased $1,092 due to the reduction in fourth quarter sales relative to the prior year and operating results from the remainder of the year attributable to the sale of the Save-A-Lot business. The remaining $56 decrease in discontinued operations net sales is primarily due to lower identical store retail sales, offset in part by sales from acquired stores now held for sale.
Operating earnings from discontinued operations for fiscal 2017 were $696 , compared with $204 for fiscal 2016. Fiscal 2017 operating earnings from discontinued operations included a pre-tax gain on sale of $637 , an asset impairment charge of $41 and goodwill impairment charges of $39 . The remaining decrease of $65 is primarily due to lower operating earnings for our held for sale retail operations, a partial fiscal year of Save-A-Lot operations in fiscal 2017 and lower operating earnings from our sold Save-A-Lot business.
Income from discontinued operations, net of tax for fiscal 2017 was $619 , compared with $137 for fiscal 2016. Fiscal 2017 income from discontinued operations includes an after-tax gain on sale of $577 , which includes a tax benefit from the utilization of capital loss carryforwards and the release of valuation allowances of approximately $244. The remaining decrease of $95 was due to the after-tax impact of the operating earnings variances discussed above and the applicable tax provision, which included certain tax matters.

NON-GAAP FINANCIAL MEASURES
Use of Non-GAAP Financial Measures
Our Consolidated Financial Statements are prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”). In addition to the above analysis of results of operations, we also consider certain non-GAAP financial measures to assess the performance of our business and understand underlying operating performance and core business trends, which we use to facilitate operating performance comparisons of our business on a consistent basis over time. The measures and items identified below, such as Adjusted EBITDA, are provided as a supplement to our results of operations and related analysis, and should not be considered superior to, a substitute for or an alternative to any financial measure of performance prepared and presented in accordance with GAAP. In each of these measures, certain items are being omitted either because they are non-cash items or are items that are not considered in our supplemental assessment of on-going business performance. Certain of these adjustments are considered in similar supplemental analyses by other companies, such as depreciation and amortization, impairment charges and certain other adjustments.
We believe these non-GAAP measures are useful to investors and financial institutions because, for example, Adjusted EBITDA provides additional understanding of other factors and trends affecting our business, which are used in the business planning process to understand expected performance, to evaluate results against those expectations, and as one of the compensation performance measures under certain compensation programs and plans. We believe Adjusted EBITDA is more reflective of factors that affect our underlying operating performance and facilitate operating performance comparisons of our business segments on a consistent basis over time.

37

Limitations of Use
Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. Certain adjustments to our GAAP financial measures reflected below exclude items that may be considered recurring in nature and may be reflected in our financial results for the foreseeable future. These measurements and items may be different from non-GAAP financial measures used by other companies. All measurements are provided with a reconciliation from a GAAP measurement. The non-GAAP financial measures below should only be considered as an additional supplement to our financial results reported in accordance with GAAP and should be reviewed in conjunction with our results reported in accordance with GAAP in this Annual Report on Form 10-K for the fiscal year ended February 24, 2018 .
There are significant limitations to using Adjusted EBITDA as a financial measure including, but not limited to, it not reflecting cash expenditures for capital assets or contractual commitments, changes in working capital, income taxes, capital lease obligations and debt service expenses that are recurring in our results of operations.
Definitions
We define Adjusted EBITDA as Net earnings (loss) from continuing operations, plus Interest expense, net and Income tax provision (benefit), less Net earnings attributable to noncontrolling interests calculated in accordance with GAAP, plus non-GAAP adjustments for Depreciation and amortization, LIFO charge (credit), certain employee-related costs and pension-related charges (including severance costs, pension settlement charges, multiemployer pension withdrawal charges, accelerated stock-based compensation charges and other items), certain non-cash asset impairment and other charges (including asset write-offs, store closures and market exits), certain gains and losses on the sale of property, goodwill and intangible asset impairment charges, costs related to the separation of businesses, legal settlement charges and gains, contract breakage costs and certain other non-cash charges or items, as determined by management.
The following table reconciles Adjusted EBITDA to Net earnings (loss) from continuing operations:
 
2018 
 (52 weeks)
 
2017 
 (52 weeks)
 
2016 
 (52 weeks)
 
2015 
 (53 weeks)
 
2014 
 (52 weeks)
Net earnings (loss) from continuing operations
$
49

 
$
35

 
$
49

 
$
(23
)
 
$
(133
)
Less net earnings attributable to noncontrolling interests
(1
)
 
(4
)
 
(8
)
 
(7
)
 
(7
)
Income tax provision (benefit)
28

 
(15
)
 
4

 
(50
)
 
(97
)
Interest expense, net
132

 
180

 
193

 
241

 
400

Depreciation and amortization
197

 
173

 
175

 
186

 
198

LIFO charge (credit)
1

 
1

 
3

 
8

 
(10
)
Merger and integration costs (1)
37

 
—

 
—

 
—

 
—

Legal reserve charge (2)
9

 
—

 
—

 
—

 
—

Severance costs (benefits) (3)
8

 
(1
)
 
6

 
1

 
41

Store closure charges and costs (4)
3

 
5

 
6

 
—

 
—

Asset impairment and other charges, net of gains (5)
2

 
—

 
—

 
—

 
(2
)
Pension, multi-employer and benefit plan settlement charges (6)
—

 
42

 
—

 
69

 
3

Goodwill and intangible asset impairment charges (7)
—

 
13

 
6

 
—

 
—

Contract breakage costs and certain other charges (8)
—

 
—

 
—

 
—

 
6

Information technology intrusion costs, net of insurance recoverable (9)
—

 
—

 
—

 
1

 
—

Sales and use tax refunds (10)
—

 
(2
)
 
—

 
—

 
—

Supply agreement termination fees (11)
—

 
(9
)
 
—

 
—

 
—

Gain on sale of property (12)
(3
)
 
—

 
—

 
—

 
—

Vendor settlement income (13)
(5
)
 
—

 
—

 
—

 
—

Benefit plan termination gain (14)
(8
)
 
—

 
—

 
—

 
—

Gain on sale of unconsolidated affiliates (15)
(13
)
 
—

 
—

 
—

 
—

Adjusted EBITDA
$
436

 
$
418

 
$
434

 
$
426

 
$
399


38

(1)
Merger and integration costs relate to the acquisition and integration of Unified and AG Florida and primarily reflect employee severance and transition costs, acquisition costs and a multiemployer pension withdrawal charge. We expect to continue to incur merger and integration costs until the completion of the integration of Unified and AG Florida.
(2)
Legal reserve charge reflects a settlement for certain legal proceedings.
(3)
Severance costs primarily reflect termination costs for employees who are not part of our on-going business. The fiscal 2017 severance benefit includes a reversal of a portion of severance costs in fiscal 2016.
(4)
Store closure charges and costs include impairment, severance and related costs due to store closures, including the sale of pharmacy prescription files related to a store closure.
(5)
Asset impairment charges include non-cash charges related to our Retail business in fiscal 2018 and amounts related to our Retail and Wholesale business in fiscal 2014, with an offsetting gain on the sale of property in fiscal 2014 related to the Wholesale business.
(6)
Pension settlement charges in fiscal 2017 and 2015 reflect accelerated amortization of accumulated actuarial loss associated with lump sum settlement payments made to certain deferred vested pension plan participants made by the SUPERVALU Retirement Plan under a lump sum payment option window.
(7)
Goodwill and intangible asset impairment charges include a non-cash goodwill impairment charge related to our Retail business in fiscal 2017 and a non-cash intangible asset impairment charge related to our non-exercise of certain options to purchase operating assets in fiscal 2016.
(8)
Contract breakage costs relate to continuing operations break-up costs from the sale of NAI.
(9)
Information technology intrusion costs include costs related to the intrusions discussed in Note 16—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part II, Item 8 of this Annual Report on Form 10-K.
(10)
Sales and use tax refunds reflect refunds received related to prior years.
(11)
Supply agreement termination fees reflect cash gains related to the termination of supply agreements.
(12)
Gain on sale of property primarily reflects cash received in excess of the property’s carrying value.
(13)
Vendor settlement income reflect funds received from vendors related to prior year claim settlements.
(14)
Benefit plan termination gain reflects the cancellation of certain non-qualified benefit plans.
(15)
Gain on sale of unconsolidated affiliates reflects the proceeds received from the sale of equity investments.

LIQUIDITY AND CAPITAL RESOURCES
Overview
•
Unused available credit under our $1,000 asset-based revolving credit facility (the “Revolving ABL Credit Facility”) increased $68 to $816 as of February 24, 2018 from $748 as of February 25, 2017 .
•
In fiscal 2018, we completed the refinancing of the term loan facility (“Secured Term Loan Facility”) due March 2019, which among other changes, reduced the interest rate by 1.00 percent for both LIBOR and Prime rate based loans and extended the maturity to June 2024, subject to certain acceleration provisions.
•
Cash and cash equivalents decreased $286 to $41 as of February 24, 2018 from $327 as of February 25, 2017 , primarily due to the net cash used in investing activities of continuing operations in fiscal 2018.
•
Total debt increased $469 to $1,732 as of February 24, 2018 from $1,263 as of February 25, 2017 , primarily related to the additional borrowings under the Secured Term Loan Facility to finance the Unified acquisition, borrowings under the Revolving ABL Credit Facility to finance the AG Florida acquisition and new loans to finance the Harrisburg, PA distribution center acquisition and related improvements.
•
Scheduled debt maturities are expected to be $8 in fiscal 2019 and payments to reduce capital lease obligations are expec ted to be approximately $26 for fiscal 2019 .
•
Working capital of continuing operations increased $3 to $464 as of February 24, 2018 from $461 as of February 25, 2017 , excluding the impacts of the LIFO reserve. The working capital increase is primarily due to the acquired working capital from the Unified and AG Florida acquisitions, offset in part by a reduction in the cash balance that was utilized in the acquisitions of Unified and AG Florida.
•
We expect to be able to fund debt maturities through internally generated funds, borrowings under the Revolving ABL Credit Facility, additional term loans under the Secured Term Loan Facility (subject to identifying term loan lenders or other institutional lenders and satisfying certain terms and conditions) or through new debt issuances.
•
In fiscal 2019, $4 of minimum pension contributions are required to be made under the Unified Grocers, Inc. Cash Balance Plan under Employee Retirement Income Security Act of 1974, as amended (“ERISA”). No minimum pension contributions are required to be made to the SUPERVALU Retirement Plan under ERISA in fiscal 2019.
Sources and Uses of Cash
We expect to continue to replenish operating assets with internally generated funds and pay down debt obligations with internally generated funds and new debt issuances or existing credit facilities. A significant reduction in operating earnings or the incurrence of operating losses could have a negative impact on our operating cash flow, which may limit our ability to pay down our outstanding indebtedness as planned. Our credit facilities are secured by a substantial portion of our total assets.
Our primary sources of liquidity are from internally generated funds and from borrowing capacity under our credit facilities. We will continue to obtain short-term and long-term financing from our credit facilities. Long-term financing will be maintained through existing and new debt issuances and our credit facilities. Our short-term and long-term financing abilities are believed to be adequate as a supplement to internally generated cash flows to fund debt obligations and capital expenditures as opportunities arise. There can be no assurance, however, that our business will continue to generate cash flow at current

39

levels or that it will continually have access to credit on acceptable terms. Maturities of debt issued will depend on management’s views with respect to the relative attractiveness of interest rates at the time of issuance and other debt maturities.
Primary uses of cash include debt servicing and maturities, capital expenditures, working capital maintenance, contributions to various benefit plans and income tax payments. Our working capital needs are generally greater during the months leading up to high sales periods, such as the time period from prior to Thanksgiving through December. We typically finance these working capital needs with cash provided from operating activities and short-term borrowings. Inventories are managed primarily through demand forecasting and replenishing depleted inventories. Strategic and operational investments in our businesses are funded by cash provided from operating activities and on a short-term basis through available liquidity.
Our continued access to short-term and long-term financing through credit markets depends on numerous factors, including the condition of the credit markets and our results of operations, cash flows, financial position and credit ratings.
We do not pay dividends and there is no current intent to pay dividends. We are limited in the aggregate amount of dividends that we may pay under the terms of our Secured Term Loan Facility and our Revolving ABL Credit Facility and would need to meet certain conditions under these credit facilities before paying a dividend. The payment of future dividends is subject to the discretion of our Board of Directors and the requirements of Delaware law, and will depend on a variety of factors that our Board of Directors may deem relevant.
Refer to Note 9—Long-Term Debt in Part II, Item 8 of this Annual Report on Form 10-K for a detailed discussion of the provisions of our credit facilities and certain long-term debt agreements and additional information.
Cash Flow Information
The following summarizes our Consolidated Statements of Cash Flows:
 
2018 
 (52 weeks)
 
2017 
 (52 weeks)
 
2016 
 (52 weeks)
 
2018 Change
 
2017 Change
Cash flow activities
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities – continuing operations
$
139

 
$
233

 
$
178

 
$
(94
)
 
$
55

Net cash used in investing activities—continuing operations
(494
)
 
(149
)
 
(172
)
 
(345
)
 
23

Net cash provided by (used in) financing activities—continuing operations
88

 
(1,107
)
 
(192
)
 
1,195

 
(915
)
Net cash (used in) provided by discontinued operations
(17
)
 
1,298

 
129

 
(1,315
)
 
1,169

Net (decrease) increase in cash and cash equivalents
(284
)
 
275

 
(57
)
 
(559
)
 
332

Cash and cash equivalents at beginning of year
332

 
57

 
114

 
275

 
(57
)
Cash and cash equivalents at the end of year
48

 
332

 
57

 
(284
)
 
275

Less cash and cash equivalents of discontinued operations at end of year
(7
)
 
(5
)
 
(17
)
 
(2
)
 
12

Cash and cash equivalents of continuing operations at end of year
$
41

 
$
327

 
$
40

 
$
(286
)
 
$
287

Operating Activities
The decrease in net cash provided by operating activities from continuing operations in fiscal 2018 compared to fiscal 2017 is primarily due to higher levels of cash utilized in operating assets and liabilities, such as accounts payable and accrued liabilities, and inventories, which were offset in part by $60 of lower contributions to benefit plans. Cash utilized in inventories increased $41 primarily due to higher wholesale inventories required to support new affiliations and sales growth.
The increase in net cash provided by operating activities from continuing operations in fiscal 2017 compared to fiscal 2016 is primarily due to lower levels of cash utilized in operating assets and liabilities, offset in part by lower cash generated from earnings and $22 of higher contributions to benefit plans.
Investing Activities
The increase in net cash used in investing activities in fiscal 2018 compared to fiscal 2017 is primarily due to $239 of higher cash payments for business combinations primarily due to the acquisitions of Unified and AG Florida, and an increase in purchases of property, plant and equipment of $125 primarily for the purchase of distribution centers in Joliet, Illinois and Harrisburg, Pennsylvania.

40

The decrease in cash used in investing activities in fiscal 2017 compared to fiscal 2016 is primarily due to a $23 decrease in cash paid for other intangible assets.
Financing Activities
The increase in net cash provided by financing activities in fiscal 2018 compared to fiscal 2017 is primarily due to the delayed draw under our term loan facility of $315, which was drawn down in full in fiscal 2018 for the purpose of consummating the acquisition of Unified, borrowings in fiscal 2018 of $127 compared to net payments of $138 in fiscal 2017 under the Revolving ABL Credit Facility, new loans in fiscal 2018 to finance the Harrisburg, PA distribution center acquisition and related improvements, and debt repayments of $99 made in fiscal 2017 that were not required in fiscal 2018. These items were partially offset by the repayment of acquired debt of $285 and $64 associated with the acquisitions of Unified and AG Florida, respectively.
The increase in net cash used in financing activities in fiscal 2017 compared to fiscal 2016 is primarily due to a $995 net increase in cash paid towards debt and capital lease obligations, of which $832 related to required prepayments of outstanding loans under the Secured Term Loan Facility following the sale of Save-A-Lot, and a $7 decrease in proceeds from the sale of common stock, offset in part by $80 of proceeds from increased borrowings under the Revolving ABL Credit Facility, $3 of lower distributions to noncontrolling interests and $3 of lower debt financing cost payments.
Discontinued Operations Activities
The decrease in net cash provided by discontinued operations in fiscal 2018 compared to fiscal 2017 is primarily due to $1,301 of proceeds received from the sale of Save-A-Lot in fiscal 2017 and lower cash generated from earnings from discontinued operations due to the partial fiscal year in 2017, offset in part by lower cash paid for discontinued operations capital expenditures for Save-A-Lot stores and stores formerly part of the Retail segment that are now included in discontinued operations.
The increase in net cash provided by discontinued operations in fiscal 2017 compared to fiscal 2016 is primarily due to $1,301 of proceeds received from the sale of Save-A-Lot, offset in part by lower cash generated from earnings from discontinued operations due to the partial fiscal year in 2017.
Capital Expenditures
The following summarizes capital expenditures and payments for business combinations of continuing operations:
•
Capital expenditures in fiscal 2018 were $277 and primarily consisted of two distribution center acquisitions and their related capital improvements, certain Retail store remodels and information technology investments. In addition, during fiscal 2018 , we paid $240 to acquire equity interests in Unified and AG Florida.
•
Capital expenditures in fiscal 2017 were $168 and primarily consisted of Wholesale capital expenditures for maintenance capital and capital expenditures to support higher Wholesale sales, Retail investments in store remodels and new stores, and information technology investments.
Capital expenditures for fiscal 2019 are estimated to be approximately $190 to $210 and primarily relate to investments in our newly acquired distribution centers and network optimization, Retail store remodels and information technology investments. The anticipated decrease in capital expenditures for fiscal 2019 in comparison to fiscal 2018 primarily relates to the strategic acquisition of two distribution centers and the related improvements to these facilities in fiscal 2018.
We define capital expenditures as cash payments for purchases of property, plant and equipment plus non-cash capital lease additions, and exclude payments for business acquisitions and capitalized property, plant and equipment obligations for which cash payments have not been made and obligations exist within Accounts payable.
Pension and Other Postretirement Benefit Obligations
Cash contributions to defined benefit pension and other postretirement benefit plans were $2 , $62 and $40 in fiscal 2018 , 2017 and 2016 , respectively. The decrease in cash contributions in fiscal 2018 compared to fiscal 2017 is primarily due to not being required to make minimum contributions in fiscal 2018 compared to the $60 of contributions to the SUPERVALU Retirement Plan in excess of required minimum contributions as required under the agreement with the Pension Benefit Guaranty Corporation entered into in connection with the sale of Save-A-Lot in fiscal 2017. Cash contributions increased in fiscal 2017 compared to fiscal 2016 primarily due to the $60 of contributions discussed above.
In fiscal 2019, $4 of minimum pension contributions are required to be made under the Unified Grocers, Inc. Cash Balance Plan under Employee Retirement Income Security Act of 1974, as amended (“ERISA”). No minimum pension contributions are required to be made to the SUPERVALU Retirement Plan under ERISA in fiscal 2019. We anticipate fiscal 2019

41

discretionary pension contributions and required minimum other postretirement benefit plan contributions will be approximately $5 to $10 .
We fund our defined benefit pension plans based on the minimum contribution amount required under ERISA, the Pension Protection Act of 2006 and other applicable laws, as determined by us, including our external actuarial consultant, and additional contributions made at our discretion. We may accelerate contributions or undertake contributions in excess of the minimum requirements from time to time subject to the availability of cash in excess of operating and financing needs or other factors as may be applicable. We assess the relative attractiveness of the use of cash to accelerate contributions considering such factors as expected return on assets, discount rates, cost of debt, reducing or eliminating required Pension Benefit Guaranty Corporation variable rate premiums or in order to achieve exemption from participant notices of underfunding.
CRITICAL ACCOUNTING POLICIES
The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“Accounting Standards”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant accounting policies are discussed in Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Management believes the following critical accounting policies reflect our more subjective or complex judgments and estimates used in the preparation of our Consolidated Financial Statements.
Business Combinations
We account for acquired businesses using the purchase method of accounting, which requires the acquired assets and assumed liabilities be recorded at their estimated fair values. Goodwill recognized from the valuation of the acquired businesses represents the excess of the consideration transferred over the estimated fair values of the net assets recorded. In determining the estimated fair value of acquired intangible assets, we typically utilize the income approach, which discounts the projected future cash flows using an appropriate discount rate that reflects the risks associated the projected cash flows. Unanticipated market or macroeconomic events and circumstances may occur that could affect the accuracy or validity of the estimates and assumptions. Other significant judgments include the estimated fair value of real and personal property that utilizes significant inputs such as rental rates and discount rates to determine the fair value of the acquired assets, and the market approach that utilizes significant inputs such as market rental rates and sales comparisons. Fair value estimates are based on available historical information, future expectations and assumptions determined to be reasonable but are inherently uncertain with respect to future events, including economic conditions, competition, the useful life of the acquired assets and other factors.
Inventories, Net
Inventories are valued at the lower of cost or market. Substantially all of our inventory consists of finished goods. Inventories are recorded net of vendor allowances and cash discounts. We evaluate inventory shortages (shrink) throughout each fiscal year based on actual physical counts in our facilities. Allowances for inventory shortages are recorded based on the results of these counts to provide for estimated shortages as of the end of each fiscal year.
To value discrete inventory items at lower of cost or market before application of any LIFO reserve, we use the weighted average cost method, standard costs, the retail inventory method (“RIM”) or the replacement cost method. Inventories were valued at the lower of cost or market under the following methods as of February 24, 2018 : weighted average cost method, 64 percent ; Standard costs, 23 percent ; RIM, 10 percent ; and replacement cost method, 3 percent .
The replacement cost approach under the FIFO method is predominantly utilized in determining the value of high turnover perishable items, including produce, deli, bakery, meat and floral, and pharmacy inventory. The replacement cost approach results in inventories valued at the lower of cost or market because of the high inventory turnover and the resulting low inventory days supply on hand combined with infrequent vendor price changes for these items of inventory.
RIM is used in valuing retail inventories. Under this method, the valuation of inventories is at cost and the resulting gross margins are calculated by applying a calculated cost-to-retail ratio to the retail value of inventories. RIM is an averaging method that has been widely used in the retail industry. Inherent in the RIM calculations are certain significant management judgments and estimates, including inventory shortages and cost-to-retail ratios, which impact the ending inventory valuation at cost, as well as the resulting gross margins. Management consistently applies its application of RIM valuations by product

42

category and believes our RIM provides an inventory valuation that reasonably approximates cost. For fiscal 2018 , a one percent change in the cost-to-retail ratios used to value inventories would impact Gross profit by less than 30 basis points .
Vendor Funds
We receive funds from many of the vendors whose products we buy for resale. These vendor funds are provided to increase the sell-through of the related products. We receive vendor funds for a variety of merchandising activities: placement of the vendors’ products in our advertising; display of the vendors’ products in prominent locations in our stores; supporting the introduction of new products into our stores and distribution centers; exclusivity rights in certain categories; and to compensate for temporary price reductions offered to customers on products held for sale. We also receive vendor funds for buying activities such as volume commitment rebates, credits for purchasing products in advance of their need and cash discounts for the early payment of merchandise purchases. The majority of the vendor fund contracts have terms of less than a year, with a small proportion of the contracts longer than one year.
We recognize vendor funds for merchandising activities as a reduction of Cost of sales when the related products are sold. Vendor funds that have been earned as a result of completing the required performance under the terms of the underlying agreements but for which the product has not yet been sold are recognized as reductions of inventory.
The amount and timing of recognition of vendor funds as well as the amount of vendor funds to be recognized as a reduction to ending inventory requires management judgment and estimates. Management determines these amounts based on estimates of current year purchase volume using forecast and historical data, and a review of average inventory turnover data. These judgments and estimates impact our reported gross profit, operating earnings and inventory amounts. The historical estimates have been reliable in the past, and we believe our methodology will continue to be reliable in the future. Based on previous experience, we do not expect significant changes in the level of vendor support. However, if such changes were to occur, cost of sales and advertising expense could change, depending on the specific vendors involved. If vendor advertising allowances were substantially reduced or eliminated, we would consider changing the volume, type and frequency of the advertising, which could increase or decrease our advertising expense. Similarly, we are not able to assess the impact of vendor advertising allowances on increasing revenues as such allowances do not directly generate revenue for our stores. For fiscal 2018 , a one percent change in total vendor funds earned, including advertising allowances, with no offsetting changes to the base price on the products purchased, would impact Gross profit by less than 10 basis points.
Long-Lived Assets
We monitor the recoverability of our long-lived assets and test them for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. If impairment is identified for long-lived assets to be held and used, the fair value is compared to the carrying value of the group of assets and an impairment charge is recorded for the excess of the carrying value over the fair value.
Significant management judgments and estimates are used in accounting for long-lived assets, including, but not limited to, the determination of useful lives estimates, dependency of identifiable cash flows, projected undiscounted cash flows and fair values based on current market values or discounted cash flows using Level 3 inputs.
Determinations of geographic markets utilized in grouping assets and the interdependency of cash flows rely on significant judgments by management. We believe revenue and cash flow dependencies exist among stores within our markets and operate our stores on that basis. We review our long-lived asset groupings at least annually or as facts and circumstances arise during interim periods that indicate a review should occur. We conducted reviews during the fourth quarter of fiscal 2018 and 2017 , and no changes to geographic market asset groupings were made as a result of these reviews. Due to the highly competitive environment and our ongoing strategic transformation, we continue to evaluate if modifications to the estimation approach of our long-lived asset groups are necessary. Future changes to our long-lived asset policy and changes in circumstances, operating results or other events may result in additional asset impairment testing and charges.
We estimate fair values based on our experience and knowledge of the market in which the property is located, including local real estate brokers and advisers. Our estimate of undiscounted cash flows attributable to the asset groups includes only future cash flows that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset group.

43

To calculate projected future cash flows, we utilize business plans that take into account operational changes, competitive factors and inflation, among other factors. Using different assumptions or estimates could result in a change in estimated cash flows and fair values that could produce different results. The composition of cash flows for identifiable cash flows that are grouped include additional projected cash outflows of operating that asset group as a whole, whereas the composition of cash flows evaluated at the retail store-level and at the distribution center level include only the cash flows required to operate those individual long-lived assets.
During fiscal 2018 and 2017 , we recorded retail asset group impairment charges related to asset groups now classified as held for sale, which are included in (Loss) income from discontinued operations, net of tax in the Consolidated Statement of Operations.
Goodwill
Goodwill is reviewed at least annually for impairment and more frequently if events or changes in circumstances indicate that the asset might be impaired. A qualitative review may be conducted to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative review is bypassed or it is determined that it is more likely than not that the carrying value is greater than the fair value of the reporting unit, a quantitative impairment test must be performed. The quantitative impairment test is performed using a two-step process. In the first step, the fair value of each reporting unit is compared with the carrying amount of the reporting unit, including goodwill. If the estimated fair value is less than the carrying amount of the reporting unit, there is an indication that goodwill impairment exists and a second step is completed in order to determine the amount of the goodwill impairment, if any, that should be recorded. In the second step, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill.
For the purposes of goodwill impairment testing, we have two goodwill reporting units: Wholesale and Retail; which are the same as our reportable segments. The determination of reporting units considers the quantitative and qualitative characteristics of aggregation of each of the components within the Wholesale and Retail operating segments. The significant qualitative and economic characteristics used in determining our components to support their aggregation include types of businesses and the manner in which the components operate, consideration of key impacts to net sales, cost of sales, competitive risks and the extent to which components share assets and other resources. Goodwill was assigned to the Wholesale reporting unit as of the acquisition date, with no amounts being allocated between reporting units.
The Wholesale reporting unit is primarily comprised of the aggregation of three geographic distribution areas, which are organized based on region components: East, Central and West. Our Retail reporting unit is comprised of the aggregation of three retail components under three banners: Cub Foods, Shoppers Food & Pharmacy and Hornbacher’s. Our Retail operations of Farm Fresh, Shop ‘n Save and Shop ‘n Save East, were classified as discontinued operations as of February 24, 2018 .
The fair values of our reporting units are determined by using both the market approach, applying a multiple of earnings and revenue based on guidelines for publicly traded companies, and the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment. The rates used to discount projected future cash flows reflect a weighted average cost of capital based on our industry, capital structure and risk premiums, including those reflected in the current market capitalization.
Fair value calculations contain significant judgments and estimates related to each reporting unit’s projected weighted average cost of capital, future revenue, profitability, cash flows and fair values of assets and liabilities. When preparing these estimates, management considers each reporting unit’s historical results, current operating trends and specific plans in place. These estimates are impacted by variable factors, including inflation, the general health of the economy and market competition. We have sufficient current and historical information available to support our judgments and estimates. However, if actual results are not consistent with our estimates, future operating results may be materially impacted.
We did not record an impairment in fiscal 2018 as a result of our reviews. Discount rates in this analysis ranged between 10 percent and 13 percent to discount projected future cash flows for each reporting unit and perpetual growth rates that ranged between 1 percent and 2 percent. In fiscal 2017 , our impairment review resulted in the write-off of the remaining Retail goodwill.
Management performed sensitivity analyses on the fair values resulting from the discounted cash flow analysis utilizing alternate assumptions that reflect reasonably possible changes to future assumptions. Based upon our analysis of the Wholesale reporting unit, a 100 basis point increase in the discount rate utilized in the discounted cash flow analysis would not have resulted in the Wholesale reporting unit failing step one of the impairment test. Additionally, a 100 basis point decrease in the estimated perpetual sales growth rates utilized in the discounted cash flow analysis would not have resulted in the Wholesale reporting unit failing step one of the impairment test. The fair value of our Wholesale reporting unit was substantially in excess

44

of its carrying value . If our stock price experiences a significant and sustained decline, or other events or changes in circumstances occur , such as a material shortfall of operating results to plan, we would reassess the fair value of our reporting units to their carrying value.
Benefit Plans
We sponsor pension and other postretirement plans in various forms covering substantially all employees who meet eligibility requirements. Pension benefits associated with these plans are generally based on each participant’s years of service, compensation, and age at retirement or termination. Our defined benefit pension plan, the SUPERVALU Retirement Plan, and certain supplemental executive retirement plans were closed to new participants and service crediting ended for all participants as of December 31, 2007.
While we believe the valuation methods used to determine the fair value of plan assets are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
The determination of our obligation and related expense for Company-sponsored pension and other postretirement benefits is dependent, in part, on management’s selection of certain actuarial assumptions used in calculating these amounts. These assumptions include, among other things, the discount rate, the expected long-term rate of return on plan assets and the rates of increase in compensation and healthcare costs. Refer to Note 11—Benefit Plans in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for information related to the actuarial assumptions used in determining pension and postretirement healthcare liabilities and expenses.
We review and select the discount rate to be used in connection with our pension and other postretirement obligations annually. The discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the year. We set our rate to reflect the yield of a portfolio of high quality, fixed-income debt instruments that would produce cash flows sufficient in timing and amount to settle projected future benefits.
Our expected long-term rate of return on plan assets assumption is determined based on the portfolio’s actual and target composition, current market conditions, forward-looking return and risk assumptions by asset class, and historical long-term investment performance. The assumed long-term rate of return on pension assets ranged from 6.0 percent to 6.25 percent for fiscal 2018 and 6.5 percent for fiscal 2017 . The 10-year rolling average annualized return for a portfolio of investments applied in a manner consistent with our target allocations have generated average returns of approximately 6.7 percent based on returns from 1990 to 2017 . In accordance with Accounting Standards, actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, affect expense and obligations in future periods.
For fiscal 2019 , each 25 basis point reduction in the discount rate would decrease pension expense by approximately $1 and each 25 basis point reduction in expected return on plan assets would increase pension expense by approximately $6 . Similarly, for postretirement benefits, a 100 basis point increase in the healthcare cost trend rate would increase the accumulated postretirement benefit obligation by approximately $3 as of the end of fiscal 2018 and would increase service and interest cost by less than $1 . Conversely, a 100 basis point decrease in the healthcare cost trend rate would decrease the accumulated postretirement benefit obligation as of the end of fiscal 2018 by approximately $3 and would decrease service and interest cost by less than $1. Although we believe our assumptions are appropriate, the actuarial assumptions may differ from actual results due to changing market and economic conditions, higher or lower withdrawal rates and longer or shorter life spans of participants.
Amortization of net actuarial loss expense recognition
In fiscal 2018, we began recognizing the amortization of net actuarial loss on the SUPERVALU Retirement Plan over the remaining life expectancy of inactive participants based on our determination that almost all of the defined benefit pension plan participants are inactive and the plan is frozen to new participants. For the purposes of inactive participants, we utilized an over approximately 90 percent threshold established under our policy. This change did not affect the measurement of total benefit obligations in fiscal 2017, and instead impacts the recognition of certain components of net periodic pension expense prospectively. The impact of the change in estimate was a reduction of the interest and service cost components within net periodic benefit cost by $31 for the defined benefit pension plans.

45

Full yield curve expense recognition
Effective fiscal 2017, we adopted the “full yield curve” approach for determining the interest and service cost components of net periodic benefit cost for defined benefit pension and other postretirement benefit plans. Under this method, the discount rate assumption used in the interest and service cost components of net periodic benefit cost is built through applying the specific spot rates along the yield curve used in the determination of the benefit obligation described above, to the relevant projected future cash flows of our pension and other postretirement benefit plans. Prior to fiscal 2017, the interest and service cost components of pension expense were estimated using a single weighted-average discount rate derived from the yield curve used to measure the projected benefit obligation at the beginning of the period.
We believe the “full yield curve” approach reflects a greater correlation between projected benefit cash flows and the corresponding yield curve spot rates and provides a more precise measurement of interest and service costs. This change did not affect the measurement of total benefit obligation. We concluded that the application of the full yield curve approach was a change in estimate and, accordingly, recognized the effect beginning in fiscal 2017. The impact of the change in estimate reduced interest and service cost components within net periodic benefit cost in fiscal 2017 by approximately $22 for the defined benefit pension plans and less than $1 for postretirement benefit plans compared to the fiscal 2016 approach.
Income Taxes
Our current and deferred tax provision is based on estimates and assumptions that could materially differ from the actual results reflected in our income tax returns filed during the subsequent year and could significantly affect the effective tax rate and cash flows in future years.
We recognize deferred tax assets and liabilities for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts using enacted tax rates in effect for the year in which we expect the differences to reverse.
Our effective tax rate is influenced by tax planning opportunities available in the various jurisdictions in which we operate. Management’s judgment is involved in determining the effective tax rate and in evaluating the ultimate resolution of any uncertain tax positions. In addition, we are currently in various stages of audits, appeals or other methods of review with taxing authorities from various taxing jurisdictions. We establish liabilities for unrecognized tax benefits in a variety of taxing jurisdictions when, despite management’s belief that our tax return positions are supportable, certain positions may be challenged and may need to be revised. We adjust these liabilities in light of changing facts and circumstances, such as the progress of a tax audit. The effective income tax rate includes the impact of reserve provisions and changes to those reserves. We also provide interest on these liabilities at the appropriate statutory interest rate. The actual benefits ultimately realized for tax positions may differ from our estimates due to changes in facts, circumstances and new information. As of February 24, 2018 and February 25, 2017 , we had $40 and $59 of unrecognized tax benefits, respectively.
We record a valuation allowance to reduce the deferred tax assets to the amount that it is more-likely-than-not to be realized. Forecasted earnings, future taxable income and future prudent and feasible tax planning strategies are considered in determining the need for a valuation allowance. In the event we are not able to realize all or part of our net deferred tax assets in the future, the valuation allowance would be increased. Likewise, if it was determined that we are more-likely-than-not to realize the net deferred tax assets, the applicable portion of the valuation allowance would reverse. We had a valuation allowance of $787 and $1,196 as of February 24, 2018 and February 25, 2017 , respectively.

46

OFF-BALANCE SHEET ARRANGEMENTS
Guarantees and Contingent Liabilities
We have outstanding guarantees related to certain leases, fixture financing loans and other debt obligations of various retailers as of February 24, 2018 . We are contingently liable for leases that have been assigned to various third parties in connection with facility closings and dispositions. We are also a party to a variety of contractual agreements under which we may be obligated to indemnify the other party for certain matters in the ordinary course of business, which indemnities may be secured by operation of law or otherwise. Refer to Note 16—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding our outstanding guarantees and contingent liabilities.
Multiemployer Benefit Plans
We contribute to various multiemployer pension plans under collective bargaining agreements, primarily defined benefit pension plans. These multiemployer plans generally provide retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose. Plan trustees typically are responsible for determining the level of benefits to be provided to participants as well as the investment of the assets and plan administration. Trustees are appointed in equal number by employers and unions that are parties to the collective bargaining agreement.
Expense is recognized in connection with these plans as contributions are funded, in accordance with Accounting Standards. We made contributions to these plans, and recognized continuing operations expense, of $44 , $36 and $36 in fiscal 2018 , 2017 and 2016 , respectively. Our contributions to these plans could increase in the near term. However, the amount of any increase or decrease in contributions will depend on a variety of factors, including the results of our collective bargaining efforts, investment returns on the assets held in the plans, actions taken by the trustees who manage the plans and requirements under the Pension Protection Act of 2006, the Multiemployer Pension Reform Act and Section 412(e) of the Internal Revenue Code. Furthermore, if we were to significantly reduce contributions, exit certain markets or otherwise cease making contributions to these plans, we could trigger a partial or complete withdrawal that could require us to make withdrawal liability payments to the fund.
Based on the assessment of the most recent information available from the multiemployer plans, we believe that most of the plans to which we contribute are underfunded. We are only one of a number of employers contributing to these plans and the underfunding is not a direct obligation or liability to us. However, we have attempted, as of February 24, 2018 , to estimate our “proportionate share” of the underfunding of multiemployer plans to which we contribute, based on the ratio of our contributions to the total of all contributions to these plans in a year. As of February 24, 2018 , using methods we believe are consistent with those used by the plans to establish the underfunded position, the estimate of our share of the underfunding of multiemployer plans to which we contribute was $562, pre-tax, or $415, after-tax, which includes continuing and discontinued operations. This represents a decrease in our estimated proportionate share of the underfunding of approximately $36, pre-tax, or an increase of $27, after-tax, as of February 24, 2018 , compared to February 25, 2017 due to a decrease in the statutory tax rate. The estimate is based on the most current information available to us, including actuarial evaluations and other data, and may be outdated or otherwise unreliable. Our proportionate share of underfunding described above is an estimate and could change based on the results of collective bargaining efforts, investment returns on the assets held in the plans, actions taken by trustees who manage the plans’ benefit payments and requirements under the Pension Protection Act of 2006, the Multiemployer Pension Reform Act and Section 412(e) of the Internal Revenue Code. This share of underfunding does not represent a multiemployer pension withdrawal obligation.
Our contributions can fluctuate from year to year due to store closures and reductions in headcount. In fiscal 2019 , we expect to contribute approximately $50 to $60 related to continuing operations contributions to the multiemployer pension plans, subject to the outcome of collective bargaining and capital market conditions. Furthermore, if we were to significantly reduce contributions, exit certain markets or otherwise cease making contributions to these plans, it could trigger a partial or complete withdrawal that would require us to record a withdrawal liability. Any withdrawal liability would be recorded when it is probable that a liability exists and can be reasonably estimated, in accordance with Accounting Standards.
We also make contributions to multiemployer health and welfare plans in amounts set forth in the related collective bargaining agreements. A small minority of collective bargaining agreements contain reserve requirements that may trigger unanticipated contributions resulting in increased healthcare expenses. If these healthcare provisions cannot be renegotiated in a manner that reduces the prospective healthcare cost as we intend, our Selling and administrative expenses could increase in the future.
Refer to Note 11—Benefit Plans in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding the plans in which we participate.

47

RECENTLY ISSUED ACCOUNTING STANDARDS
Refer to  Note 1—Summary of Significant Accounting Policies  in Part II, Item 8 of this Annual Report on Form 10-K under the caption “ Recently Issued Accounting Standards ” for a discussion of other recently issued accounting standards not yet adopted, and for which we are currently evaluating their impact on our Consolidated Financial Statements.
CONTRACTUAL OBLIGATIONS
The following table represents our significant contractual obligations as of February 24, 2018 :
 
Payments Due Per Period
 
Total
 
Fiscal 2019
 
Fiscal 2020-2021
 
Fiscal 2022-2023
 
Thereafter
Contractual obligations (1)(2) :
 
 
 
 
 
 
 
 
 
Long-term debt (3)
$
1,759

 
$
8

 
$
154

 
$
800

 
$
797

Interest on long-term debt (4)
513

 
103

 
204

 
151

 
55

Operating leases (5)
368

 
67

 
123

 
70

 
108

Capital leases (6)
253

 
40

 
72

 
53

 
88

Purchase obligations (7)
391

 
176

 
144

 
71

 
—

Self-insurance obligations (8)
72

 
21

 
23

 
11

 
17

Total contractual obligations
$
3,356

 
$
415

 
$
720

 
$
1,156

 
$
1,065

(1)
Because the timing of certain future payments beyond fiscal 2019 cannot be reasonably determined, contractual obligations payments due per fiscal period presented here exclude our discretionary funding of our pension and required funding of our postretirement benefit obligations, which totaled $2 for fiscal 2018 , and multiemployer pension plan contributions, which totaled $50 for fiscal 2018 . Pension and postretirement benefit obligations were $271 as of February 24, 2018 . We expect to contribute $5 to $10 t o pension and postretirement benefit plans during fiscal 2019 , but are not required to make minimum pension contributions.
(2)
Unrecognized tax benefits, which totaled $40 as of February 24, 2018 , were excluded from the contractual obligations table because an estimate of the timing of future tax settlements cannot be reasonably determined.
(3)
Long-term debt amounts exclude original issue discounts and deferred financing costs. Long-term debt payments due per fiscal period for 2019 through thereafter exclude any Excess Cash Flow prepayments that may be required under the provisions of the Secured Term Loan Facility because the amount of future prepayment amounts, if any, are not reasonably estimable as of  February 24, 2018 .
(4)
Amounts include contractual interest payments using the interest rate as of February 24, 2018 applicable to our variable interest debt instruments (including variable interest rates under the Secured Term Loan Facility that have been swapped to fixed interest rates) and stated fixed rates for all other debt instruments.
(5)
Represents the minimum rents payable under operating leases, excluding common area maintenance, insurance or tax payments, for which we are also obligated, offset by minimum subtenant rentals of $78 , $16 , $28 , $16 and $18 , respectively.
(6)
Represents the minimum payments under capital leases, excluding common area maintenance, insurance or tax payments, for which we are also obligated, offset by minimum subtenant rentals of $22 , $5 , $7 , $5 and $5 , respectively.
(7)
Our purchase obligations include various obligations that have annual purchase commitments of $1 or greater. As of February 24, 2018 , future purchase obligations existed that primarily related to fixed asset and information technology commitments. In addition, in the ordinary course of business, we enter into supply contracts to purchase product for resale to Wholesale customers and to consumers, which are typically of a short-term nature with limited or no purchase commitments. The majority of our supply contracts are short-term in nature and relate to fixed assets, information technology and contracts to purchase product for resale. These supply contracts typically include either volume commitments or fixed expiration dates, termination provisions and other standard contractual considerations. The supply contracts that are cancelable have not been included above.
(8)
Our insurance reserves include the undiscounted obligations related to workers’ compensation, general and automobile liabilities at the estimated ultimate cost of reported claims and claims incurred but not yet reported and related expenses.

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not use financial instruments or derivatives for any trading or other speculative purposes.
Interest Rate Risk
We are exposed to market pricing risk consisting of interest rate risk related to debt obligations and notes receivable outstanding. Interest rate risk is managed through the strategic use of fixed and variable rate debt and, to a limited extent, derivative financial instruments. Variable interest rate debt (bank loans and revolving lines of credit) is utilized to help maintain liquidity and finance business operations. Variable rate borrowings consist primarily of LIBOR and prime rate based loans, some of which contain interest rate floors. Long-term debt with fixed interest rates is used to assist in managing debt maturities and to diversify sources of debt capital. Changes in interest rates related to debt with fixed interest rates do not have an impact upon future results of operations and cash flow while outstanding; however, if additional debt issuances are required to fund fixed rate debt maturities, future results of operations or cash flows may be impacted.
Loans are extended to certain Wholesale customers in the normal course of business through notes receivable. The notes generally bear fixed interest rates negotiated with each Wholesale customer. The market value of the fixed rate notes is subject to change due to fluctuations in market interest rates.
In February 2016, we effectively converted $300 of variable rate debt under our Secured Term Loan Facility to a fixed rate by swapping the variable LIBOR rate component to a fixed rate of 2.0075 percent through an outstanding interest rate swap agreement, which matures in March 2019. This transaction was entered into to reduce our exposure to changes in market interest rates associated with our variable rate debt. Changes in market interest rates affecting the fair value of the financial instrument, unfavorable changes in interest expense, and counterparty credit risk are some of the risks associated with utilizing interest rate swaps. On June 8, 2017, we entered into a fourth amendment to the Secured Term Loan Facility, which decreased the interest rate for the term loan from LIBOR plus 4.50 percent to LIBOR plus 3.50 percent. Following this amendment, the all-in rate for this $300 tranche was 5.5075 percent. As of February 24, 2018 , a 100 basis point increase in forward LIBOR interest rates would increase the fair value of the interest rate swap by approximately $3 ; a 100 basis point decrease would decrease the fair value by approximately $3 .
The table below provides information about our financial instruments that are sensitive to changes in interest rates, including debt obligations, notes receivable and interest rate swaps. For debt obligations, the table presents principal payments and related weighted average interest rates by year of maturity using interest rates as of February 24, 2018 , applicable to variable interest debt instruments and stated fixed rates for all other debt instruments, excluding any original issue discounts and deferred financing costs. For notes receivable, the table presents the expected collection of principal cash flows and weighted average interest rates by expected year of maturity. For the interest rate swap agreement, the table presents the differential between interest payable and interest receivable under the swap agreement utilized to compute the fair value of the interest rate swaps.

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Table of Contents

 
Interest Rate Positions as of February 24, 2018
 
February 24,
2018
 
Aggregate Payments/Receipts by Fiscal Year
 
Fair
Value
 
Total
 
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
(in millions, except rates)
Debt with variable interest rates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal payments
$
701

 
$
709

 
$
8

 
$
13

 
$
141

 
$
14

 
$
36

 
$
497

Variable interest rate
 
 
5.0
%
 
4.8
%
 
4.8
%
 
4.8
%
 
5.0
%
 
5.0
%
 
5.1
%
Debt with fixed interest rates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal payments on senior notes
$
735

 
$
750

 
$
—

 
$
—

 
$
—

 
$
400

 
$
350

 
$
—

Average fixed rate
 
 
7.2
%
 
—
%
 
—
%
 
—
%
 
6.8
%
 
7.8
%
 
—
%
Principal payments on floating rate debt converted to fixed rate debt (1)
$
297

 
$
300

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
300

Fixed interest rate
 
 
5.5
%
 
—
%
 
—
%
 
—
%
 
—
%
 
—
%
 
5.5
%
Notes receivable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal receivable
$
48

 
$
49

 
$
13

 
$
7

 
$
6

 
$
5

 
$
6

 
$
12

Average rate receivable
 
 
5.6
%
 
5.4
%
 
6.7
%
 
6.4
%
 
6.1
%
 
5.6
%
 
4.8
%
Interest rate swap related to debt with variable interest rates: (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Forward starting fixed rate paid
$
—

 
2.0
%
 
—
%
 
2.0
%
 
—
%
 
—
%
 
—
%
 
—
%
Forward starting variable rate received
 
 
Rate A (2)

 
—
%
 
Rate A (2)

 
—
%
 
—
%
 
—
%
 
—
%
(1)
Relates to the $300 of debt with variable interest payments under the Secured Term Loan Facility that converted the variable LIBOR rate component to a fixed rate of 2.0075 percent through an outstanding interest rate swap agreement. Fixed rate payments began in February 2016 and conclude in March 2019. The fair value of this instrument represents a liability of $0 as of February 24, 2018 .
(2)
One-month LIBOR, subject to a 1.00 percent floor.
Investment Risk
The SUPERVALU Retirement Plan, which is a Company-sponsored qualified defined benefit pension plan, holds investments in public and private equity, fixed income and real estate securities, which is described further in Note 11—Benefit Plans in Part II, Item 8 of this Annual Report on Form 10-K. Changes in SUPERVALU Retirement Plan assets can affect the amount of our anticipated future contributions. In addition, increases or decreases in SUPERVALU Retirement Plan assets can result in a related increase or decrease to our equity through Accumulated other comprehensive loss . As of February 24, 2018 , a 10 percent unfavorable change in the value of investments held by the SUPERVALU Retirement Plan would not have had an impact on our minimum contributions required under ERISA for fiscal 2018 , but would have resulted in an unfavorable change in net periodic pension expense for fiscal 2019 of $9 a nd would have reduced stockholders’ equity by $244 on a pre-tax basis as of February 24, 2018 .

50
Table of Contents

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index of Consolidated Financial Statements
 
Page
Consolidated Financial Statements:
 
 
 
All other schedules are omitted because they are not applicable or not required.
 


51
Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
SUPERVALU INC.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of SUPERVALU INC. and subsidiaries (the Company) as of February 24, 2018 and February 25, 2017 , the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit), and cash flows for each of the fiscal years in the three-year period ended February 24, 2018 , and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of February 24, 2018 , based on criteria established in Internal Control—Integrated Framework (2013)  issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 24, 2018 and February 25, 2017 , and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended February 24, 2018 , in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 24, 2018 , based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
The Company acquired Unified Grocers, Inc. and Associated Grocers of Florida, Inc. during the fiscal year ended February 24, 2018, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of February 24, 2018, Unified Grocers, Inc. and Associated Grocers of Florida, Inc. internal control over financial reporting associated with total assets of $477 million and total revenues of $2,624 million included in the consolidated financial statements of the Company as of and for the fiscal year ended February 24, 2018. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Unified Grocers, Inc. and Associated Grocers of Florida, Inc.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also include evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

52

dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
We have served as the Company’s auditor since 1998.
Minneapolis, Minnesota

April 24, 2018


53

SUPERVALU INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
 
Fiscal Years Ended
 
February 24, 2018 
 (52 weeks)
 
February 25, 2017 
 (52 weeks)
 
February 27, 2016 
 (52 weeks)
Net sales
$
14,157

 
$
10,912

 
$
11,283

Cost of sales
12,706

 
9,517

 
9,812

Gross profit
1,451

 
1,395

 
1,471

Selling and administrative expenses
1,258

 
1,187

 
1,224

Goodwill and intangible asset impairment charges
—

 
13

 
6

Operating earnings
193

 
195

 
241

Interest expense, net
132

 
180

 
193

Equity in earnings of unconsolidated affiliates
(16
)
 
(5
)
 
(5
)
Earnings from continuing operations before income taxes
77

 
20

 
53

Income tax provision (benefit)
28

 
(15
)
 
4

Net earnings from continuing operations
49

 
35

 
49

(Loss) income from discontinued operations, net of tax
(3
)
 
619

 
137

Net earnings including noncontrolling interests
46

 
654

 
186

Less net earnings attributable to noncontrolling interests
(1
)
 
(4
)
 
(8
)
Net earnings attributable to SUPERVALU INC.
$
45

 
$
650

 
$
178

 
 
 
 
 
 
Basic net earnings per share attributable to SUPERVALU INC.:
 
 
 
 
 
Continuing operations
$
1.25

 
$
0.82

 
$
1.08

Discontinued operations
$
(0.07
)
 
$
16.35

 
$
3.65

Basic net earnings per share
$
1.18

 
$
17.17

 
$
4.72

Diluted net earnings per share attributable to SUPERVALU INC.:
 
 
 
 
 
Continuing operations
$
1.25

 
$
0.81

 
$
1.06

Discontinued operations
$
(0.07
)
 
$
16.19

 
$
3.59

Diluted net earnings per share
$
1.18

 
$
17.00

 
$
4.66

Weighted average number of shares outstanding:
 
 
 
 
 
Basic
38

 
38

 
38

Diluted
38

 
38

 
38

See Notes to Consolidated Financial Statements.


54
Table of Contents

SUPERVALU INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
 
Fiscal Years Ended
 
February 24, 2018 
 (52 weeks)
 
February 25, 2017 
 (52 weeks)
 
February 27, 2016 
 (52 weeks)
Net earnings including noncontrolling interests
$
46

 
$
654

 
$
186

Other comprehensive income:
 
 
 
 
 
Recognition of pension and other postretirement benefit obligations (1)
66

 
142

 
5

Recognition of interest rate swap cash flow hedge (2)
2

 
2

 
(4
)
Total other comprehensive income
68

 
144

 
1

Comprehensive income including noncontrolling interests
114

 
798

 
187

Less comprehensive income attributable to noncontrolling interests
(1
)
 
(4
)
 
(8
)
Comprehensive income attributable to SUPERVALU INC.
$
113

 
$
794

 
$
179


(1) Amounts are net of tax expense of $20 , $70 , and $14 for fiscal 2018 , fiscal 2017 and fiscal 2016 , respectively.
(2) Amounts are net of tax expense (benefit) of $(2) , $1 , and $(2) for fiscal 2018 , fiscal 2017 and fiscal 2016 , respectively.
See Notes to Consolidated Financial Statements

55
Table of Contents

SUPERVALU INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In millions, except par value data)
 
February 24,
2018
 
February 25,
2017
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
41

 
$
327

Receivables, net
590

 
376

Inventories, net
981

 
645

Other current assets
119

 
55

Current assets of discontinued operations
130

 
138

Total current assets
1,861

 
1,541

Property, plant and equipment, net
1,342

 
876

Goodwill
780

 
710

Intangible assets, net
131

 
37

Deferred tax assets
63

 
163

Other assets
126

 
119

Long-term assets of discontinued operations
84

 
134

Total assets
$
4,387

 
$
3,580

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
1,139

 
$
822

Accrued vacation, compensation and benefits
187

 
132

Current maturities of long-term debt and capital lease obligations
34

 
24

Other current liabilities
106

 
162

Current liabilities of discontinued operations
82

 
89

Total current liabilities
1,548

 
1,229

Long-term debt
1,724

 
1,263

Long-term capital lease obligations
149

 
169

Pension and other postretirement benefit obligations
265

 
322

Long-term tax liabilities
44

 
63

Other long-term liabilities
133

 
134

Long-term liabilities of discontinued operations
17

 
17

Commitments and contingencies

 

Stockholders’ equity
 
 
 
Common stock, $0.01 par value: 57 shares authorized; 38 and 38 shares issued, respectively
—

 
—

Capital in excess of par value
2,848

 
2,831

Treasury stock, at cost, 0 and 0 shares, respectively
(3
)
 
(2
)
Accumulated other comprehensive loss
(210
)
 
(278
)
Accumulated deficit
(2,130
)
 
(2,175
)
Total SUPERVALU INC. stockholders’ equity
505

 
376

Noncontrolling interests
2

 
7

Total stockholders’ equity
507

 
383

Total liabilities and stockholders’ equity
$
4,387

 
$
3,580




See Notes to Consolidated Financial Statements.


56
Table of Contents

SUPERVALU INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(In millions)
 
Common
Stock
 
Capital in
Excess
of  Par Value
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Loss
 
Accumulated
Deficit
 
SUPERVALU INC.
Stockholders’
Equity (Deficit)
 
Noncontrolling interests
 
Total Stockholders’
Equity (Deficit)
Balances as of February 28, 2015
$
—

 
$
2,813

 
$
(33
)
 
$
(423
)
 
$
(3,003
)
 
$
(646
)
 
$
10

 
$
(636
)
Net earnings
—

 
—

 
—

 
—

 
178

 
178

 
8

 
186

Other comprehensive income, net of tax of $12
—

 
—

 
—

 
1

 
—

 
1

 
—

 
1

Sales of common stock under option plans
—

 
(12
)
 
22

 
—

 
—

 
10

 
—

 
10

Stock-based compensation
—

 
25

 
—

 
—

 
—

 
25

 
—

 
25

Restricted stock issued and vested
—

 
(11
)
 
11

 
—

 
—

 
—

 
—

 
—

Restricted stock forfeitures
—

 
2

 
(2
)
 
—

 
—

 
—

 
—

 
—

Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
(10
)
 
(10
)
Tax impact on stock-based awards and other
—

 
(6
)
 
(3
)
 
—

 
—

 
(9
)
 
—

 
(9
)
Balances as of February 27, 2016
—

 
2,811

 
(5
)
 
(422
)
 
(2,825
)
 
(441
)
 
8

 
(433
)
Net earnings
—

 
—

 
—

 
—

 
650

 
650

 
4

 
654

Other comprehensive income, net of tax of $71
—

 
—

 
—

 
144

 
—

 
144

 
—

 
144

Sales of common stock under option plans
—

 
(3
)
 
6

 
—

 
—

 
3

 
—

 
3

Stock-based compensation
—

 
22

 
—

 
—

 
—

 
22

 
—

 
22

Restricted stock issued and vested
—

 
(4
)
 
4

 
—

 
—

 
—

 
—

 
—

Restricted stock forfeitures
—

 
5

 
(5
)
 
—

 
—

 
—

 
—

 
—

Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
(7
)
 
(7
)
Tax impact on stock-based awards and other
—

 
—

 
(2
)
 
—

 
—

 
(2
)
 
2

 
—

Balances as of February 25, 2017
—

 
2,831

 
(2
)
 
(278
)
 
(2,175
)
 
376

 
7

 
383

Net earnings
—

 
—

 
—

 
—

 
45

 
45

 
1

 
46

Other comprehensive income, net of tax of $18
—

 
—

 
—

 
68

 
—

 
68

 
—

 
68

Sales of common stock under option plans
—

 
(1
)
 
1

 
—

 
—

 
—

 
—

 
—

Stock-based compensation
—

 
20

 
—

 
—

 
—

 
20

 
—

 
20

Restricted stock issued and vested
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Restricted stock forfeitures
—

 
1

 
(1
)
 
—

 
—

 
—

 
—

 
—

Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
(3
)
 
(3
)
Acquisitions of noncontrolling interests
—

 
(2
)
 
—

 
—

 
—

 
(2
)
 
(3
)
 
(5
)
Shares traded for taxes and other
—

 
(1
)
 
(1
)
 
—

 
—

 
(2
)
 
—

 
(2
)
Balances as of February 24, 2018
$
—

 
$
2,848

 
$
(3
)
 
$
(210
)
 
$
(2,130
)
 
$
505

 
$
2

 
$
507





See Notes to Consolidated Financial Statements.

57
Table of Contents

SUPERVALU INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
Fiscal Years Ended
 
February 24, 2018 
 (52 weeks)
 
February 25, 2017 
 (52 weeks)
 
February 27, 2016 
 (52 weeks)
Cash flows from operating activities
 
 
 
 
 
Net earnings including noncontrolling interests
$
46

 
$
654

 
$
186

(Loss) income from discontinued operations, net of tax
(3
)
 
619

 
137

Net earnings from continuing operations
49

 
35

 
49

Adjustments to reconcile Net earnings from continuing operations to Net cash provided by operating activities—continuing operations:
 
 
 
 
 
Goodwill and intangible asset impairment charges
—

 
13

 
6

Asset impairment and other charges
5

 
7

 
8

Loss on debt extinguishment
5

 
19

 
10

Net gain on sale of assets and exits of surplus leases
(3
)
 
(2
)
 
(1
)
Depreciation and amortization
197

 
173

 
175

LIFO charge
1

 
1

 
3

Deferred income taxes
5

 
(5
)
 
2

Stock-based compensation
19

 
17

 
21

Net pension and other postretirement benefit (income) expense
(63
)
 
18

 
34

Contributions to pension and other postretirement benefit plans
(2
)
 
(62
)
 
(40
)
Other adjustments
(5
)
 
3

 
20

Changes in operating assets and liabilities, net of effects from business combinations:
 
 
 
 
 
Receivables
3

 
25

 
19

Inventories
(51
)
 
(10
)
 
(53
)
Accounts payable and accrued liabilities
(20
)
 
34

 
(26
)
Income taxes
14

 
(23
)
 
(8
)
Other changes in operating assets and liabilities
(15
)
 
(10
)
 
(41
)
Net cash provided by operating activities—continuing operations
139

 
233

 
178

Net cash (used in) provided by operating activities—discontinued operations
(4
)
 
131

 
248

Net cash provided by operating activities
135

 
364

 
426

Cash flows from investing activities
 
 
 
 
 
Proceeds from sale of assets
18

 
4

 
1

Purchases of property, plant and equipment
(276
)
 
(151
)
 
(142
)
Payments for business acquisitions
(240
)
 
(1
)
 
(7
)
Other
4

 
(1
)
 
(24
)
Net cash used in investing activities—continuing operations
(494
)
 
(149
)
 
(172
)
Net cash (used in) provided by investing activities—discontinued operations
(12
)
 
1,170

 
(116
)
Net cash (used in) provided by investing activities
(506
)
 
1,021

 
(288
)
Cash flows from financing activities
 
 
 
 
 
Proceeds from revolving credit facility
1,250


2,837

 
600

Payments on revolving credit facility
(1,123
)

(2,975
)
 
(462
)
Proceeds from issuance of debt
885


—

 
—

Payments of debt and capital lease obligations
(906
)

(956
)
 
(318
)
Proceeds from the sale of common stock
—


3

 
10

Payments for shares traded for taxes
(3
)

(3
)
 
(3
)
Payments for debt financing costs
(10
)

(6
)
 
(9
)
Payments to acquire noncontrolling interests
(6
)
 
—

 
—

Distributions to noncontrolling interests
(3
)

(7
)
 
(10
)
Other
4


—

 
—

Net cash provided by (used in) financing activities—continuing operations
88

 
(1,107
)
 
(192
)
Net cash (used in) financing activities—discontinued operations
(1
)
 
(3
)
 
(3
)
Net cash provided by (used in) financing activities
87

 
(1,110
)
 
(195
)
Net (decrease) increase in cash and cash equivalents
(284
)
 
275

 
(57
)
Cash and cash equivalents at beginning of year
332

 
57

 
114

Cash and cash equivalents at end of year
$
48

 
$
332

 
$
57

Less cash and cash equivalents of discontinued operations at end of year
(7
)
 
(5
)
 
(17
)
Cash and cash equivalents of continuing operations at end of year
$
41

 
$
327

 
$
40

SUPPLEMENTAL CASH FLOW INFORMATION
Supervalu’s non-cash activities were as follows:
 
 
 
 
 
Purchases of property, plant and equipment included in Accounts payable
$
39

 
$
33

 
$
28

Capital lease asset additions
$
1

 
$
17

 
$
20

Interest and income taxes paid:
 
 
 
 
 
Interest paid, net of amounts capitalized
$
124

 
$
156

 
$
176

Income taxes paid, net
$
48

 
$
24

 
$
91

See Notes to Consolidated Financial Statements.

58

SUPERVALU INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data, unless otherwise noted)

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Description and Principles of Consolidation
SUPERVALU INC. and its subsidiaries (“we”, “us”, “our”, “Supervalu” or the “Company”) provides supply chain services, primarily wholesale distribution and support services, and operates three retail grocery banners in three geographic regions under the Cub Foods, Shoppers Food & Pharmacy, and Hornbacher’s banners. We operate primarily in the United States grocery channel. The Consolidated Financial Statements include the accounts of Supervalu and all its wholly and majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.  The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).
Unless otherwise indicated, references to the Consolidated Statements of Operations and the Consolidated Balance Sheets in the Notes to the Consolidated Financial Statements exclude all amounts related to discontinued operations. Refer to Note 18—Discontinued Operations for additional information about our discontinued operations.
Fiscal Year
Our fiscal years end on the last Saturday of February and contain either 52 or 53 weeks. All references to fiscal 2018 , 2017 and 2016 relate to the 52-week fiscal years ended February 24, 2018 , February 25, 2017 and February 27, 2016 , respectively.
Use of Estimates
The preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting periods presented. Actual results could differ from those estimates.
Revenue Recognition
Revenues from Wholesale product sales are recognized upon delivery or shipment. Revenues from Retail product sales are recognized at the point of sale. Typically, invoicing, shipping, delivery and customer receipt of Wholesale product occur on the same business day. Revenues from fixed price services contracts are recognized on a straight-line basis unless revenues are earned and performance obligations are fulfilled under a different pattern. In certain circumstances, we provide incentives to Wholesale customers through upfront cash payments. Incentives are recognized as a reduction of Net sales over the term of the incentive agreements when clawback rights exist for such payments, which typically coincides with the term of the supply agreements. When no clawback provisions exist, these incentives are recognized immediately. Discounts and allowances provided to customers at the time of sale are recognized as a reduction in Net sales as the products are sold to customers. Sales tax is excluded from Net sales.
Revenues and costs from professional services and third-party logistics operations are recorded gross when we determine we are acting as a principle in the transaction, which includes our evaluation of whether we are the primary obligor in a transaction, are subject to inventory or credit risk, have latitude in establishing price and selecting suppliers, or have several, but not all, of these indicators. If we are not the primary obligor and amounts earned have little or no inventory or credit risk, revenue is recorded net as management fees when earned.
Revenue is recognized only when evidence of an arrangement exists, the price is fixed and determinable, the products or services have been rendered and collectability is reasonably assured.

59

Cost of Sales
Cost of sales in the Consolidated Statements of Operations includes cost of inventory sold during the period, including purchasing, receiving, warehousing and distribution costs, and shipping and handling costs. Costs of sales include depreciation expense and salaries and wages related to warehousing and distribution costs. We receive allowances and credits from vendors for volume incentives, promotional allowances and, to a lesser extent, new product introductions, which are typically based on contractual arrangements covering a period of one year or less. We recognize vendor funds for merchandising and buying activities as a reduction of Cost of sales when the related products are sold. Vendor funds that have been earned as a result of completing the required performance under the terms of the underlying agreements but for which the product has not yet been sold are recognized as reductions of inventory. When payments or rebates can be reasonably estimated and it is probable that the specified target will be met, the payment or rebate is accrued. However, when attaining the milestone is not probable, the payment or rebate is recognized only when and if the milestone is achieved. Any upfront payments received for multi-period contracts are generally deferred and amortized on a straight-line basis over the life of the contracts.
Retail store advertising expenses and Wholesale advertising services provided to Wholesale customers are components of Cost of sales and are expensed as incurred. Retail advertising expenses, net of cooperative advertising reimbursements, were $20 , $25 and $23 for fiscal 2018 , 2017 and 2016 , respectively.
Selling and Administrative Expenses
Selling and administrative expenses consist primarily of store and corporate employee-related costs, such as salaries and wages, incentive compensation, health and welfare and workers’ compensation, as well as net periodic pension expense, occupancy costs, including rent, utilities and operating costs of retail stores, depreciation and amortization, impairment charges on property, plant and equipment and other administrative costs. The shared service center costs incurred to support back office functions related to services agreements represent administrative overhead and are recorded in Selling and administrative expenses.
Cash and Cash Equivalents
We consider all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents include amounts due from credit card sales transactions that are settled early in the following period. Our banking arrangements allow us to fund outstanding checks when presented to the financial institution for payment. We fund all intraday bank balance overdrafts during the same business day. Checks outstanding in excess of bank balances create book overdrafts, which are recorded in Accounts payable in the Consolidated Balance Sheets and are reflected as an operating activity in the Consolidated Statements of Cash Flows. As of February 24, 2018 and February 25, 2017 , we had net book overdrafts of $144 and $91 , respectively.
Allowances for Losses on Receivables
Management makes estimates of the uncollectability of its accounts and notes receivable. In determining the adequacy of the allowances, management analyzes customer creditworthiness, aging of receivables, the value of the collateral, customer financial statements, historical collection experience, aging of receivables and other economic and industry factors. It is possible that the accuracy of the estimation process could be materially impacted by different judgments, estimations and assumptions based on the information considered and result in a further deterioration of accounts and notes receivable. Bad debt expense (income) was $6 , $(4) and $3 in fiscal 2018 , 2017 and 2016 , respectively.
Inventories, Net
Inventories are valued at the lower of cost or market. Substantially all of our inventory consists of finished goods. We use the weighted average cost method, standard costs, the retail inventory method (“RIM”) or replacement cost method to value discrete inventory items at lower of cost or market under the FIFO method before application of any last-in, first-out (“LIFO”) reserve. We evaluate inventory shortages throughout each fiscal year based on actual physical counts in our distribution facilities and stores. Allowances for inventory shortages are recorded based on the results of these counts to provide for estimated shortages as of the end of each fiscal year. See Note 5—Inventories, Net for additional information.
Property, Plant and Equipment, Net
Property, plant and equipment are carried at historical cost less any applicable impairment charges. Depreciation is based on the estimated useful lives of the assets using the straight-line method. Estimated useful lives generally are ten to 40 years for buildings and major improvements, three to ten years for equipment, and the shorter of the term of the lease or expected life for leasehold improvements and capitalized lease assets. Interest on property under construction of $1 , $1 and $1 was capitalized in fiscal 2018 , 2017 and 2016 , respectfully.

60

Business Dispositions
We review the presentation of planned business dispositions in the Consolidated Financial Statements based on the available information and events that have occurred. The review consists of evaluating whether the business meets the definition of a component for which the operations and cash flows are clearly distinguishable from the other components of the business, and if so, whether it is anticipated that after the disposal the cash flows of the component would be eliminated from continuing operations and whether the disposition represents a strategic shift that has a major effect on operations and financial results. In addition, we evaluate whether the business has met the criteria as a business held for sale. In order for a planned disposition to be classified as a business held for sale, the established criteria must be met as of the reporting date, including an active program to market the business and the expected disposition of the business within one year.
Planned business dispositions are presented as discontinued operations when all the criteria described above are met. Operations of the business components meeting the discontinued operations requirements are presented within (Loss) income from discontinued operations, net of tax in the Consolidated Statements of Operations, and assets and liabilities of the business component planned to be disposed of are presented as separate lines within the Consolidated Balance Sheets. See Note 18—Discontinued Operations for additional information.
The carrying value of the business held for sale is reviewed for recoverability upon meeting the classification requirements. Evaluating the recoverability of the assets of a business classified as held for sale follows a defined order in which property and intangible assets subject to amortization are considered only after the recoverability of goodwill, indefinite lived intangible assets and other assets are assessed. After the valuation process is completed, the held for sale business is reported at the lower of its carrying value or fair value less cost to sell, and no additional depreciation or amortization expense is recognized. The carrying value of a held for sale business includes the portion of the accumulated other comprehensive loss associated with pension and postretirement benefit obligations of the operations of the business.
There are inherent judgments and estimates used in determining impairment charges. The sale of a business can result in the recognition of a gain or loss that differs from that anticipated prior to closing.
Goodwill
Goodwill is tested annually for impairment and is tested for impairment more frequently if events or changes in circumstances indicate that the asset might be impaired. The reviews consist of comparing estimated fair value to the carrying value at the reporting unit level. Our reporting units are the operating segments of the business, which consist of Wholesale and Retail. Goodwill was assigned to these reporting units as of the applicable acquisition dates, with no amounts being allocated between reporting units. Fair values are determined by using both the market approach, applying a multiple of earnings and revenue based on guidelines for publicly traded companies, and the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment. The rates used to discount projected future cash flows reflect a weighted average cost of capital based on our industry, capital structure and risk premiums in each reporting unit, including those reflected in the current market capitalization. If management identifies the potential for impairment of goodwill, the implied fair value of the goodwill is calculated as the difference between the fair value of the reporting unit and the fair value of the underlying assets and liabilities, excluding goodwill. An impairment charge is recorded for any excess of the carrying value over the implied fair value.
We review the composition of our reporting units on an annual basis and on an interim basis if events or circumstances indicate that the composition of the reporting units may have changed. There were no changes in our reporting units as a result of the fiscal 2018 review. See Note 7—Goodwill and Intangible Assets for additional information.
Intangible Assets, Net
We review intangible assets with indefinite useful lives, which primarily consist of trademarks and tradenames, for impairment during the fourth quarter of each year, and if events or changes in circumstances indicate that the asset might be impaired. The reviews consist of comparing estimated fair value to the carrying value. Fair values of our trademarks and tradenames are determined primarily by discounting an assumed royalty value applied to management’s estimate of projected future revenues associated with the tradename using management’s expectations of the current and future operating environment. The royalty cash flows are discounted using rates based on the weighted average cost of capital discussed above and the specific risk profile of the tradenames relative to our other assets. These estimates are impacted by variable factors, including inflation, the general health of the economy and market competition. The impairment review calculation contains significant judgments and estimates, including the weighted average cost of capital, any specified risk profile of the tradename, and future revenue and profitability. See Note 7—Goodwill and Intangible Assets for additional information.

61

Impairment of Long-Lived Assets
We monitor the recoverability of our long-lived assets such as buildings and equipment, and evaluate their carrying value for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be fully recoverable. Events that may trigger such an evaluation include current period losses combined with a history of losses or a projection of continuing losses, a significant decrease in the market value of an asset or plans for closures. When such events or changes in circumstances occur, a recoverability test is performed by comparing projected undiscounted future cash flows to the carrying value of the group of assets being tested.
If impairment is identified for long-lived assets to be held and used, the fair value is compared to the carrying value of the group of assets and an impairment charge is recorded for the excess of the carrying value over the fair value. For long-lived assets that are classified as assets held for sale, we recognize impairment charges for the excess of the carrying value plus estimated costs of disposal over the estimated fair value. Fair value is based on current market values or discounted future cash flows using Level 3 inputs. We estimate fair value based on our experience and knowledge of the market in which the property is located, including the use of local real estate brokers and advisers. Our estimate of undiscounted cash flows attributable to the asset groups includes only future cash flows that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset group. Long-lived asset impairment charges are a component of Selling and administrative expenses in the Consolidated Statements of Operations.
We group long-lived assets with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets, which has predominately been at the distribution center level for Wholesale and the geographic market level for retail stores f or three geographic marke t groupings of individual retail stores, but individual store asset groupings may be assessed in certain circumstances.
Due to the highly competitive environment and our ongoing strategic transformation, we continue to evaluate if modifications to the estimation approach of our long-lived asset groups are necessary. Future changes to our long-lived asset policy and changes in circumstances, operating results or other events may result in additional asset impairment testing and charges.
Reserves for Closed Properties
We maintain reserves for costs associated with closures of retail stores, distribution centers and other properties that are no longer being utilized in current operations. We calculate closed property operating lease liabilities using a discount rate to calculate the present value of the remaining noncancellable lease payments after the closing date, reduced by estimated subtenant rentals that could be reasonably obtained for the property. Lease reserve impairment charges are recorded as a component of Selling and administrative expenses in the Consolidated Statements of Operations.
The closed property lease liabilities are usually paid over the remaining lease terms, which generally range from one to 12 years. Adjustments to closed property reserves primarily relate to changes in subtenant income or actual exit costs differing from original estimates. Adjustments are made for changes in estimates in the period in which the changes become known.
The calculation of the closed property charges requires significant judgments and estimates, including estimated subtenant rentals, discount rates and future cash flows based on our experience and knowledge of the market in which the closed property is located, previous efforts to dispose of similar assets and the assessment of existing market conditions. Reserves for closed properties are included in Other current liabilities and Other long-term liabilities in the Consolidated Balance Sheets.
Rent Expense
We recognize rent holidays, including the time period during which we have access to the property prior to the opening of the site, as well as construction allowances and escalating rent provisions, on a straight-line basis over the term of the operating lease. We recognize rent expense and the carrying value of capital lease obligations and property, plant and equipment, related to contractual obligations for properties where we remain the primary obligor upon assignment of the lease and do not obtain a release from landlords or retain the equity interests in the legal entities with the related rent contracts. Deferred rents are included in Other current liabilities and Other long-term liabilities in the Consolidated Balance Sheets.
Self-Insurance Liabilities
We use a combination of insurance and self-insurance for workers’ compensation, automobile and general liability costs. It is our policy to record insurance liabilities based on management’s estimate of the ultimate cost of reported claims and claims incurred but not yet reported and related expenses, discounted at a risk-free interest rate. The present value of such claims was calculated using dis count rates ranging from 0.3 percent to 5.1 percent fo r fiscal 2018 , 0.3 percent to 5.1 percent for fiscal 2017 and 0.3 percent to 5.1 percent for fiscal 2016 .

62

Changes in our insurance liabilities consisted of the following:
 
2018
 
2017
 
2016
Beginning balance
$
67

 
$
69

 
$
67

Expense
19

 
16

 
17

Claim payments
(19
)
 
(18
)
 
(16
)
Reclassification of insurance recoveries to receivables
—

 
—

 
1

Ending balance
67

 
67

 
69

Less current portion
(21
)
 
(21
)
 
(22
)
Long-term portion
$
46

 
$
46

 
$
47

The current portion of reserves for self-insurance is included in Other current liabilities and the long-term portion is included in Other long-term liabilities in the Consolidated Balance Sheets. The insurance liabilities as of the end of the fiscal year are net of discounts of $5 and $5 as of February 24, 2018 and February 25, 2017 , respectively. Amounts due from insurance companies were $8 and $9 as of February 24, 2018 and February 25, 2017 , respectively. The current portion of the insurance receivables is included in Receivables, net and the long-term portion is included in Other assets in the Consolidated Balance Sheets.
Benefit Plans
We recognize the funded status of our Company-sponsored defined benefit plans in the Consolidated Balance Sheets and gains or losses and prior service costs or credits not yet recognized as a component of Accumulated other comprehensive loss , net of tax, in the Consolidated Balance Sheets. We sponsor pension and other postretirement plans in various forms covering substantially all employees who meet eligibility requirements. The determination of our obligation and related expense for Company-sponsored pension and other postretirement benefits is dependent, in part, on management’s selection of certain actuarial assumptions in calculating these amounts. These assumptions include, among other things, the discount rate, the expected long-term rate of return on plan assets and the rates of increase in healthcare and compensation costs. These assumptions are disclosed in Note 11—Benefit Plans . Actual results that differ from the assumptions are accumulated and amortized over future periods.
We contribute to various multiemployer pension plans under collective bargaining agreements, primarily defined benefit pension plans. Pension expense for these plans is recognized as contributions are funded. See Note 11—Benefit Plans for additional information on participation in multiemployer plans.
We also contribute to an employee 401(k) retirement savings plan.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair value measurements, as follows:
Level 1 -
Quoted prices in active markets for identical assets or liabilities.
Level 2 -
Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable.
Level 3 -
Unobservable inputs in which little or no market activity exists, requiring an entity to develop its own assumptions that market participants would use to value the asset or liability.
We utilized fair value measurements in reporting results of operations and financial position within our Consolidated Financial Statements for the following:
•
Acquired assets and liabilities discussed in Note 2—Business and Asset Acquisitions were measured at fair value using Level 3 inputs.
•
Impairment charges related to lease reserves, and properties held and used and held for sale, as discussed in Note 4—Reserves for Closed Properties and Property, Plant and Equipment-related Impairment Charges , were measured at fair value using Level 3 inputs.
•
Goodwill and intangible asset impairment charges and acquired intangible assets, as discussed in Note 7—Goodwill and Intangible Assets and Note 18—Discontinued Operations , were measured at fair value using Level 3 inputs.
•
Assets and liabilities measured at fair value on a recurring basis using Level 1 and Level 2 inputs as discussed in Note 8—Fair Value Measurements .

63

Derivatives
We use derivatives only to manage well-defined risks. We do not use financial instruments or derivatives for any trading or other speculative purposes.
Interest rate swap contracts are entered into to mitigate our exposure to changes in market interest rates. These contracts are reviewed for hedging effectiveness at hedge inception and on an ongoing basis. If these contracts are designated as a cash flow hedge and are determined to be highly effective, changes in the fair value of these instruments are recognized in Accumulated other comprehensive loss in the Consolidated Balance Sheets and reclassified into earnings in the period in which the hedged transaction affects earnings. Hedging ineffectiveness, if any, is recognized in earnings in the Consolidated Statements of Operations.
Our limited involvement with diesel fuel derivatives is primarily to manage our exposure to changes in fuel prices utilized in the shipping process. These contracts are economic hedges of price risk and are not designated or accounted for as hedging instruments for accounting purposes. Changes in the fair value of these instruments are recognized in earnings in the Consolidated Statements of Operations.
In addition, we enter into energy commitments for certain amounts of electricity and natural gas purchases that we expect to utilize in the normal course of business. Changes in the fair value of these purchase obligations are not recognized in earnings until the underlying commitment is utilized in the normal course of business.
Stock-Based Compensation
Stock-based compensation expense is measured by the fair value of the award on the date of grant, net of the estimated forfeiture rate. We use the straight-line method to recognize stock-based compensation expense over the requisite service period related to each award.
The fair value of stock options is estimated as of the date of grant using the Black-Scholes option pricing model. The fair value of performance stock units is estimated as of the date of the grant using the Monte Carlo option pricing model.
The estimation of the fair value of stock options incorporates certain assumptions, such as the risk-free interest rate and expected volatility, dividend yield and life of options. Restricted stock awards and restricted stock units are recorded as stock-based compensation expense over the requisite service period based on the market value of our common stock on the date of grant.
Income Taxes
Deferred income taxes represent future net tax effects resulting from temporary differences between the financial statement amounts and tax bases of assets and liabilities and are measured using enacted tax rates in effect for the year in which the differences are expected to be settled or realized. See Note 15—Income Taxes for the types of differences that give rise to significant portions of deferred income tax assets and liabilities. Deferred income tax assets are reported as a noncurrent asset or liability.
We are currently in various stages of audits, appeals or other methods of review with authorities from various taxing jurisdictions. We establish liabilities for unrecognized tax benefits in a variety of taxing jurisdictions when, despite management’s belief that our tax return positions are supportable, certain positions may be challenged and may need to be revised. We adjust these liabilities in light of changing facts and circumstances, such as the progress of a tax audit. We also provide interest on these liabilities at the appropriate statutory interest rate, and accrue penalties as applicable. We recognize interest related to unrecognized tax benefits in Interest expense and penalties in Selling and administrative expenses in the Consolidated Statements of Operations.

64


Recently Adopted Accounting Standards
In March 2016, the Financial Accounting Standards Board (the “FASB”) issued authoritative guidance under Accounting Standards Update (“ASU”) 2016-09,  Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . ASU 2016-09 provides for simplification of several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. We adopted this guidance in the first quarter of fiscal 2018, which resulted in $7 of additional income tax expense that would have been recorded as an adjustment to Additional paid-in-capital under previous authoritative guidance. The adoption resulted in the presentation of payments for shares traded for taxes within financing activities, which resulted in the retrospective revision of the Consolidated Statements of Cash Flows. In addition, we elected not to change our policy on accounting for forfeitures and continue to estimate the total number of awards for which the requisite service period will not be rendered.
Recently Issued Accounting Standards
In February 2018, the FASB issued authoritative guidance under ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . ASU 2018-02 provides that the stranded tax effects from the Tax Cuts and Jobs Act (the “Tax Act”) may be reclassified to retained earnings. We are required to adopt this new guidance in the first quarter of fiscal 2020. We estimate that the stranded tax effects that may be reclassified are approximately $10.
In March 2017, the FASB issued authoritative guidance under ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. ASU 2017-07 changes how benefit plan costs for defined benefit pension and other postretirement benefit plans are presented in the statement of operations. We are required to adopt this new guidance in the first quarter of fiscal 2019. We will reclassify $63 of non-service cost components of net periodic benefit income, as disclosed in Note 11—Benefit Plans , to an other income and expense line in the Consolidated Statements of Operations upon adoption.
In January 2017, the FASB issued authoritative guidance under ASU 2017-04, Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment . ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating step 2 of the goodwill impairment test. If a reporting unit fails step 1 of the goodwill impairment test, entities are no longer required to compute the implied fair value of goodwill following the same procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. ASU 2017-04 requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value. We are required to adopt this new guidance in the first quarter of fiscal 2021. We are currently evaluating the potential impact of adoption of this standard on our consolidated financial statements.
In August 2016, the FASB issued authoritative guidance under ASU 2016-15, Statement of Cash Flows (Topic 320): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies how certain cash receipts and payments should be presented in the statement of cash flows. We are required to adopt this new guidance in the first quarter of fiscal 2019. We are currently evaluating the potential impact of adoption of this standard on our consolidated financial statements.
In June 2016, the FASB issued authoritative guidance under ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance. We are required to adopt this new guidance in the first quarter of fiscal 2021. We are currently evaluating the potential impact of adoption of this standard on our consolidated financial statements.
In February 2016, the FASB issued authoritative guidance under ASU 2016-02, Leases (Topic 842) . ASU 2016-02 provides new comprehensive lease accounting guidance that supersedes existing lease guidance. Upon adoption of ASU 2016-02, we will be required to recognize most leases on our balance sheet at the beginning of the earliest comparative period presented with a corresponding adjustment to stockholders’ equity. ASU 2016-02 requires us to capitalize most current operating lease obligations as right-of-use assets with a corresponding liability based on the present value of future operating lease obligations. Criteria for distinguishing leases between finance and operating are substantially similar to criteria for distinguishing between capital leases and operating leases in existing lease guidance. Lease agreements that are 12 months or less are permitted to be excluded from the balance sheet. We are required to adopt this new guidance in the first quarter of fiscal 2020. ASU 2016-02

65

must be adopted using a modified retrospective transition, applying the new criteria to all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements. The modified retrospective approach includes a number of optional practical expedients that we may elect to apply. Expanded disclosures with additional qualitative and quantitative information will also be required. The adoption will include updates as provided under ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842 . We are currently evaluating the potential impact of adoption of this standard on our consolidated financial statements. For a quantification of our off-balance sheet operating leases subject to capitalization under ASU 2016-02, other than those reserved for as a closed property and certain agreements that may be deemed leases under the new authoritative guidance, refer to total operating lease obligations within  Note 10—Leases .
In May 2014, the FASB issued authoritative guidance under ASU 2014-09, Revenue from Contracts with Customers (Topic 606): ASU 2014-09 supersedes existing revenue recognition requirements and provides a new comprehensive revenue recognition model that requires entities to recognize revenue to depict the transfer of promised goods or services to a customer at an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The new guidance will be adopted by us in the first quarter of fiscal 2019, as permitted by ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date . The adoption will include updates as provided under ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net); ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing; ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients; ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers; and ASU 2017-14, Income Statement-Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606). Adoption is allowed by either the full retrospective or modified retrospective approach.
We do not expect that the standard will materially affect our net earnings, financial position, or cash flows. We are also currently finalizing our accounting policies under Topic 606 and designing and implementing internal controls for the adoption and recognition of revenue under Topic 606. We completed our evaluation of the impact the standard has on our determination of whether we act as principal or agent in certain customer and vendor arrangements where the purchase and sale of inventory are virtually simultaneous, and we will continue to recognize sales and cost of sales on a gross basis. We currently believe that there will be less than a $10 impact to our Wholesale segment’s revenue. We currently believe that there will be less than a $5 increase to our Retail segment’s revenue, which relates primarily to the recognition and classification of customer loyalty programs and the presentation of certain advertising programs. We expect to recognize incentive payments made to customers under supply agreements as assets that will be amortized over the expected term of the related purchases under these agreements. Distribution contracts within Wholesale contain certain promises for goods or services that we believe will be immaterial in the context of the contracts. We will adopt the guidance in the first quarter of fiscal 2019 and plan to use the modified retrospective approach in the first quarter of fiscal 2019.

NOTE 2—BUSINESS AND ASSET ACQUISITIONS

Associated Grocers of Florida, Inc.
On December 8, 2017 , we completed the acquisition of Associated Grocers of Florida, Inc. (“AG Florida”) pursuant to the terms of an Agreement and Plan of Merger dated October 17, 2017 by and among Supervalu, a then wholly owned subsidiary of Supervalu (“AG Merger Sub”), and AG Florida. AG Florida was a retailer-owned cooperative. AG Florida distributes full lines of grocery and general merchandise to independent retailers, primarily in South Florida, the Caribbean, Central and South America and Asia.
At the closing of the transaction, AG Merger Sub merged with and into AG Florida and AG Florida became a wholly owned subsidiary of Supervalu. The transaction was valued at $193 , comprised of $131 in cash for 100 percent of the outstanding stock of AG Florida plus the assumption and payoff of AG Florida’s net debt of $62 at closing. We incurred merger and integration costs of $5 in fiscal 2018 related to the AG Florida acquisition.
Acquisition of Unified Grocers, Inc.
On June 23, 2017 , we completed the acquisition of Unified Grocers, Inc. (“Unified”) pursuant to the terms of an Agreement and Plan of Merger dated April 10, 2017 by and among Supervalu, West Acquisition Corporation, a then wholly owned subsidiary of Supervalu (“Merger Sub”), and Unified. The transaction was valued at $390 , comprised of $114 in cash for 100 percent of the outstanding stock of Unified plus the assumption and payoff of Unified’s net debt of $276 at closing.
At the closing of the transaction, Merger Sub merged with and into Unified. As a result of the transaction, Unified became a wholly owned subsidiary of Supervalu. We incurred merger and integration costs of $32 in fiscal 2018 related to the Unified

66

acquisition.
The tables immediately below summarize the preliminary fair values assigned to Unified’s and AG Florida’s net assets acquired. As of February 24, 2018 , the fair value allocation for each of the acquisitions was preliminary and will be finalized when the valuation is completed. There can be no assurance that such finalizations will not result in material changes from the preliminary purchase price allocations. Our estimates and assumptions are subject to change during the measurement period (up to one year from the applicable acquisition date), as we finalize the valuations of certain tangible and intangible assets acquired and liabilities assumed in connection with the acquisitions. The primary areas of the purchase price allocations that are not yet finalized relate to real and personal property, identifiable intangible assets, goodwill, income taxes and deferred taxes.
 
Unified
 
AG Florida
 
As Originally Reported
 
As
Revised
 
As Originally Reported
Cash and cash equivalents
$
9

 
$
9

 
$
1

Accounts receivable
176

 
178

 
49

Inventories
237

 
237

 
48

Other current assets
31

 
24

 
4

Property, plant and equipment
285

 
285

 
84

Goodwill
29

 
26

 
44

Intangible assets
54

 
56

 
52

Deferred tax assets
(19
)
 
(13
)
 
(28
)
Other assets
65

 
65

 
4

Accounts payable
(255
)
 
(255
)
 
(53
)
Other current liabilities
(89
)
 
(89
)
 
(13
)
Long-term debt and capital lease obligations
(270
)
 
(270
)
 
(60
)
Pension and other postretirement benefit obligations
(103
)
 
(101
)
 
—

Other liabilities assumed
(36
)
 
(38
)
 
(1
)
Total fair value of net assets acquired
114

 
114

 
131

Assumed obligations to make patronage payments to member-owners
—

 
—

 
5

Less cash acquired
(9
)
 
(9
)
 
(1
)
Total consideration for acquisition, less cash acquired
$
105

 
$
105

 
$
135

Recognized goodwill is primarily attributable to expected synergies from combining operations, as well as intangible assets that do not qualify for separate recognition.
As part of the acquisitions of Unified and AG Florida we recognized the following finite lived intangible assets:
 
Estimated Useful Life (in years)
 
Amounts Acquired
Customer relationships
15 years
 
$
41

Favorable operating leases
3-14 years
 
7

Trade names
14 years
 
8

Total Unified finite-lived intangibles acquired
 
 
$
56

Customer relationships and supply agreements
15 years
 
47

Favorable operating leases
2-5 years
 
5

Total AG Florida finite-lived intangibles acquired
 
 
$
52

Combined Results
The following unaudited pro forma consolidated condensed financial results of operations are presented as if the AG Florida and Unified acquisitions were consummated on February 28, 2016, the beginning of the comparable prior annual reporting period:

67

 
 
2018
 
2017 (1)
Net sales
 
$
15,892

 
$
15,323

Net earnings from continuing operations attributable to SUPERVALU INC.
 
$
48

 
$
20

Basic net earnings from continuing operations per share attributable to SUPERVALU INC.
 
$
1.24

 
$
0.52

Diluted net earnings from continuing operations per share attributable to SUPERVALU INC.
 
$
1.24

 
$
0.52

(1)
This unaudited pro forma financial information is based on Unified’s and AG Florida’s historical reporting periods. The results reflect Unified’s and AG Florida’s 52-week fiscal periods ended December 31, 2016 and January 14, 2017, respectively.
As required by GAAP, these unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined companies would have been had the acquisitions occurred at the beginning of the period being presented, nor are they indicative of future results of operations.
Cub Foods Franchised Stores
In fiscal 2018, we paid $6 to acquire the minority equity interests of six limited liability companies that own and operate six Cub Foods stores. We now own 100 percent of these companies. The results from these companies will continue to be presented on a consolidated basis in our consolidated financial statements.
Distribution Center Asset Acquisitions
In fiscal 2018, we paid $61 to acquire the land and building for a distribution center located in Joliet, IL, and we also paid $37 to acquire the land and building for a distribution center located in Harrisburg, PA. The consideration paid for the acquired assets was allocated based on the proportionate fair value of the underlying acquired assets prior to the facilities being placed into service.
Other Acquisitions
The Consolidated Financial Statements reflect the final purchase accounting allocations of the acquisitions discussed below. Pro forma information for the acquisitions discussed below are not presented since the results of operations of the acquired businesses, both individually and in the aggregate, are not material to our Consolidated Financial Statements.
During fiscal 2016, we paid $7 to acquire equipment and leasehold improvements, identifiable finite-lived intangible assets and inventories of four retail stores from multiple Wholesale customers. The purchase price was allocated to the acquired store assets and such assets were recognized at their estimated fair values and included inventories, property, plant and equipment, and goodwill.
NOTE 3—ALLOWANCE FOR DOUBTFUL ACCOUNTS
Changes in our allowance for doubtful accounts and notes receivable consisted of the following:
 
2018
 
2017
 
2016
Beginning balance
$
6

 
$
11

 
$
17

Additions charged to costs and expenses
8

 
2

 
3

Deductions
—

 
(7
)
 
(9
)
Ending balance
$
14

 
$
6

 
$
11


68

NOTE 4—RESERVES FOR CLOSED PROPERTIES AND PROPERTY, PLANT AND EQUIPMENT-RELATED IMPAIRMENT CHARGES
Reserves for Closed Properties
Changes in reserves for closed properties consisted of the following:
 
2018
 
2017
 
2016
Beginning balance
$
22

 
$
24

 
$
31

Additions
3

 
3

 
3

Payments
(7
)
 
(9
)
 
(9
)
Adjustments
(4
)
 
4

 
(1
)
Ending balance
$
14

 
$
22

 
$
24

Property, Plant and Equipment Impairment Charges
The following table presents impairment charges related to property, plant and equipment measured at fair value on a non-recurring basis:
 
2018
 
2017
 
2016
Property, plant and equipment:
 
 
 
 
 
Carrying value
$
22

 
$
21

 
$
1

Fair value measured using Level 3 inputs
16

 
18

 
0

Impairment charges
$
6

 
$
3

 
$
1

NOTE 5—INVENTORIES, NET
Inventories, net consisted of the following:
 
2018
 
2017
Inventory carried under LIFO:
Weighted average cost
$
553

 
47
%
 
$
510

 
61
%
Standard cost
258

 
22

 
—

 
—

RIM
98

 
8

 
87

 
10

Replacement cost
35

 
3

 
52

 
6

Total cost-basis inventory carried under LIFO
$
944

 
80
%
 
$
649


77
%
Inventory carried under FIFO:
 
 
 
 
 
 
 
Weighted average cost
$
201

 
17
%
 
$
173

 
21
%
RIM
17

 
2

 
18

 
2

Standard cost
15

 
1

 
—

 
—

Replacement cost
3

 
—

 
3

 
—

Total cost-basis of inventory carried under FIFO
$
236

 
20
%
 
$
194

 
23
%
Total inventory, gross
1,180

 
 
 
843

 
 
LIFO reserve
(199
)
 
 
 
(198
)
 
 
Inventories, net
$
981

 
 
 
$
645

 
 

69

NOTE 6—PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net, consisted of the following:
 
2018
 
2017
Land
$
189

 
$
61

Buildings
1,255

 
946

Property under construction
75

 
50

Leasehold improvements
302

 
258

Equipment
1,489

 
1,503

Capitalized lease assets
218

 
265

Total property, plant and equipment
3,528

 
3,083

Accumulated depreciation
(2,034
)
 
(2,020
)
Accumulated amortization on capitalized lease assets
(152
)
 
(187
)
Total property, plant and equipment, net
$
1,342

 
$
876

Depreciation expense was $170 , $149 and $152 for fiscal 2018 , 2017 and 2016 , respectively. Amortization expense related to capitalized lease assets was $14 , $15 and $15 for fiscal 2018 , 2017 and 2016 , respectively.
NOTE 7—GOODWILL AND INTANGIBLE ASSETS
Changes in the carrying value of Goodwill by goodwill reportable unit consisted of the following:
 
February 27,
2016
 
Additions
 
Impairments
 
February 25,
2017
 
Additions
 
Impairments
 
February 24,
2018
Goodwill:
 
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale
$
710

 
$
—

 
$
—

 
$
710

 
$
70

 
$
—

 
$
780

Retail
13

 
—

 
(13
)
 
—

 
—

 
—

 
—

Total goodwill
$
723

 
$
—


$
(13
)

$
710

 
$
70

 
$
—

 
$
780

In fiscal 2017, we conducted an impairment review of the carrying value of our reporting units due to declines in sales and cash flows within Retail. The review indicated the carrying value of the Retail reporting unit exceeded its estimated fair value, as determined utilizing the income approach and market approach. As a result, we performed the step 2 assessment and recorded a non-cash goodwill impairment charge of $13 in the Retail segment in fiscal 2017.
Identifiable intangible assets consisted of the following:
 
February 24, 2018
 
February 25, 2017
 
Cost
 
Accumulated Amortization
 
Net
 
Cost
 
Accumulated Amortization
 
Net
Customer lists, supply agreements, prescription files and other
$
177

 
$
(66
)
 
$
111

 
$
81

 
$
(54
)
 
$
27

Favorable operating leases
21

 
(6
)
 
15

 
9

 
(4
)
 
5

Total finite-life intangibles
$
198

 
$
(72
)
 
$
126

 
$
90

 
$
(58
)
 
$
32

Indefinite-lived tradename intangibles
5

 
—

 
5

 
5

 
—

 
5

Total intangibles
$
203

 
$
(72
)
 
$
131

 
$
95

 
$
(58
)
 
$
37

Amortization expense of intangible assets with finite useful lives of $13 , $9 and $8 was recorded in fiscal 2018 , 2017 and 2016 , respectively.
There were no impairment charges in fiscal 2018 and 2017 , respectively. In fiscal 2016 , we recorded a non-cash intangible impairment charge of  $6  within the Wholesale segment.
The estimated future amortization expense for the next five fiscal years and thereafter on intangible assets outstanding as of February 24, 2018 consists of the following:

70

Fiscal Year
2019
2020
2021
2022
2023
Thereafter
Estimated amortization expense
$
14

13

12

11

11

$
65

NOTE 8—FAIR VALUE MEASUREMENTS

Recurring fair value measurements were as follows:
 
 
 
February 24, 2018
 
Balance Sheet Location
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
 
Mutual funds
Other assets
 
$
4

 
$
—

 
$
—

 
$
4

Total
 
 
$
4

 
$
—

 
$
—

 
$
4

 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Interest rate swap derivative
Other current liabilities
 
—

 
0

 
—

 
0

Interest rate swap derivative
Other long-term liabilities
 
—

 
0

 
—

 
0

Total
 
 
$
—

 
$
0

 
$
—

 
$
0

 
 
 
February 25, 2017
 
Balance Sheet Location
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
 
Mutual funds
Other assets
 
$
5

 
$
—

 
$
—

 
$
5

Total
 
 
$
5

 
$
—

 
$
—

 
$
5

 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Diesel fuel derivatives
Other current liabilities
 
—

 
0

 
—

 
0

Interest rate swap derivative
Other current liabilities
 
—

 
2

 
—

 
2

Interest rate swap derivative
Other long-term liabilities
 
—

 
1

 
—

 
1

Total
 
 
$
—

 
$
3

 
$
—

 
$
3

Mutual Funds
Mutual fund assets consist of balances held in investments to fund certain deferred compensation plans. The fair values of mutual fund assets are based on quoted market prices of the mutual funds held by the plan at each reporting period. Mutual funds traded in active markets are classified within Level 1 of the fair value hierarchy. Mutual fund assets are restricted for use to pay deferred compensation liabilities. Deferred compensation liabilities consist of obligations to participants in deferred compensation plans, and are determined based on the fair value of the related deferred compensation plan investments or designated phantom investments of the plan at each reporting period.
Interest Rate Swap Derivatives
In fiscal 2016, we effectively converted $300 of variable rate debt under our Secured Term Loan Facility to a fixed rate by swapping the variable LIBOR rate component to a fixed rate of 2.0075 percent, which matures in March 2019. This transaction was entered into to reduce our exposure to changes in market interest rates associated with our variable rate debt. We designated this derivative as a cash flow hedge of the variability in expected cash outflows for interest payments. On June 8, 2017, we entered into a fourth amendment to the Secured Term Loan Facility that decreased the interest rate for the term loan from LIBOR plus 4.50 percent to LIBOR plus 3.50 percent . Following this amendment, the all-in rate for this $300 tranche was 5.5075 percent .
In fiscal 2018 , 2017 and 2016 , no amounts were recorded in the Consolidated Statements of Operations for interest rate swap derivative ineffectiveness.
The fair value of the interest rate swap is measured using Level 2 inputs. The interest rate swap agreement is valued using an income approach interest rate swap valuation model incorporating observable market inputs including interest rates, LIBOR swap rates and credit default swap rates. As of February 24, 2018 , a 100 basis point increase in forward LIBOR interest rates

71

would increase the fair value of the interest rate swap by approximately $3 ; a 100 basis point decrease in forward LIBOR interest rates would decrease the fair value of the interest rate swap by approximately $3 .
Diesel Fuel Derivatives
Commodity derivatives consist of forward fixed price purchase diesel fuel contracts. The fair value of our diesel fuel derivatives is measured using Level 2 inputs due to our use of observable market quotations without significant adjustments to determine fair values.
Fuel derivative gains (losses) are included within Cost of sales in the Consolidated Statements of Operations and were $0 , $0 and $(3) for fiscal 2018 , 2017 and 2016 , respectively.
Fair Value Estimates
For certain of our financial instruments, including cash and cash equivalents, receivables, accounts payable, accrued salaries and other current assets and liabilities, the fair values approximate carrying values due to their short maturities.
The estimated fair value of notes receivable was less than the carrying value by $1 as of February 24, 2018 and there was no difference to the carrying amount as of February 25, 2017 . The estimated fair value of notes receivable was calculated using a discounted cash flow approach applying a market rate for similar instruments using Level 3 inputs.
The estimated fair value of our long-term debt was lower than the carrying amount, excluding debt financing costs, by approximately $23 as of February 24, 2018 and there was no difference to the carrying amount, excluding debt financing costs, as of February 25, 2017 . The estimated fair value was based on market quotes, where available, or market values for similar instruments, using Level 2 and 3 inputs.
NOTE 9—LONG-TERM DEBT
Our long-term debt consisted of the following:
 
Average
Interest Rate at
February 24, 2018
 
Maturity Year
 
February 24,
2018
 
February 25,
2017
Secured Term Loan Facility - variable rate
5.07%
 
2024
 
$
834

 
$
—

Secured Term Loan Facility - variable rate
5.50%
 
2019
 
—

 
524

Senior Notes - fixed rate
6.75%
 
2021
 
400

 
400

Senior Notes - fixed rate
7.75%
 
2022
 
350

 
350

Revolving ABL Credit Facility - variable rate
3.01%
 
2021
 
127

 
—

Other secured loans - variable rate
4.02%
 
2022-2023
 
48

 
—

Debt financing costs, net

 

 
(24
)
 
(10
)
Original issue discount on debt

 

 
(3
)
 
(1
)
Total debt
 
 
 
 
1,732

 
1,263

Less current maturities of long-term debt
 
 
 
 
(8
)
 
—

Long-term debt
 
 
 
 
$
1,724

 
$
1,263

Future maturities of long-term debt, excluding debt financing costs and the original issue discount on debt, as of February 24, 2018 , consist of the following:
Fiscal Year
2019
2020
2021
2022
2023
Thereafter
Total
Contractual debt obligation maturities
$
8

13

141

414

386

797

$
1,759

Our credit facilities and certain long-term debt agreements have restrictive covenants and cross-default provisions, which generally provide, subject to our right to cure, for the acceleration of payments due in the event of a breach of a covenant or a default in the payment of a specified amount of indebtedness due under certain other debt agreements. We were in compliance with all such covenants and provisions for all periods presented.

72

Secured Credit Agreements
On June 8, 2017, we entered into a fourth amendment agreement (the “Fourth Term Loan Amendment”) amending and restating our Secured Term Loan Facility due March 2019 (the “Secured Term Loan Facility due March 2019” and as amended and restated, the “Secured Term Loan Facility”). The Secured Term Loan Facility provides for (i) an initial term loan facility of $525 , which was drawn down in full to refinance outstanding loans under the Secured Term Loan Facility due March 2019, and (ii) a delayed draw term loan facility of $315 , which was drawn down in full in the second quarter of fiscal 2018 for the purpose of consummating the acquisition of Unified. Borrowings under the Secured Term Loan Facility bear interest at the rate of LIBOR plus 3.50 percent with a floor on LIBOR set at 1.00 percent , compared to the rate under the Secured Term Loan Facility due March 2019 of LIBOR plus 4.50 percent with a floor of 1.00 percent . The Secured Term Loan Facility will mature on June 8, 2024. However, if we have not repaid our 6.75 percent Senior Notes due June 2021 or our 7.75 percent Senior Notes due November 2022 by the date that is 91 days prior to the respective maturity date of such notes, the Secured Term Loan Facility will mature on the date that is 91 days prior to the maturity date of such notes. In fiscal 2018, in connection with the completion of the Fourth Term Loan Amendment, we paid debt financing costs of approximately $8 , of which $5 was capitalized and $3 was expensed, incurred an original issue discount on borrowings of approximately $2 and recognized a non-cash charge of approximately $2 for the write-off of existing unamortized debt financing costs. On June 23, 2017, in connection with the closing of the acquisition of Unified, we executed the delayed draw under the Secured Term Loan Facility and increased the outstanding borrowings under the facility to $840 .
The Secured Term Loan Facility is secured by substantially all of our real estate, equipment and certain other assets. The Secured Term Loan Facility is guaranteed by our material subsidiaries (together with Supervalu, the “Term Loan Parties”). To secure their obligations under the Secured Term Loan Facility, the Term Loan Parties have granted a perfected first-priority security interest in substantially all of their intellectual property and a first priority mortgage lien and security interest in certain owned or ground-leased real estate and associated equipment pledged as collateral. As of February 24, 2018 and February 25, 2017 , there was $710 and $520 , respectively, of owned or ground-leased real estate and associated equipment pledged as collateral, which was included in Property, plant and equipment, net and Long-term assets of discontinued operations in the Consolidated Balance Sheets. In addition, the obligations of the Term Loan Parties under the Secured Term Loan Facility are secured by second-priority security interests in the collateral securing our $1,000 asset-based revolving credit facility (the “Revolving ABL Credit Facility”). As of February 24, 2018 and February 25, 2017 , $8 and $0 of the Secured Term Loan Facility was classified as current, respectively, excluding debt financing costs and original issue discount.
The loans under the Secured Term Loan Facility may be voluntarily prepaid in certain minimum principal amounts, subject to the payment of breakage or similar costs. Pursuant to the Secured Term Loan Facility, we must, subject to certain exemptions and certain customary reinvestment rights, apply 100 percent of Net Cash Proceeds (as defined in the facility) from certain types of asset sales (excluding proceeds of the collateral security of the Revolving ABL Credit Facility and other secured indebtedness) to prepay the loans outstanding under the Secured Term Loan Facility. We must also prepay loans outstanding under the facility no later than 90 days after the fiscal year end in an aggregate principal amount equal to a percentage (which percentage ranges from 0 to 50 percent depending on our Total Secured Leverage Ratio (as defined in the facility) as of the last day of such fiscal year) of Excess Cash Flow (as defined in the facility) for the fiscal year then ended, minus any voluntary prepayments made during such fiscal year with Internally Generated Cash (as defined in the facility). Based on our Excess Cash Flow for the fiscal year ended February 24, 2018 , no prepayments will be required under the Secured Term Loan Facility in fiscal 2019.
The assets included in the Consolidated Balance Sheets securing the outstanding borrowings under the Revolving ABL Credit Facility on a first-priority basis, and the unused available credit and fees under the Revolving ABL Credit Facility, were as follows:
Assets securing the Revolving ABL Credit Facility:
 
February 24,
2018
 
February 25,
2017
Certain inventory assets included in Inventories, net and Current assets of discontinued operations
 
$
1,176

 
$
949

Certain receivables included in Receivables, net and Current assets of discontinued operations
 
410

 
228

Certain amounts included in Cash and cash equivalents and Current assets of discontinued operations
 
20

 
19


73

Unused available credit and fees under the Revolving ABL Credit Facility:
 
February 24,
2018
 
February 25,
2017
Outstanding letters of credit
 
$
57

 
$
53

Letter of credit fees
 
1.375
%
 
1.375
%
Unused available credit
 
816

 
748

Unused facility fees
 
0.25
%
 
0.25
%
The revolving loans under the Revolving ABL Credit Facility may be voluntarily prepaid in certain minimum principal amounts, in whole or in part, without premium or penalty, subject to breakage or similar costs. SUPERVALU INC. and those subsidiaries named as borrowers under the Revolving ABL Credit Facility are required to repay the revolving loans in cash and provide cash collateral under this facility to the extent that the revolving loans and letters of credit exceed the lesser of the borrowing base then in effect or the aggregate amount of the lenders’ commitments under the Revolving ABL Credit Facility. Certain of our material subsidiaries are co-borrowers under the Revolving ABL Credit Facility, and this facility is guaranteed by the rest of our material subsidiaries (SUPERVALU INC. and those subsidiaries named as borrowers and guarantors under the Revolving ABL Credit Facility, the “ABL Loan Parties”). To secure their obligations under this facility, the ABL Loan Parties have granted a perfected first-priority security interest for the benefit of the facility lenders in their present and future inventory, credit card, wholesale trade, pharmacy and certain other receivables, prescription files and related assets. In addition, the obligations under the Revolving ABL Credit Facility are secured by second-priority liens on and security interests in the collateral securing the Secured Term Loan Facility, subject to certain limitations to ensure compliance with our outstanding debt instruments and leases.
Both the Secured Term Loan Facility and the Revolving ABL Credit Facility limit our ability to make Restricted Payments (as defined in both the Secured Term Loan Facility and the Revolving ABL Credit Facility), which include dividends to stockholders and share repurchases. The Secured Term Loan Facility allows up to $125 of Restricted Payments regardless of the resulting pro forma Total Leverage Ratio (as defined in the facility). The Secured Term Loan Facility caps the aggregate amount of additional Restricted Payments that may be made over the life of the Secured Term Loan Facility, with the additional Restricted Payments being subject to a pro forma Total Secured Leverage Ratio requirement (as defined in the facility) of 3.5 to 1. That aggregate cap can fluctuate over time and the cap could be reduced by certain other actions we may take, including prepayments of debt other than the senior notes and Permitted Investments (as defined in the Secured Term Loan Facility). As of February 24, 2018 , that aggregate cap on Restricted Payments was approximately $502 . The Secured Term Loan Facility permits unlimited Restricted Payments if the Total Leverage Ratio (as defined in the the Secured Term Loan Facility) after giving effect thereto would be less than 2.0 to 1. The Revolving ABL Credit Facility permits dividends up to $75 per fiscal year, not to exceed $175 in the aggregate over the life of the Revolving ABL Credit Facility, as long as no Cash Dominion Event (as defined in the Revolving ABL Credit Facility) exists. Those caps could be reduced by certain debt prepayments we make. The Revolving ABL Credit Facility permits other Restricted Payments as long as the Payment Conditions (as defined in the Revolving ABL Credit Facility) are met.
Debentures
The $400 of 6.75 percent Senior Notes due June 2021, and the $350 of 7.75 percent Senior Notes due November 2022 contain operating covenants, including limitations on liens and on sale and leaseback transactions. We were in compliance with all such covenants and provisions for all periods presented.
NOTE 10—LEASES
We lease most of our Retail stores and certain distribution centers, office facilities and equipment from third parties. Many of these leases include renewal options and, in certain instances, also include options to purchase. Future minimum lease payments to be made by us for noncancellable operating leases and capital leases as of February 24, 2018 consist of the following:

74

 
Lease Obligations
Fiscal Year
Operating Leases
 
Capital Leases
2019
$
77

 
$
41

2020
79

 
38

2021
62

 
34

2022
46

 
30

2023
34

 
23

Thereafter
123

 
84

Total future minimum obligations
$
421

 
250

Less interest
 
 
(75
)
Present value of net future minimum obligations
 
 
175

Less current capital lease obligations
 
 
(26
)
Long-term capital lease obligations
 
 
$
149

Total future minimum obligations have not been reduced for future minimum subtenant rentals under certain operating subleases.
Rent expense, other operating lease expense and subtenant rentals all under operating leases consisted of the following:
 
2018
 
2017
 
2016
Minimum rent
$
103

 
$
86

 
$
87

Contingent rent
3

 
4

 
4

Rent expense (1)
106

 
90

 
91

Less subtenant rentals
(29
)
 
(27
)
 
(27
)
Total net rent expense
$
77

 
$
63

 
$
64

(1)
Rent expense as presented here includes $13, $12 and $11, respectively, of operating lease rent expense related to stores within discontinued operations for which we expect to assign the lease of the stores that are held for sale within discontinued operations, but for which GAAP requires the historical expense to be included within continuing operations, as we expect to remain primarily obligated under these leases.
We lease certain property to third parties under operating, capital and direct financing leases. Under the direct financing leases, we lease buildings to Wholesale customers with terms ranging from one to three years.
Future minimum lease and subtenant rentals to be received under noncancellable operating and deferred financing income leases, under which we are the lessor, as of February 24, 2018 , consist of the following:
 
Lease Receipts
Fiscal Year
Operating Leases
 
Direct Financing Leases
2019
$
20

 
$
1

2020
19

 
—

2021
15

 
—

2022
13

 
—

2023
8

 
—

Thereafter
23

 
—

Total minimum lease receipts
$
98

 
$
1

The carrying value of owned property leased to third parties under operating leases was as follows:
 
2018
 
2017
Property, plant and equipment
$
4

 
$
4

Less accumulated depreciation
(3
)
 
(3
)
Property, plant and equipment, net
$
1

 
$
1


75

NOTE 11—BENEFIT PLANS
Substantially all of our employees are covered by various contributory and non-contributory pension, profit sharing or 401(k) plans. Our primary defined benefit pension plan, the SUPERVALU Retirement Plan, and certain supplemental executive retirement plans were closed to new participants and service crediting ended for all participants as of December 31, 2007. Pay increases were reflected in the amount of benefits accrued in these plans until December 31, 2012. Most union employees participate in multiemployer retirement plans under collective bargaining agreements, unless the collective bargaining agreement provides for participation in plans sponsored by Supervalu. In addition to sponsoring both defined benefit and defined contribution pension plans, we provide healthcare and life insurance benefits for eligible retired employees under postretirement benefit plans. We also provide certain health and welfare benefits, including short-term and long-term disability benefits, to inactive disabled employees prior to retirement. The terms of the postretirement benefit plans vary based on employment history, age and date of retirement. For many retirees, we provide a fixed dollar contribution and retirees pay contributions to fund the remaining cost.
In fiscal 2016, we amended the Supervalu Retiree Benefit Plan which provides medical, prescription drug, dental and life benefits, to eliminate benefits provided by the plan for certain participants under a collective bargaining agreement. As a result of the plan amendment, certain Supervalu Retiree Benefit Plan obligations were re-measured using a discount rate of  4.25 percent and the MP-2015 mortality improvement scale. This re-measurement resulted in a  $28  reduction in postretirement benefit obligations within Pension and other postretirement benefit obligations with a corresponding decrease to Accumulated other comprehensive loss.
The benefit obligation, fair value of plan assets and funded status of our defined benefit pension plans and other postretirement benefit plans consisted of the following:
 
Pension Benefits
 
Other Postretirement Benefits
 
2018
 
2017
 
2018
 
2017
Changes in Benefit Obligation
 
 
 
 
 
 
 
Benefit obligation at beginning of year
$
2,480

 
$
2,664

 
$
44

 
$
54

Acquired benefit plan obligations
268

 
—

 
28

 
—

Plan amendment
(21
)
 
—

 
(1
)
 
(7
)
Service cost
—

 
—

 
—

 
1

Interest cost
83

 
84

 
2

 
2

Actuarial loss (gain)
2

 
37

 
(3
)
 
(3
)
Settlements paid
—

 
(200
)
 
—

 
—

Plan termination
—

 
—

 
(11
)
 
—

Benefits paid
(140
)
 
(105
)
 
(3
)
 
(3
)
Benefit obligation at end of year
2,672

 
2,480

 
56

 
44

Changes in Plan Assets
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
2,183

 
2,119

 
16

 
15

Acquired benefit plan assets
193

 
—

 
—

 
—

Actual return on plan assets
206

 
307

 
—

 
—

Employer contributions
2

 
62

 
—

 
4

Plan participants’ contributions
—

 
—

 
1

 
2

Settlements paid
—

 
(200
)
 
—

 
—

Benefits paid
(140
)
 
(105
)
 
(4
)
 
(5
)
Fair value of plan assets at end of year
2,444

 
2,183

 
13

 
16

Unfunded status at end of year
$
(228
)
 
$
(297
)
 
$
(43
)
 
$
(28
)
For the defined benefit pension plans, the accumulated benefit obligation is equal to the projected benefit obligation.

76

Amounts recognized in the Consolidated Balance Sheets consist of the following:
 
Pension Benefits
 
Other Postretirement Benefits
 
2018
 
2017
 
2018
 
2017
Accrued vacation, compensation and benefits
$
(2
)
 
$
(2
)
 
$
(4
)
 
$
(1
)
Pension and other postretirement benefit obligations
(226
)
 
(295
)
 
(39
)
 
(27
)
Total
$
(228
)
 
$
(297
)
 
$
(43
)
 
$
(28
)
Amounts recognized in Accumulated other comprehensive loss for the defined benefit pension and other postretirement benefit plans consist of the following:
 
Pension Benefits
 
Other Postretirement Benefits
 
2018
 
2017
 
2018
 
2017
Prior service benefit
$
21

 
$
—

 
$
21

 
$
42

Net actuarial loss
(401
)
 
(478
)
 
(8
)
 
(13
)
Total recognized in Accumulated other comprehensive loss
$
(380
)
 
$
(478
)
 
$
13

 
$
29

Total recognized in Accumulated other comprehensive loss, net of tax
$
(216
)
 
$
(293
)
 
$
6

 
$
17

Net periodic benefit (income) cost and other changes in plan assets and benefit obligations recognized in Other comprehensive income (loss) for defined benefit pension and other postretirement benefit plans consist of the following:
 
Pension Benefits
 
Other Postretirement Benefits
 
2018
 
2017
 
2016
 
2018
 
2017
 
2016
Net Periodic Benefit (Income) Cost
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
—

 
$
—

 
$
—

 
$
—

 
$
1

 
$
—

Interest cost
83

 
84

 
106

 
2

 
2

 
3

Expected return on plan assets
(138
)
 
(141
)
 
(142
)
 
—

 
—

 
—

Amortization of prior service benefit
—

 
—

 
—

 
(16
)
 
(15
)
 
(15
)
Amortization of net actuarial loss
12

 
43

 
79

 
2

 
2

 
3

Plan termination
—

 
—

 
—

 
(8
)
 
—

 
—

Settlement
—

 
42

 
—

 
—

 
—

 
—

Net periodic benefit (income) cost
(43
)
 
28

 
43

 
(20
)
 
(10
)
 
(9
)
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss)
 
 
 
 
 
 
 
 
 
 
 
Prior service benefit
(22
)
 
—

 
—

 
5

 
(7
)
 
(21
)
Amortization of prior service benefit
—

 
—

 
—

 
16

 
15

 
15

Net actuarial (gain) loss
(66
)
 
(172
)
 
76

 
(3
)
 
(3
)
 
(7
)
Amortization of net actuarial loss
(11
)
 
(43
)
 
(79
)
 
(1
)
 
(2
)
 
(3
)
Total expense (benefit) recognized in Other comprehensive income (loss)
(99
)
 
(215
)
 
(3
)
 
17

 
3

 
(16
)
Total expense (benefit) recognized in net periodic benefit cost (income) and Other comprehensive income (loss)
$
(142
)
 
$
(187
)
 
$
40

 
$
(3
)
 
$
(7
)
 
$
(25
)
The estimated net actuarial loss that will be amortized from Accumulated other comprehensive loss into net periodic benefit cost for the defined benefit pension plans during fiscal 2019 is $11 . The estimated net amount of prior service benefit and net actuarial loss for the postretirement benefit plans that will be amortized from Accumulated other comprehensive loss into net periodic benefit cost during fiscal 2019 is $13 .

77

Assumptions
Weighted average assumptions used to determine benefit obligations and net periodic benefit cost consisted of the following:
 
2018
 
2017
 
2016
Benefit obligation assumptions:
 
 
 
 
 
Discount rate
4.04 – 3.37%

 
3.92 – 3.78%

 
4.16 – 3.95%

Rate of compensation increase
—
%
 
—
%
 
—
%
Net periodic benefit cost assumptions: (1)
 
 
 
 
 
Discount rate
3.92 – 2.75%

 
4.16
%
 
3.80
%
Rate of compensation increase
—
%
 
—
%
 
—
%
Expected return on plan assets (2)
6.25– 6.00%

 
6.50
%
 
6.50
%
(1)
For fiscal 2018 and prior, net periodic benefit cost is measured using weighted average assumptions as of the beginning of each year.
(2)
Expected return on plan assets is estimated by utilizing forward-looking, long-term return, risk and correlation assumptions developed and updated annually by Supervalu. These assumptions are weighted by the actual or target allocation to each underlying asset class represented in the pension plan asset portfolio. We also assess the expected long-term return on plan assets assumption by comparison to long-term historical performance on an asset class to ensure the assumption is reasonable. Long-term trends are also evaluated relative to market factors such as inflation, interest rates, and fiscal and monetary policies in order to assess the capital market assumptions.
We review and select the discount rate to be used in connection with measuring our pension and other postretirement benefit obligations annually. In determining the discount rate, we use the yield on corporate bonds (rated AA or better) that coincides with the cash flows of the plans’ estimated benefit payouts. The model uses a yield curve approach to discount each cash flow of the liability stream at an interest rate specifically applicable to the timing of each respective cash flow. The model totals the present values of all cash flows and calculates the equivalent weighted average discount rate by imputing the singular interest rate that equates the total present value with the stream of future cash flows. This resulting weighted average discount rate is then used in evaluating the final discount rate to be used.
In fiscal 2018, we began recognizing the amortization of net actuarial loss on the SUPERVALU Retirement Plan over the remaining life expectancy of inactive participants based on our determination that almost all of the defined benefit pension plan participants are inactive and the plan is frozen to new participants. For the purposes of inactive participants, we utilized an over approximately 90 percent threshold established under our policy. This change did not affect the measurement of total benefit obligations in fiscal 2017, and instead impacted the recognition of certain components of net periodic pension expense prospectively. The impact of the change in estimate was a reduction of the interest and service cost components within net periodic benefit cost by $31 for the defined benefit pension plans.
Effective fiscal 2017, we adopted the “full yield curve” approach for determining the interest and service cost components of net periodic benefit cost for defined benefit pension and other postretirement benefit plans. Under this method, the discount rate assumption used in the interest and service cost components of net periodic benefit cost was built by applying the specific spot rates along the yield curve used in the determination of the benefit obligation described above, to the relevant projected future cash flows of our pension and other postretirement benefit plans. Prior to fiscal 2017, the interest and service cost components of pension expense were estimated using a single weighted-average discount rate derived from the yield curve used to measure the projected benefit obligation at the beginning of the period.
The alternative approach improves the correlation between projected benefit cash flows and the corresponding yield curve spot rates and provides a more precise measurement of interest and service costs. This change did not affect the measurement of total benefit obligations. We have concluded that the application of the full yield curve approach was a change in estimate and, accordingly, recognized the effect prospectively beginning in fiscal 2017. The impact of the change in estimate was an anticipated reduction of the interest and service cost components within net periodic benefit cost in fiscal 2017 by approximately $22 for the defined benefit pension plans and less than $1 for postretirement benefit plans compared to the fiscal 2016 approach.
For those retirees whose health plans provide for variable employer contributions, the assumed healthcare cost trend rate used in measuring the accumulated postretirement benefit obligation before age 65 was 7.80 percent as of February 24, 2018 . The assumed healthcare cost trend rate for retirees before age 65 will decrease each year through fiscal 2026, until it reaches the ultimate trend rate of 4.50 percent . For those retirees whose health plans provide for variable employer contributions, the assumed healthcare cost trend rate used in measuring the accumulated postretirement benefit obligation after age 65 was 8.70 percent as of February 24, 2018 . The assumed healthcare cost trend rate for retirees after age 65 will decrease through fiscal 2026, until it reaches the ultimate trend rate of 4.50 percent . For those retirees whose health plans provide for a fixed employer

78

contribution rate, a healthcare cost trend is not applicable. The healthcare cost trend rate assumption would have had the following impact on the amounts reported: a 100 basis point increase in the trend rate would have impacted our service and interest cost by less than $1 for fiscal 2018 ; a 100 basis point decrease in the trend rate would have decreased our accumulated postretirement benefit obligation as of the end of fiscal 2018 by approximately $3 ; and a 100 basis point increase would have increased our accumulated postretirement benefit obligation by approximately $3 .
Pension Plan Assets
Pension plan assets are held in a master trust and invested in separately managed accounts and other commingled investment vehicles holding domestic and international equity securities, domestic fixed income securities and other investment classes. We employ a total return approach whereby a diversified mix of asset class investments is used to maximize the long-term return of plan assets for an acceptable level of risk. Alternative investments are also used to enhance risk-adjusted long-term returns while improving portfolio diversification. Risk is managed through diversification across asset classes, multiple investment manager portfolios and both general and portfolio-specific investment guidelines. Risk tolerance is established through careful consideration of the plan liabilities, plan funded status and our financial condition. This asset allocation policy mix is reviewed annually and actual versus target allocations are monitored regularly and rebalanced on an as-needed basis. Plan assets are invested using a combination of active and passive investment strategies. Passive, or “indexed” strategies, attempt to mimic rather than exceed the investment performance of a market benchmark. The plan’s active investment strategies employ multiple investment management firms. Managers within each asset class cover a range of investment styles and approaches and are combined in a way that controls for capitalization, and style biases (equities) and interest rate exposures (fixed income) versus benchmark indices. Monitoring activities to evaluate performance against targets and measure investment risk take place on an ongoing basis through annual liability measurements, periodic asset/liability studies and quarterly investment portfolio reviews.
The asset allocation targets and the actual allocation of pension plan assets are as follows:
Asset Category
Target
 
2018
 
2017
Domestic equity
21.6
%
 
26.3
%
 
22.0
%
International equity
6.5
%
 
4.4
%
 
9.5
%
Private equity
4.9
%
 
4.7
%
 
5.9
%
Fixed income
62.3
%
 
57.3
%
 
54.1
%
Real estate
4.7
%
 
7.3
%
 
8.5
%
Total
100.0
%
 
100.0
%
 
100.0
%
The following is a description of the valuation methodologies used for investments measured at fair value:
Common stock —Valued at the closing price reported in the active market in which the individual securities are traded.
Common collective trusts —Investments in common/collective trust funds are stated at net asset value (“NAV”) as determined by the issuer of the common/collective trust funds and is based on the fair value of the underlying investments held by the fund less its liabilities. The majority of the common/collective trust funds have a readily determinable fair value and classified as level 2.  Other investments in common/collective trust funds determine NAV on a less frequent basis and/or have redemption restrictions.  For these investments, NAV is used as a practical expedient to estimate fair value.
Corporate bonds —Valued based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar bonds, the fair value is based upon an industry valuation model, which maximizes observable inputs.
Government securities —Certain government securities are valued at the closing price reported in the active market in which the security is traded. Other government securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings.
Mortgage backed securities —Valued based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar securities, the fair value is based upon an industry valuation model, which maximizes observable inputs.
Mutual funds —Mutual funds are valued at the closing price reported in the active market in which the individual securities are traded.

79

Private equity and real estate partnerships —Valued based on NAV provided by the investment manager, updated for any subsequent partnership interests’ cash flows or expected changes in fair value. The NAV is used as a practical expedient to estimate fair value.
Other —Valued under an approach that maximizes observable inputs, such as gathering consensus data from the market participant’s best estimate of mid-market pricing for actual trades or positions held.
The valuation methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement.
The fair value of assets of our defined benefit pension plans held in a master trust as of February 24, 2018 , by asset category, consisted of the following:
 
Level 1
 
Level 2
 
Level 3
 
Measured at NAV
 
Total
Common stock
$
188

 
$
—

 
$
—

 
$
—

 
$
188

Common collective trusts
—

 
728

 
—

 
75

 
803

Corporate bonds
—

 
418

 
—

 
—

 
418

Government securities
68

 
168

 
—

 
—

 
236

Mutual funds
46

 
440

 
—

 
—

 
486

Mortgage-backed securities
—

 


 
—

 
—

 
—

Other
10

 
21

 
—

 
—

 
31

Private equity and real estate partnerships
—

 
—

 
—

 
282

 
282

Total plan assets at fair value
$
312

 
$
1,775

 
$
—

 
$
357

 
$
2,444

The fair value of assets of our defined benefit pension plans held in a master trust as of February 25, 2017 , by asset category, consisted of the following:
 
Level 1
 
Level 2
 
Level 3
 
Measured at NAV
 
Total
Common stock
$
366

 
$
—

 
$
—

 
$
—

 
$
366

Common collective trusts
—

 
735

 
—

 
102

 
837

Corporate bonds
—

 
248

 
—

 
—

 
248

Government securities
27

 
133

 
—

 
—

 
160

Mutual funds
54

 
205

 
—

 
—

 
259

Mortgage-backed securities
—

 
18

 
—

 
—

 
18

Other
4

 
5

 
—

 
—

 
9

Private equity and real estate partnerships
—

 
—

 
—

 
286

 
286

Total plan assets at fair value
$
451

 
$
1,344

 
$
—

 
$
388

 
$
2,183

Contributions
In August 2014, the Highway and Transportation Funding Act of 2014, which included an extension of pension funding interest rate relief, was signed into law. The Highway and Transportation Funding Act includes a provision for interest rate stabilization for defined benefit employee pension plans. As a result of this stabilization provision, our required pension contributions to the SUPERVALU Retirement Plan decreased significantly in fiscal 2016 compared to fiscal 2015, and we expect that to continue for the next several years. In fiscal 2019, $4 of minimum pension contributions are required to be made under the Unified Grocers, Inc. Cash Balance Plan under Employee Retirement Income Security Act of 1974, as amended (“ERISA”). No minimum pension contributions are required to be made to the SUPERVALU Retirement Plan under ERISA in fiscal 2019. We expect to contribute approximately $5 to $10 to our defined benefit pension plans and postretirement benefit plans in fiscal 2019 .
We fund our defined benefit pension plans based on the minimum contribution required under the Employee Retirement Income Security Act of 1974, as amended, the Pension Protection Act of 2006 and other applicable laws, as determined by our external actuarial consultant, and additional contributions made at our discretion. In connection with the sale of Save-A-Lot, we

80

agreed with the Pension Benefit Guaranty Corporation (the “PBGC”) to make $60 in aggregate contributions to the SUPERVALU Retirement Plan in excess of required minimum contributions. We made those contributions in the fourth quarter of fiscal 2017 and have fully fulfilled our obligations under our agreement with the PBGC. We will recognize contributions in accordance with applicable regulations, with consideration given to recognition for the earliest plan year permitted.
At our discretion, additional funds may be contributed to the pension plan. We may accelerate contributions or undertake contributions in excess of the minimum requirements from time to time subject to the availability of cash in excess of operating and financing needs or other factors as may be applicable. We assess the relative attractiveness of the use of cash including such factors as expected return on assets, discount rates, cost of debt, reducing or eliminating required PBGC variable rate premiums or the ability to achieve exemption from participant notices of underfunding.
Lump Sum Pension Settlement
During fiscal 2017, the SUPERVALU Retirement Plan made lump sum settlement payments to certain deferred vested pension plan participants under a lump sum payment option window. The payments were equal to the present value of the participant’s pension benefits, and were made to certain former employees who were deferred vested participants in the SUPERVALU Retirement Plan, who had not yet begun receiving monthly pension benefit payments and who elected to participate in the lump sum payment option window. In fiscal 2017, the SUPERVALU Retirement Plan made lump sum settlement payments of approximately  $200 . The lump sum settlement payments resulted in a non-cash pension settlement charge of  $42  from the acceleration of a portion of the accumulated unrecognized actuarial loss. As a result of the lump sum settlements, the SUPERVALU Retirement Plan assets and liabilities were re-measured at December 3, 2016 using a discount rate of  4.1 percent , an expected rate of return on plan assets of  6.5 percent and the RP-2014 Aggregate Mortality Table adjusted back to 2006 using projection scale MP-2014, and then projected forward using MP-2016. The settlement and subsequent re-measurement resulted in a decrease to accumulated other comprehensive loss of  $172  pre-tax ( $105  after-tax) and a corresponding increase to the SUPERVALU Retirement Plan’s funded status.
Estimated Future Benefit Payments
The estimated future benefit payments to be made from our defined benefit pension and other postretirement benefit plans, which reflect expected future service, are as follows:
Fiscal Year
Pension Benefits
 
Other Postretirement
Benefits
2019
$
176

 
$
5

2020
155

 
5

2021
160

 
5

2022
166

 
5

2023
173

 
4

Years 2024-2028
860

 
19

Defined Contribution Plans
We sponsor defined contribution and profit sharing plans pursuant to Section 401(k) of the Internal Revenue Code. Employees may contribute a portion of their eligible compensation to the plans on a pre-tax basis. We match a portion of certain employee contributions by contributing cash into the investment options selected by the employees. The total amount contributed by us to the plans is determined by plan provisions or at our discretion. Total employer contribution expenses for these plans were $11 , $8 and $4 for fiscal 2018 , 2017 and 2016 , respectively. Matching contributions were reduced or eliminated in January 2013 for most employees. We made a discretionary match for each of fiscal 2018 and fiscal 2017 for eligible employees. There were no discretionary matches made in fiscal 2016. Since June 2014, plan investment options do not include shares of our common stock.
Post-Employment Benefits
We recognize an obligation for benefits provided to former or inactive employees. We are self-insured for certain disability plan programs, which comprise the primary benefits paid to inactive employees prior to retirement.

81

Amounts recognized in the Consolidated Balance Sheets consisted of the following:
 
 
Post-Employment Benefits
 
 
2018
 
2017
Accrued vacation, compensation and benefits
 
$
4

 
$
3

Other long-term liabilities
 
6

 
7

Total
 
$
10

 
$
10

Multiemployer Plans
We contribute to various multiemployer pension plans under collective bargaining agreements, primarily defined benefit pension plans. These multiemployer plans generally provide retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose. Plan trustees typically are responsible for determining the level of benefits to be provided to participants as well as the investment of the assets and plan administration. Trustees are appointed in equal number by employers and the unions that are parties to the collective bargaining agreement.
Expense is recognized in connection with these plans as contributions are funded, in accordance with GAAP. We contributed $44 , $36 and $36 to these plans for fiscal years 2018 , 2017 and 2016 , respectively. The risks of participating in these multiemployer plans are different from the risks associated with single-employer plans in the following respects:
a.
Assets contributed to the multiemployer plan by one employer are held in trust and may be used to provide benefits to employees of other participating employers.
b.
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.
c.
If we choose to stop participating in some multiemployer plans, or make market exits or closures or otherwise have participation in the plan drop below certain levels, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
Our participation in these plans is outlined in the table below. The EIN-Pension Plan Number column provides the Employer Identification Number (“EIN”) and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act (“PPA”) zone status available in 2018 and 2017 relates to the plans’ two most recent fiscal year-ends. The zone status is based on information that we received from the plan and is certified by each plan’s actuary. Among other factors, red zone status plans are generally less than 65 percent funded and are considered in critical status, plans in yellow zone status are less than 80 percent funded and are considered in endangered or seriously endangered status, and green zone plans are at least 80 percent funded. The Multiemployer Protection Act of 2014 (“MPRA”) created a new zone status called “critical and declining” or “Deep Red”. Plans are generally considered Deep Red if they are projected to become insolvent within 15 years. The FIP/RP Status Pending/Implemented column indicates plans for which a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented by the trustees of each plan.
Certain plans have been aggregated in the All Other Multiemployer Pension Plans line in the following table, as the contributions to each of these plans are not individually material. None of our collective bargaining agreements require that a minimum contribution be made to these plans. Multiemployer pension plan contributions and participants were generally comparable for fiscal 2018 , 2017 and 2016 .
At the date the financial statements were issued, Forms 5500 were generally not available for the plan years ending in 2017 .

82

The following table contains information about our multiemployer plans:
 
EIN—Pension
Plan Number
 
Plan
Month/Day
End Date
 
Pension Protection Act Zone Status
 
FIP/RP Status
Pending/ Implemented
 
Contributions
 
Surcharges
Imposed (1)
 
Amortization
Provisions
Pension Fund
2018
 
2017
 
2018
 
2017
 
2016
 
Minneapolis Food Distributing Industry Pension Plan
416047047-001
 
12/31
 
Green
 
Green
 
Implemented
 
$
10

 
$
10

 
$
10

 
No
 
No
Minneapolis Retail Meat Cutters and Food Handlers Pension Fund
410905139-001
 
2/28
 
Yellow
 
Green
 
Implemented
 
9

 
9

 
9

 
No
 
No
Central States, Southeast and Southwest Areas Pension Fund
366044243-001
 
12/31
 
Deep Red
 
Deep Red
 
Implemented
 
5

 
4

 
4

 
No
 
Yes
UFCW Unions and Participating Employers Pension Fund
526117495-002
 
12/31
 
Red
 
Red
 
Implemented
 
6

 
6

 
5

 
No
 
Yes
Western Conference of Teamsters Pension Plan
916145047-001
 
12/31
 
Green
 
Green
 
No
 
11

 
4

 
4

 
No
 
No
UFCW Unions and Employers Pension Plan
396069053-001
 
10/31
 
Red
 
Red
 
Implemented
 
2

 
2

 
2

 
No
 
Yes
All Other Multiemployer Pension Plans (2)
 
 
 
 
 
 
 
 
 
 
1

 
1

 
2

 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
$
44

 
$
36

 
$
36

 
 
 
 
(1)
PPA surcharges are 5 percent or 10 percent of eligible contributions and may not apply to all collective bargaining agreements or total contributions to each plan.
(2)
All Other Multiemployer Pension Plans includes 7 plans, none of which is individually significant when considering our contributions to the plan, severity of the underfunded status or other factors.
The following table describes the expiration of our collective bargaining agreements associated with the significant multiemployer plans in which we participate:
 
 
 
Most Significant Collective Bargaining Agreement
 
 
Pension Fund
Range of Collective Bargaining Agreement Expiration Dates
 
Total Collective Bargaining Agreements
 
Expiration Date
 
% of Associates under Collective Bargaining Agreement (1)
 
Over 5% Contribution 2018
Minneapolis Food Distributing Industry Pension Plan
5/31/2018
 
1

 
5/31/2018
 
100.0
%
 
Yes
Minneapolis Retail Meat Cutters and Food Handlers Pension Fund
3/3/2018
 
1

 
3/3/2018
 
100.0
%
 
Yes
Central States, Southeast and Southwest Areas Pension Fund
3/30/2019 - 9/20/2019
 
4

 
9/14/2019
 
40.1
%
 
No
UFCW Unions and Participating Employers Pension Plan
7/11/2020
 
2

 
7/11/2020
 
73.0
%
 
Yes
Western Conference of Teamsters Pension Plan
4/21/2018 – 9/26/2020
 
22

 
4/20/2019
 
15.8
%
 
No
UFCW Unions and Employers Pension Plan
4/6/2019
 
1

 
4/6/2019
 
100.0
%
 
Yes
(1)
Company participating employees in the most significant collective bargaining agreement as a percent of all Company employees participating in the respective fund.

83

Multiemployer Postretirement Benefit Plans Other than Pensions
We also make contributions to multiemployer health and welfare plans in amounts set forth in the related collective bargaining agreements. These plans provide medical, dental, pharmacy, vision and other ancillary benefits to active employees and retirees as determined by the trustees of each plan. The vast majority of our contributions benefit active employees and as such, may not constitute contributions to a postretirement benefit plan. However, we are unable to separate contribution amounts to postretirement benefit plans from contribution amounts paid to benefit active employees.
We co ntributed $92 , $78 and $70 for fiscal 2018 , 2017 and 2016 , respectively, to multiemployer health and welfare plans. If healthcare provisions within these plans cannot be renegotiated in a manner that reduces the prospective healthcare cost as we intend, our Selling and admin istrative expenses could increase in the future.
Collective Bargaining Agreements
As of February 24, 2018 , we had approximately 23,000 employees. Approximately 14,000 employees are covered by 52 collective bargaining agreements. During fiscal 2018 , 21 collective bargaining agreements covering approximately 5,100 employees were renegotiated. No collective bargaining agreements expired without their terms being renegotiated. Negotiations are expected to continue with the bargaining units representing the employees subject to those agreements. During fiscal 2019 , 15 collective bargaining agreements covering approximately 5,000 employees are scheduled to expire.
NOTE 12—NET EARNINGS PER SHARE
The following table reflects the calculation of basic and diluted net earnings per share:
 
2018
 
2017
 
2016
Net earnings from continuing operations
$
49

 
$
35

 
$
49

Less net earnings attributable to noncontrolling interests
(1
)
 
(4
)
 
(8
)
Net earnings from continuing operations attributable to SUPERVALU INC.
48

 
31

 
41

(Loss) income from discontinued operations, net of tax
(3
)
 
619

 
137

Net earnings attributable to SUPERVALU INC.
$
45

 
$
650

 
$
178

 
 
 
 
 
 
Weighted average number of shares outstanding—basic
38

 
38

 
38

Dilutive impact of stock-based awards
—

 
—

 
—

Weighted average number of shares outstanding—diluted
38

 
38

 
38

 
 
 
 
 
 
Basic net earnings per share attributable to SUPERVALU INC.:
 
 
 
 
 
Continuing operations
$
1.25

 
$
0.82

 
$
1.08

Discontinued operations
$
(0.07
)
 
$
16.35

 
$
3.65

Basic net earnings per share
$
1.18

 
$
17.17

 
$
4.72

Diluted net earnings per share attributable to SUPERVALU INC.:
 
 
 
 
 
Continuing operations
$
1.25

 
$
0.81

 
$
1.06

Discontinued operations
$
(0.07
)
 
$
16.19

 
$
3.59

Diluted net earnings per share
$
1.18

 
$
17.00

 
$
4.66

Stock-based awards of 2 , 2 and 1 that were outstanding during fiscal 2018 , 2017 and 2016 , respectively, were excluded from the calculation of Net earnings from continuing operations per share—diluted, Net earnings from discontinued operations per share—diluted and Net earnings per share—diluted for the periods because their inclusion would be antidilutive.
Reverse Stock Split
At the close of business on August 1, 2017, a 1-for-7 reverse split of our common stock became effective and the number of authorized shares of our common stock decreased to approximately 57 , while the number of issued and outstanding shares was reduced from approximately 269 to 38 . Our common stock began trading on a split-adjusted basis when the market opened on August 2, 2017. No fractional shares were issued from the reverse stock split. In lieu of any fractional shares, any holder of less than one share of common stock was entitled to receive cash for such holder’s fractional share. The reverse stock split did not impact the authorized number of shares of preferred stock of Supervalu, none of which were outstanding. The reverse stock

84

split reduced the number of shares of common stock available for issuance under our equity compensation plans in proportion to the reverse stock split ratio. The reverse stock split caused a reduction in the number of shares of common stock issuable upon exercise or vesting of equity awards in proportion to the reverse stock split ratio and caused a proportionate increase in any exercise price of such awards. Our common stock continues to trade on the NYSE under the symbol “SVU.”
NOTE 13—COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED COMPREHENSIVE LOSS
Comprehensive income (loss) is reported in the Consolidated Statements of Comprehensive Income. Comprehensive income includes all changes in stockholders’ equity during the reporting period, other than those resulting from investments by and distributions to stockholders. Our comprehensive income (loss) is calculated as net earnings (loss) including noncontrolling interests, plus or minus adjustments for pension and other postretirement benefit obligations and interest rate swaps, net of tax, less comprehensive income attributable to noncontrolling interests.
Accumulated other comprehensive loss represents the cumulative balance of other comprehensive income (loss), net of tax, as of the end of the reporting period and relates to pension and other postretirement benefit obligation adjustments, net of tax, and interest rate swaps designated as hedges, net of tax. Changes in Accumulated other comprehensive loss by component are as follows:
 
Accumulated Other Comprehensive Loss
 
Benefit Plans
 
Interest Rate Swap
 
Total
February 28, 2015
$
(423
)
 
$
—

 
$
(423
)
Other comprehensive loss before reclassifications
(37
)
 
(4
)
 
(41
)
Amortization of amounts included in net periodic benefit cost (1)
42

 
—

 
42

Net Other comprehensive income (loss)
5

 
(4
)
 
1

February 27, 2016
(418
)
 
(4
)
 
(422
)
Other comprehensive income before reclassifications
97

 
—

 
97

Amortization of amounts included in net periodic benefit cost (1)
19

 
—

 
19

Amortization of cash flow hedge
—

 
2

 
2

Pension settlement charges (2)
26

 
—

 
26

Net Other comprehensive income
142

 
2

 
144

February 25, 2017
(276
)
 
(2
)
 
(278
)
Other comprehensive income before reclassifications
68

 
1

 
69

Amortization of amounts included in net periodic benefit income (1)
(2
)
 
—

 
(2
)
Amortization of cash flow hedge
—

 
1

 
1

Net Other comprehensive income
66

 
2

 
68

February 24, 2018
$
(210
)
 
$
—

 
$
(210
)
(1)
Amortization of amounts included in net periodic benefit (income) cost includes amortization of prior service benefit and amortization of net actuarial loss as reflected in Note 11—Benefit Plans .
(2)
Refer to Note 11—Benefit Plans for additional information on our fiscal 2017 pension settlement charges.

85

Items reclassified out of Accumulated other comprehensive loss had the following impact on the Consolidated Statements of Operations:
 
2018
 
2017
 
2016
 
Affected Line Item on Consolidated Statements of Operations
Pension and postretirement benefit plan obligations:
 
 
 
 
 
 
 
Amortization of amounts included in net periodic benefit (income) cost (1)
$
(3
)
 
$
28

 
$
59

 
Selling and administrative expenses
Amortization of amounts included in n et periodic benefit (income) cost (1)
—

 
2

 
8

 
Cost of sales
Pension settlement charges
—

 
42

 
—

 
Selling and administrative expenses
Total reclassifications
(3
)
 
72

 
67

 
 
Income tax expense (benefit)
1

 
(27
)
 
(25
)
 
Income tax provision (benefit)
Total reclassifications, net of tax
$
(2
)
 
$
45

 
$
42

 
 
 
 
 
 
 
 
 
 
Interest rate swap cash flow hedge:
 
 
 
 
 
 
 
Reclassification of cash flow hedge
$
1

 
$
3

 
$
—

 
Interest expense, net
Income tax benefit
—

 
(1
)
 
—

 
Income tax provision (benefit)
Total reclassifications, net of tax
$
1

 
$
2

 
$
—

 
 
(1)
Amortization of amounts included in net periodic benefit (income) cost includes amortization of prior service benefit and amortization of net actuarial loss as reflected in Note 11—Benefit Plans .

As of  February 24, 2018 , we expect to reclassify  $1  out of Accumulated other comprehensive loss into Interest expense, net during the following twelve-month period.
NOTE 14—STOCK-BASED AWARDS
As of February 24, 2018 , we have stock options, restricted stock awards, restricted stock units and performance share units (collectively referred to as “stock-based awards”) outstanding under the 2012 Stock Plan and 2007 Stock Plan. Our 2012 Stock Plan, which was amended and restated in fiscal 2015 and further amended in fiscal 2017 (as amended, the “2012 Stock Plan”), is the only plan under which stock-based awards may be granted to employees. The 2012 Stock Plan provides that the Board of Directors or the Leadership Development and Compensation Committee of the Board (the “Compensation Committee”) may determine at the time of grant whether each stock-based award granted will be a non-qualified or incentive stock-based award under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The terms of each stock-based award will be determined by the Board of Directors or the Compensation Committee. Generally, stock-based awards granted from fiscal 2006 to fiscal 2012 generally have a term of seven years, and starting in fiscal 2013 stock-based awards granted generally have a term of ten years.
At the discretion of the Board of Directors or the Compensation Committee, we have granted stock options to purchase common stock at an exercise price not less than 100 percent of the fair market value of our common stock on the date of grant, restricted stock awards, restricted stock units and performance share units (“PSUs”) to executive officers and other key salaried employees. Stock options have also been granted to our non-employee directors. All stock options, restricted stock awards, restricted stock units and PSUs issued in fiscal 2018, and 2017 vest either pro rata over three years or cliff vest after three years. The restrictions on the restricted stock awards and restricted stock units generally lapse between one and five years from the date of grant. The performance metrics of PSUs are determined at the discretion of the Board of Directors or Compensation Committee.
As of February 24, 2018 , there were 4 shares available for future issuance of stock-based awards under the 2012 Stock Plan. Common stock has been delivered out of treasury stock or newly issued shares upon the exercise or vesting of stock-based awards. The provisions of future stock-based awards may change at the discretion of the Board of Directors or the Compensation Committee.

86

Stock Options
Stock options granted, exercised and outstanding consisted of the following:
 
Shares Under Option
(In thousands)
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term
(In years)
 
Aggregate Intrinsic Value
(In thousands)
Outstanding, February 28, 2015
2,983

 
$
69.92

 
6.55
 
$
61,073

Granted
790

 
52.11

 
 
 
 
Exercised
(246
)
 
40.90

 
 
 
 
Canceled and forfeited
(477
)
 
174.62

 
 
 
 
Outstanding, February 27, 2016
3,050

 
$
51.56

 
5.93
 
$
6,827

Granted
137

 
39.48

 
 
 
 
Exercised
(249
)
 
25.58

 
 
 
 
Canceled and forfeited
(712
)
 
68.14

 
 
 
 
Outstanding, February 25, 2017
2,226

 
$
48.38

 
5.99
 
$
2,161

Granted
36

 
29.19

 
 
 
 
Exercised
(10
)
 
15.96

 
 
 
 
Canceled and forfeited
(542
)
 
60.75

 
 
 
 
Outstanding, February 24, 2018
1,710

 
$
44.15

 
5.55
 
$
—

Vested and expected to vest in the future as of February 24, 2018
1,690

 
$
44.28

 
5.52
 
$
—

Exercisable, February 24, 2018
1,487

 
$
44.54

 
5.20
 
$
—

For our annual grant made in the first quarter of fiscal 2018 , 2017 and 2016 , we granted 36 thousand , 137 thousand and 552 thousand , respectively, of non-qualified stock options to certain employees under the 2012 Stock Plan with a weighted average grant date fair value of $13.92 , $18.68 and $25.69 per share, respectively. These stock options vest over a period of three years, and were awarded as part of a broad-based employee incentive initiative designed to retain and motivate employees across Supervalu.
We estimated the fair value of each option on the date of grant using the Black Scholes option pricing mode, based upon the following assumptions:
 
2018
 
2017
 
2016
Dividend yield
—
%
 
—
%
 
—
%
Volatility rate
53.7
%
 
54.2
%
 
49.0 – 56.5%

Risk-free interest rate
1.8
%
 
1.3
%
 
1.2 – 1.4%

Expected option life
5.0 years

 
5.0 years

 
5.0 years


87

Restricted Stock
Restricted stock awards and restricted stock unit activity consisted of the following:
 
Restricted Stock Units
(In thousands)
 
Restricted Stock Awards
(In thousands)
 
Weighted Average Grant Date Fair Value (1)
Outstanding, February 28, 2015
293

 
76

 
77.14

Granted
9

 
334

 
61.15

Lapsed
(106
)
 
(65
)
 
47.77

Canceled and forfeited
(18
)
 
(34
)
 
61.53

Outstanding, February 27, 2016
178

 
311

 
60.74

Granted
653

 
1

 
39.48

Lapsed
(119
)
 
(108
)
 
60.11

Canceled and forfeited
(190
)
 
(78
)
 
61.53

Outstanding, February 25, 2017
522

 
126

 
$
60.48

Granted
881

 
—

 
—

Lapsed
(225
)
 
(61
)
 
60.57

Canceled and forfeited
(166
)
 
(18
)
 
59.06

Outstanding, February 24, 2018
1,012

 
47

 
$
60.86

(1) Weighted average grant date fair value is only used for restricted stock awards.

In fiscal 2018 and 2017, we granted restricted stock units that vest over a three -year period from the date of the grant. In fiscal 2016, we granted restricted stock awards that vest over a three -year period from the date of grant. The fair value of restricted stock awards and restricted stock units is based on the closing price of our common stock on the date of grant.
Performance Share Units
In fiscal 2018 and 2017, we granted  178 thousand and 201 thousand PSUs, respectively, to certain employees under the 2012 Stock Plan. The PSUs granted in fiscal 2018 have a fiscal 2018-2020 performance period and the PSUs granted in fiscal 2017 have a fiscal 2017-2019 performance period, and both settle in shares of our common stock. We used the Monte Carlo method to estimate the fair value of the PSUs at grant date based upon the following assumptions:
 
2018
 
2017
Dividend yield
—
%
 
—
%
Volatility rate
44.3
%
 
41.3
%
Risk-free interest rate
1.41
%
 
0.9
%
Expected PSU life
2.8 years

 
2.8 years

Performance share unit activity consisted of the following:
 
Performance Share Units
(In thousands)
 
Weighted Average Grant Date Fair Value
Outstanding, February 27, 2016
—


$
—

Granted
201

 
45.17

Lapsed
—

 
—

Canceled and forfeited
(29
)
 
45.17

Outstanding, February 25, 2017
172

 
$
45.17

Granted
178

 
35.18

Lapsed
—

 
—

Canceled and forfeited
(80
)
 
37.44

Outstanding, February 24, 2018
270

 
$
40.75


88

Stock-Based Compensation Expense
The components of pre-tax stock-based compensation expense are included primarily in Selling and administrative expenses in the Consolidated Statements of Operations. The expense recognized and related tax benefits were as follows:
 
2018
 
2017
 
2016
Stock-based compensation
$
19

 
$
17

 
$
21

Income tax benefits
(7
)
 
(7
)
 
(8
)
Stock-based compensation, net of tax
$
12

 
$
10

 
$
13

Unrecognized Stock-Based Compensation Expense
As of February 24, 2018 , there was $23 of unrecognized compensation expense related to unvested stock-based awards granted under our stock plans. The expense is expected to be recognized over a weighted average remaining vesting period of approximately 2 years.
NOTE 15—INCOME TAXES
Income Tax Provision (Benefit)
The income tax provision (benefit) consisted of the following:
 
2018
 
2017
 
2016
Current
 
 
 
 
 
Federal
$
(8
)
 
$
(15
)
 
$
7

State
(2
)
 
8

 
(4
)
Total current
(10
)
 
(7
)
 
3

Deferred
38

 
(8
)
 
1

Income tax provision (benefit)
$
28

 
$
(15
)
 
$
4

The difference between the actual tax provision and the tax provision computed by applying the statutory federal income tax rate to Earnings from continuing operations before income taxes is attributable to the following:
 
2018
 
2017
 
2016
Federal taxes based on statutory rate
$
25

 
$
7

 
$
18

State income taxes, net of federal benefit
1

 
(1
)
 
—

Tax contingency
(12
)
 
(1
)
 
(8
)
Change in valuation allowance
(21
)
 
2

 
—

Pension
(5
)
 
(9
)
 
(4
)
Deferred tax adjustment
—

 
(10
)
 
—

U.S. tax reform
31

 
—

 
—

Stock Compensation
7

 
—

 
—

Other
2

 
(3
)
 
(2
)
Income tax provision (benefit)
$
28

 
$
(15
)
 
$
4

Deferred Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the basis in assets and liabilities for financial reporting and income tax purposes. Our deferred tax assets and liabilities consisted of the following:

89

 
2018
 
2017
Deferred tax assets:
 
 
 
Compensation and benefits
$
105

 
$
162

Self-insurance
12

 
17

Property, plant and equipment and capitalized lease assets
30

 
35

Loss on sale of discontinued operations
795

 
1,174

Net operating loss carryforwards
50

 
15

Other
42

 
75

Gross deferred tax assets
1,034

 
1,478

Valuation allowance
(787
)
 
(1,196
)
Total deferred tax assets
247

 
282

Deferred tax liabilities:
 
 
 
Property, plant and equipment and capitalized lease assets
(160
)
 
(91
)
Inventories
(11
)
 
(13
)
Intangible assets
(5
)
 
(7
)
Other
(8
)
 
(8
)
Total deferred tax liabilities
(184
)
 
(119
)
Net deferred tax assets
$
63

 
$
163

We have valuation allowances to reduce deferred tax assets to the amount that is more-likely-than-not to be realized. We currently have federal (“NOL”) carryforwards of $122 and state NOL carryforwards of $350 for tax purposes. Federal NOL carryforwards of $84 have no expiration date and federal NOL carryforwards of $38 expire beginning in 2033 and continuing through 2037. There is no valuation allowance recorded for the federal NOL carryforwards. The state NOL carryforwards expire beginning in fiscal 2019 and continuing through fiscal 2036 and have a $15 valuation allowance.
In fiscal 2014, the sale of NAI resulted in a capital loss due to the additional tax basis on the sale of the shares. In fiscal 2017, we utilized a portion of the capital loss carryforward offset by a matching release of the valuation allowance on the capital loss.  We estimated additional utilization of the capital loss carryforward in fiscal 2018 and recorded an offsetting release of the valuation allowance. At this time, a valuation allowance has been recognized for the remaining capital loss carryforward of $771 as it is more likely than not that the capital loss will not be used prior to its expiration in fiscal 2019 .
U.S. Tax Reform
On December 22, 2017, the U.S. government enacted comprehensive tax legislation under the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including reducing the U.S. federal corporate tax rate from 35 percent to 21 percent, effective January 1, 2018. Shortly after the Tax Act was enacted, the SEC issued accounting guidance, which provides a one-year measurement period during which a company may complete its accounting for the impacts of the Tax Act. To the extent a company’s accounting for certain income tax effects of the Tax Act is incomplete, the company may determine a reasonable estimate for those effects and record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted.
As a result of the Tax Act, we recorded a discrete income tax expense of $31 in fiscal 2018 associated with the remeasurement of deferred tax assets and liabilities as a result of the reduction in the U.S. federal corporate tax rate. We have not completed our accounting for the income tax effects of certain elements of the Tax Act, but recorded provisional adjustments based on reasonable estimates. These estimates may be impacted by the need for further analysis and future clarification and guidance regarding available tax accounting methods and elections, state tax conformity to federal tax changes, and expected changes to U.S. Treasury regulations. We do not anticipate material changes to these estimates and will record any changes in the quarter in which we complete our analysis, not to exceed one year from the period of enactment.

90

Uncertain Tax Positions
Changes in our unrecognized tax positions consisted of the following:
 
2018
 
2017
 
2016
Beginning balance
$
59

 
$
70

 
$
94

Increase based on tax positions related to the current year
2

 
7

 
5

Increase based on tax positions related to prior years
2

 
—

 
—

Decrease based on tax positions related to prior years
—

 
(15
)
 
(23
)
Decrease related to settlements with taxing authorities
—

 
1

 
—

Decrease due to lapse of statute of limitations
(23
)
 
(4
)
 
(6
)
Ending balance
$
40

 
$
59

 
$
70

Included in the balance of unrecognized tax benefits as of the fiscal year end 2018 , 2017 and 2016 are tax positions, net of tax, of $23 , $33 and $34 , respectively, which would reduce our effective tax rate if recognized in future periods.
Because existing tax positions will continue to generate increased liabilities for unrecognized tax benefits over the next 12 months, and since we are routinely under audit by various taxing authorities, it is reasonably possible that the amount of unrecognized tax benefits will change during the next 12 months. An estimate of the amount or range of such change cannot be made at this time. However, we do not expect the change, if any, to have a material effect on our Consolidated Balance Sheets, Statement of Operations, or Statement Cash Flows within the next 12 months.
We recognized interest expense (income) of $0 , $3 and $(1) in fiscal 2018 , 2017 and 2016 , respectively, from continuing operations within Interest expense, net in the Consolidated Statements of Operations. No penalty expense has been recognized from continuing operations within Selling and administrative expenses in fiscal 2018 , 2017 and 2016 in the Consolidated Statements of Operations.
At February 24, 2018 and February 25, 2017 , we accrued interest of $11 and $11 , respectively, related to uncertain tax positions recorded in Other current liabilities, and Long-term tax liabilities in the Consolidated Balance Sheets. At February 24, 2018 and February 25, 2017 , we have accrued penalties of $1 and $2 , respectively, related to uncertain tax positions recorded in Long-term tax liabilities in the Consolidated Balance Sheets.
We are currently under examination or other methods of review in several tax jurisdictions and remain subject to examination until the statute of limitations expires for the respective taxing jurisdiction or an agreement is reached between the taxing jurisdiction and Supervalu. As of February 24, 2018 , we are no longer subject to federal income tax examinations for fiscal years before 2015 and in most states is no longer subject to state income tax examinations for fiscal years before 2008.
NOTE 16—COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS
Guarantees and Contingent Liabilities
We have outstanding guarantees related to certain leases, fixture financing loans and other debt obligations of various retailers as of February 24, 2018 . These guarantees were generally made to support the business growth of Wholesale customers. The guarantees are generally for the entire terms of the leases, fixture financing loans or other debt obligations with remaining terms that range from less than one year to fourteen years, with a weighted average remaining term of approximately eight years. For each guarantee issued, if the Wholesale customer or other third party defaults on a payment, we would be required to make payments under our guarantee. Generally, the guarantees are secured by indemnification agreements or personal guarantees of the Wholesale customer.
We review performance risk related to our guarantee obligations based on internal measures of credit performance. As of February 24, 2018 , the maximum amount of undiscounted payments we would be required to make in the event of default of all guarantees was $55 ( $44 on a discounted basis). Based on the indemnification agreements, personal guarantees and results of the reviews of performance risk, we believe the likelihood that we will be required to assume a material amount of these obligations is remote. Accordingly, no amount has been recorded in the Consolidated Balance Sheets for these contingent obligations under our guarantee arrangements as the fair value has been determined to be de minimis.
We are contingently liable for leases that have been assigned to various third parties in connection with facility closings and dispositions. We could be required to satisfy the obligations under the leases if any of the assignees are unable to fulfill their lease obligations. Due to the wide distribution of our lease assignments among third parties, and various other remedies available, we believe the likelihood that we will be required to assume a material amount of these obligations is remote. No

91

amount has been recorded in the Consolidated Balance Sheets for these contingent obligations under our guarantee arrangements as the fair value has been determined to be de minimis.
We are a party to a variety of contractual agreements under which we may be obligated to indemnify the other party for certain matters in the ordinary course of business, which indemnities may be secured by operation of law or otherwise. These agreements primarily relate to our commercial contracts, service agreements, contracts entered into for the purchase and sale of stock or assets, operating leases and other real estate contracts, financial agreements, agreements to provide services to us and agreements to indemnify officers, directors and employees in the performance of their work. While our aggregate indemnification obligations could result in a material liability, we are not aware of any matters that are expected to result in a material liability. No amount has been recorded in the Condensed Consolidated Balance Sheets for these contingent obligations as the fair value has been determined to be de minimis.
Following the sale of NAI on March 21, 2013, we remain contingently liable with respect to certain self-insurance commitments and other guarantees as a result of parental guarantees we issued with respect to the obligations of NAI that were incurred while NAI was our subsidiary. As of February 24, 2018 , using actuarial estimates as of June 30, 2017, the total undiscounted amount of all such guarantees was estimated at $69 ( $62 on a discounted basis). Based on the expected settlement of the self-insurance claims that underlie our commitments, we believe that such contingent liabilities will continue to decline. Subsequent to the sale of NAI, NAI collateralized most of these obligations with letters of credit and surety bonds to numerous states. Because NAI remains a primary obligor on these self-insurance and other obligations and has collateralized most of the self-insurance obligations for which we remain contingently liable, we believe that the likelihood that we will be required to assume a material amount of these obligations is remote. Accordingly, no amount has been recorded in the Consolidated Balance Sheets for these guarantees as the fair value has been determined to be de minimis.
Agreements with Save-A-Lot and Onex
The Agreement and Plan of Merger pursuant to which we sold the Save-A-Lot business (the “SAL Merger Agreement”) contains customary indemnification obligations of each party with respect to breaches of their respective representations, warranties and covenants, and certain other specified matters, on the terms and subject to the limitations set forth in the SAL Merger Agreement. Similarly, we entered into a Separation Agreement with Moran Foods (the “Separation Agreement”) which contains indemnification obligations and covenants related to the separation of the assets and liabilities of the Save-A-Lot business from us. We also entered into a Services Agreement with Moran Foods (the “Services Agreement”), pursuant to which we are providing Save-A-Lot various technical, human resources, finance and other operational services for a term of five years, subject to termination provisions that can be exercised by each party. Save-A-Lot paid $30 upon entry into the Services Agreement, which has been credited against fees due under the Services Agreement. The initial annual base charge under the Services Agreement is $30 , subject to adjustments. The Services Agreement generally requires each party to indemnify the other party against third-party claims arising out of the performance of or the provision or receipt of services under the Services Agreement. While our aggregate indemnification obligations to Save-A-Lot and Onex could result in a material liability, we are not aware of any matters that are expected to result in a material liability. We have recorded the fair value of the guarantee in the Consolidated Balance Sheets.
Agreements with AB Acquisition LLC and Affiliates
In connection with the sale of NAI, we entered into various agreements with AB Acquisition LLC and its affiliates related to on-going operations, including a Transition Services Agreement with each of NAI and Albertson’s LLC (collectively, the “TSA”). We are now providing services to NAI and Albertson’s LLC to transition and wind down the TSA. In exchange for these transition and wind down services, we are entitled to receive aggregate fees of $50 that are being paid in eight $6 increments from April 2015 through October 2018. These payments are separate from and incremental to the fixed and variable fees we receive under the TSA. On October 17, 2017, we entered into a letter agreement with each of Albertson’s LLC and NAI pursuant to which the parties agreed that the TSA would expire on September 21, 2018 as to those services that we are providing to Albertson’s LLC and NAI, other than with respect to certain limited services. We will provide services to Albertson’s LLC for one distribution center until at least October 2018, and NAI may notify us that it requires services for certain stores beyond September 21, 2018. The fees for these extended services, if any, will be the same per-store weekly fee (subject to a minimum fee) and the same weekly fee for the distribution center that Albertson’s LLC and NAI currently pay to us. The parties do not expect any of these services, or any of the transition and wind down services, to extend beyond April 2019. We also agreed that Albertson’s would no longer provide services to us after September 21, 2019. In addition, we operate a distribution center in Lancaster, PA that is owned by NAI. In March 2017, we acquired a distribution center in Harrisburg, PA that will replace the Lancaster facility in fiscal 2019.

92

Haggen
In connection with Haggen’s bankruptcy process, Haggen has now closed or sold all 164 of its stores. The transition and wind down of the Haggen transition services agreement occurred in the second quarter of fiscal 2017, and we now provide limited services in connection with the wind down of the Haggen estate. We filed approximately $2 of administrative 503(b)(9) priority claims and approximately $8 of unsecured claims with the bankruptcy court, including a number of contingent claims. On September 30, 2016, the bankruptcy court approved settlement agreements resolving our unsecured claims against Haggen. In accordance with the terms of the settlement agreements, we received approximately $3 from Haggen on October 11, 2016, and Haggen is obligated to make further payments of approximately $2 on account of our claims. Pursuant to the settlement agreement, Haggen has agreed not to pursue claw-backs of any transfers made to us. We could be exposed to claims from third parties from which we source products, services, licenses and similar benefits on behalf of Haggen. We have reserved for possible losses related to a portion of these third-party claims. It is reasonably possible that we could experience losses in excess of the amount of such reserves; however, at this time we cannot reasonably estimate a range of such excess losses because of the factual and legal issues related to whether Supervalu would have liability for any such third-party claims, if such third-party claims were asserted against us.
Pursuant to a trade agreement that Unified entered into with Haggen, Haggen paid a substantial portion of Unified’s prepetition receivables in exchange for certain shipping terms from Unified, and Haggen also agreed to stipulate to an allowed administrative 503(b)(9) priority claim for the balance of Unified’s prepetition claim for goods shipped to Haggen. Accordingly, Unified filed a proof of claim asserting an administrative expense priority claim in the amount of $6 . Haggen has asserted certain potential offsets to Unified’s priority claim that Unified disputes. Unified also filed a proof of claim against Haggen for breach of contract damages related to the termination of its supply agreement and various ancillary agreements. If allowed, such claim would be treated as a general unsecured claim in the Haggen bankruptcy cases. Relatedly, on September 7, 2016, the Official Committee of Unsecured Creditors (the “Committee”) filed a complaint against Comvest Group Holdings, LLC, the private equity owner of Haggen (“Comvest”), certain of Haggen’s non-debtor affiliates, and certain of their respective officers, directors and managers (collectively the “Defendants”) in the bankruptcy court to recover additional funds for Haggen’s bankruptcy estate for the benefit of creditors, including the potential payment of Unified claims. On December 9, 2016, the Defendants filed their answer to the Committee’s complaint generally denying the allegations asserted therein. The trial concluded in November 2017 and on January 22, 2018, the bankruptcy court ruled in favor of the Defendants on all counts dismissing the Committee’s complaint. On February 2, 2018, the Committee filed a Notice of Appeal and subsequently filed a Statement of Issues on Appeal challenging the bankruptcy court’s ruling with respect to the Committee’s recharacterization claim. Absent a successful appeal, it is our understanding that the Haggen estate will not have sufficient assets to pay administrative expense priority claims in full, including our and Unified’s 503(b)(9) priority claims, or to pay any amounts for general unsecured claims.
Information Technology Intrusions
Computer Network Intrusions - In fiscal 2015, we announced we had experienced two separate criminal intrusions into the portion of our computer network that processes payment card transactions for some of our owned and franchised retail stores, including some of our associated stand-alone liquor stores.
Some stores owned and operated by Albertson’s LLC and NAI experienced related criminal intrusions. We provide information technology services to these Albertson’s LLC and NAI stores pursuant to the TSA. We believe that any losses incurred by Albertson’s LLC or NAI as a result of the intrusions affecting their stores would not be our responsibility.
Investigations and Proceedings - As a result of the criminal intrusions, the payment card brands conducted investigations and, although our network has previously been found to be compliant with applicable data security standards, the forensic investigator working on behalf of the payment card brands concluded that we were not in compliance at the time of the intrusions and that the alleged non-compliance caused at least some portion of the compromise of payment card data that allegedly occurred during the intrusions. On August 1, 2016, MasterCard provided notice of its assessment of non-ordinary course expenses and incremental counterfeit fraud losses allegedly incurred by it or its issuers as a result of the criminal intrusions. On September 1, 2016, we submitted an appeal of the assessment to MasterCard and on December 5, 2016, MasterCard denied the appeal and imposed a reduced assessment. On January 2, 2018, Visa provided notice of its assessment of operating expense and incremental counterfeit fraud losses allegedly incurred by it or its issuers as a result of the criminal intrusions. The other payment card brands may also allege that we were not compliant with the applicable data security standards at the time of the intrusions and that such alleged non-compliance caused the compromise of payment card data during the intrusions. We believe these payment card brands may also make claims against us for non-ordinary course operating expenses and incremental counterfeit fraud losses allegedly incurred by them or their issuers by reason of the intrusions and we expect to dispute those claims. While we do not believe that a loss is probable by reason of these as yet unasserted claims, we believe that a loss in connection with these claims, should they be asserted, is reasonably possible; however, at this time we

93

cannot reasonably estimate a range of possible losses because the payment card brands have not alleged what payment cards they consider to have been compromised, what data from those cards they consider to have been compromised, or the amount of their and/or their issuers’ claimed losses. Similar to the assessments imposed by MasterCard and Visa, we do not currently believe that any amount that may be paid for other payment card brand claims that might be asserted will be material to our consolidated results of operations, cash flows or financial condition.
On October 23, 2015, we received a letter from a multistate group of Attorneys General seeking information regarding the intrusions. We are cooperating with the request. To date, no claims have been asserted against us related to this inquiry. If any claims are asserted, we expect to dispute those claims.
As discussed in more detail below in this Note 16 under Legal Proceedings , four class action complaints related to the intrusions have been filed against us and consolidated into one action and are currently on appeal after being dismissed. As indicated below, we believe that the likelihood of a material loss from the four class actions is remote. It is possible that other similar complaints by consumers, banks or others may be filed against us in connection with the intrusions.
Insurance Coverage and Expenses - We had $50 of cyber threat insurance above a per incident deductible of $1 at the time of the intrusions, which we believe should mitigate the financial effect of these intrusions, including claims made or that might be made against us based on these intrusions. We now maintain $90 of cyber threat insurance above a per incident deductible of approximately $3 , in each case subject to certain sublimits.
Other Contractual Commitments
In the ordinary course of business, we enter into supply contracts to purchase products for resale and purchase, and service contracts for fixed asset and information technology commitments. These contracts typically include either volume commitments or fixed expiration dates, termination provisions and other standard contractual considerations. As of February 24, 2018 , we had approximately $391 of non-cancelable future purchase obligations.
Legal Proceedings
We are subject to various lawsuits, claims and other legal matters that arise in the ordinary course of conducting business. In the opinion of management, based upon currently-available facts, the likelihood that the ultimate outcome of any lawsuits, claims and other proceedings will have a material adverse effect on our overall results of operations, cash flows or financial position is remote.
In December 2008, a class action complaint was filed in the United States District Court for the Western District of Wisconsin against us alleging that a 2003 transaction between Supervalu and C&S Wholesale Grocers, Inc. (“C&S”) was a conspiracy to restrain trade and allocate markets. In the 2003 transaction, we purchased certain assets of the Fleming Corporation as part of Fleming Corporation’s bankruptcy proceedings and sold certain of our assets to C&S that were located in New England. Three other retailers filed similar complaints in other jurisdictions and the cases were consolidated and are proceeding in the United States District Court in Minnesota. The complaints alleged that the conspiracy was concealed and continued through the use of non-compete and non-solicitation agreements and the closing down of the distribution facilities that we and C&S purchased from each other. Plaintiffs are divided into Midwest plaintiffs and a New England plaintiff and are seeking monetary damages, injunctive relief and attorney’s fees. On June 19, 2015, the District Court Magistrate Judge entered an order that decided a number of matters including granting Midwest plaintiffs’ request to seek class certification for certain Midwest Distribution Centers and denying New England plaintiff’s request to add an additional New England plaintiff and denying plaintiff’s request to seek class certification for a group of New England retailers. In September 2015, the New England plaintiff appealed to the 8th Circuit the denial of the request to add an additional New England plaintiff and to seek class certification for a group of New England retailers and the hearing before the 8th Circuit occurred on May 17, 2016. On September 7, 2016, the District Court granted Midwest plaintiffs’ motion to certify five Midwest distribution center classes, only one of which sued us (the non-arbitration Champaign distribution center class). On March 1, 2017, the 8th Circuit denied the New England plaintiff’s appeals seeking to join an additional New England plaintiff and the appeal seeking the ability to move for class certification of a smaller New England class. At a mediation on May 25, 2017, we reached a settlement with the non-arbitration Champaign distribution center class, which is the one Midwest class suing us. We and the Midwest plaintiffs have entered into a settlement agreement and the court granted final approval of the settlement on November 17, 2017. The material terms of the settlement include: (1) denial of wrongdoing and liability by us; (2) release of all Midwest plaintiffs’ claims against us related to the allegations and transactions at issue in the litigation that were raised or could have been raised by the non-arbitration Champaign distribution center class; and (3) payment by us of $9 . There is no contribution between us and C&S, and C&S did not settle the claims alleged against it and on April 19, 2018, a jury returned a verdict in favor of C&S determining that there was no conspiracy between Supervalu and C&S to restrain trade. The New England plaintiff is not a party to the settlement and is pursuing its individual claims and potential class action claims against us, which at this time are determined as remote. On

94

February 15, 2018, we filed a summary judgment and Daubert motion and the New England plaintiff filed a motion for class certification. The hearing on the motions is scheduled for May 16, 2018.
In August and November 2014, four class action complaints were filed against us relating to the criminal intrusions into our computer network that we announced in fiscal 2015 (the “Criminal Intrusion”). The cases were centralized in the Federal District Court for the District of Minnesota under the caption In Re: SUPERVALU Inc. Customer Data Security Breach Litigation . On June 26, 2015, the plaintiffs filed a Consolidated Class Action Complaint. We filed a Motion to Dismiss the Consolidated Class Action Complaint and the hearing took place on November 3, 2015. On January 7, 2016, the District Court granted the Motion to Dismiss and dismissed the case without prejudice, holding that the plaintiffs did not have standing to sue as they had not met their burden of showing any compensable damages. On February 4, 2016, the plaintiffs filed a motion to vacate the District Court’s dismissal of the complaint or in the alternative to conduct discovery and file an amended complaint, and we filed our response in opposition on March 4, 2016. On April 20, 2016, the District Court denied plaintiffs’ motion to vacate the District Court’s dismissal or in the alternative to amend the complaint. On May 18, 2016, plaintiffs appealed to the 8th Circuit and on May 31, 2016, we filed a cross-appeal to preserve our additional arguments for dismissal of the plaintiffs’ complaint. On August 30, 2017, the 8th Circuit affirmed the dismissal for 14 out of the 15 plaintiffs finding they had no standing. The 8th Circuit did not consider our cross-appeal and remanded the case back for consideration of our additional arguments for dismissal against the one remaining plaintiff. On October 30, 2017, we filed our motion to dismiss the remaining plaintiff and on November 7, 2017, the plaintiff filed a motion to amend its complaint. The Court held a hearing on the motions on December 14, 2017, and on March 7, 2018, the District Court denied plaintiff’s motion to amend and granted our motion to dismiss. On March 14, 2018, plaintiff appealed to the 8th Circuit.
On June 30, 2015, we received a letter from the Office for Civil Rights of the U.S. Department of Health and Human Services (“OCR”) seeking documents and information regarding our HIPAA breach notification and reporting from 2009 to the present. The letter indicates that the OCR Midwest Region is doing a compliance review of our alleged failure to report small breaches of protected health information related to our pharmacy operations (e.g., any incident involving less than 500 individuals). On September 4, 2015, we submitted our response to OCR’s letter. While we do not believe that a loss is probable by reason of the compliance review, we believe that a loss is reasonably possible; however, at this time we cannot estimate a range of possible losses because the OCR’s review is at the early stages and we do not know if OCR will find a violation(s) and, if so, what violation(s) and whether OCR will proceed with corrective action, issuance of penalties or monetary settlement. The potential penalties related to the issues being investigated are up to $50 thousand per violation (which can be counted per day) with a $1.5 per calendar year maximum for multiple violations of a single provision (with the potential for finding violations of multiple provisions each with a separate $1.5 per calendar year maximum); however, as noted above, any actual penalties will be determined only after consideration by OCR of various factors, including the nature of any violation, remedial actions taken by us and other factors determined relevant by OCR.
On September 21, 2016, our Farm Fresh retail banner, classified as discontinued operations, received an administrative subpoena issued by the Drug Enforcement Administration (“DEA”). In addition to requesting information on Farm Fresh’s pharmacy policies and procedures generally, the subpoena also requested the production of documents that are required to be kept and maintained by Farm Fresh pursuant to the Controlled Substances Act and its implementing regulations. On November 23, 2016, Farm Fresh responded to the subpoena and is cooperating fully with DEA’s additional requests for information. On February 8, 2018, Farm Fresh received a letter from the US Attorney’s Office asserting violations of the Controlled Substances Act and the potential for penalties. Farm Fresh’s response to the alleged violations is due April 30, 2018. In March 2018, representatives for Farm Fresh engaged in discussions with representatives for the DEA and the US Attorney’s Office. We believe that a settlement of the matter is probable. We do not have a best estimate in the range of probable settlement amounts as the discussions with the DEA and US Attorney’s Office are preliminary and we do not know the amount of monetary penalties, if any, the DEA or US Attorney’s Office may seek. We have therefore accrued for the reasonably estimated loss within discontinued operations based on the low end of the range of probable settlement amounts based on information available to us at this time. Furthermore, we believe that a monetary loss in excess of the probable settlement amounts is reasonably possible, but cannot estimate the amount of any such loss for the reasons stated above.
Predicting the outcomes of claims and litigation and estimating related costs and exposures involves substantial uncertainties that could cause actual outcomes, costs and exposures to vary materially from current expectations. We regularly monitor our exposure to the loss contingencies associated with these matters and may from time to time change our predictions with respect to outcomes and estimates with respect to related costs and exposures.
With respect to the C&S, Criminal Intrusion and OCR matters discussed above, we believe the chance of a material loss is remote. It is possible, although management believes that the likelihood is remote, that material differences in actual outcomes, costs and exposures relative to current predictions and estimates, or material changes in such predictions or estimates, could have a material adverse effect on our financial condition, results of operations or cash flows.

95

NOTE 17—SEGMENT INFORMATION
Our operating segments reflect the manner in which our business is managed, resources are allocated, and internal performance is assessed. Our chief operating decision maker is the Chief Executive Officer.
We offer a wide variety of grocery products, general merchandise and health and beauty care, pharmacy, fuel and other items and services. Our business is classified into two reportable segments: Wholesale and Retail. These reportable segments are two distinct businesses, each with a different customer base, marketing strategy and management structure. Reportable segments are reviewed on an annual basis, or more frequently if events or circumstances indicate a change in reportable segments has occurred.
The Wholesale reportable segment derives revenues from wholesale distribution and services to retail food stores and other customers (collectively referred to as “Wholesale customers”). The Retail reportable segment derives revenues from the sale of groceries and other products at retail locations operated by us. Substantially all of our operations are domestic.
We offer a wide variety of nationally advertised brand name and private-label products, primarily including grocery (both perishable and nonperishable), general merchandise and health and beauty care, pharmacy and fuel, which are sold through our Wholesale segment to Wholesale customers and through our Retail segment in owned and franchised retail stores to shoppers. The following table provides additional detail on the amounts and percentages of Net sales for each group of similar products sold in our Wholesale and Retail segments, and service agreement revenue in Corporate:
 
2018
 
2017
 
2016
Wholesale:
 
 
 
 
 
 
 
 
 
 
 
Nonperishable grocery products (1)
$
7,634

 
54
%
 
$
5,579

 
52
%
 
$
5,753

 
51
%
Perishable grocery products (2)
3,241

 
23

 
1,969

 
18

 
2,025

 
18

Services to Wholesale customers and other
179

 
1

 
157

 
1

 
157

 
1

 
11,054

 
78
%
 
7,705

 
71
%
 
7,935

 
70
%
Retail:
 
 
 
 
 
 
 
 
 
 
 
Nonperishable grocery products (1)
$
1,612

 
12
%

$
1,663

 
15
%
 
$
1,731

 
15
%
Perishable grocery products (2)
1,002

 
7

 
1,026

 
9

 
1,072

 
10

Pharmacy products
302

 
2

 
312

 
3

 
316

 
3

Other
27

 
—

 
27

 
—

 
26

 
—

 
2,943

 
21
%
 
3,028

 
27
%
 
3,145

 
28
%
Corporate:
 
 
 
 
 
 
 
 
 
 
 
Services agreement revenue
$
160

 
1
%
 
$
179

 
2
%
 
$
203

 
2
%
Net sales
$
14,157

 
100
%
 
$
10,912

 
100
%
 
$
11,283

 
100
%
(1)
Includes such items as dry goods, dairy, frozen foods, beverages, general merchandise, home, health and beauty care and candy
(2)
Includes such items as meat, produce, deli and bakery
Segment operating earnings include revenues and costs attributable to each of the respective business segments and allocated corporate overhead, based on the segment’s estimated consumption of corporately managed resources. Variances to planned corporate overhead allocated to business segments remain in Corporate because allocated corporate overhead affecting segment operating profit is centrally managed. Reported segment information is presented on the same basis as it is reviewed by executive management.
The presentation of identifiable assets by reportable segment includes allocations from Wholesale to Retail of shared assets based on estimated usage. The presentation of capital expenditures by reportable segment includes allocations of corporate expenditures for information technology and other investments from Corporate to Wholesale and Retail based on estimated usage.
Summary operating results by reportable segment consisted of the following:

96

 
2018
 
Wholesale
 
Retail
 
Corporate
 
Total
Net sales
$
11,054

 
$
2,943

 
$
160

 
$
14,157

Cost of sales
10,591

 
2,115

 
—

 
12,706

Gross profit
463

 
828

 
160

 
1,451

Selling and administrative expenses
237

 
841

 
180

 
1,258

Operating earnings (loss)
$
226

 
$
(13
)
 
$
(20
)
 
$
193

Interest expense, net
 
 
 
 
 
 
132

Equity in earnings of unconsolidated affiliates
 
 
 
 
 
 
(16
)
Earnings from continuing operations before income taxes
 
 
 
 
 
 
$
77

Depreciation and amortization
$
84

 
$
100

 
$
13

 
$
197

Capital expenditures
$
207

 
$
70

 
$
—

 
$
277

Identifiable assets
$
3,343

 
$
823

 
$
7

 
$
4,173

 
2017
 
Wholesale
 
Retail
 
Corporate
 
Total
Net sales
$
7,705

 
$
3,028

 
$
179

 
$
10,912

Cost of sales
7,350

 
2,167

 
—

 
9,517

Gross profit
355

 
861

 
179

 
1,395

Selling and administrative expenses
130

 
851

 
206

 
1,187

Goodwill impairment charge
—

 
13

 
—

 
13

Operating earnings (loss)
$
225

 
$
(3
)
 
$
(27
)
 
$
195

Interest expense, net
 
 
 
 
 
 
180

Equity in earnings of unconsolidated affiliates
 
 
 
 
 
 
(5
)
Earnings from continuing operations before income taxes
 
 
 
 
 
 
$
20

Depreciation and amortization
$
54

 
$
108

 
$
11

 
$
173

Capital expenditures
$
85

 
$
83

 
$
—

 
$
168

Identifiable assets
$
2,182

 
$
829

 
$
297

 
$
3,308

 
2016
 
Wholesale
 
Retail
 
Corporate
 
Total
Net sales
$
7,935

 
$
3,145

 
$
203

 
$
11,283

Cost of sales
7,564

 
2,248

 
—

 
9,812

Gross profit
371

 
897

 
203

 
1,471

Selling and administrative expenses
147

 
831

 
246

 
1,224

Intangible asset impairment charge
6

 
—

 
—

 
6

Operating earnings (loss)
$
218

 
$
66

 
$
(43
)
 
$
241

Interest expense, net
 
 
 
 
 
 
193

Equity in earnings of unconsolidated affiliates
 
 
 
 
 
 
(5
)
Earnings from continuing operations before income taxes
 
 
 
 
 
 
$
53

Depreciation and amortization
$
49

 
$
114

 
$
12

 
$
175

Capital expenditures
$
88

 
$
74

 
$
—

 
$
162

Identifiable assets
$
2,203

 
$
874

 
$
9

 
$
3,086

NOTE 18—DISCONTINUED OPERATIONS
During the fourth quarter of fiscal 2018, we announced that we are pursuing the sale of certain of our corporately owned and operated retail operations consisting of Farm Fresh, Shop ‘n Save, and Shop ‘n Save East. The results of operations, financial position and cash flows of these banners have been presented as discontinued operations and the related assets and liabilities have been reclassified as held-for-sale for all periods presented. These three retail banners were previously separate components included in our Retail reporting segment. We entered into agreements to sell a majority of our Farm Fresh retail stores and pharmacy assets for a total of $53 in March 2018.

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During the third quarter of fiscal 2017, we determined the Save-A-Lot business met the criteria to be held-for-sale and classified as a discontinued operation. The Save-A-Lot business was previously disclosed as a separate reporting segment. The assets, liabilities, operating results, and cash flows of the Save-A-Lot business have been presented separately as discontinued operations in the Consolidated Financial Statements for all periods presented in a manner consistent with the SAL Merger Agreement and the Separation Agreement. In addition, discontinued operations include the results of operations and cash flows attributed to the assets and liabilities of the NAI business.
Results of Discontinued Operations
Operating results of discontinued operations are summarized below:
 
2018
 
2017
 
2016
Net sales
$
1,522

 
$
5,097

 
$
6,245

Cost of sales
1,141

 
4,145

 
5,132

Gross profit
381

 
952

 
1,113

Selling and administrative expenses
409

 
854

 
909

Goodwill impairment charge
—

 
39

 
—

Gain on sale
—

 
(637
)
 
—

Operating (loss) earnings
(28
)
 
696

 
204

Interest expense (income), net
—

 
(4
)
 
(5
)
(Loss) earnings from discontinued operations before income taxes
(28
)
 
700

 
209

Income tax (benefit) provision
(25
)
 
81

 
72

(Loss) income from discontinued operations, net of tax
$
(3
)
 
$
619

 
$
137


98

The carrying amounts of major classes of assets and liabilities that were classified as held-for-sale on the Consolidated Balance Sheets were as follows:
 
February 24, 2018
 
February 25, 2017
Current assets
 
 
 
Cash and cash equivalents
$
7

 
$
5

Receivables, net
8

 
10

Inventories, net
109

 
119

Other current assets
6

 
4

Total current assets of discontinued operations
130

 
138

Long-term assets
 
 
 
Property, plant and equipment, net
74

 
128

Intangible assets, net
1

 
2

Deferred tax assets
8

 
2

Other assets
1

 
2

Total long-term assets of discontinued operations
84

 
134

Total assets held for sale
$
214

 
$
272

 
 
 
 
Current liabilities
 
 
 
Accounts payable
$
51

 
$
59

Accrued vacation, compensation and benefits
20

 
18

Current maturities of capital lease obligations
2

 
2

Other current liabilities
9

 
10

Total current liabilities of discontinued operations
82

 
89

Long-term liabilities
 
 
 
Long-term capital lease obligations
14

 
17

Other long-term liabilities
3

 
—

Total long-term liabilities of discontinued operations
17

 
17

Total liabilities of discontinued operations
99

 
106

Net assets of discontinued operations
$
115

 
$
166

Gain on Save-A-Lot Sale
The following table provides the composition of the gain on the sale of Save-A-Lot:
 
2017
Purchase price
$
1,304

Disposed of balance sheet assets and liabilities, net
(635
)
Transaction costs and other
(32
)
Pre-tax gain on sale
637

Income tax provision
(60
)
After-tax gain on sale
$
577

Income taxes on the gain were recorded at a significantly reduced effective rate due to the anticipated utilization of capital loss carryforwards and the release of valuation allowances of approximately $244 . Income tax on the gain on sale of Save-A-Lot was paid in fiscal 2018.

99

Goodwill and Long-Lived Asset Impairment Charges
Prior to the classification of the Save-A-Lot business as held-for-sale, we assessed the carrying value of the Save-A-Lot business for impairment in accordance with GAAP to determine if the carrying value of the Save-A-Lot assets exceeded their estimated fair value, prior to measuring the held-for-sale business at fair value less cost to sell. The carrying value of the total net assets of the Save-A-Lot reporting units were compared to their estimated fair value based on the proceeds expected to be received pursuant to the SAL Merger Agreement. Our review of goodwill indicated that the estimated fair value of the Save-A-Lot licensee distribution reporting unit was in excess of its carrying value, but that the carrying value of the Save-A-Lot corporate stores reporting unit exceeded its estimated fair value. We recorded a non-cash goodwill impairment charge of $37 before tax during the third quarter of fiscal 2017, which was included as a component of (Loss) income from discontinued operations, net of tax , resulting from a decline in discounted cash flows under the income approach and indicated reporting unit fair values under the market approach. Additionally, in fiscal 2017 we conducted an impairment review of the remaining carrying value of our reporting units due to declines in sales and cash flows within Retail. As a result, we recorded an additional non-cash goodwill impairment charge of $2 , which was allocated to Retail banners classified as discontinued operations as of February 24, 2018 . The calculation of the impairment charge contains significant judgments and estimates including weighted average cost of capital, future revenue, profitability, cash flows and fair values of assets and liabilities.
In fiscal 2018, two retail asset groups, which consisted of two separate retail banners, indicated a decline in their results of operations and the cash flow projections of these two retail asset groups declined compared to prior projections. As a result, the two retail asset groups were selected for an undiscounted cash flow review. Both of these retail asset groups failed the long-lived asset recoverability test. Accordingly, a fair value assessment using the income approach was performed over each retail group’s long-lived assets. The carrying value of both asset groups exceeded the estimated fair value and were reduced to the lower of the carrying value or fair value, resulting in an impairment charge of  $47 , within Selling and administrative expenses of discontinued operations.
In fiscal 2017, one retail asset group indicated a decline in their results of operations and the cash flow projections declined compared to prior projections. As a result, the retail asset group was selected for an undiscounted cash flow review. The retail asset group failed the long-lived asset recoverability test. Accordingly, a fair value assessment using the income approach was performed over the retail asset group’s long-lived assets. The carrying value of the assets within this asset group exceeded the estimated fair value and was reduced until all long-lived assets were recorded at the lower of their carrying value or fair value, resulting in an impairment charge of $41 within Selling and administrative expenses of discontinued operations.
Multiemployer Plans
We contributed $6 for each fiscal year 2018, 2017 and 2016, respectively, to multiemployer pension plans included in discontinued operations. We contributed $2 for each fiscal year 2018, 2017 and 2016, respectively to Central States Southeast and Southwest Areas Pension Fund.  See Note 11—Benefit Plans , for additional information regarding this plan.
NOTE 19—SUBSEQUENT EVENTS
Sale Leaseback Transaction  
On April 23, 2018, we entered into a series of agreements to sell eight of our distribution centers for an aggregate purchase price, excluding costs and taxes, of approximately $483 . The estimated after-tax net proceeds are expected to be approximately $445 . We intend to use the net proceeds to pay down outstanding debt. Subject to customary closing conditions, upon closing of the sale of the properties, we will enter into lease agreements for each of the properties for initial terms of 20 years with five five-year renewal options, that are expected to qualify for sale-leaseback accounting and be classified as operating leases. Any gain on the sale of these properties will be deferred and amortized over the term of the leases. The aggregate initial annual rent payment for the eight properties is expected to be approximately $31 , with scheduled rent increases occurring generally over the initial 20-year term. Of these eight transactions, which are subject to closing conditions, seven are expected to be completed during the first quarter and one is expected to be completed in the third quarter of fiscal 2019. Separate from this sale leaseback transaction, we also entered into an agreement to sell one distribution center. Subject to closing conditions, upon closing of this sale we would enter into a shorter-term lease for the facility.

100

UNAUDITED QUARTERLY FINANCIAL INFORMATION
(In millions, except per share data)
Unaudited quarterly financial information for SUPERVALU INC. and its subsidiaries is as follows:
 
2018
 
First
(16 weeks)
 
Second
(12 weeks)
 
Third
(12 weeks)
 
Fourth
(12 weeks)
 
Fiscal Year
(52 weeks)
Net sales
$
3,517

 
$
3,449

 
$
3,597

 
$
3,594

 
$
14,157

Gross profit
$
431

 
$
340

 
$
324

 
$
356

 
$
1,451

Net earnings (loss) attributable to SUPERVALU INC.
$
11

 
$
(25
)
 
$
26

 
$
33

 
$
45

Net earnings (loss) per share attributable to SUPERVALU INC.—diluted
$
0.30

 
$
(0.66
)
 
$
0.67

 
$
0.86

 
$
1.18

Weighted average shares—diluted
38

 
38

 
38

 
38

 
38

 
2017
 
First
(16 weeks)
 
Second
(12 weeks)
 
Third
(12 weeks)
 
Fourth
(12 weeks)
 
Fiscal Year
(52 weeks)
Net sales
$
3,293

 
$
2,461

 
$
2,629

 
$
2,529

 
$
10,912

Gross profit
$
432

 
$
310

 
$
315

 
$
338

 
$
1,395

Net earnings (loss) attributable to SUPERVALU INC.
$
46

 
$
31

 
$
(26
)
 
$
599

 
$
650

Net earnings (loss) per share attributable to SUPERVALU INC.—diluted
$
1.20

 
$
0.81

 
$
(0.70
)
 
$
15.61

 
$
17.00

Weighted average shares—diluted
38

 
38

 
38

 
38

 
38




101

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.    CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Supervalu carried out an evaluation, under the supervision and with the participation of Supervalu’s management, including Supervalu’s Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of Supervalu’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of February 24, 2018 , the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of February 24, 2018 , Supervalu’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by Supervalu in the reports that it files or submits under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and (2) accumulated and communicated to Supervalu’s management, including Supervalu’s Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
The financial statements, financial analyses and all other information included in this Annual Report on Form 10-K were prepared by Supervalu’s management, which is responsible for establishing and maintaining adequate internal control over financial reporting.
Supervalu’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Supervalu’s internal control over financial reporting includes those policies and procedures that:
i.
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Supervalu;
ii.
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Supervalu are being made only in accordance with authorizations of management and directors of Supervalu; and
iii.
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition and use or disposition of Supervalu’s assets that could have a material effect on the financial statements.
There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal control can provide only reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.
Management assessed the design and effectiveness of Supervalu’s internal control over financial reporting as of February 24, 2018 . In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013) . Based on management’s assessment under the framework in Internal Control - Integrated Framework (2013) , as of February 24, 2018 , Supervalu’s internal control over financial reporting is effective.
In conducting its assessment of the effectiveness of our internal control over financial reporting, management has excluded Unified Grocers, Inc. (“Unified”) which was acquired on June 23, 2017 and Associated Grocers of Florida, Inc. (“AG Florida”), which was acquired on December 8, 2017, as permitted by the guidance issued by the Office of the Chief Accountant of the Securities and Exchange Commission. Unified’s and AG Florida’s total assets constituted $477 million and total revenues of $2,624 million included in the Consolidated Financial Statements as of and for the fiscal year ended February 24, 2018.
The effectiveness of Supervalu’s internal control over financial reporting as of February 24, 2018 has been audited by KPMG LLP, Supervalu’s independent registered public accounting firm. Their report, which is set forth in Part II, Item 8 of this Annual Report on Form 10-K, expresses an unqualified opinion on the effectiveness of Supervalu’s internal control over financial reporting as of February 24, 2018 .

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Changes in Internal Control Over Financial Reporting
On June 23, 2017, Supervalu completed its acquisition of Unified and on December 8, 2017, Supervalu completed its acquisition of AG Florida. See Note 2—Business and Asset Acquisitions , to the Consolidated Financial Statements in Part I, Item 8 of this Form 10-K for further detail of the transactions. Management continues to evaluate the internal controls and procedures of Unified and AG Florida. Management is currently in the process of assessing Unified’s and AG Florida’s material internal controls over financial reporting. Other than in connection with these acquisitions, there have not been any changes in Supervalu’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended February 24, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B.    OTHER INFORMATION

Sale-Leaseback Agreements
On April 23, 2018, SUPERVALU INC. and certain of its wholly-owned subsidiaries (each, a “Lessee” and collectively, the “Lessees”) entered into a series of agreements (the “Sale Leaseback”) to sell, for an aggregate cash purchase price of approximately $483 (the “Purchase Price”), certain of our real estate consisting of eight distribution centers (collectively, the “Real Estate”) to CF Grocery Distribution Propco LLC (“Buyer”). Upon consummation of the sales, the Real Estate will simultaneously be leased back to the Lessees. The consummation of the transactions under the Sale Leaseback, including payment of the Purchase Price, is expected to occur in May 2018 for seven of the distribution centers and by October 2018 for one of the distribution centers, in each case subject to the terms and conditions of the applicable Purchase Agreement (as defined below) and satisfaction of certain closing conditions described therein. In addition, Buyer has agreed to fund an expansion at our distribution center in Harrisburg, PA, one of the facilities included in the Sale Leaseback, for an estimated cost of $20.
The material documentation for the Sale Leaseback includes (i) three (3) purchase and sale agreements (each, a “Purchase Agreement” and collectively, the “Purchase Agreements”), each between Buyer and one or more of the Lessees, (ii) a lease agreement for each distribution center (each, a “Lease” and together, the “Leases”), each between Buyer and the applicable Lessee, and (iii) one or more guaranties by Supervalu in favor of Buyer securing the obligations of the Lessees under each of the Leases (each, a “Guaranty” and together, the “Guaranties”). The Purchase Agreements are dated April 23, 2018. The Leases and the Guaranties will be executed on the applicable date that the Sale Leasebacks are consummated and the Real Estate is conveyed to the Buyer pursuant to the terms, and subject to the closing conditions, of the Purchase Agreements.
Buyer will lease back the Real Estate to the relevant Lessee for an initial term of 20 years pursuant to the Leases in exchange for rental payments (the “Lease Payments”) to be made by the Lessees to Buyer pursuant to the terms of the applicable Lease (as defined below). At the end of the initial term of each Lease, the relevant Lessee may elect to extend the term of its Lease for up to five additional periods of five years each. Pursuant to the Guaranties, Supervalu will guaranty each of the Lessees’ payment and performance obligations under the Leases. The aggregate amount of Lease Payments for the first year of the term of the Leases is approximately $31 .
The material agreements contain affirmative and restrictive covenants customary for transactions of this type. Buyer will be entitled to terminate a Lease upon certain customary enumerated events of default, including (i) a payment default or (ii) failure by Lessee to perform its other obligations under the applicable Lease, in each case following customary notice and cure periods.
The form of Purchase Agreement is filed herewith as Exhibit 10.49 to this Form 10-K and incorporated by reference, and the forms of Lease and Guaranty are filed as exhibits thereto.
Fiscal 2019 Long-Term Incentive Plan
On April 19, 2018, the Leadership Development and Compensation Committee (the “LDCC”) of the Board of Directors of Supervalu approved or, in the case of awards for Mr. Gross, the LDCC recommended and on April 20, 2018 the independent members of the Board of Directors of Supervalu ratified, changes to Supervalu’s long-term incentive compensation plan and awards for the Company’s named executive officers. Under Supervalu’s long-term incentive compensation plan for fiscal 2019, all equity awards to the named executive officers are in the form of performance share units (“PSUs”) granted under the Supervalu Inc. 2012 Stock Plan. Approximately half of each named executive officer’s PSU award will be earned based on achievement of three strategic metrics and were granted pursuant to the form Performance Share Unit Award Agreement filed as Exhibit 10.4 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended June 18, 2016. The remaining portion of each named executive officer’s PSU award will be earned based on the achievement of certain Supervalu stock price

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performance levels and were granted pursuant to a new form Performance Share Unit Award Agreement which is attached as Exhibit 10.32 to this Form 10-K and incorporated by reference.
PART III
ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information called for by Item 10, as to compliance with Section 16(a) of the Exchange Act, is incorporated by reference to our definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with our 2018 Annual Meeting of Stockholders under the heading “Other Information—Section 16(a) Beneficial Ownership Reporting Compliance.” The information called for by Item 10, as to the audit committee and the audit committee financial expert, is incorporated by reference to our definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with our 2018 Annual Meeting of Stockholders under the heading “Committees of the Board of Directors—Audit Committee.” The information called for by Item 10, as to executive officers, is set forth under “Executive Officers of Supervalu Inc.” in Part I, Item 1 of this Annual Report on Form 10-K. The information called for by Item 10, as to directors, is incorporated by reference to our definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with our 2018 Annual Meeting of Stockholders under the heading “Election of Directors (Item 1).”
We have adopted a code of ethics called the Code of Business Conduct that applies to our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions and all other employees, and a Code of Business Conduct and Ethics that applies to our directors. The Codes are posted on our website ( www.supervalu.com ). We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the code of ethics that applies to Supervalu’s principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions, by posting such information on our website at the address specified above.
Our Governance Principles and charters for each Committee of our Board of Directors are also available on our website. The Codes, Governance Principles and charters are also available in print to any stockholder who submits a request to: Corporate Secretary, SUPERVALU INC., P.O. Box 990, Minneapolis, Minnesota 55440.
Information on our website is not deemed to be incorporated by reference into this Annual Report on Form 10-K.
ITEM 11.    EXECUTIVE COMPENSATION
The information called for by Item 11 is incorporated by reference to our definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with our 2018 Annual Meeting of Stockholders under the headings “Board Practices—Compensation Risk Assessment,” “Director Compensation,” “Committees of the Board of Directors—Leadership Development and Compensation Committee—Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis,” “Executive Compensation” and “Report of the Leadership Development and Compensation Committee.”
ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information called for by Item 12 is incorporated by reference to our definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with our 2018 Annual Meeting of Stockholders under the headings “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management.”
The following table sets forth information as of February 24, 2018 about our common stock that may be issued under all of our equity compensation plans:

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Equity Compensation Plan Information
(shares not in millions)
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)
1,709,961

 
$
44.15

 
3,864,479

(2)  
Equity compensation plans not approved by security holders
—

 
$
—

 
—

 
Total
1,709,961

 
$
44.15

 
3,864,479

(2)  
(1)
Includes Supervalu’s 2012 Stock Plan and Supervalu’s Director’s Deferred Compensation Plan.
(2)
Consists of 3,568,295 shares available for issuance under the 2012 Stock Plan and 296,184 shares available for issuance under the Director’s Deferred Compensation Plan. The 2012 Stock Plan provides that any shares subject to awards under the 2007 Stock Plan as of May 23, 2016 that cease for any reason to be subject to such awards (other than by reason of exercise or settlement of such awards to the extent they are exercised for or settled in vested and non-forfeitable shares) are added to the 2012 Stock Plan reserve for issuance. The 3,568,295 shares available for issuance under the 2012 Stock Plan includes 366,114 shares that have been added from awards that had been outstanding under the 2007 Stock Plan as of May 23, 2016.
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information called for by Item 13, as to director independence, is incorporated by reference to our definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with our 2018 Annual Meeting of Stockholders under the heading “Board Practices—Director Independence.” The information called for by Item 13, as to related person transactions, is incorporated by reference to our definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with our 2018 Annual Meeting of Stockholders under the heading “Board Practices—Policy and Procedures Regarding Transactions with Related Persons.”
ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES
The information called for by Item 14 is incorporated by reference to our definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with our 2018 Annual Meeting of Stockholders under the heading “Independent Registered Public Accounting Firm’s Fees.”


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PART IV
ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1)
 
Financial Statements:
 
 
 
 
 
The Consolidated Financial Statements to Supervalu listed in the accompanying “Index of Consolidated Financial Statements” together with the report of KPMG LLP, independent registered public accountants, are filed as part of this Annual Report on Form 10-K.
 
 
 
(2)
 
Financial Statement Schedules:
 
 
 
 
 
The consolidated financial statement schedule of Supervalu listed in the accompanying “Index of Consolidated Financial Statements.”
 
 
 
(3)
 
Exhibits:
 
 
 
 
 
 
 
(2)
 
Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession:
 
 
 
 
 
 
 
 
 
 
 
 
Stock Purchase Agreement, dated January 10, 2013, by and among SUPERVALU INC., AB Acquisition LLC and New Albertson’s, Inc., is incorporated herein by reference to Exhibit 2.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on January 14, 2013 (Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request.)
 
 
 
 
 
 
 
 
 
 
 
 
Tender Offer Agreement, dated January 10, 2013, by and between SUPERVALU INC., Symphony Investors LLC and Cerberus Capital Management, L.P., is incorporated herein by reference to Exhibit 2.2 to Supervalu’s Current Report on Form 8-K filed with the SEC on January 14, 2013 (Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request.)
 
 
 
 
 
 
 
 
 
 
 
 
Asset Purchase Agreement, dated May 6, 2014, by and among RBF, LLC, Roundy’s Supermarkets, Inc., SUPERVALU INC., SUPERVALU Pharmacies, Inc. and SUPERVALU Gold, LLC., is incorporated herein by reference to Exhibit 2.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on May 7, 2014 (Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request.)
 
 
 
 
 
 
 
 
 
 
 
 
Agreement and Plan of Merger, dated as of October 16, 2016, by and among Smith Acquisition Corp, Smith Merger Sub Corp, Moran Foods, LLC and SUPERVALU INC., is incorporated herein by reference to Exhibit 2.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on October 17, 2016 (Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the SEC upon request.)
 
 
 
 
 
 
 
 
 
 
 
 
Separation Agreement, dated as of October 16, 2016, by and among SUPERVALU INC. and Moran Foods, LLC, is incorporated herein by reference to Exhibit 2.2 to Supervalu’s Current Report on Form 8-K filed with the SEC on October 17, 2016 (Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the SEC upon request.)
 
 
 
 
 
 
 
 
 
 
 
 
Agreement and Plan of Merger, dated as of April 10, 2017, by and among Unified Grocers, Inc., SUPERVALU INC., and West Acquisition Corporation, is incorporated herein by reference to Exhibit 2.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on April 11, 2017 (Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the SEC upon request.)
 
 
 
 
 
 
 
 
 
 
 
 
Agreement and Plan of Merger, dated as of October 17, 2017, by and among SUPERVALU INC., Gator Merger Sub Inc. and Associated Grocers of Florida, Inc., is incorporated herein by reference to Exhibit 2.1 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended September 9, 2017 (Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the SEC upon request.)
 
 
 
 
 
 
 
 
 
(3)
 
Articles of Incorporation and Bylaws:
 
 
 
 
 
 
 
 
 
 
 
 
Restated Certificate of Incorporation is incorporated herein by reference to Exhibit 3.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on July 18, 2012.
 
 
 
 
 
 
 
 
 
 
 
 
Certificate of Amendment to the Restated Certificate of Incorporation is incorporated herein by reference to Exhibit 3.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on July 20, 2017.

 
 
 
 
 
 
 

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Amended and Restated Bylaws of SUPERVALU INC., effective January 18, 2017, are incorporated herein by reference to Exhibit 3.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on January 23, 2017.
 
 
 
 
 
 
 
 
 
(4)
 
Instruments defining the rights of security holders, including indentures:
 
 
 
 
 
 
 
 
 
 
 
 
Indenture, dated as of July 1, 1987, between SUPERVALU INC. and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as Trustee, is filed herewith.
 
 
 
 
 
 
 
 
 
 
 
 
First Supplemental Indenture, dated as of August 1, 1990, between SUPERVALU INC. and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as Trustee, to Indenture, dated as of July 1, 1987, between Supervalu and Deutsche Bank Trust Company Americas, as Trustee, is filed herewith.
 
 
 
 
 
 
 
 
 
 
 
 
Second Supplemental Indenture, dated as of October 1, 1992, between SUPERVALU INC. and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as Trustee, to Indenture, dated as of July 1, 1987, between Supervalu and Deutsche Bank Trust Company Americas, as Trustee, is filed herewith.
 
 
 
 
 
 
 
 
 
 
 
 
Third Supplemental Indenture, dated as of September 1, 1995, between SUPERVALU INC. and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as Trustee, to Indenture, dated as of July 1, 1987, between Supervalu and Deutsche Bank Trust Company Americas, as Trustee, is incorporated herein by reference to Exhibit 4.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on October 2, 1995.
 
 
 
 
 
 
 
 
 
 
 
 
Fourth Supplemental Indenture, dated as of August 4, 1999, between SUPERVALU INC. and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as Trustee, to Indenture, dated as of July 1, 1987, between Supervalu and Deutsche Bank Trust Company Americas, as Trustee, is incorporated herein by reference to Exhibit 4.2 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended September 11, 1999.
 
 
 
 
 
 
 
 
 
 
 
 
Fifth Supplemental Indenture, dated as of September 17, 1999, between SUPERVALU INC. and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as Trustee, to Indenture, dated as of July 1, 1987, between Supervalu and Deutsche Bank Trust Company Americas, as Trustee, is incorporated herein by reference to Exhibit 4.3 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended September 11, 1999.
 
 
 
 
 
 
 
 
 
 
 
 
Officers’ Certificate and Authentication Order, dated May 7, 2009, for the 8.000% Senior Notes due 2016 (which includes the form of Note) issued pursuant to the Indenture, dated as of July 1, 1987, as amended and supplemented by the First Supplemental Indenture, dated as of August 1, 1990, the Second Supplemental Indenture, dated as of October 1, 1992, the Third Supplemental Indenture, dated as of September 1, 1995, the Fourth Supplemental Indenture, dated as of August 4, 1999, and the Fifth Supplemental Indenture, dated as of September 17, 1999, each between SUPERVALU INC. and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as Trustee, is incorporated herein by reference to Exhibit 4.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on May 7, 2009.

 
 
 
 
 
 
 
 
 
 
 
 
Officers’ Certificate and Authentication Order, dated May 21, 2013, for the 6.750% Senior Notes due 2021 (which includes the form of Note) issued pursuant to the Indenture, dated as of July 1, 1987, as amended and supplemented by the First Supplemental Indenture, dated as of August 1, 1990, the Second Supplemental Indenture, dated as of October 1, 1992, the Third Supplemental Indenture, dated as of September 1, 1995, the Fourth Supplemental Indenture, dated as of August 4, 1999, and the Fifth Supplemental Indenture, dated as of September 17, 1999, each between SUPERVALU INC. and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as Trustee, is incorporated herein by reference to Exhibit 4.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on May 21, 2013.
 
 
 
 
 
 
 
 
 
 
 
 
Officers’ Certificate and Authentication Order, dated November 14, 2014, for the 7.750% Senior Notes due 2022 (which includes the form of Note) issued pursuant to the Indenture, dated as of July 1, 1987, as amended and supplemented by the First Supplemental Indenture, dated as of August 1, 1990, the Second Supplemental Indenture, dated as of October 1, 1992, the Third Supplemental Indenture, dated as of September 1, 1995, the Fourth Supplemental Indenture, dated as of August 4, 1999, and the Fifth Supplemental Indenture, dated as of September 17, 1999, each between SUPERVALU INC. and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as Trustee, is incorporated herein by reference to Exhibit 4.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on November 14, 2014.
 
 
 
 
 
 
 
 
 
 
 
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of certain instruments defining the rights of holders of certain long-term debt to Supervalu and its subsidiaries are not filed and, in lieu thereof, Supervalu agrees to furnish copies thereof to the SEC upon request.
 
 
 
 
 

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(10)
 
Material Contracts:
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. Excess Benefits Plan (1989 Restatement), as amended, is filed herewith.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. Executive Deferred Compensation Plan, as amended, is incorporated herein by reference to Exhibit 10.14 to Supervalu’s Annual Report on Form 10-K for the year ended February 22, 2003.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. Executive Deferred Compensation Plan II, as amended, is incorporated herein by reference to Exhibit 10.15 to Supervalu’s Annual Report on Form 10-K for the year ended February 22, 2003.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. Executive Deferred Compensation Plan (2008 Statement) is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended November 29, 2008.*
 
 
 
 
 
 
 
 
 
 
 
 
Form of Agreement used in connection with Supervalu’s Executive Post Retirement Survivor Benefit Program is incorporated herein by reference to Exhibit (10)i. to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended September 12, 1998.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. Deferred Compensation Plan for Non-Employee Directors, as amended, is incorporated herein by reference to Exhibit 10.11 to Supervalu’s Annual Report on Form 10-K for the year ended February 22, 2003.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. Directors’ Deferred Compensation Plan (2009 Statement), as amended, is incorporated herein by reference to Exhibit 10.7 to Supervalu’s Current Report on Form 8-K filed with the SEC on July 18, 2012.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. Directors Retirement Program, as amended, is incorporated herein by reference to Exhibit 10.18 to Supervalu’s Annual Report on Form 10-K for the year ended February 22, 2003.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. Non-Employee Directors Deferred Stock Plan, as amended, is incorporated herein by reference to Exhibit 10.24 to Supervalu’s Annual Report on Form 10-K for the year ended February 22, 2003.*
 
 
 
 
 
 
 
 
 
 
 
 
Amended and Restated SUPERVALU INC. Grantor Trust, dated as of May 1, 2002, is incorporated herein by reference to Exhibit 10.3 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended June 15, 2002.*
 
 
 
 
 
 
 
 
 
 
 
 
Annual discretionary CEO Bonus Pool is incorporated herein by reference to Exhibit 10.40 to Supervalu’s Annual Report on Form 10-K for the year ended February 25, 2006.*
 
 
 
 
 
 
 
 
 
 
 
 
Albertson’s, Inc. Executive ASRE Makeup Plan, dated as of September 26, 1999, is incorporated herein by reference to Exhibit 10.3 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended September 11, 2010.*
 
 
 
 
 
 
 
 
 
 
 
 
First Amendment to the Albertson’s, Inc. Executive ASRE Makeup Plan, dated as of May 25, 2001, is incorporated herein by reference to Exhibit 10.14.1 to the Annual Report on Form 10-K of Albertson’s, Inc. (Commission File Number 1-6187) for the year ended January 30, 2003.*
 
 
 
 
 
 
 
 
 
 
 
 
Second Amendment to the Albertson’s, Inc. Executive ASRE Makeup Plan, dated as of December 31, 2001, is incorporated herein by reference to Exhibit 10.14.2 to the Annual Report on Form 10-K of Albertson’s, Inc. (Commission File Number 1-6187) for the year ended January 30, 2003.*
 
 
 
 
 
 
 
 
 
 
 
 
Third Amendment to the Albertson’s Inc. Executive ASRE Makeup Plan, effective January 1, 2003, is filed herewith.*
 
 
 
 
 
 
 
 
 
 
 
 
Fourth Amendment to the Albertson’s Inc. Executive ASRE Makeup Plan, dated as of April 28, 2006, is incorporated herein by reference to Exhibit 10.14.3 to the Quarterly Report on Form 10-Q of Albertson’s, Inc. (Commission File Number 1-6187) for the quarter ended May 4, 2006.*
 
 
 
 
 
 
 
 
 
 
 
 
Form of Change of Control Severance Agreement, as amended, is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended June 20, 2009.*
 
 
 
 
 
 
 
 
 
 
 
 
Form of Change of Control Severance Agreement is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on November 22, 2013.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. Executive & Officer Severance Pay Plan, as amended and restated April 20, 2018, is filed herewith.*
 
 
 
 
 
 
 

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Summary of Non-Employee Director Compensation is incorporated herein by reference to Exhibit 10.33 to Supervalu’s Annual Report on Form 10-K for the year ended February 28, 2015.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. 2012 Stock Plan (As Amended July 20, 2016), is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on July 22, 2016.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. 2012 Stock Plan Form of Stock Option Agreement is incorporated herein by reference to Exhibit 10.2 to Supervalu’s Current Report on Form 8-K filed with the SEC on July 18, 2012.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. 2012 Stock Plan Form of Stock Option Terms and Conditions (For Employees) is incorporated herein by reference to Exhibit 10.3 to Supervalu’s Current Report on Form 8-K filed with the SEC on July 18, 2012.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. 2012 Stock Plan Form of Stock Option Agreement and Terms and Conditions (Employees) adopted May 6, 2013 is incorporated herein by reference to Exhibit 10.2 to Supervalu’s Current Report on Form 8-K filed with the SEC on May 8, 2013.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. 2012 Stock Plan Form of Stock Option Agreement and Terms and Conditions (Directors) adopted May 6, 2013 is incorporated herein by reference to Exhibit 10.3 to Supervalu’s Current Report on Form 8-K filed with the SEC on May 8, 2013.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. 2012 Stock Plan Form of Stock Option Agreement is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended June 14, 2014.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. 2012 Stock Plan Form of Stock Option Agreement is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended June 20, 2015.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. 2012 Stock Plan Form of Restricted Stock Award Agreement is incorporated herein by reference to Exhibit 10.2 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended June 20, 2015.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. 2012 Stock Plan Form of Restricted Stock Unit Award Agreement (Stock-Settled) is incorporated herein by reference to Exhibit 10.3 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended June 20, 2015.*
 
 
 
 

 
 
 
 
 
 
 
SUPERVALU INC. 2012 Stock Plan Form of Restricted Stock Unit Award Agreement (Cash Settled) is incorporated herein by reference to Exhibit 10.70 to Supervalu’s Annual Report on Form 10-K for the year ended February 28, 2015.

 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. 2012 Stock Plan Revised Form of Performance Share Unit Award Agreement is incorporated herein by reference to Exhibit 10.4 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended June 18, 2016.*
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. 2012 Stock Plan Form of Performance Share Unit Award Agreement is filed herewith.*
 
 
 
 
 
 
 
 
 
 
 
 
Trust Agreement Amendment, dated January 9, 2013, by and between SUPERVALU INC. and Wells Fargo Bank N.A., as Trustee and Successor to Wells Fargo Bank of Minnesota, N.A., is incorporated herein by reference to Exhibit 10.4 to Supervalu’s Current Report on Form 8-K filed with the SEC on January 14, 2013.*
 
 
 
 
 
 
 
 
 
 
 
 
Form of Retention Agreement, dated as of July 16, 2012, between SUPERVALU INC. and certain key employees, is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended June 16, 2012.
 
 
 
 
 
 
 

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Amended and Restated Credit Agreement, dated March 21, 2013, among SUPERVALU INC., as Lead Borrower, the subsidiaries of Supervalu named as borrowers therein, the subsidiaries of Supervalu named as guarantors therein, Wells Fargo Bank, National Association, as Administrative Agent, Swing Line Lender and LC Issuer, certain other lenders party thereto, as LC Issuers, and the lenders party thereto, U.S. Bank, National Association and Rabobank Nederland, New York Branch, as Co-Syndication Agents, Wells Fargo Bank, National Association, as collateral agent, Goldman Sachs Bank USA, Credit Suisse AG, Morgan Stanley Senior Funding, Inc., Barclays Bank PLC and Bank of America, N.A., as Co-Documentation Agents, BMO Harris Bank N.A., RBS Citizens Business Capital, a division of RBS Asset Finance, Inc., Regions Bank and Union Bank, N.A., as Senior Managing Agents, and Wells Fargo Bank, National Association, U.S. Bank, National Association, Goldman Sachs Bank USA, Credit Suisse Securities (USA) LLC, Morgan Stanley Senior Funding, Inc., Barclays Bank PLC, Rabobank Nederland, New York Branch and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arrangers and Joint Bookrunners, is incorporated herein by reference to Exhibit 10.3 to Supervalu’s Current Report on Form 8-K filed with the SEC on March 26, 2013.**
 
 
 
 
 
 
 
 
 
 
 
 
Amendment No. 1 to Amended and Restated Credit Agreement, dated April 17, 2014, among SUPERVALU INC., as Lead Borrower, the subsidiaries of Supervalu named as loan parties therein, Wells Fargo, N.A., as Administrative Agent and Collateral Agent, and the lenders parties thereto, is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on April 18, 2014.**
 
 
 
 
 
 
 
 
 
 
 
 
Amendment No. 2 to Amended and Restated Credit Agreement, dated September 30, 2014, among SUPERVALU INC., as Lead Borrower, the subsidiaries of Supervalu named as borrowers therein, the subsidiaries of Supervalu named as guarantors therein, Wells Fargo Bank, National Association, as Administrative Agent and Collateral Agent and the lenders parties thereto, is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on October 1, 2014.
 
 
 
 
 
 
 
 
 
 
 
 
Amendment No. 3 to Amended and Restated Credit Agreement, dated February 3, 2016, among SUPERVALU INC., as Lead Borrower, the subsidiaries of Supervalu named as borrowers therein, the subsidiaries of Supervalu named as guarantors therein, Wells Fargo Bank, National Association, as Administrative Agent and Collateral Agent and the lenders parties thereto, is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on February 4, 2016. **
 
 
 
 
 
 
 
 
 
 
 
 
Third Amended and Restated Term Loan Credit Agreement, dated as of June 8, 2017, among SUPERVALU INC., as Borrower, the subsidiaries of Supervalu named as loan parties therein, Goldman Sachs Bank USA, as Administrative Agent and Collateral Agent, and the lenders party thereto, is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on June 8, 2017.**
 
 
 
 
 
 
 
 
 
 
 
 
Transition Services Agreement, dated as of March 21, 2013, by and between SUPERVALU INC. and Albertson’s LLC, is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on March 26, 2013.**
 
 
 
 
 
 
 
 
 
 
 
 
Transition Services Agreement, dated as of March 21, 2013, by and between SUPERVALU INC. and New Albertson’s, Inc., is incorporated herein by reference to Exhibit 10.2 to Supervalu’s Current Report on Form 8-K filed with the SEC on March 26, 2013.**
 
 
 
 
 
 
 
 
 
 
 
 
Letter Agreement, dated April 16, 2015, regarding the Transition Services Agreement between SUPERVALU INC. and New Albertson’s, Inc. dated March 21, 2013, and the Transition Services Agreement between SUPERVALU INC. and Albertson’s LLC dated March 21, 2013, is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Current Report on Form 8-K, filed with the SEC on April 17, 2015.
 
 
 
 
 
 
 
 
 
 
 
 
Letter Agreement, dated November 30, 2015, between SUPERVALU INC. and Eric Claus is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended December 5, 2015.*
 
 
 
 
 
 
 
 
 
 
 
 
Letter Agreement Amendment, dated May 27, 2016, between SUPERVALU INC. and Eric Claus is incorporated herein by reference to Exhibit 10.7 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended June 18, 2016.*
 
 
 
 
 
 
 
 
 
 
 
 
Letter Agreement, dated February 2, 2016, between SUPERVALU INC. and Mark Gross is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on February 3, 2016.*
 
 
 
 
 
 
 
 
 
 
 
 
Letter Agreement Amendment, dated July 25, 2016, between SUPERVALU INC. and Mark Gross is incorporated herein by reference to Exhibit 10.6 to Supervalu’s Quarterly Report on Form 10-Q for the quarter ended June 18, 2016.*
 
 
 
 
 
 
 

110
Table of Contents

 
 
 
 
 
Aircraft Time Sharing Agreement, dated March 8, 2016, between SUPERVALU INC. and Mark Gross, is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on March 10, 2016.
 
 
 
 
 
 
 
 
 
 
 
 
Services Agreement, dated as of December 5, 2016, between SUPERVALU INC. and Moran Foods, LLC, is incorporated herein by reference to Exhibit 10.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on December 9, 2016. **
 
 
 
 
 
 
 
 
 
 
 
 
Form of Purchase Agreement with CF Grocery Distribution Propco LLC, including form of Lease and Guaranty, dated April 23, 2018, is filed herewith.

 
 
 
 
 
 
 
 
 
(12)
 
Statements re computation of ratios.
 
 
 
 
 
 
 
 
 
 
 
 
Ratio of Earnings to Fixed Charges.
 
 
 
 
 
 
 
 
 
(21)
 
Subsidiaries of Supervalu.
 
 
 
 
 
 
 
 
 
 
 
 
SUPERVALU INC. Subsidiaries.
 
 
 
 
 
 
 
 
 
(23)
 
Consents of Experts and Counsel.
 
 
 
 
 
 
 
 
 
 
 
 
Consent of KPMG LLP.
 
 
 
 
 
 
 
 
 
(24)
 
Power of Attorney.
 
 
 
 
 
 
 
 
 
 
 
 
Power of Attorney.
 
 
 
 
 
 
 
 
 
(31)
 
Rule 13a-14(a)/15d-14(a) Certifications.
 
 
 
 
 
 
 
 
 
 
 
 
Chief Executive Officer Certification of Periodic Financial Report pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
 
 
 
 
Chief Financial Officer Certification of Periodic Financial Report pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
 
(32)
 
Section 1350 Certifications.
 
 
 
 
 
 
 
 
 
 
 
 
Chief Executive Officer Certification of Periodic Financial Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
 
 
 
 
Chief Financial Officer Certification of Periodic Financial Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
 
(101)
 
Interactive Data File.
 
 
 
 
 
 
 
 
 
 
 
101
 
The following materials from the SUPERVALU INC. Annual Report on Form 10-K for the fiscal year ended February 24, 2018 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Stockholders’ Equity (Deficit), (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.
*
Indicates management contracts, compensatory plans or arrangements required to be filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.
**
Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, confidential portions of this exhibit have been deleted and filed separately with the SEC pursuant to a request for confidential treatment.

111
Table of Contents

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, SUPERVALU INC. has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.  
 
SUPERVALU INC.
 
 
(Registrant)
 
Dated: April 24, 2018
By:
/S/    MARK GROSS
 
 
Mark Gross
 
 
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of SUPERVALU INC. and in the capacities and on the dates indicated:  
 
 
 
 
 
Signature
 
Title
 
Date
 
 
 
 
 
/ S /    MARK GROSS
 
President and Chief Executive Officer and Director
 
April 24, 2018
Mark Gross
 
(Principal Executive Officer)
 
 
 
 
 
/ S /    ROB WOSETH
 
Executive Vice President and Chief Financial Officer
 
April 24, 2018
Rob Woseth
 
(Principal Financial Officer)
 
 
 
 
 
 
 
/ S /    DAVID JOHNSON
 
Vice President, Controller and Chief Accounting Officer
 
April 24, 2018
David Johnson
 
(Principal Accounting Officer)
 
 
 
 
 
 
 
/ S /    DONALD R. CHAPPEL*
 
Director and Non-Executive Chairman
 
 
Donald R. Chappel
 
 
 
 
 
 
 
 
 
/ S /    IRWIN S. COHEN*
 
Director
 
 
Irwin S. Cohen
 
 
 
 
 
 
 
 
 
/ S /    PHILIP L. FRANCIS*
 
Director
 
 
Philip L. Francis
 
 
 
 
 
 
 
 
 
/ S /    ERIC G. JOHNSON*
 
Director
 
 
Eric G. Johnson
 
 
 
 
 
 
 
 
 
/ S /    MATHEW M. PENDO*
 
Director
 
 
Mathew M. Pendo
 
 
 
 
 
 
 
 
 
/ S /    FRANCESCA RUIZ DE LUZURIAGA*
 
Director
 
 
Francesca Ruiz de Luzuriaga
 
 
 
 
 
 
 
 
 
 
 
 
 
 
/ S /    FRANK A. SAVAGE*
 
Director
 
 
Frank A. Savage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
/ S /    MARY A. WINSTON*
 
Director
 
 
Mary A. Winston
 
 
 
 
*
Executed this 24 th  day of April 2018, on behalf of the indicated Directors by Stuart D. McFarland, duly appointed Attorney-in-Fact.
 
By:
 
/S/    STUART D. MCFARLAND
 
 
Stuart D. McFarland
 
 
Attorney-in-Fact

112


Exhibit 4.1




Super Valu Stores, Inc.
TO
Bankers Trust Company,
Trustee
Indenture
Dated as of July 1, 1987





SUPER VALU STORES, INC.
Debt Securities
Reconciliation and tie between Trust Indenture Act of 1939 and
Indenture, dated as of July 1, 1987
Trust
 
 
Indenture
 
Indenture
Act Section
 
Section
§ 310(a)(1)
........................................................................................................................................
609
(a)(2)
........................................................................................................................................
609
(a) (3)
........................................................................................................................................
Not Applicable
(a)(4)
........................................................................................................................................
Not Applicable
(b)
........................................................................................................................................
608
 
 
610
§ 311(a)
........................................................................................................................................
613(a)
(b)
........................................................................................................................................
613(b)
(b)(2)
........................................................................................................................................
703(a)(2)
 
 
703(b)
§ 312(a)
........................................................................................................................................
701
 
 
702(a)
(b)
........................................................................................................................................
702(b)
(c)
........................................................................................................................................
702(c)
§ 313(a)
........................................................................................................................................
703(a)
(b)
........................................................................................................................................
703(b)
(c)
........................................................................................................................................
703(a), 703(b)
(d)
........................................................................................................................................
703(c)
§ 314(a)
........................................................................................................................................
704
(b)
........................................................................................................................................
Not Applicable
(c)1
........................................................................................................................................
102
(c)2
........................................................................................................................................
102
(c)3
........................................................................................................................................
Not Applicable
(d)
........................................................................................................................................
Not Applicable
(e)
........................................................................................................................................
102
§ 315(a)
........................................................................................................................................
601(a)
(b)
........................................................................................................................................
602
 
 
703(a)(6)
(c)
........................................................................................................................................
601(b)
(d)
........................................................................................................................................
601(c)
(d)(1)
........................................................................................................................................
601(a)(1)
(d)(2)
........................................................................................................................................
601(c)(2)
(d)(3)
........................................................................................................................................
601(c)(3)
(e)
........................................................................................................................................
514
§ 316(a)
........................................................................................................................................
101
(a)(1)(A)
........................................................................................................................................
502
 
 
512
(a)(1)(B)
........................................................................................................................................
513
(a)(2)
........................................................................................................................................
Not Applicable
(b)
........................................................................................................................................
508
§ 317(a)(1)
........................................................................................................................................
503
(a)(2)
........................................................................................................................................
504
(b)
........................................................................................................................................
1003
§ 318(a)
........................................................................................................................................
108
_______________
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.




TABLE OF CONTENTS
 
PAGE
 
Recitals of the Company
1

ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 101.
Definitions
1

Act
2

Affiliate
2

Authenticating Agent
2

Authorized Newspaper
2

Bearer Security
2

Board of Directors
2

Board Resolution
2

Business Day
2

Commission
2

Common Depositary
2

Company
3

Company Request or Company Order
3

Consolidated Net Tangible Assets
3

Corporate Trust Office
3

corporation
3

coupon
3

Debt
3

Defaulted Interest
3

Dollar or $
3

Domestic Subsidiary
3

ECU
4

Euro-clear
4

Event of Default
4

Exchange Date
4

Funded Debt
4

Government Obligations
4

Holder
4

Indenture
4

interest
4

Interest Payment Date
4

Market Exchange Rate
4

Maturity
5

mortgage or mortgages
5


i


Officers’ Certificate
5

Operating Property
5

Opinion of Counsel
5

Original Issue Discount Security
5

Outstanding
5

Paying Agent
6

Person
6

Place of Payment
6

Predecessor Security
6

Redemption Date
6

Redemption Price
6

Registered Security
6

Regular Record Date
7

Responsible Officer
7

Sale and Lease-back Transaction
7

Securities
7

Security Register and Security Registrar
7

Special Record Date
7

Stated Maturity
7

Subsidiary
7

Trustee
7

Trust Indenture Act
8

United States
8

United States Alien
8

Value
8

Vice President
8

Section 102.
Compliance Certificates and Opinions
8

Section 103.
Form of Documents Delivered to Trustee
9

Section 104.
Acts of Holders
9

Section 105.
Notices, Etc., to Trustee and Company
10

Section 106.
Notice to Holders of Securities; Waiver
11

Section 107.
Language of Notices, Etc.
12

Section 108.
Conflict with Trust Indenture Act
12

Section 109.
Effect of Headings and Table of Contents
12

Section 110.
Successors and Assigns
12

Section 111.
Separability Clause
12

Section 112.
Benefits of Indenture
12

Section 113.
Governing Law
12

Section 114.
Legal Holidays
12

Section 115.
Appointment of Agent for Service
13


ii


ARTICLE TWO
SECURITY FORMS
Section 201.
Forms Generally
13

Section 202.
Form of Trustee’s Certificate of Authentication
14

Section 203.
Securities in Global Form
14

ARTICLE THREE
THE SECURITIES
Section 301.
Amount Unlimited; Issuable in Series
15

Section 302.
Denominations
17

Section 303.
Execution, Authentication, Delivery and Dating
17

Section 304.
Temporary Securities
19

Section 305.
Registration, Registration of Transfer and Exchange
21

Section 306.
Mutilated, Destroyed, Lost and Stolen Securities or Coupons
23

Section 307.
Payment of Interest; Interest Rights Preserved
24

Section 308.
Persons Deemed Owners
25

Section 309.
Cancellation
26

Section 310.
Computation of Interest
26

ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401.
Satisfaction and Discharge of Indenture
26

Section 402.
Application of Trust Money; Indemnification.
27

Section 403.
Defeasance and Discharge of Indenture
28

ARTICLE FIVE
REMEDIES
Section 501.
Events of Default
29

Section 502.
Acceleration of Maturity; Rescission and Annulment
30

Section 503.
Collection of Indebtedness and Suits for Enforcement by Trustee
31

Section 504.
Trustee May File Proofs of Claim
31

Section 505.
Trustee May Enforce Claims Without Possession of Securities or Coupons
32

Section 506.
Application of Money Collected
32

Section 507.
Limitation on Suits
33

Section 508.
Unconditional Right of Holders to Receive Principal, Premium and Interest
33

Section 509.
Restoration of Rights and Remedies
34

Section 510.
Rights and Remedies Cumulative
34

Section 511.
Delay or Omission Not Waiver
34

Section 512.
Control by Holders
34

Section 513.
Waiver of Past Defaults
34

Section 514.
Undertaking for Costs
35

Section 515.
Waiver of Stay or Extension Laws
35


iii


ARTICLE SIX
THE TRUSTEE
Section 601.
Certain Duties and Responsibilities
35

Section 602.
Notice of Defaults
37

Section 603.
Certain Rights of Trustee
37

Section 604.
Not Responsible for Recitals or Issuance of Securities
38

Section 605.
May Hold Securities and Coupons
38

Section 606.
Money Held in Trust
38

Section 607.
Compensation and Reimbursement
38

Section 608.
Disqualification; Conflicting Interests
39

Section 609.
Corporate Trustee Required; Eligibility
43

Section 610.
Resignation and Removal; Appointment of Successor
44

Section 611.
Acceptance of Appointment by Successor
45

Section 612.
Merger, Conversion, Consolidation or Succession to Business
46

Section 613.
Preferential Collection of Claims Against Company
47

Section 614.
Appointment of Authenticating Agent
50

ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701.
Company to Furnish Trustee Names and Addresses of Holders
52

Section 702.
Preservation of Information; Communications to Holders
52

Section 703.
Reports by Trustee
53

Section 704.
Reports by Company
55

ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801.
Company May Consolidate, Etc., Only on Certain Terms
55

Section 802.
Successor Corporation Substituted
56

ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901.
Supplemental Indentures Without Consent of Holders
57

Section 902.
Supplemental Indentures with Consent of Holders
58

Section 903.
Execution of Supplemental Indentures
59

Section 904.
Effect of Supplemental Indentures
59

Section 905.
Conformity with Trust Indenture Act
59

Section 906.
Reference in Securities to Supplemental Indentures
59

ARTICLE TEN
CONVENANTS
Section 1001.
Payment of Principal, Premium and Interest
60

Section 1002.
Maintenance of Office or Agency
60

Section 1003.
Money for Securities Payments to Be Held in Trust
61

Section 1004.
Corporate Existence
62

Section 1005.
Maintenance of Properties
63


iv


Section 1006.
Payment of Taxes and Other Claims
63

Section 1007.
Restrictions on Liens
63

Section 1008.
Restrictions on Sale and Lease-back Transactions
65

Section 1009.
Additional Amounts
65

Section 1010.
Purchase of Securities by Company or Subsidiary
66

Section 1011.
Defeasance of Certain Obligations
66

Section 1012.
Statement by Officers as to Default
67

Section 1013.
Waiver of Certain Covenants
67

ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101.
Applicability of Article
68

Section 1102.
Election to Redeem; Notice to Trustee
68

Section 1103.
Selection by Trustee of Securities to Be Redeemed
68

Section 1104.
Notice of Redemption
68

Section 1105.
Deposit of Redemption Price
69

Section 1106.
Securities Payable on Redemption Date
69

Section 1107.
Securities Redeemed in Part
70

ARTICLE TWELVE
SINKNG FUNDS
Section 1201.
Applicability of Article
70

Section 1202.
Satisfaction of Sinking Fund Payments with Securities
71

Section 1203.
Redemption of Securities for Sinking Fund
71

ARTICLE THIRTEEN
MEETINGS OF HOLDERS OF SECURITIES
Section 1301.
Purposes for Which Meetings May Be Called
71

Section 1302.
Call, Notice and Place of Meetings
71

Section 1303.
Persons Entitled to Vote at Meetings
72

Section 1304.
Quorum; Action
72

Section 1305.
Determination of Voting Rights; Conduct and Adjournment of Meetings
73

Section 1306.
Counting Votes and Recording Action of Meetings
74

EXHIBIT A [FORM OF REGISTERED SECURITY WHICH IS NOT AN ORIGINAL. ISSUE DISCOUNT SECURITY]
A-1

EXHIBIT B [FORM OF REGISTERED SECURITY WHICH IS AN ORIGINAL ISSUE DISCOUNT SECURITY]
B-1

EXHIBIT C [FORM OF BEARER SECURITY WHICH IS NOT AN ORIGINAL ISSUE DISCOUNT SECURITY AND FORM OF RELATED COUPON]
C-1

EXHIBIT D [FORM OF BEARER SECURITY WHICH IS AN ORIGINAL ISSUE DISCOUNT SECURITY AND FORM OF RELATED COUPON]
D-1


v


INDENTURE, dated as of July 1, 1987, between SUPER VALU STORES, INC., a corporation duly organized and existing under the laws of the State of Delaware (herein called the “Company”), having its principal office at Minneapolis, Minnesota with a mailing address at P.O. Box 990, Minneapolis, Minnesota 55440, and BANKERS TRUST COMPANY, a banking corporation duly organized and existing under the laws of the State of New York, as Trustee (herein called the “Trustee”).
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (herein called the “Securities”), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities and any coupons appertaining thereto by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities of any series thereof or of any coupons appertaining thereto, as follows:


ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101.     Definitions .
For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(1)    the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;
(2)    all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;
(3)    all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States, and, except as otherwise herein expressly provided, the term “generally accepted accounting principles” with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States at the date of such computation; and

1


(4)    the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that Article.
“Act”, when used with respect to any Holder, has the meaning specified in Section 104.
“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control”, when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Authenticating Agent” means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series.
“Authorized Newspaper” means a newspaper, in the English language or in an official language of the country of publication, customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in the place in connection with which the term is used or in the financial community of such place. Where successive publications are required to be made in Authorized Newspapers, the successive publications may be made in the same or in different newspapers in the same city meeting the foregoing requirements and in each case on any Business Day.
“Bearer Security” means any Security in the form set forth in either Exhibit C or Exhibit D to this Indenture or established pursuant to Section 201 which is payable to bearer.
“Board of Directors” means either the board of directors of the Company or any duly authorized executive committee of that board.
“Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.
“Business Day”, when used with respect to any Place of Payment means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law or executive order to close.
“Commission” means the Securities and Exchange Commission as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.
“Common Depositary” has the meaning specified in Section 304.

2


“Company” means the Person named as the “Company” in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Company” shall mean such successor corporation.
“Company Request” or “Company Order” means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.
“Consolidated Net Tangible Assets” means the total of all the assets appearing on the consolidated balance sheet of the Company and its Subsidiaries, less the following:
(1)     current liabilities, including liabilities for indebtedness maturing more than 12 months from the date of the original creation thereof but maturing within 12 months from the date of determination;
(2)    reserves for depreciation and other asset valuation reserves;
(3)    intangible assets including, but without limitation, such items as goodwill, trademarks, trade names, patents and unamortized debt discount and expense carried as an asset on said balance sheet; and
(4)    appropriate adjustments on account of minority interests of other persons holding stock in any Subsidiary of the Company.
Consolidated Net Tangible Assets shall be determined in accordance with generally accepted accounting principles and practices applicable to the type of business in which the Company and its Subsidiaries are engaged and which are approved by the independent accountants regularly retained by the Company, and may be determined as of a date not more than 60 days prior to the happening of the event for which such determination is being made,
“Corporate Trust Office” means the principal office of the Trustee in New York, New York at which at any particular time its corporate trust business shall be administered.
“corporation” includes corporations, associations, companies and business trusts.
“coupon” means any interest coupon appertaining to a Bearer Security.
“Debt” means all indebtedness for money borrowed.
Defaulted Interest” has the meaning specified in Section 307.
“Dollar” or “$” means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts.
“Domestic Subsidiary” means any Subsidiary which owns an Operating Property.

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“ECU” means the European Currency Unit as defined and revised from time to time by the Council of European Communities.
“Euro-clear” means the operator of the Euro-clear System.
“Event of Default” has the meaning specified in Section 501.
“Exchange Date” has the meaning specified in Section 304.
“Funded Debt” means any Debt which by its terms matures at or is extendible or renewable at the sole option of the obligor without requiring the consent of the obligee to a date more than 12 months after the date of the creation of such Debt.
“Government Obligations” means, in respect of any series of Securities. securities of (i) the government which issued the currency in which the Securities of such series are denominated or in which interest is payable on the Securities of such series or (ii) government agencies backed by the full faith and credit of such government.
“Holder”, when used with respect to any Security, means in the case of a Registered Security the Person in whose name such Security is registered in the Security Register and in the case of a Bearer Security the bearer thereof and, when used with respect to any coupon, means the bearer thereof.
“Indenture” means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities established as contemplated by Section 301.
“interest”, when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity.
“Interest Payment Date”, when used with respect to any Security, means the Stated Maturity of an instalment of interest on such Security.
“Market Exchange Rate” shall mean the noon Dollar buying rate for that currency for cable transfers quoted in The City of New York as certified for customs purposes by the Federal Reserve Bank of New York; provided, however , in the case of ECUs. Market Exchange Rate shall mean the rate of exchange of ECUs for Dollars determined by the Commission of the European Communities (or any successor thereto) as published in the Official Journal of the European Communities (such publication or any successor publication, the “Journal”). If such Market Exchange Rate is not available for any reason with respect to such currency, the Trustee shall use, in its sole discretion and without liability on its part, such quotation of the Federal Reserve Bank of New York or, in the case of ECUs, the rate of exchange as published in the Journal, as of the most recent available date, or quotations or, in the case of ECUs, rates of exchange from one or more major banks in The City of New York or in the country of issue of the currency in question, which for purposes of the ECU

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shall be Brussels, Belgium, or such other quotations or, in the case of ECUs, rates of exchange as the Company shall deem appropriate.
“Maturity”, when used with respect to any Security, means the date on which the principal of such Security or an instalment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.
“mortgage” or “mortgages” has the meaning specified in Section 1007.
“Officers’ Certificate” means a certificate signed by the Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee.
“Operating Property” means any manufacturing or processing plant, office facility. retail store, warehouse, distribution center or equipment located in the United States of America or its territories or possessions and owned and operated now or hereafter by the Company or any Domestic Subsidiary and having a book value on the date as of which the determination is being made of more than 0.85% of Consolidated Net Tangible Assets.
“Opinion of Counsel” means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee.
“Original Issue Discount Security” means any Security which provides for amount less than the principal amount thereof to be due and payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502.
“Outstanding”, when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:
(i)    Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;
(ii)    Securities for whose payment or redemption money or Government Obligations (as provided in Section 403) in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and
(iii)    Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof pursuant to Section 502, (ii) the principal amount of a Security denominated in a foreign currency or currencies shall be the Dollar equivalent, determined on the date of original issuance of such Security at the Market Exchange Rate, of the principal amount (or, in the case of an Original Issue Discount Security, the Dollar equivalent on the date of original issuance of such Security at the Market Exchange Rate of

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the amount determined as provided in (i) above) of such Security, and (iii) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor.
“Paying Agent” means any Person authorized by the Company to pay the principal of (and premium, if any) or any interest on any Securities on behalf of the Company.
“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
“Place of Payment”, when used with respect to the Securities of any series, means the place or places where, subject to the provisions of Section 1002, the principal of (and premium, if any) and any interest on the Securities of that series are payable as specified as contemplated by Section 301.
“Predecessor Security” of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security or a Security to which a mutilated, destroyed, lost or stolen coupon appertains shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security or the Security to which the mutilated, destroyed, lost or stolen coupon appertains, as the case may be.
“Redemption Date”, when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.
“Redemption Price”, when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.
“Registered Security” means any Security in the form set forth in either Exhibit A or Exhibit B to this Indenture or established pursuant to Section 201, which is registered in the Security Register.

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“Regular Record Date” for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301.
“Responsible Officer”, when used with respect to the Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier,
any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject.
“Sale and Lease-back Transaction” means any arrangement with any Person providing for the leasing to the Company or any Domestic Subsidiary of any Operating Property (except for temporary leases for a term, including any renewal thereof, of not more than 36 months and except for leases between the Company and a Domestic Subsidiary or between Domestic Subsidiaries), which Operating Property has been or is to be sold or transferred by the Company or such Domestic Subsidiary to such Person.
“Securities” has the meaning stated in the first recital of this Indenture more particularly means any Securities authenticated and delivered under this and Indenture.
“Security Register” and “Security Registrar” have the respective meanings    , specified in Section 305.
“Special Record Date” for the payment of any Defaulted Interest on the Registered Securities of any series means a date fixed by the Trustee pursuant to Section 307.
“Stated Maturity”, when used with respect to any Security or any instalment of principal thereof or interest thereon, means the date specified in such Security or coupon representing such instalment of interest as the fixed date on which the principal of such Security or such instalment of principal or interest is due and payable.
“Subsidiary” means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, “voting stock” means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.
“Trustee” means the Person named as the “Trustee” in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, “Trustee” as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series.

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“Trust Indenture Act” means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as provided in Section 905.
“United States” means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction.
“United States Alien” means any Person who, for United States Federal income tax purposes, is a foreign corporation, a non-resident alien individual, a non-resident alien fiduciary of a foreign estate or trust, or a foreign partnership one or more of the members of which is, for United States Federal income tax purposes, a foreign corporation, a non-resident alien individual or a non-resident alien fiduciary of a foreign estate or trust.
“Value” means, with respect to a Sale and Lease-back Transaction, as of any particular time, the amount equal to the greater of (1) the net proceeds from the sale or transfer of the property leased pursuant to such Sale and Lease-back Transaction or (2) the fair value in the opinion of the Board of Directors or the President or any Vice President of the Company of such property at the time of entering into such Sale and Lease-back Transaction, in either case multiplied by a fraction, the numerator of which shall be equal to the number of full years of the term of the lease which is part of such Sale and Lease-back Transaction remaining at the time of determination and the denominator of which shall be equal to the number of full years of such term, without regard to any renewal or extension options contained in such lease.
“Vice President”, when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title “vice president”.
SECTION 102.     Compliance Certificates and Opinions .
Except as otherwise expressly provided in Sections 203 and 303, upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers’ Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include
(1)    a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;
(2)    a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(3)    a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(4)    a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

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SECTION 103.     Form of Documents Delivered to Trustee .
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
SECTION 104.     Acts of Holders .
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing. If Securities of a series are issuable as Bearer Securities, any request., demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of such series may, alternatively, be embodied in and evidenced by the record of Holders of Securities of such series voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders of Securities of such series duly called and held in accordance with the provisions of Article Thirteen, or a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments and so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. The record of any meeting of Holders of Securities shall be proved in the manner provided in Section 1306.

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(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to such witness, notary public or officer the execution thereof. Where such execution is by a signer acting in a capacity other than such signer’s individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer’s authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.
(c) The principal amount and serial numbers of Registered Securities held by any Person, and the date of holding the same, shall be proved by the Security Register.
(d) The principal amount and serial numbers of Bearer Securities held by any Person. and the date of holding the same, may be proved by the production of such Bearer Securities or by a certificate executed, as depositary, by any trust company, bank, banker or other depositary, wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such Person had on deposit with such depositary, or exhibited to it, the Bearer Securities therein described; or such facts may be proved by the certificate or affidavit of the Person holding such Bearer Securities, if such certificate or affidavit is deemed by the Trustee to be satisfactory. The Trustee and the Company may assume that such ownership of any Bearer Security continues until (1) another certificate or affidavit bearing a later date issued in respect of the same Bearer Security is produced, or (2) such Bearer Security is produced to the Trustee by some other Person, or (3) such Bearer Security is surrendered in exchange for a Registered Security, or (4) such Bearer Security is no longer Outstanding. The principal amount and serial numbers of Bearer Securities held by any Person, and the date of holding the same, may also be proved in any other manner which the Trustee deems sufficient
(e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.
SECTION 105.     Notices, Etc., to Trustee and Company .
Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust and Agency Group, or
(2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class

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postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company.
SECTION 106.     Notice to Holders of Securities; Waiver .
Except as otherwise expressly provided in this Section and Sections 602, 703 and 704, where this Indenture provides for notice to Holders of Securities of any event,
(1)    such notice shall be sufficiently given to Holders of Registered Securities if in writing and mailed, first-class postage prepaid, to each Holder of a Registered Security affected by such event, at the address of such Holder as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice; and
(2)    such notice shall be sufficiently given to Holders of Bearer Securities if published in an Authorized Newspaper in The City of New York and in such other city or cities as may be specified in such Securities on a Business Day at least twice, the first such publication to be not earlier than the earliest date, and the second publication to be not later than the latest date, prescribed for the giving of such notice.
In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice to Holders of Registered Securities by mail, then such notification as shall be satisfactory to the Trustee shall constitute a sufficient notification for every purpose hereunder. In any case where notice to Holders of Registered Securities is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder of Registered Securities shall affect the sufficiency of such notice with respect to other Holders of Registered Securities or the sufficiency of any notice to Holders of Bearer Securities given as provided herein.
In case by reason of the suspension of publication of any Authorized Newspaper or Authorized Newspapers or by reason of any other cause it shall be impracticable to publish any notice to Holders of Bearer Securities as provided above, then such notification to Holders of Bearer Securities as shall be given in a manner satisfactory to the Trustee shall constitute sufficient notice to such Holders for every purpose hereunder. Neither the failure to give notice by publication to Holders of Bearer Securities as provided above, nor any defect in any notice so published, shall affect the sufficiency of any notice to Holders of Registered Securities given as provided herein.
Where this indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders of Securities shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

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SECTION 107.     Language of Notices, Etc .
Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication.
SECTION 108.     Conflict with Trust Indenture Act .
If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control.
SECTION 109.     Effect of Headings and Table of Contents .
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
SECTION 110.     Successors and Assigns .
All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not.
SECTION 111.     Separability Clause .
In case any provision in this Indenture or in the Securities or coupons shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 112.     Benefits of Indenture .
Nothing in this Indenture or in the Securities or coupons, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders of Securities and coupons, any benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 113.     Governing Law .
This Indenture and the Securities and coupons, if any, shall be governed by and construed in accordance with the laws of the State of New York.
SECTION 114.     Legal Holidays .
In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities or coupons other than a provision in the Securities of any series which specifically states that such provision shall apply in lieu of this Section) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the

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same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
SECTION 115.     Appointment of Agent for Service .
By the execution and delivery of this Indenture, the Company hereby appoints the Trustee as its agent, in respect of Securities of any series which are issued in bearer form and any coupons appertaining thereto, upon which process may be served in any legal action or proceeding which may be instituted in any Federal or State court in the Borough of Manhattan, The City of New York, arising out of or relating to such Securities or coupons or this Indenture. Service of process upon such agent at the office of such agent at Four Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency Group (or such other address in the Borough of Manhattan, The City of New York, as may be the Corporate Trust Office of the Trustee) and written notice of said service to the Company by the Person serving the same addressed as provided in Section 105, shall be deemed in every respect effective service of process upon the Company in any such legal action or proceeding, and the Company hereby submits to the jurisdiction of any such court in which any such legal action or proceeding is so instituted. Such appointment shall be irrevocable so long as the Holders of such Securities or coupons shall have any rights pursuant to the terms thereof or of this Indenture until the appointment of a successor by the Company with the consent of the Trustee and such successor’s acceptance of such appointment. The Company further agrees to take any and all action, including the execution and filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment of such agent or successor.
By the execution and delivery of this Indenture, the Trustee hereby agrees to act as such agent and undertakes promptly to notify the Company of receipt by it of service of process in accordance with this Section.

ARTICLE TWO
SECURITY FORMS
SECTION 201.     Forms Generally .
The Registered Securities, if any, of each series and the Bearer Securities, if any, of each series and related coupons shall be in substantially the forms set forth in Exhibits A, B, C and D to this Indenture, or in such other form (including permanent global form) as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities or coupons, as evidenced by their execution of such Securities or coupons. If temporary Securities of any series are issued in global form as permitted by Section 304. the form thereof shall be established as provided in the preceding sentence. If the forms of Securities or coupons of any series (or any such temporary global Security) are established by action taken

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pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities (or any such temporary global Security) or coupons.
The Trustee’s certificates of authentication shall be in substantially the form set forth in this Article.
Unless otherwise specified as contemplated by Section 301, Securities in bearer form shall have interest coupons attached.
The definitive Securities and coupons, if any, shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities or coupons.
SECTION 202.     Form of Trustee’s Certificate of Authentication .
This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY
as Trustee
By         
Authorized Signature    
SECTION 203.     Securities in Global Form .
If Securities of a series are issuable in global form, as specified as contemplated by Section 301, then, notwithstanding clause (10) of Section 301 and the provisions of Section 302. any such Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities from time to time endorsed thereon and that the aggregate amount of Outstanding Securities represented thereby may from time to time be reduced to reflect exchanges. Any endorsement of a Security in global form to reflect the amount, or any increase or decrease in the amount of Outstanding Securities represented thereby shall be made by the Trustee in such manner and upon instructions given by such Person or Persons as shall be specified therein or in the Company Order to be delivered to the Trustee pursuant to Section 303 or Section 304. Subject to the provisions of Section 303 and, if applicable, Section 304, the Trustee shall deliver and redeliver any Security in permanent global form in the manner and upon instructions given by the Person or Persons specified therein or in the applicable Company Order. If a Company Order pursuant to Section 303 or 304 has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement or delivery or redelivery of a Security in global form shall be in writing but need not comply with Section 102 and need not be accompanied by an Opinion of Counsel.

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Unless otherwise specified as contemplated by Section 301, payment of principal of and any premium and interest on any Security in permanent global form shall be made to the Person or Persons specified therein.
Notwithstanding the provisions of Section 308 and except as provided in the preceding paragraph, the Company, the Trustee and any agent of the Company and the Trustee shall treat a Person as the Holder of such principal amount of Outstanding Securities represented by a permanent global Security as shall be specified in a written statement of the Person in whose name such permanent global Security is registered or, in the case of a permanent global Security in bearer form, of Euro-clear or CEDEL S.A., which is produced to the Trustee on behalf of such Person by the Holder or by Euro-clear or CEDEL S.A., as the case may be.

ARTICLE THREE
THE SECURITIES
SECTION 301.     Amount Unlimited; Issuable in Series .
The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution and set forth or determined in the manner provided in an Officers’ Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series.
(1)    the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities);
(2)    any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906 or 1107);
(3)    whether Securities of the series are to be issuable as Registered Securities, Bearer Securities or both, whether any Securities of the series are to be issuable initially in temporary global form and whether any Securities of the series are to be issuable in permanent global form with or without coupons and, if so, whether beneficial owners of interests in any such permanent global Security may exchange such interests for Securities of such series and of like tenor of any authorized form and denomination and the circumstances under which any such exchanges may occur, if other than in the manner provided in Section 305;
(4)    the Person to whom any interest on any Registered Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, the manner in which, or the Person to whom, any interest on any Bearer Security of the

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series shall be payable, if otherwise than upon presentation and surrender of the coupons appertaining thereto as they severally mature, and the extent to which, or the manner in which, any interest payable on a temporary global Security on an Interest Payment Date will be paid if other than in the manner provided in Section 304;
(5)    the date or dates on which the principal of the Securities of the series is payable;
(6)    the rate or rates (which may be fixed or variable) at which the Securities of the series shall bear interest, if any, the date or dates from which any such interest shall accrue, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date for any interest payable on any Registered Securities on any Interest Payment Date;
(7)    the place or places where, subject to the provisions of Section 1002, the principal of and any premium and interest on Securities of the series shall be payable, any Registered Securities of the series may be surrendered for registration of transfer. Securities of the series may be surrendered for exchange and notices and, if other than in the manner provided in Section 105, demands to or upon the Company in respect of the Securities of the series and this Indenture may be served;
(8)    the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company;
(9)    the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation;
(10)    if other than denominations of $1,000 and any integral multiple thereof, the denominations in which any Registered Securities of the series shall be issuable and, if other than the denomination of $5,000, the denomination or denominations in which any Bearer Securities of the series shall be issuable;
(11)    the currency or currencies, including composite currencies, in which payment of the principal of and any premium and interest on the Securities of the series shall be payable if other than in Dollars;
(12)    if the amount of payments of principal of and any premium or interest on the Securities of the series may be determined with reference to an index, the manner in which such amounts shall be determined;
(13)    if other than the principal amount thereof, the portion of the principal amount of any Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502;

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(14)    if the principal of or interest on the Securities of a series are to be payable, at the election of the Company or a Holder of such Securities or coupons appertaining thereto, in a coin or currency other than that in which the Securities are denominated, the period or periods within which, and the terms and conditions upon which, such election may be made;
(15)    whether and under what circumstances the Company will pay additional amounts on the Securities of a series and any coupons appertaining thereto held by a Person who is a United States Alien in respect of any tax. assessment or governmental charge withheld or deducted and, if so, whether the Company will have the option to redeem such Securities and coupons rather than pay such additional amounts;
(16)    if principal of or any premium or interest on the Securities of a series is denominated or payable in a currency or currencies other than the Dollar, whether and under what terms and conditions the Company may be discharged from obligations pursuant to Sections 403 and 1011 with respect to Securities of such series: and
(17)    any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture).
All Securities of any one series and the coupons appertaining to any Bearer Securities of such series shall be substantially identical except, in the case of Registered Securities, as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to above and set forth in the Officers’ Certificate referred to above or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers’ Certificate setting forth the terms of the series.
SECTION 302.     Denominations .
Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities, any Registered Securities of a series shall be issuable in denominations of $1,000 and any integral multiple thereof and any Bearer Securities of a series shall be issuable in the denomination of $5,000.
SECTION 303.     Execution, Authentication, Delivery and Dating .
The Securities shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries and any coupons appertaining thereto shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents. The signature of any of these officers on the Securities or coupons may be manual or facsimile. Typographical and other minor errors or defects in any reproduction of the seal on any Security or any signature on any Security or coupon appertaining thereto shall not affect the validity

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or enforceability of any Security that has been duly authenticated and delivered by the Trustee or of any coupon appertaining to such a Security.
Securities and coupons bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company. notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series, together with any coupons appertaining thereto, executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities. and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities; provided, however, that, in connection with its original issuance, no Bearer Security shall be mailed or otherwise delivered to any location in the United States; and provided, further, that a Bearer Security may be delivered in connection with its original issuance only if the Person entitled to receive such Bearer Security shall have furnished a certificate in the form set forth in Exhibit E.1 to this Indenture, dated no earlier than 15 days prior to the earlier of the date on which such Bearer Security is delivered and the date on which any temporary Security first becomes exchangeable for such Bearer Security in accordance with the terms of such temporary Security and this Indenture. If any Security shall be represented by a permanent global Bearer Security, then, for purposes of this Section and Section 304, the notation of a beneficial owner’s interest therein upon original issuance of such Security or upon exchange of a portion of a temporary global Security shall be deemed to be delivery in connection with its original issuance of such beneficial owner’s interest in such permanent global Bearer Security. Except as permitted by Section 306, the Trustee shall not authenticate and deliver any Bearer Security unless all appurtenant coupons for interest then matured have been detached and cancelled.
If the form or terms of the Securities of the series and any related coupons have been established in or pursuant to one or more Board Resolutions as permitted by Sections 201 and 301, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating,
(a) if the forms of such Securities and any coupons have been established by or pursuant to Board Resolution as permitted by Section 201, that such forms have been established in conformity with the provisions of this Indenture;
(b) if the terms of such Securities and any coupons have been established by or pursuant to Board Resolution as permitted by Section 301, that such terms have been established in conformity with the provisions of this Indenture; and
(c) that such Securities, together with any coupons appertaining thereto, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms,

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subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors’ rights and to general equity principles.
The Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee’s own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee.
Each Registered Security shall be dated the date of its authentication; and each Bearer Security shall be dated as of the date of original issuance of the first Security of such series to be issued.
No Security or coupon appertaining thereto shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder.
SECTION 304.     Temporary Securities .
Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver. temporary Securities which are printed, lithographed, typewritten. mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, in registered form or, if authorized, in bearer form with one or more coupons or without coupons, and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. In the case of any series issuable as Bearer Securities, such temporary Securities may be in global form.
Except in the case of temporary Securities in global form (which shall be exchanged in accordance with the provisions of the following paragraphs), if temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series (accompanied by any unmatured coupons appertaining thereto) the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series and of like tenor of authorized denominations; provided., however, that no definitive Bearer Security shall be delivered in exchange for a temporary Registered Security; and provided, further, that a definitive Bearer Security shall be delivered in exchange for a temporary Bearer Security only in compliance with the conditions set forth in Section 303.
If temporary Securities of any series are issued in global form, any such temporary global Security shall, unless otherwise provided therein, be delivered to the London office of a depositary

19


or common depositary (the “Common Depositary”), for the benefit of Euro-clear and CEDEL S.A., for credit to the respective accounts of the beneficial owners of such Securities (or to such other accounts as they may direct).
Without unnecessary delay but in any event not later than the date specified in, or determined pursuant to the terms of , any such temporary global Security (the “Exchange Date”), the Company shall deliver to the Trustee in accordance with the Trustee’s instructions, if any, definitive Securities, in aggregate principal amount equal to the principal amount of such temporary global Security, executed by the Company. On or after the Exchange Date such temporary global Security shall be surrendered by the Common Depositary to the Trustee, as the Company’s agent for such purpose, to be exchanged, in whole or from time to time in part, for definitive Securities without charge and the Trustee shall authenticate and deliver, in exchange for each portion of such temporary global Security, an equal aggregate principal amount of definitive Securities of the same series of authorized denominations and of like tenor as the portion of such temporary global Security to be exchanged. The definitive Securities to be delivered in exchange for any such temporary global Security shall be in bearer form, registered form, permanent global bearer form or permanent global registered form, or any combination thereof, as specified as contemplated by Section 301, and, if any combination thereof is so specified, as requested by the beneficial owner thereof; provided, however, that, unless otherwise specified in such temporary global Security, upon such presentation by the Common Depositary, such temporary global Security is accompanied by a certificate dated the Exchange Date or a subsequent date and signed by Euro-clear as to the portion of such temporary global Security held for its account then to be exchanged and a certificate dated the Exchange Date or a subsequent date and signed by CEDEL S.A. as to the portion of such temporary global Security held for its account then to be exchanged, each in the form set forth in Exhibit E.2 to this Indenture; and provided, further, that definitive Bearer Securities shall be delivered in exchange for a portion of a temporary global Security only in compliance with the requirements of Section 303.
Unless otherwise specified in such temporary global Security, the interest of a beneficial owner of Securities of a series in a temporary global Security shall be exchanged for definitive Securities of the same series and of like tenor following the Exchange Date when the account holder instructs Euro-clear or CEDEL S.A., as the case may be, to request such exchange on his behalf and delivers to Euro-clear or CEDEL S.A., as the case may be, a certificate in the form set forth in Exhibit E.1 to this Indenture, dated no earlier than 15 days prior to the Exchange Date, copies of which certificate shall be available from the offices of Euro-clear and CEDEL S.A., the Trustee, any Authenticating Agent appointed for such series of Securities and each Paying Agent . Unless otherwise specified in such temporary global Security, any such exchange shall be made free of charge to the beneficial owners of such temporary global Security, except that a Person receiving definitive Securities must bear the cost of insurance, postage. transportation and the like in the event that such Person does not take delivery of such definitive Securities in person at the offices of Euro-clear or CEDEL S.A. Definitive Securities in bearer form to be delivered in exchange for any portion of a temporary global Security shall be delivered only outside the United States.
Until exchanged in full as hereinabove provided, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series and of like tenor authenticated and delivered hereunder, except that, unless otherwise

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specified as contemplated by Section 301, interest payable on a temporary global Security on an Interest Payment Date for Securities of such series occurring prior to the applicable Exchange Date shall be payable to Euro-clear and CEDEL S.A. on such Interest Payment Date upon delivery by Euro-clear and CEDEL S.A. to the Trustee of a certificate or certificates in the form set forth in Exhibit E.3 to this Indenture, for credit without further interest on or after such Interest Payment Date to the respective accounts of the Persons who are the beneficial owners of such temporary global Security on such Interest Payment Date and who have each delivered to Euro-clear or CEDEL S.A., as the case may be, a certificate in the form set forth in Exhibit E.4 to this Indenture. Any interest so received by Euro-clear and CEDEL S.A. and not paid as herein provided shall be returned to the Trustee immediately prior to the expiration of two years after such Interest Payment Date in order to be repaid to the Company in accordance with Section 1003.
SECTION 305.     Registration, Registration of Transfer and Exchange .
The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the “Security Register”) in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Registered Securities and of transfers of Registered Securities. The Trustee is hereby appointed “Security Registrar” for the purpose of registering Registered Securities and transfers of Registered Securities as herein provided.
Upon surrender for registration of transfer of any Registered Security of any series at the office or agency in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees. one or more new Registered Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, Registered Securities of any series may be exchanged for other Registered Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. Bearer Securities may not be issued in exchange for Registered Securities.
In the event the Securities of any series are issued in both registered and bearer form, then, at the option of the Holder, Bearer Securities of such series may be exchanged for Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Bearer Securities to be exchanged at any such office or agency, with all unmatured coupons and all matured coupons in default thereto appertaining. If the Holder of a Bearer Security is unable to produce any such unmatured coupon or coupons or matured coupon or coupons in default, such exchange may be effected if the Bearer Securities are accompanied by payment in funds acceptable to the Company in an amount equal to the face amount of such missing coupon or coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there is furnished to them such .security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder

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of such Security shall surrender to any Paying Agent any such missing coupon in respect of which such a payment shall have been made, such Holder shall be entitled to receive the amount of such payment; provided, however, that, except as otherwise provided in Section 1002, interest represented by coupons shall be payable only upon presentation and surrender of those coupons at an office or agency located outside the United States. Notwithstanding the foregoing, in case a Bearer Security of any series is surrendered at any such office or agency in exchange for a Registered Security of the same series and like tenor after the close of business at such office or agency on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date. or (i) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment ox Defaulted Interest, such Bearer Security shall be surrendered without the coupon relating to such Interest Payment Date or proposed date for payment, as the case may be, and interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture.
Whenever any Securities are so surrendered for exchange, the Company shall execute. and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 301. any permanent global Security shall be exchangeable only as provided in this paragraph. If the beneficial owners of interests in a permanent global Security are entitled to exchange such interests for Securities of such series and of like tenor and principal amount of another authorized form and denomination, as specified as contemplated by Section 301, then without unnecessary delay but in any event not later than the earliest date on which such interests may be so exchanged, the Company shall deliver to the Trustee definitive Securities in aggregate principal amount equal to the principal amount of such permanent global Security, executed by the Company. On or after the earliest date on which such interests may be so exchanged, such permanent global Security shall be surrendered by the Common Depositary or such other depositary as shall be specified in the Company Order with respect thereto to the Trustee. as the Company’s agent for such purpose, to be exchanged, in whole or from time to time in part. for definitive Securities without charge and the Trustee shall authenticate and deliver, in exchange for each portion of such permanent global Security, an equal aggregate principal amount of definitive Securities of the same series of authorized denominations and of like tenor as the portion of such permanent global Security to be exchanged which, unless the Securities of the series are not issuable both as Bearer Securities and as Registered Securities, as specified as contemplated by Section 301, shall be in the form of Bearer Securities or Registered Securities, or any combination thereof, as shall be specified by the beneficial owner thereof; provided however , that no such exchanges may occur during a period beginning at the opening of business 15 days before any selection of Securities of that series to be redeemed and ending on the relevant Redemption Date; and provided, further, that no Bearer Security delivered in exchange for a portion of a permanent global Security shall be mailed or otherwise delivered to any location in the United States. If a Registered Security is issued in exchange for any portion of a permanent global Security after the close of business at the office or agency where such exchange occurs on (i) any Regular Record Date and before the opening of business at such office or agency

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on the relevant Interest Payment Date, or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of such Registered Security, but will be payable on such Interest Payment Date or proposed date for payment, as the case may be, only to the Person to whom interest in respect of such portion of such permanent global Security is payable in accordance with the provisions of this Indenture.
All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee or any transfer agent) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar or any transfer agent duly executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before any selection of Securities of that series to be redeemed under Section 1103 and ending at the close of business on (A) if Securities of the series are issuable only as Registered Securities, the day of the mailing of the relevant notice of redemption and (B) if Securities of the series are issuable as Bearer Securities, the day of the first publication of the relevant notice of redemption, or if Securities of the series are also issuable as Registered Securities and there is no publication, the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Registered Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part, or (iii) to exchange any Bearer Security so elected for redemption except that such a Bearer Security may be exchanged for a Registered Security of that series and like tenor, provided that such Registered Security shall be simultaneously surrendered for redemption.
SECTION 306.     Mutilated, Destroyed, Lost and Stolen Securities or Coupons .
If any mutilated Security or a Security with a mutilated coupon appertaining thereto is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding, with coupons corresponding to the coupons, if any, appertaining to the surrendered Security.
If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security or coupon and (ii) such security or indemnity as may

23


be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security or coupon has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security or in exchange for the Security to which a destroyed, lost or stolen coupon appertains (with all appurtenant coupons not destroyed, lost or stolen), a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding with coupons corresponding to the coupons, if any, appertaining to such destroyed, lost or stolen Security or to the Security to which such destroyed, lost or stolen coupon appertains.
In case any such mutilated, destroyed, lost or stolen Security or coupon has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security or coupon; provided , however, that principal of (and premium, if any) and any interest on Bearer Securities shall, except as otherwise provided in Section 1002, be payable only at an office or agency located outside the United States and, unless otherwise specified as contemplated by Section 301, any interest on Bearer Securities shall be payable only upon presentation and surrender of the coupons appertaining thereto.
Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series, with its coupons, if any. issued pursuant to this Section in lieu of any destroyed, lost or stolen Security or in exchange for a Security to which a destroyed, lost or stolen coupon appertains, shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security and its coupons, if any, or the destroyed, lost or stolen coupon shall be at any time enforceable by anyone, and any such new Security and coupons, if any, shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series and their coupons, if any, duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons.
SECTION 307.     Payment of Interest; Interest Rights Preserved .
Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities. interest on any Registered Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest.
Any interest on any Registered Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall

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forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Registered Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Registered Securities of such series at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the Registered Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 308.     Persons Deemed Owners .
Prior to due presentment of a Registered Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Registered Security is registered as the owner of such Registered Security for the purpose of receiving

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payment of principal of (and premium, if any) and (subject to Sections 305 and 307) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.
Title to any Bearer Security and any coupons appertaining thereto shall pass by delivery. The Company, the Trustee and any agent of the Company or the Trustee may treat the bearer of any Bearer Security and the bearer of any coupon as the absolute owner of such Security or coupon for the purpose of receiving payment thereof or on account thereof and for all other purposes whatsoever, whether or not such Security or coupon be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.
All payments made to any Person deemed an owner under this Section, or upon such Person’s order, shall be valid and, to the extent of the sum or sums so paid. effectual to satisfy and discharge the liability for moneys payable upon any such Security or coupon.
SECTION 309.     Cancellation .
All Securities and coupons surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee. All Securities and matured coupons so delivered shall be promptly cancelled by the Trustee. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities and coupons held by the Trustee shall be destroyed, and an affidavit of destruction by the Trustee shall be sent to the Company.
SECTION 310.     Computation of Interest .
Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a year of twelve 30-day months.

ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401.     Satisfaction and Discharge of Indenture .
This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when
(1) either

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(A) all Securities theretofore authenticated and delivered (other than (i) coupons appertaining to Bearer Securities surrendered for exchange for Registered securities and maturing after such exchange, whose surrender is not required or has been waived as provided in Section 305, (ii) Securities and coupons which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306, (iii) coupons appertaining to Securities called for redemption and maturing after the relevant Redemption Date, whose surrender has been waived as provided in Section 1106, and (iv) Securities and coupons for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or
(B) all such Securities and, in the case of (i) and (ii) below, any coupons appertaining thereto not theretofore delivered to the Trustee for cancellation
(i)    have become due and payable. or
(ii)    will become due and payable at their Stated Maturity within one year, or
(iii)    are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be;
(2)    the Company has paid or caused to be paid all other sums payable hereunder by the Company; and
(3)    the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive.
SECTION 402.     Application of Trust Money; Indemnification .

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(a) Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401, all money and Government Obligations deposited with the Trustee pursuant to Section 403 or 1011 and all money received by the Trustee in respect of Government Obligations deposited with the Trustee pursuant to Section 403 or 1011, shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium. if any) and interest for whose payment such money has been deposited with or received by the Trustee or to make mandatory sinking fund payments or analogous payments as contemplated by Section 403 or 1011.\
(b) The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against Government Obligations deposited pursuant to Section 403 or 1011 or the interest and principal received in respect of such obligations other than any payable by or on behalf of Holders.
(c) The Trustee shall deliver or pay to the Company from time to time upon Company Request any Government Obligations or money held by it as provided in Section 403 or 1011 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are then in excess of the amount thereof which then would have been required to be deposited for the purpose for which such obligations or money were deposited or received.
SECTION 403.     Defeasance and Discharge of Indenture .
If principal of and any premium and interest on Securities of any series are denominated and payable in Dollars, the Company shall be deemed to have paid and discharged the entire indebtedness on all the Outstanding Securities of such series on the 91st day after the date of the deposit referred to in subparagraph (d) hereof, and the provisions of this Indenture, as it relates to such Outstanding Securities, shall no longer be in effect (and the Trustee, at the expense of the Company, shall at Company Request, execute proper instruments acknowledging the same), except as to:
(a)    the rights of Holders of Securities to receive, from the trust funds described in subparagraph (d) hereof, (i) payment of the principal of (and premium, if any) or interest on the Outstanding Securities on the Stated Maturity of such principal or instalment of principal or interest and (ii) the benefit of any mandatory sinking fund payments applicable to the Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and the Securities;
(b)    the Company’s obligations with respect to such Securities under Sections 305, 306, 1002 and 1003; and
(c)    the rights, powers, trusts, duties and immunities of the Trustee hereunder;
provided that, the following conditions shall have been satisfied:
(d)    the Company has deposited or caused to be irrevocably deposited (except as provided in Section 402) with the Trustee (or another trustee satisfying the requirements of

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Section 609) as trust funds in the trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities, (i) money in an amount, or (ii) Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph (d) money in an amount or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge (A) the principal of (and premium, if any) and each instalment of principal of (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or instalment of principal or interest and (B) any mandatory sinking fund payments applicable to the Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and of the Securities;
(e)    such deposit shall not cause the Trustee with respect to the Securities to have a conflicting interest as defined in Section 608 and for purposes of the Trust Indenture Act with respect to the Securities;
(f)    such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound;
(g)    such provision would not cause any Outstanding Securities then listed on the New York Stock Exchange or other securities exchange to be de-listed as a result thereof;
(h)    no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit or during the period ending on the 91st day after such date;
(i)    the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel to the effect that there has been a change in applicable Federal law such that, or the Company has received from, or there has been published by, the Internal Revenue Service a ruling to the effect that, Holders of the Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such deposits, defeasance and discharge and will be subject to Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred; and
(j)    the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the defeasance contemplated by this Section have been complied with.
ARTICLE FIVE
REMEDIES
SECTION 501.     Events of Default .
“Event of Default”, wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

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(1)    default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; or
(2)    default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity; or
(3)    default in the deposit of any sinking fund payment, when and as due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of series of Securities other than that series), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder, or
(5)      the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or
(6)    the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of .any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or
(7)    any other Event of Default provided with respect to Securities of that series.
SECTION 502.     Acceleration of Maturity; Rescission and Annulment .
If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount (or, if the Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of all of the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if
(1)    the Company has paid or deposited with the Trustee a sum sufficient to pay
(A)    all overdue interest on all Securities of that series,
(B)    the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Securities,
(C)    to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and
(D)    all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel;
and

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(2)    all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right consequent thereon.
SECTION 503.     Collection of Indebtedness and Suits for Enforcement by Trustee .
The Company covenants that if
(1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities and coupons, the whole amount then due and payable on such Securities and coupons for principal (and premium, if any) and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate or rates prescribed therefor in such Securities and coupons, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities, wherever situated.
If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series and any related coupons by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504.     Trustee May File Proofs of Claim .
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of

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whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,
(i)    to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders of Securities and coupons allowed in such judicial proceeding, and
(ii)    to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder of Securities and coupons to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders of Securities and coupons, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of Securities and coupons any plan of reorganization, arrangement, adjustment or composition affecting the Securities or coupons or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder of Securities and coupons in any such proceeding.
SECTION 505.     Trustee May Enforce Claims Without Possession of Securities or Coupons .
All rights of action and claims under this Indenture or the Securities or coupons may be prosecuted and enforced by the Trustee without the possession of any of the Securities or coupons or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities and coupons in respect of which such judgment has been recovered.
SECTION 506.     Application of Money Collected .
Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities or coupons and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607; and

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SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities and coupons in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities and coupons for principal (and premium, if any) and interest, respectively.
SECTION 507.     Limitation on Suits .
No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1)    such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series;
(2)    the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(3)    such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;
(4)    the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders.
SECTION 508.     Unconditional Right of Holders to Receive Principal, Premium and Interest .
Notwithstanding any other provision in this Indenture, the Holder of any Security or coupon shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 305) interest on such Security or payment of such coupon on the Stated Maturity or Maturities expressed in such Security or coupon (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.

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SECTION 509.     Restoration of Rights and Remedies .
If the Trustee or any Holder of a Security or coupon has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders of Securities or coupons shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.
SECTION 510.     Rights and Remedies Cumulative .
Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders of Securities or coupons is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511.     Delay or Omission Not Waiver .
No delay or omission of the Trustee or of any Holder of any Securities or coupons to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 512.     Control by Holders .
The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that
(1)    such direction shall not be in conflict with any rule of law or with this Indenture, and
(2)    the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.
SECTION 513.     Waiver of Past Defaults .
The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series and any related coupons waive any past default hereunder with respect to such series and its consequences, except a default

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(1)    in the payment of the principal of (or premium, if any) or interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
SECTION 514.     Undertaking for Costs .
All parties to this Indenture agree, and each Holder of any Security or coupon by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the Stated Maturity or Maturities expressed in such Security or coupon (or, in the case of redemption, on or after the Redemption Date).
SECTION 515.     Waiver of Stay or Extension Laws .
The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE SIX
THE TRUSTEE
SECTION 601.     Certain Duties and Responsibilities .
(a)    Except during the continuance of an Event of Default,

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(1)    the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(2)    in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture.
(b)    In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
(c)    No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that
(1)    this Subsection shall not be construed to limit the effect of Subsection (a) of this Section;
(2)    the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;
(3)    the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities of any series, determined as provided in Section 512, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities of such series; and
(4)    no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(d)    Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.

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(e)    Not less than 15 days prior to any date on which payment of principal, premium, if any, or interest is required to be made on the Securities, the Trustee shall give notice of such payment date to the Company, provided that failure to give or receive such notice shall not effect the obligation of the Company to make such payment as required by this Indenture.
SECTION 602.     Notice of Defaults .
Within 90 days after the occurrence of any default hereunder with respect to the Securities of any series, the Trustee shall transmit in the manner and to the extent provided in Section 703(c) notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided , however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Security of such series or in the payment of any sinking fund instalment with respect to Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Securities of such series; and provided, further, that in the case of any default of the character specified in Section 501(4) with respect to Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term “default” means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series.
SECTION 603.     Certain Rights of Trustee .
Subject to the provisions of Section 601:
(a)    the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper parry or parties;
(b)    any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution;
(c)    whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other, evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers’ Certificate;
(d)    the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(e)    the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to

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this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;
(f)    the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note. other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and
(g)    the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.
SECTION 604.     Not Responsible for Recitals or Issuance of Securities .
The recitals contained herein and in the Securities, except the Trustee’s certificates of authentication, and in any coupons shall be taken as the statements of the Company, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities or coupons. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of Securities or the proceeds thereof.
SECTION 605.     May Hold Securities and Coupons .
The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and coupons and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent
SECTION 606.     Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company.
SECTION 607.     Compensation and Reimbursement .
The Company agrees
(1)    to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

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(2)    except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and
(3)    to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection, with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.
SECTION 608.     Disqualification; Conflicting Interests .
(a)    If the Trustee has or shall acquire any conflicting interest, as defined in this Section, with respect to the Securities of any series, it shall, within 90 days after ascertaining that it has such conflicting interest, either eliminate such conflicting interest or resign with respect to the Securities of that series in the manner and with the effect hereinafter specified in this Article.
(b)    In the event that the Trustee shall fail to comply with the provisions of Subsection (a) of this Section with respect to the Securities of any series, the Trustee shall, within 10 days after the expiration of such 90-day period, give notice of such failure in the manner provided in Section 106.
(c)    For the purposes of this Section, the Trustee shall be deemed to have a conflicting interest with respect to the Securities of any series if
(1)    the Trustee is trustee under this Indenture with respect to the Outstanding Securities of any series other than that series or is trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the Company are outstanding, unless such other indenture is a collateral trust indenture under which the only collateral consists of Securities issued under this Indenture, provided that there shall be excluded from the operation of this Subsection this Indenture with respect to the Securities of any series other than that series or any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if
(i) this Indenture and such other indenture or indentures are wholly unsecured and such other indenture or indentures are hereafter qualified under the Trust Indenture Act, unless the Commission shall have found and declared by order pursuant to Section 305(b) or Section 307(c) of the Trust Indenture Act that differences exist between the provisions of this Indenture with respect to Securities of that series and one or more other series or the provisions of such other indenture or indentures which are so likely to involve a material conflict

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of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture with respect to the Securities of that series and such other series or under such other indenture or indentures, or
(ii) the Company shall have sustained the burden of proving, on application to the Commission and after opportunity for hearing thereon, that trusteeship under this Indenture with respect to the Securities of that series and such other series or such other indenture or indentures is not so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture with respect to the Securities of that series and such other series or under such other indenture or indentures;
and, provided further, that there shall be excluded from the operation of this Subsection the Indenture dated as of July 1, 1985, between the Company and Bankers Trust Company, as Trustee, under which the Company’s 10½% Notes due July 15,1995 and 8 8-7/8% Sinking Fund Debentures due April 1, 2016 are outstanding;
(2)    the Trustee or any of its directors or executive officers is an obligor upon the Securities or an underwriter for the Company;
(3)    the Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with the Company or an underwriter for the Company;
(4)    the Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee or representative of the Company, or of an underwriter (other than the Trustee itself) for the Company who is currently engaged in the business of underwriting, except that (i) one individual may be a director or an executive officer, or both, of the Trustee and a director or an executive officer, or both, of the Company but may not be at the same time an executive officer of both the Trustee and the Company; (ii) if and so long as the number of directors of the Trustee in office is more than nine, one additional individual may be a director or an executive officer, or both, of the Trustee and a director of the Company; and (iii) the Trustee may be designated by the Company or by any underwriter for the Company to act in the capacity of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent or depositary, or in any other similar capacity, or, subject to the provisions of paragraph (1) of this Subsection, to act as trustee, whether under an indenture or otherwise;
(5)    10% or more of the voting securities of the Trustee is beneficially owned either by the Company or by any director, partner or executive officer thereof, or 20% or more of such voting securities is beneficially owned, collectively, by any two or more of such persons; or 10% or more of the voting securities of the Trustee is beneficially owned either by an underwriter for the Company or by any director, partner or executive officer thereof, or is beneficially owned, collectively, by any two or more such persons;

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(6)    the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this Subsection defined), (i) 5% or more of the voting securities, or 10% or more of any other class of security, of the Company not including the Securities issued under this Indenture and securities issued under any other indenture under which the Trustee is also trustee, or (ii) 10% or more of any class of security of an underwriter for the Company;
(7)    the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this Subsection defined), 5% or more of the voting securities of any person who, to the knowledge of the Trustee, owns 10% or more of the voting securities of, or controls directly or indirectly or is under direct or indirect common control with, the Company;
(8)    the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this Subsection defined), 10% or more of any class of security of any person who, to the knowledge of the Trustee, owns 50% or more of the voting securities of the Company; or
(9)    the Trustee owns, on May 15 in any calendar year, in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of 25 % or more of the voting securities, or of any class of security, of any person, the beneficial ownership of a specified percentage of which would have constituted a conflicting interest under paragraph (6), (7) or (8) of this Subsection. As to any such securities of which the Trustee acquired ownership through becoming executor, administrator or testamentary trustee of an estate which included them, the provisions of the preceding sentence shall not apply, for a period of two years from the date of such acquisition, to the extent that such securities included in such estate do not exceed 25% of such voting securities or 25% of any such class of security. Promptly after May 15 in each calendar year, the Trustee shall make a check of its holdings of such securities in any of the above-mentioned capacities as of such May 15. If the Company fails to make payment in full of the principal of or premium, if any) or interest on any of the Securities when and as the same becomes due and payable, and such failure continues for 30 days thereafter, the Trustee shall make a prompt check of its holdings of such securities in any of the above-mentioned capacities as of the date of the expiration of such 30-day period, and after such date, notwithstanding the foregoing provisions of this paragraph, all such securities so held by the Trustee, with sole or joint control over such securities vested in it, shall, but only so long as such failure shall continue, be considered as though beneficially owned by the Trustee for the purposes of paragraphs (6), (7) and (8) of this Subsection.
The specification of percentages in paragraphs (5) to (9), inclusive, of this Subsection shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufficient constitute direct or indirect control for the purposes of paragraph (3) or (7) of this Subsection .
For the purposes of paragraphs (6), (7), (8) and (9) of this Subsection only, (i) the terms “security” and “securities” shall include only such securities as are generally known as corporate

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securities, but shall not include any note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person by one or more banks, trust companies or banking firms. or any certificate of interest or participation in any such note or evidence of indebtedness; (ii) an obligation shall be deemed to be “in default” when a default in payment of principal shall have continued for 30 days or more and shall not have been cured; and (iii) the Trustee shall not be deemed to be the owner or holder of (A) any security which it holds as collateral security, as trustee or otherwise, for an obligation which is not in default as defined in clause (ii) above, or (B) any security which it holds as collateral security under this Indenture, irrespective of any default hereunder, or (C) any security which it holds as agent for collection, or as custodian, escrow agent or depositary, or in any similar representative capacity.
(d)    For the purposes of this Section:
(1)    The term “underwriter”, when used with reference to the Company, means every person who, within three years prior to the time as of which the determination is made, has purchased from the Company with a view to, or has offered or sold for the Company in connection with, the distribution of any security of the Company outstanding at such time, or has participated or has had a direct or indirect participation in any such undertaking, or has participated or has had a participation in the direct or indirect underwriting of any such undertaking, but such term shall not include a person whose interest was limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors’ or sellers’ commission.
(2)    The term “director” means any director of a corporation or any individual performing similar functions with respect to any organization, whether incorporated or unincorporated.
(3)    The term “person” means an individual, a corporation, a partnership, an association, a joint-stock company, a trust, an unincorporated organization or a government or political subdivision thereof. As used in this paragraph, the term “trust” shall include only a crust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security.
(4)    The term “voting security” means any security presently entitling the owner or holder thereof to vote in the direction or management of the affairs of a person, or any security issued under or pursuant to any trust, agreement or arrangement whereby a trustee or trustees or agent or agents for the owner or holder of such security are presently entitled to vote in the direction or management of the affairs of a person.
(5)    The term “Company” means any obligor upon the Securities.
(6)    The term “executive officer” means the president, every vice president, every trust officer, the cashier, the secretary and the treasurer of a corporation, and any individual customarily performing similar functions with respect to any organization whether incorporated or unincorporated, but shall not include the chairman of the board of directors.

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(e)    The percentages of voting securities and other securities specified in this Section shall be calculated in accordance with the following provisions:
(1)    A specified percentage of the voting securities of the Trustee, the Company or any other person referred to in this Section (each of whom is referred to as a “person” in this paragraph) means such amount of the outstanding voting securities of such person as entitles the holder or holders thereof to cast such specified percentage of the aggregate votes which the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management of the affairs of such person.
(2)    A specified percentage of a class of securities of a person means such percentage of the aggregate amount of securities of the class outstanding.
(3)    The term “amount”, when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares and the number of units if relating to any other kind of security.
(4)    The term “outstanding” means issued and not held by or for the account of the issuer. The following securities shall not be deemed outstanding within the meaning of this definition:
(i) securities of an issuer held in a sinking fund relating to securities of the issuer of the same class;
(ii) securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise;
(iii) securities pledged by the issuer thereof as security for an obligation of the issuer not in default as to principal or interest or otherwise; and
(iv) securities held in escrow if placed in escrow by the issuer thereof;
provided. however, that any voting securities of an issuer shall be deemed outstanding if any person other than the issuer is entitled to exercise the voting rights thereof.
(5)    A security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and privileges; provided, however, that in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series different classes and provided, further, that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture.
SECTION 609.     Corporate Trustee Required; Eligibility .

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There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 subject to supervision or examination by Federal or State authority and having its Corporate Trust Office in the Borough of Manhattan. The City of New York or it shall maintain an office in that location for the purpose stated in Section 1002. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.
SECTION 610.     Resignation and Removal; Appointment of Successor .
(a)    No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611.
(b)    The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company.
(d)    If at any time:
(1)    the Trustee shall fail to comply with Section 608(a) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or
(2)    the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or
(3)    the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation.
Then, in any such case. (i) the Company by a Board Resolution may remove the Trustee with respect to all Securities, or (ii) subject to Section 514, any Holder who has been a bona

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fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.
(e)    If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611. any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others, similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.
(f)    The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities in the manner provided in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office.
SECTION 611.     Acceptance of Appointment by Successor .
(a)    In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.
(b)    In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each

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successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates.
(c)    Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be.
(d)    No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.
SECTION 612.     Merger, Conversion, Consolidation or Succession to Business .
Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities.

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SECTION 613.     Preferential Collection of Claims Against Company .
(a)    Subject to Subsection (b) of this Section, if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company within four months prior to a default, as defined in Subsection (c) of this Section, or subsequent to such a default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually, the Holders of the Securities and the holders of other indenture securities, as defined in Subsection (c) of this Section:
(1)    an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such four months’ period and valid as against the Company and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in paragraph (2) of this Subsection, or from the exercise of any right of set-off which the Trustee could have exercised if a petition in bankruptcy had been filed by or against the Company upon the date of such default; and
(2)    all property received by the Trustee in respect of any claims as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such four months’ period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of the Company and its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
(A)    to retain for its own account (i) payments made on account of any such claim by any Person (other than the Company) who is liable thereon, and (ii) the proceeds of the bona fide sale of any such claim by the Trustee to a third Person, and (iii) distributions made in cash securities or other property in respect of claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to Federal bankruptcy law as now or hereafter constituted, or any other applicable Federal or State law;
(B)    to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such four months’ period;
(C)    to realize, for its own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such four months’ period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default, as defined in Subsection (c) of this Section, would occur within four months; or

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(D)    to receive payment on any claim referred to in paragraph (B) or (C), against the release of any property held as security for such claim as provided in paragraph (B) or (C), as the case may be, to the extent of the fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted after the beginning of such four months’ period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any pre-existing claim of the Trustee as such creditor, such claim shall have the same status as such pre-existing claim.
If the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned among the Trustee, the Holders and the holders of other indenture securities in such manner that the Trustee, the Holders and the holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from the Company of the funds and property in such special account and before crediting to the respective claims of the Trustee and the Holders and the holders of other indenture securities dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account As used in this paragraph, with respect to any claim, the term “dividends” shall include any distribution with respect to such claim, in bankruptcy or receivership or proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law, whether such distribution is made in cash, securities or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership or proceedings for reorganization are pending shall have jurisdiction (i) to apportion among the Trustee, the Holders and the holders of other indenture securities, in accordance with the provisions of this paragraph, the funds and property held in such special account and proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee and the Holders and the holders of other indenture securities with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula.
Any Trustee which has resigned or been removed after the beginning of such four months’ period shall be subject to the provisions of this Subsection as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such four

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months’ period, it shall be subject to the provisions of this Subsection if and only if the following conditions exist:
(i)    the receipt of property or reduction of claim, which would have given rise to the obligation to account, if such Trustee had continued as Trustee, occurred after the beginning of such four months’ period; and
(ii)    such receipt of property or reduction of claim occurred within four months after such resignation or removal.
(b)    There shall be excluded from the operation of Subsection (a) of this Section a creditor relationship arising from:
(1)    the ownership or acquisition of securities issued under any indenture, or any security or securities having a maturity of one year or more at the time of acquisition by the Trustee;
(2)    advances authorized by a receivership or bankruptcy court of competent jurisdiction or by this Indenture, for the purpose of preserving any property which shall at any time be subject to the lien of this Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advances and of the circumstances surrounding the making thereof is given to the Holders at the time and in the manner provided in this Indenture;
(3)    disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar. custodian, paying agent, fiscal agent or depositary, or other similar capacity;
(4)    an indebtedness created as a result of services rendered or premises rented; or an indebtedness created as a result of goods or securities sold in a cash transaction, as defined in Subsection (c) of this Section;
(5)    the ownership of stock or of other securities of a corporation organized under the provisions of Section 25(a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Company; and
(6)    the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptances or obligations which fall within the classification of self-liquidating paper, as defined in Subsection (c) of this Section.
(c)    For the purposes of this Section only:
(1)    the term “default” means any failure to make payment in full of the principal of or interest on any of the Securities or upon the other indenture securities when and as such principal or interest becomes due and payable;

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(2)    the term “other indenture securities” means securities upon which the Company is an obligor outstanding under any other indenture (i) under which the Trustee is also trustee, (ii) which contains provisions substantially similar to the provisions of this Section, and (iii) under which a default exists at the time of the apportionment of the funds and property held in such special account;
(3)    the term “cash transaction” means any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand;
(4)    the term “self-liquidating paper” means any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation; and
(5)    the term “Company” means any obligor upon the Securities.
SECTION 614.     Appointment of Authenticating Agent .
At any time when any of the Securities remain Outstanding the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306. and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee’s certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section,

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such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give notice of such appointment to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, in the manner provided in Section 106. Any successor Authenticating Agent upon acceptance of its appointment hereunder shaft become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607.
If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee’s certificate of authentication, an alternate certificate of authentication in the following form:
This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY
as Trustee
By         
As Authenticating Agent

By         
Authorized Signature

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If all of the Securities of a series may not be originally issued at one time, and if the Trustee does not have not have an office capable of authenticating Securities upon original issuance located in a Place of Payment where the Company wishes to have Securities of such series authenticated upon original issuance, the Trustee, if so requested by the Company in writing (which writing need not comply with Section 102 and need not be accompanied by an Opinion of Counsel), shall appoint in accordance with this Section an Authenticating Agent having an office in a Place of Payment designated by the Company with respect to such series of Securities.

ARTICLE SEVEN
HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701.     Company to Furnish Trustee Names and Addresses of Holders .
The Company will furnish or cause to be furnished to the Trustee
(a)    semi-annually, not more than 10 days after the Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Registered Securities as of such Regular Record Date, and
(b)    at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished;
provided that if and so long as the Trustee shall be the Security Registrar for Securities of any series, such list shall not be required to be furnished for such series.
SECTION 702.     Preservation of Information; Communications to Holders .
(a)    The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished.
(b)    If three or more Holders (herein referred to as “applicants”) apply in writing to the Trustee, and furnished to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders with respect to their rights under this Indenture or under the Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five business days after the receipt of such application, at its election, either
(i)    afford such applicants access to the information preserved at the time by the Trustee in accordance with Section 702(a), or

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(ii)    inform such applicants as to the approximate number of Holders whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 702(a), and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder whose name and address appear in the information preserved at the time by the Trustee in accordance with Section 702(a) a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interest of the Holders or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender, otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application.
(c)    Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 702(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 702(b).
SECTION 703.     Reports by Trustee .
(a)    Within 60 days after March 1 of each year commencing with the year 1988, the Trustee shall transmit to the Holders of Securities, as provided in Subsection (c) of this Section, a brief report dated as of such March 1 with respect to:
(1)    its eligibility under Section 609 and its qualifications under Section 608, or in lieu thereof, if to the best of its knowledge it has continued to be eligible and qualified under said Sections, a written statement to such effect;
(2)    the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) which remain unpaid on the date of such report, and for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities, on any property

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or funds held or collected by it as Trustee. except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than 1/2 of 1% of the principal amount of the Securities Outstanding on the date of such report;
(3)    the amount. interest rate and maturity date of all other indebtedness owing by the Company (or by any other obligor on the Securities) to the Trustee in its individual capacity, on the date of such report, with a brief description of any property held as collateral security therefor, except an indebtedness based upon a creditor relationship arising in any manner described in Section 613(b)(2), (3), (4) or (6);
(4)    the property and funds, if any, physically in the possession of the Trustee as such on the date of such report;
(5)    any additional issue of Securities which the Trustee has not previously reported; and
(6)    any action taken by the Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Securities, except action in respect of a default, notice of which has been or is to be withheld by the Trustee in accordance with Section 602.
(b)    The Trustee shall transmit to the Holders of Securities, as provided in Subsection (c) of this Section, a brief report with respect to the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) since the date of the last report transmitted pursuant to Subsection (a) of this Section (or if no such report has yet been so transmitted, since the date of execution of this instrument) for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities, on property or funds held or collected by it as Trustee and which it has not previously reported pursuant to this Subsection, except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate 10% or less of the principal amount of the Securities Outstanding at such time, such report to be transmitted within 90 days after such time.
(c)    Reports pursuant to this Section shall be transmitted by mail:
(1)    to all Holders of Registered Securities, as the names and addresses of such Holders appear in the Security Register,
(2)    to such Holders of Bearer Securities as have, within the two years preceding such transmission, filed their names and addresses with the Trustee for that purpose; and
(3)    except in the case of reports pursuant to Subsection (b) of this Section, to each Holder of a Security whose name and address is preserved at the time by the Trustee, as provided in Section 702(a).

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(d)    A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any stock exchange.
SECTION 704.     Reports by Company .
The Company shall:
(1)    file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;
(2)    file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and
(3)    transmit, within 30 days after the filing thereof with the Trustee, to the Holders of Securities, in the manner and to the extent provided in Section 703(c) with respect to reports pursuant to Section 703(a), such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission.

ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801.     Company May Consolidate, Etc., Only on Certain Terms .
The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless:

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(1)    in case the Company shall consolidate with or merge into another corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed;
(2)    immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or a Subsidiary as a result of such transaction as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing;
(3)    if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Company would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by this Indenture, the Company or such successor corporation or Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all indebtedness secured thereby; and
(4)    the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.
SECTION 802.     Successor Corporation Substituted .
Upon any consolidation by the Company with or merger by the Company into any other corporation or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the successor corporation formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Securities and any coupons.

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ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901.     Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1)    to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or
(2)    to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or
(3)    to add any additional Events of Default; or
(4)    to add or to change any of the provisions of this Indenture to provide that Bearer Securities may be registrable as to principal, to change or eliminate any restrictions on the payment of principal of or any premium or interest on Bearer Securities, to permit Bearer Securities to be issued in exchange for Registered Securities, to permit Bearer Securities to be issued in exchange for Bearer Securities of other authorized denominations or to permit or facilitate the issuance of Securities in uncertificated form, provided that any such action shall not adversely affect the interests of the Holders of Securities of any series or any related coupons in any material respect; or
(5)    to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or
(6)    to secure the Securities pursuant to the requirements of Section 1007 or otherwise; or
(7)    to establish the form or terms of Securities of any series as permitted by Sections 201 and 301; or
(8)    to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611(b); or

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(9)    to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided such action shall not adversely affect the interests of the Holders of Securities of any series in any material respect.
SECTION 902.     Supplemental Indentures with Consent of Holders .
With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby,
(1)    change the Stated Maturity of the principal of, or any instalment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or change the coin or currency in which, any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or
(2)    reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or
(3)    change any obligation of the Company to maintain an office or agency in the places and for the purposes specified in Section 1002, or
(4)    modify any of the provisions of this Section, Section 513 or Section 1013, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to “the Trustee” and concomitant changes in this Section and Section 1013, or the deletion of this proviso, in accordance with the requirements of Sections 611(b) and 901(8).
A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect

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to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903.     Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise. Promptly after the execution by the Company and the Trustee of any supplemental indenture, the Company shall give notice within 30 days of such execution in the manner provided in Section 106, setting forth in general form the substance of such supplemental indenture, to all Holders of the Securities. Any failure of the Company to give such notice or any defect therein shall not impair or effect the validity of such supplemental indenture.
SECTION 904.     Effect of Supplemental Indentures .
Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder and of any coupons appertaining thereto shall be bound thereby.
SECTION 905.     Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906.     Reference in Securities to Supplemental Indentures .
Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series.

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ARTICLE TEN
COVENANTS
SECTION 1001.     Payment of Principal, Premium and Interest .
The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of (and premium, if any) and interest on the Securities of that series in accordance with the terms of the Securities, any coupons appertaining thereto and this Indenture. Unless otherwise specified as contemplated by Section 301 with respect to any series of Securities, any interest due on Bearer Securities on or before Maturity, shall be payable only upon presentation and surrender of the several coupons for such interest instalments as are evidenced thereby as they severally mature.
SECTION 1002.     Maintenance of Office or Agency .
If Securities of a series are issuable only as Registered Securities, the Company will maintain in each Place of Payment for such series an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. If Securities of a series are issuable as either Bearer Securities or Registered Securities, the Company will maintain (A) in the Borough of Manhattan, The City of New York, an office or agency where any Registered Securities of that series may be presented or surrendered for payment, where any Registered Securities of that series may be surrendered for registration of transfer, where Securities of that series may be surrendered for exchange, where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served and where Bearer Securities of that series and related coupons may be presented or surrendered for payment in the circumstances described in the following paragraph (and not otherwise), (B) subject to any laws or regulations applicable thereto, in a Place of Payment for that series which is located outside the United States, an office or agency where Securities of that series and related coupons may be presented and surrendered for payment (including payment of any additional amounts payable on Securities of that series pursuant to Section 1009); provided however, that if the Securities of that series are listed on The Stock Exchange of the United Kingdom and the Republic of Ireland, the Luxembourg Stock Exchange or any other stock exchange located outside the United States and such stock exchange shall so require, the Company will maintain a Paying Agent for the Securities of that series in London, Luxembourg or any other required city located outside the United States, as the case may be. so long as the Securities of that series are listed on such exchange, and (C) subject to any laws or regulations applicable thereto, in a Place of Payment for that series located outside the United States an office or agency where any Registered Securities of that series may be surrendered for registration of transfer, where Securities of that series may be surrendered for exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee and the Holders of the location, and any change in the location, of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency in respect of any series of Securities or shall fail to furnish the Trustee with the address thereof, such presentations and

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surrenders of Securities of that series may be made and notices and demands may be made or served at the Corporate Trust Office of the Trustee, except that Bearer Securities of that series and the related coupons may be presented and surrendered for payment (including payment of any additional amounts payable on Bearer Securities of that series pursuant to Section 1009) at Bankers Trust Company, Corporate Trust and Agency Group, Dashwood House, 69 Old Broad Street, London EC2P 2EE, England, and the Company hereby appoints the same as its agent to receive such respective presentations, surrender’s, notices and demands.
No payment of principal, premium or interest on Bearer Securities shall be made at any office or agency of the Company in the United States or by check mailed to any address in the United States or by transfer to an account maintained with a bank located in the United States; provided however, that, if the Securities of a series are denominated and payable in Dollars, payment of principal of and any premium and interest on any Bearer Security (including any additional amounts payable on Securities of such series pursuant to Section 1009) shall be made at the office of the Company’s Paying Agent in the Borough of Manhattan, The City of New York, if (but only if) payment in Dollars of the full amount of such principal, premium, interest or additional amounts, as the case may be, at all offices or agencies outside the United States maintained for the purpose by the Company in accordance with this Indenture is illegal or effectively precluded by exchange controls or other similar restrictions.
The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided. however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
SECTION 1003.     Money for Securities Payments to Be Held in Trust .
If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, prior to each due date of the principal of (and premium, if any) or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act.

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The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will:
(1)    hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities of that series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;
(2)    give the Trustee notice of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment of principal (and premium, if any) or interest on the Securities of that series; and
(3)    at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Security of any series and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security or any coupon appertaining thereto shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided , however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in an Authorized Newspaper in each Place of Payment, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 1004.     Corporate Existence .
Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders.

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SECTION 1005.     Maintenance of Properties .
The Company will cause all properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders.
SECTION 1006.     Payment of Taxes and Other Claims .
The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings.
SECTION 1007.     Restrictions on Liens .
(a) The Company will not, nor will it permit any Domestic Subsidiary to, issue, assume or guarantee any Debt secured by any mortgage, security interest, pledge, lien or other encumbrance (hereinafter called “mortgage” or “mortgages”) upon any Operating Property of the Company or of a Domestic Subsidiary or upon any shares of stock or indebtedness of any Domestic Subsidiary (whether such Operating Property, shares of stock or indebtedness is now owned or hereafter acquired) without in any such case effectively securing, concurrently with the issuance, assumption or guaranty of any such Debt, the Securities (together with, if the Company shall so determine, any other indebtedness of or guaranteed by the Company or such Domestic Subsidiary ranking equally with the Securities and then existing or thereafter created) equally and ratably with such Debt; provided, however, that the foregoing restrictions shall not apply to
(i)     mortgages on any property acquired, constructed or improved by the Company or any Domestic Subsidiary after July 1, 1987 which are created or assumed contemporaneously with, or within 180 days after, such acquisition, or completion of such construction or improvement, or within six months thereafter pursuant to a firm commitment for financing arranged with a lender or investor within such 180 day period, to secure or provide for the payment of all or any part of the purchase price of such property or the cost of such construction or improvement incurred after the date of this Indenture or, in addition to mortgages contemplated by clause (ii) below, mortgages on any property existing at the time of acquisition thereof (including acquisition through merger or consolidation), provided that the mortgage shall not apply to any property theretofore owned by the Company or any Domestic Subsidiary other than, in the case of any such construction or improvement, any

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theretofore unimproved real property on which the property so constructed, or the improvement, is located;
(ii)     mortgages on property of a corporation existing at the time such corporation becomes a Domestic Subsidiary;
(iii)     mortgages to secure Debt of a Domestic Subsidiary to the Company or to another Domestic Subsidiary;
(iv) mortgages in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, to secure partial progress, advance or other payments pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of constructing or improving the property subject to such mortgages; or
(v)    mortgages for the sole purpose of extending, renewing or replacing in whole or in part Debt secured by any mortgage referred to in the foregoing clauses (i) to (iv), inclusive, or in this clause (v) or any mortgage existing on the date on which a Security is first authenticated, dated and delivered by the Trustee under this Indenture; provided, however, that the principal amount of Debt secured thereby shall not exceed the principal amount of Debt so secured at the tune of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to all or part of the property which secured the mortgage so extended, renewed or replaced (plus improvements on such property).
(b) The provisions of Subsection (a) of this Section 1007 shall not apply to the issuance, assumption or guarantee by the Company or any Domestic Subsidiary of Debt secured by a mortgage which would otherwise be subject to the foregoing restrictions up to an aggregate amount which, together with all other Debt of the Company and its Domestic Subsidiaries secured by mortgages (other than mortgages permitted by Subsection (a) of this Section 1007) which would otherwise be subject to the foregoing restrictions and the Value of all Sale and Lease-back Transactions in existence at such time (other than any Sale and Lease-back Transaction which if such Sale and Lease-back Transaction had been a mortgage, would have been permitted by clause (i) of Section 1007(a) and other than Sale and Lease-back Transactions as to which application of amounts have been made in accordance with clause (b) of Section 1008) does not at the time exceed 5% of Consolidated Net Tangible Assets.
(c) If at any time the Company or any Domestic Subsidiary shall issue, assume or guarantee any Debt secured by any mortgage and if Subsection (a) of this Section 1007 requires that the Securities be secured equally and ratably with such Debt, the Company will promptly deliver to the Trustee
(i) an Officers’ Certificate stating that the covenant of the Company contained in paragraph (a) of this Section 1007 has been complied with; and

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(ii) an Opinion of Counsel to the effect that such covenant has been complied with, and that any instruments executed by the Company in the performance of such covenant comply with the requirements of such covenant.
In the event that the Company shall hereafter secure the Securities equally and ratably with any other obligation or indebtedness pursuant to the provisions of this Section 1007, the Trustee is hereby authorized to enter into an indenture or agreement supplemental hereto and to take such action, if any, as it may deem advisable to enable it to enforce effectively the rights of the holders of the Securities so secured, equally and ratably with such other obligation or indebtedness.
SECTION 1008.     Restrictions on Sale and Lease-back Transactions .
The Company will not, nor will it permit any Domestic Subsidiary to, enter into any Sale and Lease-back Transaction, unless the net proceeds of such Sale and Lease-back Transaction are at least equal to the fair value (as determined by the Board of Directors or the President or any Vice President of the Company) of the Operating Property to be leased and either (a) the Company or such Domestic Subsidiary would be entitled, pursuant to the provisions of (1) clause (i) of Subsection (a) of Section 1007 or (2) Subsection (b) of Section 1007 hereof, to incur Debt secured by a mortgage on such Operating Property without equally and ratably securing the Securities, or (b) the Company shall, and in any such case the Company covenants that it will, within 120 days of the effective date of any such arrangement (or in the case of (iii) below, within six months thereafter pursuant to a firm purchase commitment entered into within such 120 day period), apply an amount equal to the fair value (as so determined) of such Operating Property (i) to the redemption of Securities of any series which are, by their terms, at the time redeemable or the purchase and retirement of Securities, which Securities shall, in any such case, be delivered to the Trustee for cancellation pursuant to Section 309, (ii) to the payment or other retirement of Funded Debt incurred or assumed by the Company which ranks senior to or pari passu with the Securities or of Funded Debt incurred or assumed by any Domestic Subsidiary (other than, in either case, Funded Debt owned by the Company or any Domestic Subsidiary) or (iii) to the purchase of Operating Property (other than the Operating Property involved in such sale).
SECTION 1009.     Additional Amounts .
If the Securities of a series provide for the payment of additional amounts, as specified as contemplated by Section 301, the Company will pay to the Holder of any Security of such series or any coupon appertaining thereto additional amounts as provided therein. Whenever in this Indenture there is mentioned, in any context, the payment of the principal of or any premium or interest on, or in respect of, any Security of any series or payment of any related coupon or the net proceeds received on the sale or exchange of any Security of any series, such mention shall be deemed to include mention of the payment of additional amounts provided for in this Section to the extent that, in such context, additional amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section and express mention of the payment of additional amounts if applicable) in any provisions hereof shall not be construed as excluding additional amounts in those provisions hereof where such express mention is not made.

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If the Securities of a series provide for the payment of additional amounts, at least 10 days prior to the first Interest Payment Date with respect to that series of Securities (or if the Securities of that series will not bear interest prior to Maturity, the first day on which a payment of principal and any premium is made), and at least 10 days prior to each date of payment of principal and any premium or interest if there has been any change with respect to the matters. set forth in the below-mentioned Officers’ Certificate, the Company will furnish the Trustee and the Company’s principal Paying Agent or Paying Agents, if other than the Trustee, with an Officers’ Certificate instructing the Trustee and such Paying Agent or Paying Agents whether such payment of principal of and any premium or interest on the Securities of that series shall be made to Holders of Securities of that series or any related coupons who are United States Aliens without withholding for or on account of any tax, assessment or other governmental charge described in the Securities of that series. If any such withholding shall be required, then such Officers’ Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders of Securities or coupons and the Company will pay to the Trustee or such Paying Agent the additional amounts required by this Section. The Company covenants to indemnify the Trustee and any Paying Agent for, and to hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by any of them in reliance on any Officers’ Certificate furnished pursuant to this Section.
SECTION 1010.     Purchase of Securities by Company or Subsidiary .
If and so long as the Securities of a series are listed on The Stock Exchange of the United Kingdom and the Republic of Ireland and such stock exchange shall so require, the Company will not, and will not permit any of its Subsidiaries to, purchase any Securities of that series by private treaty at a price (exclusive of expenses and accrued interest) which exceeds 120% of the mean of the nominal quotations of the Securities of that series as shown in The Stock Exchange Daily Official List for the last trading day preceding the date of purchase.
SECTION 1011.     Defeasance of Certain Obligations .
If principal of and any premium and interest on Securities of any series are nominated and payable in Dollars, the Company may omit to comply with any term, provision or condition set forth in Sections 1007 and 1008, with respect to the Securities of such series if:
(1)    With reference to this Section 1011, the Company has deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 609) as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities, (1) money in an amount, or (ii) Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph (1) money in an amount, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge (A) the principal of (and premium, if any) and each instalment of principal of (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or instalment of principal or interest and

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(B) any mandatory sinking fund payments applicable to the Securities on the day on which such payments are due and payable in accordance with the terms of the Indenture and of the Securities;
(2)    Such deposit shall not cause the Trustee with respect to the Securities to have a conflicting interest as defined in Section 608 and for purposes of the Trust Indenture Act with respect to the Securities;
(3)    Such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound;
(4)    No Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit;
(5)    The Company, has delivered to the Trustee an Opinion of Counsel to the effect that Holders of the Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit and defeasance had not occurred; and
(6)    The Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the defeasance contemplated by this Section have been complied with.
SECTION 1012.     Statement by Officers as to Default .
The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers’ Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of Sections 1004 to 1010, inclusive, and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.
SECTION 1013.     Waiver of Certain Covenants .
The Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 1004 to 1008, inclusive, with respect to the Securities of any series if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect.

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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101.     Applicability of Article .
Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article.
SECTION 1102.     Election to Redeem; Notice to Trustee .
The election of the Company to redeem any Securities shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company of less than all the Securities of any series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities of such series to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers’ Certificate evidencing compliance with such restriction.
SECTION 1103.     Selection by Trustee of Securities to Be Redeemed .
If less than all the Securities of any series are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series.
The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed.
SECTION 1104.     Notice of Redemption .
Notice of redemption shall be given in the manner provided in Section 106 to the Holders of Securities to be redeemed not less than 30 nor more than 60 days prior to the Redemption Date.
All notices of redemption shall state:
(1)    the Redemption Date,

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(2)    the Redemption Price,
(3)    if less than all the Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed,
(4)    that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date,
(5)    the place or places where such Securities, together in the case of Bearer Securities with all coupons appertaining thereto, if any, maturing after the Redemption Date, are to be surrendered for payment of the Redemption Price, and
(6)    that the redemption is for a sinking fund, if such is the case.
A notice of redemption published as contemplated by Section 106, need not identify particular Registered Securities to be redeemed.
Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company’s request, by the Trustee in the name and at the expense of the Company.
SECTION 1105.     Deposit of Redemption Price .
Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date.
SECTION 1106.     Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest and the coupon for such interest appertaining to any Bearer Securities so to be redeemed, except to the extent provided below, shall be void. Upon surrender of any such Security for redemption in accordance with said notice, together with all coupons, if any, appertaining thereto maturing after the Redemption Date, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that instalments of interest on Bearer Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of coupons for such interest, and provided, further, that, unless otherwise specified as contemplated by Section

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301, instalments of interest on Registered Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307.
If any Bearer Security surrendered for redemption shall not be accompanied by all appurtenant coupons maturing after the Redemption Date, such Security may be paid after deducting from the Redemption Price an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction shall have been made from the Redemption Price, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented by coupons shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of those coupons.
If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security.
SECTION 1107.     Securities Redeemed in Part .
Any Registered Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Registered Security or Securities of the same series, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201.     Applicability of Article .
The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a “mandatory sinking fund payment”, and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein

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referred to as an “optional sinking fund payment”. If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series.
SECTION 1202.     Satisfaction of Sinking Fund Payments with Securities .
The Company (1) may deliver Outstanding Securities of a series (other than any previously called for redemption), together in the case of any Bearer Securities of such series with all unmatured coupons appertaining thereto, and (2) may apply as a credit Securities of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly.
SECTION 1203.     Redemption of Securities for Sinking Fund .
Not less than 45 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officers’ Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 1202 and will also deliver to the Trustee any Securities to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1301.     Purposes for Which Meetings May Be Called .
If Securities of a series are issuable as Bearer Securities, a meeting of Holders of Securities of such series may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Securities of such series.
SECTION 1302.     Call, Notice and Place of Meetings .

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(a)    The Trustee may at any time call a meeting of Holders of Securities of any series for any purpose specified in Section 1301, to be held at such time and at such place in the Borough of Manhattan, The City of New York, or in London as the Trustee shall determine. Notice of every meeting of Holders of Securities of any series, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 106, not less than 21 nor more than 180 days prior to the date fixed for the meeting.
(b)    In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in principal amount of the Outstanding Securities of any series shall have requested the Trustee to call a meeting of the Holders of Securities of such series for any purpose specified in Section 1301, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first publication of the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities of such series in the amount above specified, as the case may be, may determine the time and the place in the Borough of Manhattan, The City of New York, or in London for such meeting and may call such meeting for such purposes by giving notice thereof as provided in Subsection (a) of this Section.
SECTION 1303.     Persons Entitled to Vote at Meetings .
To be entitled to vote at any meeting of Holders of Securities of any series, a Person shall be (1) a Holder of one or more Outstanding Securities of such series, or (2) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities of such series by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders of Securities of any series shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.
SECTION 1304.     Quorum ; Action.
The Persons: entitled to vote a majority in principal amount of the Outstanding Securities of a series shall constitute a quorum for a meeting of Holders of Securities of such series; provided, however, that if any action is to be taken at such meeting with respect to a consent or waiver which this Indenture expressly provides may be given by the Holders of not less than 66⅔% in principal amount of the Outstanding Securities of a series, the Persons entitled to vote 66⅔% in principal amount of the Outstanding Securities of such series shall constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities of such series, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 1302(a), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state

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expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series which shall constitute a quorum.
Except as limited by the proviso to Section 902, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of a majority in principal amount of the Outstanding Securities of that series; provided, however, that, except as limited by the proviso to Section 902, any resolution with respect to any consent or waiver which this Indenture expressly provides may be given by the Holders of not less than 66⅔% in principal amount of the Outstanding Securities of a series may be adopted at a meeting or an adjourned meeting duly convened and at which a quorum is present as aforesaid only by the affirmative vote of the Holders of 66⅔% in principal amount of the Outstanding Securities of that series; and provided, further, that, except as limited by the proviso to Section 902, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of a series may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Securities of that series.
Any resolution passed or decision taken at any meeting of Holders of Securities of any series duly held in accordance with this Section shall be binding on all the Holders of Securities of such series and the related coupons, whether or not present or represented at the meeting.
SECTION 1305.     Determination of Voting Rights; Conduct and Adjournment of Meetings .
(a) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities of a series in regard to proof of the holding of Securities of such series and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 104 and the appointment of any proxy shall be proved in the manner specified in Section 104 or by having the signature of the person executing the proxy witnessed or guaranteed by any trust company, bank or banker authorized by Section 104 to certify to the holding of Bearer Securities. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 104 or other proof.
(b) The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders of Securities as provided in Section 1302(b), in which case the Company or the Holders of Securities of the series calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting.

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(c) At any meeting each Holder of a Security of such series or proxy shall be entitled to one vote for each $1,000 principal amount of the Outstanding Securities of such series held or represented by him; provided , however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called pursuant to Section 1302 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting; and the meeting may be held as so adjourned without further notice.
SECTION 1306.     Counting Votes and Recording Action of Meetings .
The vote upon any resolution submitted to any meeting of Holders of Securities of any series shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities of such series or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities of such series held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Securities of any series shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 1302 and, if applicable, Section 1304. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company, and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.
This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.
SUPER VALU STORES, INC.


By     
Senior Vice President-Finance


Attest:

    
Secretary

BANKERS TRUST COMPANY


By     
Assistant Vice President

Attest:

    
Assistant Secretary

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STATE OF MINNESOTA    )
) SS.:
COUNTY OF HENNEPIN    )
On the 7th day of August, 1987, before me personally came John B. Ferris, to me known, who, being by me duly sworn, did depose and say that he is Senior Vice President—Finance of Super Valu Stores, Inc., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.
    


STATE OF NEW YORK    )
) SS.:
COUNTY OF NEW YORK    )
On the 10th day of August, 1987, before me personally came Marie A. Colas, to me known, who, being by me duly sworn, did depose and say that she is Assistant Vice President of Bankers Trust Company, one of the corporations described in and which executed the foregoing instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that she signed her name thereto by like authority.
    



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EXHIBIT A
[FORM OF REGISTERED SECURITY WHICH IS NOT AN
ORIGINAL ISSUE DISCOUNT SECURITY]
[Form of Face]
_______________________________
No. [R-] _________________    [U.S.$]_____________
SUPER VALU STORES, INC., a corporation duly organized and existing under the laws of Delaware [herein called the “Company”, which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to _______________________________________, or registered assigns, the principal sum of __________________________________ [United States Dollars] on ________________, and to pay interest thereon from _____________, 19__, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, [semi-annually in arrears on and _________ in each year] [annually in arrears on _______________ in each year], commencing on _________, 19__, at the rate of _____% per annum, until the principal hereof is paid or made available for payment [If applicable, insert—, and (to the extent that the payment of such interest shall be legally enforceable) at the rate of _____% per annum on any overdue principal [and premium] and on any overdue instalment of interest]. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the _______________ [or _____________] day (whether or not a Business Day) [, as the case may be,] next preceding such Interest Payment Date. Except as otherwise provided in the Indenture, any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of [(and premium, if any)] and interest [and additional amounts, if any,] on this Security will be made at [the office or agency of the Company maintained for that purpose in _________________, in such coin or currency of [the United States of America] as at the time of payment is legal tender for payment of public and private debts] [the option of the Holder (a) at [the Corporate Trust Office of the Trustee or] such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, in such coin or currency of [the United States of America] as at the time of payment shall be legal tender for the payment of public and private debts or (b) subject to any laws or regulations applicable thereto and to the right of the Company (limited as provided in the Indenture) to rescind the designation of any such Paying Agent, at the [main] offices of

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_________ in ___________, ___________ in __________, ___________ in ____________ in ___________ and ____________ in ____________, or at such other offices or agencies as the Company may designate, by [United States dollar] check drawn on, or transfer to a [United States dollar] account maintained by the payee with, a bank in The City of New York] [If applicable, insert—; provided, however, that at the option of the Company, payment of interest may be made by [United States dollar] check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register.].
[If Securities of the series are to be offered to United States Aliens, insert applicable provisions, if any, for the payment of additional amounts.]
Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof, directly or through an Authenticating Agent, by manual signature of an authorized signatory, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.
SUPER VALU STORES, INC.

By     

Attest:
    
Dated     


TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY
as Trustee
By         
Authorized Signature

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[Form of Reverse]
This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of July 1, 1987 (herein called the “Indenture”), between the Company and Bankers Trust Company, as Trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities [If the Securities of the series are issuable as Bearer Securities, insert— and any coupons appertaining thereto] and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof[, limited in aggregate principal amount to [U.S.$]_______________]. [If the Securities of the series are issuable as Bearer Securities, insert— The Securities of this series are issuable as Bearer Securities[, with interest coupons attached,] in the denomination of [U.S.$]_____________ and as Registered Securities, without coupons, in denominations of [U.S.$] ______________ and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Bearer Securities and Registered Securities of this series are exchangeable for a like aggregate principal amount of Registered Securities of this series and of like tenor of any authorized denominations, as requested by the Holder surrendering the same, upon surrender of the Security or Securities to be exchanged at any office or agency described below where Registered Securities of this series may be presented for registration of transfer. Bearer Securities may not be issued in exchange for Registered Securities.] [If the Securities of the series are not issuable as Bearer Securities, insert— The Securities of this series are issuable only in registered form, without coupons, in denominations of [$]________________ and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.]
[If applicable, insert— The Securities of this series are subject to redemption [(1)] [If applicable, insert— on _____________ in any year commencing with the year ____ and ending with the year ____ through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount,] [and (2)] [If applicable, insert— at any time [on or after ______________, 19 __], as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed [on or before ____________, ___%, and if redeemed] during the 12-month period beginning on __________ of the years indicated,
Year
Redemption
Price
Year
Redemption
Price

and thereafter at a Redemption Price equal to ___% of the principal amount.] [If applicable, insert— [and (______)] under the circumstances described in the next [two] succeeding paragraph[s] at a Redemption Price equal to 100% of the principal amount,] together in the case of any such redemption [If applicable, insert—(whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date: provided, however, that instalments of interest on

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this Security whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holder of this Security, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.]
[If applicable, insert —The Securities of this series are subject to redemption (1) on _______ in any year commencing with the year _____ and ending with the year _____ through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [on or after ___________, 19__], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during the 12-month period beginning on ______________ of the years indicated,
Year
Redemption Price  
for Redemption  
Through Operation  
 of the  
Sinking Fund
Redemption Price for  
Redemption Otherwise  
Than Through Operation  
of the Sinking Fund

and thereafter at a Redemption Price equal to _____% of the principal amount[.] [If applicable, insert—, and (3) under the circumstances described in the next [two] succeeding paragraph[s] at a Redemption Price equal to 100% of the principal amount,] together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date ; provided, however, that instalments of interest on this Security whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holder of this Security, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.] [Notwithstanding the foregoing, the Company may not, prior to _____________, redeem any Securities of this series as contemplated by Clause [(2)] above as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than ___% per annum.]
[If Securities of the series are to be offered to United States Aliens, insert applicable provisions, if any, for the redemption of the Securities in the event the Company will become obligated to pay additional amounts.]
[The sinking fund for this series provides for the redemption on in each year, beginning with the year _____ and ending with the year ____ of [not less than] [U.S.$]____________ [(“mandatory sinking fund”) and not more than [U.S.$]____________] aggregate principal amount of Securities of this series. [Securities of this series acquired or redeemed by the Company otherwise than through [mandatory] sinking fund payments may be credited against subsequent [mandatory] sinking fund payments otherwise required to be made—in the inverse order in which they become due.]

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Notice of redemption will be given by mail to Holders of [If Securities of the series are issuable as Bearer Securities, insert— Registered] Securities, not less than 30 nor more than 60 days prior to the date fixed for redemption, all as provided in the Indenture.
In the event of redemption of this Security in part only, a new [If Securities of the series are issuable as Bearer Securities, insert —Registered] Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected [If Securities of the series are issuable as Bearer Securities, insert— and any related coupons] under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series [If Securities of the series are issuable as Bearer Securities, insert— and any related coupons], to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
As set forth in, and subject to, the provisions of the Indenture, no Holder of any Security of this series will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to this series, the Holders of not less than 25% in principal amount of the Outstanding Securities of this series shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee, and the Trustee shall not have received from the Holders of a majority in principal amount of the Outstanding Securities of this series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days; provided, however, that such limitations do not apply to a suit instituted by the Holder hereof for the enforcement of payment of the principal of [(and premium, if any)] or interest on this Security on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of [(and premium, if any)], and interest [(including additional amounts, as described on the face hereof)] on this Security at the times, place[s] and rate, and in the coin or currency, herein prescribed.

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As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in [any place where the principal of [(and premium, if any) and interest on this Security are payable] [the Borough of Manhattan, The City of New York, or, subject to any laws or regulations applicable thereto and to the right of the Company (limited as provided in the Indenture) to rescind the designation of any such transfer agent, at the [main] offices of ______________ in ____________ and _________________ in _______________ or at such other offices or agencies as the Company may designate], duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, and thereupon one or more new [If the Securities of the series are issuable as Bearer Securities, insert— Registered] Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security is overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture[,] [and] the Securities [If the Securities of the series are issuable as Bearer Securities, insert— and any coupons appertaining thereto] shall be governed by and construed in accordance with the laws of the State of New York.
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.


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EXHIBIT B
[FORM OF REGISTERED SECURITY WHICH IS AN
ORIGINAL ISSUE DISCOUNT SECURITY]
[Form of Face]
FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS SECURITY IS _____% OF ITS PRINCIPAL AMOUNT, THE ISSUE DATE IS ___________, 19___ [,--AND] THE YIELD TO MATURITY IS _____% [, THE METHOD USED TO DETERMINE THE YIELD IS ___________________ AND THE AMOUNT OF ORIGINAL ISSUE DISCOUNT APPLICABLE TO THE SHORT ACCRUAL PERIOD OF __________, 19___ TO ____________, 19___ IS _____% OF THE PRINCIPAL AMOUNT OF THIS SECURITY].
______________________________
No. [R-] ________     [U.S.$]________
SUPER VALU STORES, INC., a corporation duly organized and existing under the laws of Delaware (herein called the “Company”, which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to _________________, or registered assigns, the principal sum of __________________________ _________________________________ [United States Dollars] on _____________________. [If the Security is interest-bearing, insert—, and to pay interest thereon from _________, 19__ or from the most recent Interest Payment Date to which interest has been paid or duly provided for, [semi-annually in arrears on ______________ and _____________ in each year] [annually in arrears on ____________ in each year], commencing on ____________, 19___ at the rate of ___% per annum, until the principal hereof is paid or made available for payment [If applicable, insert—, and (to the extent that the payment of such interest shall be legally enforceable) at the rate of ___% per annum on any overdue principal [and premium] and on any overdue instalment of interest]. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the _______ [or _________] day (whether or not a Business Day)[, as the case may be,] next preceding such Interest Payment Date. Except as otherwise provided in the Indenture, any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture). [If the Security is not to bear interest prior to Maturity, insert —The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated

B- 1


Maturity, and in such case the overdue principal of this Security shall bear interest at the rate of _____% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such default in payment to the date payment of such principal has been made or duly provided for, Interest on any overdue principal shall be payable on demand. Any such interest on any overdue principal that is not so paid on demand shall bear interest at the rate of ____% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.] Payment of the principal of [(and premium, if any)] and [If applicable, insert— any such] interest [and additional amounts, if any,] on this Security will be made at [the office or agency of the Company maintained for that purpose in __________________, in such coin or currency of [the United States of America] as at the time of payment is legal tender for payment of public and private debts] [the option of the Holder (a) at [the Corporate Trust Office of the Trustee or] such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, in such coin or currency of [the United States of America] as at the time of payment shall be legal tender for the payment of public and private debts or (b) subject to any laws or regulations applicable thereto and to the right of the Company (limited as provided in the Indenture to rescind the designation of any such Paying Agent, at the [main] offices of ______________ in ____________, _____________ in ____________, ____________ in _____________ in ______________ and ______________ in _____________ or at such other offices or agencies as the Company may designate, by [United States dollar] check drawn on, or transfer to a [United States dollar] account maintained by the payee with, a bank in The City of New York] [If applicable, insert—; provided, however, that at the option of the Company payment of interest may be made by [United States dollar] check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register].
[If Securities of the series are to be offered to United States Aliens, insert applicable provisions, if any, for the payment of additional amounts.]
Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof, directly or through an Authenticating Agent, by manual signature of an authorized signatory, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

B- 2


IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.
SUPER VALU STORES, INC.

By     


Attest:
    
Dated     


TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY
as Trustee
By         
Authorized Signature

B- 3



[Form of Reverse]
This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of July 1, 1987 (herein called the “Indenture”), between the Company and Bankers Trust Company, as Trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities [If the Securities of the series are issuable as Bearer Securities, insert—and any coupons appertaining thereto] and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof [, limited in aggregate principal amount to [U.S.$] ______________]. [If Securities of the series are issuable as Bearer Securities, insert— The Securities of this series are issuable as Bearer Securities[,with interest coupons attached,] in the denomination of [U.S.$]______________, and as Registered Securities, without coupons, in denominations of [U.S.$) _____________ and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Bearer Securities and Registered Securities of this series are exchangeable for a like aggregate principal amount of Registered Securities of this series and of like tenor of any authorized denominations, as requested by the Holder surrendering the same, upon surrender of the Security or Securities to be exchanged at any office or agency described below where Registered Securities of this series may be presented for registration of transfer. Bearer Securities may not be issued in exchange for Registered Securities.] [If the Securities of the series are not issuable as Bearer Securities, insert— The Securities of this series are issuable only in registered form, without coupons, in denominations of $_____________ and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.]
[If applicable, insert —The Securities of this series are subject to redemption [(l)] [If applicable, insert— on _____________ in any year commencing with the year ____and ending with the year ____ through operation of the sinking fund for this series at a Redemption Price equal to [Insert formula for determining the amount ]] [and (2)] [If applicable, insert— at any time [on or after _____________ 19__], as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed [on or before ______________, ____%, and if redeemed] during the 12-month period beginning ____________ of the years indicated.
Year
Redemption
Price
Year
Redemption
Price

and thereafter at a Redemption Price equal to ____% of the principal amount,] [If - applicable, insert —[and (_____)] under the circumstances described in the next [two] succeeding paragraph[s] at a Redemption Price equal to [Insert formula for determining the amount] [If the Security is interest-

B- 4


bearing, insert —, together in the case of any such redemption [If applicable, insert —(whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date; provided, however, that instalments of interest on this Security whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holder of this Security, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture].
[If applicable, insert —The Securities of this series are subject to redemption (1) on _______ in any year commencing with the year ______ and ending with the year _____ through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [on or after ___________, 19__], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during the 12-month period beginning on ______________ of the years indicated,
Year
Redemption Price  
for Redemption  
Through Operation  
 of the  
Sinking Fund
Redemption Price for  
Redemption Otherwise  
Than Through Operation  
of the Sinking Fund


and thereafter at a Redemption Price equal to ___% of the principal amount[.] [ If applicable, insert—, and (3) under the circumstances described in the next [two] succeeding paragraph[s] at a Redemption Price equal to [ insert formula for determining the amount ]] [If the Security is interest-bearing, insert— together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date; provided, however, that instalments of interest on this Security whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holder of this Security, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture].] [Notwithstanding the foregoing, the Company may not, prior to _____________, redeem any Securities of this series as contemplated by Clause [(2)] above as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than ____% per annum.]
[If Securities of the series are to be offered to United States Aliens, insert applicable provisions, if any, for the redemption of the Securities in the event the Company will become obligated to pay additional amounts.]
[The sinking fund for this series provides for the redemption on _____________ in each year, beginning with the year ______ and ending with the year ______ of [not less than] [U.S.$] __________ [(“mandatory sinking fund”) and not more than [U.S.$] __________] aggregate principal amount of Securities of this series. [Securities of this series acquired or redeemed by the

B- 5


Company otherwise than through [mandatory] sinking fund payments may be credited against subsequent [mandatory] sinking fund payments otherwise required to be made in the inverse order in which they become due.]
Notice of redemption will be given by mail to Holders of [if the Securities of the series are issuable as Bearer Securities, insert— Registered] Securities, not less than 30 nor more than 60 days prior to the date fixed for redemption, all as provided in the Indenture.
In the event of redemption of this Security in part only, a new [ If the Securities of the series are issuable as Bearer Securities, insert— Registered] Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.
If an Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. Such amount shall be equal to —insert formula for determining the amount. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company’s obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected [ If the Securities of the series are issuable as Bearer Securities and are interest-bearing, insert— and any related coupons] under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series [If the Securities of the series are issuable as Bearer Securities and are interest-bearing, insert— and any related coupons], to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
As set forth in, and subject to, the provisions of the Indenture, no Holder of any Security of this series will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to this series, the Holders of not less than 25% in principal amount of the Outstanding Securities of this series shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee, and the Trustee shall not have received from the Holders of a majority in principal amount of the Outstanding Securities of this series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days; provided, however, that such limitations do not apply to a suit instituted

B- 6


by the Holder hereof for the enforcement of payment of the principal of [(and premium, if any)] or [any] interest on this Security on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of [(and premium, if any)] and [any] interest [(including additional amounts, as described on the face hereof)] on this Security at the times, place[s] and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in [any place where the principal of [(and premium, if any)] and [any] interest on this Security are payable] [the Borough of Manhattan, The City of New York, or, subject to any laws or regulations applicable thereto and to the right of the Company (limited as provided in the Indenture) to rescind the designation of any such transfer agent, at the [main] offices of ___________________ in _______________ and _______________ in __________________ or at such other offices or agencies as the Company may designate], duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, and thereupon one or more new [If the Securities of the series are issuable as Bearer Securities, insert— Registered] Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security is overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture[,] [and] the Securities [If the Securities of the series are issuable as Bearer Securities, insert —and any coupons appertaining thereto] shall be governed by and construed in accordance with the laws of the State of New York.
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.


B- 7


EXHIBIT C
[FORM OF BEARER SECURITY WHICH IS NOT AN
ORIGINAL ISSUE DISCOUNT SECURITY AND FORM OF RELATED COUPON]
[Form of Face]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1257(a) OF THE INTERNAL REVENUE CODE.
______________________________
No. B- ________     [U.S.$]________
SUPER VALU STORES, INC., a corporation duly organized and existing under the laws of Delaware (herein called the “Company”, which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to bearer upon presentation and surrender of this Security the principal sum of ___________ [United States Dollars] on __________ and to pay interest thereon, from the date hereof, [semi‑annually in arrears on ________ and ________ in each year] [annually in arrears on _____________ in each year], commencing on __________, 19__ at the rate of ____% per annum, until the principal hereof is paid or made available for payment [If applicable, insert— , and (to the extent that the payment of such interest shall be legally enforceable) at the rate of ___% per annum on any overdue principal and premium and on any overdue instalment of interest]. Such payments [(including premium, if any)] shall be made, subject to any laws or regulations applicable thereto and to the right of the Company (limited as provided in the Indenture) to rescind the designation of any such Paying Agent, at the [main] offices of _______________ in _______________, _______________ in ______________, _______________ in ____________, ___________ in _____________ and ____________ in ____________, or at such other offices or agencies outside the United States (as defined below) as the Company may designate, at the option of the Holder, by [United States dollar] check drawn on a bank in [The City of New York] or by transfer of [United States dollars] to an account maintained by the payee with a bank located outside the United States. Interest on this Security due on or before Maturity shall be payable only upon presentation and surrender at such an office or agency of the interest coupons hereto attached as they severally mature. No payment of principal [, premium] or interest on this Security shall be made at any office or agency of the Company in the United States or by check mailed to any address in the United States or by transfer to an account maintained with a bank located in the United States (If Security is denominated and payable in United States dollars, insert—; provided, however, that payment of principal of [(and premium, if any)] and interest on this Security [including any additional amounts which may be payable as in provided below] shall be made at the office of the Company’s Paying Agent in the Borough of Manhattan, The City of New York if (but only if payment in [United States dollars] of the full amount of such principal, [premium,] interest or additional amounts, as the case may be, at all offices or agencies outside the United States maintained for the purpose by the Company in

C- 1


accordance with the Indenture is illegal or effectively precluded by exchange controls or other similar restrictions].
[Insert applicable provisions, if any, for the payment of additional amounts.]
Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof, directly or through an Authenticating Agent, by manual signature of an authorized signatory, neither this Security, nor any coupon appertaining hereto, shall be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal and coupons bearing the facsimile signature of its to be annexed hereto.
SUPER VALU STORES, INC.

By     

Attest:
    
Dated     

TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY
as Trustee
By         
Authorized Signature
[Form of Reverse]
This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of July 1, 1987 (herein called the “Indenture”), between the Company and Bankers Trust Company, as Trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and any coupons appertaining thereto and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of

C- 2


the series designated on the face hereof[, limited in aggregate principal amount to [U.S.$]____________]. The Securities of this series are issuable as Bearer Securities, with interest coupons attached, in the denomination of [U.S.$] __________ [, and as Registered Securities, without coupons, in denominations of [U.S.$] ___________ and any integral multiple thereof]. [As provided in the Indenture and subject to certain limitations therein set forth, Bearer Securities and Registered Securities of this series are exchangeable for a like aggregate principal amount of Registered Securities of this series and of like tenor of any authorized denominations, as requested by the Holder surrendering the same, upon surrender of the Security or Securities to be exchanged, with all unmatured coupons and all matured coupons in default thereto appertaining, at any office or agency described below where Registered Securities of this series may be presented for registration of transfer; provided, however, that Bearer Securities surrendered in exchange for Registered Securities between a Record Date and the relevant Interest Payment Date shall be surrendered without the coupon relating to such Interest Payment Date. Bearer Securities may not be issued in exchange for Registered Securities.]
[If applicable, insert —The Securities of this series are subject to redemption [(1)] [ If applicable insert-- on ____________ in any year commencing with the year _____ and ending with the year _____ through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount [.] [, and (2)] [ if applicable, insert— at any time [on or after _________, 19___], as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed [on or before ____________, ____% and if redeemed] during the 12-month period beginning ____________ of the years indicated,
Year
Redemption
Price
Year
Redemption
Price


and thereafter at a Redemption Price equal to ____% of the principal amount,] [and (____)] under the circumstances described in the next [two] succeeding paragraph[s] at a Redemption Price equal to 100% of the principal amount, together in the case of any such redemption [ If applicable, insert— whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date; provided, however, that interest instalments on this Security whose Stated Maturity is on or prior to such Redemption Date will be payable only upon presentation and surrender of coupons for such interest (at an office or agency located outside the United States, except as herein provided otherwise).]
[If applicable, insert— The Securities of this series are subject to redemption (1) on _________ in any year commencing with the year _____ and ending with the year _____ through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [on or after ___________, 19___], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the - sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during the 12-month period beginning on ________ of the years indicated,

C- 3


Year
Redemption Price  
for Redemption  
Through Operation  
 of the  
Sinking Fund
Redemption Price for  
Redemption Otherwise  
Than Through Operation  
of the Sinking Fund


and thereafter at a Redemption Price equal to ______% of the principal amount, and (3) under the circumstances described in the next [two] succeeding paragraph[s] at a Redemption Price equal to 100% of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date; provided, however, that interest instalments on this Security whose Stated Maturity is on or prior to such Redemption Date will be payable only upon presentation and surrender of coupons for such interest (at an office or agency located outside the United States, except as herein provided otherwise on or after the Stated Maturity of such interest instalments.)] [Notwithstanding the foregoing, the Company may not, prior to ________ redeem any Securities of this series as contemplated by Clause [(2)] above as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than ______% per annum.]
[Insert applicable provisions, if any, for the redemption of the Securities in the event the Company will become obligated to pay additional amounts.]
[The sinking fund for this series provides for the redemption on ___________ in each year, beginning with the year ______ and ending with the year _______ of [not less than] [U.S.$] ____________ [(“mandatory sinking fund”) and not more than [U.S.$] ________] aggregate principal amount of Securities of this series. [Securities of this series acquired or redeemed by the Company otherwise than through [mandatory] sinking fund payments may be credited against subsequent [mandatory] sinking fund payments otherwise required to be made—in the inverse order in which they become due].]
Notice of redemption will be given by publication in an Authorized Newspaper in The City of New York and, if the Securities of this series are then listed on [The Stock Exchange of the United Kingdom and the Republic of Ireland] [the Luxembourg Stock Exchange] [or] any [other] stock exchange located outside the United States and such stock exchange shall so require, in [London] [Luxembourg] [or] in any [other] required city outside the United States or, if not practicable, elsewhere in Europe, [and by mail to Holders of Registered Securities,] not less than 30 nor more than 60 days prior to the date fixed for redemption, all as provided in the Indenture.
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of

C- 4


the Securities of each series and any related coupons to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series and any related coupons, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and any coupon appertaining hereto and of any Security issued in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
As set forth in, and subject to, the provisions of the Indenture, no Holder of any Security of this series will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to this series, the Holders of not less than 25% in principal amount of the Outstanding Securities of this series shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee, and the Trustee shall not have received from the Holders of a majority in principal amount of the Outstanding Securities of this series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days; provided, however, that such limitations do not apply to a suit instituted by the Holder hereof or any related coupon for the enforcement of payment of the principal of [(and premium, if any)] or any interest on this Security or payment of such coupon on or after the respective due dates expressed herein or in such coupon.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of [(and premium, if any)] and any interest (including additional amounts, as described on the face hereof) on this Security at the times, places and rate, and in the coin or currency, herein prescribed.
Title to [Bearer] Securities and coupons shall pass by delivery. [If Securities of the series are issuable as Registered Securities, insert— As provided in the Indenture and subject to certain limitations therein set forth, the transfer of Registered Securities is registrable in the Security Register, upon surrender of a Registered Security for registration of transfer at the [Corporate Trust Office of the Trustee or such other office or agency of the Company as may be designated by it in the Borough of Manhattan, The City of New York, or, subject to any laws or regulations applicable thereto and to the right of the Company (limited as provided in the Indenture) to rescind the designation of any such transfer agent, at the [main] offices of _____________ in ____________ and ____________ in ____________ or at such other offices or agencies as the Company may designate, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing, and thereupon one or more new Registered Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.]

C- 5


[If Securities of the series are issuable as Registered Securities, insert— No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.]
The Company, the Trustee and any agent of the Company or the Trustee may treat the bearer of a Bearer Security of any series and any coupon appertaining thereto. [If Securities of the series are issuable as Registered Securities, insert— and prior to due presentment of a Registered Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered,] as the owner thereof for all purposes, whether or not such Security or such coupon is overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture, the Securities and any coupons appertaining thereto shall be governed by and construed in accordance with the laws of the State of New York.
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

C- 6


[Form of Face of Coupon]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.
[R-]* _______
[U.S.$] ______
Due_________
______________________________
Unless the Security to which this coupon appertains shall have been called for previous redemption and payment thereof duly provided for on the date set forth hereon, ________________ (herein called the “Company”) will pay to bearer, upon surrender hereof, the amount shown hereon [(together with any additional amounts in respect thereof which the Company may be required to pay according to the terms of said Security and the Indenture referred to therein)] at the Paying Agents set out on the reverse hereof or at such other offices or agencies (which, except as otherwise provided in the Security to which this coupon appertains, shall be located outside the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction (the “United States”)) as the Company may designate from time to time, at the option of the Holder, by [United States dollar] check drawn on a bank in [The City of New York] or by transfer of [United States dollars] to an account maintained by the payee with a bank located outside the United States, being [one year’s] interest then payable on said Security.
    
By     




* For coupons maturing on or after the date, if any, on which a partial redemption of the Securities of the series is possible, insert the letter “R” in front of the coupon number. The coupon number, United States dollar amount and due date should appear in the right-hand section of the face of the coupon.


C- 7


[Reverse of Coupon]

_______________________________*
_______________________________
_______________________________
_______________________________
_______________________________


and any other Paying Agents or offices as may from time to time be appointed by the Company and notice of which has been given to the Holders.













* Insert names and addresses of initial Paying Agents located outside the United States.


C- 1


EXHIBIT D
[FORM OF BEARER SECURITY WHICH IS AN
ORIGINAL ISSUE DISCOUNT SECURITY AND FORM OF RELATED COUPON]
[Form of Face]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS SECURITY IS ____% OF ITS PRINCIPAL AMOUNT, THE ISSUE DATE IS ___________, 19___ [,—AND] THE YIELD TO MATURITY IS ____% [THE METHOD USED TO DETERMINE THE YIELD IS ______________ AND THE AMOUNT USED TO DETERMINE THE YIELD IS ____________ AND THE AMOUNT OF ORIGINAL ISSUE DISCOUNT APPLICABLE TO THE SHORT ACCRUAL PERIOD OF __________, 19___ TO __________, 19___ IS _____% OF THE PRINCIPAL AMOUNT OF THIS SECURITY].
_____________________________
No. B-________     [U.S.$] ________
SUPER VALU STORES, INC., a corporation duly organized and existing under the laws of Delaware (herein called the “Company”, which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to bearer upon presentation and surrender of this Security the principal sum of ________ [United States Dollars] on_____________________ [If the Security is interest-bearing prior to Maturity , insert—, and to pay interest thereon, from the date hereof, [semi-annually in arrears on ____________ and ________________ in each year] [annually in arrears on ____________ in each year], commencing on _________, 19___, at the rate of _____% per annum, until the principal hereof is paid or made available for payment [If applicable, insert—, and (to the extent that the payment of such interest shall be legally enforceable) at the rate of _____% per annum on any overdue principal and premium and on any overdue instalment of interest]. [If the Security is not to bear interest prior to Maturity , insert— The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity, and in such case the overdue principal of this Security shall bear interest at the rate of_____% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such default in payment to the date payment of such principal has been made or duly provided for. Interest on any overdue principal shall be payable on demand. Any such interest on any overdue principal that is not so paid on demand shall bear interest at the rate of ____% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.] Such payments [(including premium, if any)] shall be made, subject to any laws or regulations applicable thereto and to the right of the Company (limited as provided in the Indenture) to rescind the designation

D- 1


of any such Paying Agent, at the [main] offices of _____________ in ______________, _____________ in ______________, _____________ in _____________, ____________ in _______________ and ____________ in ____________, or at such other offices or agencies outside the United States (as defined below) as the Company may designate, at the option of the Holder, by [United States dollar] check drawn on a bank in [The City of New York] or by transfer of [United States dollars] to an account maintained by the payee with a bank located outside the United States. [If the Security is interest-bearing, insert —Interest on this Security due on or before Maturity shall be payable only upon presentation and surrender at such an office or agency of the interest coupons hereto attached as they severally mature.] No payment of principal [, or] [,] [premium] [or interest] on this Security shall be made at any office or agency of the Company in the United States or by check mailed to any address in the United States or by transfer to an account maintained with a bank located in the United States, provided, however, that payment of principal of [(and premium, if any)] and [any] interest on this Security [(including any additional amounts which may be payable as provided below)] shall be made at the office of the Company’s Paying Agent in the Borough of Manhattan, The City of New York, if (but only if) payment in [United States dollars] of the full amount of such principal [, premium] [, interest] or additional amounts, as the case may be, at all offices or agencies outside the United States maintained for the purpose by the Company in accordance with the Indenture is illegal or effectively precluded by exchange controls or other similar restrictions.
[Insert applicable provisions, if any, for the payment of additional amounts.]
Reference is hereby made to the further provisions of this Security set on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof, directly or through an Authenticating Agent, by manual signature of an authorized signatory, neither this Security, nor any coupon appertaining hereto, shall be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal and coupons bearing the facsimile signature of its _____________ to be annexed hereto.
SUPER VALU STORES, INC.


By     

Attest:
    
Dated     


D- 2


TRUSTEE’S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY
as Trustee
By         
Authorized Signature
[Form of Reverse]
This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of July 1, 1987 (herein called the “Indenture”), between the Company and Bankers Trust Company, as Trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and any coupons appertaining thereto and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof [, limited in aggregate principal amount to [U.S.$] ____________]. The Securities of this series are issuable as Bearer Securities, with interest coupons attached, in the denomination of [U.S.$] __________ [, and as Registered Securities, without coupons, in denominations of [U.S.$] __________ and any integral multiple thereof]. [As provided in the Indenture and subject to certain limitations therein set forth, Bearer Securities and Registered Securities of this series are exchangeable for a like aggregate principal amount of Registered Securities of this series and of like tenor of any authorized denominations, as requested by the Holder surrendering the same, upon surrender of the Security or Securities to be exchanged, with all unmatured coupons and all matured coupons in default thereto appertaining, at any office or agency described below where Registered Securities of this series may be presented for registration of transfer; provided, however, that Bearer Securities surrendered in exchange for Registered Securities between a Record Date and the relevant Interest Payment Date shall be surrendered without the coupon relating to such Interest Payment Date. Bearer Securities may not be issued in exchange for Registered Securities.]
[ If applicable, insert— The Securities of this series are subject to redemption [(1)][ If applicable, insert— (1)] on _________________ in any year commencing with the year ____and ending with the year _____ through operation of the sinking fund for this series at a Redemption Price equal to [Insert formula for determining the amount]. [.] [and (2)] [If applicable, insert— at any time [on or after ___________________, 19__], as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed [on or before ______%, and if redeemed] during the 12-month period beginning _________________ of the years indicated,

D- 3


Year
Redemption
Price
Year
Redemption
Price
 
 
 
 
 
 
 
 

and thereafter at a Redemption Price equal to _______% of the principal amount,] [and (______)] under the circumstances described in the next [two] succeeding paragraph[s] at a Redemption Price equal to [Insert formula for determining the amount] [If the Security is interest-bearing, insert—, together in the case of any such redemption [If applicable, insert— (whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date; provided, however, that interest instalments on this Security whose Stated Maturity is on or prior to such Redemption Date will be payable only upon presentation and surrender of coupons for such interest (at an office or agency located outside the United States, except as herein provided otherwise)].]
[If applicable, insert— The Securities of this series are subject to redemption (1) on ______ in any year commencing with the year _____ and ending with the year ____ through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [on or after __________, 19___], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below. If redeemed during the 12-month period beginning on _____________ of the years indicated,
Year
Redemption Price  
for Redemption  
Through Operation  
 of the  
Sinking Fund
Redemption Price for  
Redemption Otherwise  
Than Through Operation  
of the Sinking Fund
 
 
 
 
 
 


and thereafter at a Redemption Price equal to ____% of the principal amount, and (3) under the circumstances described in the next [two] succeeding paragraph[s] at a Redemption Price equal to [Insert formula for determining the amount] [If the Security is interest-bearing, insert—, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date; provided, however, that interest instalments on this Security whose Stated Maturity is on or prior to such Redemption Date will be payable only upon presentation and surrender of coupons for such interest (at an office or agency located outside the United States, except as herein provided otherwise) on or after the Stated Maturity of such interest instalments].] [Notwithstanding the foregoing, the Company may not, prior to _________ redeem any Securities of this series as contemplated by Clause [(2)] above as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having

D- 4


an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than ___% per annum.]
[Insert applicable provisions, if any, for the redemption of the Securities in the event the Company will become obligated to pay additional amounts.)
[The sinking fund for this series provides for the redemption on ____________ in each year, beginning with the year _______ and ending with the year _______, of [not less than] [U.S.$] ___________ [(“mandatory sinking fund”) and not more than [U.S.$]_______________] aggregate principal amount of Securities of this series. [Securities of this series acquired or redeemed by the Company otherwise than through [mandatory] sinking fund payments may be credited against subsequent [mandatory] sinking fund payments otherwise required to be made in the inverse order in which they become due].]
Notice of redemption will be given by publication in an Authorized Newspaper in The City of New York and, if the Securities of this series are then listed on [The Stock Exchange of the United Kingdom and the Republic of Ireland] [the Luxembourg Stock Exchange] [or] any [other] stock exchange located outside the United States and such stock exchange shall so require, in [London] [Luxembourg] [or] in any [other] required city outside the United States or, if not practicable, elsewhere in Europe [and by mail to Holders of Registered Securities,] not less than 30 nor more than 60 days prior to the date fixed for redemption, all as provided in the Indenture.
If an Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. Such amount shall be equal to —insert formula for determining the amount. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company’s obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series [If the Securities of the series are interest-bearing, insert— and any related coupons] to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series [If the Securities of the series are interest-bearing, insert— and any related coupons], to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and any coupon appertaining hereto and of any Security issued in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

D- 5


As set forth in, and subject to, the provisions of the Indenture, no Holder of any Security of this series will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to this series, the Holders of not less than 25% in principal amount of the Outstanding Securities of this series shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee, and the Trustee shall not have received from the Holders of a majority in principal amount of the Outstanding Securities of this series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days; provided, however, that such limitations do not apply to a suit instituted by the Holder hereof [If the Security is interest-bearing, insert— or any related coupon] for the enforcement of payment of the principal of [(and premium, if any)] or [any] interest on this Security [ If the Security is interest-bearing, insert— or payment of such coupon] on or after the respective due dates expressed herein [If the Security is interest-bearing, insert— or in such coupon].
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of [(and premium, if any)] and [any] interest (including additional amounts, as described on the face hereof) on this Security at the times, places and rate, and in the coin or currency, herein prescribed.
Title to [Bearer] Securities and coupons shall pass by delivery. [If Securities of the series are issuable as Registered Securities, insert —As provided in the Indenture and subject to certain limitations therein set forth, the transfer of Registered Securities is registrable in the Security Register, upon surrender of a Registered Security for registration of transfer at the [Corporate Trust Office of the Trustee or such other office or agency of the Company as may be designated by it in the Borough of Manhattan, The City of New York, or, subject to any laws or regulations applicable thereto and to the right of the Company (limited as provided in the Indenture) to rescind the designation of any such transfer agent, at the [main] offices of ______________ in ____________ and ______________ in _____________ or at such other offices or agencies as the Company may designate, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing, and thereupon one or more new Registered Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.]
[ If Securities of the series are Issuable as Registered Securities, insert— No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.]
The Company, the Trustee and any agent of the Company or the Trustee may treat the bearer of a Bearer Security of any series [If the Securities of the series are interest-bearing, insert —and any coupon appertaining thereto] [If Securities of the series are issuable as Registered Securities, insert—, and prior to due presentment of a Registered Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose

D- 6


name such Security is registered,] as the owner thereof for all purposes, whether or not such Security [If the Securities of the series are interest-bearing, insert— or such coupon] is overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture, the Securities and any coupons appertaining thereto shall be governed by and construed in accordance with the laws of the State of New York.
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
[Form of Face of Coupon]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS. INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE OF 1954, AS AMENDED.
[R--]* _______
[U.S.$] ______
Due_________
Unless the Security to which this coupon appertains shall have been called for previous redemption and payment thereof duly provided for on the date set forth hereon, ________________ (herein called the “Company”) will pay to bearer, upon surrender hereof, the amount shown hereon [(together with any additional amounts in respect thereof which the Company may be required to pay according to the terms of said Security and the Indenture referred to therein)] at the Paying Agents set out on the reverse hereof or at such other offices or agencies (which, except as otherwise provided in the Security to which this coupon appertains, shall be located outside the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction (the “United States”)) as the Company may designate from time to time, at the option of the Holder, by [United States dollar] check drawn on a bank in [The City of New York] or by transfer of [United States dollars] to an account maintained by the payee with a bank located outside the United States, being [one year’s] interest then payable on said Security.
    
By     

* For coupons maturing on or after the date, if any, on which a partial redemption of the Securities of the series is possible, insert the letter “R” in front of the coupon number. The coupon number, United States dollar amount and due date should appear in the right-hand section of the face of the coupon.


D- 7


[Reverse of Coupon]

_______________________________*
_______________________________
_______________________________
_______________________________
_______________________________
and any other Paying Agents or officers as may from time to time be appointed by the Company and notice of which has been given to the Holders.















* Insert names and addresses of initial Paying Agents located outside the United States.


D- 1


EXHIBIT E
[FORMS OF CERTIFICATION]
EXHIBIT E.1
[FORM OF CERTIFICATE TO BE GIVEN BY
PERSON ENTITLED TO RECEIVE BEARER SECURITY]
CERTIFICATE
______________________________
[Insert title or sufficient description
of Securities to be delivered]
This is to certify that the above-captioned Securities are not being acquired by or on behalf of a United States person (as hereinafter defined) or, if a beneficial interest in the Securities is being acquired by or on behalf of a United States person or any person inside the United States, that such United States person is a financial institution within the meaning of Section 1.165-12T(c)(1)(v) of the United States Treasury regulations which agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986 and the regulations thereunder and which is not purchasing for offer to resell or for resale inside the United States. If the undersigned is a dealer, the undersigned agrees to obtain a similar certificate from each person entitled to delivery of any of the above-captioned Securities in bearer form purchased from it; provided, however, that if the undersigned has actual knowledge that the information contained in such a certificate is false, the undersigned will not deliver a Security in temporary or definitive bearer form to the person who signed such certificate notwithstanding the delivery of such certificate to the undersigned.
As used herein, “United States person” means any citizen or resident of the United States, any corporation, partnership or other entity created or organized in or under the laws of the United States and any estate or trust the income of which is subject to United States Federal income taxation regardless of its source, and “United States” means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction.
We undertake to advise you by telex if the above statement as to beneficial ownership is not correct on the date of delivery of the above-captioned Securities in bearer form as to all of such Securities.

E- 1


We understand that this certificate may be required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings.
Dated: __________, 19__
[To be dated on or after
_______, 19___. (the date
determined as provided in
the Indenture)]
[Name of Person entitled to
Receive Bearer Security]


    
(Authorized Signatory)
Name:
Title:

E-2



EXHIBIT E.2
[FORM OF CERTIFICATE TO BE GIVEN BY EURO-CLEAR AND CEDEL S.A. IN
CONNECTION WITH THE EXCHANGE OF A
PORTION OF A TEMPORARY GLOGAL
SECURITY]
CERTIFICATE
______________________________
[Insert title or sufficient description
of Securities to be delivered]
This is to certify with respect to [$________]_______________ principal amount of the above-captioned Securities (i) that we have received from each of the persons appearing in our records as persons entitled to a portion of such principal amount (our “Qualified Account Holders”) a certificate with respect to such portion substantially in the form attached hereto, and (ii) that we are not submitting herewith for exchange any portion of the temporary global Security representing the above-captioned Securities excepted in such certificates.
We further certify that as of the date hereof we have not received any notification from any of our Qualified Account Holders to the effect that the statements made by such Qualified Account Holders with respect to any portion of the part submitted herewith for exchange are no longer true and cannot be relied upon as of the date hereof.
Dated: ___________19__
[To be dated no earlier than
the Exchange Date]
[MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, BRUSSELS OFFICE, as
Operator of the Euro-clear System]
[CEDEL S.A.]


By     



E-3



EXHIBIT E.3
[FORM OF CERTIFICATE TO BE GIVEN BY EURO-CLEAR AND CEDEL S.A. TO
OBTAIN INTEREST PRIOR TO AN EXCHANGE DATE]
CERTIFICATE
______________________________
[Insert title or sufficient description of Securities]
We confirm that the interest payable on the Interest Payment Date on [Insert Date] will be paid to each of the persons appearing in our records as being entitled to interest payable on such date from whom we have received a written certification, dated not earlier than such Interest Payment Date, substantially in the form attached hereto. We undertake to retain certificates received from our member organizations in connection herewith for four years from the end of the calendar year in which such certificates are received.
We undertake that any interest received by us and not paid as provided above shall be returned to the Trustee for the above Securities immediately prior to the expiration of two years after such Interest Payment Date in order to be repaid by such Trustee to the above issuer at the end of two years after such Interest Payment Date.
Dated:___________19__
[To be dated on or after the relevant
Interest Payment Date]
[MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, BRUSSELS OFFICE, as
Operator of the Euro-clear System]
[CEDEL S.A.]


By     



E-4



EXHIBIT E.4
[FORM OF CERTIFICATE TO BE GIVEN BY BENEFICIAL OWNER TO
OBTAIN INTEREST PRIOR TO AN EXCHANGE DATE]
CERTIFICATE
______________________________
[Insert title or sufficient description of Securities]
This is to certify that as of the Interest Payment Date on [Insert date] and except as provided in the third paragraph hereof, none of the above-captioned Securities held by you for our account was beneficially owned by a United States person as hereinafter defined) or, if any of such Securities held by you for our account were beneficially owned by a United States person, such United States person was either provided an Internal Revenue Service Form W-9 with respect to such interest payment or certified with respect to such interest payment that it was an exempt recipient as defined in Section 1.6049-4(c)(1)(ii) of the United States Treasury regulations.
As used herein, “United States person” means any citizen or resident of the United States, any corporation, partnership or other entity created or organized in or under the laws of the United States and any estate or trust the income of which is subject to United States Federal income taxation regardless of its source, and “United States” means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction.
This certificate excepts and does not relate to [U.S.$] ______________ principal amount of the above-captioned Securities appearing in your books as being held for our account as to which we are not yet able to certify and as to which we understand interest cannot be credited unless and until we are able so to certify.
We understand that this certificate may be required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings.
Dated:____________19__
[To be dated on or after the relevant
Interest Payment Date]
[Name of Person entitled to Receive Interest]

    
(Authorized Signatory)
Name:
Title:

E-5

Exhibit 4.2










SUPER VALU STORES, INC.,
Issuer

AND

BANKERS TRUST COMPANY,
Trustee


____________________



FIRST SUPPLEMENTAL INDENTURE

TO

Indenture Dated as of July 1, 1987



____________________


Dated as of August 1, 1990






-1-

FIRST SUPPLEMENTAL INDENTURE, dated as of August 1, 1990, between SUPER VALU STORES, INC., a corporation duly organized and existing under the laws of the State of Delaware (herein called the “Company”), having its principal office at 11840 Valley View Road, Eden Prairie, Minnesota 55344, and BANKERS TRUST COMPANY, a banking corporation duly organized and existing under the laws of the State of New York, as Trustee (herein called the “Trustee”).
RECITALS
The Company has heretofore executed and delivered to the Trustee a certain indenture, dated as of July 1, 1987 (herein called the “Indenture”), pursuant to which one or more series of unsecured debentures, notes or other evidences of indebtedness of the Company (herein called the “Securities”) may be issued from time to time. All terms used in this First Supplemental Indenture which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
The Company desires and has requested the Trustee to join with it in the execution and delivery of this First Supplemental Indenture for the purpose of amending the Indenture in order to facilitate the issuance of medium-term notes and to permit the Company to elect that the Securities of any series be issued, in whole or in part, in book-entry-only form.
Section 901(9) of the Indenture provides that a supplemental indenture may be entered into by the Company and the Trustee without the consent of any Holders to make provisions with respect to matters arising under the Indenture which do not adversely affect the interests of the Holders of Securities of any series in any material respect.
The Company has furnished the Trustee with (i) an Opinion of Counsel stating that the execution of this First Supplemental Indenture is authorized or permitted by the

-1-

Indenture and (ii) a copy of the resolutions of its Board of Directors certified by its Secretary, pursuant to which this First Supplemental Indenture has been authorized.
All things necessary to make this First Supplemental Indenture a valid agreement of the Company and the Trustee and a valid amendment of and supplement to the Indenture have been done.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities and any coupons appertaining thereto by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities of any series thereof or of any coupons appertaining thereto, as follows:
ARTICLE ONE
SECTION 101. Section 101 of the Indenture is hereby amended to include therein the following provisions:
(a)    After the definition of Defaulted Interest:
“‘Depositary’ means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more Global Securities, the clearing agency registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), specified for that purpose as contemplated by Section 301 or any successor clearing agency registered under the Exchange Act as contemplated by Section 305, and if at any time there is more than one such Person, “Depositary” as used with respect to the Securities of any series shall mean the Depositary with respect to the Securities of such series.”

-2-

(b)    After the definition of Funded Debt:
“‘Global Security’ means a Security bearing the legend specified in Section 204 evidencing all or part of a series of Securities, issued to the Depositary for such series or its nominee, and registered in the name of such Depositary or nominee. Unless otherwise specified, references to a permanent global security in this Indenture shall include any Global Security.”
SECTION 102. With respect to Securities of a series all or part of which is represented by a Global Security, Section 203 of the Indenture shall not apply.
SECTION 103. Section 204 of the Indenture is amended to read in its entirety as follows:
“Section 204. Form of Legend for Global Securities .
Any Global Security authenticated and delivered hereunder shall bear a legend in substantially the following form:
‘This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee of a Depositary. This Security is exchangeable for Securities registered in the name of a Person other than the Depositary or its nominee only in the limited circumstances described in the Indenture, and no transfer of this Security (other than a transfer of this Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in such limited circumstances.’”
SECTION 104. Section 301 of the Indenture is hereby amended as set forth:

-3-

(a)    The phrase “, subject to Section 303,” is inserted (i) after the phrase “pursuant to a Board Resolution and” and before the phrase “set forth or determined in the manner provided” in the second paragraph of Section 301 and (ii) after the phrase “Board Resolution referred to above and” and before the phrase “set forth in the Officers’ Certificate” in the penultimate paragraph of Section 301.
(b)    The phrase “and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder” is inserted after the number “1107” and before the punctuation “);” of Section 301(2).
(c)    Immediately after the phrase “whether any Securities of the series are to be issuable” in Section 301(3), the following phrase replaces the remainder of Section 301(3) in its entirety: “in whole or in part in the form of one or more Global Securities and, if so, (a) the Depositary with respect to such Global Security or Securities and (b) the circumstances under which any such Global Security may be exchanged for Securities registered in the name of, and any transfer of such Global Security may be registered to, a Person other than such Depositary or its nominee, if other than as set forth in Section 305;”.
(d)    the phrase “initial authentication of Securities of that series.” replaces the phrase “delivery of the Officers’ Certificate setting forth the terms of the series.” in the last paragraph of Section 301.
SECTION 105. Section 303 of the Indenture is amended to include therein the following provisions:
(a)    Immediately after the fourth paragraph thereof;

-4-

“Notwithstanding the provisions of Section 301 of this Section, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers’ Certificate otherwise required pursuant to Section 301 or the Company Order and Opinion of Counsel otherwise required pursuant to this Section at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the time of authentication upon original issuance of the first Security of such series to be issued.”
(b)    At the end of the final paragraph thereof: “Notwithstanding the foregoing, if any Security shall have been authenticated hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309 together with a written statement stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.”
SECTION 106. Section 305 of the Indenture is amended as follows:
(a)    The phrase “in the last paragraph of this Section and” is inserted after the phrase “except as otherwise specified” and before the phrase “as contemplated by” in the first sentence of the sixth paragraph thereof.
(b)    The following paragraph is appended to the end thereof:
“Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 301, any Global Security shall be exchangeable pursuant to this Section 305 or Sections 304, 306, 906 or 1107 for Securities registered in the name of, and a transfer of a Global Security of any series may be registered to,

-5-

any Person other than the Depositary for such Security or its nominee only if (i) such Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or if at any time such Depositary ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, (ii) the Company executes and delivers to the Trustee a Company Order that such Global Security shall be so exchangeable and the transfer thereof so registrable or (iii) there shall have occurred and be continuing an Event of Default or an event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default with respect to the Securities of such series. Upon the occurrence in respect of any Global Security of any series of any one or more of the conditions specified in clauses (i), (ii) or (iii) of the preceding sentence or such other conditions as may be specified as contemplated by Section 301 for such series, such Global Security may be exchanged for Securities registered in the names of, and the transfer of such Global Security may be registered to, such Persons (including Persons other than the Depositary with respect to such series and its nominees) as such Depositary, in the case of an exchange, and the Company, in the case of a transfer, shall direct. Notwithstanding any other provision of this Indenture, any Security authenticated and delivered upon registration of transfer of any Global Security shall also be a Global Security and bear the legend specified in Section 204.
SECTION 107. The following paragraph is inserted immediately before the last paragraph of Section 308 of the Indenture:

-6-

“No holder of any beneficial interest in any Global Security held on its behalf by a Depositary (or its nominee) shall have any rights under this Indenture with respect to such Global Security or any Security represented thereby, and such Depositary may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the owner of such Global Security or any Security represented thereby for all purposes whatsoever. Notwithstanding the foregoing, with respect to any Global Security, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as Holder of any Security.”
SECTION 108. Section 309 of the Indenture is amended by inserting the phrase “and may deliver to the Trustee (or any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold,” after the word “whatsoever” in the third sentence thereof.
SECTION 109. With respect to any series of Securities issued after August 1, 1990, Section 310 of the Indenture is amended by inserting the phrase “360-day” prior to the word “year”.
SECTION 110. Section 1107 of the Indenture is amended to read in its entirety as follows:
“SECTION 1107. Securities Redeemed in Part .
Any Registered Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due

-7-

endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Registered Security or Securities of the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered; provided , that if a Global Security is so surrendered, such a new Registered Security so issued shall be a new Global Security in a denomination equal to the unredeemed portion of the principal of the Global Security so surrendered.”
ARTICLE TWO
SECTION 201. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
____________________

-8-


IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.
SUPER VALU STORES, INC.


By:         
David A. Cairns
Vice President and Treasurer
[Seal]
Attest:


    
James A. Strom
Secretary

BANKERS TRUST COMPANY


By         

[Seal]
Attest:


    


-9-


STATE OF MINNESOTA    )
: ss.:
COUNTY OF HENNEPIN    )

On the _____ of August, 1990, before me personally came David A. Cairns, to me known, who, being by me duly sworn, did depose and say that he is Vice President and Treasurer of Super Valu Stores, Inc., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.

         
Notary Public





STATE OF NEW YORK    )
: ss.:
COUNTY OF NEW YORK    )

On the _____ of August, 1990, before me personally came Jean O’Keefe, to me known, who, being by me duly sworn, did depose and say that she is Assistant Vice President of Bankers Trust Company, one of the corporations described in and which executed the foregoing instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that she signed her name thereto by like authority.

         
Notary Public




Exhibit 4.3








SUPERVALU INC.,
(formerly Super Valu Stores, Inc.)
Issuer

AND

BANKERS TRUST COMPANY,
Trustee


____________________



SECOND SUPPLEMENTAL INDENTURE

TO

Indenture dated as of July 1, 1987, as amended by the First Supplemental Indenture
dated as of August 1, 1990



____________________


Dated as of October 1, 1992






-1-

SECOND SUPPLEMENTAL INDENTURE, dated as of October 1, 1992, between SUPERVALU INC. (formerly Super Valu Stores, Inc.), a corporation duly organized and existing under the laws of the State of Delaware (herein called the “Company”), having its principal office at 11840 Valley View Road, Eden Prairie, Minnesota 55344, and BANKERS TRUST COMPANY, a banking corporation duly organized and existing under the laws of the State of New York, as Trustee (herein called the “Trustee”).
RECITALS
The Company has heretofore executed and delivered to the Trustee a certain Indenture, dated as of July 1, 1987, as amended by that certain First Supplemental Indenture, dated as of August 1, 1990 (said Indenture, as so amended, being herein called the “Indenture”), pursuant to which one or more series of unsecured debentures, notes or other evidences of indebtedness of the Company (herein called the “Securities”) may be issued from time to time. All terms used in this Second Supplemental Indenture which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
The Company desires and has requested the Trustee to join with it in the execution and delivery of this Second Supplemental Indenture for the purposes of (i) amending certain operating and financial covenants of the Company with respect to series of Securities to be issued by the Company subsequent to the date hereof and (ii) amending the Indenture to conform to the requirements of the Trust Indenture Reform Act of 1990 and to make explicit those provisions of such Act that are, as a matter of law, deemed to govern retroactively all previously qualified indentures, and to govern prospectively each indenture thereafter qualified, under the Trust Indenture Act of 1939.
Section 901(9) of the Indenture provides that a supplemental indenture may be entered into by the Company and the Trustee without the consent of any Holders to make provisions with respect to matters arising under the Indenture which do not adversely affect the interests of the Holders of Securities of any series in any material respect.
The Company has furnished the Trustee with (i) an Opinion of Counsel stating that the execution of this Second Supplemental Indenture is authorized or permitted by the Indenture and (ii) a copy of the resolutions of its Board of Directors certified by its Secretary, pursuant to which this Second Supplemental Indenture has been authorized.
All things necessary to make this Second Supplemental Indenture a valid agreement of the Company and the Trustee and a valid amendment of and supplement to the Indenture have been done.
NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities and any coupons appertaining thereto by the Holders thereof, it is mutually covenanted and agreed,

-1-

for the equal and proportionate benefit of all Holders of the Securities of any series thereof or of any coupons appertaining thereto, as follows:
ARTICLE ONE
SECTION 101. The definition of “Operating Property” set forth in Section 101 of the Indenture is hereby amended in its entirety to read as follows:
“Operating Property” means (x) when a determination is made in respect of any series of Securities issued prior to October 1, 1992, any manufacturing or processing plant, office facility, retail store, warehouse, distribution center or equipment located in the United States of America or its territories or possessions and owned and operated now or hereafter by the Company or any Domestic Subsidiary and having a book value on the date as of which the determination is being made of more than 0.85% of Consolidated Net Tangible Assets, and (y) when a determination is made in respect of any series of Securities issued on or after October 1, 1992, any manufacturing or processing plant, office facility, retail store, warehouse, distribution center or equipment located in the United States of America or its territories or possessions and owned and operated now or hereafter by the Company or any Domestic Subsidiary and having a book value on the date as of which the determination is being made of more than 0.65% of Consolidated Net Tangible Assets.” Upon payment in full and the cancellation of the Company’s 9-3/8% Notes due August 15, 1994, 8-7/8% Notes due June 15, 1999, 8.39% Notes due September 15, 2000 and 9.64% Medium-Term Notes due September 18, 1997, “Operating Property” shall thereafter have the meaning set forth in (y) above.
SECTION 102. Section 608 of the Indenture is hereby amended as set forth below:
(a)    Section 608(a) is hereby amended in its entirety as follows:
“(a) If the Trustee has or shall acquire any conflicting interest, as defined in this Section, with respect to the Securities of any series, it shall, within 90 days after ascertaining that it has such conflicting interest, and, if the Event of Default (exclusive of any period of grace or requirement of notice provided for in Section 501 of this Indenture) to which such conflicting interest relates has not been cured or duly waived or otherwise eliminated before the end of such 90 day period, either eliminate such conflicting interest or resign with respect to the Securities of that series in the manner and with the effect hereinafter specified in this Article.”
(b)    The introductory clause of Section 608(c) is hereby amended in its entirety to read as follows:

-2-

“(c) For the purposes of this Section, the Trustee shall be deemed to have a conflicting interest with respect to the Securities of any series if there has been an Event of Default with respect to Securities of that series (exclusive of any period of grace or requirement of notice provided for in Section 501 of this Indenture) and”.
(c)    Section 608(c)(2) is hereby amended in its entirety to read as follows:
“(2) the Trustee or any of its directors or executive officers is an underwriter for the Company;”.
(d)    Section 608(c)(3) is hereby amended in its entirety to read as follows:
“(3) the Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with an underwriter for the Company;”.
(e)    Section 608(c)(8) is hereby amended by deleting the word “or” at the end of such Section.
(f)    Section 608(c)(9) is hereby amended in its entirety to read as follows:
“(9) the Trustee owns, on the date of any Event of Default with respect to Securities of that series (exclusive of any period of grace or requirement of notice provided for in Section 501 of this Indenture), or any anniversary of such Event of Default while such Event of Default is continuing, in any calendar year, in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of 25% or more of the voting securities, or of any class of security, of any person, the beneficial ownership of a specified percentage of which would have constituted a conflicting interest under paragraph (6), (7) or (8) of this Subsection. As to any such securities of which the Trustee acquired ownership through becoming executor, administrator or testamentary trustee of an estate which included them, the provisions of the preceding sentence shall not apply, for a period of two years from the date of such acquisition, to the extent that such securities included in such estate do not exceed 25% of such voting securities or 25% of any such class of security. Promptly after the dates of any Event of Default with respect to Securities of that series and annually in each succeeding year that such Event of Default is continuing, the Trustee shall make a check of its holdings of such securities in any of the above-mentioned capacities as of such dates. If the Company fails to make payment in full of the principal of (or premium, if any) or interest on any of the Securities when and as the same becomes due and payable, and such failure continues for 30 days thereafter, the Trustee shall make a prompt check of its holdings of such securities in any of the above-

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mentioned capacities as of the date of the expiration of such 30-day period, and after such date, notwithstanding the foregoing provisions of this paragraph, all such securities so held by the Trustee, with sole or joint control over such securities vested in it, shall, but only so long as such failure shall continue, be considered as though beneficially owned by the Trustee for the purposes of paragraph (6), (7) and (8) of this Subsection; or”.
(g)    Section 608(c) is hereby amended to include therein the following new paragraph (10) immediately after paragraph (9) thereof:
“(10) except under the circumstances described in paragraphs (1), (3), (4), (5) or (6) of Section 311(b) of the Trust Indenture Act, the Trustee shall be or shall become a creditor of the Company.”
(h)    Section 608(d)(1) is hereby amended by replacing the phrase “three years” with the phrase “one year’.
(i)    Section 608 is hereby amended to include therein the following new Subsection (f) immediately after the last paragraph of Section 608(e):
“(f) Except in the case of a default in the payment of the principal or interest on the Securities of any series, or in the payment of any sinking fund installment, the Trustee shall not be required to resign as provided by this Section 608 if the Trustee shall have sustained the burden of proving, on application to the Commission and after opportunity for hearing thereon, that (i) the Event of Default may be cured or waived during a reasonable period and under the procedures described in such application, and (ii) a stay of the Trustee’s duty to resign will not be inconsistent with the interests of holders of the Securities of any series. The filing of such an application shall automatically stay the performance of the duty to resign until the Commission orders otherwise.”
SECTION 103. Section 609 of the Indenture is hereby amended by adding the following sentence to the end of such Section: “Neither the Company nor any person or corporation directly or indirectly controlling, controlled by or under common control with the Company shall act as Trustee hereunder.”
SECTION 104. Section 613 of the Indenture is hereby amended by replacing each reference to the phrase “four months” with the phrase “three months” and by replacing each reference to the phrase “four months’ period” with the phrase “three months’ period”.
SECTION 105. Section 703 of the Indenture is hereby amended as follows:
(a)    The introductory clause of Section 703(a) is hereby amended in its entirety to read as follows:

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“Within 60 days after March 1 of each year commencing with the year 1988, the Trustee shall transmit to the Holders of Securities, as provided in Subsection (c) of this Section, a brief report dated as of such March 1 with respect to any of the following events which may have occurred within the previous 12 months (but if no such event has occurred within such period no report need be transmitted):”.
(b)    Paragraph (1) of Section 703(a) is hereby amended by inserting the phrase “any change to” to the beginning of such paragraph.
(c)    Section 703(a) is further amended by inserting a new paragraph (2) to read as follows:
“(2) the creation of any material change to a relationship specified in paragraphs (1) through (10) of Section 608(c);”.
(d)    Currently effective paragraphs (2) through (6) of Section 703(a) are hereby amended to reflect the renumbering of such paragraphs resulting from the insertion of new paragraph (2).
(e)    Currently effective paragraph (4) of Section 703(a) is hereby amended by inserting the phrase “any change to” to the beginning of such paragraph.
SECTION 106. Section 704 of the Indenture is hereby amended as follows:
(a)    Section 704(2) is hereby amended to delete the word “and” from the end of such Section.
(b)    Section 704(3) is hereby amended to replace the period at the end of such Section with “; and”.
(c)    Section 704 is hereby amended to include therein the following new paragraph (4) thereof immediately after paragraph (3) thereof:
“(4) furnish to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, a brief certificate of the Company’s principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company’s compliance with all conditions and covenants required under this Indenture. For purposes of this paragraph, such compliance shall be determined without regard to any period of grace or requirement of notice provided for in Section 501 of this Indenture.”
SECTION 107. Section 902 of the Indenture is hereby amended by replacing in paragraph (4) thereof each reference to “Section 1013” with a reference to “Section 1012”.

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SECTION 108. Subsection (b) of Section 1007 of the Indenture is hereby amended in its entirety as follows:
“(b) The provisions of Subsection (a) of this Section 1007 shall not apply (x) when a determination is made in respect of any series of Securities issued prior to October 1, 1992, to the issuance, assumption or guarantee by the Company or any Domestic Subsidiary of Debt secured by a mortgage which would otherwise be subject to the foregoing restrictions up to an aggregate amount which, together with all other Debt of the Company and its Domestic Subsidiaries secured by mortgages (other than mortgages permitted by Subsection (a) of this Section 1007) which would otherwise be subject to the foregoing restrictions and the Value of all Sale and Lease-back Transactions in existence as such time (other than any Sale and Lease-back Transaction which if such Sale and Lease-back Transaction had been a mortgage, would have been permitted by clause (i) of Section 1007(a) and other than Sale and Lease-back Transactions as to which application of amounts have been made in accordance with clause (b) of Section 1008) does not at the time exceed 5% of Consolidated Net Tangible Assets and (y) when a determination is made in respect of any series of Securities issued on or after October 1, 1992, to the issuance, assumption or guarantee by the Company or any Domestic Subsidiary of Debt secured by a mortgage which would otherwise be subject to the foregoing restrictions up to an aggregate amount which, together with all other Debt of the Company and its Domestic Subsidiaries secured by mortgages (other than mortgages permitted by Subsection (a) of this Section 1007) which would otherwise be subject to the foregoing restrictions and the Value of all Sale and Lease-back Transactions in existence at such time (other than any Sale and Lease-back Transaction which if such Sale and Lease-back Transaction had been a mortgage, would have been permitted by clause (i) of Section 1007(a) and other than Sale and Lease-back Transactions as to which application of amounts have been made in accordance with clause (b) of Section 1008) does not at the time exceed 10% of Consolidated Net Tangible Assets.” Upon payment in full and the cancellation of the Company’s 9-3/8% Notes due August 15, 1994, 8-7/8% Notes due June 15, 1999, 8.39% Notes due September 15, 2000 and 9.64% Medium-Term Notes due September 18, 1997, the provisions of Subsection (a) of this Section 1007 shall not apply upon the circumstances described in (y) above.
SECTION 109. Section 1012 of the Indenture is hereby deleted in its entirety, and Section 1013 is redesignated as Section 1012.
SECTION 110. The Company hereby certifies that the amendments to the Indenture set forth in this Second Supplemental Indenture do not adversely affect in any material respect the interests of the Holders of Securities of any series issued prior to October 1, 1992. So

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long as any of the Company’s 9-3/8% Notes due August 15, 1994, 8-7/8% Notes due June 15, 1999, 8.39% Notes due September 15, 2000 or 9.64% Medium-Term Notes due September 18, 1997 remain Outstanding, the Company hereby covenants and agrees that (a) the covenants of the Company set forth in Sections 1007 and 1008 of the Indenture, as stated prior to the amendments set forth in Sections 101 and 108 of this Second Supplemental Indenture, shall remain in full force and effect with respect to Securities of series issued prior to October 1, 1992, (b) the Company shall comply with Sections 1007 and 1008 of the Indenture, as stated prior to the amendments set forth in Sections 101 and 108 of this Second Supplemental Indenture, as they apply by their terms to Securities of series issued prior to October 1, 1992, (c) the Company shall comply with Sections 1007 and 1008 of the Indenture, in their amended form as described in Sections 101 and 108 of this Second Supplemental Indenture, as they apply by their terms to Securities of any series issued on or after October 1, 1992 and (d) the Company shall confirm to the Trustee annually its compliance with Sections 1007 and 1008 of the Indenture, both as stated prior to the amendments set forth in this Second Supplemental Indenture and in their amended form as described in Sections 101 and 108 of this Second Supplemental Indenture, in the certificate referred to in Section 106(c) of this Second Supplemental Indenture; provided however , that, consistent with the provisions of paragraph (4) of Section 501 of the Indenture, a default in the performance, or breach, of the covenants set forth in Sections 1007 and 1008 of the Indenture, as stated prior to the amendments set forth in Sections 101 and 108 of this Second Supplemental Indenture, as they apply by their terms to Securities of series issued prior to October 1, 1992, shall constitute such a default or breach only with respect to Securities of series issued prior to October 1, 1992; and provided further , that, consistent with the provisions of paragraph (4) of Section 501 of the Indenture, a default in the performance, or breach, of the covenants set forth in Sections 1007 and 1008 of the Indenture, in their amended form as described in Sections 101 and 108 of this Second Supplemental Indenture, as they apply by their terms to Securities of any series issued on or after October 1, 1992, shall constitute such a default or breach only with respect to Securities of any series issued on or after October 1, 1992.
ARTICLE TWO
SECTION 201. For all purposes of this Second Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words “herein,” “hereof” and “hereby” and other words of similar import used in this Second Supplemental Indenture refer to this Second Supplemental Indenture as a whole and not to any particular section hereof.
SECTION 202. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect.
SECTION 203. This Second Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby.

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SECTION 204. This Second Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all of such counterparts shall together constitute one and the same instrument.
SECTION 205. The Trustee makes no representation as to the validity or sufficiency of this Second Supplemental Indenture.
SECTION 206. The Recitals contained herein shall be taken as the statements of the Company and the Trustee assumes no responsibility for their correctness.
SECTION 207. This instrument shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the laws of the State of New York.

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IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.
SUPERVALU INC.


By:         
Name: David A. Cairns
Title: Vice President and Treasurer
[Seal]
Attest:


    
Name: James A. Strom
Title: Corporate Secretary

BANKERS TRUST COMPANY


By         
Name: Susan Johnson
Title: Assistant Vice President

[Seal]
Attest:


    
Name: Dorothy Robinson
Title: Assistant Vice President





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STATE OF MINNESOTA    )
: ss.:
COUNTY OF HENNEPIN    )

On the 11 th of November, 1992, before me personally came David A. Cairns, to me known, who, being by me duly sworn, did depose and say that he is Vice President and Treasurer of SUPERVALU INC., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.

/s/ Sarah E. Nelsen    
Notary Public





STATE OF NEW YORK    )
: ss.:
COUNTY OF NEW YORK    )

On the 9 th of November, 1992, before me personally came Susan Johnson, to me known, who, being by me duly sworn, did depose and say that she is Assistant Vice President of Bankers Trust Company, one of the corporations described in and which executed the foregoing instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.

/s/ Marjorie Stanley    
Notary Public




Exhibit 10.1
SUPERVALU INC .
EXCESS BENEFITS PLAN
(1989 Restatement)
First Effective February 24, 1985
As Amended and Restated Effective February 28, 1987
And
As Amended and Restated Effective February 26, 1989


AND

As Amended By

The FIRST AMENDMENT Adopted and
Effective June 30, 1998

The SECOND AMENDMENT Adopted June 2, 2003
But Effective December 1, 2003
The THIRD AMENDMENT Adopted November 18, 2008
But Effective August 1, 2007, December 31, 2007, January 1, 2008, November 1, 2008 and January 1, 2009





Note:
Material added or modified by the First and Second Amendments is shown in italics. Effective December 1, 2003, the Second Amendment changed all references of “SUPER VALU Stores, Inc.” to “SUPERVALU INC.” (except where the prior name should be retained in the preambles for historical purposes) as shown in italics. Appendix A was added by the Third Amendment effective January 1, 2008 but is not shown in italics. Modified section numbers are not generally shown in italics.
                                                
This Working Copy has been compiled from the original Plan documents and amendments for the convenience of those charged with administration of the Plan. This Working Copy has not been approved, ratified or executed by the company, its board, its officers or any committee. This Working Copy is not, therefore, an official legal document under which the Plan is maintained. The Working Copy reflects only the most current provisions of the Plan document and does not reflect every change made by every amendment. Specifically, the Working Copy does not reflect changes made by prior amendments which were changed subsequently by more recent amendments. Certain questions, particularly questions relating to the effectiveness of amendments, can only be resolved by referring to the original Plan documents and amendments.



:

SUPERVALU INC .
EXCESS BENEFITS PLAN
(1989 Restatement)
WHEREAS, This corporation and certain subsidiaries of this corporation have heretofore adopted and currently maintain a defined benefit pension plan known as the Super Valu Stores, Inc. Retirement Plan (hereinafter the “Retirement Plan”) and several defined contribution profit sharing plans (hereinafter collectively the “Profit Sharing Plans”) for the purpose of developing retirement benefits for employees; and
WHEREAS, The Retirement Plan and the Profit Sharing Plans are subject to the Employee Retirement Income Security Act of 1974, as amended (hereinafter “ERISA”) and they are intended to qualify under section 401(a) of the Internal Revenue Code of 1954, as amended (hereinafter the “Code”); and
WHEREAS, By operation of section 401(a) of the Code, benefits which may be paid under the Retirement Plan and allocations which may be made under the Profit Sharing Plans are restricted so that they do not exceed certain maximum limitations established under section 415 of the Code; and
WHEREAS, For benefits accruing under the Retirement Plan and Profit Sharing Plans during plan years beginning after December 31, 1988, the maximum amount of annual compensation which may be taken into account for any employee may not exceed a fixed dollar amount which is established under section 401(a)(17) of the Code; and
WHEREAS, Changes in the Retirement Plan accrued benefit formula were required to be made effective February 26, 1989, to keep the Retirement Plan in compliance with section 401(l) of the Code and these changes had the effect of reducing the expected benefits which certain employees might have expected to realize if the Retirement Plan formulas had not been changed; and
WHEREAS, ERISA authorizes the establishment of an unfunded, nonqualified plan of deferred compensation maintained by an employer solely for the purpose of providing benefits for employees which are in excess of the limitations on benefits and allocations imposed on qualified plans by section 415 of the Code; and
WHEREAS, ERISA also authorizes the establishment of an unfunded, nonqualified plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees; and
WHEREAS, Effective February 24, 1985, this corporation did establish a nonqualified plan known as the “Super Valu Stores, Inc. Excess Benefit Plan” and did amend and restate the same effective February 28, 1987, in a document known as the “Super Valu Stores, Inc. Excess Benefit Plan (1987 Restatement)”; and



WHEREAS, It is in the interest of this corporation to provide the full benefits promised to certain employees under the Retirement Plan and to make the full allocations for certain employees under the Profit Sharing Plans without regard to the limitations on benefits and allocations imposed by section 415 of the Code and without regard to the compensation limitation imposed by section 401(a)(17) of the Code and that an unfunded nonqualified deferred compensation plan be maintained for this and other purposes;
NOW THEREFORE, This corporation does hereby amend and restate the previously established “Super Valu Stores, Inc. Excess Benefit Plan (1987 Restatement)” and amend it to incorporate features of an unfunded, nonqualified deferred compensation plan, the terms and conditions of which are as follows:
Third Amendment–Effective January 1, 2008
1.     Introduction .
1.1.     Plan Name .    This plan shall be referred to as the SUPERVALU INC. Excess Benefits Plan (hereinafter “Plan”).
1.2.     Rules That Apply To Pre‑2005 Accruals . The portion of a Participant’s benefit that accrued under the Plan as of December 31, 2004, shall be governed by the terms of the Plan Statement disregarding requirements under section 409A of the Code and the rules set forth in Appendix A.
1.3.     Rules That Apply to Post‑2004 Accruals . The portion of a Participant’s benefit that accrued after December 31, 2004, shall be governed by the terms of the Plan Statement subject to the modifications specified in Appendix A, which are intended to comply with section 409A of the Code and final regulations thereunder .


2.     Participating Employees .
2.1.     General Rules . The individuals eligible to participate in and receive benefits under the Plan are those of SUPERVALU INC. and its subsidiaries who, on or after February 24, 1985:
(i)
are participating employees in the Retirement Plan or a Profit Sharing Plan, or both; and
(ii)
are actively employed by SUPERVALU INC. or one of its subsidiaries; and
(iii)
are affirmatively selected for participation in this Plan by the Compensation Committee of the Board of Directors.


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Third Amendment–Effective December 31, 2007
Notwithstanding the foregoing, no employees shall become Participants in this Plan after December 31, 200 7.
2.2.     Specific Exclusions . Notwithstanding anything apparently to the contrary in this Plan or in any written communication, summary, resolution or document or oral communication, no individual shall be a participating employee in this Plan, develop benefits under this Plan or be entitled to receive benefits under this Plan (either for himself or his survivors) unless such individual is a member of a select group of management or highly compensated employees (as that expression is used in ERISA). If a court of competent jurisdiction, any representative of the U.S. Department of Labor or any other governmental, regulatory or similar body makes any direct or indirect, formal or informal, determination that an individual is not a member of a select group of management or highly compensated employees (as that expression is used in ERISA), such individual shall not be (and shall not have ever been) a participating employee in this Plan at any time. If any person not so defined has been erroneously treated as a participating employee in this Plan, upon discovery of such error such person’s erroneous participation shall immediately terminate ab initio and upon demand such person shall be obligated to reimburse SUPERVALU INC. for all amounts erroneously paid to him or her.
3.     Benefit for Retirement Plan Participating Employees .
3.1.     General Amount . Except to the extent provided otherwise in Section 3.6, this Plan shall pay to participating employees the excess, if any, of:
(i)
the amount that would have been payable under the Retirement Plan if such benefit had been determined without regard to the benefit limitations under section 415 of the Code and without regard to the compensation limitation of section 401(a)(17) of the Code, over
(ii)
the amount actually paid from the Retirement Plan.
Third Amendment–Effective December 31, 2007
The amount determined under paragraph (i) above that would have been payable under the Retirement Plan without regard to the limitations under section 415 and 401(a)(17) of the Code shall be determined without counting any service after December 31, 2007, as Credited Service in the Retirement Plan and without counting any compensation after December 31, 2012, as Final Average Compensation in the Retirement Plan .

3.2.     Form . Except as provided in paragraph 6 below, this benefit (minus the withholding and payroll taxes which must be deducted therefrom) shall be paid to the participating employee directly from the general assets SUPERVALU INC. in such one of the


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following Actuarially Equivalent forms as the participating employee shall have elected in writing not later than October 1, 1990:
(i)
a single lump sum;
(ii)
a series of five (5) equal annual installments;
(iii)
a series of ten (10) equal annual installments;
(iv)
a single life annuity (also known as a Basic Pension);
(v)
a joint and 50% to surviving spouse annuity;
(vi)
a joint and 67% to surviving spouse annuity; or
(vii)
a joint and 100% to surviving spouse annuity.
Third Amendment–Effective November 1, 2008
Installment payments shall be determined by reference to the rules in Section 4 of Appendix A of the SUPERVALU INC. Nonqualified Supplemental Executive Retirement Plan . Actuarially Equivalent value shall be determined by reference to the rules and factors in effect under the Retirement Plan at the time the benefit is first payable. Benefits payable to a surviving spouse shall be paid only to the person, if any, who was the participating employee’s surviving spouse at the time of the Termination of Employment. If there is no such surviving spouse at such time, all elections of forms paying benefits to a surviving spouse shall be deemed to be elections of a single life annuity (or Basic Pension) form. Amounts payable to the participating employee in a lump sum or installment form which are not paid at the participating employee’s death shall be paid to the participating employee’s estate.
3.3.     Time . The payment shall be made (in the case of a single lump sum) or commenced (in the case of installments or an annuity) at whichever of the following dates as the participating employee shall have elected in writing delivered to the Committee not later than October 1, 1990:
(i)
within thirty (30) days after the participating employee shall have had a Termination of Employment;
(ii)
during the March following the date the participating employee shall have had a Termination of Employment;
(iii)
during the March following the date the participating employee shall have attained age sixty‑two (62) years or had a Termination of Employment, if later;
(iv)
during the March following the date the participating employee shall have attained age sixty‑five (65) years or had a Termination of Employment, if later.


‑4‑

3.4.     Default . If for any reason a participating employee shall have failed to make a timely written designation of form and time for distribution (including reasons beyond the control of the participating employee), the distribution shall be made in a single lump sum during the March following the date the participating employee shall have had a Termination of Employment. If the Participant shall have not filed an application for a benefit within five (5) years after his Normal Retirement Date (or his Termination of Employment, if later), such benefit shall be permanently and irrevocably forfeited.
Second Amendment–Effective December 1, 2003
3.5.     Election Changes. Notwithstanding anything to the contrary in this Plan, at any time and from time to time, each participating employee may file with the Committee a new election of a form and time of distribution of the benefit from this Plan, and such new election shall supersede all prior elections; provided, however, that any new election must be filed prior to the calendar year preceding the calendar year in which the participating employee’s benefits would otherwise have been commenced or distributed. If a new election under this Section 3.5 is not effective, the participating employee’s most recent effective election (including any default election) shall govern the form and time of payment .
3.6.     Special Benefit . In lieu of all benefits described in Section 3.1 and Section 5 there shall be paid to (and with respect to) participating employees who:
(i)
were born before March 1, 1952; and
(ii)
have not less than fifteen (15) years of Credited Service with SUPERVALU INC. and its subsidiaries under the Retirement Plan at termination of employment; and
(iii)
are “highly compensated employees” as defined in Code section 414(q) at the time of their termination of employment; and
(iv)
were actively employed by SUPERVALU INC. and participating in the Retirement Plan on February 26, 1989,
only the benefits, if any, described in the separate nonqualified plan document titled as the SUPERVALU INC . NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Notwithstanding anything apparently to the contrary such persons shall not be entitled to participate in or develop benefits under or receive benefits from this Plan.
4.     Benefit For Profit Sharing Plan Participating Employees . This Plan shall provide for participating employees as defined in Section 2.1, the excess, if any, of:
(i)
the amount which would have been allocated for the participating employee under the Profit Sharing Plans if such allocation had been determined without regard to the allocation limitations under section 415 of the Code and without regard to the compensation limitation of section 401(a)(17) of the Code, over


‑5‑

(ii)
the amount actually allocated for the participating employee under the Profit Sharing Plans after taking into account the allocation limitations under section 415 of the Code and the compensation limitation of section 401(a)(17) of the Code.
This benefit shall be credited to an account for the participating employee under the Super Valu Stores, Inc. Deferred Compensation Plan at the same time as the contribution would have been made for the participating employee if it had been made under the Profit Sharing Plan. Provided, however, if the participating employee is not fully (100%) vested under the Profit Sharing Plan at that time of contribution, the contribution shall not be credited under Super Valu Stores, Inc. Deferred Contribution Plan until such time as the participating employee is fully (100%) vested under the Profit Sharing Plan. All matters concerning distribution of this benefit from the Super Valu Stores, Inc. Deferred Compensation Plan to the participating employee or survivors of the participating employee shall be governed under the terms and provisions of the Super Valu Stores, Inc. Deferred Compensation Plan including that plan’s accrual of interest provisions (and not this document or the Profit Sharing Plans’ documents).
5.     Benefit to Retirement Plan Beneficiaries .
5.1.     Amount . There shall be paid under this Plan and to the surviving spouse or other joint or contingent annuitant or beneficiary of a participating employee as defined in Section 2.1 (subject to the exclusion in Section 3.6), the excess, if any, of:
(i)
the amount which would have been payable under the Retirement Plan if such benefit had been determined without regard to the benefit limitations of section 415 of the Code and without regard to the compensation limitation of section 401(a)(17) of the Code, over
(ii)
the amount actually paid from the Retirement Plan.
Third Amendment–Effective December 31, 2007
The amount determined under paragraph (i) above that would have been payable under the Retirement Plan without regard to the limitations under section 415 and 401(a)(17) of the Code shall be determined without counting any service after December 31, 2007, as Credited Service in the Retirement Plan and without counting any compensation after December 31, 2012, as Final Average Compensation in the Retirement Plan .



‑6‑


5.2.     Form . Except as provided in paragraph 6 below, this benefit (minus the withholding and payroll taxes which must be deducted therefrom) shall be paid to such person directly from the general assets of SUPERVALU INC. in such one of the following Actuarially Equivalent forms as the participating employee shall have elected in writing delivered to the Committee not later than October 1, 1990:
(i)
a single lump sum;
(ii)
a series of five (5) annual installments;
(iii)
a series of ten (10) annual installments;
(iv)
a single life annuity (for the life of the joint annuitant only).
Third Amendment–Effective November 1, 2008
Installment payments shall be determined by reference to the rules in Section 4 of Appendix A of the SUPERVALU INC. Nonqualified Supplemental Executive Retirement Plan . Actuarially Equivalent value shall be determined by reference to the rules and factors in effect under the Retirement Plan at the time the benefit is first payable. Benefits payable to a surviving spouse shall be paid only to the person, if any, who was the participating employee’s surviving spouse at the time of the Termination of Employment. If there is no such surviving spouse at such Termination of Employment, all elections of forms paying benefits to a surviving spouse shall be deemed to be elections of a single life annuity (or Basic Pension) form. Benefits payable in a lump sum or installment form that have not been paid at the death of the Beneficiary shall be payable to the Beneficiary’s estate.

5.3.     Time . The payment shall be made (in the case of a single lump sum) or commenced (in the case of installments or an annuity) at whichever of the following dates as the participating employee shall have elected in writing delivered to the Committee not later than October 1, 1990:
(i)
within thirty (30) days after the participating employee shall have died;
(ii)
during the March following the date the participating employee shall have died;
(iii)
during the March following the date the participating employee shall have attained age sixty‑two (62) years or died if later;
(iv)
during the March following the date the participating employee shall have attained age sixty‑five (65) years or died if later.
5.4.     Default . If for any reason a participating employee shall have failed to make such a timely written designation of form and time for distribution (including reasons beyond the control of the participating employee), the distribution shall be made in a single lump


‑7‑

sum during the March following the date the participating employee shall have died. No spouse, former spouse, designated Joint Annuitant or Beneficiary shall have any right to participate in the Participant’s selection of the time or the form of benefit or the designation of a Joint Annuitant or Beneficiary or the changing of the same. If the Participant shall have not filed an application for a benefit within five (5) years after his Normal Retirement Date (or his Termination of Employment, if later), such benefit shall be permanently and irrevocably forfeited.
Second Amendment–Effective December 1, 2003
5.5.     Election Changes. Notwithstanding anything to the contrary in this Plan, at any time and from time to time, each participating employee may file with the Committee a new election of a form and time of distribution of the benefit from this Plan, and such new election shall supercede all prior elections; provided, however, that any new election must be filed prior to the calendar year preceding the calendar year in which the participating employee’s benefits would otherwise have been commenced or distributed. If a new election under this Section 5.5 is not effective, the participating employee’s most recent effective election (including any default election) shall govern the form and time of payment .

Third Amendment–Effective January 1, 2009
5.6.     Determination of Beneficiary . If the Participant was married for at least one (1) year ending on the date of the Participant’s death, the survivor benefit shall be payable to the surviving spouse unless the Participant has elected otherwise pursuant to rules established by the Administrative Committee. If the Participant was not married to the surviving spouse for at least one (1) year ending on the date of death, the survivor benefit shall be payable to the Participant’s designated beneficiary or, in the absence of such designation, to the Participant’s estate. No spouse, former spouse, designated joint annuity or beneficiary shall have any right to participate in the Participant’s selection of time or form of distribution or any change of the same.


6.     Commutation of Retirement Plan Excess Benefits . At the election of the Compensation Committee of the Board of Directors of SUPERVALU INC. (or its authorized agent), and for the purpose of minimizing employer payroll or other taxes due on benefits payable under this Plan with respect to the Retirement Plan, the Compensation Committee may commute the value of benefits payable to or with respect to participating employee at the time of the retirement, quit, discharge, death or other termination of employment of the participating employee. The commuted single sum of the value so determined shall be calculated by reference to the interest and mortality factors then in effect under the Retirement Plan with respect to which the commuted benefits are paid. The commuted single sum value shall then be transferred to the Super Valu Stores, Inc. Deferred Compensation Plan as of the date of commutation for payment in accordance with the terms of that plan. If the Compensation Committee elects to commute Retirement Plan benefits payable to or with respect to a participating employee, the Compensation Committee shall cause the participating employee or other person to whom such benefits are payable to be immediately notified in writing of that commutation.


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7.     Funding . All benefits payable under this Plan shall be paid exclusively from the general assets of SUPERVALU INC. and no fund or trust shall be established apart from the general assets of such corporation for this purpose nor shall any assets or property be segregated or set apart from such corporation’s general assets for the purposes of funding this Plan.
Third Amendment–Effective August 1, 2007
8.     General Matters .
8.1.     Employer . Except as hereinafter provided, functions generally assigned to the Employer shall be discharged by its officers or delegated and allocated as provided herein.
8.2.     Committee . Each Committee established pursuant to the document entitled “Committee Bylaws for SUPERVALU Benefit Plans” adopted effective August 1, 2007, by action of the Chief Executive Officer of SUPERVALU, as amended from time to time (“Bylaws”) shall have authority and responsibility under the Plan as set forth in such Bylaws and shall perform all duties assigned to such Committee by the express terms of this Plan Statement.
8.3.     Termination . The Compensation Committee of the Board of Directors of SUPERVALU shall have the exclusive authority to terminate or curtail the benefits of this Plan both with regard to persons expecting to receive benefits hereunder in the future and persons already receiving benefits at the time of such action.
8.4.     Plan Administrator . SUPERVALU INC. shall be the administrator for purposes of section 3(16)(A) of the Employee Retirement Income Security Action of 1974.
8.5.     Disclaimer . This Plan shall not alter, enlarge or diminish any person’s employment rights or obligations or rights or obligations under a Retirement Plan or a Profit Sharing Plan .


Third Amendment–Effective January 1, 2009
8.6. Amendment . SUPERVALU INC. reserves the power to amend this Plan Statement either prospectively or retroactively or both, at any time and for any reason deemed sufficient by it without notice to any person affected by the Plan:
(i) in any respect by action of its Board of Directors (or any duly authorized committee of the Directors), and
(ii) in any respect that increases or decreases the cost of the Plan by more than Five Million Dollars ($5,000,000), by action of the Executive Plans Committee, and
(ii) in any respect that increases or decreases the cost of the Plan by Five Million Dollars ($5,000,000) or less, by action of the Benefit Plans Committee .

9.     Forfeiture of Benefits . All unpaid benefits under this Plan, including without limiting the generality of the foregoing, undistributed accruals attributable to this Plan which are developed


‑9‑

under the Super Valu Stores, Inc. Deferred Compensation Plan, shall be forfeited upon the determination by the Compensation Committee of the Board of Directors of SUPERVALU INC. that the participating employee, either before or after termination of employment:
(i)
has engaged in a felonious, fraudulent or other activity resulting in harm to SUPERVALU INC. or a subsidiary;
(ii)
has divulged to a competitor any confidential information, or trade information, or trade secrets of SUPERVALU INC. or a subsidiary; or
(iii)
has provided SUPERVALU INC. or a subsidiary with materially false reports concerning his business interests or employment; or
(iv)
has made materially false representations which are relied upon by SUPERVALU INC. or a subsidiary in furnishing information to shareholders, stock exchange or the Securities and Exchange Commission; or
(v)
has maintained an undisclosed, unauthorized and material conflict of interest in the discharge of the duties owed by the participating employee to SUPERVALU INC. or a subsidiary; or
(vi)
has engaged in conduct causing a serious violation of state or federal law by SUPERVALU INC. or a subsidiary ; or
(vii)
has engaged in the theft of assets or funds of SUPERVALU INC. or a subsidiary; or
(viii)
has engaged in fraud or dishonesty toward SUPERVALU INC. or a subsidiary which is admitted or judicially proven; or
(ix)
has been convicted of any crime which directly or indirectly arose out of his employment relationship with SUPERVALU INC. or a subsidiary or materially affected his ability to discharge the duties of his employment with SUPERVALU INC. or a subsidiary; or
(x)
has during his employment or for a period of two years after the termination of his employment engaged in any employment or self‑employment with a competitor of SUPERVALU INC. or a subsidiary within the geographical area which is then served by SUPERVALU INC. or the subsidiary.


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Third Amendment-Effective January 1, 2008
10.      Claims Procedure .
10.1.      Determinations . The Administrative Committee shall make such determinations as may be required from time to time in the administration of this Plan. The Administrative Committee shall have the discretionary authority and responsibility to interpret and construe the Plan Statement and all relevant documents and information, 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.
10.2.      Method of Executing Instruments . Information to be supplied or written notices to be made or consents to be given by the Principal Sponsor, the Employer, the Committee, or any other person pursuant to any provision of the Plan Statement may be signed in the name of the Principal Sponsor or Employer by any officer or other person who has been authorized to make such certification or to give such notices or consents.
10.3.      Claims Procedure . 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. An application for a distribution shall be considered as a claim for the purposes of this Section.
(a)      Initial Claim and Decision . An individual may, subject to any applicable deadline, file with the Administrative Committee a written claim for benefits under the Plan in a form and manner prescribed by the Administrative Committee. If the claim is denied in whole or in part, the Administrative Committee shall notify the claimant of the adverse benefit determination within 90 days after receipt of the claim. The 90 day period for making the claim determination may be extended for 90 days if the Administrative Committee determines that special circumstances require an extension of time for determination of the claim, provided that the Administrative Committee notifies the claimant, prior to the expiration of the initial 90 day period, of the special circumstances requiring an extension and the date by which a claim determination is expected to be made. The notice of adverse determination shall provide: (i) the specific reasons for the adverse determination; (ii) references to the specific provisions of the Plan Statement (or other applicable Plan document) on which the adverse determination is based; (iii) a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary; and (iv) a description of the claim and review procedures, including the time limits applicable to such procedure, and (v) a statement of the claimant’s right to bring a civil action under ERISA section 502(a) following an adverse determination on review.



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(b)      Request for Review and Final Decision . Within 60 days after receipt of an initial adverse benefit determination notice, the claimant may file with the Administrative 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 60 days after receipt of the initial adverse determination notice shall be untimely. If the claim, upon review, is denied in whole or in part, the Administrative Committee shall notify the claimant within 60 days after receipt of the request for a review. Such 60‑day period may be extended for 60 days if the Administrative Committee determines that special circumstances require an extension and notifies the claimant what special circumstances require the extension and the date by which the decision is expected. If the extension is due to the claimant’s failure to submit information necessary to decide the claim, the claimant shall have 60 days to provide the necessary information and the period for making the decision shall be tolled from the date on which the extension notice is sent until the date the claimant responds to the information request or, if earlier, the expiration of 60 days. The Administrative Committee’s review of a denied claim shall take into account all documents and other information submitted by the claimant, whether or not the information was submitted before the claim was initially decided. The notice of denial upon review shall set forth in a manner calculated to be understood by the claimant: (i) the specific reasons for the denial; (ii) references to the specific provisions of the Plan document on which the denial is based; (iii) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information relevant to the claim; and (iv) a statement of the claimant’s right to bring a civil action under ERISA section 502(a).
10.4.      Rules and Regulations .
10.4.1. Adoption of Rules . Any rule not in conflict or at variance with the provisions hereof may be adopted by the Administrative Committee.
10.4.2. Specific Rules .
(a)      Any decision or determination to be made by the Principal Sponsor or Employer shall be made by the Administrative Committee unless delegated, in which case references in this Section 8 to the Administrative Committee shall be treated as references to the Administrative Committee’s delegate. No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the established claim procedures. The Administrative Committee may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by the Administrative Committee upon request.



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(b)      Claimants may be represented by a lawyer or other representative at their own expense, but Administrative Committee reserves the right to require the claimant to furnish written authorization and establish reasonable procedures for determining whether an individual has been authorized to act on behalf of a claimant. A claimant’s representative shall be entitled to copies of all notices given to the claimant.
(c)      The decision on a claim and on a request for a review of a denied claim may be provided to the claimant in electronic form instead of in writing at the discretion of the Administrative Committee.
(d)      The time period within which a benefit determination will be made shall begin to run at the time a claim or request for review is filed in accordance with the claims procedures, without regard to whether all the information necessary to make a benefit determination accompanies the filing.
(e)      The claims and review procedures shall be administered with appropriate safeguards so that benefit claim determinations are made in accordance with governing plan documents and, where appropriate, the plan provisions have been applied consistently with respect to similarly situated claimants.
(f)      For the purpose of this Section, a document, record, or other information shall be considered “relevant” as defined in Labor Reg. §2560.503‑1(m)(8).
(g)      The Administrative Committee may, in its discretion, rely on any applicable statute of limitation or deadline as a basis for denial of any claim.
10.4.3. Limitations and Exhaustion .
(a)      No claim shall be considered under these administrative procedures unless it is filed with the Administrative Committee within one (1) year after the Participant knew (or reasonably should have known) of the general nature of the dispute giving rise to the claim. Every untimely claim shall be denied by the Administrative Committee without regard to the merits of the claim. No suit may be brought by or on behalf of any Participant or Beneficiary on any matter pertaining to this Plan unless the action is commenced in the proper forum before the earlier of: (i) three (3) years after the Participant knew (or reasonably should have known) of the general nature of the dispute giving rise to the action, or (ii) sixty (60) days after the Participant has exhausted these administrative procedures.
(b)      These administrative procedures are the exclusive means for resolving any dispute arising under this Plan. No Participant or Beneficiary shall be permitted to litigate any such matter unless a timely claim has been filed under these administrative procedures and these administrative procedures have been exhausted, and determinations under these administrative procedures (including determinations as to whether the claim was timely filed) shall be afforded the maximum deference permitted by law.



‑13‑

(c)      For the purpose of applying the deadlines to file a claim or a legal action, knowledge of all facts that a Participant knew or reasonably should have known shall be imputed to every claimant who is or claims to be a Beneficiary of the Participant or otherwise claims to derive an entitlement by reference to the Participant for the purpose of applying the previously specified periods.
(d)      Except to the extent that federal law is controlling, this Plan Statement shall be construed and enforced in accordance with the laws of the State of Minnesota. All controversies, disputes, claims, or causes of action arising under or related to the Plan or any other party with a relationship to the Plan (including any claims for benefits or any other claims brought under ERISA section 502) must be brought in the United States District Court For the District of Minnesota .

11.     Construction . This Plan is adopted with the understanding that it is in part an unfunded excess benefit plan within the meaning of Section 3(36) ERISA and is in part an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as provided in sections 201(2), 301(3) and 401(a)(1) of ERISA. Each provision hereof shall be interpreted and administered accordingly.
Third Amendment–Effective January 1, 2008
The rules of section 409A of the Code shall apply to this Plan to the extent applicable and this Plan Statement shall be construed and administered accordingly. The Principal Sponsor has affirmatively determined that all amounts accrued under the Plan that were earned and vested before January 1, 2005 (i.e., amounts specified in Section 1.2) shall not be subject to 409A of the Code, and this Plan Statement shall be construed accordingly. Notwithstanding the foregoing, neither the Principal Sponsor, nor the Employer 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 under this Plan or on account of any failure to comply with any Code section .
Unless a contrary intention is clearly expressed herein, terms defined in the Retirement Plan and used in this Plan shall have the meanings assigned in the Retirement Plan insofar as this Plan is developing benefits by reference to the Retirement Plan. Unless a contrary intention is clearly expressed herein, terms defined in a Profit Sharing Plan and used in this Plan shall have the meanings assigned in the Profit Sharing Plan insofar as this Plan is developing benefits by reference to such Profit Sharing Plan.
It is specifically contemplated that the Retirement Plan and the Profit Sharing Plans will, from time to time, be amended and possibly terminated. All such amendments and terminations shall be given effect under this Plan (it being expressly intended that this Plan shall not freeze or lock in the benefit structures of such plans as they exist at the adoption of this Plan or upon the commencement of participation by any participating employee).
This Plan is adopted in the State of Minnesota and shall be construed and enforced according to the laws of that State to the extent such laws are not preempted by federal law.


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This Plan will not provide any excess benefits with respect to any stock bonus plan, employee stock ownership plan or PAYSOP. This Plan shall be construed to prevent the duplication of benefits provided under any other plan or arrangement, whether qualified or nonqualified, funded or unfunded, to the extent that such other benefits are provided directly or indirectly by the Employer.
First Amendment–Effective June 30, 1998
12. Change in Control .
12.1.    Special Definitions . A “Change of Control” shall be deemed to have occurred upon any of the following events:
(i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) of beneficial ownership (within the meaning of Rule 13d‑3 promulgated under the Exchange Act) of 20% or more of either (A) the then outstanding shares of common stock of the Company or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, 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 of any corporation controlled by the Company; or
(ii) the consummation of any merger or other business combination of the Company, sale or lease of the Company’s assets or combination of the foregoing transactions (the “ Transactions ”) other than a Transaction immediately following which the shareholders of the Company and any trustee or fiduciary of any Company employee benefit plan immediately prior to the Transaction own at least 60% of the voting power, directly or indirectly, of (A) the surviving corporation in any such merger or other business combination; (B) the purchaser or lessee of the Company’s assets; or (C) both the surviving corporation and the purchaser or lessee in the event of any combination of Transactions; or
(iii) within any 24 month period, the persons who were directors immediately before the beginning of such period (the “ Incumbent Directors ”) shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of a successor to the Company. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least three‑fourths of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has expressed an intent to effect a Change of Control or engage in a proxy or other control contest); or
(iv) such other event or transaction as the Board shall determine constitutes a Change in Control.
12.2.    Amendment . Notwithstanding any other provision of the Plan, during the five (5) years following a change in control, the provisions of the Plan may not be amended if any amendment would adversely affect the rights, expectancies or benefits provided by the Plan (as in effect immediately prior to the change in control), of any Participant, Beneficiary or other person entitled to payments under the Plan.




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APPENDIX A

RULES FOR POST‑2004 ACCRUALS
The portion of a Participant’s benefit that accrued after December 31, 2004, shall be governed by the terms of the Plan Statement subject to modifications specified in this Appendix A which are intended to comply with section 409A of the Code.
Pursuant to Section 2.1 of the Plan Statement (as amended herein), all Participants in this Plan were determined on or before December 31, 2007, and no employees shall become Participants in this Plan after December 31, 2007. Distribution elections with respect to accruals after December 31, 2004, were made by Participants either before December 31, 2004, or in accordance with the transition relief described in IRS Notice 2005‑1; Q&A–19(c) and the preambles to the proposed regulations under section 409A of the Code.
1.    Separation from Service. The term Termination of Employment is replaced throughout the Plan Statement by the term Separation from Service, and Separation from Service is defined as follows:
Separation from Service — a severance of an employee’s employment relationship with the Employers and all Affiliates for any reason other than the employee’s death.
(a)
A transfer from employment with an Employer to employment with an Affiliate, or vice versa, shall not constitute a Separation from Service.
(b)
Whether a Separation from Service has occurred is determined based on whether the facts and circumstances indicate that the Employer and employee reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the employee would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding thirty‑six (36) month period (or the full period of services to the employer if the employee has been providing services to the employer for less than thirty‑six months).
(c)
Separation from Service shall not be deemed to occur while the employee is on military leave, sick leave or other bona fide leave of absence if the period does not exceed six (6) months or, if longer, so long as the employee retains a right to reemployment with the Employer or an Affiliate under an applicable statute or by contract. For this purpose, a leave is bona fide only if, and so long as, there is a reasonable expectation that the employee will return to perform services for the Employer or an Affiliate. Notwithstanding the foregoing, a 29‑month period of absence will be substituted for such 6‑month period if the leave is due to any medically determinable physical or mental


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impairment that can be expected to result in death or can be expected to last for a continuous period of no less than 6 months and that causes the employee to be unable to perform the duties of his or her position of employment.
(d)
Where as part of a sale or other disposition of assets by the Employer to an employer that is not an Affiliate, an employee providing services to the Employer immediately before the transaction and to the buyer immediately after the transaction (“Affected Employee”) would otherwise experience a Separation from Service from the Employer as a result of the transaction, the Employer and the buyer shall have the discretion to specify that the Affected Employee has not experienced a Separation from Service if (i) the transaction results from bona fide, arm’s length negotiations, (ii) all Affected Employees are treated consistently, and (iii) such treatment is specified in writing no later than the closing date of the transaction.
2.    Specified Employee. For purposes of application of the six (6) month delay rule in Section 3.3 (as modified in this Appendix A), Specified Employee is defined as follows:
Specified Employee — a Participant who is a key employee as defined in section 416(i) of the Code. A Participant’s status as a Specified Employee shall be determined each December 31st based on the facts existing during the year ending on that date. If a Participant is determined to be a Specified Employee on that date, the Participant shall be treated as a Specified Employee for purposes of the six (6) month delay under Section 3.3 (as modified in this Appendix A) if Separation from Service occurs during the twelve (12) month period beginning the following April 1.
3.    Affiliate. For purposes of the application of the definition of Separation from Service, Affiliate is defined as follows:
Affiliate — a business entity that is treated as a single employer with SUPERVALU INC. under the rules of section 414(b) and (c) of the Code, including the eighty percent (80%) standard therein.
4.    Form of Distribution to Participant. Section 3.2 of the Plan Statement is revised to read in full as follows:
3.2.     Form of Distribution to Participant . Distribution of the Participant’s benefit shall be made to the Participant in whichever of the following Actuarially Equivalent forms the Participant shall have timely elected in writing delivered to the Plan Sponsor. If for any reason a Participant shall have failed to make a timely election of form of distribution (including reasons entirely beyond the control of the Participant), distribution shall be made in the form of a single lump sum.
(i)
a single lump sum;
(ii)
a series of five (5) equal annual installments;
(iii)
a series of ten (10) equal annual installments;


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(iv)
a single life annuity;
(v)
a joint and 50% to surviving spouse annuity;
(vi)
a joint and 67% to surviving spouse annuity; or
(vii)
a joint and 100% to surviving spouse annuity.
Actuarially Equivalent value shall be determined by reference to the rules and factors in effect under the Retirement Plan at the time the benefit is first payable.
5.    Time of Distribution to Participant. Section 3.3 of the Plan Statement is revised to read in full as follows:
3.3.     Time of Distribution to Participant . Distribution of a Participant’s benefit shall be made or commenced at whichever of the following dates as the Participant shall have timely elected in writing delivered to the Plan Sponsor:
(i)
within thirty (30) days after the Participant’s Separation from Service;
(ii)
during the month of March following the Participant’s Separation from Service;
(iii)
during the month of March following the later of (A) the Participant’s sixty‑second (62 nd ) birthday or (B) the Participant’s Separation from Service; or
(v)
during the month of March following the later of (A) the Participant’s sixty‑fifth (65 th ) birthday or (B) the Participant’s Separation from Service;
provided, however, that if distribution is made or commenced in the event of the Participant’s Separation from Service and if the Participant is a Specified Employee, distribution shall be delayed until the six (6) month anniversary of the date following the date of the Participant’s Separation from Service (or if earlier, until the death of the Participant) and distribution shall be made or commenced on the first payroll date of the Plan Sponsor thereafter.
Notwithstanding the foregoing, the time of any distribution shall be delayed in accordance with the rules in Section 3.5 related to subsequent election changes.
No spouse or former spouse shall have any right to participate in the Participant’s election of time of distribution.
6.    Default Election. Section 3.4 of the Plan Statement is revised to read in full as follows:
3.4.     Default . If for any reason a Participant shall have failed to make a timely election of time for distribution (including reasons entirely beyond the control of the Participant),


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the Participant shall be deemed to have elected to receive distribution during the March following the Participant’s Separation from Service.
7.    Subsequent Changes in Elections for Distribution to Participant. Section 3.5 of the Plan Statement is revised to read in full as follows:
3.5.     Subsequent Changes in Elections for Distribution to Participant . A Participant shall be permitted to change prior elections of time of distribution and form of distribution if such election change is made in the form and manner prescribed by the Administrative Committee and only if the following conditions are satisfied:
(a)
the election change shall not take effect until the date that is twelve (12) months after the date on which the Participant submits the election change;
(b)
if the Participant changes the form of distribution elected under Section 3.2 (as modified in this Appendix A), distribution shall be delayed until the date that is five (5) years after the date the distribution would have been made or commenced but for the election change; provided, however, that for this purpose, a change from one life annuity form of distribution to another actuarially equivalent life annuity form before distribution has commenced shall not be considered a change in form of distribution; and
(c)
if the Participant changes the time of distribution elected under Section 3.3 (as modified in this Appendix A) or by default under Section 3.4 (as modified in this Appendix A), the election change (i) must be submitted at least 12 months before the distribution date previously elected by the Participant, and (ii) distribution shall be delayed at least five (5) years after the date distribution would have been made or commenced but for the election change.
8.    Benefit to Beneficiaries. The lead‑in to Section 5.1 of the Plan Statement is revised to read as follows:
5.1.     Amount . There shall be paid under this Plan to the Participant’s Beneficiary as determined in Section 5.6, the excess, if any, of:
9.    Form of Distribution to a Beneficiary. Section 5.2 of the Plan Statement is revised to read in full as follows:
5.2.     Form of Distribution to a Beneficiary . Distribution to the Participant’s Beneficiary shall be made in whichever of the following Actuarially Equivalent forms the Participant shall have timely elected in writing delivered to the Plan Sponsor. If for any reason a Participant shall have failed to make a timely election of form of distribution (including reasons entirely beyond the control of the Participant), distribution shall be made to such person in the form of a single lump sum.


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(i)
a single lump sum;
(ii)
a series of five (5) equal annual installments;
(iii)
a series of ten (10) equal annual installments; or
(iv)
a single life annuity.
Actuarially Equivalent value shall be determined by reference to the rules and factors in effect under the Retirement Plan at the time the benefit is first payable. Amounts paid to the Beneficiary in a lump sum or installment form which are not paid at the Beneficiary’s death, shall be paid to the Beneficiary’s estate.
10.    Time of Distribution to Beneficiary. Section 5.3 of the Plan Statement is revised to read in full as follows :
5.3.     Time of Distribution to Participant . Distribution to a Participant’s Beneficiary shall be made or commenced at whichever of the following dates the Participant shall have timely elected in writing delivered to the Plan Sponsor:
(i)
within thirty (30) days after the date of the Participant’s death;
(ii)
during the month of March following the date of the Participant’s death;
(iii)
during the month of March following the later of: (A) the date the Participant would have attached age sixty‑two (62) or (B) the date of the Participant’s death; or
(v)
during the month of March following the later of: (A) the date the Participant would have attached age sixty‑five (65) or (B) the date of the Participant’s death.
11.    Default Election. Section 5.4 of the Plan Statement is revised to read in full as follows:
5.4.     Default . If for any reason a Participant shall have failed to make a timely election of time for distribution to the Beneficiary (including reasons entirely beyond the control of the Participant), the Participant shall be deemed to have elected distribution to the Beneficiary during the March following the date of the Participant’s death.
12.    Subsequent Changes in Elections for Distribution to Beneficiary. Section 5.5 of the Plan Statement is revised to read in full as follows:
5.5.     Subsequent Changes in Elections for Distribution to Beneficiary . A Participant shall be permitted to change prior elections of time of distribution and form of distribution to a Beneficiary if such election change is made in the form and manner prescribed by the Administrative Committee and only if the following conditions are satisfied:


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(a)
the election change shall not take effect until the date that is twelve (12) months after the date on which the Participant submits the election change;
(b)
if the Participant changes the form of distribution elected under Section 5.2 (as modified in this Appendix A), distribution shall be delayed until the date that is five (5) years after the date the distribution would have been made or commenced but for the election change; provided, however, that for this purpose, a change from one life annuity form of distribution to another actuarially equivalent life annuity form before distribution has commenced shall not be considered a change in form of distribution; and
(c)
if the Participant changes the time of distribution elected under Section 5.3 (as modified in this Appendix A) or by default under Section 5.4 (as modified in this Appendix A), the election change (i) must be submitted at least 12 months before the distribution date previously elected by the Participant, and (ii) distribution shall be delayed at least five (5) years after the date distribution would have been made or commenced but for the election change.
13.    Section Disregarded. Section 6 of the Plan Statement (and all cross‑references thereto) are deleted and have no further effect.



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Exhibit 10.15
THIRD AMENDMENT TO
ALBERTSON'S, INC. EXECUTIVE ASRE MAKEUP PLAN


WHEREAS, the Albertson's, Inc. Executive ASRE Makeup Plan (the "Plan") was established effective September 26, 1999, and has previously been amended;
WHEREAS, Albertson's, Inc. desires to further amend the Plan;

NOW, THEREFORE, the following amendments to the Plan are hereby adopted:

1.     Section 6.4(a) and (d) of the Plan are amended and restated, effective
January 1, 2003, to read in their entirety as follows:

6.4 (a)(i) Except as otherwise provided in this Section 6.4, the amount credited to a Participant's Account shall be paid in one or more of the following forms: (A) a single lump sum, (B) a 5-year payout in 60 approximately equal monthly installments or 5 (five) equal annual installments, but not both, (C) a 10-year payout in 120 approximately equal monthly installments or 10 (ten) equal annual installments, but not both or (D) a 15-year payout in 180 approximately equal monthly installments or 15 equal annual payments, but not both, or a combination of the foregoing to the extent administratively practicable, as the Participant shall elect in any Deferral Agreement; provided, however, that in the absence of such election in any Deferral Agreement, the respective amounts credited to the Participant's Account shall be payable in 120 approximately equal monthly installments. If installment payments are elected, the Account shall be amortized with an assumed rate of return of six percent (6%) unless the Participant selects, and the Committee approves, an alternative assumed rate of return. As of each January 1, the amount to be distributed in installment payments for that year shall be determined by amortizing the Participant's Account balance as of the preceding December 1 over the remainder of the installment period, using the assumed rate of return which was fixed under the preceding sentence at the time installment payments were elected. The Participant shall not be entitled to select a different form of distribution with respect to the amounts credited to the
Participant's Account in each Plan Year. Instead, the distribution form(s) selected by the Participant shall apply to the entire balance of the Participant's Account.




(ii)     The Participant may modify the form of the distribution of all or part of the Participant's Account; provided that such modification is made on a validly executed and timely filed Deferral Agreement at least 12 months prior to the date on which the modification is to be effective. Notwithstanding the foregoing, distribution of the Participant's entire Account balance must be completed no later than the fifteenth year following the year in which distributions commence.




(d)     Notwithstanding anything in this Section 6.4 to the contrary, in the event that the value of a Participant's Account does not exceed $30,000, as of the date the Participant terminates employment with the Employer, the Committee shall cause such Participant's Account to be distributed in a single lump sum payment.



IN WITNESS WHEREOF, the Employer has caused this instrument to be executed by its officer, duly authorized by its Board of Directors, this 30 th day of
November , 2002.
ALBERTSON'S, INC.

By
 
/S/ John R. Sims
 
 
John R. Sims
Its
 
Executive Vice President
 
 
& General Counsel





Exhibit 10.19
SUPERVALU INC.
EXECUTIVE & OFFICER SEVERANCE PAY PLAN
(As amended and restated effective April 20, 2018)

SUPERVALU INC., a Delaware corporation, hereby establishes a severance pay plan for those employees of SUPERVALU and its subsidiaries (the “Company”) who have been elected by the Board of Directors as a Section 16 or corporate officer, pursuant to this Plan document (the “Plan”). If and to the extent that any employees covered by this Plan are also covered under the plan set forth in the document entitled “SUPERVALU INC. Severance Pay Plan for Nonunion Associates” and dated June 2, 2008, as amended from time to time, this Plan shall entirely replace and supersede such coverage.

1.
Purpose . The Plan provides severance benefits to certain employees of the Company whose employment is involuntarily terminated without Cause, as that term is defined herein.

2.
Effective Date . This Plan document is effective for any termination of employment of which a participant (as defined in paragraph 3) is notified on or after April 20, 2018.

3.
Participation . Unless excluded under paragraph 4, an employee of the Company becomes a participant in the Plan if:

(a)
at the time of termination, the employee has been elected by the Board of Directors as a Section 16 or corporate officer; and

(b)
the employee is involuntarily terminated without Cause, on or after the effective date of this Plan, as that term is defined herein.

For purposes of subparagraph (b), Cause means:

(i)
the continued failure to substantially perform employee’s duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written notice has been provided identifying the manner in which the employee has not substantially performed employee’s duties, and after employee has had six (6) months to improve performance to Company’s expectations;

(ii)
the conviction of, or plea of guilty or nolo contendere to, a felony or the employee’s engagement in conduct which, in the Company’s opinion, is materially and demonstrably injurious to the Company;

(iii)
the commission of an act or acts of personal dishonesty intended to result in substantial personal enrichment of the employee at the expense of the Company; provided, however, that in no event shall Cause exist by virtue of any action taken by the employee in compliance with express written directions of the Board, the Company’s Chief Executive Officer, or the officer to whom the employee reports, or in reliance upon the express written consent of the Company’s counsel; or

(iv)
employee’s failure to comply with Company policies relating to Code of Business Conduct, Equal Employment Opportunities and Harassment, or Workplace Violence.


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With respect to the Chief Executive Officer only, for a termination of employment to be for Cause, the employee must be provided with a notice of termination within six (6) months after the Company has actual knowledge of the act or omission constituting Cause, the employee must be provided with an opportunity to be heard by the Board no earlier than 30 days following the notice of termination; and there must be a good faith determination of Cause by at least 2/3rds of the non-employee outside directors of the Company.

Whether the termination meets the criteria for Cause outlined above will be determined by the Company in its sole discretion based on all the facts and circumstances. The Company’s decision will be final and binding.

A participant will continue in the Plan until the earliest of: (i) the date the participant has been paid all the severance payments due under the Plan, (ii) the date the participant accepts continuing employment with the Company in a classification other than a classification of employees covered by this Plan, (iii) the date the participant’s employment is terminated under conditions that do not qualify for benefits under this Plan, or (iv) the date of the participant’s death.

4.
Exclusions . Even if an employee satisfies the requirements in paragraph 3, the employee will not become a participant or receive benefits in this Plan if:

(a)
employee is terminated due to disability or death;

(b)
employee has not been actively at work at any time during the six (6) months immediately preceding the termination date;

(c)
employee accepts any position with the Company or a subsidiary thereof;

(d)
employee is offered a position by the Company or a subsidiary thereof, and such position does not require relocation and offers total annual cash compensation equal to or greater than employee’s current total annual cash compensation, even if employee does not accept such offer;

(e)
employee is employed in a business unit in which a sale or other transfer of the business unit, a portion of the business unit, or specific assets of the business unit to another employer occurs and, (i) upon or within one hundred twenty days (120) days following the closing of that transaction, (A) employee accepts any position with the other employer or (B) is offered a position that does not require relocation and with total annual cash compensation that is not less than the employee’s current total annual cash compensation, even if employee does not accept such offer; provided that, employee remains employed by the Company through the occurrence of either (A) or (B) or (ii) the employment of employees employed by such business unit is continued immediately following the closing of that transaction by operation of law. For purposes of this subparagraph 4(e), “business unit” shall mean any subunit of the Company as defined at the discretion of the Company (e.g., subsidiary, district, region, or cost center may be “business units” under this subparagraph);

(f)
employee does not continue working through the date designated by the Company as the employee’s termination date or any earlier date that is designated by the Company as the employee’s release from duty date;

(g)
employee fails to return Company property on or before the employee’s last day of work;


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(h)
employee is eligible for a severance payment on account of the employee’s termination of employment under an individual Change of Control Severance Agreement; or

(i)
employee fails to execute a Release of Claims and Agreement in the form and manner prescribed by the Company within the time set forth in the Release of Claims and Agreement or revokes or rescinds such Release of Claims and Agreement during the revocation or rescission period set forth in such Release of Claims and Agreement (the Agreement will include the participant’s agreements related to confidentiality, noncompetition, nonsolicitation, nondisparagement, and arbitration).
 
5.
Severance Pay Benefit . The amount of severance pay is determined under this paragraph 5.

(a)
Amount . The amount of severance pay depends on the participant’s classification as follows:

Tier I
Chief Executive Officer
(1) 2 times annual base salary at time of termination

Plus

(2) an amount calculated as follows: take the average of the Company’s performance results (expressed as a percentage) under the Company’s annual bonus plan for executive officers for the preceding three years. Multiply that percentage by employee’s current target bonus amount under such annual bonus plan. Multiply the result of this subparagraph by two.

Plus

(3) a pro-rated bonus under the Company’s annual bonus plan (based on weeks of service in relevant bonus year) calculated on the same basis as all others in the same annual bonus plan.

Plus

(4) Reimbursement for cost of COBRA coverage for medical and/or dental insurance (if participant has been enrolled in such prior to termination, and if participant timely makes a COBRA election) until the earlier of: a) eighteen (18) months following termination; or b) participant is eligible to obtain medical and/or dental coverage through other sources. (Reimbursed amounts will be taxable to the participant).
Tier II

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Executive Officers, as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (other than the Chief Executive Officer)
(1) 1.5 times annual base salary at the time of termination

Plus

(2) an amount based on the following calculation: take the average of the Company’s performance results (expressed as a percentage) under the Company’s annual bonus plan for executive officers for the preceding three years. Multiply that percentage by employee’s current target bonus amount under such annual bonus plan. Multiply the result of this subparagraph by 1.5.

Plus

(3) a pro-rated bonus under the Company’s annual bonus plan (based on weeks of service in relevant bonus year) calculated on the same basis as all others in the same annual bonus plan.

Plus

(4) Reimbursement for cost of COBRA coverage for medical and/or dental insurance (if participant has been enrolled in such prior to termination, and if participant timely makes a COBRA election) until the earlier of: a) eighteen (18) months following termination; or b) participant is eligible to obtain medical and/or dental coverage through other sources. (Reimbursed amounts will be taxable to the participant).
Tier III
Employees who have been elected by the Board of Directors as a corporate officer (other than executive officers)
(1) 1 times annual base salary at time of termination

Plus

(2) an amount based on the following calculation: take the average of the Company’s performance results (expressed as a percentage) under the applicable Company’s annual bonus plan for the preceding three years. Multiply that percentage by employee’s current target bonus amount under such annual bonus plan. Multiply the result of this subparagraph by one.

Plus

(3) a pro-rated bonus under the Company’s annual bonus plan (based on weeks of service in relevant bonus year) calculated on the same basis as all others in the same annual bonus plan.

Plus

(4) Reimbursement for cost of COBRA coverage for medical and/or dental insurance (if participant has been enrolled in such prior to termination, and if participant timely makes a COBRA election) until the earlier of: a) twelve (12) months following termination; or b) participant is eligible to obtain medical and/or dental coverage through other sources. (Reimbursed amounts will be taxable to the participant).

In the event that not all employees in a particular tier are or were on the same annual bonus plan or if the applicable bonus plan did not involve metrics tied to performance of the Company, the portion of the severance pay calculated by reference to the average of the Company’s performance results for the preceding three years shall instead refer to the average of the performance results for the annual bonus plan that was applicable to the employee during each of the preceding three years.

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Furthermore, in the situation described in the preceding sentence, if the employee was not employed by the Company or did not participate in an annual bonus plan for any portion of the preceding three years, the severance pay calculation shall instead refer to the performance under the annual bonus plan applicable to the most similarly situated employee for the applicable year or years, as determined by the Board of Directors for any executive officers, or by the Chief Human Resources Officer or person performing such functions (“CHRO”) for all other employees.

In all cases above, employees shall also be entitled to receive any benefits or payouts, including accelerated vesting of awards, to which the employee may be entitled under any long-term incentive compensation award, including any equity compensation, as provided by the terms of the applicable plan and/or agreement governing such long-term incentive compensation award.

(b)
Time and Form of Payment . All severance pay, except the pro-rated amounts under the Company’s annual bonus plan will be paid in a single lump sum as soon as practicable after the tenth day following the last day of the revocation period specified in the Release of Claims and Agreement, subject to paragraph 9(e) below. Except as otherwise stated herein, bonuses payable under the annual bonus plan will be paid in the same form of payment as otherwise payable under the plan. In no case will payment of severance pay (other than the pro-rated amounts under the Company’s annual bonus plan) be made later than the later of (i) two and one half months following the end of the fiscal year in which the termination date or, if earlier, the release from duty date, occurs or (ii) March 15 of the calendar year next following the calendar year in which the termination date or, if earlier, the release from duty date, occurs.

The pro-rated annual bonus will be paid at the same time other bonuses are paid under the annual bonus plan. In no event, however, will payments under the annual bonus plan or any other amounts payable under this plan, except for reimbursement for the cost of COBRA coverage, be paid later than the applicable short term deferral period under Internal Revenue Code Section 409A. Required taxes will be withheld from payments under this Plan, and appropriate tax documents will be issued reflecting amounts received pursuant to this plan. Severance pay is not eligible for contributions to the 401(k) plan, flexible spending account plan or any deferred compensation plan.

(c)
WARN Benefits . Where the requirements of the Worker Adjustment and Retraining Notification Act (“WARN”) or other similar state or local requirements apply, participants will receive the legally required notice of termination dates. These participants will remain on active employment status as required by law through that notice period. Where the Company determines that the services of such participant are not required through the full notice period, the participant may be released from duty (see paragraph (d) below) but will continue to receive regular pay and benefits on the same basis as if they had reported to work and will also receive all severance pay under this Plan for which they are eligible.

(d)
Release from Duty Date . In some circumstances, the Company may determine in its sole discretion that the employee is not needed at work through the stated termination date. A participant will be eligible to receive severance pay under this Plan if the participant stops coming to work after receiving written notification from the Company of such an early release date.


5



(e)
Repayment of Severance Pay . If within six (6) months of an individual’s termination date, the Company wishes to rehire, in any capacity, an individual who has received severance benefits pursuant to this Plan, the rehired employee is required to repay to the Company a portion of the severance benefits received, calculated as follows: convert the amount of base salary in item (1) in Tier I, II, and III charts above into weeks of base salary (e.g., 52 weeks for a Tier III participant) and subtract from it the number of full weeks that elapsed between the participant’s termination date (or release from duty date, if earlier) and rehire date. Multiply that number of weeks by the weekly equivalent of the total base salary and bonus amounts in items (1) and (2) in the Tier I, II, and III charts, above. (The weekly equivalent is obtained by adding together the amounts paid under Items (1) and (2) and then dividing by 104 for Tier I, 78 for Tier II and 52 for Tier III). The result is the gross repayment amount. The individual must repay that amount, reduced by applicable taxes, to the Company prior to the date employment recommences or the employment offer will be withdrawn.

6.
Related Benefits and Benefit Plans.

(a)
Outplacement Assistance . At participant’s request, outplacement services shall be provided by a professional outplacement provider mutually acceptable to the employee and the Company at a cost to the Company of not more than Twenty-Five Thousand Dollars ($25,000). Such services may be provided by direct payment to the outplacement provider and not by reimbursement to employee. Services shall be paid only if the services are provided during the period beginning with the later of the termination date or last day worked and ending on the December 31 of the second calendar year following the calendar year in which the termination occurred. However, outplacement services may begin after the date employee is notified of termination with advance written approval of the Company.

(b)
Other Benefit Plans . Benefits in other benefit plans provided by the Company will be determined in accordance with the plan documents for those benefit plans. Severance pay is not eligible for deferral into 401(k) plans sponsored by the Company and will not be counted as pay in the SUPERVALU INC. Retirement Plan. Severance pay is not eligible for contribution to any Section 125 “cafeteria” plans or any deferred compensation plans. This Plan does not affect the payment of unused vacation or the terms of any stock option plan or agreements.

7.
Amendment and Termination of Plan . SUPERVALU INC., by action of its Board of Directors, reserves the right to amend or terminate this Plan without notice (subject to the proviso in this sentence), in any respect, in whole or in part, for any reason, at any time and from time to time, prospectively or retroactively or both, as to persons who are participants and as to persons who may become participants and as to benefits being received and as to benefits that may be received in the future in whole or in part. Changes to the Plan which are administrative or clarify its terms but that are not changes to eligibility requirements or reduction in the amount of benefits available under this Plan may be adopted and approved in writing by either the Board of Directors, the Chief Human Resources Officer or the General Counsel and Corporate Secretary or the person performing such functions.

8.
Claims Procedure .
(a)
Initial Claim and Decision . If a participant (referred to as claimant for remainder of Section 8) believes that she or he is not receiving a benefit she or he is entitled to receive under the Plan, the claimant may file a claim with the Vice President of Compensation or person

6



performing such functions. The claim must be in writing, must include the facts and arguments the claimant wants considered, and must be filed within one year of the date the claimant knew (or should have known) the facts behind the claim. The Vice President of Compensation or person performing such functions has 90 days after receiving the claim to make a decision and notify the claimant if the claim is denied in whole or in part. The notice of denial will state the reasons for denial, the Plan provisions on which the denial is based, a description of additional material (if any) needed from the claimant and why, the procedure for requesting a review of the denial, and the participant’s right to file a civil action under section 502(a) of ERISA if the claim is denied upon review.

(b)
Request for Review and Decision . If the claimant disagrees with the denial of the claim, the claimant may file a request for a review of that decision. The request must be in writing to the CHRO or equivalent, must state the reason for disagreement with the denial of the claim, and must be filed within 60 days after the denial notice was received. The claimant should submit all documents and written arguments she or he wants considered at the review, and the claimant may, upon request and free of charge, receive copies of documents and information relevant to the claim. The CHRO has 60 days after receiving the request to make a decision and notify the claimant if the denial is upheld. If the CHRO decides that the claim was correctly denied, the notice will state the reasons for the denial, the Plan provisions on which the denial is based, the claimant’s right to receive, upon request and free of charge, reasonable access to and copies of the relevant documents and information used in the claims process, and the claimant’s right to file a civil action under section 502(a) of ERISA.

(c)
Extensions of Time Periods . If the claimant is notified what special circumstances require an extension and what date the claim is expected to be decided, the 90-day period for deciding an initial claim may be extended for up to 90 additional days and the 60-day period for making a decision following a request for a review may be extended for up to 60 additional days. If an extension of the 60-day period is necessary because the claimant needs to submit additional information, the claimant will be given 60 days to provide that information. The time it takes the claimant to provide that information will not count against the 60 days the CHRO has to make a decision.

(d)
In General . The CHRO will make all final decisions on claims. The CHRO has the discretion, authority, and responsibility to decide all factual and legal questions under the Plan, to interpret and construe the Plan and any ambiguous or unclear terms, and to determine whether a claimant is eligible for benefits and the amount of benefits, if any, a claimant is entitled to receive. The CHRO has the right to delegate his or her authority to make decisions and all such decisions are conclusive and binding on all parties. A claimant may, at his or her own expense, have an attorney or representative act on his or her behalf, but the Company has the right to require a written authorization from the claimant.

(e)
Substitution . For purposes of Section 8 (b) through (d) above, if the claimant is the CHRO, then “General Counsel and Corporate Secretary” shall be substituted wherever “Chief Human Resources Officer” or “CHRO” currently appears. In the absence of an individual designated as “General Counsel and Corporate Secretary,” the executive who oversees legal services shall be substituted wherever “Chief Human Resources Officer” or “CHRO” currently appears.


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(f)
Deadline to File a Legal Action . No legal action to recover Plan benefits or to enforce or clarify rights under the Plan under section 502 or section 510 of ERISA or under any other provision of law, whether or not statutory, may be brought by any claimant on any matter pertaining to this Plan unless the legal action is commenced in the proper forum and before the earlier of: (a) thirty (30) months after the claimant knows or reasonably should have known of the principal facts on which the claim is based, or (b) six (6) months after the claimant has exhausted the claim and review procedure.

(g)
Choice of Forum . All controversies, disputes, claims, or causes of actions arising under or related to the Plan must be brought in the United States District Court for the District of Minnesota.

9.
Miscellaneous Provisions .

(a)
No Assignment . No participant will have any transmissible interest in any benefit under the Plan nor shall any participant have any power to anticipate, alienate, dispose of, pledge or encumber the same, nor shall the Company recognize any assignment thereof, either in whole or in part, nor shall any benefit be subject to attachment, garnishment, execution following the judgment or other legal process.

(b)
Correction of Error . The Company has the right to correct any errors that may occur in the administration of the Plan, including reducing or eliminating benefits to the participant under the Plan.

(c)
Governing Law . To the extent not preempted by the laws of the United States, the laws of the State of Minnesota shall apply with respect to the Plan.

(d)
Severability . If a provision of the Plan shall be held to be illegal, invalid or unenforceable, the illegal, invalid or unenforceable provision shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provisions had not been included.

(e)
409A Limitation . Notwithstanding any provision to the contrary, the Plan shall either provide for payments that are exempt from Code section 409A or such payments shall be made in compliance with Code section 409A. To the extent that any payments or benefits to be provided to the participant under this Plan would be considered deferred compensation under Code Section 409A and the participant, as of the date of participant’s termination of employment, is a “specified employee” as defined in regulations issued under Code Section 409A of the Code, then any such payments that would otherwise be due and payable during the first six (6) months following and on account of a termination of employment shall instead be paid to the participant upon the earlier of (i) six months and one day after the date of the participant’s termination of employment or (ii) any other date permitted under section 409A(a)(2) and section 409A(a)(3). To the extent that any payments or benefits to be provided to the participant under this Plan would be considered deferred compensation under Code section 409A, the provisions of this Plan pertaining thereto shall be construed and administered to comply with section 409A. Neither the Company nor any of its officers, directors, agent 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 paid or payable under this Plan or on account of any failure to comply with section 409A.

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9

Exhibit 10.32


SUPERVALU INC.
2012 STOCK PLAN
PERFORMANCE SHARE UNIT AWARD AGREEMENT
This Performance Share Unit Award Agreement (the “Agreement”) is made and entered into as of the grant date indicated below (the “Grant Date“), by and between SUPERVALU INC. (the “Company”), and you, the Award Recipient whose name appears below. The Agreement consists of this cover page, the Performance Share Unit Award Terms and Conditions (the “Terms and Conditions”) on the following pages, and Schedule A attached hereto.
The Company has established the 2012 Stock Plan, as amended and restated (the “Plan”), under which key employees of the Company may be granted Awards of Restricted Stock Units whose vesting and settlement may be made subject to the satisfaction of Performance Goals (“Performance Share Units”). You have been selected by the Company to receive an Award of Performance Share Units subject to the provisions of this Agreement. Capitalized terms that are used but not defined in this Agreement shall have the meanings ascribed to them in the Plan.
In consideration of the foregoing, the Company and you hereby agree as follows:
1. Grant. Effective as of the Grant Date, the Company hereby grants to you, subject to your acceptance hereof, an Award of Performance Share Units (the “Units”) in an amount initially equal to the Target Number of Units indicated in the table below. Each Unit represents the right to receive one Share of the Company’s common stock, $0.01 par value (the “Common Stock”), following the vesting of the Unit.
2. Acceptance of Award of Performance Share Units. This Award of Performance Share Units is subject to and governed by this Agreement, which includes the Terms and Conditions and Schedule A, and the terms and provisions of the Plan. To accept this Award, this Agreement must be delivered and accepted by you through an electronic medium in accordance with procedures established by the Company, or you must sign and return a copy of this Agreement to the Company, in either case within sixty (60) days after the Grant Date. By so doing, you acknowledge receipt of the Agreement and the Plan, and represent that you have read and understand the same and agree to be bound by the terms and provisions of this Agreement, including Section 1(b) of the Terms and Conditions, and of the Plan. Any question of administration or interpretation arising under this Agreement shall be determined by the Committee administering the Plan, and such determination shall be final, conclusive and binding upon all parties in interest.
Name of Recipient:
 
Target Number of Units:
 
Grant Date:
 
Performance Period:
 
Vesting Schedule:
The number of Units determined in accordance with Schedule A to have been earned as of the end of the Performance Period will vest* on the date the Committee certifies such performance results, which shall be no later than 70 days after the end of the Performance Period (the “Scheduled Vesting Date”) unless otherwise provided under Section 4 of the Terms and Conditions
Performance Metric:
[See Schedule A]
* Assumes your employment has been continuous from the Grant Date to the vesting date.
 

SUPERVALU INC.
 
RECIPIENT:
By:
 
 
 
 
Mark Gross
 
FIRST_NAME-MIDDLE_NAME- LAST_NAME-
 
President and Chief Executive Officer
 
EMPLOYEE_IDENTIFIER-

    



SUPERVALU INC.
2012 STOCK PLAN

PERFORMANCE SHARE UNIT AWARD TERMS AND CONDITIONS

1.     Award of Performance Share Units.

(a)     Nature of Award . The Company hereby confirms the grant to you, as of the Grant Date and subject to the terms and conditions of this Agreement and the Plan, the Award of Units in an amount initially equal to the Target Number of Units specified on the cover page of this Agreement. The number of Units that may actually be earned and become eligible to vest pursuant to this Award can be between [__] and [__] of the Target Number of Units, plus any Dividend Equivalent Units (as defined in Section 3 of these Terms and Conditions) that are credited to you in accordance with this Agreement. Each earned Unit that thereafter vests represents the right to receive one Share of the Company’s common stock. Prior to their settlement or forfeiture in accordance with the terms of this Agreement, the Units granted to you will be credited to an account in your name maintained by the Company. This account will be unfunded and maintained for book-keeping purposes only, with the Units simply representing an unfunded and unsecured contingent obligation of the Company.

(b)     Conditions of Acceptance . By accepting this Award and entering into this Agreement, you acknowledge and agree that this Award is granted pursuant to the Plan and that if any provision of this Agreement is inconsistent with the terms and provisions of the Plan, the terms and provisions of the Plan will govern.

2.     Restrictions Applicable to Units . The Units are not transferable. More particularly, neither this Award nor the Units subject to this Award may be sold, assigned, transferred, exchanged, pledged or encumbered (whether by operation of law or otherwise), or subjected to execution, attachment or similar process, except for a transfer upon your death in accordance with your will or the laws of descent and distribution, or as otherwise permitted by the Committee in accordance with Section 6(h)(v) of the Plan. Following any such transfer, the Units shall continue to be subject to the same terms and conditions that were applicable to the Units immediately prior to their transfer. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Units contrary to these provisions, or the levy of an execution, attachment or similar process upon the Units, shall be void. The Units and your right to receive Shares in settlement of any Units under this Agreement shall be subject to forfeiture except to extent the Units have been earned and thereafter vest as provided in Sections 3, 4 and 5 below.

3.     Shareholder Rights and Dividend Equivalents .

(a)     Shareholder Rights . The Units subject to this Award do not entitle you to any rights of a shareholder of the Company’s common stock. You will not have any of the rights of a shareholder of the Company in connection with any Units granted or earned pursuant to this Agreement unless and until Shares are issued to you in settlement of vested Units as provided in Section 5.

(b)     Dividend Equivalents . On the date that the number of earned Units has been determined to have vested in accordance with the terms of this Agreement, a Total Dividend Equivalent amount will be credited to your account and shall be deemed reinvested in additional Units (“Dividend Equivalent Units”). The Total Dividend Equivalent amount will be determined by multiplying the number of Units determined to have vested by the per share amount of each cash dividend paid on the Company’s common stock with a record date and payment date occurring between the Grant Date and the applicable vesting date, and adding those products together. Each of those products is referred to as a “Dividend Equivalent amount.” The number of Dividend Equivalent Units to be credited to your account pursuant to this deemed reinvestment will be determined by dividing each Dividend Equivalent amount by the Fair Market Value of a share of the

2

Company’s common stock on the applicable dividend payment date, and adding those quotients together. Any Dividend Equivalent Units so credited will be fully vested and subject to settlement as provided in Section 5 below.

4.     Vesting and Forfeiture of Units. The Units shall vest at the earliest of the times and to the degree specified in Sections 4(a) through 4(e) below. If your employment with the Company and its Affiliates terminates prior to the Scheduled Vesting Date under circumstances other than as set forth in Sections 4(b) through 4(e), all unvested Units shall immediately be forfeited.

(a)     Scheduled Vesting . The number of Units that have been earned for the Performance Period, as determined by the Committee in accordance with Schedule A, will vest on the Scheduled Vesting Date, so long as your employment has been continuous from the Grant Date to the Scheduled Vesting Date. For these purposes, the “Scheduled Vesting Date” means the date the Committee certifies (i) the degree to which the applicable performance goals for the Performance Period have been satisfied, and (ii) the number of Units that have been earned during the Performance Period and will vest as determined in accordance Schedule A, which certification shall occur no later than 70 days following the end of the Performance Period. Any Units that do not vest on the Scheduled Vesting Date shall immediately be forfeited.

(b)     Retirement . If, during the term of this Award but prior to a Change of Control, your employment terminates by reason of your Retirement, then you will be entitled to have a number of Units vest on the earlier of (i) the Scheduled Vesting Date, or (ii) the date a Change of Control involving a Transaction occurs. If such vesting occurs on the Scheduled Vesting Date, the number of Units that will vest shall be a pro rata portion of the number of Units that would otherwise have been determined to have been earned during the Performance Period in accordance with Schedule A if you had remained continuously employed until the Scheduled Vesting Date. If such vesting occurs on the date a Change of Control involving a Transaction occurs, the number of Units that will vest shall be a pro rata portion of the number of Units that are determined to have been earned based on actual performance as specified in Schedule A. In either case, the pro rata portion shall be determined utilizing a fraction whose numerator is the number of days during the Performance Period prior to your employment termination date and whose denominator is the number of days in the Performance Period. For purposes of this Agreement, “Retirement” shall mean the termination of your employment for any reason other than death, Disability or Cause, and at the time of your termination you are at least sixty (60) years of age and you have completed at least fifteen (15) years of service with the Company or its Affiliates (or their successors). Any Units that do not vest on the vesting date specified in this Section 4(b) shall immediately be forfeited.

(c)     Death or Disability . Except as otherwise provided in Section 4(e), if your employment terminates by reason of your death or Disability prior to the Scheduled Vesting Date, then you will be entitled to have vest on the date your employment terminates a pro rata portion of the Target Number of Units. The pro rata portion shall be determined in the same manner as provided in Section 4(b). Any Units that do not vest as of the date your employment terminates shall immediately be forfeited.

(d)     Reduction in Force . If, during the term of this Award but prior to a Change of Control, your employment is involuntarily terminated as a result of a Company-determined reduction in force, then you will be entitled to have a number of Units vest on the earlier of (i) the Scheduled Vesting Date, or (ii) the date a Change of Control involving a Transaction occurs. If such vesting occurs on the Scheduled Vesting Date, the number of Units that will vest shall be a pro rata portion of the number of Units that would otherwise have been determined to have been earned during the Performance Period in accordance with Schedule A if you had remained continuously employed until the Scheduled Vesting Date. If such vesting occurs on the date a Change of Control involving a Transaction occurs, the number of Units that will vest shall be a pro rata portion of the number of Units that are determined to have been earned based on actual performance as specified in Schedule A. In either case, the pro rata portion shall be determined in the same manner as

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provided in Section 4(b). Any Units that do not vest on the vesting date specified in this Section 4(d) shall immediately be forfeited.

(e)     Change of Control . If a Change of Control that does not involve a Transaction occurs after the Grant Date but before the Scheduled Vesting Date and while you continue to be employed by the Company or any of its Affiliates, then you will be entitled to have vest on the Scheduled Vesting Date (or such earlier date as provided below in this subpart (e), as applicable) the number of Units that would otherwise have been determined to have been earned during the Performance Period in accordance with Schedule A regardless of whether you remain continuously employed by the Company or any of its Affiliates until the Scheduled Vesting Date. Any Units that do not vest on the Scheduled Vesting Date shall immediately be forfeited.

If a Change of Control involving a Transaction occurs after the Grant Date but before the Scheduled Vesting Date (including after a Change of Control that does not involve a Transaction) and the surviving or successor entity (or its parent entity) (the “Survivor”) is not a publicly traded company with securities listed on a national securities exchange, then the Performance Period will be truncated and will end as of the effective date of such Change of Control and you will be entitled to have vest as of the effective date of such Change of Control the number of Units that are determined to have been earned based on actual performance as specified in Schedule A. Any Units determined not to have been vested pursuant to this paragraph shall be forfeited as of the effective date of such Change of Control.

If a Change of Control involving a Transaction occurs after the Grant Date but before the Scheduled Vesting Date (including after a Change of Control that does not involve a Transaction) and while you continue to be employed by the Company or any of its Affiliates and the Survivor is a publicly traded company with securities listed on a national securities exchange, then the following shall apply:

(1)     Award Not Continued, Assumed or Replaced . If this Award is not continued, assumed or replaced by the Survivor in connection with the Change of Control, then the Performance Period will be truncated and will end as of the effective date of the Change of Control and you will be entitled to have vest as of the effective date of the Change of Control the number of Units that are determined to have been earned based on actual performance as specified in Schedule A. Any Units determined not to have been vested pursuant to this paragraph shall be forfeited as of the effective date of the Change of Control.
(2)     Award Continued, Assumed or Replaced . If this Award is continued, assumed or replaced by the Survivor in connection with the Change of Control, the Units shall be deemed to have been earned as of the effective date of the Change of Control based on actual performance as specified in Schedule A using a truncated Performance Period that ends as of the effective date of the Change of Control. Any Units deemed not to have been earned pursuant to this paragraph shall be forfeited as of the effective date of the Change of Control. The vesting of the Units deemed to have been earned pursuant to this paragraph shall remain subject to your continued employment with the Survivor or any of its affiliated entities until the last day of the Performance Period (as specified on the cover page of this Agreement). Notwithstanding the foregoing, if your employment is terminated prior to the last day of the Performance Period by the Survivor or any of its affiliated entities for reasons other than Cause (including as a result of a Survivor-determined reduction in force), by you for Good Reason, or by reason of Retirement, death or Disability, the earned Units will vest on the date your employment terminates. Any Units that do not vest on the date your employment terminates as specified in this paragraph shall immediately be forfeited.
(3)     Settlement Other Than in Shares . Notwithstanding Section 5 below, the Committee may, in its discretion, provide that the Units determined to have vested pursuant to this Section 4(e) shall be settled in cash, property or a combination thereof that is determined by the Committee to

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be at least equal to the value of the consideration that would be received in the Change of Control by the holder of a number of Shares equal to the number of Units determined to have vested.

(4)     What Constitutes Assumption or Replacement . For purposes of this Section 4(e), this Award shall be considered assumed or replaced if, in connection with the Change of Control and in a manner consistent with Code Section 409A, either (i) the contractual obligations represented by the Award are expressly assumed by the Survivor with appropriate adjustments to the number and type of securities subject to the Award and to the performance goals applicable to the Award that preserves the intrinsic value of the Award existing at the time of the Change of Control, or (ii) you have received a comparable equity-based award that preserves the intrinsic value of this Award existing at the time of the Change of Control and contains terms and conditions that are substantially similar to those of this Award. The Committee is under no obligation to treat recipients of Performance Share Unit Awards uniformly and has the discretionary authority to treat recipients disparately.

(f)     Change in Duties/Leave of Absence . The Units shall not be affected by any change of your duties or position or by a temporary leave of absence approved by the Company so long as you continue to be an employee of the Company or of an Affiliate.

5.     Settlement of Units. As soon as practicable after any date on which Units vest, but in no event later than sixty (60) calendar days after the vesting date occurs, the Company shall cause to be issued to you one Share in payment and settlement of each vested Unit, provided payment of the applicable withholding taxes pursuant to Section 6 hereof has been made. The Company shall cause such Shares (less any Shares withheld to pay taxes) to be delivered to you, free of any restrictions, as follows:
(i)    In the form of a stock certificate registered in your name or your name and the name of another adult person (twenty-one (21) years of age or older) as joint tenants, and mailed to your address;
(ii)    In “book entry” form, that is, registered with the Company’s stock transfer agent, in your name or your name and the name of another adult person (twenty-one (21) years of age or older) as joint tenants, with a notice of issuance provided to you; or
(ii)    sent by electronic delivery to your brokerage account.
Only whole Shares shall be issued to you pursuant to this Agreement.
6.     Taxes.
(a)     Responsibility . You acknowledge that you will consult with your personal tax advisor regarding the income tax consequences associated with the grant, vesting and settlement of the Units. In order to comply with all applicable federal, state or local income, social security, payroll, withholding or other tax laws or regulations, the Company may take such action, and may require you to take such action, as it deems appropriate to ensure that all applicable federal, state or local income, social security, payroll, withholding or other taxes, which are your sole and absolute responsibility, are withheld or collected from you.
(b)     Withholding . You acknowledge that you are responsible for the payment of any federal, state, local or other taxes that are required to be withheld by the Company upon vesting or settlement of the Units, and authorize the Company to withhold from other compensation owed to you an amount or amounts sufficient to pay such taxes. In order to satisfy any applicable federal, state, local or other taxes that are required to be withheld in connection with the vesting or settlement of Units, the Company shall withhold

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a portion of the Shares otherwise to be issued following vesting of the Units having a Fair Market Value as of the settlement date equal to the amount of federal and state income tax required to be withheld upon such settlement.
7.     Recovery Rights. If your employment with the Company or an Affiliate is terminated for Cause, or if you breach any of the covenants contained in Section 8 below, the Company shall have the right to recover any Shares (or other consideration) received by you in connection with any settlement of Units that occurred within six (6) months prior to the date on which your employment with the Company and its Affiliates ended, or at any time thereafter. The Company may exercise its rights to recover the Shares by depositing in the United States mail a written notice addressed to you at the latest mailing address for you on the records of the Company within thirty (30) days following the termination of your employment for the recovery of Shares attributable to Units that settled prior to any termination for Cause, and within thirty (30) days after the Company’s discovery of any breach of the covenants contained in Section 8. Within thirty (30) days after the mailing of such notice, you shall deliver to the Company the number of Shares specified by the Company in the notice. If you have disposed of the Shares, then in lieu of delivering the specified number of Shares to the Company, you must pay to the Company the fair market value of the Shares, determined at the time of the disposition, exclusive of any taxes due and payable or commissions or fees arising from such disposition. If the Company exercises its recovery rights prior to the actual issuance and delivery to you of any such Shares, no Shares need be issued or recovered. Rather, you shall immediately forfeit any rights to such Shares.

8.     Employee Covenants. In consideration of benefits described elsewhere in this Agreement, and in recognition of the fact that, as a result of your employment with the Company or any of its Affiliates, you have had or will have access to and gain knowledge of highly confidential or proprietary information or trade secrets pertaining to the Company or its Affiliates, as well as the customers, suppliers, joint ventures, licensors, licensees, distributors or other persons and entities with whom the Company or any of its Affiliates does business (“Confidential Information”), which the Company or its Affiliates have expended time, resources and money to obtain or develop and which have significant value to the Company and its Affiliates, you agree for the benefit of the Company and its Affiliates, and as a material condition to your receipt of benefits described elsewhere in these Terms and Conditions and the attached Agreement, as follows:

(a)     Non-Disclosure of Confidential Information . You acknowledge that you will receive access or have received access to Confidential Information about the Company or its Affiliates, that this information was obtained or developed by the Company or its Affiliates at great expense and is zealously guarded by the Company and its Affiliates from unauthorized disclosure, and that your possession of this special knowledge is due solely to your employment with the Company or one (1) or more of its Affiliates. In recognition of the foregoing, you will not at any time during employment or following termination of employment for any reason, disclose, use or otherwise make available to any third party, any Confidential Information relating to the Company’s or any Affiliate’s business, products, services, customers, vendors, or suppliers; trade secrets, data, specifications, developments, inventions and research activity; marketing and sales strategies, information and techniques; long and short term plans; existing and prospective client, vendor, supplier and employee lists, contacts and information; financial, personnel and information system information and applications; and any other information concerning the business of the Company or its Affiliates which is not disclosed to the general public or known in the industry, except for disclosure necessary in the course of your duties or with the express written consent of the Company. All Confidential Information, including all copies, notes regarding and replications of such Confidential Information will remain the sole property of the Company or its Affiliate, as applicable, and must be returned to the Company or such Affiliate immediately upon termination of your employment.
(b)     Return of Property . Upon termination of employment with the Company or any of its Affiliates, or at any other time at the request of the Company, you shall deliver to a designated Company representative all records, documents, hardware, software and all other property of the Company or its

6

Affiliates and all copies of such property in your possession. You acknowledge and agree that all such materials are the sole property of the Company or its Affiliates and that you will certify in writing to the Company at the time of delivery, whether upon termination or otherwise, that you have complied with this obligation.
(c)     Non-Solicitation of Existing or Prospective Customers, Vendors and Suppliers . You specifically acknowledge that the Confidential Information described in Section 8(a) includes confidential data pertaining to existing and prospective customers, vendors and suppliers of the Company or its Affiliates; that such data is a valuable and unique asset of the business of the Company or its Affiliates; and that the success or failure of their businesses depends upon their ability to establish and maintain close and continuing personal contacts and working relationships with such existing and prospective customers, vendors and suppliers and to develop proposals which are specific to such existing and prospective customers, vendors and suppliers. Therefore, during your employment with the Company or any of its Affiliates and for the twelve (12) months following termination of your employment for any reason, you agree that you will not, except on behalf of the Company or its Affiliates, or with the Company’s express written consent, solicit, approach, contact or attempt to solicit, approach or contact, either directly or indirectly, on your own behalf or on behalf of any other person or entity, any existing or prospective customers, vendors or suppliers of the Company or its Affiliates with whom you had contact or about whom you gained Confidential Information during your employment with the Company or its Affiliates for the purpose of obtaining business or engaging in any commercial relationship that would be competitive with the “Business of the Company” (as defined below in Section 8(e)(1)) or cause such customer, supplier or vendor to materially change or terminate its business or commercial relationship with the Company or its Affiliates.
(d)     Non-Solicitation of Employees . You specifically acknowledge that the Confidential Information described in Section 8(a) also includes confidential data pertaining to employees and agents of the Company or its Affiliates, and you further agree that during your employment with the Company or its Affiliates and for the twelve (12) months following termination of employment for any reason, you will not, directly or indirectly, on your own behalf or on behalf of any other person or entity, solicit, contact, approach, encourage, induce or attempt to solicit, contact, approach, encourage or induce any of the employees or agents of the Company or its Affiliates to terminate their employment or agency with the Company or any of its Affiliates.
(e)     Non-Competition . You covenant and agree that during your employment with the Company or any of its Affiliates and for the twelve (12) months following termination of employment for any reason, you will not, in any geographic market in which you worked on behalf of the Company or any of its Affiliates, or for which you had any sales, marketing, operational, logistical or other management or oversight responsibility, engage in or carry on, directly or indirectly, as an owner, employee, agent, associate, consultant, partner or in any other capacity, a business competitive with the Business of the Company.
(1)    The “Business of the Company” shall mean any business or activity involved in grocery or general merchandise retailing and supply chain logistics, including but not limited to grocery distribution, business-to-business portal, retail support services and third-party logistics, of the type provided by the Company or its Affiliates, or presented in concept to you by the Company or its Affiliates at any time during your employment with the Company or any of its Affiliates.
(2)    To “engage in or carry on” shall mean to have ownership in such business (excluding ownership of up to one percent (1%) of the outstanding shares of a publicly-traded company) or to consult, work in, direct or have responsibility for any area of such business, including but not limited to operations, logistics, sales, marketing, finance, recruiting, sourcing, purchasing, information technology or customer service.
(f)     No Disparaging Statements . You agree that you will not make any disparaging statements about the Company, its Affiliates, directors, officers, agents, employees, products, pricing policies or services.

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(g)     Remedies for Breach of These Covenants . Any breach of the covenants in this Section 8 likely will cause irreparable harm to the Company or its Affiliates for which money damages could not reasonably or adequately compensate the Company or its Affiliates. Accordingly, the Company or any of its Affiliates shall be entitled to all forms of injunctive relief (whether temporary, emergency, preliminary, prospective or permanent) to enforce such covenants, in addition to damages and other available remedies, and you consent to the issuance of such an injunction without the necessity of the Company or any such Affiliate posting a bond or, if a court requires a bond to be posted, with a bond of no greater than $500 in principal amount. In the event that injunctive relief or damages are awarded to the Company or any of its Affiliates for any breach by you of this Section 8, you further agree that the Company or such Affiliate shall be entitled to recover its costs and attorneys’ fees necessary to obtain such recovery. In addition, you agree that upon your breach of any covenant in this Section 8, the Performance Share Units issued under the Plan or any other equity compensation plans of the Company will immediately terminate and the Company shall have the right to exercise any and all of the rights described above including the provisions articulated in Section 7.
(h)     Enforceability of These Covenants . It is further agreed and understood by you and the Company that if any part, term or provision of this Agreement should be held to be unenforceable, invalid or illegal under any applicable law or rule, the offending term or provision shall be applied to the fullest extent enforceable, valid or lawful under such law or rule, or, if that is not possible, the offending term or provision shall be struck and the remaining provisions of this Agreement shall not be affected or impaired in any way.
9.     Arbitration. You and the Company agree that any controversy, claim or dispute arising out of or relating to this Award or Agreement or any breach of this Agreement, or arising out of or relating to your employment relationship with the Company or any of its Affiliates, or the termination of such relationship, shall be resolved by final and binding arbitration under the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association, or other neutral arbitrator and rules as mutually agreed to by you and the Company, except for claims by the Company relating to your alleged breach of any of the employee covenants set forth in Section 8 above. This agreement to arbitrate specifically includes, but is not limited to, discrimination claims under Title VII of the Civil Rights Act of 1964 and under state and local laws prohibiting employment discrimination. Nothing in this Section 9 shall preclude the Company from pursuing a court action to obtain a temporary restraining order or a preliminary injunction relating to the alleged breach of any of the covenants set forth in Section 8. This agreement to arbitrate shall continue in full force and effect despite the expiration or termination of your Award or your employment relationship with the Company or any of its Affiliates. You and the Company agree that any award rendered by the arbitrator must be in writing and include the findings of fact and conclusions of law upon which it is based, shall be final and binding and that judgment upon the final award may be entered in any court having jurisdiction thereof. The arbitrator may grant any remedy or relief that the arbitrator deems just and equitable, including any remedy or relief that would have been available to you or the Company or any of its Affiliates had the matter been heard in court. All expenses of arbitration, including the required travel and other expenses of the arbitrator and any witnesses, and the costs relating to any proof produced at the direction of the arbitrator, shall be borne equally by you and the Company unless otherwise mutually agreed or unless the arbitrator directs otherwise in the award. The arbitrator’s compensation shall be borne equally by you and the Company unless otherwise mutually agreed or the law provides otherwise.

10.     Adjustments. The Parties acknowledge that the number and type of Shares (or other securities or other property) subject to this Award are subject to adjustment as provided in Section 4(c) of the Plan.

11.     Severability. In the event that any provision of this Agreement shall be held to be invalid, the same shall not affect in any respect whatsoever the validity and enforceability of the remainder of this Agreement.


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12.     No Right to Employment. Nothing in this Agreement or the Plan shall be construed as giving you the right to be retained as an employee of the Company or any Affiliate. In addition, the Company or any Affiliate may at any time dismiss you from employment, free from any liability or any claim under this Agreement, unless otherwise expressly provided in this Agreement.

13.     Reservation of Shares. The Company shall at all times during the term of the Award reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of this Agreement.

14.     Securities Matters. The Company shall not be required to deliver any Shares in settlement of Units until the requirements of any federal or state securities or other laws, rules or regulations (including the rules of any securities exchange) as may be determined by the Company to be applicable are satisfied.

15.     Headings. Headings are given to the sections and subsections of this Agreement 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 this Agreement or any provision hereof.

16.     Governing Law. The internal law, and not the law of conflicts, of the State of Delaware will govern all questions concerning the validity, construction and effect of this Agreement.

17.     Notices . For purposes of this Agreement, notices and all other communications contemplated by or provided for in this Agreement, shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed United States certified or registered mail, return receipt requested, postage prepaid, and addressed, in the case of the Company, to the Company at:
P.O. Box 990
Minneapolis, MN 55440
Attention: Corporate Secretary

and in the case of you, to you at the most current address shown on your employment records. Either party may designate a different address by giving notice of change of address in the manner provided above, except that notices of change of address shall be effective only upon receipt.
(a)     Notice of Termination by Company . Any purported termination of employment of you by the Company (whether for Cause or without Cause) shall be communicated by a Notice of Termination to you. No purported termination of employment of you by the Company shall be effective without a Notice of Termination having been given.
(b)      Good Reason Notice by You . Any purported termination of employment by you for Good Reason shall be communicated by a Notice of Termination to the Company or its successor. Your termination of employment will not be for Good Reason unless (i) you give the Company written notice of the event or circumstance which you claim is the basis for Good Reason within ninety (90) days of such event or circumstance first occurring, and (ii) the Company is given thirty (30) days from its receipt of such notice within which to cure or resolve the event or circumstance so noticed. If the circumstance is cured or resolved within said thirty (30) days, your termination of employment will not be for Good Reason.
18.     Successors and Assigns . Subject to the restrictions on transfer contained herein, this Agreement shall be binding upon you and your heirs, executors, administrators, successors and assigns, and upon the successors and assigns of the Company.
19.     Code Section 409A . Notwithstanding anything to the contrary in this Agreement, if this Award should constitute a deferral of compensation subject to Code Section 409A, then the provisions of Section 6(h)(vii) of the Plan shall be fully applicable to this Award. Except as may be required by the foregoing

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sentence, the shares of Stock issuable hereunder shall be distributed no later than the 15 th day of the third month following your first taxable year in which the Units have vested as provided herein.
20.     Definitions . The following terms, and terms derived from the following terms, shall have the following meanings when used in this Agreement with initial capital letters unless, in the context, it would be unreasonable to do so.
(a)    “ Cause ” shall mean:     
(i)    your continued failure to perform your duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to you by the Board or an officer of the Company which specifically identifies the manner in which the Board or the officer believes that you have not substantially performed your duties;
(ii)    the conviction of, or plea of guilty or nolo contendere to, a felony or the willful engaging by you in conduct which is materially and demonstrably injurious to the Company;

(iii)    your commission of a material act or material acts of personal dishonesty intended to result in your substantial personal enrichment at the expense of the Company; or

(iv)    your material violation of Company policies relating to Code of Business Conduct, Equal Employment Opportunities and Harassment or Workplace Violence;
provided, however, that in no event shall Cause exist by virtue of any action taken by you (A) in compliance with express written directions of the Board, the Company's Chief Executive Officer or the officer to whom you report, or (B) in reliance upon the express written consent of the Company's counsel.
In each case above, for a termination of employment to be for Cause, you must be provided with a Notice of Termination (as described in Section 17(a)) within six (6) months after the Company has actual knowledge of the act or omission constituting Cause. Whether a termination of employment is for Cause as provided above will be determined by the Company in its sole discretion based on all the facts and circumstances. For purposes hereof, the term “Company” shall include an Affiliate.
(b)    “ Disability ” means that you suffer from a medically determinable physical or mental impairment that renders you incapable of performing any substantial gainful employment, and is evidenced by a certification to such effect by a doctor of medicine approved by the Company. In lieu of such certification, the Company shall accept, as proof of permanent disability, your eligibility for long-term disability payments under the applicable Long-Term Disability Plan of the Company.
(c)    “ Good Reason ” shall mean any one (1) or more of the following events occurring during the two-year period following the date of a Change of Control:
(i)    your annual base salary is materially reduced below the amount in effect on the date of the Change of Control;

(ii)    your Target Bonus is materially reduced below the Target Bonus as it existed on the date of the Change of Control;


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(iii)    your duties and responsibilities are materially and adversely diminished in comparison to the duties and responsibilities that you had on the date of the Change of Control other than in a general reduction of the number or scope of personnel for which you are responsible for supervising which reduction occurs in connection with a restructuring or recapitalization of the Company or the division of the Company in which you work;

(iv)    the program of long term incentive compensation is materially and adversely diminished in comparison to the program of long term incentive compensation as it existed for you on the date of the Change of Control (for purposes of this clause (iv), a reduction of fifteen percent (15%) or more of the target dollar amount of your long term incentive compensation as it existed for you on the date of the Change of Control based on your most recent award of long term incentive compensation prior to the date of the Change of Control shall be considered to be material and adverse); or

(v)    you are required to be based at a location more than forty-five (45) miles from the location where you were based and performed services on the date of the Change of Control;
 
provided, however, that any diminution of duties or responsibilities that occurs solely as a result of the fact that the Company ceases to be a public company or that the size of the Company has been reduced as a result of the Change of Control shall not, in and of itself, constitute Good Reason. Your termination of employment will not be for Good Reason unless (i) you give the Company written notice of the event or circumstance which you claim is the basis for Good Reason (the “Good Reason Event”) within ninety (90) days of the Good Reason Event first occurring, (ii) the Company is given thirty (30) days from its receipt of such notice within which to cure or resolve the event or circumstance so noticed (the “Cure Period”) and fails to do so within the Cure Period, and (iii) your actual termination of employment occurs within six (6) months of the initial existence of the Good Reason Event. Notwithstanding anything to the contrary set forth herein, in the event that the Company decides not to cure or resolve the Good Reason Event in accordance with clause (ii) above, the Company may require you to actually terminate employment for Good Reason during the Cure Period. 

(d)    “ Notice of Termination ” shall mean a written notice which shall indicate the specific provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for your termination of employment under the provisions so indicated.
(e)    “ Target Bonus” shall mean the target amount of bonus established under the annual bonus plan for you for the year in which the termination of employment occurs. When the context requires, it shall also mean the target amount of bonus established for any earlier or later year.

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Schedule A
Performance Share Unit Award Agreement
Performance Goals and Determination of Earned Units

Participant:    
Grant Date:    
Target Number of Units:    
Performance Period:    
Subject to the terms of the Performance Share Unit Award Agreement (“Agreement”) referenced above and to which this Schedule A is attached and of which it is a part, the number of Units that will be earned and will vest as of the Scheduled Vesting Date or such earlier date as provided in Section 4 of the Agreement will be determined as provided below. Any capitalized term used in this Schedule A that is not defined herein will have the meaning given to it in the Agreement or the Plan.

[Performance metric and related performance goals to be described]




    


A-1


Exhibit 10.49
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this “ Agreement ”) is entered into as of April 23, 2018 (the “ Effective Date ”), by and between ________________ (each a “ Seller ” and collectively, the “ Sellers ”), and CF GROCERY DISTRIBUTION PROPCO LLC, a Delaware limited liability company (“ Buyer ”).
RECITALS
A.    Sellers are the owners of certain parcels of real property identified on Exhibit A-1 , and legally described on Exhibit A-2 (collectively, the “ Real Properties ” and each, a “ Real Property ”).
B.    Buyer desires to purchase such real property from Seller, and Seller desires to sell such real property to Buyer, subject to and upon the terms and conditions of this Agreement.
ACCORDINGLY, Seller and Buyer hereby agree as follows:
1.     Sale of Property . Subject to and upon the terms of this Agreement, Sellers agree to sell to Buyer, and Buyer agrees to buy from Sellers, all of Sellers’ right, title and interest in the Real Properties, together with all easements, appurtenances and hereditaments pertaining thereto and all buildings and improvements located thereon (each a “ Property ” and collectively, the “ Properties ”); provided, however, the Properties shall not include (i) any of Tenant’s Property, as that term is used and defined in the Leases, which includes among other things the trade fixtures and attached equipment that are described on Exhibit B attached hereto (“ Seller’s Retained Property ”), and (ii) the Existing Leases (as defined below), which shall remain the property of the applicable Seller and be subordinated to the applicable Lease(s) at Closing pursuant to Section 5.2.8.
2.     Purchase Price . The “ Purchase Price ” for the Properties shall be _________________, payable as follows:
2.1.     Earnest Money . No later than one (1) business day after the execution of this Agreement, and as an express condition to the effectiveness of this Agreement, Buyer shall deposit an earnest money deposit in the amount of _____________________ (such amount, together with interest thereon, the “ Earnest Money ”) into escrow with the Minneapolis office of First American Title Insurance Company (“ Title Company ”) by wire transfer of immediately available funds. The Earnest Money shall be invested as Buyer so directs in a standard money market interest-bearing account. Any and all interest earned on the Earnest Money shall be reported to Buyer’s federal tax identification number. Upon deposit, all of the Earnest Money shall automatically and forever be absolutely non-refundable to Buyer, except in the sole event that Buyer terminates this Agreement following a default by Seller pursuant to Section 12. The Earnest Money shall be applied to the Purchase Price at Closing. Immediately upon receipt of the Earnest Money, Title Company shall transfer to Seller an amount thereof equal to _______________ (the “ Independent Consideration ”) as consideration for Seller entering into this Agreement. The Independent




Consideration shall be non-refundable to Buyer in all events and shall be applicable to the Purchase Price at the Initial Closing.
2.2.     Balance of Purchase Price . Buyer will pay the balance of the Purchase Price required at each Closing pursuant to Section 5.3 and subject to the adjustment, pro rations and other provisions set forth in this Agreement.
3.     Due Diligence .
3.1.     Due Diligence . Buyer hereby acknowledges and agrees that (i) prior to the Effective Date, Buyer has had ample time to inspect each of the Properties and review all matters related thereto, including their physical and environmental condition and title and survey related matters, including all matters of record, (ii) conduct any “know your customer” checks on Sellers, and (iii) Buyer has found the Sellers and the Properties to be suitable for Buyer’s intended purposes and is prepared to proceed to Closing pursuant to the terms of this Agreement.
3.2.     Title . Prior to the Effective Date, Buyer has reviewed (a) commitments for ALTA extended owner’s policies of title insurance covering each of the Properties (the “ Title Commitments ”) issued by Title Company, and (b) copies of any surveys of the Properties in Sellers’ possession (collectively, the “ Surveys ”). The Title Commitments and the Surveys shall sometimes be referred to in this Agreement as the “ Title Evidence ”. In addition, Sellers shall not place any new encumbrances of record against any of the Properties after the Effective Date and before Closing without Buyer’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. At Closing each of the Sellers shall deliver an owner’s title affidavit covering the Property or Properties owned by such Seller in the form attached hereto as Exhibit F (a “ Title Affidavit ”). As of the Effective Date, Buyer has negotiated proforma title insurance policies for each of the Properties with Title Company in substantially the forms attached hereto as Exhibit E (each a “ Title Policy ”, and collectively the “ Title Policies ”). Any matters reflected as exceptions in the Title Policies shall be “ Permitted Exceptions ”. Promptly after the mutual execution and delivery of this Agreement, each Seller owning a Property that is subject to one of the recorded documents listed on Exhibit G attached hereto and made a part hereof (the “ Estoppel Required Recorded Documents ”) shall deliver a written request to the counterparty to each of the applicable Estoppel Required Recorded Documents requesting that they sign and return an estoppel certificate in a form reasonably approved by Buyer. If Sellers receive any of the executed estoppel certificates before Closing, then Sellers shall deliver them at Closing but in no event shall the delivery of all or any of the foregoing estoppel certificates be a condition to Buyer’s obligation to Close the transaction contemplated in this Agreement.
3.3     Confidentiality .
3.3.1    Notwithstanding anything contained in the Confidentiality Agreement, dated January 18, 2018, executed by __________________ (the “ Prior Confidentiality Agreement ), unless and until the Closing occurs, Buyer agrees to not disclose the Title Evidence, the Reports, or the contents of any thereof, or any

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material term or condition of this Agreement or make any public pronouncements, issue any press releases or otherwise furnish any information regarding this Agreement, or the transactions contemplated hereby, or any information disclosed, discovered or determined in connection with Buyer’s investigations of the Property or any other Confidential Information (as defined in the Prior Confidentiality Agreement) (except for items or information that (i) are publicly available or were otherwise known by Buyer, or (ii) are independently generated by Buyer) (collectively, the “ Seller Confidential Information ”) to any person or entity other than (a) Buyer's Affiliates (as hereinafter defined), attorneys, accountants, surveyors, architects, contractors or other business consultants assisting Buyer in this transaction, third parties as required under applicable law, and Buyer’s potential investors, purchasers and lenders, and then only to the extent the applicable party is aware of the terms of this Section 3.3, (b) in response to lawful process or subpoena or order of a court of competent jurisdiction, or (c) in any filings with governmental authorities required by reason of the transactions provided for herein. Buyer will take reasonable steps to ensure that any parties to whom it furnishes such Seller Confidential Information keep the same confidential as provided in this Section 3.3. If this Agreement is terminated or the Closing does not occur for any reason, Buyer shall promptly deliver to Seller or destroy all copies of the Seller Confidential Information (except to the extent any Seller Confidential Information is no longer reasonably accessible by Buyer, but is archived pursuant to Buyer’s file retention policies). Notwithstanding the foregoing, Buyer shall be entitled to retain one copy of any document or report constituting Seller Confidential Information for compliance purposes or for the purpose of defending or maintaining litigation or threatened litigation.
3.3.2    Without the prior written consent of Buyer, and unless the Closing occurs (except as may otherwise be required by law), Seller shall not disclose to any third party the existence of this Agreement (or a copy of this Agreement) or any material term or condition of this Agreement or make any public pronouncements, issue any press releases or otherwise furnish any information regarding this Agreement, or the transactions contemplated hereby (except for items or information that (i) are publicly available or were otherwise known by Sellers, or (ii) are independently generated by Sellers) (collectively, the “ Buyer Confidential Information ”) to any person or entity other than (a) Sellers’ Affiliates (as hereinafter defined), attorneys, accountants, surveyors, architects, contractors or other business consultants assisting Sellers in this transaction, third parties as required under applicable law, (b) in response to lawful process or subpoena or order of a court of competent jurisdiction, or (c) in any filings with governmental authorities required by reason of the transactions provided for herein or to comply with applicable securities regulations; provided, however, that Shall first provide Buyer with a copy of any such proposed filing and allows Buyer an opportunity to reasonably comment on such proposed filing, and in no event shall any public announcement or public filing or disclosure use the name, logo or otherwise refer to ________________________ or any of its Affiliates, unless legally required to be

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disclosed. Sellers will take reasonable steps to ensure that any parties to whom it furnishes such Buyer Confidential Information keep the same confidential as provided in this Section 3.3.
3.3.3    The parties hereto shall not issue any press releases with respect to the transactions contemplated hereby or consummated in accordance with the terms hereof except upon the mutual agreement of the parties as to the form and content of such press release (with consent not to be unreasonably withheld, conditioned or delayed by either party). As used in this Agreement, “ Affiliate ” means any person directly or indirectly controlling or controlled by or under direct or indirect common control with the applicable party.
4.     Conditions Precedent.
4.1.     Buyer’s Conditions . Buyer’s obligation to consummate the Closing pursuant to this Agreement is contingent upon the satisfaction (or waiver by Buyer) of the following conditions precedent on the Closing Date:
4.1.1     Title . Upon receipt of the applicable premiums required for such issuance and Sellers Closing Deliveries, and through no failure of Buyer to perform any of its obligations under this Agreement, the Title Company is irrevocably prepared to issue the Title Policy to Buyer (or its designee) for each of the applicable Properties.
4.1.2     Sellers’ Representations . Each of the representations and warranties of Sellers in Section 6.3 shall be true and correct as if the same were made on the Closing Date; provided, however, Buyer may only terminate this Agreement pursuant to the terms of this Section 4.1 for a failure of the representations and warranties of Sellers in Section 6.3.3 or 6.3.4 if (i) under Section 6.3.3, pending or threatened litigation impairs Sellers’ ability to consummate the transaction contemplated in this Agreement, or perform any of its obligations under the applicable Lease; or (ii) under Section 6.3.4, such condemnation permits the applicable Seller to terminate the applicable Lease pursuant to the terms thereof, and such Seller does not provide the affirmation contemplated in clause (ii) of Section 10 below.
4.1.3     Harrisburg Closing . Concurrently with the Closing contemplated under this Agreement, the Closing (as such term is defined in the Harrisburg Purchase Agreement) under that certain Purchase Agreement between Buyer and Supervalu Penn, LLC, a Pennsylvania limited liability company, dated as of the Effective Date (the “ Harrisburg Purchase Agreement ”) shall also occur; provided, that the foregoing shall not be a condition to Buyer’s obligation to Close under this Agreement if the transaction contemplated under the Harrisburg Purchase Agreement fails to close due to a default by Buyer thereunder.

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4.1.4     Subordination Agreements . At Closing, the applicable Sellers shall have delivered to Buyer a Subordination Agreement for each of the Existing Leases affecting their respective Properties, in the form attached hereto as Exhibit D-5.
If any conditions in this Section 4.1 have not been satisfied on or before the Closing Date, Buyer may terminate this Agreement by notice to Sellers on or before the Closing Date (subject to Section 12) and the Earnest Money shall be disbursed to Buyer. To the extent that any of the conditions in this Section 4.1 require the consent or determination of Buyer, the same shall be determined by Buyer in its sole and absolute discretion. The conditions in this Section 4.1 are specifically stated and for the sole benefit of Buyer. Buyer in its discretion may unilaterally waive (conditionally or absolutely) the fulfillment of any one or more of the conditions, or any part thereof, by notice to Sellers.
4.2.     Sellers’ Conditions . Sellers’ obligation to consummate the Closing pursuant to this Agreement is contingent upon the satisfaction (or waiver by Sellers) of the following conditions precedent on the Closing Date:
4.2.1     Buyer’s Representations . Each of the representations and warranties of Buyer in Section 6.1 shall be true and correct as if the same were made on the Closing Date.
4.2.2     Harrisburg Closing . Concurrently with the Closing contemplated under this Agreement, the Closing (as such term is defined in the Harrisburg Purchase Agreement) under the Harrisburg Purchase Agreement shall also occur, provided that the foregoing shall not be a condition to Sellers’ obligation to Close under this Agreement if the transaction contemplated under the Harrisburg Purchase Agreement fails to close due to a default by the Seller thereunder.
If any conditions in this Section 4.2 have not been satisfied on or before the Closing Date, then Sellers may terminate this Agreement by notice to Buyer on or before the Closing Date (subject to Section 12), and the Earnest Money shall be disbursed to Sellers. To the extent that any of the conditions in this Section 4.2 require the satisfaction of Sellers, such satisfaction shall be determined by Sellers in their sole and absolute discretion. The conditions in this Section 4.2 are specifically stated and for the sole benefit of Sellers. Sellers in their discretion may unilaterally waive (conditionally or absolutely) the fulfillment of any one or more of the conditions, or any part thereof, by notice to Buyer. If Sellers fail to timely terminate this Agreement on or before the applicable date, then the applicable condition shall be deemed to be satisfied and waived by Sellers.
5.     Closing .
5.1     Closing Date . Subject to the provisions of Section 4 above, the closing of the purchase and sale of the Properties (the “ Closing ”) shall occur on a date mutually agreed to by Buyer and Sellers, which date shall be no later than ________, 2018 (the “ Closing Date ”). The Closing will occur through the deposit of documents, deliveries and funds into an escrow established with Title Company pursuant to Sellers’ and Buyer’s respective closing

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instructions to Title Company, which instructions shall be consistent with the terms of this Agreement. Fee title to the Properties will be delivered to Buyer on the applicable Closing Date, subject to the Permitted Exceptions and the Leases.
5.2.     Sellers Closing Deliveries . No later than the Closing Date, each Seller shall, with respect to the Property owned by such Seller, deliver or cause to be delivered into escrow with Title Company the following, properly completed and duly executed by such Seller and notarized where applicable, and in commercially reasonable form (collectively, “ Sellers Closing Deliveries ”):
5.2.1     Deed . A special or limited warranty deed (or the state equivalent thereof) conveying fee simple title to each Property, and a quit claim deed conveying a certain easement interest for roadway purposes in Parcel 4-B at Urbana, all in the forms attached hereto as Exhibit D-1 (the “ Deeds ”).
5.2.2     Leases and Memoranda of Leases . A separate lease with respect to each Property, to be signed by the applicable Seller (each, a “ Lease ” and, collectively, the “ Leases ”), together with a memorandum thereof (collectively, the “ Memoranda ”), all in the form attached as Exhibits D-2 and D-3 , respectively provided, however, (a) the tenant under the Lease with respect to the Property located in Oglesby, Illinois, shall be Oglesby Distribution Company, LLC, Delaware limited liability company, and (b) the tenant under the Lease with respect to the Property located in Urbana, Illinois, shall be Champaign Distribution Company, LLC, Delaware limited liability company. The annual Base Rent for Lease Year 1 with respect to each of the Leases will be as set forth on Exhibit A-1 .
5.2.3     Guaranty . A separate Guaranty from SUPERVALU INC., a Delaware corporation, with respect to each Lease, in the form attached hereto as Exhibit D-4 .
5.2.4     Title Affidavit . The Title Affidavit for each Property.
5.2.5     FIRPTA . A transferor's certification stating that Seller is not a “foreign person”, “foreign partnership”, “foreign trust” or “foreign estate” as those terms are defined in Section 1445 of the Internal Revenue Code, and containing such additional information as may be required thereunder.
5.2.6     Miscellaneous . Any customary closing documents in commercially reasonable form and substance and consistent with this Agreement which (a) Title Company may reasonably determine are necessary to evidence the authority of Sellers to enter into and perform this Agreement and the documents and instruments required to be executed and delivered by Sellers pursuant to this Agreement, or (b) may be required of Sellers under applicable law, including any transfer, revenue or tax certificates, statements or other forms, necessary to permit Title Company to deliver the Title Policies to Buyer.

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5.2.7     Settlement Statement . A settlement statement consistent with this Agreement.
5.2.8     Subordination Agreements .     A Subordination Agreement for each of the Existing Leases that have actually been received by Sellers as of the Closing Date.
5.2.9     Date Down Certificate . A “Seller’s Closing Certificate”, if applicable (as defined in Section 6.4 below).
5.2.10     Lease Estoppel Certificate . An estoppel certificate from each Seller, in its capacity as the tenant under the applicable Lease, covering each Lease, in the form attached to the respective Lease.
5.2.11     Harrisburg Closing Deliverables . All documents required to be delivered pursuant to Section 5.2 of the Harrisburg Purchase Agreement.
5.2.12 Post Closing Agreement . One original counterpart of a post-closing agreement, executed by Sellers, wherein Sellers will agree to use commercially reasonable efforts to deliver to Buyer all Subordination Agreements that were not delivered at Closing, no later than sixty (60) days after the Closing Date.
5.3.     Buyer’s Closing Deliveries . No later than the Closing Date, Buyer shall deliver or cause to be delivered into escrow with Title Company, in addition to any other items required by this Agreement, the following, properly completed and duly signed by Buyer and notarized where applicable, and in commercially reasonable form (collectively, “ Buyer’s Closing Deliveries ”):
5.3.1     Purchase Price . The balance of the Purchase Price by wire transfer of immediately available funds.
5.3.2     Leases . Buyer’s counterpart to each of the Leases and the Memoranda.
5.3.3     Date Down Certificate . A “Buyer’s Closing Certificate”, if applicable (as defined in Section 6.2 below).
5.3.4     Miscellaneous . Any customary closing documents in commercially reasonable form and substance and consistent with this Agreement which (i) Title Company may reasonably determine are necessary to evidence the authority of Buyer to enter into and perform this Agreement and the documents and instruments required to be executed and delivered by Buyer pursuant to this Agreement, or (ii) may be required of Buyer under applicable law, including any revenue or tax certificates or statements.
5.3.5     Settlement Statement . A settlement statement consistent with this Agreement.

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5.3.6     Harrisburg Closing Deliverables . All documents required to be delivered pursuant to Section 5.3 of the Harrisburg Purchase Agreement.
5.3.7     Post Closing Agreement . One original counterpart of a post-closing agreement, executed by Buyer, wherein Sellers will agree to use commercially reasonable efforts to deliver to Buyer all Subordination Agreements that were not delivered at Closing, no later than sixty (60) days after the Closing Date.
5.4.     Adjustments and Prorations . The following adjustments will be made to the Purchase Price at Closing:
5.4.1     Real Estate Taxes . There shall be no Closing adjustment or proration of real estate taxes or special assessments with respect to any of the Property between Sellers and Buyer since Sellers will be responsible as owner for those allocable to the period prior to the Closing and pursuant to the Lease for those allocable from and after the Closing.
5.4.2     Title Costs and Reports . Sellers will pay all costs of the Title Evidence, all costs incurred to update the Survey and costs related to any Reports ordered by Sellers or ordered by Buyer following Sellers’ prior written agreement to pay the cost thereof, including, but not limited to, the costs for the property condition reports. Sellers will pay the basic premium for each Title Policy (excluding the portion of the premium applicable to extended coverage and endorsements). Buyer will pay all costs of any Title Policy premiums attributable to extended coverage and any endorsements required by Buyer. Buyer will pay all premiums for any loan policies of title insurance. Sellers and Buyer will each pay one‑half of any Closing fee payable to Title Company acting as escrow agent in connection with this transaction.
5.4.4     Recording Costs . Buyer will pay the cost of recording the Deeds, the Memoranda, and any other documents to be recorded in connection with the Closing.
5.4.5     Transfer Taxes . Sellers will pay any state, county or city deed or transfer tax imposed in connection with the recording of the Deed or the Memoranda (including, but not limited to, any taxes related to the leaseback transactions contemplated by this Agreement). Buyer will pay any mortgage registry tax regarding any mortgage given by Buyer on the Property in connection with this transaction.
5.4.6     Operating Expenses and Income . There shall be no Closing adjustment or proration of any income or any utility and other operating expenses with respect to any of the Property between Sellers and Buyer since Sellers will be responsible as owner for those allocable to the period prior to the Closing and pursuant to the Lease for those allocable from and after the Closing.

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5.4.7     Other Closing Costs . All other Closing costs will be allocated between Sellers and Buyer in accordance with the customary practice for commercial real estate transactions in county and state where the Properties are located.
5.4.8     Brokerage Commissions . Sellers will pay all brokerage commissions owed to CBRE, Inc. (“ Broker ”) in connection with the sale of the Properties to Buyer as contemplated by this Agreement.
5.5.     Strict Adherence . Each of the requirements set forth in this Agreement with respect to the Earnest Money and Closing have been fully negotiated and agreed to, and strict adherence to such requirements is a condition of this Agreement and shall be the sole responsibility of Buyer and Sellers, as applicable. No notice and cure period contemplated under Section 12 shall be applicable for any failure of (i) Seller to deliver any of the documents listed in Section 5.2 on or prior to the Closing Date, or (ii) Buyer to deliver any of the documents listed in Section 5.3 on or prior to the Closing Date.
6.     Representations and Warranties.
6.1.     Representations and Warranties by Buyer . Buyer represents and warrants to Sellers that:
6.1.1     Authority . Buyer is a Delaware limited liability company. Buyer has the requisite power and authority to enter into and perform this Agreement and the documents to be executed by Buyer in connection with this transaction. This Agreement and such documents have been or will be duly authorized by all necessary action on the part of Buyer and have been or will be duly executed and delivered on the part of Buyer. The execution, delivery and performance by Buyer of this Agreement and such documents does not conflict with or result in a violation of Buyer’s organizational documents or any agreement, judgment, order, or decree of any court or arbiter to which Buyer is a party or is subject.
6.1.2     Prohibited Persons and Transactions . Neither Buyer nor any of its Affiliates is, nor will they become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“ OFAC ”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism) or other governmental action and does not, to its actual knowledge, engage in any dealings or transactions with such persons or entities.
6.1.3     Bankruptcy. Buyer has not (i) commenced (within the meaning of any federal or state bankruptcy law) a voluntary case, (ii) consented to the entry of an order for relief against it in an involuntary case, or (iii) consented to the appointment of a custodian, in each case, of it or for all or any substantial part of its

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property, nor has a court of competent jurisdiction (a) entered an order or decree under any federal or state bankruptcy law that is for relief against Buyer in an involuntary case or (b) appointed a custodian of Buyer for all or any substantial part of its respective property.
6.1.4     Government Approvals . Buyer has received all governmental approvals required to be obtained for Buyer to consummate the transactions contemplated in this Agreement.
6.2     Representations Remade . At the Closing, Buyer shall be deemed to remake and restate the representations set forth in Section 6.1 as of the Closing Date, unless Buyer has updated such representations prior to the Closing Date by delivering written notice (the “ Buyer’s Closing Certificate ”) to Seller on or prior to the Closing which notice shall reflect any fact, matter or circumstance which Buyer has become aware of, other than facts, matters or circumstances that Buyer has been informed of by Sellers or any agent of Sellers, that would make any of Buyer’s representations or warranties contained herein untrue or incorrect in any material respect.
6.3.     Representations and Warranties by Sellers . Each of the Sellers makes the following representations and warranties in its individual capacity, as applicable, and in its capacity as the Owner of its respective Property or Properties. In no event shall any of the following representations and warranties made by a Seller be deemed to apply to any Properties not owned by that Seller. Sellers represent and warrant to Buyer that:
6.3.1     Authority . Each Seller is duly formed and in good standing in the state of its formation. Each Seller is duly qualified to transact business in each State in which the Property owned by such Seller is located. Each Seller has the requisite power and authority to enter into and perform this Agreement and the documents to be executed by such Seller in connection with this transaction. This Agreement and such documents have been or will be duly authorized by all necessary action on the part of each Seller and have been or will be duly executed and delivered on the part of each Seller. The execution, delivery and performance by each Seller of this Agreement and such documents and transactions contemplated hereby (including, without limitation, each Lease) does not conflict with or result in a violation of such Seller's organizational documents or any agreement, judgment, order, or decree of any court or arbiter to which that Seller is a party or is subject. No Seller has entered into any purchase agreements, contracts for deed, rights of first refusal, options or the like whereby someone other than Buyer has a right to acquire all or any part of the Property, except as may be reflected in the Title Evidence.
6.3.2     FIRPTA . No Seller is a “foreign person”, “foreign partnership”, “foreign trust” or “foreign estate” as those terms are defined in Section 1445 of the Internal Revenue Code. The representations and warranties of Sellers contained in this Section 6.3.2 shall survive Closing indefinitely.

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6.3.3     Litigation . To the actual knowledge of the Sellers, there is no litigation pending or threatened against the Property owned by the respective Seller, or against any Seller in a manner that would affect such Seller’s ability to perform its obligations under this Agreement.
6.3.4 Condemnation. No Seller has received from any governmental authority any written notice of any condemnation or eminent domain proceedings affecting any Property or any part thereof, and to the knowledge of each Seller, no such proceedings are threatened with respect to any Property or any part thereof.
6.3.5 Bankruptcy. No Seller has commenced (within the meaning of any federal or state bankruptcy law) a voluntary case, consented to the entry of an order for relief against it in an involuntary case, or consented to the appointment of a custodian of it or for all or any substantial part of its property, nor has a court of competent jurisdiction entered an order or decree under any federal or state bankruptcy law that is for relief against Seller in an involuntary case or appointed a custodian of Seller for all or any substantial part of its respective property.
6.3.6 Prohibited Persons and Transactions . No Seller nor any of their respective affiliates is, nor will they become, a person or entity with whom U.S. persons or entities are restricted from doing business under OFAC or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism) or other governmental action and does not, to its actual knowledge, engage in any dealings or transactions with such persons or entities.
6.3.7      Leases . No Seller has entered into an agreement granting any third party a right to occupy any portion of its respective Property, except for those leases described on the attached Exhibit C (the “ Existing Leases ”) and Permitted Exceptions.
6.3.8     Government Approvals . Sellers have received all governmental approvals required to be obtained for Sellers to consummate the transactions contemplated in this Agreement.
6.3.9     Possession . Each of the Sellers are in possession of their respective Properties, subject to Permitted Exceptions and the Existing Leases.
The “ knowledge of the Seller ” and similar terms mean the actual, present consciousness of (i) Jessica London, Vice President, Real Estate & Development, or (ii) Devon Hart, Vice President and Treasurer of Supervalu Inc., without any duty of inquiry or investigation. Seller represents that the person(s) listed in the immediately preceding sentence are the persons having direct responsibility for the oversight of the Sellers’ real estate and management of the Sellers’ real estate portfolio and are the persons who would have knowledge of the matters set forth in this Section 6.3 . If Buyer proceeds to Closing

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notwithstanding Buyer’s actual knowledge of any breach or untruth of any representation or warranty by a Seller, Buyer is deemed to have waived the breach or untruth at such Closing. Except as otherwise set forth above, all representations and warranties of Seller set forth in this Agreement shall survive the Closing for a period of one (1) year.
6.4.      Representations Remade . At the Closing, Sellers shall be deemed to remake and restate the representations set forth in Section 6.3 as of the Closing Date, unless Sellers have updated such representations at or prior to the Closing Date by delivering written notice (the “ Seller’s Closing Certificate ”) to Buyer on or prior to the Closing which notice shall reflect any fact, matter or circumstance which Sellers have become aware of, other than facts, matters or circumstances that Sellers have been informed of by Buyer or any agent of Buyer, that would make any of Sellers’ representations or warranties contained herein untrue or incorrect in any material respect. In no event shall Sellers be deemed to be in default under this Agreement if any of their representations and warranties in Section 6.3 (that were true and correct on the Effective Date) are not true and correct on the Closing Date, except to the extent that (i) a Seller took willful action after the Effective Date that caused a representation and warranty in Section 6.3 to become untrue and incorrect, and (ii) the Seller knew before taking such action that the action would cause a representation and warranty in Section 6.3 to become untrue and incorrect.
7.     Sale “As Is” .
7.1.     Buyer’s Obligations . SUBJECT TO THE TERMS OF THIS AGREEMENT, BUYER WILL CONDUCT SUCH INSPECTIONS AND INVESTIGATIONS OF THE PROPERTY (INCLUDING ITS PHYSICAL AND ENVIRONMENTAL CONDITION) AS IT DEEMS NECESSARY TO PROCEED WITH THE CLOSING AND THIS TRANSACTION, AND ASSUMES THE RISK THAT ADVERSE MATTERS, INCLUDING THE DISCLAIMED MATTERS (AS DEFINED IN SECTION 7.2), MAY NOT HAVE BEEN REVEALED BY BUYER’S INSPECTIONS AND INVESTIGATIONS. SUCH INSPECTIONS AND INVESTIGATIONS OF BUYER WILL BE DEEMED TO INCLUDE AN ENVIRONMENTAL AUDIT OF THE PROPERTY, AN INSPECTION OF THE PHYSICAL COMPONENTS AND GENERAL CONDITION OF ALL PORTIONS OF THE PROPERTY, SUCH STATE OF FACTS AS AN ACCURATE SURVEY AND INSPECTION OF THE PROPERTY WOULD SHOW, PRESENT AND FUTURE ZONING AND LAND USE ORDINANCES, RESOLUTIONS AND REGULATIONS OF THE CITY, COUNTY AND STATE WHERE THE PROPERTY IS LOCATED AND THE VALUE AND MARKETABILITY OF THE PROPERTY.
7.2.     Disclaimers . BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT OR IN ANY DOCUMENTS EXECUTED BY SELLERS AT CLOSING PURSUANT TO THIS AGREEMENT, (A) BUYER HAS NOT RELIED UPON AND WILL NOT RELY UPON, EITHER DIRECTLY OR INDIRECTLY, ANY REPRESENTATION OR WARRANTY OF SELLERS IN

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CONNECTION WITH THE PROPERTY OR THIS TRANSACTION, (B) SELLERS WILL SELL AND CONVEY TO BUYER, AND BUYER WILL ACCEPT THE PROPERTY “AS IS”, “WHERE IS”, AND “WITH ALL FAULTS” ON THE CLOSING DATE, AND THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR REPRESENTATIONS, COLLATERAL TO OR AFFECTING THE PROPERTY BY SELLERS OR ANY THIRD PARTY, AND (C) SELLERS DO NOT, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, AND SELLERS WILL NOT, BY THE EXECUTION AND DELIVERY OF ANY DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION WITH CLOSING, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN OR THEREIN, MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE WHATSOEVER, WITH RESPECT TO THE PROPERTY. WITHOUT LIMITING THE GENERALITY OF THE PROVISIONS OF THIS SECTION 7.2, BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN ANY OTHER AGREEMENT EXECUTED BY SELLERS AT CLOSING PURSUANT TO THIS AGREEMENT, SELLERS MAKE, AND WILL MAKE, NO EXPRESS OR IMPLIED WARRANTY AS TO (I) MATTERS OF TITLE, (II) ZONING, (III) TAX CONSEQUENCES, (IV) PHYSICAL OR ENVIRONMENTAL CONDITION (INCLUDING LAWS, RULES, REGULATIONS, ORDERS AND REQUIREMENTS PERTAINING TO THE USE, HANDLING, GENERATION, TREATMENT, STORAGE OR DISPOSAL OF ANY TOXIC OR HAZARDOUS WASTE OR TOXIC, HAZARDOUS OR REGULATED SUBSTANCE, AND FURTHER INCLUDING THE COMPREHENSIVE ENVIRONMENTAL RESPONSE AND COMPENSATION AND LIABILITY ACT, THE RESOURCE CONSERVATION AND RECOVERY ACT, THE CLEAN WATER ACT, THE SOLID WASTE DISPOSAL ACT, THE FEDERAL WATER POLLUTION CONTROL ACT, THE OIL POLLUTION ACT, THE FEDERAL CLEAN AIR ACT, THE FEDERAL INSECTICIDE, FUNGICIDE AND RODENTICIDE ACT, EACH AS MAY BE AMENDED FROM TIME TO TIME, AND INCLUDING ANY AND ALL REGULATIONS, RULES OR POLICIES PROMULGATED THEREUNDER AND ALL APPLICABLE LOCAL LAWS, ORDINANCES, AND REGULATIONS, (V) VALUATION, (VI) GOVERNMENTAL APPROVALS, GOVERNMENTAL REGULATIONS, ENTITLEMENT STATUS OR ANY OTHER MATTER OR THING RELATING TO OR AFFECTING THE PROPERTY, (VII) THE USE, INCOME POTENTIAL, EXPENSES, OCCUPANCY STATUS, OPERATION OR CHARACTERISTICS OF THE PROPERTY OR ANY PORTION OF THE PROPERTY, INCLUDING WARRANTIES OF SUITABILITY, HABITABILITY, MERCHANTABILITY, DESIGN OR FITNESS FOR ANY SPECIFIC PURPOSE OR FOR A PARTICULAR PURPOSE, OR GOOD OR WORKMANLIKE CONSTRUCTION, (VIII) THE NATURE, MANNER, CONSTRUCTION, CONDITION, STATE OF REPAIR OR LACK OF REPAIR OF ANY OF THE BUILDINGS, STRUCTURES OR IMPROVEMENTS, ON OR UNDER THE SURFACE, WHETHER OR NOT LATENT, OBVIOUS, VISIBLE OR APPARENT, (IX) THE NATURE OR QUALITY OF CONSTRUCTION, STRUCTURAL DESIGN OR ENGINEERING OF THE PROPERTY, (X) THE SOIL CONDITIONS, DRAINAGE, FLOODING GEOTECHNICAL AND

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SEISMIC CHARACTERISTICS, ACCESS, UTILITIES OR OTHER CONDITIONS EXISTING IN, ON OR UNDER THE PROPERTY, (XI) THE PRESENCE OR EXISTENCE OF MOLD OR OTHER ORGANISMS, LEAD BASED PAINT OR WATER PENETRATION IN OR ABOUT THE BUILDINGS, STRUCTURES OR IMPROVEMENTS, OR (XII) ANY OTHER STATE OF FACTS THAT EXISTS WITH RESPECT TO ANY OF THE PROPERTY (COLLECTIVELY, “ DISCLAIMED MATTERS ”),
7.3.     Waiver and Release . EXCEPT WITH RESPECT TO (A) THE EXPRESS AGREEMENTS, REPRESENTATIONS, WARRANTIES AND OBLIGATIONS OF SELLERS UNDER THIS AGREEMENT OR UNDER ANY OTHER AGREEMENT EXECUTED BY SELLERS AT CLOSING PURSUANT TO THE TERMS OF THIS AGREEMENT, AND (B) ANY FRAUD OF ANY RELEASED PARTY, BUYER AND ANYONE CLAIMING BY, THROUGH OR UNDER BUYER HEREBY FULLY AND IRREVOCABLY WAIVES AND RELEASES SELLERS AND EACH OF THEIR SHAREHOLDERS, EMPLOYEES, OFFICERS, MANAGERS, REPRESENTATIVES, AGENTS, SUCCESSORS AND ASSIGNS (EACH, A “ RELEASED PARTY ”) FROM ANY AND ALL CLAIMS THAT IT MAY NOW HAVE OR HEREAFTER ACQUIRE AGAINST ANY RELEASED PARTY FOR AND AGAINST ANY AND ALL ANY LIABILITIES, WHETHER DIRECT OR INDIRECT, KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, ARISING FROM OR RELATED TO ANY OF THE DISCLAIMED MATTERS.
7.4.     Limitation of Sellers’ Liability . ANY PARTY SEEKING TO ENFORCE ANY DUTY, OBLIGATION, LIABILITY OR RESPONSIBILITY OF SELLERS ARISING UNDER THIS AGREEMENT WILL RELY ON AND LOOK SOLELY TO THE PROPERTY AND ANY INCOME OR PROCEEDS (INCLUDING, BUT NOT LIMITED TO, ANY INSURANCE PROCEEDS) FROM THE PROPERTY. SELLERS WILL HAVE NO LIABILITY FOR THE PERFORMANCE OF ANY DUTIES OR OBLIGATIONS OF SELLERS UNDER THIS AGREEMENT BEYOND ITS INTEREST IN THE PROPERTY AND ITS PROCEEDS (INCLUDING, BUT NOT LIMITED TO, ANY INSURANCE PROCEEDS). BUYER WILL NOT SEEK TO ENFORCE ANY CLAIM OR JUDGMENT OBTAINED BY BUYER AGAINST SELLERS AGAINST ANY PROPERTY OF SELLERS OTHER THAN ITS INTEREST IN THE PROPERTY AND ITS PROCEEDS, AND BUYER WILL LOOK SOLELY TO, AND RELY SOLELY ON, THAT INTEREST AND THOSE PROCEEDS FOR ENFORCEMENT AND SATISFACTION OF ANY CLAIM OR JUDGMENT. BUYER AGREES THAT THE DIRECTORS, OFFICERS, PARTNERS, MEMBERS, OWNERS AND EMPLOYEES OF SELLERS HAVE NO PERSONAL LIABILITY UNDER THIS AGREEMENT, AND BUYER WAIVES ITS RIGHT TO SUE ANY OF THEM PERSONALLY OR INDIVIDUALLY.
8.     Executory Period . After the Effective Date until the date of Closing or earlier termination of this Agreement (the “ Executory Period ”), Sellers shall operate, maintain and manage each Property in a manner generally consistent with the manner in which Sellers have operated and maintained the Property prior to the Effective Date.

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9.     Casualty . If (i) any of the Improvements are damaged or destroyed during the Executory Period by any fire or other casualty, and (ii) after such fire or other casualty, the applicable Seller reaffirms the validity of the Lease for such Property and that such Lease shall remain in full force and effect and will not be terminated, notwithstanding such fire or other casualty, then (a) this Agreement shall remain in effect, (b) the Property shall be conveyed at Closing in its damaged condition without adjustment of the Purchase Price, and (c) the affected Improvements shall be repaired or restored in accordance with the Lease.
10.     Eminent Domain . If (i) eminent domain proceedings are commenced against all or a part of any Property during the Executory Period, and (ii) after such eminent domain proceedings, the applicable Seller reaffirms the validity of the Lease for such Property and that such Lease shall remain in full force and effect and will not be terminated, notwithstanding such eminent domain proceedings, then (a) this Agreement shall remain in effect, (b) the Property shall be conveyed at Closing in its condemned condition without adjustment of the Purchase Price, and (c) the condemnation will be addressed pursuant to the terms of the applicable Lease.
11.     Assignment; Third Party Beneficiaries . This Agreement is made solely for the benefit of the parties hereto and their respective successor and assigns. No rights, privileges or immunities of either Sellers or Buyer under this Agreement shall inure to the benefit of any third‑party, nor shall any third‑party be deemed to be a beneficiary of any of the provisions contained in this Agreement. Buyer may not fully or partially assign or transfer this Agreement or any interest therein in any manner whatsoever without Sellers’ prior written consent, which may be given, conditioned or withheld in Sellers’ reasonable discretion. Notwithstanding the foregoing, Sellers’ consent shall not be required for an assignment or partial assignment by Buyer of Buyer’s rights and obligations under this Agreement to (a) any parent, subsidiary or other affiliate of Buyer, or (b) to any person or entity which succeeds to the business of Buyer as a result of any reorganization, joint venture, merger or consolidation of Buyer, provided that any such assignment or partial assignment made without Sellers’ prior written consent shall only occur simultaneously with the Closing. Buyer must give Sellers not less than ten (10) business days’ prior notice of any proposed assignment of this Agreement (even if permitted under this Section 11); which notice shall be accompanied by a copy of the assignment (and an assumption of this Agreement) and documents evidencing the formation, ownership, good standing and authority of the assignee to assume and perform the Buyer’s obligations under this Agreement. No assignment or transfer of Buyer’s rights or obligations under the Agreement (even if permitted under this Section 11 or consented to by Sellers) shall operate to modify or relieve Buyer of its obligations under the Agreement. Following any partial assignment of Buyer’s rights and obligations under this Agreement, Buyer shall, nevertheless, remain liable for all of Buyer’s obligations hereunder, and in no event shall Buyer’s liability be in any way limited or altered by the occurrence of any such partial assignment.

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12.     Default and Remedies .
12.1.     Default By Sellers . If a Seller defaults under this Agreement (including, but not limited to, by Sellers failing to deliver any of the items listed under Section 5.2 on or before the Closing Date) and such default continues for ten (10) days following notice from Buyer to Sellers specifying the default (provided that no notice or cure period shall be required with respect to any default of any obligations to be performed at Closing), Buyer may exercise one of the following as its sole, exclusive and mutually-exclusive remedies, either (a) terminate this Agreement by giving written notice to Sellers, in which event Buyer shall be entitled to immediate refund of the Earnest Money and recover its actual, third party costs incurred to conduct its due diligence activities, for any diligence reports ordered by Buyer with Sellers’ prior written approval, and for reasonable attorneys’ fees incurred in connection with entering into this Agreement, provided such cost shall not exceed One Million and 00/100 Dollars ($1,000,000), or (b) seek specific performance of this Agreement, provided that Buyer shall commence any action for specific performance within sixty (60) days after such default, and in which event Buyer may also recover all of its actual and reasonable out of pocket costs incurred in seeking such specific performance; provided, such costs shall not exceed One Million and 00/100 Dollars ($1,000,000). If Buyer proceeds to Closing notwithstanding any defaults by Sellers, Buyer shall be deemed to have waived such defaults. Notwithstanding the foregoing, Buyer may enforce any provisions of this Agreement which have not otherwise been waived pursuant to this Agreement and survive Closing, and Buyer may recover from Sellers its reasonable fees and costs of enforcing those provisions. A default by the seller under the Harrisburg Purchase Agreement or by the seller under that certain Purchase Agreement between Buyer and Supervalu Holdings, Inc. dated as of the Effective Date (the “ Joliet Purchase Agreement ”) that occurs before the Closing contemplated under this Agreement, shall be deemed to be a default by Seller under this Agreement. Following a default by a seller under the Harrisburg Purchase Agreement or Joliet Purchase Agreement and the expiration of any applicable notice and cure period thereunder that occurs before the Closing contemplated under this Agreement, Buyer may pursue any of its remedies specified in this Section 12.1 as a default by Seller hereunder. In no event shall Buyer be permitted to double recover any damages payable by Sellers under clause (a) above. Any amounts payable by Sellers under clause (a) above shall be reduced to the extent a Seller has already paid any amount thereof to Buyer or any of Buyer’s Affiliates or other third parties, regardless of whether such payment was made under this Agreement, the Harrisburg Purchase Agreement or Joliet Purchase Agreement.
12.2.     Default By Buyer . If Buyer defaults under this Agreement (including, but not limited to, Seller failing to deliver any of the items listed under Section 5.3 on or before the Closing Date) and such default continues for ten (10) days following notice from Sellers to Buyer specifying the default (provided that no notice or cure period shall be required with respect to any default of any obligations to be performed at Closing), Sellers may terminate this Agreement by giving written notice to Buyer, in which event Sellers shall be entitled to immediate payment of the Earnest Money as liquidated damages (Sellers and Buyer each hereby agreeing that determining Sellers’ actual damages would be difficult, and the Earnest Money is a reasonable estimate of Sellers’ damages). Notwithstanding the foregoing, Sellers

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may enforce any provisions of this Agreement which survive Closing, and Sellers may recover from Buyer its reasonable fees and costs of enforcing those provisions. A default by Buyer under the Harrisburg Purchase Agreement or by Buyer under the Joliet Purchase Agreement that occurs before the Closing contemplated under this Agreement shall be deemed to be a default by Buyer under this Agreement. Following a default by Buyer under the Harrisburg Purchase Agreement or Joliet Purchase Agreement and the expiration of any applicable notice and cure period thereunder that occurs before the Closing contemplated under this Agreement, Seller may pursue any of its remedies specified in this Section 12.2 as a default by Buyer hereunder.
THE PARTIES FURTHER ACKNOWLEDGE AND AGREE THAT (A) BUYER SEEKS TO LIMIT ITS LIABILITY UNDER THIS AGREEMENT TO THE AMOUNT OF THE EARNEST MONEY IN THE EVENT THIS AGREEMENT IS TERMINATED AND THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT DOES NOT CLOSE DUE TO A DEFAULT OF BUYER UNDER THIS AGREEMENT, AND (B) THE PAYMENT OF SUCH LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLERS.
Sellers’ Initials _______            Buyer’s Initials ________
12.3.     Nature of Remedies . Sellers’ and Buyer’s respective remedies as set forth in this Section 12 are their sole and exclusive remedies, except with respect their respective obligations that expressly survive Closing or termination under this Agreement. Sellers and Buyer each hereby waive any right to sue the other or recover any costs or other damages whatsoever except as expressly provided in this Section 12 (except with respect to obligations that expressly survive Closing or termination as provided under this Agreement).
12.4.     Limitations Period on Suits and Proceedings . If either Sellers or Buyer is entitled to commence any action or other proceeding to seek specific performance of this Agreement, or to recover any fees, costs or other amounts expressly recoverable under this Section 12, the applicable party must do so within sixty (60) days after the earlier of (a) the date that party obtains actual knowledge of the defaulting party’s default, or (b) the date of termination of this Agreement, or such party shall be deemed to have irrevocably waived the related claims and shall be barred from asserting the related claims.
12.5.     Attorney’s Fees . Each of the parties will pay its own attorney’s fees with respect to this Agreement and this transaction, except that a party defaulting under this Agreement or any closing document will pay the reasonable attorneys’ fees and court costs at trial and on any appeal incurred by the non‑defaulting party to enforce its rights regarding such default.

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13.     Notices . Any notice required or permitted to be given by this Agreement will be in writing and will be given by nationally recognized overnight courier, or by certified or registered mail, return receipt requested, postage prepaid. Notices so given shall be deemed received when actually received or when delivery is confirmed or refused. Notices may also be given by e-mail, and will be effective at the time of sending at the e-mail address specified below if sent by 5:00 p.m. Pacific Time on a business day with confirmation of receipt (and otherwise as of the next business day), provided the notice-giving party also sends notice by nationally recognized overnight courier on the same date as sending the e-mail, time being of the essence. Any notice required to be given under this Agreement shall be addressed as follows:
Sellers:                SUPERVALU INC.
11840 Valley View Road
Eden Prairie, MN 55344
Attn: Legal Department
Email:

with a copy to:            SUPERVALU INC.
11840 Valley View Road
Eden Prairie, MN 55344
Attn: Asset Management
                
Buyer    :            

with a copy to:            

with a copy to:            
                        
Any party may, by notice to the others, specify a different address for notice purposes.

14.     Termination . If this Agreement is terminated pursuant to the terms hereof, then (a) the respective rights of Buyer and Sellers arising out of this Agreement shall immediately cease with the exception of obligations that expressly survive termination under this Agreement, and (b) within ten (10) days after such termination notice, Buyer shall (i) deliver to Sellers a true, correct, complete and legible copy of the Reports, if any, to the extent not previously delivered to Sellers, and (ii) execute, acknowledge, and deliver to Sellers a letter acknowledging that this Agreement was terminated and that Buyer does not have any interest in any of the Properties (provided that the failure to give such letter shall not affect the termination of this Agreement). Buyer’s obligations under this Section 14 shall survive termination of this Agreement, and Sellers may recover from Buyer its reasonable legal fees and costs of enforcing the provisions of this Section 14.


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15.     Tax Deferred Exchange . Sellers and/or Buyer may elect to dispose of or acquire (as the case may be) any of the Real Property in connection with the completion of a tax-deferred exchange (a “ 1031 Exchange ”) under Section 1031 of the Internal Revenue Code of 1986, as amended. Each party agrees to take such steps as the other may reasonably require in order to complete such tax-deferred exchange, including accepting payment of all or a portion of the Purchase Price from a third party; provided that (i) neither party shall be obligated to delay the closing hereunder and (ii) neither party shall be obligated to execute any note, contract, deed or other document not otherwise expressly provided for in this Agreement providing for any personal liability, nor shall either party be obligated to take title to any property other than the property as otherwise contemplated in this Agreement or incur additional expense for the benefit of the other party. Each party shall indemnify and hold the other harmless against any liability that arises or is claimed to have arisen on account of any exchange proceeding which is initiated on behalf of the indemnifying party. In the event that Sellers elect to undertake a 1031 Exchange, any exchanger or similar agent (a “1031 Agent”) utilized by Sellers shall be required to provide such documents and other information as is reasonably requested by Buyer to allow Buyer to process customary “know your customer” checks on such 1031 Agent.
16.     Brokers . Sellers and Buyer each represents and warrants to the other that it has not retained or dealt with any broker entitled to a commission or other fee in connection with this transaction except for Broker, which is acting as Sellers’ agent. If the Closing occurs, Sellers will pay a commission to Broker in accordance with a separate agreement with Broker. Sellers and Buyer shall indemnify, defend (with counsel reasonably acceptable to the indemnified party) and hold the other party harmless against all claims (and any related liabilities) made by any person other than Broker alleging to have represented or assisted the indemnifying party and to thereby be owed a commission or fee in connection with the signing or consummation of this Agreement. The indemnity obligations under this Section 16 shall survive Closing or any termination of this Agreement.
17.     No Liens . Buyer may not record this Agreement or any memorandum of this Agreement against the title to the Property or in other public records. Buyer may not record a lien, notice of lis pendens or other instrument against the title to the Property except in connection with a timely‑ and properly‑filed specific performance action permitted under this Agreement, and Buyer waives any other right to do so at law or in equity. This Agreement is not, and does not convey, any interest in or lien against the Property.
18.     Waiver of Jury Trial . TO THE MAXIMUM EXTENT PERMITTED BY LAW, SELLERS AND BUYER EACH IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER ON, OR IN RESPECT OF, ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE RELATIONSHIP OF BUYER AND SELLERS HEREUNDER OR ARISING OUT OF OR RELATING TO THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT.

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19.     Miscellaneous . This Agreement may be signed in counterparts and evidenced by facsimile, PDF format or similarly-imaged pages. Buyer and Sellers each acknowledge and agree that it has had an opportunity to receive the advice of such counsel and other advisors as it desires before entering into this Agreement. Time is of the essence of this Agreement. This Agreement shall be governed by and construed and interpreted in accordance with the laws of Delaware, without regard to its conflicts of laws principles. This Agreement contains the entire agreement between the parties hereto with respect to this transaction, supersedes any prior oral negotiations or agreements. Subject to Section 11, this Agreement is binding upon the parties hereto and their respective legal representatives, successors and permitted assigns. No amendment, modification or waiver of the provisions of this Agreement will be effective unless it is in writing and signed by the party against whom it is to be enforced. All decisions requiring the “approval” or “agreement” of any party hereto shall be made in writing the applicable party. If any part of this Agreement is held to be illegal, invalid or unenforceable, the remainder of this Agreement will be unaffected and continue in full force and effect. Sellers’ preparation of this Agreement and submission of this Agreement for the review or execution by any party is not an offer by Sellers to sell the Property, and this Agreement is not binding upon Sellers or Buyer until it has been signed by Sellers and Buyer. The section headings and other captions are for ease of reference only, and are not otherwise part of this Agreement. Any reference to a section of this Agreement includes its subsections and parts.
20.     Rules of Construction . In interpreting this Agreement, the following rules of construction shall be used.
20.1.     Construction . The rule of strict construction shall not apply to this Agreement. This Agreement shall not be interpreted in favor of or against either Buyer or Sellers merely because of their respective efforts in preparing it.
20.2.     Captions, Gender, Number, and Language of Inclusion . The article and section headings in this Agreement are for convenience of reference only and shall not define, limit or prescribe the scope or intent of any term of this Agreement. As used in this Agreement, the singular shall include the plural and vice versa, the masculine, feminine, and neuter adjectives shall include one another, and the following words and phrases shall have the following meanings: (a) “ including ” shall mean “including but not limited to”; (b) “ terms ” shall mean “terms, provisions, duties, covenants, conditions, representations, warranties, and indemnities”; (c) “ any of the Property ” or “ any of the Property ” shall mean “the Property or any part thereof or interest therein” or “the Property or any part thereof or interest therein”, as the case may be; (d)  “rights” shall mean “rights, duties, and obligations”; (e) “ liabilities ” shall mean “liabilities, obligations, damages, fines, penalties, claims, demands, costs, losses, charges, liens, judgments, actions, causes of action, and expenses, including reasonable attorneys’ fees”; (f) “ incurred by ” shall mean “imposed upon or suffered or incurred or paid by or asserted against”; (g) “ applicable law ” shall mean “all applicable federal, state, county, municipal, local, or other laws, statutes, codes, ordinances, rules, and regulations”; (h) “ about the Property ” or “ about the Property ” shall mean “in, on, under, or about the Property” or “in, on, under, or about the Property”, as the case may be; (i) “ operation ” shall mean “use, non‑use, possession, occupancy,

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condition, operation, maintenance, or management”; and (j) “ this transaction ” shall mean “the purchase, sale, and related transactions contemplated by this Agreement”.
20.3.     Time Periods . Any reference in this Agreement to the time for performance of obligations or elapsed time shall mean consecutive days, months or years, as applicable. In the event the time for performance of any obligation hereunder expires on the day that is not a business day, the time for performance shall be extended to the next business day. A “ business day ” means any day that is not Saturday, Sunday or a federal or Delaware state holiday.
20.4     Joint and Several Liability . If more than one person is named as Seller hereunder, the obligations under this Agreement of all such persons named as Seller shall be joint and several.
21.     Escrow Provisions .
21.1.     Earnest Money . Title Company will hold and disburse the Earnest Money in accordance with the terms of this Agreement, unless otherwise directed by the mutual written direction of the parties.
21.2.     Duties of Title Company . The sole duties of Title Company will be those described herein, and Title Company will be under no obligation to determine whether the parties hereto are complying with any requirements of law or the terms of any other agreements among said parties. Title Company may conclusively rely upon and will be protected in acting upon any notice, consent, order or other document believed by it to be genuine and to have been signed or presented by the proper party or parties, consistent with reasonable due diligence on Title Company’s part. Title Company may consult the advice of counsel with respect to any issue concerning the interpretation of its duties hereunder. Title Company will have no duty or liability to verify any such notice, consent, order or other document, and its sole responsibility will be to act as expressly set forth in this Agreement. Title Company will be under no obligation to institute or defend any action, suit or proceeding in connection with this Agreement. If any dispute arises with respect to the disbursement of any money, Title Company may continue to hold the money, or commence an interpleader action in a court of competent jurisdiction and remit the money to that court.
22.     State-Specific Provisions .

22.1     California . Without limiting the choice of law provision set forth in Section 19, the following provisions shall apply to the extent that the laws of the State of California govern the interpretation or enforcement of this Agreement with respect to any Property located in such state, as determined by a court of competent jurisdiction:

22.1.1    The second grammatical paragraph of Section 12.2 is replaced with the following:


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THE PARTIES HAVE AGREED THAT SELLERS ACTUAL DAMAGES, IN THE EVENT OF A FAILURE TO CONSUMMATE THIS SALE WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE, AFTER NEGOTIATION AND ADVICE OF COUNSEL, THE PARTIES HAVE AGREED THAT, CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT, THE TOTAL AMOUNT OF THE EARNEST MONEY IS A REASONABLE ESTIMATE OF THE DAMAGES THAT SELLERS WOULD INCUR IN SUCH EVENT. THE PARTIES ACKNOWLEDGE THAT THE PAYMENT OF SUCH LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLERS, PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677. NOTHING IN THIS PARAGRAPH SHALL CONSTITUTE A WAIVER OF THE RIGHTS OF SELLERS TO RECOVER PREVAILING PARTY ATTORNEY FEES AND EXPENSES UNDER THIS AGREEMENT OR APPLICABLE LAW. BY PLACING THEIR INITIALS BELOW, EACH PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE AND THE FACT THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED, AT THE TIME THIS AGREEMENT WAS MADE, THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION.

___________________        ______ ______ _____ _____
Buyer’s Initials            Each Seller’s Initials

22.2     Florida . Without limiting the choice of law provision set forth in Section 19, the following provisions shall apply to the extent that the laws of the State of Florida govern the interpretation or enforcement of this Agreement with respect to any Property located in such state, as determined by a court of competent jurisdiction:

22.2.1 Radon Gas Notice . The following radon gas notice is given pursuant to Section 404.056, Florida Statutes. RADON GAS: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health department.

22.2.2 Attorneys' Fees . The provisions for payment of attorneys' fees set out in Section 12.5 expressly include all costs and reasonable attorneys’ fees incurred in connection with any dispute arising under or as a result of this Agreement by the prevailing party in court-ordered mediation, at trial, in all appellate proceedings, in bankruptcy and administrative proceedings and in any and all other proceedings to determine the reasonableness of such fees and costs. The provisions of this subsection shall expressly survive Closing or termination as provided under this Agreement.


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22.2.3 Commercial Real Estate Sales Commission Lien Act . The Florida Commercial Real Estate Sales Commission Lien Act provides that a broker has a lien upon any Seller's net proceeds from the sale of commercial real estate for any commission earned by the broker under a brokerage agreement. The lien upon any Seller's net proceeds is a lien upon personal property which attaches to such Seller's net proceeds and does not attach to any interest in the Property. This lien right cannot be waived before the commission is earned.

22.2.4 Special Assessment Liens Imposed by Public Body . The Property may be subject to unpaid special assessment liens imposed by a public body. A public body includes a Community Development District, Special Assessment District or Municipal Service Taxing Unit. Buyer will assume at Closing any outstanding capital assessment balances and special assessments due for the period of time from and after the Closing Date. Notwithstanding the foregoing, nothing contained in this Agreement shall in any way affect or diminish any tenant’s obligations under any applicable Lease to pay any capital assessment balances or special assessment liens levied against the Property.

A COMMUNITY DEVELOPMENT DISTRICT MAY IMPOSE AND LEVY TAXES OR ASSESSMENTS, OR BOTH TAXES AND ASSESSMENTS, ON THE PROPERTY. THESE TAXES AND ASSESSMENTS PAY THE CONSTRUCTION, OPERATION, AND MAINTENANCE COSTS OF CERTAIN PUBLIC FACILITIES AND SERVICES OF THE DISTRICT AND ARE SET ANNUALLY BY THE GOVERNING BOARD OF THE DISTRICT. THESE TAXES AND ASSESSMENTS ARE IN ADDITION TO COUNTY AND OTHER LOCAL GOVERNMENTAL TAXES AND ASSESSMENTS AND ALL OTHER TAXES AND ASSESSMENTS PROVIDED FOR BY LAW.

22.2.5 Flood Area Hazard Zone Disclosure . The Property may be located in a Special Flood Hazard Area. Flood insurance on structures may be required as a condition of financing. Buyer is advised to verify any such requirements within its due diligence period, if any.

22.2.6 Energy-Efficiency Rating Information . In accordance with Section 553.996, Florida Statutes, Buyer may have the energy-efficiency rating of the Property determined. Buyer acknowledges that it has received from Seller a copy of The Florida Building Energy Rating System Brochure as provided by the State of Florida Department of Community Affairs.

22.2.7 Property Tax Disclosure . Buyer should not rely on the Seller’s current property taxes as the amount of property taxes that the Buyer may be obligated to pay in the year subsequent to purchase. A change of ownership or property improvements triggers reassessments of the Property that could result in higher property taxes. If you have any questions concerning valuation, contact the local county property appraiser’s office for information.

22.2.9     Tax Liabilities . Associated Grocers of Florida, Inc. (“AGF”) shall pay all sales and use taxes under Florida Statutes Section 212.031, payable to the Florida

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Department of Revenue arising from the operation of the business on the portion of the Property located in Florida. If AGF fails to pay any such sales and use taxes, then Sellers shall indemnify, defend, and hold Buyer harmless from and against any and all losses, claims, damages and liabilities, including without limitation reasonable attorneys' fees and costs of defense, which may be incurred by Buyer in connection with Seller's obligations under this Section 22.2.9 and non-payment by a Seller of any taxes imposed upon such Seller in connection therewith.

22.3     Illinois . Without limiting the choice of law provision set forth in Section 19, the following provisions shall apply to the extent that the laws of the State of Illinois govern the interpretation or enforcement of this Agreement with respect to any Property located in such state, as determined by a court of competent jurisdiction.

22.3.1     Broker’s Invoice and Lien Waiver . The following is hereby added to Section 5.2: “An invoice and waiver of lien from Broker (as defined in Section 5.4.8).”

    

[Remainder of page intentionally left blank]



24
    


SIGNATURE PAGE
TO
PURCHASE AGREEMENT
Sellers and Buyer executed this Agreement as of the Effective Date.

“ Seller ”
SUPERVALU INC.,
a Delaware corporation

By: __________________________________
Name:
Its:

“ Seller ”
UNIFIED GROCERS, INC.,
a California corporation

By: __________________________________
Name:
Its:

“ Seller ”
SUPERVALU HOLDINGS, INC.,
a Missouri corporation

By: __________________________________
Name:
Its:
“ Seller ”
ASSOCIATED GROCERS OF FLORIDA, INC.,
a Florida corporation

By: __________________________________
Name:
Its:

 
 

 
[SIGNATURES CONTINUE ON NEXT PAGE]

S-1
        







“ Buyer ”
CF  GROCERY DISTRIBUTION PROPCO LLC ,

a Delaware limited liability company

By: __________________________________
Name: _______________________________
Its:___________________________________

S-2
        



JOINDER BY TITLE COMPANY

FIRST AMERICAN TITLE INSURANCE COMPANY is executing this Agreement in its capacity as Title Company only, and by such execution is only agreeing to act strictly in accordance with the terms of this Agreement that govern the duties and obligations of Title Company, including being the designated party to comply with any reporting requirements specified in Section 6045 of the United States Internal Revenue Code (and any related regulations regarding such reporting obligations) in relation to this transaction.

FIRST AMERICAN TITLE INSURANCE COMPANY

By: ___________________________________
Name: _________________________________
Its: ___________________________________
Date: __________, 2018




S-3
        


EXHIBIT A-1
LIST OF PROPERTIES, SELLERS AND ALLOCATED INITIAL BASE RENT

PROPERTY
SELLER
INITIAL BASE RENT
 
 
 



A-1-1
        


EXHIBIT A-2
LEGAL DESCRIPTION OF THE PROPERTIES



A-2-1
        


EXHIBIT B
SELLER’S RETAINED PROPERTY

All owned or leased items of inventory, personal property, equipment and trade fixtures in the Premises, and whether or however attached to the Improvements, at any time during the Term that are necessary, incidental or convenient to the business from time to time conducted at the Premises, including, without limitation, all signs and other forms of business identification, furniture, totes, inventory, machinery, storage equipment, racking (wherever located), shelving, kitchen equipment and furnishings (including microwaves and unit, breakroom and non-walk-in refrigerators), televisions, work stations, portable or movable partitions, receptionist desks, millwork, credenzas, bulletin boards, computer installations (including computers, computer hardware, raised flooring, IDF and MDF cabinets, UPS and mini UPS equipment, security cameras and security systems, DVR’s and access control systems, freestanding supplemental air conditioning or cooling systems therefor), wireless network repeaters, two-way radio repeaters, VOIP telecommunications systems & equipment (desktop & conference phones, and main telecommuting network panel), chemical dispersion systems, specific isolation fencing, gates and security screening, miscellaneous material handling equipment (including cranes and hoists and trolly railing, balers, personnel safety caging, and scales), thermal technologies, leased (rather than owned) high speed freezer doors, safety and PPE closing equipment and tools (including refrigeration personal protection equipment and barrel drum transfer equipment), financial services equipment, safes, safe doors, bulletin boards, book shelves and file cabinets, generators, and all items of personal property whatsoever whether owned by Tenant or any of its subtenants, employees or invitees or otherwise.

“ Tenant Property ” shall not include the central HVAC or other building systems, public announcement system, fire and life safety communications systems including alarms, strobes and enunciators, water heaters, boilers, sinks, water closets, water basins, pipes, faucets or other plumbing fixtures, walk-in refrigerators or freezers, walls (other than demountable walls or partitions), doors, trim, floor and wall coverings, ceiling lights and tile, window shades and the like

B-1
        



EXHIBIT C
TENANT LEASES




C-1
        



EXHIBIT D-1
FORM OF DEEDS



D-1-1
        


EXHIBIT D-2
FORM OF LEASES

LEASE
THIS LEASE (this “ Lease ”) is entered into as of __________, 2018 (the “ Effective Date ”), by and between CF Grocery Distribution Propco LLC, a Delaware limited liability company (“ Landlord ”), and _____________________, a ________________ (“ Tenant ”).
RECITALS
A.    Contemporaneously with the execution of this Lease, Tenant is conveying the Premises (as defined below) to Landlord.
B.    Tenant desires to lease the Premises from Landlord, and Landlord desires to lease the Premises to Tenant, subject to and upon the terms of this Lease.
C.    Pursuant to the terms of the Guaranty, no modification or amendment of this Lease shall be entered into if it increases the Base Rent or the Term or materially increases any other obligation of Tenant hereunder, unless consented to in writing by Guarantor.
ACCORDINGLY, Landlord and Tenant hereby agree as follows:
1.     Definitions . The following terms shall have the meanings set forth in this Section   1:
Alteration . Construction, reconstruction, replacement, repairs, renewals, alterations, changes, additions, improvements and demolitions of or to the Improvements and all excavations at any time made or to be made in, or on about the Land.
Base Rent . The Base Rent as provided for in Section 3.1 of this Lease.
Commencement Date . The date of commencement of the Term hereof, which shall be the Effective Date.
Event of Default . As defined in Section 14.1 of this Lease.
Extension Term . As defined in Section 2.3.
First Offer Right . Tenant’s first offer right to purchase the Premises in accordance with Section 22.
Governmental Authorities . All federal, state, county, municipal and local governments, and all departments, commissions, boards, bureaus and officers thereof, having or claiming jurisdiction over the Premises or Tenant’s use thereof.
Guarantor . SUPERVALU INC., a Delaware corporation, or any substitute guarantor under the Guaranty.


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Guaranty . The Guaranty dated as of the Effective Date from Guarantor to Landlord with respect to this Lease, or any substitute guaranty provided pursuant to the terms and conditions thereof.
Hazardous Materials . All (a) petroleum or any fraction of petroleum or petroleum product, natural gas, synthetic gas, asbestos in any form, urea formaldehyde and polychlorinated biphenyls, (b) any toxic, infectious, reactive, corrosive, ignitable or flammable chemical or chemical compound, and (c) any chemicals, materials or substances which are included in the definitions of “hazardous substances”, “hazardous wastes”, “hazardous materials”, “toxic substances” or words of similar import in Legal Requirements.
Improvements . The building, fixtures and other improvements located on the Land, together with all alterations and additions thereto and replacement thereof, including by reason of Restoration, but excluding all Tenant Property.
Initial Term . The initial term of this Lease as provided in Section 2.2.
Insurance Requirements . All terms of any insurance policy required to be maintained by Tenant pursuant to Section 9.
Interest Rate . The simple per annum interest rate equal to the lesser of (a) the prime rate, plus two and one-half percent (2.5%) and (b) the maximum lawful rate of interest. As used herein, the “ prime rate ” means the rate of interest published from time to time as the “Prime Rate” in the Wall Street Journal under the heading Money Rates; provided, however, that (y) if more than one such rate is published therein the prime rate shall be the highest such rate and (z) if such rate is no longer published in the Wall Street Journal or is otherwise unavailable, the prime rate shall be a substantially comparable index of short term loan interest rates charged by banks to corporate borrowers selected by Landlord and approved by Tenant, such approval not to be unreasonably withheld.
Land . The land located in ____________ County, ________________ as legally described on Exhibit A and depicted on the Site Plan, together with all easements, appurtenances and hereditaments pertaining thereto.
Lease Year . A period of twelve (12) consecutive months of the Term commencing on the Commencement Date or an anniversary of the Commencement Date and ending on the day prior to the next-succeeding anniversary of the Commencement Date
Legal Requirements . All laws, statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions, directions and requirements of all Governmental Authorities which now or at any time hereafter may be applicable to or required in connection with the Premises or any part thereof, or any use or condition of the Premises or any part thereof.

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Market Base Rent . The annual Base Rent that the Premises would be expected to be leased for, for a five (5) year renewal term commencing on the first (1st) day of the applicable Extension Term, in its then-existing condition, in an arm's-length triple-net lease transaction between a willing lessor and a willing lessee for comparable leased premises in the ________ market existing at the time such Base Rent is established, and considering all relevant factors including the credit of the Tenant, the presence or absence of any incentives then being offered (including remodeling allowances, moving allowances, commissions, free rent, rent abatements and other concessions) for comparable leased premises, payment of operating expenses, taxes and other property expenses, and other escalation bench marks which affect rent, and the age, quality, size, location, area, and nature of the Improvements.
Mortgage . Any mortgage or deed of trust encumbers the Premises and any replacements, renewals, amendments, modifications, extensions or refinancings thereof.
Permitted Exceptions . The matters described on Exhibit E , together with any matters affecting title to the Premises which are consented to by Tenant pursuant to Section 21.
Phase I. That certain Phase I Environmental Site Assessment dated _______________ prepared by ____________ as project no. __________ for _______________.
Premises . The Land and the Improvements, collectively.
Restore or Restoration . The repair, restoration or rebuilding of the Premises or any part thereof, following any Taking, damage to or destruction of the same by fire or other casualty or cause, as nearly as possible to its size, type and character immediately prior to such Taking, damage or destruction, in accordance with all Legal Requirements and Insurance Requirements, with such Alterations as may be determined by Tenant, together with any temporary repairs and property protection pending completion of the work, provided that if Tenant desires to make additional Alterations as provided hereunder, then Tenant shall be entitled to do so at its election, subject to obtaining Landlord’s prior consent, if required pursuant to Section 8.2.
Site Plan . The site plan attached hereto Exhibit B.
Taking . A taking of all or any part of the Premises, or any interest therein or right accruing thereto, including any right of access thereto existing on the date of this Lease, as the result of or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain. The Taking shall be deemed to occur on the date on which the condemning authority takes possession.

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Taxes . All real estate taxes, general and special assessments, water rates and charges, sewer rates and charges, including any sum or sums payable for present or future sewer or water capacity, charges for public utilities, street lighting, excise levies, licenses, permits, inspection fees, other governmental charges, and all other charges or burdens of whatsoever kind and nature incurred in the use, occupancy, ownership, operation, leasing or possession of the Premises, including any substitution, in whole or in part, therefor, due to a future change in the method of taxation, including any increase in any of the foregoing resulting from any sale, exchange, mortgage, encumbrance or other disposition by Landlord, and all transfer taxes imposed in connection with this Lease, and any and all transfer taxes assessed against or allocable or attributable to any of the Premises and accruing during or prior to the Term; provided, however, “Taxes” shall not include, and Tenant shall not be required to pay or reimburse Landlord for, (a) any income, profit, inheritance, estate, succession, gift, franchise or transfer taxes, (b) any tax, assessment, charge or levy imposed or levied upon or assessed against any property of Landlord (other than the Premises or any income to or accruing from the Premises) or business activity of Landlord not in connection with the Premises, or (c) any transfer taxes arising from or in connection with any sale or transfer by Landlord of the Premises or any assignment or hypothecation of Landlord’s interest under this Lease.
Tenant Property . All personal property, trade fixtures and other special equipment and machinery described on Exhibit D , and all additions, alterations and replacements thereof.
Term . The Initial Term and all Extension terms resulting from Tenant’s exercise of the extension options granted under Section 2.3.
Unavoidable Delays . Acts of God, casualties, war, civil commotion, embargo, riots, strikes, unavailability of materials (but not unavailability of funds) and any other events which are not within the reasonable control of the party in question to prevent, control or correct.
[ UST(s) . Any underground storage tank or tanks now or hereafter located on the Premises that were installed by or for Tenant or are otherwise used by Tenant in the conduct of its business on the Premises.]

2.     Demise of Premises; Term .
2.1.     Demise . Landlord does hereby demise and lease to Tenant, and Tenant does hereby take and hire, the Premises, upon and subject to the terms of this Lease.
2.2.     Demise; Initial Term . The Initial Term of this Lease shall commence on the Commencement Date and end on the day prior to the twentieth (20th) anniversary of the Commencement Date, subject to extension as provided in Section 2.3.

5



2.3.     Extension . Tenant is hereby granted the options to extend the Term of this Lease for five (5) additional periods of five (5) years each (each, an “ Extension Term ”), upon the same terms as applicable during the initial Term. Tenant’s option to extend the Term shall be exercised by giving Landlord notice thereof not less than twelve (12) months, nor more than fifteen (15) months, prior to the expiration of the initial Term or the then current Extension Term, as applicable, and, as of the date Tenant delivers such notice to Landlord, and as of the commencement of date of such Extension Term, there shall be no existing monetary Event of Default under this Lease. The Extension Terms shall constitute extensions of the Term hereof, so that this Lease and each and every covenant, agreement and provision thereof shall be and remain in full force and effect during the Term as extended and with the same force and effect as if the Term of this Lease were originally for such extended period. Failure by Tenant to exercise an Extension Term shall constitute a waiver by Tenant of all subsequent Extension Terms.
3.     Rent .
3.1.     Base Rent . Commencing as of the Commencement Date and continuing thereafter throughout the Term, Tenant covenants and agrees to pay to Landlord, without demand, setoff or abatement except as provided in this Lease, the Base Rent in the amounts set forth on Exhibit C , payable in equal installments of 1/12th of the Base Rent in advance on the first day of each calendar month included in the Term, and at that rate prorated (based on the actual number of days in such month) and payable in advance for any portion of a calendar month at the commencement or the end of such period. In the event of an early termination of this Lease for any cause other than an Event of Default, any Base Rent paid in advance shall be prorated (based on the actual number of days in such month) as of the date of such termination with the portion properly allocated to the period following termination refunded to Tenant upon such termination. All Base Rent shall be paid by Tenant to Landlord at the address of Landlord set forth in Section 27, or to such other address as Landlord may direct by notice to Tenant.
3.2.     Delinquent Rent Payments . If Tenant does not pay any installment of Base Rent or any other payment due under this Lease within ten (10) business days after written notice from Landlord to Tenant stating that the same is past due and owing, Tenant will pay Landlord interest on any delinquent payment calculated at the Interest Rate from the date when the payment is due through the date the payment is made. Landlord's right to receive such interest and the Late Fee (as hereinafter defined) for the delinquency is in addition to all of Landlord's rights and remedies under this Lease, at law or in equity. Interest shall begin to accrue on the date that Tenant fails to pay such amounts when due. In addition, if Landlord delivers written notice of default to Tenant with respect to more than two (2) failures by Tenant to pay when due any installment of Base Rent or any other payment due under this Lease in any twelve (12) month period, then for any additional failure by Tenant to pay any installment of Base Rent or any other payment when due under this Lease in such twelve (12) month period, Tenant shall pay a late fee equal to two percent (2%) of each such delinquent payment (the “ Late Fee ”), which shall be due and payable to Landlord immediately after demand therefor.

6



3.3.     Net Lease . It is the purpose and intent of Landlord and Tenant that the Base Rent shall be net to Landlord and that Tenant shall pay the Base Rent and other amounts payable by Tenant under this Lease without notice or demand and without abatement, deduction or setoff, except as otherwise provided in this Lease. Without limiting the generality of the foregoing, Tenant shall be responsible for all Taxes (including penalties and interest thereon), insurance premiums, all charges for the use at the Premises of water, sewer, electricity, heating, air conditioning and all other utilities, the cost of all repairs, maintenance, Alterations, and Restoration, the cost of compliance with all Legal Requirements, amounts payable under any Permitted Exceptions, and all other costs and expenses and obligations of every kind and nature whatsoever relating to the Premises, including, but not limited to, all costs, expenses and obligations relating to USTs, in each instance whether foreseen or unforeseen, ordinary or extraordinary [[* , including, but not limited to, as set forth in Section 18.3 and Section 23 of this Lease *]] . All of the obligations of Tenant hereunder shall be independent of the obligations of Landlord.

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3.4     Determination of Market Base Rent . If Tenant properly exercises its option to extend the Term for an Extension Term pursuant to Section 2.3, Landlord shall notify Tenant of Landlord's determination of the Market Base Rent for the Renewal Term within thirty (30) days thereafter. Landlord and Tenant shall then attempt to agree as to the Market Base Rent within thirty (30) days after such notice from Landlord. If Landlord and Tenant do not agree as to the Market Base Rent by such date, Tenant's exercise of the option to extend shall be null and void unless, within ten (10) days after the expiration of such thirty (30) day period, Tenant notifies Landlord that the Market Base Rent shall be determined by arbitration, in accordance with the following provisions of this Section 3.4. Tenant’s notice demanding arbitration shall also specify the name, address and professional qualifications of the person designated to act as appraiser on its behalf. Within ten (10) days after receipt or deemed receipt of such notice delivered pursuant to Section 27, Landlord shall notify Tenant of the name, address and professional qualifications of the person designated to act as appraiser on Landlord's behalf. Within ten (10) days after selection of the second appraiser, the two (2) appraisers shall select an arbitrator. The appraisers and the arbitrator shall be MAI members of the Appraisal Institute with not less than ten (10) years of experience in the appraisal of improved office building real estate in the ____________ area, be devoting substantially all of their time to professional appraisal work at the time of appointment, and be in all respects impartial and disinterested. Each appraiser shall give its determination of Market Base Rent within a period of thirty (30) days after the appointment of the arbitrator. If the appraisers do not agree on Market Base Rent, then the arbitrator shall determine Market Base Rent by selecting the Market Base Rent proposed by one of the two appraisers. Any determination by the arbitrator shall be made no later than thirty (30) days following delivery of each appraisal and shall be final, binding and conclusive upon Landlord and Tenant. Each party shall pay the fees and expenses of the appraiser appointed by or on behalf of such party and the fees and expenses of the arbitrator shall be borne equally by both parties. If the party receiving a request for arbitration fails to appoint its appraiser within the time specified above, or if the two (2) appraisers so selected cannot agree on the selection of the arbitrator within the time above specified, then either party, upon not less than ten (10) days' prior notice to the other party, may request such appointment of such second appraiser or the arbitrator, as the case may be, by application to any judge of the district court of the county where the Premises is located.
3.5     Additional Payments by Tenant . Any amounts due and payable by Tenant to Landlord under this Lease (other than Base Rent) shall be due and payable within thirty (30) days after written demand therefor from Landlord to Tenant, which demand shall include reasonable substantiation of the amounts deemed to be due and payable.
4.     Taxes .

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4.1.     Taxes . Tenant shall pay directly to the applicable Governmental Authority all Taxes on the Premises due and payable during the Term before any fine, penalty, interest or cost may be added thereto for the nonpayment thereof; provided, however, that (a) if, by law, any Tax may be paid in installments Tenant shall be obligated only to pay such installments as may become due during the Term, and (b) any Tax due and payable, including any installments thereof, in the year of commencement or in the final year of the Term shall be prorated for any period before or after the Term. Tenant shall have no obligation to make monthly or other escrow deposits with respect to Taxes. If any Tax is payable in part with respect to the Premises and in part with respect to other land or other improvements, such Tax shall be apportioned on a square foot basis, as to Taxes allocable to land, and on the basis of the value of the improvements in question as determined by the taxing authority, as to Taxes allocable to improvements. Landlord shall cause the applicable taxing authorities to furnish each Tax bill directly to Tenant. Upon Landlord’s request, Tenant shall furnish to Landlord official receipts of the appropriate taxing authority, or other appropriate proof, evidencing the payment of Taxes from time to time. If Tenant fails to pay to the appropriate party all Taxes when due hereunder, then Tenant shall, without limiting any other remedies available to Landlord, reimburse Landlord for any and all penalties or interest, or portion of such Taxes, paid or incurred by Landlord as a result of such nonpayment or late payment by Tenant. Without limitation of the foregoing, Tenant shall pay to Landlord, no later than the last day of the Term, an amount sufficient to pay unpaid Taxes and other accrued liabilities of Tenant that will encumber the Premises after the end of the Term, to the extent that Taxes and such other liabilities have accrued and will accrue through the end of the Term.

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4.2.     Contests . Tenant shall have the right, provided that there is no monetary Event of Default occurring at the time Tenant wishes to exercise such right, in its sole discretion and at its expense to contest the amount or validity, in whole or in part, of any Taxes by appropriate proceedings diligently conducted in good faith; provided, however, that Tenant delivers to Landlord prior written notice of any such proceeding by Tenant, and that Tenant has paid timely (and continues to pay timely) all Taxes as provided in this Lease to the extent required by applicable Legal Requirements.. Upon the termination of any such proceedings, Tenant shall pay the amount of such Taxes or part thereof, if any, as finally determined in such proceedings, the payment of which may have been deferred during the prosecution of such proceedings (if permitted under the immediately preceding sentence), together with any costs, fees, including attorney's fees, interest, penalties, fines and other liability in connection therewith. Tenant shall be entitled to the refund of any Taxes, penalty, fine and interest thereon to the extent allocable to the Term. Landlord shall join in (at no cost to Landlord) any proceedings referred to in this Section 4.2 to the extent the provisions of any law, rule or regulation at the time in effect shall require that such proceedings be brought by or in the name of Landlord. Landlord shall not contest any Taxes payable within the Term without Tenant's prior written consent which consent may be withheld in Tenant's sole and absolute discretion, provided that such consent shall not be unreasonably withheld during the last twelve (12) months of the Term if Tenant has not exercised its option to extend for the next Extension Term. If Landlord elects to contest any Taxes payable within the Term (and Tenant consents to such contest), (a) such contest shall be at Landlord's sole expense (provided that if the amount of Taxes payable by Tenant are reduced by reason of Landlord's contest, Tenant shall reimburse Landlord for the reasonable costs incurred by Landlord in such contest to the extent of the reduction in Taxes from time to time received by Tenant), and (b) Landlord shall be solely responsible and shall pay when due any increase in Taxes resulting from such contest.
5.     Use .
5.1.     Permitted Use . Tenant may use and occupy the Premises for any lawful business purpose (including at Tenant’s option for food processing, warehousing and storage purposes), in compliance with all Legal Requirements and Insurance Requirements. Tenant will obtain and maintain all permits and approvals required under Legal Requirements for Tenant's specific use of the Premises. Tenant shall have the exclusive right of access to and use of the Premises at all times during the Term.
5.2     No Operating Covenant . Nothing in this Lease shall be deemed to impose upon Tenant, either directly or indirectly, constructively or implicitly, any obligation to open for business, or remain open or operate at the Premises or any portion thereof at any time, in accordance with any operating schedule, or in any manner whatsoever. Nothing in this Section 5.2 shall be deemed to relieve Tenant from complying with all of the other terms and conditions of this Lease. The methods and manner of Tenant’s operation of the Premises, if any, shall be determined by Tenant in its sole and absolute discretion.

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5.3.     Acceptance of Premises . Tenant acknowledges that neither Landlord nor any agent, contractor or employee of Landlord has made any representation or warranty of any kind with respect to the Premises, the Improvements or the Land, including any representation or warranty of suitability or fitness of the Premises for any particular purpose, and that Tenant is leasing and accepting the Premises “AS IS”, “WHERE IS”, AND “WITH ALL FAULTS” on the Commencement Date. Without limiting the generality of the provisions of this Section 5.3, Tenant acknowledges and agrees that, except as otherwise expressly provided in this Lease, Landlord makes, and will make, no express or implied warranty as to (a) matters of title, (b) zoning, (c) tax consequences, (d) physical or environmental condition (including Legal Requirements pertaining to the use, handling, generation, treatment, storage or disposal of any Hazardous Materials, (e) valuation, (f) Legal Requirements, governmental approvals, governmental regulations, entitlement status or any other matter or thing relating to or affecting the Premises, (g) the use, income potential, expenses, occupancy status, operation or characteristics of the Premises or any portion of the property, including warranties of suitability, habitability, merchantability, design or fitness for any specific purpose or for a particular purpose, or good or workmanlike construction, (h) the nature, manner, construction, condition, state of repair or lack of repair of any of the Improvements, on or under the surface, whether or not latent, obvious, visible or apparent, (i) the nature or quality of construction, structural design or engineering of the Premises, (j) the soil conditions, drainage, flooding geotechnical and seismic characteristics, access, utilities or other conditions existing in, on or under the Premises, (k) the presence or existence of mold or other organisms, lead based paint or water penetration in or about the Improvements, or (l) any other state of facts that exists with respect to any of the Premises.
5.4.     Signs . Subject to applicable Legal Requirements, Tenant shall have the exclusive right to install and maintain such signage on or about the Improvements and the Land as Tenant shall desire from time to time (including any monument or other on-Premises signage). [During the Term, Tenant shall further have the right to install, maintain and replace identification signage in the locations and on the sign structure(s) shown on the Exhibit __, and Tenant shall be responsible for maintaining its identification panels in good order and repair at its sole cost and expense.]
5.5.     Parking; Roads . Tenant shall have the exclusive right to use the parking spaces and roadways upon the Premises. [During the Term, Tenant and its agents, contractors, servants, employees, licensees and invitees shall further have the non-exclusive right to use the “Access Drives” shown on the Site Plan for vehicular and pedestrian access purposes.]

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6.     Utilities and Services . During the Term, Tenant will secure and manage, or may retain a property manager to manage, the Premises and all of the services Tenant deems necessary for the use and operation of the Premises, including services for janitorial, electrical, heating, ventilation and air conditioning, water, and security. Except to the extent arising as a result of the grossly negligent acts or willful misconduct of Landlord or any of its agents, contractors, servants, employees, licensees or invitees, no interruption in, or temporary stoppage of, any of the services this Section 6 describes is to be deemed an eviction or disturbance of Tenant's use and possession of the Premises, nor does any interruption or stoppage relieve Tenant from any obligation this Lease describes, render Landlord liable for damages or entitle Tenant to any abatement of Base Rent. Tenant has the exclusive right and discretion to select the provider of any service to the Premises.
7.     Repairs and Maintenance .
7.1     General . Throughout the Term, Tenant, at its sole cost and expense (except as otherwise provided in this Section 7), shall take good care of the Premises, and shall at all times keep the same in good order, repair and condition consistent with that existing on Effective Date, ordinary wear and tear excepted, and make all necessary repairs thereto, interior and exterior, structural and non-structural (including any roof on any buildings) [[* , including to the USTs as more specifically set forth in Section 23 hereof, *]] and shall take such reasonable actions necessary for the preservation and safety of the Premises. The necessity for and adequacy of the repairs to the Premises made or required to be made pursuant to this Section 7 shall be measured by the requirements of buildings of similar construction and age containing similar facilities which are managed and operated in accordance with Tenant’s normal practices. All repairs by Tenant shall be made in accordance with the provisions of Section 8 and other applicable provisions of this Lease, and effected by Tenant with due diligence and in a workmanlike manner and in compliance with all Insurance Requirements and Legal Requirements. Landlord shall have no duty whatsoever to maintain, replace, upgrade, or repair any portion of the Premises, including any structural items, roof or roofing materials.

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7.2     Certain Capital Repairs . If during the last three (3) years of the Term, (a) Tenant determines that any element of the Improvements (including the exterior, roof, load-bearing walls or other structural portions of the Improvements, electrical, utility, HVAC, transportation or other building systems, or parking, drive or other access areas) needs to be materially repaired or replaced (as opposed to operation or routine maintenance), or (b) any alteration or improvement to the Premises is required under any Legal Requirements or Insurance Requirements first-becoming effective after the Effective Date (other than any required as a result of Tenant’s specific use of the Premises), then Tenant may notify Landlord of such determination or requirements, together with Tenant’s reasonable estimate of the costs and expenses of performing such repair, replacement alteration or improvement. If within twenty (20) days after such notice from Tenant, Landlord approves such repair, replacement alteration or improvement, then (x) Tenant shall perform the same in accordance with the requirements of this Lease, (y) the costs and expenses thereof reasonably incurred by Tenant shall be amortized, together with interest at the Interest Rate, over the reasonably anticipated remaining useful life of the element of the Improvements with respect to which the applicable repair, replacement alteration or improvement item was performed, and (z) within thirty (30) days after Tenant notifies Landlord of completion thereof (which notice shall be accompanied by reasonable substantiation of such costs and expenses), Landlord shall reimburse Tenant for such amortized amounts allocable to periods after the scheduled expiration of the Term (such amounts, collectively, the “ Landlord Amortization Amount ”); provided, however, if following such reimbursement by Landlord, Tenant exercises an option to extend the Term for an Extension Term, then Tenant shall repay to Landlord the portion of the Landlord Amortization Amount that is allocable to such Extension Term. If Landlord does not so approve such repair, replacement alteration or improvement, then Tenant shall be released from any obligations to perform such repair or replacement under this Section 7 or any of the other terms and conditions of the Lease.
7.3     Immediate Repairs . In addition to all of Tenant’s other obligations under this Lease, Tenant hereby agrees to complete the repairs listed on Exhibit H attached hereto and made a part hereof (the “ Immediate Repairs ”). Subject to Unavoidable Delay, Tenant shall use commercially reasonable efforts to complete the Immediate Repairs no later than ninety (90) days after the Effective Date, and upon completion of such Immediate Repairs, Tenant shall provide Landlord documentation reasonably necessary to evidence the completion thereof.

8.     Alterations .

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8.1.     General . Tenant shall have the right from time to time during the Term to make Alterations in or to the Improvements, subject in all cases to the further provisions of this Section 8 and to all other applicable provisions of this Lease [[* , including, but not limited to Section 23, which shall govern the replacement of any UST. *]] All Alterations shall be made and completed in a good and workmanlike manner, in accordance with all Legal Requirements and Insurance Requirements, and at Tenant’s cost and expense. Before any Alterations are begun, Tenant shall procure, at its expense, all necessary licenses, permits, approvals and authorizations from all Governmental Authorities and shall, on demand, deliver photocopies thereof to Landlord. Upon Tenant’s request, Landlord shall join in the application for such licenses, permits, approvals and authorizations whenever such action is necessary, at no cost to Landlord. Notwithstanding anything to the contrary contained herein, Tenant shall not be permitted to install any underground storage tank during the Term without Landlord’s prior written consent, which Landlord may grant or withhold in its sole and absolute discretion, and any above ground storage tanks installed during the Term shall include secondary containment sufficient to prevent spills, overfills or tank ruptures from causing a Hazardous Materials release.
8.2.     Consent Required . Notwithstanding Section 8.1, no Alteration shall be made without Landlord’s prior consent if the proposed Alteration would (i) materially or adversely affect the structural integrity, (ii) decrease the value of the Improvements or (iii) would cost in excess of Five Million and 00/100 Dollars ($5,000,000.00).
8.3.     Landlord Approval . Any consent or approval required from Landlord under this Section 8 shall not be unreasonably withheld, conditioned or delayed. If Landlord does not respond to Tenant’s request for consent within fifteen (15) days after Tenant’s request, then Tenant shall send Landlord a second request for consent, and on such request there shall be included the following language in large, bold font: “SECOND REQUEST FOR CONSENT TO ALTERATIONS, FAILURE TO RESPOND WILL BE DEEMED CONSENT UNDER THE TERMS OF THE LEASE BETWEEN YOU AND TENANT” . If Landlord fails to respond to Tenant’s second request for consent, provided in accordance with this Section 8.3, within five (5) business days after Landlord’s receipt or deemed receipt of such second request delivered pursuant to Section 27, then Landlord’s consent shall be deemed given upon the expiration of such second five (5) business day period.
8.4.     Plans and Specifications . Any Alteration for which Landlord’s consent is required under Section 8.2 shall be made (a) under the supervision of an architect or engineer selected by Tenant and approved by Landlord, (b) in accordance with detailed plans and specifications prepared by such architect or engineer, and (c) pursuant to a contract therefor approved by Landlord between Tenant and a general contractor engaged by Tenant and approved by Landlord in its reasonable discretion, which contract incorporates such plans and specifications. Copies of all such plans and specifications shall be delivered by Tenant to Landlord, and shall be subject to Landlord’s prior approval.

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8.5.     Liens . Tenant will keep the Premises free from any mechanics', materialmen's, designers' or other liens arising out of any work performed, materials furnished or obligations incurred by or for Tenant or any person or entity claiming by, through or under Tenant. If any such liens are filed, Tenant at its option may contest the validity of any lien or claim of lien, provided that within sixty (60) days after such filing (or sooner if such lien is impeding any sale or financing of the Premises), Tenant shall release the same of record or provide Landlord with a bond or other security satisfactory to Landlord protecting Landlord and the Premises against such liens.
8.6.     No Landlord Alterations . Landlord will not make any Alterations to the Premises without Tenant’s prior written consent, which consent may be granted or withheld in Tenant’s sole discretion.
9.     Insurance .
9.1.     Property Insurance . Tenant, at its expense, shall procure and maintain or cause to be procured and maintained during the Term an “all-risk” or “Special” peril form policy of property insurance insuring the Improvements for their actual full replacement cost under an agreed amount form, exclusive of non-building improvements, excavations, footings and foundation below the lowest floor level. The property insurance shall be endorsed to include coverage for the perils of Flood, Earthquake, Sinkhole, Windstorm, Terrorism, Ordinance or Law and Boiler & Machinery. Tenant shall also maintain Business Interruption Insurance. Such insurance shall name Landlord (and any first mortgagee designated by Landlord) and Tenant as insureds as their interest may appear. Whenever appropriate, while any Alterations are in the course of being made, said insurance shall be carried or caused to be carried by Tenant in builder’s risk form unless equivalent coverage is provided under “All Risk or Special Peril” property policy written on a full replacement cost basis. Such property insurance will include Landlord’s lender as mortgagee and loss payee.
9.2.     Liability Insurance . Tenant, at its cost, shall procure and maintain or cause to be procured and maintained during the Term the following liability insurance, in any combination of one or more of the following and having policy amounts not less than the following:
(a)    Commercial general liability insurance against claims for bodily injury, death or property damage, occurring on, in or about the Premises in the amount of $1,000,000 per occurrence and an aggregate of $2,000,000;
(b)    Automobile Liability in the amount of $2,000,000 per accident; and
(c)    Umbrella Liability in the amount of $10,000,000 per occurrence and an aggregate of $10,000,000.

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Landlord, together with Landlord’s Affiliates and parent entities, and any first mortgagee designated by Landlord, shall be named as additional insureds with respect to the Commercial General Liability policy referred to in Section 9.2(a).
9.3.     [[* Storage Tank Liability Insurance . Throughout the term of this Lease, Tenant shall maintain Storage Tank Third Party Liability, Corrective Action and Cleanup insurance with limits of not less than $1,000,00 each incident, and $2,000,000 aggregate per policy period. Coverage shall apply to both pre-existing and new conditions with no retro dates later than the retro dates in Tenant’s existing policies. If Tenant’s existing policy provides claims-made coverage, an extended reporting period will be provided for two years following the termination of the policy, provided that such extended reporting period coverage is available in the market place and Tenant does not simultaneously obtain a new policy complying with this section. *]]
9.4     Policy Requirements . All insurance policies provided for in this Section 9 shall be issued by insurance companies rated at least A-/VII by A.M. Best Insurance Service and licensed to do business in the state where the Premises is located. Any insurance required under this Section 9 may be carried on a blanket policy basis, under a separate policy therefor, or under any combination of self-insurance (subject to Section 9.7), primary insurance and umbrella insurance carried by Tenant. Tenant may maintain commercially reasonable deductibles and self-insured retentions for any insurance required under this Section 9; provided, however, Landlord has reviewed and acknowledges and agrees that the deductibles and self-insured retentions held by Tenant as of the Effective Date are commercially reasonable.
9.5.     Evidence of Insurance . Tenant shall provide to Landlord a certificate or certificates of insurance or such other commercially reasonable form of evidence of insurance from the issuing insurance companies demonstrating that the policies required to be carried by Tenant are in full force and effect, in a form reasonably acceptable to Landlord and Landlord’s lenders. Tenant shall provide Landlord with not less than thirty (30) days’ prior notice of any cancellation of any insurance required under this Section 9.
9.6.     Tenant's Failure to Insure . Notwithstanding any contrary language in this Lease and any notice and cure rights this Lease provides Tenant, if Tenant fails to provide Landlord with evidence of insurance as required under Section 9.5 or notice of self-insurance as provided in Section 9.7, and such failure continues for more than ten (10) business days after notice from Landlord, Landlord may, but is not obligated to, obtain such insurance for Landlord's benefit. In such event, Tenant will reimburse Landlord for all reasonable costs and expenses that Landlord incurs obtaining such insurance.

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9.7.     Self-Insurance . Notwithstanding the foregoing provisions of this Section 9, Tenant shall have the right, at its sole election, to self-insure with respect to the insurance coverages required to be maintained by Tenant under this Lease, provided the same does not thereby decrease the coverage requirements set forth in this lease, provided that Tenant shall have such right only as long as it maintains a credit rating of BBB-/Baa3 or higher and provides Landlord written notice of such self-insurance together with reasonably satisfactory evidence establishing that Tenant has such credit rating. Any self-insurance shall be deemed to contain all of the coverage terms and conditions as required in Section 9. Tenant agrees to provide Landlord a statement of self-insurance in the event Tenant elects to self-insure pursuant to this Section 9.7. Tenant agrees to defend, indemnify and hold harmless Landlord from and against any liabilities that would have been covered by the insurance policy replaced by self-insurance. In the event Tenant self-insures pursuant to this Section 9.7, Tenant shall only be liable under this Section 9.7 for losses that would have been covered by the policies of insurance required by this Section 9 if they had been issued by a third-party insurer. With respect to any claims which may result from incidents occurring during the Term, such self-insurance obligation shall survive the expiration or earlier termination of this Lease to the same extent as the insurance would have survived.
10.     Indemnification; Waiver of Claims .
10.1.     Indemnification . Tenant shall defend (with counsel selected by Tenant and reasonably approved by Landlord), indemnify and save Landlord harmless from and against all third-party liabilities which may be imposed upon or incurred or paid by or asserted against Landlord, the Premises or any interest therein by reason of or in connection with (a) any Alterations and anything done in, on or about the Premises or any part thereof in connection therewith, (b) the use, occupancy, condition, operation, maintenance or management of the Premises, (c) any negligence or intentional misconduct on the part of Tenant or any of its agents, contractors, servants, employees, licensees or invitees, (d) any accident, injury, death or damage to any person or property occurring in or on the Premises during the Term, (e) whether heretofore now existing or hereafter arising out of or in any way related to or resulting directly or indirectly from the presence or release at, on, under, to or from the Premises of Hazardous Materials , and (f) any failure of Tenant to comply with Legal Requirements. Notwithstanding anything to the contrary in this Lease, Tenant shall not be required to indemnify Landlord to the extent any such liabilities are directly attributable to Landlord’s gross negligence or willful misconduct.
10.2.     Landlord Not Liable . Except to the extent arising as a direct result of the grossly negligent acts or willful misconduct of Landlord or any of its agents, contractors, servants or employees, Landlord shall not be responsible or liable to Tenant for any loss or damage occasioned by or through or arising from (a) the acts or omissions of persons other than Landlord occupying premises adjacent to the Premises, or transacting any business in the area of the Premises, or (b) burst, stopped or leaking water, gas or sewer pipes or any failure of, or defect in, any electric line, circuit or facility, or (c) any condition of the Premises.

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10.3.     Release . Notwithstanding any other provision of the Lease, Landlord and Tenant each hereby release the other (and each party for which such other may be responsible) from any and all liability or responsibility (to the other or anyone claiming by, through or under them by way of subrogation or otherwise) for any loss or damage to property that is coverable or would have been coverable by the insurance described in Section 9.1 even if such damage is caused by the negligence or other fault of the party so released or any party for which it may be responsible. Each party shall require their insurance companies providing insurance required to be provided by such party under this Lease to include an endorsement waiving their rights of subrogation against the other party.
11.     Casualty .
11.1.     Notice; Restoration . In case of any material damage to or destruction of the Premises or any part thereof, Tenant shall give notice thereof to Landlord and unless this Lease is terminated pursuant to Section 11.4, Tenant at Tenant’s expense, shall commence and proceed with commercially reasonable diligence and efforts to complete Restoration (subject to Unavoidable Delays), all in accordance with the requirements of Section 8. Unless Landlord otherwise consents, the replacement building(s) to be constructed shall have a usable area which is not less than the usable area of the Improvements, and shall be of a quality not less than the quality of the Improvements, as the same existed immediately prior to such damage or destruction.
11.2.     Insurance Proceeds . All losses shall be adjusted with the insurers and/or underwriters by the Landlord and Tenant, unless Tenant Restores the Improvements, in which event Tenant shall be authorized exclusively to adjust the loss (but Landlord shall have the right to approve such adjustment) and receive the proceeds to pay for Restoration as Restoration progresses, subject to reasonable and customary disbursement procedures as may be required by the applicable property insurer. Upon the expiration or sooner termination of this Lease, any insurance proceeds with respect to the Premises not theretofore applied to the cost of Restoration shall be paid to Landlord, except that if such termination occurs in connection with any purchase of the Premises by Tenant, such insurance proceeds shall be payable to Tenant. Notwithstanding any other provisions of this Lease, all proceeds of any insurance carried by Tenant on the Tenant Property or any other property of Tenant shall be payable directly to Tenant and Tenant shall have the exclusive right to adjust and settle losses with respect thereto and to retain the same. If insurance proceeds as a result of a casualty to the Premises are insufficient to complete the Restoration necessary by reason of such casualty, then Tenant shall be responsible for the payment of such amounts necessary to complete such Restoration, including any deductibles or self-insurance retentions maintained by Tenant.

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11.3.     No Abatement or Termination . No destruction of or damage to the Premises, or any part thereof, whether such damage or destruction be partial or total or otherwise, shall entitle or permit Tenant to surrender or terminate this Lease or shall relieve Tenant from its liability to pay in full the Base Rent and other sums and charges payable by Tenant hereunder, or from any of its other obligations under this Lease, and Tenant hereby waives any rights now or hereafter conferred upon it by statute or otherwise to surrender this Lease or quit or surrender the Premises or any part thereof, or to receive any suspension, diminution, abatement or reduction of the Base Rent or other sums and charges payable by Tenant hereunder on account of any such destruction or damage.
11.4     Damage in Last Two Years . Notwithstanding anything in this Lease to the contrary, Tenant shall have the right to terminate this Lease if, in Tenant’s good faith business judgment, the Premises are rendered untenantable by fire or other casualty during the last two (2) years of the Term (as extended through the last exercised option period), by giving Landlord written notice of such termination within sixty (60) days after the occurrence of such casualty, which termination shall be effective on the date such notice is given. In the event of any such termination, provided, Tenant has maintained the insurance required under the terms of this Lease, (i) Tenant shall not have any obligation to Restore the Premises, (ii) Tenant shall promptly assign to Landlord all insurance proceeds that would otherwise be payable to Tenant as a result of any insurance maintained by Tenant pursuant to the terms of this Lease that are allocable to the Improvements, but Tenant shall not be required to assign to Landlord any insurance proceeds that are allocable to any Tenant Property, and (iii) all losses related to that portion of insurance proceeds that are assigned to Landlord pursuant to clause (ii) may be adjusted with the insurers and/or underwriters by Landlord, with Tenant’s consent not to be unreasonably withheld, conditioned or delayed.
12.     Condemnation .
12.1.     Total Taking . In the event of a Taking of the whole or substantially all of the Premises, this Lease shall terminate on the date of such Taking, and the Base Rent and all other sums and charges required to be paid by Tenant hereunder shall be apportioned and paid to the date of such Taking. In the event of any such Taking and notwithstanding the termination of this Lease, Landlord and Tenant shall together make one claim for an award for their combined interests and the net award received shall be allocated between Landlord and Tenant on the basis of their respective interests therein, including in the case of Landlord the value of its reversion interest in the Premises and, in the case of Tenant, the bargain value, if any, of its leasehold estate computed as though the Lease had not been terminated, and damages sustained as a result of termination of the Lease prior to the end of the Term. In addition, Tenant shall be entitled to any award made in respect of or allocable to the Tenant Property and for moving, relocation and other statutory benefits. As used in this Section 12, a Taking of “ substantially all of the Premises ” shall mean a Taking of such portion of the Premises or any access thereto as renders it in Tenant’s good faith business judgment uneconomical or unfeasible to operate the Premises for the purpose for which the Premises was operated prior to such Taking.

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12.2.     Partial Taking . In the event of a Taking of less than substantially all of the Premises, this Lease shall continue in full force and effect (including, but not limited to, Tenant’s obligation to pay the full amount of Base Rent and all other amounts payable by Tenant to Landlord under the terms of this Lease, without any offset, abetment or diminution thereof), and Tenant shall with commercially reasonable diligence and efforts (subject to Unavoidable Delays) commence and complete Restoration in accordance with the requirements of Section 8, except to the extent made unfeasible by any reduction in area of the Land or Improvements caused by such Taking, provided that Tenant shall not be obligated to expend in excess of the condemnation proceeds it actually receives in connection with such Restoration (though Tenant shall be obligated to spend so much of the condemnation proceeds as is reasonably necessary to complete the Restoration in accordance with the terms hereof). In no event shall Landlord have any obligation to expend any amount to complete the Restoration pursuant to this Lease, as all such costs of Restoration shall be borne solely by Tenant as provided above. Tenant shall receive any award made in respect of or allocable to the Tenant Property. All awards made in respect of or allocable to the Premises shall be distributed to Tenant for Restoration in accordance with this Section 12.2. Landlord shall receive the balance of the award, subject to the rights of Tenant, if any, as purchaser of the Premises pursuant to Section 22.
13.     Sublease; Assignment and Transfer .
13.1     Sublease and Assignment by Tenant . Tenant may sublet all or any portion of the Premises without Landlord’s consent, but Tenant shall provide notice to Landlord of any such sublet (other than as described in clause (a) below), which notice shall be delivered not later than thirty (30) days after the effective date thereof. Tenant may assign this Lease to a Release Credit Entity without Landlord’s consent. Any assignment to any assignee that is not a Release Credit Entity shall require Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Any assignment or subletting shall be expressly subject to the terms and provisions of this Lease. Any assignee of Tenant’s interest in the Lease (regardless of whether consent was required pursuant to the terms hereof) shall assume this Lease and all obligations thereunder which arise or accrue from and after the date of such assignment. Without limiting the generality of the foregoing, Tenant shall have the right without notice to or the consent of Landlord to sublet all or any portion of the Premises and/or to assign this Lease or any interest therein and/or to otherwise transfer its interest in this Lease (a) to any parent, subsidiary or other Affiliate of Tenant, and/or (b) to any person or entity which succeeds to the business of Tenant at the Premises as a result of any reorganization, joint venture, merger, consolidation or issuance, pledge, sale, redemption, conversion, or other disposition (by operation of law or otherwise) from time to time of any stock, membership, partnership or other direct or indirect ownership interest or assets of Tenant. Nothing in this Lease shall be construed to limit or curtail the issuance, pledge, sale, redemption, conversion, or other disposition (by operation of law or otherwise) from time to time of any stock, membership, partnership or other direct or indirect ownership interest in Tenant, whether or not such issuance, pledge, sale, redemption or other disposition shall result in a change in the voting or other control of Tenant. No assignment or sublease shall release, affect or reduce any of the obligations of Tenant hereunder (or of

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Guarantor under the Guaranty); provided, however, (x) if Tenant assigns this Lease to an assignee that, immediately following such assignment (including any assignment which is expressly permitted above) and after having given effect thereto, is a Release Credit Entity, then the transferor Tenant shall be automatically released from all liabilities and obligations under this Lease (and Guarantor shall be automatically released from all liabilities and obligations under the Guaranty) accruing or arising after the date of such assignment, and (y) if Tenant or Guarantor provides a substitute guaranty in the substantially the same form as the Guaranty from a substitute guarantor that is a Release Credit Entity, then Guarantor shall be automatically released from all liabilities and obligations under the Guaranty accruing or arising after the date of such substitute guaranty. In the event of any such release of liability, Landlord agrees to execute and deliver to Tenant and Guarantor a written confirmation of any such release in commercially reasonable form requested by Tenant or Guarantor within fifteen (15) after request therefor. For purposes of this Section 13.1, “ Release Credit Entity ” shall mean any entity that (in the case of a Tenant assignment immediately following such assignment and after having given effect thereto) shall have a publicly traded unsecured senior debt rating of “Baa3” or better from Moody’s or a rating of “BBB-” or better from S&P and is not on “Negative Credit Watch” by S&P or Moody’s (or, if such entity does not then have rated debt, a determination that by either of such rating agencies its unsecured senior debt would be so rated by such agency), and in the event both such rating agencies cease to furnish such ratings, then a comparable rating by any rating agency reasonable acceptable to Landlord, Tenant and Guarantor. Notwithstanding anything to the contrary contained herein, any amendment or modification of this Lease that increases the Base Rent or the Term or materially increases any other obligation of Tenant hereunder shall be consented to by Guarantor.
13.2     Tenant Financing . Notwithstanding Section 13.1 above, Tenant shall have the absolute right from time to time during the Term and without Landlord’s consent to collaterally assign or to grant and assign a mortgage or other security interest in Tenant’s interest in this Lease and/or the Tenant Property to Tenant’s lenders in connection with Tenant’s financing arrangements. Landlord agrees to execute such confirmation, certificates and other documents (other than amendments to this Lease) as Tenant’s lenders may reasonably request and in a form acceptable to Landlord in connection with any such financing, provided that the fee simple interest of Landlord cannot be pledged or encumbered by Tenant in connection with any such financing arrangement, and Landlord shall have no liability to any such lenders other than its obligations to honor the terms of this Lease. Landlord shall not be obligated to subordinate any or all of Landlord’s right, title or interest in and to the Premises or this Lease to the lien of any leasehold mortgage. A leasehold mortgage shall encumber only Tenant’s leasehold interest in the Premises and shall not encumber Landlord’s right, title or interest in the Premises. Landlord shall have no liability whatsoever for the payment or performance of any obligation secured by any leasehold mortgage or related obligations.

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13.3     Landlord’s Sale of the Premises . Subject to Section 22, Landlord shall have the right at any time to sell or transfer its interest in the Premises to any person, firm or corporation; provided, however, any such sale or transfer shall be subject to the terms and conditions of this Lease, all of Landlord’s covenants and obligations contained herein shall be binding upon any such transferee, and the transferring Landlord shall be released for its obligations under this Lease accruing or arising from and after such transfer; provided such transferee shall expressly assume in writing all of the obligations of Landlord under this Lease. Notwithstanding the foregoing, the transferring Landlord shall remain fully liable for any and all liabilities, obligations, claims or other matters accruing or arising under this Lease prior the date of such transfer.
14.     Default .
14.1.     Event of Default . Any one of the following events shall constitute an “ Event of Default ”:
14.1.1    Tenant fails to pay any amount of Base Rent on or before the date when due and Tenant does not cure such default within ten (10) days after written notice thereof from Landlord to Tenant; provided, however, Tenant shall only be entitled to such notice and cure period for the first two (2) failures by Tenant to pay Base Rent in any calendar year. For any additional failure to pay Base Rent in the same calendar year, an Event of Default shall occur immediately when Tenant defaults in such payment.
14.1.2    Tenant shall fail to observe or perform any of the terms of this Lease, other than the failure to pay Base Rent, and any such other failure shall continue for a period of thirty (30) days after written notice of such failure from Landlord to Tenant, or, in the case of a non-monetary default which cannot with due diligence be cured within such period of thirty (30) days, Tenant fails to proceed with due diligence within such period of thirty (30) days to commence to cure the same and thereafter to prosecute the curing of such default with due diligence.
14.1.3     There is any default by Guarantor under the Guaranty, and such default continues beyond the notice and cure period provided in Section 13 of the Guaranty with respect thereto .
14.2.     Termination . If an Event of Default shall have occurred and be continuing, Landlord may at its sole option by written notice to Tenant terminate this Lease. Neither the passage of time after the occurrence of the Event of Default nor exercise by Landlord of any other remedy with regard to such Event of Default shall limit Landlord's rights under this Section 14.2.

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14.3.     Repossession . If an Event of Default shall have occurred and be continuing, whether or not Landlord elects to terminate this Lease, Landlord may enter upon and repossess the Premises (said repossession being hereinafter referred to as " Repossession ") by force, summary proceedings, ejectment or otherwise, and may remove Tenant and all other persons and property therefrom.
14.4.     Reletting . From time to time after Repossession of the Premises, whether or not this Lease has been terminated, Landlord may, but shall not be obligated to, attempt to relet the Premises for the account of Tenant in the name of Landlord or otherwise, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Term) and for such terms (which may include concessions or free rent) and for such uses as Landlord, in its uncontrolled discretion, may determine, and may collect and receive the rent therefor. Any rent received shall be applied against Tenant's obligations hereunder. Unless required by Legal Requirements, Landlord shall have no obligation to mitigate its damages caused by the Event of Default (or Tenant’s breach or default under this Lease), but if Landlord does attempt to so mitigate its damages, such efforts by Landlord shall not waive Landlord’s right to recover damages under this Article 14.
14.5.     Damages . In the event of any such termination or Repossession, whether or not the Premises shall have been relet, Tenant shall pay to Landlord the Base Rent and other sums and charges to be paid by Tenant up to the time of such termination or Repossession, and thereafter Tenant, until the end of what would have been the Term in the absence of such termination or Repossession, shall pay to Landlord, as and for liquidated and agreed current damages for Tenant's default, the equivalent of the amount of the Base Rent and such other sums and charges which would be payable under this Lease by Tenant if this Lease were still in effect, less the net proceeds, if any, of any reletting effected pursuant to the provisions of Section 14.4 after deducting all of Landlord's expenses in connection with such reletting, including all repossession costs, brokerage and management commissions, operating expenses, reasonable legal expenses and attorneys' fees, and expenses of preparation for such reletting. Tenant shall pay such current damages to Landlord monthly on the days on which the Base Rent would have been payable under this Lease if this Lease were still in effect, and Landlord shall be entitled to recover the same from Tenant on each such day. Landlord shall not have any right to accelerate the Base Rent hereunder, provided, however, that at any time after such termination, whether or not Landlord shall have collected any current damages as aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant shall pay to Landlord on demand, as and for liquidated and agreed final damages for Tenant's default, an amount equal to the then present value of the excess of the Base Rent reserved under this Lease from the day of such termination for what would be the then unexpired term if the same had remained in effect, over the amount of the fair rental value (equivalent of Base Rent) for the same period, said present value to be arrived at on the basis of a discount of four percent (4%) per annum.
14.6.     Exercise of Rights While in Non-Monetary Default . Tenant may exercise and continue to exercise all of its rights under this Lease upon the occurrence and during

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the continuance of any non-monetary default and non-monetary Event of Default under this Lease up to the point of termination of this Lease, including the First Offer Right and the options to extend the Term.

15.     Landlord's Right to Cure Default . If Tenant commits an Event of Default (or if any default exists and Landlord has good cause for taking action prior to expiration of Tenant's grace period), then Landlord may, but shall not be required to, make such payment or do such act, or correct any damage caused by such prohibited act and to enter the Premises as appropriate in connection therewith, and the amount of the expense thereof, if made or done so by Landlord, with interest thereon at the Interest Rate from the date paid by Landlord, shall be paid by Tenant to Landlord immediately upon Landlord’s request therefor.

16.     No Consequential Damages . Notwithstanding anything in this Lease to the contrary, in no event shall Landlord or Tenant be liable to the other party or to any other person for consequential, special or punitive damages, including lost profits; provided, however, that notwithstanding the foregoing, Tenant shall be responsible for the consequences of any unauthorized holdover and shall indemnify, defend, protect (with counsel selected by Landlord) and hold Landlord and Landlord’s members, partners, shareholders, officers, directors, employees, agents, attorneys, contractors, affiliates wholly free and harmless from any and all losses, claims and liabilities arising therefrom, including consequential damages resulting from Landlord’s loss of a potential replacement tenant. Notwithstanding the foregoing, Tenant shall have no obligation to indemnify Landlord for the consequences of any unauthorized holdover unless each of the following conditions are satisfied (i) at least thirty (30) days prior to the date that Landlord is obligated to deliver the Premises to a third party pursuant to the terms of a separate written agreement, Landlord shall deliver a written notice to Tenant informing Tenant of such delivery obligation and specifying the date that Landlord is required to deliver the Premises to such third party, and (ii) Tenant holds over in the Premises, without Landlord’s consent, after the date specified by Landlord for delivery to such third party.
17.     Waiver . No failure by any party to insist upon the strict performance of any term hereof or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial rent during the continuance of any such breach, shall constitute a waiver of any such breach or of any such term. Except as specifically set forth in this Lease, no failure by Landlord or Tenant to insist upon the other party's performance of any of the terms of this Lease or to exercise any right or remedy upon a breach thereof, constitutes a waiver of any such breach or of any breach or default by the other party in its performance of its obligations under this Lease. No acceptance by Landlord of full or partial Base Rent from Tenant or any third party during the continuance of any breach or default by Tenant of Tenant's performance of its obligations under this Lease constitutes Landlord's waiver of any such breach or default.
18.     Surrender .

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18.1    In the event Tenant does not exercise and fulfill the requirements of the First Offer Right, upon the expiration or sooner termination of this Lease, Tenant shall quit and surrender the Premises to Landlord in the condition required to be maintained in accordance with this Lease (subject to ordinary wear and tear, damage by fire or other casualty excepted or eminent domain). Upon such expiration or termination of this Lease, any Tenant Property which shall remain on the Premises after the expiration or termination of this Lease may, at the option of Landlord, be deemed to have been abandoned, and may either be retained by Landlord as its property or be disposed at Tenant’s expense and without accountability, as Landlord may see fit. In connection with the surrender of the Premises.
18.2    Tenant shall be entitled to remove any Tenant Property and shall repair any damage to the Improvements caused by such removal, provided that Tenant shall not be required to repair any damage to finish work or minor holes in walls or partitions or to remove any cables or lines from conduits.

18.3     [[* Upon the expiration or termination of this Lease, Landlord shall have the option of (i) removing any UST (and associated vent and fill ports, piping and dispersers) from the Premises and backfilling, compacting, grading and paving the area disturbed by the removal of the UST(s), or (ii) causing any existing UST to be closed in place, in each case in accordance with applicable Legal Requirements, and complete any additional remediation work necessary to confirm that the Premises are in a clean and safe condition and free and clear of any Hazardous Materials caused by Tenant in excess of a concentration at which remediation is required by applicable Legal Requirements (the “ UST Work ”). Landlord shall advise Tenant in writing at least sixty (60) days prior to the expiration or earlier termination of this Lease whether Landlord elects to retain and close or to remove any USTs (and associated vent and fill ports, piping and dispensers), existing on the Premises as of the date of such notice. Such written election shall be accompanied by a facility decommissioning and Hazardous Materials closure plan for the completion of the UST Work (the “ Exit Survey ”) prepared by an independent third party state-certified professional with appropriate expertise, selected by Landlord and reasonably approved by Tenant, which shall (a) identify the steps required to complete the UST Work, and (b) a detailed summary (together with reasonable backup) specifying the costs required to complete the UST Work. If removal or closure of any UST containing petroleum is not subject to, or is exempt from, environmental Legal Requirements, then Landlord shall remove or close any such UST subject to the more stringent, as between state and federal, environmental Legal Requirements governing underground storage tanks containing petroleum, except Landlord shall not be obligated to comply with any requirements concerning the submission of documents to any Governmental Authorities in connection with such removal or closure. Tenant shall (i) provide Landlord access to the Premises at all times reasonably necessary for Landlord to complete the UST Work and prepare the Exit Survey and (ii) reasonably cooperate with Landlord as may be necessary or desirable to permit Landlord to complete the UST Work in accordance with the terms of this Section 18.3. In no event shall Landlord’s access to the Premises or activities thereon, to the extent related to the completion of the UST Work or the preparation of the Exit Survey, be deemed to be a disturbance of Tenant’s quite enjoyment of the Premises or otherwise entitle Tenant to exercise any rights or remedies

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hereunder as a result thereof, provided that Landlord shall use commercially reasonable efforts to minimize interference with the conduct of Tenant’s business on the Premises. Not later than the date that the Lease expires or terminates, (but no sooner than the thirtieth (30 th ) day after Tenant receives the Exit Survey), Tenant shall pay Landlord the cost reflected in the Exit Survey to complete the UST Work, provided such cost is commercially reasonable. If any additional reasonable, out-of-pocket costs to complete the UST Work or the Exit Survey are incurred by Landlord after the date the Lease expires or terminates, then Landlord shall provide Tenant an invoice therefor (together with reasonable backup), and Tenant shall pay such amounts shown on such invoice no later than thirty (30) days after receipt thereof; provided, that Landlord shall not be permitted to deliver any such invoice after the date that is six (6) months after the date the Lease expires or terminates, and, after the expiration of such six month period; provided, Tenant has otherwise paid any and all amounts invoiced to Tenant in accordance with the terms of this Section 18.3, Tenant shall thereafter be released from any and all liabilities relating to the USTs. *]] The provisions of this Section 18 shall survive the expiration or sooner termination of this Lease.

19.     Entry on Premises by Landlord . Upon not less than five (5) business days’ prior notice to Tenant (except in the event of an emergency, in which case, no notice shall be required), Landlord and its authorized representatives may enter the Premises during normal business hours for the purpose of inspecting the same, and showing the same to prospective purchasers, mortgagees and (during the last twelve (12) months of the Term only) tenants. Tenant shall have the right to have an authorized representative of Tenant accompany any such entry. No such entry by Landlord subject to and in accordance with this Section 19 shall entitle Tenant to any reduction in or abatement of its rental or other obligations or constitute any constructive eviction.
20.     Subordination; Estoppel .
20.1.     Subordination . Tenant agrees that, upon the request of Landlord made in writing, Tenant will subordinate this Lease to any Mortgage, provided that, to evidence any such subordination, Tenant and Landlord and the mortgagee shall mutually execute and deliver the Subordination, Nondisturbance and Attornment Agreement in the form attached hereto as Exhibit F (the “ Subordination Agreement ”). In the event the mortgagee or other purchaser at foreclosure sale succeeds to the interest of Landlord under this Lease, Tenant will automatically become the tenant of and shall be deemed to have attorned to such successor in interest as Landlord under this Lease without change in the terms or of this Lease, provided, however, that such successor in interest shall not be bound by any amendment or modification of this Lease made after Tenant enters into the Subordination Agreement without the written consent of such mortgagee or such successor in interest.

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20.2.     Estoppel Certificates . Each party hereto agrees from time to time, upon not less than twenty (20) days’ prior notice from the other, to execute, acknowledge and deliver, without charge, to the other or its designee, a statement in writing, certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, identifying the same by the date thereof and specifying the nature thereof), the dates to which the Base Rent and other sums and charges payable hereunder have been paid, the amount of the Base Rent, that to its actual knowledge there are no claims against the other hereunder (or if there are any such claims, specifying the same), that to its actual knowledge the other party is not in default and there exists no circumstance which with the giving of notice or lapse of time, or both, would constitute a default (or if such party is aware of any such default or circumstance specifying the same) and such other information as the requesting party may reasonably require, which certificate shall be in the form attached hereto as Exhibit G . On the date that Tenant delivers any estoppel certificate, Tenant may modify Exhibit G to reflect any facts or circumstances that exist as of such date.
21.     Quiet Enjoyment . Landlord covenants that Tenant, upon paying the Base Rent and performing all covenants, agreements and conditions of this Lease on its part to be performed, shall quietly have, hold and enjoy the Premises during the Term without hindrance or molestation by anyone claiming by, through or under Landlord. Landlord agrees that it will not without the prior written consent of Tenant (which consent Tenant may not unreasonably withhold, condition or delay) (a) enter into any agreements which would be binding upon the Premises, including any easement and/or operation agreements and any development agreements, zoning applications, restrictions or other agreements with any Governmental Authority, or (b) amend, modify, or consent to any variance from, any of the Permitted Exceptions. Landlord acknowledges and agrees that the Premises includes the Permitted Exceptions. Tenant shall have the exclusive right to exercise any rights accruing to the Premises or Landlord pursuant to any of the Permitted Exceptions. Upon Tenant’s request, Landlord shall reasonably cooperate with Tenant’s efforts to enforce and exercise rights under the Permitted Exceptions.
22.     First Offer Right .

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22.1.     Restriction; Grant . If Landlord elects to sell the Premises (either individually or collectively with any other property or assets) at any time during the Term of this Lease, or if Landlord receives an offer to sell the Premises which Landlord desires to accept, Landlord shall first notify Tenant in writing of its intent to sell, setting forth the specific terms and conditions upon which Landlord will offer for sale or desires to sell the Premises (the “ Offer Notice ”). Tenant shall have and is hereby granted the exclusive right and option (“ First Offer Right ”) to purchase the Premises at the price (the “ Proposed Purchase Price ”) and upon the terms and conditions stated in the Offer Notice. Landlord will not sell less than all of the Premises during the Term, and agrees that any disposition of the Premises will be for consideration expressed and payable solely in United States dollars. If the Premises is being offered together with any other property or assets, (i) the Offer Notice and Proposed Purchase Price shall cover only the Premises, (ii) the Proposed Purchase Price of the Premises shall be a reasonable allocation of the value of the Premises; (iii) Tenant shall only have the right to purchase the Premises and not any other property or assets being offered together with the Premises, (iv) the Offer Notice shall be structured in a manner that makes clear Tenant is permitted to exercise the First Offer Right contemplated in this Article 22 solely with respect to the Premises, and Tenant will not have any right or obligation to purchase any other properties or assets in connection therewith.
22.2.     Exercise . Provided no monetary Event of Default is then existing, the First Offer Right may be exercised by Tenant by giving notice to Landlord at any time within thirty (30) days after receipt of the Offer Notice. If Tenant so exercises its right to purchase the Premises, (a) Landlord shall be obligated to sell the Premises to Tenant, and Tenant shall be obligated to purchase the Premises from Landlord, upon the terms and conditions provided in the Offer Notice, with a conveyance by a deed substantially in the same form delivered by Tenant to Landlord to transfer the Premises to Landlord immediately prior to the Effective Date, an allocation and proration of closing costs and taxes and assessments according to local custom, such other terms and conditions as may be customary, and a closing date not less than thirty (30) nor more than sixty (60) days after such exercise by Tenant. Landlord and Tenant shall promptly negotiate in good faith and within ten (10) business days after such exercise shall execute a purchase agreement containing the terms, conditions and matters described in clause (a); provided, however, the execution of such purchase agreement shall not be a condition of Tenant’s obligation to buy, or Landlord’s obligation to sell, the Premises.
22.3.     Non-Exercise . If Tenant does not timely and properly exercise its right to purchase the Premises, then Landlord may offer for sale and sell the Premises to any person or entity, provided that Landlord may not sell the Premises for less than ninety five percent (95%) of the Proposed Purchase Price, or upon terms that are materially more favorable to the purchaser than stated in the Offer Notice, and provided further that if Landlord proposes to sell the Premises for less than the Proposed Purchase Price or upon terms that are materially more favorable to the purchaser than stated in the Offer Notice, or more than one hundred eighty (180) days after the initial Offer Notice, then Landlord must re-offer the Premises to Tenant following the procedure described above in this Section 22.

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22.4.     Excepted Transfers . Notwithstanding anything contained herein, the First Offer Right shall not apply if the Premises is sold to an Affiliate, or sold in connection with a foreclosure or deed in lieu of foreclosure.
22.5.     Continuing Right . Subject to Sections 22.3 and 22.4, the First Offer Right herein granted to Tenant is a continuing right of first offer and shall apply as often as any then holder of any part of the Landlord’s interest hereunder (including any such holder who or which shall have acquired its interest in a disposition to which the First Offer Right applied but was not exercised) shall make or propose to make a sale of the Premises during the Term of the Lease.
22.6.     Certain Definitions . For purposes of this Section 22, (a) “ selling ” or a “ sale ” shall mean any, direct or indirect, sale, conveyance, assignment, transfer, exchange or other disposition of all or a part of Landlord’s interest in the Premises (provided that any transfer of less than fifty percent (50%) or more of the ownership interests, direct or indirect, in the owner of the Premises, so long as the entire remaining funds or accounts of such owner continue to be managed directly or indirectly by Affiliates of __________________________, shall not be considered a “sale” under this Section 22), (b) “ Affiliate ” means any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Landlord, and (c) “ control ” when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

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23.     [[* Hazardous Materials . At any time, from to time and on reasonable prior written notice to Tenant, Landlord shall have the right to conduct appropriate tests of the Premises or any portion thereof to determine whether Hazardous Materials are leaking from the USTs. Tenant shall pay all reasonable costs of such tests if such tests reveal that Hazardous Materials have been released from the USTs in excess of a concentration at which remediation is required by applicable Legal Requirements. If underground or other storage tanks storing Hazardous Materials are located on the Premises, or are hereafter placed on the Premises, then Tenant shall register, repair, monitor and maintain the storage tanks, maintain appropriate records, implement reporting procedures, properly remove any underground storage tanks and related piping and dispensers and take or cause to be taken all other steps necessary or required under Legal Requirements, all at Tenant’s sole cost and expense. If, for any reason, any underground storage tank cannot be repaired and must be replaced, Tenant may choose to replace such underground storage tank, subject to Landlord’s consent to such replacement, at Tenant’s sole cost and expense, with comparable equipment, in compliance with all applicable Legal Requirements; provided, that if Tenant chooses not to replace such underground storage tank, then Tenant shall remove such underground storage tank in compliance with all Legal Requirements. Upon request by Landlord, Tenant shall furnish to Landlord a copy of any and all records and/or tests associated with the underground storage tanks, including, but not limited to, test results of the underground storage tanks, cathodic protection systems, leak detection systems, fire suppression equipment, Stage II vapor recovery equipment and overfill containment systems. Tenant shall be responsible for posting on the Premises any signs required under applicable Legal Requirements related to Hazardous Materials. Tenant shall also complete and file any business response plans or inventories required by any such Legal Requirements. Tenant shall concurrently file a copy of any such business response plan or inventory with Landlord. Tenant’s obligations under this Section 23 shall survive the expiration or earlier termination of this Lease. *]]
24.     No Merger of Title . There shall be no merger of Tenant’s interest in this Lease nor of the leasehold estate created by this Lease with the fee estate in the Premises or any part thereof by reason of the fact that the same person may acquire or own or hold, directly or indirectly, Tenant’s interest in this Lease or the leasehold estate created by this Lease or any interest therein and the fee estate in the Premises or any part thereof or any interest therein.
25.     Consent . In any case under this Lease which requires consent or approval and no standard is specified for providing such consent or approval, then such consent or approval shall not be unreasonably withheld, conditioned or delayed.
26.     Short Form Lease . If requested by Tenant, Landlord and Tenant shall enter into a short form or memorandum of lease in form and substance reasonably acceptable to Landlord and Tenant for the purpose of reflecting on the record title to the Land, Tenant’s leasehold estate and other rights under this Lease.

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27.     Financial Statements . If at any time during the Term, Guarantor ceases to be a publicly traded company and/or its financial reports and statements (i.e. 10-K and 10-Q reports) are no longer available to Landlord via Edgar or other online reporting sources, then Tenant shall deliver to Landlord within one hundred twenty (120) days after the close of each fiscal year of Guarantor, annual audited financial statements of the Tenant and Guarantor certified by a nationally recognized firm of independent certified public accountants and prepared in accordance with GAAP.
28.     Notices . Any notice required or permitted to be given by this Lease will be in writing and will be given by nationally recognized overnight courier, or by certified or registered mail, return receipt requested, postage prepaid. Notices so given shall be deemed received when actually received or when delivery is confirmed or refused. Notices may also be given by e-mail, and will be effective at the time of sending at the e-mail address specified below if sent by 5:00 p.m. Central Time on a business day with confirmation of receipt (and otherwise as of the next business day) if recipient provides an email confirmation of receipt and if the notice-giving party also sends notice by nationally recognized overnight courier on the same date as sending the e-mail, time being of the essence. Any notice required to be given under this Lease shall be addressed as follows:
Landlord:            

with a copy to:            


Tenant    :            __________________________
11840 Valley View Road
Eden Prairie, MN 55344
Attn: Legal Department
Email:

with a copy to:            SUPERVALU INC.
11840 Valley View Road
Eden Prairie, MN 55344
Attn: Asset Management

Any party may, by notice to the others, specify a different address for notice purposes.
29.     Waiver of Jury Trial . LANDLORD AND TENANT EACH IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS TRANSACTION.

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30.     Miscellaneous . This Lease may be signed in counterparts and evidenced by facsimile, PDF format or similarly-imaged pages. Landlord and Tenant each acknowledge and agree that it has had an opportunity to receive the advice of such counsel and other advisors as it desires before entering into this Lease. Time is of the essence of this Lease. This Lease will be governed by and construed under and in accordance with the laws of the state where the Premises is located. This Lease contains the entire agreement between the parties hereto with respect to this transaction, supersedes any prior oral negotiations or agreements. Subject to Section 13, this Lease is binding upon the parties hereto and their respective legal representatives, successors and permitted assigns. No amendment, modification or waiver of the provisions of this Lease will be effective unless it is in writing and signed by the party against whom it is to be enforced. All decisions requiring the “approval” or “agreement” of any party hereto shall be made in writing the applicable party. If any part of this Lease is held to be illegal, invalid or unenforceable, the remainder of this Lease will be unaffected and continue in full force and effect. This Lease is not binding upon Landlord or Tenant until it has been signed by Landlord and Tenant. The section headings and other captions are for ease of reference only, and are not otherwise part of this Lease. Any reference to a section of this Lease includes its subsections and parts.
31.     Rules of Construction . In interpreting this Lease, the following rules of construction shall be used.
31.1.     Construction . The rule of strict construction shall not apply to this Lease. This Lease shall not be interpreted in favor of or against either Landlord or Tenant merely because of their respective efforts in preparing it.
31.2.     Captions, Gender, Number, and Language of Inclusion . The section headings in this Lease are for convenience of reference only and shall not define, limit or prescribe the scope or intent of any term of this Lease. As used in this Lease, the singular shall include the plural and vice versa, the masculine, feminine, and neuter adjectives shall include one another, and the following words and phrases shall have the following meanings: (a) “ including ” shall mean “including but not limited to”; (b) “ terms ” shall mean “terms, provisions, duties, covenants, conditions, representations, warranties, and indemnities”; (c) “ any of the Premises ” or “any of the Premises” shall mean “the Premises or any part thereof or interest therein” or “the Premises or any part thereof or interest therein”, as the case may be; (d) “ rights ” shall mean “rights, duties, and obligations”; (e) “ liabilities ” shall mean “liabilities, obligations, damages, fines, penalties, claims, demands, costs, losses, charges, liens, judgments, actions, causes of action, and expenses, including reasonable attorneys’ fees”; (f) “ incurred by ” shall mean “imposed upon or suffered or incurred or paid by or asserted against”; (g) “ applicable law ” shall mean “all applicable federal, state, county, municipal, local, or other laws, statutes, codes, ordinances, rules, and regulations”; (h) “ about the Premises ” or “about the Premises” shall mean “in, on, under, or about the Premises” or “in, on, under, or about the Premises”, as the case may be; and (i) “ operation ” shall mean “use, non‑use, possession, occupancy, condition, operation, maintenance, or management”.

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31.3.     Time Periods . Any reference in this Lease to the time for performance of obligations or elapsed time shall mean consecutive days, months or years, as applicable. In the event the time for performance of any obligation hereunder expires on the day that is not a business day, the time for performance shall be extended to the next business day. A “ business day ” means any day that is not Saturday, Sunday or a federal or state holiday.
32.     True Lease . Landlord and Tenant agree that this Lease constitutes a true lease and not a financing or other form of transaction (including for federal income tax purposes). In furtherance of the foregoing, Landlord and Tenant each irrevocably waives any claim or defense based upon the characterization of this Lease as anything other than a true lease and irrevocably waives any claim or defense that asserts that this Lease is anything other than a true lease. Landlord and Tenant covenant and agree that they will not assert that this Lease is anything but a true lease. Landlord and Tenant each stipulate and agree not to challenge the validity, enforceability or characterization of this Lease of the Premises as a true lease and further stipulate and agree that nothing contained in this Lease creates or is intended to create a joint venture, partnership (either de jure or de facto), equitable mortgage, trust, financing device or arrangement, security interest or the like. Landlord and Tenant each shall support the intent of the parties that the lease of the Premises pursuant to this Lease is a true lease and does not create a joint venture, partnership (either de jure or de facto), equitable mortgage, trust, financing device or arrangement, security interest or the like, if, and to the extent that, any challenge occurs. Tenant has discussed the characterization of this Lease with its independent auditors and Tenant believes that this Lease will be treated as an operating lease rather than a capital lease. Landlord shall have the sole right to claim all depreciation with respect to the Premises.

33.      State-Specific Provision.

33.1 California . Without limiting the choice of law provision set forth in Section 29 , the following provisions shall apply to the extent that the laws of the State of California govern the interpretation or enforcement of this Lease with respect to the Premises, as determined by a court of competent jurisdiction.

(a) Effect of Waivers . Each of Landlord and Tenant hereby waives, to the fullest extent permitted by Law, the benefits of California Civil Code Section 1542, which provides as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”

(b) Eminent Domain . The provisions of this Lease, including those in Section 12 , constitute an express agreement between Landlord and Tenant that applies in the event there is any taking of any part of the Premises for any public or quasi-public use under any statute or by right of eminent domain or by purchase in lieu thereof (collectively, “ Condemnation ”). Tenant and Landlord each hereby waives, to the fullest extent permitted by Law, all rights it may have under California Code of Civil Procedure Section 1265.130, or otherwise, to terminate this Lease based on a total or partial Condemnation, provided that

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nothing in this paragraph shall be deemed to limit or modify the express terms of Section 12 of this Lease.

(c) Damage and Destruction . The provisions of this Lease, including those in Section 11, constitute an express agreement between Landlord and Tenant that applies in the event that the Premises or any part thereof shall be damaged or destroyed by fire or other casualty of any kind or nature. Landlord and Tenant, each therefore, fully waives, to the fullest extent permitted by Law, the provisions of any statute or regulation, including California Civil Code, Sections 1932(2) and 1933(4), relating to any rights or obligations concerning any such fire or other casualty, provided that nothing in this paragraph shall be deemed to limit or modify the express terms of Section 11 of this Lease.

(d) Notices . When this Lease requires service of a notice, that notice shall replace rather than supplement any equivalent or similar statutory notice, including any notices required by California Code of Civil Procedure Section 1161 or any similar or successor statute. When a statute requires service of a notice in a particular manner, service of that notice (or a similar notice required by this Lease) in the manner required by Section 27 shall replace and satisfy the statutory service-of-notice procedures, including those required by California Code of Civil Procedure, Section 1162 or any similar or successor statute.

(e) Certified Access Specialist Inspection . Pursuant to Section 1938(a) of the California Civil Code, Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, that the Premises have not undergone inspection by a Certified Access Specialist (as defined in Section 55.52 of the California Civil Code) (a “ CASp ”). As required by Section 1938(e) of the California Civil Code, Landlord hereby states as follows:  "A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law.  Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant.  The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises."  In furtherance of the foregoing, Landlord and Tenant hereby agree as follows:  (a) any CASp inspection requested by Tenant shall be conducted, at Tenant's sole cost and expense, by a CASp designated by Tenant and reasonably approved by Landlord; and (b) subject to the terms and conditions Article 7, Tenant, at its sole cost and expense, shall be responsible for making any improvements, alterations, modifications or repairs to correct violations of construction-related accessibility standards disclosed in the CASp inspection.

(f) Remedies . It is intended that Landlord shall have the remedy described in California Civil Code, Section 1951.4, which provides that, when a tenant has the right to sublet or assign, the landlord may continue the lease in effect after the tenant's breach

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and abandonment and recover rent as it becomes due. Accordingly, if Landlord has not terminated Tenant’s right to possession of the Premises following an Event of Default, Landlord may enforce all of Landlord's rights and remedies under this Lease, including the right to recover all Rent as it becomes due pursuant to the terms of California Civil Code, Section 1951.4.

33.2      Florida . Without limiting the choice of law provision set forth in Section 29 , the following provisions shall apply to the extent that the laws of the State of Florida govern the interpretation or enforcement of this Lease with respect to the Premises, as determined by a court of competent jurisdiction:

(a)     Sales Tax . Tenant shall pay monthly to Landlord any sales, use, or other tax (excluding state and federal income tax) now or hereafter imposed on any Rent due under this Lease. The term “ Rent ” when used in this Lease includes Base Rent and all other amounts payable by Tenant under this Lease, which shall be deemed additional rent.
(b)     Liens . The interest of Landlord in the Premises shall not be subject in any way to any liens, including construction liens, for any Alteration made by or on behalf of Tenant. This exculpation is made with express reference to Section 713.10, Florida Statutes. Tenant represents to Landlord that any improvements that might be made by Tenant to the Premises are not required to be made under the terms of this Lease and that any improvements which may be made by Tenant do not constitute the "pith of the lease" under applicable Florida case law.

(c)    Repossession. The word “force,” is hereby deleted from Section 14.3.

(d)    Reletting. The following is hereby deleted from the first sentence of Section 14.4: “whether or not this Lease has been terminated,”.

(e)    Damages. Note that under Florida law, in the event that Landlord terminates the Lease due to an Event of Default, Landlord shall not have the right to collect Rent (or damages therefor) from Tenant accruing after such termination. Further, in connection with an Event of Default, Landlord shall have the right to accelerate the Rent under the Lease, but solely as may be deemed necessary under Florida law to collect the liquidated damages provided for in the last sentence of Section 14.5 through the end of the then unexpired term.

(f)     Radon Gas Notice. The following radon gas notice is given pursuant to Section 404.056(5), Florida Statutes. “Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health department.


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(g)     Waiver of Landlord’s Lien . Landlord hereby waives its lien for rent imposed on Tenant’s Property at the Premises in Florida by Section 83.08, Florida Statutes.

(h)     Attorneys’ Fees. The provisions for payment of reasonable attorneys’ fees set out in Section 30.2 as applicable to the Premises shall include all costs and fees incurred in court-ordered mediation, at trial, in all appellate proceedings and in any proceedings to determine the reasonableness of such fees and costs.

33.3     Illinois . Without limiting the choice of law provision set forth in Section 29 , the following provisions shall apply to the extent that the laws of the State of Illinois govern the interpretation or enforcement of this Lease with respect to the Premises.

(a) The word “force,” is hereby deleted from Section 14.3

(b) The following is hereby added to the end of Section 14.3: “Should Landlord have reentered the Premises pursuant to this Section 14.3, whether by any action for eviction, unlawful detainer or otherwise, Landlord shall not be deemed to have terminated, waived or forfeited the liability of Tenant to pay rent under the terms of the Lease thereafter accruing, or to have terminated Tenant’s liability for damages under any of the provisions of this Lease, including under Section 14.5 hereof, and Tenant shall remain liable for same.  Tenant covenants that the service by Landlord of any notice pursuant to the eviction or unlawful detainer statutes of the State of Illinois and the surrender of possession pursuant to such notice shall not (unless Landlord elects to the contrary at the time of or at any time subsequent to the serving of such notices and such election is evidenced by a written notice to Tenant) be deemed to be a termination of this Lease.”

33.4     Pennsylvania . Without limiting the choice of law provision set forth in Section 29 , the following provisions shall apply to the extent that the laws of the State of Pennsylvania govern the interpretation or enforcement of this Lease with respect to the Premises.

The following is hereby added to the end of Section 14 :

CONFESSION OF JUDGMENT FOR POSSESSION FOR THE PREMISES . TENANT HEREBY EXPRESSLY AUTHORIZES THE PROTHONOTARY, CLERK OR ANY ATTORNEY OF' ANY COURT OF RECORD TO ACCEPT SERVICE OF PROCESS FOR, TO APPEAR FOR, AND TO CONFESS JUDGMENT AGAINST TENANT AND ALL PERSONS CLAIMING UNDER TENANT IN ANY AND ALL, ACTIONS BROUGHT HEREUNDER BY LANDLORD AGAINST TENANT TO RECOVER POSSESSION OF THE PREMISES (IN EJECTMENT OR OTHERWISE) TO THE EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, WITHOUT ANY LIABILITY ON THE PART OF SAID ATTORNEY, FOR WHICH THIS LEASE SHALL BE SUFFICIENT WARRANT, AND TENANT AGREES THAT UPON THE ENTRY OF SUCH JUDGMENT, A WRIT OF POSSESSION OR OTHER APPROPRIATE PROCESS

36



MAY ISSUE FORTHWITH (WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER).

IN ANY SUCH ACTION, LANDLORD SHALL FIRST CAUSE TO BE FILED IN SUCH ACTION AN AFFIDAVIT MADE BY LANDLORD OR SOMEONE ACTING FOR IT SETTING FORTH FACTS NECESSARY TO AUTHORIZE THE ENTRY OF JUDGMENT, OF WHICH FACTS SUCH AFFIDAVIT SHALL BE CONCLUSIVE EVIDENCE IF TRUE, AND IF A TRUE COPY OF THIS LEASE BE FILED IN SUCH ACTION (AND SUCH AFFIDAVIT SHALL BE SUFFICIENT EVIDENCE OF THE TRUTH OF SUCH COPY OF THIS LEASE), IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL AS A WARRANT OF ATTORNEY, ANY RULE OF COURT, CUSTOM OR PRACTICE TO THE CONTRARY NOTWITHSTANDING. PROVIDED THE FACTS STATED IN THE AFFIDAVIT ARE TRUE AND CORRECT, TENANT AND ALL PERSONS CLAIMING UNDER TENANT HEREBY RELEASE LANDLORD FROM ANY CLAIMS ARISING FROM ANY ERRORS OR DEFECTS WHATSOEVER IN ENTERING SUCH ACTION OR JUDGMENT, IN CAUSING SUCH WRIT OF POSSESSION OR OTHER PROCESS TO BE ISSUED OR IN ANY PROCEEDING THEREON OR CONCERNING THE SAME, AND HEREBY AGREE THAT NO WRIT OF ERROR OR OBJECTION SHALL BE MADE OR TAKEN THERETO.

THIS WARRANT OF ATTORNEY SHALL NOT BE EXHAUSTED BY ONE EXERCISE, BUT JUDGMENT MAY BE CONFESSED FROM TIME TO TIME, AS OFTEN AS OCCASION THEREFOR SHALL EXIST. SUCH POWERS MAY BE EXERCISED DURING AS WELL AS AFTER THE EXPIRATION OR TERMINATION OF THIS LEASE TERM AND DURING AND AT ANY TIME AFTER ANY EXTENSION OR RENEWAL OF THE LEASE TERM.

THIS SECTION 14 SETS FORTH A WARRANT OF ATTORNEY FOR AN ATTORNEY TO CONFESS JUDGMENT AGAINST TENANT. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST TENANT, TENANT, FOLLOWING CONSULTATION WITH (OR DECISION NOT TO CONSULT WITH) SEPARATE COUNSEL FOR TENANT AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY KNOWINGLY, INTELLIGENTLY AND VOLUNTARILY WAIVES UNCONDITIONALLY ANY AND ALL RIGHTS TENANT HAS OR MAY HAVE TO PRE-JUDGMENT AND PRE-EXECUTION NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES OF AMERICA, THE COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE.

TENANT SPECIFICALLY ACKNOWLEDGES THAT LANDLORD HAS RELIED ON THE WARRANT OF ATTORNEY SET FORTH IN THIS SECTION 14 IN ENTERING INTO THIS LEASE WITH TENANT AND THAT THE LANDLORD-TENANT RELATIONSHIP CREATED HEREBY IS COMMERCIAL IN NATURE.


37



(a)    Waiver of Notice to Quit. Tenant agrees to give up certain legal rights as provided by the Landlord and Tenant Act of 1951, as amended, 68 P.S. § 250.101, et seq., including, but not limited to the ten (10) or thirty (30) day notice period which is contained in § 501 thereof, or any other notice period established by applicable law. Provided that Tenant receives the applicable notices and cure periods contemplated in this Lease for a failure by Tenant to comply with the terms of this Lease, no additional notice will be required to be given by Landlord to Tenant to leave and give up the Premises. Tenant will be asked to leave the Premises without notice other than that expressly provided under the terms of this Lease following an Event of Default and subject to applicable Legal Requirements.

33.5     Wisconsin . Without limiting the choice of law provision set forth in Section 29 , the following provisions shall apply to the extent that the laws of the State of Wisconsin govern the interpretation or enforcement of this Lease with respect to the Premises.

(a) Recklessness . The references to gross negligence or grossly negligent acts in Sections 6, 10.1, and 10.2 are hereby amended to recklessness or reckless acts, as applicable.

(b) Jury Trial Waiver . The following is hereby added to the end of Section 28 : THIS WAIVER OF RIGHT TO TRIAL BY JURY IS A MATERIAL CONSIDERATION FOR AND SUBSTANTIAL INDUCEMENT TO LANDLORD AND TENANT TO ENTER INTO THIS LEASE.


[Remainder of page intentionally left blank]
         

38



signature page
to
LEASE
Landlord and Tenant executed this Lease as of the Effective Date.

“ Landlord ”
CF Grocery Distribution Propco LLC ,
 
a Delaware limited liability company

By: __________________________________
Name: _______________________________
Its: ___________________________________


[Signatures Continue on Next Page]




Signature Page



“ Tenant ”
_________________________________,
 
a _______________________________

By: __________________________________
Name: _______________________________
Its: ___________________________________



Signature Page



EXHIBIT A
Legal Description of the Land






A - 1



EXHIBIT B
SITE PLAN



B - 1



EXHIBIT C
BASE RENT SCHEDULE


 
Annual Base Rent [ Annual Base Rent will increase 1.75% annually in years 2-6 and 7.5% in years 11, 16, 21 and 26 ]
Monthly Base Rent
Lease Year 1
 
 
Lease Year 2
 
 
Lease Year 3
 
 
Lease Year 4
 
 
Lease Year 5
 
 
Lease Year 6
 
 
Lease Year 7
 
 
Lease Year 8
 
 
Lease Year 9
 
 
Lease Year 10
 
 
Lease Year 11
 
 
Lease Year 12
 
 
Lease Year 13
 
 
Lease Year 14
 
 
Lease Year 15
 
 
Lease Year 16
 
 
Lease Year 17
 
 
Lease Year 18
 
 
Lease Year 19
 
 

C - 1



Lease Year 20
 
 
Extension Term 1
 
 
Extension Term 2
 
 
Extension Term 3
Market Base Rent
1/12 of Market Base Rent
Extension Term 4
Market Base Rent
1/12 of Market Base Rent
Extension Term 5
Market Base Rent
1/12 of Market Base Rent










EXHIBIT D

LIST OF TENANT PROPERTY


All owned or leased items of inventory, personal property, equipment and trade fixtures in the Premises, and whether or however attached to the Improvements, at any time during the Term that are necessary, incidental or convenient to the business from time to time conducted at the Premises, including, without limitation, all signs and other forms of business identification, furniture, totes, inventory, machinery, storage equipment, racking (wherever located), shelving, kitchen equipment and furnishings (including microwaves and unit, breakroom and non-walk-in refrigerators), televisions, work stations, portable or movable partitions, receptionist desks, millwork, credenzas, bulletin boards, computer installations (including computers, computer hardware, raised flooring, IDF and MDF cabinets, UPS and mini UPS equipment, security cameras and security systems, DVR’s and access control systems, freestanding supplemental air conditioning or cooling systems therefor), wireless network repeaters, two-way radio repeaters, VOIP telecommunications systems & equipment (desktop & conference phones, and main telecommuting network panel), chemical dispersion systems, specific isolation fencing, gates and security screening, miscellaneous material handling equipment (including cranes and hoists and trolly railing, balers, personnel safety caging, and scales), thermal technologies, leased (rather than owned) high speed freezer doors, safety and PPE closing equipment and tools (including refrigeration personal protection equipment and barrel drum transfer equipment), financial services equipment, safes, safe doors, bulletin boards, book shelves and file cabinets, generators, and all items of personal property whatsoever whether owned by Tenant or any of its subtenants, employees or invitees or otherwise.

“ Tenant Property ” shall not include the central HVAC or other building systems, public announcement system, fire and life safety communications systems including alarms, strobes and enunciators, water heaters, boilers, sinks, water closets, water basins, pipes, faucets or other plumbing fixtures, walk-in refrigerators or freezers, walls (other than demountable walls or partitions), doors, trim, floor and wall coverings, ceiling lights and tile, window shades and the like.


D - 1



EXHIBIT E
PERMITTED EXCEPTIONS





E - 1



EXHIBIT F
FORM OF SUBORDINATION AGREEMENT


SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT (this “ Agreement ”) is entered into as of __________, 20__ (the “ Effective Date ”), by and among _____________________, a ________________ (“ Lender ”), _____________________, a ________________ (“ Tenant ”), and CF Grocery Distribution Propco LLC, a Delaware limited liability company (“ Landlord ”).
RECITALS
A.    Landlord owns the real property legally described in Exhibit A (the “ Premises ”).
B.     Landlord has leased the Premises to Tenant pursuant to that certain Lease dated as of ______________, 2018, which Lease is memorialized of record pursuant to that certain Memorandum of Lease dated as of ______________, 2018, and recorded on as of ______________, 2018, in the _____________ of the _____________ of _____________ as _____________ (together with all amendments, supplements and additions thereto, the “ Lease ”).
C.    Lender is the holder to that certain Mortgage dated as of ______________, 20__, from Landlord to Lender, and recorded on as of ______________, 20__, in the _____________ of the _____________ of _____________ as _____________ (together with all renewals, modifications, supplements, replacements and extensions thereof, the “ Mortgage ”).
D.    Tenant has agreed to subordinate the Lease to the lien of the Mortgage and Lender has agreed to grant nondisturbance rights to Tenant, on the terms set forth in this Agreement.
ACCORDINGLY, Lender, Tenant and Landlord hereby agree as follows:
1.     Subordination . Tenant agrees that the Lease and all of the terms, covenants and provisions thereof (and all of Tenant’s right, title and interest in and to the Premises) are, and shall at all times continue to be, subordinate in all respects to the lien of the Mortgage and to all renewals, modifications, supplements, replacements and extensions thereof with the same force and effect as if the Mortgage had been executed, delivered and recorded prior to the execution and delivery of the Lease, so that at all times the Mortgage shall be and remain a lien on the Premises prior and superior to the Lease for all purposes.
2.     Nondisturbance . So long as Tenant is not in default (beyond any period provided Tenant in the Lease to cure such default) in the payment of rent or in the performance of any of the terms, covenants or conditions of the Lease on Tenant’s part to be performed as would entitle Landlord to terminate the Lease, Lender agrees that Tenant's possession of the Premises and the other terms of Tenant's rights under the Lease shall not be diminished, disturbed or interfered with by Lender and if any action or proceeding is commenced by Lender for the foreclosure of the Mortgage and/or the sale of the Premises, Tenant shall not be named as a party defendant therein unless required by law only for such purpose and not to terminate the Lease or otherwise


Exhibit F

    


diminish or interfere with Tenant's rights and under the Lease or under this Agreement. Should Lender become the owner of the Premises, or should the Premises be sold by reason of foreclosure, or other proceedings brought to enforce the Mortgage, or should the Premises be transferred by deed in lieu of foreclosure, or should any portion of the Premises be sold under a trustee's sale, then, subject to the foregoing sentence, the Lease will continue in full force and effect as a direct lease between the Lender and/or the succeeding owner of the Premises, as the case may be, and Tenant, upon and subject to all of the terms, covenants and conditions of the Lease (including any first offer rights in favor of Tenant) for the balance of its term as it may be extended, and Lender, or any successor owner of the Premises, will be bound by all of the terms of the Lease (including all of Tenant’s rights under the Lease) to the extent first arising after the date Lender or such successor owner takes title to the Premises (it being understood that Tenant shall not be relieved from its obligations under the Lease first arising prior to such date that Lender or any successor owner takes title to the Premises).
3.     Attornment . Tenant agrees that the institution of any action or other proceedings by Lender under the Mortgage in order to realize upon Landlord's interest in the Premises shall not result in the cancellation or termination of the Lease or Tenant's obligations thereunder. If Lender shall become the owner of the Premises by reason of the foreclosure of the Mortgage or the acceptance of a deed in lieu of foreclosure or otherwise, (a) the Lease shall not be terminated or affected thereby, (b) Tenant shall attorn to Lender and recognize Lender as its landlord under the Lease for the unexpired term of the Lease, subject to all of the terms and conditions of the Lease and such attornment shall be effective and self‑operative without the execution of any further instrument on the part of Lender or Tenant, (c) if, by operation of law, or otherwise, the commencement of any action or other proceedings by Lender under the Mortgage or the entry into and taking possession of the Premises shall result in the cancellation or termination of the Lease or Tenant's obligations thereunder, Tenant shall, upon request, execute and deliver a new lease of the Premises containing the same terms and conditions as contained in the Lease (including all right of renewal and extension), for the remaining term thereof, and (d) Lender shall not be (i) responsible or liable for any monetary damages as a result of, or obligated to cure, any defaults by Landlord under the Lease (provided that the foregoing shall not be deemed to relieve Lender or any other party from the obligation to perform any obligations of a continuing nature, at the time that Lender or any other party succeeds to the interest of Landlord under the Lease), (ii) subject to claims, defenses or offsets under the Lease or against Landlord which arose or existed prior to the time Lender obtains possession of the Premises (provided that the foregoing shall not be deemed to (A) relieve Lender or any other party from any obligations of a continuing nature, at the time that Lender or any other party succeeds to the interest of Landlord under the Lease), or (B) modify or waive any rights of self-help, set-off, abatement or termination expressly provided in the Lease or otherwise provided by applicable law, (iii) bound by any rent paid more than thirty (30) days in advance other than prepayments expressly required by the Lease, but only to the extent required, and credits due Tenant pursuant to any payment of additional rent made in advance (including CAM, insurance and real estate taxes), (iv) liable for the return of any security deposit paid to any prior landlord, including Landlord, unless Lender has actually received the same, or (v) bound by any material amendment or modification of the Lease or any waiver of any term of the Lease made without Lender’s written consent, which consent shall not be unreasonably withheld, conditioned or delayed and it being agreed by

Exhibit F



Lender that consent shall be deemed given unless Lender makes an objection in writing and properly noticed to Tenant within thirty (30) days from the date of Tenant’s notice to Lender. As used herein, “ material amendment or modification ” shall mean an amendment or modification of the Lease that (x) reduces the amount of rent payable by Tenant under the Lease, (y) reduces the term of the Lease, or (z) imposes any material additional financial obligation on Landlord or Lender; provided, however, that the foregoing shall not apply to termination rights that are expressly granted to Tenant under the Lease and which termination rights are available to Tenant without regard to whether Landlord is in default under the Lease. Nothing in this Section 3 shall be deemed a waiver of any rights or remedies that Tenant may possess or claim personally against Landlord for any defaults or acts of Landlord. Tenant agrees that (a) the Lease cannot be materially amended or modified nor shall have any of its terms been waived by the Landlord, (b) Tenant and Landlord may not terminate, cancel or surrender the term of the Lease, except as expressly permitted by the provisions of the Lease, and (c) Tenant shall not pay any rent for more than the month in advance of the date when due, unless in each case Lender’s prior written consent shall have been obtained.
4.     Right to Cure Landlord's Default . Notwithstanding any provisions of the Lease to the contrary, no notice of cancellation of the Lease by Tenant shall be effective unless Lender shall have first received notice of the default giving rise to such cancellation and shall have failed, for a period of thirty (30) days after receipt thereof, which shall run contemporaneously with any cure period afforded to the landlord under the Lease, to cure such default; provided, however, that the foregoing shall not apply to any termination rights that are expressly granted to Tenant under the Lease and are available to Tenant without regard to whether Landlord is in default under the Lease.
5.     Assignment of Lease . Tenant acknowledges that Landlord is assigning the Lease and rents thereunder to Lender as security for the note given by Landlord to Lender. Tenant agrees that upon receipt of a written notice from Lender, it will thereafter pay to Lender directly all rent and other amounts due or to become due from time to time under the Lease. Landlord acknowledges it agrees that Tenant shall have the right to rely upon any such notice from Lender and that Tenant may pay such rents and other amounts to Lender without any obligation or right to determine the actual existence of the right of Lender to receive such rents and other amounts, notwithstanding any notice from or claim of Landlord to the contrary. Landlord shall have no right or claim against Tenant for any such rents and other amounts so paid by Tenant to Lender and Landlord waives and releases any such claims. Landlord and Lender agree that Tenant shall be credited under the Lease for any payments sent to Lender pursuant to such written notice. Lender agrees to indemnify and hold harmless Tenant from and against any and all liabilities by Landlord in any way related to Tenant's compliance with this Section 5.
6.     Casualty and Condemnation . Lender agrees that so long as neither the Lease nor Tenant’s right of possession of the Premises shall have been terminated by reason of a default by Tenant under the Lease (beyond any period provided Tenant in the Lease to cure such default), if the Premises shall be damaged or destroyed by fire or other casualty, or taken by condemnation, then notwithstanding any contrary provision contained in the Mortgage, Lender will make the proceeds of insurance, or condemnation award, available for the purpose of repairing and restoring the Premises, as the case may be, in accordance with the terms of the Lease and subject

Exhibit F



to such reasonable and customary procedures with respect to the disbursement thereof as Lender may impose.
7.     Tenant Property; Tenant Financing . Lender hereby disclaims and releases any and all right, title or interest in any personal property of Tenant (the “Tenant Property”), and acknowledges and agrees the mortgaged property and collateral encumbered by the Mortgage does not include any of the Tenant Property. Lender acknowledges and agrees that pursuant to Section 13.2 of the Lease, Tenant shall have the absolute right from time to time during the Term and without Landlord’s or Lender’s consent to collaterally assign or to grant and assign a mortgage or other security interest in Tenant’s interest in this Lease and/or the Tenant Property to Tenant’s lenders in connection with Tenant’s financing arrangements. Lender agrees to execute such confirmation, certificates and other documents (other than amendments to this Lease) as Tenant’s lenders may reasonably request and in a form reasonably acceptable to Lender in connection with any such financing, provided that the fee simple interest of Landlord cannot be pledged or encumbered by Tenant in connection with any such financing arrangement.
8.     Notices . Any notice required or permitted to be given by this Agreement will be in writing and will be given by nationally recognized overnight courier, or by certified or registered mail, return receipt requested, postage prepaid. Notices so given shall be deemed received when actually received or when delivery is confirmed or refused. Notices may also be given by e-mail, and will be effective at the time of sending at the e-mail address specified below in sent by 5:00 p.m. Central Time on a business day with confirmation of receipt (and otherwise as of the next business day), provided the notice-giving party also sends notice by nationally recognized overnight courier on the same date as sending the e-mail, time being of the essence. Any notice required to be given under this Agreement shall be addressed as follows:
Lender:            __________________________
__________________________
__________________________
Attn: _____________________

with a copy to:            __________________________
__________________________
__________________________
Attn: _____________________

Tenant:            __________________________
__________________________
__________________________
Attn: _____________________


Exhibit F



with a copy to:            __________________________
__________________________
__________________________
Attn: _____________________

Landlord:            __________________________
__________________________
__________________________
Attn: _____________________

with a copy to:            __________________________
__________________________
__________________________
Attn: _____________________

Any party may, by notice to the others, specify a different address for notice purposes.
9.     Waiver of Jury Trial . LENDER, TENANT AND LANDLORD EACH IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS TRANSACTION.
10.     Miscellaneous . This Agreement may be signed in counterparts and evidenced by facsimile, PDF format or similarly-imaged pages. Lender, Tenant and Landlord each acknowledge and agree that it has had an opportunity to receive the advice of such counsel and other advisors as it desires before entering into this Agreement. Time is of the essence of this Agreement. This Agreement will be governed by and construed under and in accordance with the laws of the state where the Premises is located. This Agreement contains the entire agreement between the parties hereto with respect to this transaction, supersedes any prior oral negotiations or agreements. This Agreement is binding upon the parties hereto and their respective legal representatives, successors and permitted assigns. No amendment, modification or waiver of the provisions of this Agreement will be effective unless it is in writing and signed by the party against whom it is to be enforced. All decisions requiring the “approval” or “agreement” of any party hereto shall be made in writing the applicable party. If any part of this Agreement is held to be illegal, invalid or unenforceable, the remainder of this Agreement will be unaffected and continue in full force and effect. This Agreement is not binding upon Lender, Tenant or Landlord until it has been signed by Lender, Tenant and Landlord. The section headings and other captions are for ease of reference only, and are not otherwise part of this Agreement. Any reference to a section of this Agreement includes its subsections and parts.

Exhibit F



11.     Rules of Construction . In interpreting this Agreement, the following rules of construction shall be used.
11.1.    Construction. The rule of strict construction shall not apply to this Agreement. This Agreement shall not be interpreted in favor of or against any of Lender, Tenant or Landlord merely because of their respective efforts in preparing it.
11.2.    Captions, Gender, Number, and Language of Inclusion. The article and section headings in this Agreement are for convenience of reference only and shall not define, limit or prescribe the scope or intent of any term of this Agreement. As used in this Agreement, the singular shall include the plural and vice versa, the masculine, feminine, and neuter adjectives shall include one another, and the following words and phrases shall have the following meanings: (a) “including” shall mean “including but not limited to”; (b) “terms” shall mean “terms, provisions, duties, covenants, conditions, representations, warranties, and indemnities”; (c) “any of the Premises” shall mean “the Premises or any part thereof or interest therein” or “the Premises or any part thereof or interest therein”, as the case may be; (d) “rights” shall mean “rights, duties, and obligations”; (e) “liabilities” shall mean “liabilities, obligations, damages, fines, penalties, claims, demands, costs, losses, charges, liens, judgments, actions, causes of action, and expenses, including reasonable attorneys’ fees”; (f) “incurred by” shall mean “imposed upon or suffered or incurred or paid by or asserted against”; (g) “applicable law” shall mean “all applicable federal, state, county, municipal, local, or other laws, statutes, codes, ordinances, rules, and regulations”; (h) “about the Premises” or “about the Premises” shall mean “in, on, under, or about the Premises” or “in, on, under, or about the Premises”, as the case may be; (i) “operation” shall mean “use, non‑use, possession, occupancy, condition, operation, maintenance, or management”; and (j) “this transaction” shall mean “the purchase, sale, and related transactions contemplated by this Agreement”.
11.3.    Time Periods. Any reference in this Agreement to the time for performance of obligations or elapsed time shall mean consecutive days, months or years, as applicable. In the event the time for performance of any obligation hereunder expires on the day that is not a business day, the time for performance shall be extended to the next business day. A “business day” means any day that is not Saturday, Sunday or a federal or state holiday.
    
[Remainder of page intentionally left blank]
    


Exhibit F

 

signature pageS
to
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
Lender, Tenant and Landlord have executed this Agreement as of the Effective Date.

“ Lender ”
_________________________________,
a _______________________________


By: __________________________________
Name: _______________________________
Its: ___________________________________



STATE OF _____________    )
) ss.
COUNTY OF ___________    )


The foregoing instrument was acknowledged before me this ____ day of ______________, 20__, by ___________, the ________________ of _________________, a ______________________________, on behalf of the ______________.

___________________________
Notary Public




Exhibit F


 


“ Tenant ”
_________________________________,
a _______________________________


By: __________________________________
Name: _______________________________
Its: ___________________________________



STATE OF _____________    )
) ss.
COUNTY OF ___________    )


The foregoing instrument was acknowledged before me this ____ day of ______________, 20__, by ___________, the ________________ of _________________, a ______________________________, on behalf of the ______________.

___________________________
Notary Public






Exhibit F


 


“ Landlord ”
CF Grocery Distribution Propco LLC,
a Delaware limited liability company
[NOTE: Signature block to be completed at execution]


By: __________________________________
Name: _______________________________
Its: ___________________________________



STATE OF _____________    )
) ss.
COUNTY OF ___________    )


The foregoing instrument was acknowledged before me this ____ day of ______________, 20__, by ___________, the ________________ of _________________, a ______________________________, on behalf of the ______________.

___________________________
Notary Public




The foregoing instrument was drafted by:

Faegre Baker Daniels LLP (SAA)
2200 Wells Fargo Center
90 S. Seventh Street

Exhibit F


 

Minneapolis, Minnesota 55424
(612) 766-7000



Exhibit F




EXHIBIT A
LEGAL DESCRIPTION OF THE PREMISES





Exhibit F



EXHIBIT G

FORM OF ESTOPPEL CERTIFICATE

______________________________, a __________________________ (“ Tenant ”), hereby certifies unto [ ________________ a Delaware limited liability company ] , its successors and assigns (collectively, “ Landlord ”) that as of the date hereof:

1.     Tenant is the lessee of that certain premises located at _____________________________________________ (the “ Premises ”) under a certain Lease dated _____________, 2018 by and between Landlord, and Tenant (together with all schedules, exhibits, addenda, supplements, amendments and modifications thereto, collectively, the “ Lease ”). All initially capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Lease.
2.     A true, correct and complete copy of the Lease is attached hereto as Exhibit A , and there are no amendments, modifications, alterations or changes, written or oral, to the Lease except as attached hereto. The Lease constitutes the entire agreement between Landlord and Tenant with respect to the Premises.
3.     To the knowledge of the undersigned, the Lease is in full force and effect, and the obligations of Tenant are valid and binding.
4.     Tenant is not in breach or default under the Lease, and there exist no facts or events which with the passage of time or giving of notice or both will result in any such breach or default. To Tenant’s knowledge, Landlord is not in breach or default under the Lease, and there exist no facts or events which with the passage of time or giving of notice or both will result in any such breach or default. To Tenant’s current, actual knowledge, Tenant does not presently have any offset, abatement, reduction in rent, charge, lien, claim, counterclaim, termination right or defense under the Lease
5.     The Lease has not been assigned, transferred or hypothecated by Tenant, nor the Premises or any portion thereof sublet except as set forth on Schedule 1 attached hereto.
6.     The Lease term commenced on ___________________, ____ and expires on ___________________, ____ (without taking into account exercise of any extension options). There are no options or rights to renew or extend the term of the Lease except as set forth in Section 2.3 of the Lease.
7.     The current monthly base rental is US $______________.
8.     No security or other deposit has been paid or required under the Lease. Tenant has not made any prepayment of rent or other charges more than one (1) month in advance.
9.     Tenant has no right of first offer, right of first refusal, or any other right or option to purchase all or any part of the Premises, except as set forth in Section 22 of the Lease.




10.     All exhibits and schedules attached hereto are by this reference incorporated fully herein and are true, correct and complete. The term “this Certificate” shall be considered to include all such exhibits and schedules.
11.     There are no guarantors of the Lease, except for _____________. If there are any guarantors, Tenant shall cause each guarantor to sign and date a guarantor estoppel certificate in form and substances reasonably acceptable to Landlord.
12.     Tenant and the persons executing this Certificate on behalf of Tenant have the power and authority to execute and deliver this Certificate.
13.     This Certificate may be relied upon and shall inure to the benefit of Landlord and Landlord’s successors and assigns, and shall be binding upon Tenant.
Dated: As of _____________, 201___        _________________________________,
a _______________________________


By: ______________________________
Name: ____________________________
Title: _____________________________


3



Exhibit A

Lease

See attached.




Schedule 1

Subleases








H- 1





EXHIBIT H

IMMEDIATE REPAIRS








D-2-1
        

 

EXHIBIT D-3
FORM OF MEMORANDUM OF LEASE
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE (this “ Memorandum ”) is entered into as of [________________], 2018 (the “ Effective Date ”), by and between [_____________________], a Delaware limited liability company (“ Landlord ”), and [____________], a [_______________] (“ Tenant ”).
RECITALS
A.    Landlord owns the real property in __________, and legally described in Exhibit A (the “ Premises ”).
B.    Landlord has leased the Premises to Tenant pursuant to that certain Lease dated as of the date hereof (the “ Lease ”).
C.    Landlord and Tenant now desire to memorialize the Lease of record pursuant to this Memorandum.
ACCORDINGLY, Landlord and Tenant hereby agree as follows:
1.     Demise . For and in consideration of the rents reserved and of the covenants and agreements contained in the Lease, Landlord does hereby demise and lease to Tenant, and Tenant does hereby take and hire, the Premises, upon and subject to the terms of the Lease.
2.     Term . The initial term of this Lease shall commence on the Effective Date and end on the day prior to the twentieth (20th) anniversary of the Effective Date. Tenant has options to extend the term of the Lease for five (5) additional periods of five (5) years each, upon and subject to the terms and conditions more particularly provided in Section 2.3 of the Lease.
3.     Permitted Use . Tenant may use and occupy the Premises for any lawful business purpose in accordance with the terms of the Lease.
4.     Right of First Offer . Tenant has a right of first offer to purchase the Premises, upon and subject to the terms and conditions more particularly provided in Section 22 of the Lease.
5.     Memorandum of Lease . This Memorandum is executed for the purposes of giving notice of the existence of the Lease. The Lease contains other terms, conditions, provisions, covenants, representations and warranties, all of which are hereby incorporated in this Memorandum by reference as though fully set forth herein, and both the Lease and this Memorandum shall be deemed to constitute a single instrument. Copies of the Lease are maintained at the offices of Landlord and Tenant. Nothing contained herein shall be construed to amend, modify, amplify, interpret or supersede any provision of the Lease, which shall in all events control.
6.     Miscellaneous . This Memorandum may be signed in counterparts and evidenced by facsimile, PDF format or similarly-imaged pages. This Memorandum will be governed by and construed under and in accordance with the laws of the state where the Premises is located. This Memorandum is binding upon the parties hereto and their respective legal representatives, successors and permitted assigns. No amendment, modification or waiver of the provisions of this

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Memorandum will be effective unless it is in writing and signed by the party against whom it is to be enforced.
[Remainder of page intentionally left blank]


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SIGNATURE PAGES
TO
MEMORANDUM OF LEASE
Landlord and Tenant have executed this Agreement as of the Effective Date.
“ Tenant ”
_________________________________,
a _______________________________


By: __________________________________
Name: _______________________________
Its: ___________________________________



STATE OF _____________    )
) ss.
COUNTY OF ___________    )


The foregoing instrument was acknowledged before me this ____ day of ______________, 2018, by ___________, the ________________ of _________________, a ______________________________, on behalf of the ______________.

___________________________
Notary Public






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“ Landlord ”
_________________________________,
a Delaware limited liability company


By: __________________________________
Name: _______________________________
Its: ___________________________________



STATE OF _____________    )
) ss.
COUNTY OF ___________    )


The foregoing instrument was acknowledged before me this ____ day of ______________, 2018, by ___________, the ________________ of _________________, a ______________________________, on behalf of the ______________.

___________________________
Notary Public




The foregoing instrument was drafted by:

Faegre Baker Daniels LLP (SAA)
2200 Wells Fargo Center
90 S. Seventh Street
Minneapolis, Minnesota 55424
(612) 766-7000



D-3-4
        

 

EXHIBIT A
LEGAL DESCRIPTION OF THE PREMISES






Exhibit A to Exhibit D-3
        

 

EXHIBIT D-4
FORM OF GUARANTY

THIS GUARANTY (this “ Guaranty ”) is entered into as of [_____________], 2018 (the “ Effective Date ”), by and between SUPERVALU INC., a Delaware corporation (“ Guarantor ”), and CF GROCERY DISTRIBUTION PROPCO LLC, a Delaware limited liability company (“ Landlord ”).
RECITALS
A.    Landlord, as landlord, and [____________________], a [_______________________] (“ Tenant ”), as tenant, entered into that certain Lease dated as of even date herewith (the “ Lease ”), relating to certain real property located at [____________] in [_____________, ___________], as more particularly described in the Lease (the “ Premises ”).
B.    As a condition to entering into the Lease, Landlord has required that Guarantor execute and deliver this Guaranty to Landlord.
C.    Guarantor, directly or indirectly, currently owns 100% of the issued and outstanding equity interests of Tenant, and as such Guarantor will derive substantial financial benefits from the Lease and the transactions contemplated thereby and associated therewith.
ACCORDINGLY, in consideration of the execution by Landlord of the Lease and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Guarantor hereby agrees as follows:
1.     Defined Terms . Unless otherwise provided in this Agreement, all capitalized terms have the meanings assigned to them in the Lease.
2.     Guaranty . Guarantor hereby guarantees, irrevocably, unconditionally and absolutely, to Landlord, the full and prompt payment by Tenant, its successors and assigns, of all rents of every kind under the Lease and the full, faithful and timely performance of each and all of the covenants, agreements, obligations, representations, indemnities, warranties and liabilities of Tenant (and of Tenant’s assigns and successors to all or any portion of such Tenant’s interest in the Lease) under the Lease (collectively, the “ Obligations ”), until all such Obligations have been fully paid, performed and discharged. The liability of Guarantor hereunder shall be for all Obligations owed to Landlord under the Lease, including, without limitation, costs and fees (including, without limitation, actual attorneys’ and experts’ fees and disbursements and court costs that would have accrued under the Lease) and all other Obligations that would have been paid, performed and discharged by Tenant (or Tenant’s assigns and successors to all or any portion of Tenant’s interest in the Lease) under the Lease but for the commencement of a case under Title 11 of the United States Code or under any successor statute thereto (the “ Bankruptcy Code ”), or any other law governing solvency, bankruptcy, reorganization or like proceedings, and other reasonable expenses incurred by Landlord in the enforcement of this Guaranty as provided in Paragraph 8 below. The Obligations shall further include any amendment or modification to the Lease from time to time to the extent such amendment or modification (a) does not increase the rent or lease term (including, without limitation, any renewal or extension rights) or materially increase any other obligations of Tenant under the Lease, or (b) is consented to in writing by Guarantor. The Obligations are to be construed in the most comprehensive sense and shall continue,

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unaffected by any actual, purported or attempted assignment, transfer or sublease of all or any portion of Tenant’s interest in its Lease or the Premises. Guarantor acknowledges receipt of a copy of the Lease.
3.     Guaranty Absolute . The covenants and obligations of Guarantor hereunder shall be construed as an absolute, continuing, and unlimited guaranty of payment and performance. Landlord may, at its option, join Guarantor as a party in any action or proceeding brought against Tenant in connection with and based upon or arising out of the provisions of the Lease, and recovery may be had against Guarantor therein, whether or not judgment is also taken or had against Tenant. This Guaranty may be enforced by Landlord against Guarantor without first proceeding against Tenant. The obligations and liabilities of Guarantor hereunder shall not be deemed terminated, lessened, impaired or otherwise affected by any of the following, any or all of which may be taken without the consent of, or notice to, Guarantor: (a) any bankruptcy or insolvency of Tenant or Guarantor or any bankruptcy or insolvency proceedings brought by or against Tenant including, without limitation, (i) any release or discharge of Tenant in any creditor’s proceedings, receivership, bankruptcy or other proceedings, (ii) any impairment, limitation or modification of the liability of Tenant or the estate of Tenant in bankruptcy, or of any remedy or the enforcement of Tenant’s said liability under the Lease, resulting from the operation of any present or future provision of the Bankruptcy Code or other statute, or from the decision of any court, or (iii) the rejection or disaffirmance of the Lease in any such proceedings; (b) any renewal or extension of the Lease in accordance with the terms and conditions thereof, or any holding over by Tenant after the expiration of the term of the Lease (including following any renewal or extension term), whether or not consented to by Landlord; (c) any exercise or non-exercise or delay in the exercise or assertion by Landlord of any right or privilege under this Guaranty or the Lease; (d) any extension of time or other indulgence granted to Tenant or any waiver with respect to the payment of rents, additional rents and other charges and expenses to be paid by Tenant or with respect to the performance and observance of any other obligations of Tenant under the Lease; (e) any assignment of the Lease or any subletting of all or any portion of the Premises; (f) the acceptance by Landlord of any security (including any real or personal property collateral) for the punctual and full payment of said rents or the punctual and full performance and observance of said Tenant obligations, or the release, surrender, substitution or omission to act, by Landlord with respect to any such security; (g) any disaffirmance or abandonment by Tenant, any debtor-in-possession or any trustee of Tenant; (h) any other act or omission to act by Landlord; and (i) except as otherwise provided in this Guaranty, any other matter whatsoever whereby Guarantor would or might be released.
4.     Release . This Guaranty is an irrevocable, continuing guaranty and Guarantor agrees that this Guaranty shall remain in full force and effect until all of the Obligations are fully paid, performed and discharged, regardless of the expiration or earlier termination of the Lease, and regardless of the bankruptcy, reorganization, dissolution or insolvency of Tenant, its successors and assigns, and regardless of any actual, attempted or purported assignment, sublease or other transfer of all or any portion of Tenant’s interest in the Lease. Guarantor further agrees that this Guaranty may not be revoked by Guarantor. If any provision of this Guaranty is held to be invalid or unenforceable, the validity and enforceability of the other provisions of this Guaranty shall not be affected. This Guaranty shall remain in full force and effect notwithstanding future changes of conditions, including any changes in law or invalidity or irregularity in the creation of any of the Obligations. Notwithstanding the foregoing or any other provision of this Guaranty, (a) if Tenant assigns the Lease to an assignee that, immediately following such assignment and after having given effect thereto, is a Release Credit Entity, then Guarantor shall be automatically released from all liabilities and

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obligations under this Guaranty accruing or arising after the date of such assignment, (b) if Guarantor provides a substitute guaranty in substantially the same form as this Guaranty from a substitute guarantor that is a Release Credit Entity, then Guarantor shall be automatically released from all liabilities and obligations under this Guaranty accruing or arising after the date of such substitute guaranty, and (c) if Guarantor provides a substitute guaranty in substantially the same form as this Guaranty from a substitute guarantor that (i) is a direct or indirect parent entity of Guarantor, (ii) owns a direct or indirect interest in Tenant, and (iii) directly or indirectly succeeds to a substantial portion of Guarantor’s and its Affiliates’ wholesale business through one or a series of related transactions, then Guarantor shall be automatically released from all liabilities and obligations under this Guaranty accruing or arising after the date of such substitute guaranty; provided, however, that for a release of the Guarantor pursuant to clauses (a), (b) or (c), to take effect, Guarantor shall deliver written notice of same to Landlord, together with all documents as are reasonably necessary for Landlord to confirm that such release of the Guarantor hereunder complies with the requirements of this Section 4. In the event of any such release of liability, Landlord agrees to execute and deliver to Guarantor a written confirmation of any such release in commercially reasonable form requested by Tenant or Guarantor within fifteen (15) after request therefor. For purposes of this Section 4, “ Release Credit Entity ” shall mean any entity that (in the case of a Tenant assignment immediately following such assignment and after having given effect thereto) shall have a publicly traded unsecured senior debt rating of “Baa3” or better from Moody’s or a rating of “BBB-” or better from S&P and is not on “Negative Credit Watch” by S&P or Moody’s (or, if such entity does not then have rated debt, a determination that by either of such rating agencies its unsecured senior debt would be so rated by such agency), and in the event both such rating agencies cease to furnish such ratings, then a comparable rating by any rating agency reasonable acceptable to Landlord, Tenant and Guarantor.
5.     Waivers . Guarantor hereby knowingly, irrevocably, unconditionally and voluntarily waives (a) presentment, diligence, demand for payment or performance, (b) except as provided in Paragraph 13 of this Guaranty, notices of any kind, including, without limitation, notices of default, nonpayment, dishonor or nonperformance, notice of acceptance of this Guaranty, any liability to which it may apply, and all other notices, demands and indulgences of every kind relating to the Obligations, (c) any right to require Landlord to proceed against Tenant or any other person or to exhaust any security held by Landlord or to pursue any other remedy whatsoever, (d) any defense arising by reason of any invalidity or unenforceability of the Lease, including, without limitation, (i) any rejection or termination of any Lease under Section 365 of the Bankruptcy Code or (ii) any reduction, diminution or limitation upon or discharge of the liability of any Tenant under the Bankruptcy Code, (e) any defense based upon an election of remedies by Landlord, (f) any duty of Landlord to advise Guarantor of any information known to Landlord regarding the financial condition of Tenant, (g) any defense based upon (i) the lack of perfection or continuing perfection or failure of priority of collateral security, if any, which may now or hereafter be given for performance of the Obligations, (ii) the failure by Landlord to marshal assets, (iii) any act or omission of Landlord that results in or aids in the discharge or release of Tenant, (iv) any law that provides that the obligations of a guarantor must not be larger in amount nor in other respects more burdensome than that of the principal or that reduces a guarantor’s obligation in proportion to the principal obligation, (v) any failure of Landlord to file or enforce or compromise a claim in any bankruptcy proceeding, (vi) the avoidance of any lien in favor of Landlord for any reason, (vii) the right to enforce any remedy against any other person, (viii) the right, if any, to the benefit of, or to direct the application of any security held by Landlord, and, until all of the Obligations have been paid and performed in full, all rights of subrogation, any right to enforce any remedy that Landlord now has or hereafter may have against Tenant, and any right to participate in any security now or hereafter held by Landlord, or (ix) the benefits or defenses, if Guarantor is entitled to any benefits or defenses, of any or all anti-deficiency statutes or single-action legislation, and (h) any setoff, defense or counter-claim that Tenant or Guarantor may have or claim to have against Landlord. Guarantor consents to, and agrees that its liability will not be affected by, any forbearances and extensions of time granted to Tenant by Landlord for the performance of

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the Obligations, or any changes and modifications in the terms, covenants and conditions of the Lease hereafter made or granted, all without notice to, or further consent from, Guarantor. Guarantor agrees that until all the terms, covenants and conditions of the Lease on Tenant’s part to be performed and observed are fully performed and observed, Guarantor (y) waives any right (and any defense arising out of any right) of contribution, reimbursement, recourse or subrogation against Tenant by reason of any payment or performance by Guarantor, and (z) subordinates any liability or indebtedness of Tenant now or hereafter held by Guarantor to the obligations of Tenant to Landlord under the Lease. Guarantor waives any and all defenses and discharges available to a surety, guarantor, or accommodation co-obligor in its capacity as such, other than a defense to the extent it would be available to Tenant itself, as obligor. No act or thing need occur to establish the liability of Guarantor hereunder and Guarantor shall remain liable as principal until all of the Obligations to be observed, paid or performed by Tenant have been paid, performed and observed pursuant to the Lease, notwithstanding any act, omission or thing which might operate as a legal or equitable discharge of Tenant or of Guarantor. GUARANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
6.     Representations and Warranties . Guarantor and the individual signing on behalf of Guarantor warrants and represents that: (a) Guarantor has the full capacity, right, power and authority to execute, deliver and perform this Guaranty, and all required actions and approvals therefor have been duly taken and obtained; and (b) the individual(s) signing this Guaranty on behalf of Guarantor is and shall be duly authorized to sign the same on Guarantor’s behalf and to bind Guarantor thereto.
7.     Remedies Cumulative . No single or partial exercise by Landlord of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. All of the rights and remedies of Landlord shall be deemed to be cumulative.
8.     Costs of Enforcement . Guarantor agrees that in the event this Guaranty is or shall be enforced by suit or otherwise, Guarantor will indemnify and save harmless Landlord from all expenses incurred, including, but not limited to, disbursements, court costs, costs of discovery and reasonable attorneys’ fees.
9.     Assignment . Except as provided in Section 4 above, Guarantor agrees that the validity of this Guaranty shall not be terminated, affected or otherwise impaired by reason of any assignment or other transfer of all or any portion of Tenant’s interest in the Lease. This Guaranty shall inure to the benefit of and may be enforced by Landlord, its successors or assigns, and shall be binding upon and enforceable against Guarantor, its heirs, executors, administrators, personal representatives, successors or assigns. Guarantor’s obligations hereunder may not be assigned.
10.     Joint and Several Obligations . If Guarantor consists of more than one person, firm, or corporation, the obligations and liabilities under this Guaranty of those persons, firms and corporations shall be joint and several, and the word “Guarantor” shall mean all or some or any of them.
11.     Notices . Any notice required or permitted to be given by this Guaranty will be in writing and will be given by nationally recognized overnight courier, or by certified or registered mail, return receipt requested, postage prepaid. Notices so given shall be deemed received when actually received or when delivery is confirmed or refused. Notices may also be given by e-mail, and will be effective at the time of sending at the e-mail address specified below if sent by 5:00 p.m. Central Time on a business day with confirmation of receipt (and otherwise as of the next business day), provided the notice-giving party also

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sends notice by nationally recognized overnight courier on the same date as sending the e-mail, time being of the essence. Any notice required to be given under this Guaranty shall be addressed as follows:
Landlord:            

with a copy to:            
 

with a copy to:            
 

Guarantor:            __________________________
__________________________
__________________________
Attn: _____________________

with a copy to:            __________________________
__________________________
__________________________
Attn: _____________________

Any party may, by notice to the others, specify a different address for notice purposes.
12.     Financial Statements . Guarantor agrees to deliver all financial reports required to be delivered by Guarantor pursuant to Section 26 of each Lease within the time frames set forth therein.
13.     Default . Guarantor shall not be considered to be in default of Guarantor’s obligations under this Guaranty unless (a) Landlord shall have provided Guarantor notice of any alleged breach of or other failure by Guarantor to perform such obligations, and Guarantor shall have failed to cure such breach or failure within (i) in the case of a monetary default, ten (10) days after such notice, and (ii) in the case of a non-monetary default, thirty (30) days after such notice, or (b) if at any time during the Term, (i) Guarantor files a Petition (as hereinafter defined), (ii) any creditor or other person that is an Affiliate of Guarantor files against Guarantor any Petition, or any creditor or other person (whether or not an Affiliate of Guarantor) files against Guarantor any Petition, where Guarantor cooperates or colludes with such creditor or other person in connection with such Petition or the filing thereof, (iii) any creditor or other person that is not an Affiliate of Guarantor files a Petition against Guarantor, where Guarantor does not cooperate or collude with such creditor or other Person in connection with such Petition or the filing thereof, and such Petition is not vacated or withdrawn within sixty (60) days after the filing thereof, (iv) a trustee or receiver is appointed to take possession of the Premises, and such appointment is not vacated or withdrawn and possession of the Premises restored to Tenant within sixty (60) days thereafter, or (v) any sheriff, marshal, constable or other duly-constituted public official takes possession of the Premises by authority of any attachment, execution, or other judicial seizure proceedings, and such attachment or other seizure remains undismissed or undischarged for a period of sixty (60) days after the levy thereof. “ Petition ” means a petition in bankruptcy (including any such petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief) under the Bankruptcy Code of the United States of America, or under any other present or future federal or state statute, law or regulation of similar intent or application.
14.     Miscellaneous . This Guaranty may be signed in counterparts and evidenced by facsimile, PDF format or similarly-imaged pages. Landlord and Guarantor each acknowledge and agree that it has had

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an opportunity to receive the advice of such counsel and other advisors as it desires before entering into this Guaranty. Time is of the essence of this Guaranty. This Guaranty will be governed by and construed under and in accordance with the laws of the State of Delaware. This Guaranty contains the entire agreement between the parties hereto with respect to this transaction, supersedes any prior oral negotiations or agreements. This Guaranty is binding upon the parties hereto and their respective legal representatives, successors and permitted assigns. No amendment, modification or waiver of the provisions of this Guaranty will be effective unless it is in writing and signed by the party against whom it is to be enforced. All decisions requiring the “approval” or “agreement” of any party hereto shall be made in writing the applicable party. If any part of this Guaranty is held to be illegal, invalid or unenforceable, the remainder of this Guaranty will be unaffected and continue in full force and effect. This Guaranty is not binding upon Landlord or Guarantor until it has been signed by Landlord and Guarantor. The section headings and other captions are for ease of reference only, and are not otherwise part of this Guaranty. Any reference to a section of this Guaranty includes its subsections and parts.
[Remainder of page intentionally left blank]

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SIGNATURE PAGE
TO
GUARANTY

Guarantor and Landlord have caused this Guaranty to be executed effective as of Effective Date.

“ Guarantor ”
SUPERVALU INC.,
a Delaware corporation


By: __________________________________
Name: _______________________________
Its: __________________________________




[Signatures Continue on Next Page]




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“ Landlord ”
CF GROCERY DISTRIBUTION PROPCO LLC,
a Delaware limited liability company


By: __________________________________
Name: _______________________________
Its: ___________________________________











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EXHIBIT D-5
FORM OF SUBORDINATION AGREEMENTS

SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this “ Agreement ”) is entered into as of __________, 2018 (the “ Effective Date ”), by and among _____________________, a ________________ (“ Tenant ”), _____________________, a ________________ (“ Subtenant ”), and _____________________, a ________________ (“ Prime Landlord ”).
RECITALS
A.    Tenant, as landlord, and Subtenant, as tenant, are parties to that certain ______________ dated __________ (as amended from time to time, the “ Sublease ”), relating to certain leased premises (the “ Sublease Premises ”) consisting of a portion of the real property located in _____________, ___________, and more particularly described in the Sublease and legally described on Exhibit A attached hereto (the “ Property ”).
B.    Contemporaneously with the execution and delivery of this Agreement, Tenant is (i) conveying the Property to Prime Landlord, and (ii) leasing back the Property from Prime landlord pursuant to that certain Lease dated as of the Effective Date by and between Prime Landlord, as landlord, and Tenant, as tenant (as amended from time to time, the “ Prime Lease ”).
C.    Subtenant has agreed to subordinate the Sublease to the Prime Lease and Tenant has agreed to grant nondisturbance rights to Subtenant, on the terms and conditions hereinafter set forth.
D.    Subtenant has agreed to, upon request, attorn to Prime Landlord and any lender of Prime Landlord (a “ Lender ”) following a termination of the Sublease.
ACCORDINGLY, Tenant, Subtenant and Prime Landlord hereby agree as follows:
1.     Subordination . Subtenant agrees that the Sublease and all of the terms, covenants and provisions of the Sublease are, and shall at all times continue to be, subject and subordinate in all respects to the Prime Lease and to all renewals, modifications, supplements, replacements and extensions thereof, as well as to any mortgages, deeds of trust or similar encumbrances of the Property (“ Mortgages ”), and that the Sublease constitutes a sublease under and subject to the Prime Lease.
2.     Sublease Ratification; Attornment . The Sublease remains in full force and effect (as a direct sublease between Tenant, as sublandlord, and Subtenant, as subtenant). Notwithstanding the subordination of the Sublease to the Prime Lease pursuant to Section 1, Subtenant hereby agrees to and does hereby continue to attorn to Tenant and recognize Tenant as sublandlord under the Sublease subject to and in accordance with all of the terms and conditions of the Sublease. Without limiting the generality of the foregoing, Subtenant shall continue to make all rent payments payable by Subtenant under the Sublease directly to Tenant as provided in the Sublease. In the event the Prime Lease terminates, then at the election of Prime Landlord (i) the Sublease shall not terminate, and (ii) Subtenant shall attorn to Prime Landlord as successor to Tenant (as sublandlord) under the Sublease. The foregoing provisions shall inure to the benefit of any Lender and any purchaser at

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a foreclosure sale following a foreclosure of Prime Landlord’s interests in the Property pursuant to the terms of any Mortgage.
3.     Nondisturbance . So long as Subtenant is not in default under the Sublease (beyond any period given Subtenant in the Sublease to cure such default), Tenant and Prime Landlord agree that Subtenant's possession of the Sublease Premises shall not be diminished, disturbed or interfered with by Prime Landlord or its successors and assigns.
4.     Estoppel . Subtenant hereby certifies to Tenant and Prime Landlord as follows:
4.1    The term of the Sublease will expire on ____________, ____. Tenant has no rights or options to renew or extend the term of the Sublease, except _________.
4.2    There have been no amendments, modifications or revisions to the Sublease, except _________.
4.3    The Sublease has been properly executed by Subtenant and is in full force and effect.
4.4    The Sublease has not been assigned by operation of law or otherwise by Subtenant, and no sublease covering the Sublease Premises, or any portion thereof, has been entered into by Subtenant.
4.5    Neither Tenant nor Subtenant is in default under the Sublease and no event has occurred which, with the giving of notice of passage of time, or both, could result in such a default.
4.6    Subtenant has no existing accrued defenses, offsets, liens, claims or credits against the rentals or otherwise which presently exist or have accrued under the Sublease or against the enforcement of the Sublease by Tenant.
5.     Miscellaneous . This Agreement may be signed in counterparts and evidenced by facsimile, PDF format or similarly-imaged pages. Tenant and Subtenant each acknowledge and agree that it has had an opportunity to receive the advice of such counsel and other advisors as it desires before entering into this Agreement. Time is of the essence of this Agreement. This Agreement will be governed by and construed under and in accordance with the laws of the state where the Sublease Premises is located. This Agreement contains the entire agreement between the parties hereto with respect to this transaction, supersedes any prior oral negotiations or agreements. This Agreement is binding upon the parties hereto and their respective legal representatives, successors and permitted assigns. No amendment, modification or waiver of the provisions of this Agreement will be effective unless it is in writing and signed by the party against whom it is to be enforced. If any part of this Agreement is held to be illegal, invalid or unenforceable, the remainder of this Agreement will be unaffected and continue in full force and effect. This Agreement shall not be binding upon the parties hereto until it has been signed by Tenant, Subtenant and Prime Landlord. The section headings and other captions are for ease of reference only, and are not otherwise part of this Agreement. Any reference to a section of this Agreement includes its subsections and parts.
[Remainder of page intentionally left blank]
SIGNATURE PAGES

D-5-2
        
 

TO
SUBORDINATION AGREEMENT
Tenant, Prime Landlord and Subtenant have executed this Agreement as of the Effective Date.
 
“ Tenant ”
_________________________________,
a _______________________________


By: __________________________________
Name: _______________________________
Its: ___________________________________



STATE OF _____________    )
) ss.
COUNTY OF ___________    )


The foregoing instrument was acknowledged before me this ____ day of ______________, 2018, by ___________, the ________________ of _________________, a ______________________________, on behalf of the ______________.

___________________________
Notary Public

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“ Prime Landlord ”
_________________________________,
a _______________________________

By: __________________________________
Name: _______________________________
Its: ___________________________________



STATE OF _____________    )
) ss.
COUNTY OF ___________    )


The foregoing instrument was acknowledged before me this ____ day of ______________, 2018, by ___________, the ________________ of _________________, a ______________________________, on behalf of the ______________.

___________________________
Notary Public




D-5-4
        
 


“ Subtenant ”
_________________________________,
a _______________________________


By: __________________________________
Name: _______________________________
Its: ___________________________________



STATE OF _____________    )
) ss.
COUNTY OF ___________    )


The foregoing instrument was acknowledged before me this ____ day of ______________, 2018, by ___________, the ________________ of _________________, a ______________________________, on behalf of the ______________.

___________________________
Notary Public




The foregoing instrument was drafted by:

Faegre Baker Daniels LLP (SAA)
2200 Wells Fargo Center
90 S. Seventh Street
Minneapolis, Minnesota 55424
(612) 766-7000



D-5-5
        


EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY




Exhibit A to D-5
        



EXHIBIT E
TITLE POLICY PROFORMAS



E-1
        


EXHIBIT F
TITLE AFFIDAVIT

AFFIDAVIT REGARDING CORPORATION
(__________________, __________________)


STATE OF ____________________    )
) ss:
COUNTY OF __________________    )

________________________ ( “Affiant” ), being first duly sworn, on oath says that as of __________ ___, 2018:

1.    He/She is the ____________________ of [Applicable Seller], a __________ (“Grantor”), the corporation named as Grantor in that certain [Limited] [Special] Warranty Deed dated as of even date herewith conveying certain real property located at ________________ __________________________________________________, (the “Premises”). That Owner has owned, or has had an ownership interest in, the Property continuously for the last _______ years.

1.
That Owner’s possession of the Property has been peaceable and undisturbed, and that title to the Property has never been disputed or questioned.

2.
Grantor’s principal place of business is at ____________________________________________ ___________________________________.

3.
There have been no:
a.
Bankruptcy or dissolution proceedings involving said corporation during the time Grantor has had any interest in the Premises;
b.
Unsatisfied judgments of record against Grantor nor any actions pending in any courts which affect the Premises; or
c.    Tax liens filed against said Grantor.

4.
Any bankruptcy or dissolution proceedings of record against corporations with the same or similar names, during the time period in which the above named corporation had any interest in the Premises, are not against the above named Grantor.

5.
Any judgments or tax liens of record against corporations with the same or similar names are not against the above named Grantor.

6.
To Affiant’s actual knowledge, there has been no labor or materials furnished to the Premises at the order of the above named corporation for which payment has not been made or will not be made in the ordinary course of business.


F-1
        


7.
To Affiant’s actual knowledge, there are no unrecorded contracts, leases, easements or other agreements or interests relating to the Premises, other than those identified on Exhibit A attached hereto. [Modify for Pompano to reflect Lease Agreement between Associated Grocers of Florida, Inc., a Florida Corporation, as landlord, and Lions Sales and Marketing LLC, a Florida limited liability company, as tenant, dated May 25, 2017, as amended from time to time]

8.
To Affiant’s actual knowledge, there are no persons in possession of any portion of the Premises other than pursuant to a recorded document, except as set forth on Exhibit B attached hereto.

Affiant believes, to the best of Affiant’s knowledge, that the matters herein stated are true and makes this Affidavit for the purpose of inducing the passing of title to the Premises; provided, however, Affiant makes this Affidavit only on behalf of the above-referenced corporation and not in any individual or other capacity.

_______________________,
a ______________________



By:                         
Name:                         
Its:                         


   Subscribed and sworn to before me
this ___ day of ______________, 2018.


_______________________________________
SIGNATURE OF NOTARY PUBLIC OR OTHER OFFICIAL

 
NOTARIAL STAMP OR SEAL (OR OTHER TITLE OR RANK)





 



F-2
        





F-3
        



EXHIBIT A
(Unrecorded Contracts, Leases, Easements or Other Agreements or Interests)

(If none – state “None”)






Exhibit A to Exhibit F-1
        



EXHIBIT B
(Tenants)

(If none – state “None”)






Exhibit B to Exhibit F-1
        


EXHIBIT G
LIST OF ESTOPPEL REQUIRED RECORDED DOCUMENTS









        
G-1


Exhibit 12.1  
Ratio of Earnings to Fixed Charges
(In millions, except ratios)  
 
February 24, 2018 
 (52 weeks)
 
February 25, 2017 
 (52 weeks)
 
February 27, 2016 
 (52 weeks)
 
February 28, 2015 (1)  
 (53 weeks)
 
February 22, 2014 (2)  
 (52 weeks)
Net earnings (loss) from continuing operations before income taxes
$
77

 
$
20

 
$
53

 
$
(73
)
 
$
(230
)
Less net earnings attributable to noncontrolling interests
(1
)
 
(4
)
 
(8
)
 
(7
)
 
(7
)
Net overdistributed earnings of less than fifty percent owned affiliates
1

 
—

 
1

 
—

 
1

Fixed charges
159


200


214


261


424

Amortized capitalized interest
(1
)
 
—

 
(1
)
 
(1
)
 
(1
)
Earnings available to cover fixed charges
$
235


$
216


$
259


$
180


$
187

 


 


 


 


 


Interest expense
136

 
181

 
194

 
241

 
403

Capitalized interest
1

 
—

 
1

 
1

 
1

Interest on operating leases
22

 
19

 
19

 
19

 
20

Total fixed charges
$
159

 
$
200

 
$
214

 
$
261

 
$
424

 


 


 


 


 


Excess (deficiency) of earnings to fixed charges
$
76

 
$
16

 
$
45

 
$
(81
)
 
$
(237
)
Ratio of earnings to fixed charges
1.48

 
1.08

 
1.21

 
N/A

 
N/A


N/A represents a ratio of less than one.
(1)   
Supervalu ’s earnings available to cover fixed charges were insufficient to cover fixed charges for fiscal 2015 due to $69 of pension, multi-employer and benefit plan settlement charge, $1 of severance costs and $1 Information technology intrusion costs, net of insurance recoverable before tax.
(2) Supervalu ’s earnings available to cover fixed charges were insufficient to cover fixed charges for fiscal 2014 due to $99 of charges for the write-off of non-cash unamortized financing costs and original issue discount acceleration before tax, $75 of debt refinancing costs before tax, $41 of severance costs before tax, , $6 of contract breakage and other costs before tax, and $3 of multi-employer pension withdrawal charge before tax, offset in part by $15 of gain on sale of property before tax and $2 of non-cash asset impairment and other charges before tax.







Exhibit 21.1
Subsidiaries of Supervalu as of April 23, 2018
SUPERVALU INC.
 
JURISDICTION OF ORGANIZATION
Advantage Logistics-Southeast, Inc. 
 
Alabama
Advantage Logistics Southwest, Inc. 
 
Arizona
Advantage Logistics USA East L.L.C. 
 
Delaware
Advantage Logistics USA West L.L.C. 
 
Delaware
American Commerce Centers, Inc.
 
Florida
Arden Hills 2003 LLC
 
Delaware
Associated Grocers Acquisition Company
 
Florida
Associated Grocers of Florida, Inc.
 
Florida
Billings Distribution Company, LLC
 
Delaware

Bismarck Distribution Company, LLC
 
Delaware

Blaine North 1996 L.L.C. 
 
Delaware
Blue Nile Advertising, Inc.
 
Florida
Burnsville 1998 L.L.C. 
 
Delaware
Butson Enterprises of Vermont, Inc. 
 
Vermont
Butson’s Enterprises of Massachusetts, Inc. 
 
Massachusetts
Butson’s Enterprises, Inc. 
 
New Hampshire
Cambridge 2006 L.L.C. 
 
Delaware
Champaign Distribution Company, LLC
 
Delaware

Champlin 2005 L.L.C. 
 
Delaware
Coon Rapids 2002 L.L.C. 
 
Delaware
Crown Grocers, Inc.
 
California
Cub Foods, Inc.
 
Delaware
Cub Stores Prop, LLC
 
Delaware

Eagan 2008 L.L.C. 
 
Delaware
Eagan 2014 L.L.C.
 
Delaware
Eastern Beverages, Inc. 
 
Maryland
Eastern Region Management Corporation
 
Virginia
Fargo Distribution Company, LLC
 
Delaware

FF Acquisition, L.L.C. 
 
Virginia
Foodarama LLC
 
Delaware
Forest Lake 2000 L.L.C. 
 
Delaware
Fridley 1998 L.L.C. 
 
Delaware
Grocers Capital Company
 
California
Hastings 2002 L.L.C. 
 
Delaware
Hazelwood Distribution Company, Inc.
 
Delaware
Hazelwood Distribution Holdings, Inc.
 
Delaware
Hopkins Distribution Company, LLC
 
Delaware

Hornbacher’s, Inc.
 
Delaware
International Distributors Grand Bahama Limited
 
Bahamas
Inver Grove Heights 2001 L.L.C. 
 
Delaware
Keatherly, Inc. 
 
New Hampshire
Keltsch Bros., Inc. 
 
Indiana
Lakeville 2014 L.L.C.
 
Delaware
Maplewood East 1996 L.L.C. 
 
Delaware
Market Company, Ltd. 
 
Bermuda
Market Improvement Company
 
Bahamas




Monticello 1998 L.L.C. 
 
Delaware
NAFTA Industries Consolidated, Inc. 
 
Texas
NAFTA Industries, Ltd. 
 
Texas
NC & T Supermarkets, Inc. 
 
Ohio
Nevada Bond Investment Corp. I
 
Nevada
Northfield 2002 L.L.C. 
 
Delaware
Oglesby Distribution Company, LLC
 
Delaware

Plymouth 1998 L.L.C. 
 
Delaware
Savage 2002 L.L.C. 
 
Delaware
SFW Holding Corp. 
 
Delaware
Shop ’N Save East, LLC
 
Delaware
Shop ’ N Save East Prop, LLC
 
Delaware
Shop 'N Save Prop, LLC
 
Delaware

Shop ’N Save St. Louis, Inc. 
 
Missouri
Shop ’N Save Warehouse Foods, Inc. 
 
Missouri
Shoppers Food Warehouse Corp. 
 
Ohio
Shorewood 2001 L.L.C. 
 
Delaware
Silver Lake 1996 L.L.C. 
 
Delaware
Southstar LLC
 
Delaware
Stevens Point Distribution Company, LLC
 
Delaware
Sunflower Markets, LLC
 
Delaware
Super Rite Foods, Inc. 
 
Delaware
SUPERVALU Enterprise Services, Inc. 
 
Delaware
SUPERVALU Holdings, Inc. 
 
Missouri
SUPERVALU Holdings-PA LLC
 
Pennsylvania
SUPERVALU Gold, LLC
 
Delaware
SUPERVALU Independent Business, Inc
 
Delaware
SUPERVALU India, Inc. 
 
Minnesota
SUPERVALU Pharmacies, Inc. 
 
Minnesota
SUPERVALU Penn, LLC
 
Pennsylvania
SUPERVALU Receivables Funding Corporation
 
Delaware
SUPERVALU Services USA, Inc. 
 
Minnesota
SUPERVALU Transportation, Inc. 
 
Minnesota
SUPERVALU TTSJ, INC. 
 
Delaware
SUPERVALU WA, L.L.C.
 
Delaware
SV Markets, Inc. 
 
Ohio
TC Michigan LLC
 
Michigan
TTSJ Aviation, Inc. 
 
Delaware
Ultra Foods, Inc. 
 
New Jersey
Unified Grocers, Inc.
 
California
Unified International, Inc.
 
Delaware
W. Newell & Co., LLC
 
Delaware
Wetterau Insurance Co. Ltd. 
 
Bermuda
WSI Satellite, Inc.
 
Missouri




Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
SUPERVALU INC.:
We consent to the incorporation by reference in the registration statements No. 333‑200039 on Form S‑3; and No. 333‑83977, No. 333‑132397, and No. 333‑191144 on Form S‑4; and No. 33‑16934, No. 33‑50071, No. 333‑10151, No. 333‑89157, No. 333‑32354, No. 333‑44570, No. 333‑100913, No. 333‑134671, No. 333‑143859, No. 333‑158832, No. 333‑182757, No. 333‑188141, No. 333‑191301, No. 333‑197760, and No. 333‑212883 on Form S‑8 of SUPERVALU INC. of our report dated April 24, 2018 , with respect to the consolidated balance sheets of SUPERVALU INC. and subsidiaries as of February 24, 2018 and February 25, 2017 , and the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit), and cash flows for each of the fiscal years in the three-year period ended February 24, 2018 , and the effectiveness of internal control over financial reporting as of February 24, 2018 , which report appears in the February 24, 2018 annual report on Form 10-K of SUPERVALU INC.
/s/ KPMG LLP
Minneapolis, Minnesota
April 24, 2018





Exhibit 24.1
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Stuart D. McFarland the undersigned’s true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for the undersigned and in such person’s name, place and stead, in any and all capacities (including the undersigned’s capacity as Director and/or Principal Executive Officer of SUPERVALU INC.), to sign SUPERVALU’s Annual Report on Form 10-K to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, for the fiscal year ended February 24, 2018 , and any or all amendments to said Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or their substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed as of the 24 th  day of April, 2018, by the following persons:
 
 
 
 
Signature
 
 
 
 
 
/s/ Donald R. Chappel
 
/s/ Mathew M. Pendo
Donald R. Chappel
 
Mathew M. Pendo
 
 
 
/s/ Irwin S. Cohen
 
/s/ Francesca Ruiz de Luzuriaga
Irwin S. Cohen
 
Francesca Ruiz de Luzuriaga
 
 
 
/s/ Philip L. Francis
 
/s/ Frank A. Savage
Philip L. Francis
 
Frank A. Savage
 
 
 
/s/ Eric G. Johnson
 
/s/ Mary A. Winston
Eric G. Johnson
 
Mary A. Winston





Exhibit 31.1
Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Mark Gross, certify that:
1. I have reviewed this Annual Report on Form 10-K of SUPERVALU INC. for the fiscal year ended February 24, 2018 ;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: April 24, 2018
 
/S/ MARK GROSS
 
 
Mark Gross
 
 
Chief Executive Officer and President




Exhibit 31.2
Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Rob N. Woseth, certify that:
1. I have reviewed this Annual Report on Form 10-K of SUPERVALU INC. for the fiscal year ended February 24, 2018 ;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: April 24, 2018
 
/S/ ROB N. WOSETH
 
 
Rob N. Woseth
 
 
Executive Vice President and Chief Financial Officer




Exhibit 32.1
Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of SUPERVALU INC. (the “Company”) certifies that the Annual Report on Form 10-K of the Company for the fiscal year ended February 24, 2018 , fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in that Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company for the period and as of the dates covered thereby.
Dated: April 24, 2018
 
/S/ MARK GROSS
 
 
Mark Gross
 
 
Chief Executive Officer and President




Exhibit 32.2
Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of SUPERVALU INC. (the “Company”) certifies that the Annual Report on Form 10-K of the Company for the fiscal year ended February 24, 2018 , fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in that Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company for the period and as of the dates covered thereby.
Dated: April 24, 2018
 
/S/ ROB N. WOSETH
 
 
Rob N. Woseth
 
 
Executive Vice President and Chief Financial Officer