SUPERVALU INC (Form: 10-K, Received: 05/10/2006 13:19:46)

SUPERVALU INC.

(Registrant)

DATE: May 9, 2006

/s/ J EFFREY N ODDLE

Jeffrey Noddle

Chief Executive Officer

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 25, 2006

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-5418

SUPERVALU INC.

(Exact name of registrant as specified in its charter)


Delaware		41-0617000
(State or other jurisdiction of 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 $1.00 per share		New York Stock Exchange
Preferred Share Purchase Rights		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 x 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 x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark if the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of September 10, 2005 was approximately $4,238,283,124 (based upon the closing price of Registrant’s Common Stock on the New York Stock Exchange on September 9, 2005.

Number of shares of $1.00 par value Common Stock outstanding as of May 1, 2006: 136,974,770.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant’s definitive Proxy Statement filed for the Registrant’s 2006 Annual Meeting of Stockholders are incorporated by reference into Part III, as specifically set forth in Part III.

PART I

ITEM 1.

BUSINESS

General Development

SUPERVALU is one of the largest companies in the United States grocery channel. SUPERVALU conducts its retail operations under three retail food store formats: extreme value stores primarily under the retail banner Save-A-Lot; price superstores, under the regional retail banners of Cub Foods, Shop ’n Save, Shoppers Food & Pharmacy and bigg’s; and supermarkets, under the regional retail banners of Farm Fresh, Scott’s and Hornbacher’s. As of the close of the fiscal year, the company conducted its retail operations through 1,381 stores, including 862 licensed extreme value stores. Store counts are adjusted for the planned sale of Deals and corporate owned Shop ’n Save Pittsburgh. SUPERVALU also provides supply chain services, including food distribution and related logistics support services primarily across the United States retail grocery channel. As of the close of the fiscal year, the company served as the primary grocery supplier to approximately 2,200 retail food stores in 48 states, including its own regional banner store network, and as a secondary supplier to approximately 500 stores.

SUPERVALU is focused on retail growth through targeted new store development, remodel activities, licensee growth and acquisitions. During fiscal 2006, the company added 17 net new stores through new store development, excluding the Cub Chicago and Pittsburgh market exits. The company’s plans also include leveraging its distribution operations by providing logistics and service solutions through an increasingly efficient supply chain, which should allow it to affiliate new independent customers.

On January 23, 2006, SUPERVALU announced that SUPERVALU, CVS Corporation (“CVS”) and an investment group led by Cerberus Capital Management, L.P. (the “Cerberus Group”) had reached definitive agreements to acquire Albertson’s, Inc (“Albertsons”). Each Albertsons stockholder will ultimately be entitled to receive $20.35 in cash and 0.182 shares of SUPERVALU common stock for each share of Albertsons’ common stock that they held before the transaction. Pursuant to those agreements, SUPERVALU will acquire the operations of Acme Markets, Bristol Farms, Jewel-Osco, Shaw’s Supermarkets, Star Markets, and the Albertsons’ banner stores in the Intermountain, Northwest and Southern California regions, and the related in-store pharmacies under the Osco and Save-On banners, for a total of approximately 1,125 stores (the “Proposed Transaction”). The total consideration to be paid by SUPERVALU is approximately $12.4 billion (based on a $32.65 average stock price using the 20 day trading average of the closing price of SUPERVALU stock through January 20, 2006) including approximately $3.8 billion in cash and $2.5 billion in stock and the assumption of approximately $6.1 billion of Albertsons’ debt. Following the Proposed Transaction, which is expected to close during June 2006, approximately 65 percent of SUPERVALU will be held by existing SUPERVALU stockholders and approximately 35 percent will be held by former Albertsons’ stockholders, on a fully diluted basis, including the early settlement of the Albertsons’ 7.25 percent mandatory convertible securities. The “new” SUPERVALU will have approximately 224 million fully diluted common shares outstanding, compared to approximately 146 million fully diluted shares outstanding as of February 25, 2006. After the Proposed Transaction, SUPERVALU is expected to have revenues of approximately $44 billion (of which approximately 80% will be retail), approximately 194,000 employees, 2,505 owned and licensed stores, 878 in-store pharmacies and 117 fuel centers. The transaction is subject to approval by SUPERVALU stockholders and Albertsons’ stockholders, the contemporaneous closing of the agreements with the Cerberus Group and CVS, and the satisfaction or waiver of customary closing conditions. On April 28, 2006, the Securities and Exchange Commission (“SEC”) declared effective the Form S-4 Joint Proxy Statement / Prospectus in connection with the Proposed Transaction. Concurrent with the announcement of the Proposed Transaction, the company sold 26 Cub Foods stores located primarily in the Chicago area in January 2006 to the Cerberus Group for an after tax loss of approximately $61 million.

SUPERVALU INC., a Delaware corporation, was organized in 1925 as the successor to two wholesale grocery firms established in the 1870’s. The company’s principal executive offices are located at 11840 Valley View Road, Eden Prairie, Minnesota 55344 (Telephone: 952-828-4000). Unless the discussion in this Annual Report on Form 10-K indicates otherwise, all references to the “company,” “SUPERVALU” or “Registrant” relate to SUPERVALU INC. and its majority-owned subsidiaries.

The company makes available free of charge at its internet website ( www.supervalu.com ) its 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 the company’s website is not deemed to be incorporated by reference into this report. The company will also provide its SEC filings free of charge upon written request to the Corporate Secretary, SUPERVALU INC., P.O. Box 990, Minneapolis, MN 55440.

Additional description of the company’s business is found in Part II, Item 7 of this report.

Financial Information About Reportable Segments

The company’s business is classified by management into two reportable segments: Retail food and supply chain services. Effective in the first quarter of fiscal 2006, SUPERVALU changed its food distribution segment name to supply chain services reflecting the evolving nature of the business that now includes traditional food distribution services, as well as the recently acquired third party logistics business. Retail food operations include three retail food store formats: extreme value stores, regional price superstores and regional supermarkets. The retail operations include results of food stores owned and results of sales to extreme value stores licensed by the company. Supply chain services operations include results of sales to affiliated food stores, mass merchants and other customers, and logistics arrangements. Management utilizes more than one measurement and multiple views of data to assess segment performance and to allocate resources to the segments. However, the dominant measurements are consistent with the consolidated financial statements. The financial information concerning the company’s operations by reportable segment for the fiscal years ended February 25, 2006, February 26, 2005 and February 28, 2004 is contained on page F-7.

The forward looking statements in the following sections of Item 1 are all independent of the company’s plan to acquire the selected assets of Albertson’s, Inc. as described above.

Retail Food Operations

Overview . At February 25, 2006, the company conducted its retail food operations through a total of 1,381 retail stores, including 862 licensed extreme value stores. Store counts are adjusted for the planned sale of Deals and corporate owned Shop ‘n Save Pittsburgh stores. Its principal retail food formats include extreme value stores, regional price superstores and regional supermarkets. These diverse formats enable the company to operate in a variety of markets under widely differing competitive circumstances. Based on revenues, the company was the ninth largest grocery retailer in the United States as of February 25, 2006.

Extreme Value Stores . The company operates extreme value stores primarily under the Save-A-Lot banner. Save-A-Lot holds the number one market position, based on revenues, in the extreme value grocery-retailing sector. Save-A-Lot food stores typically are approximately 15,000 square feet in size, and stock approximately 1,400 high volume food items generally in a single size for each product sold, as well as a limited offering of general merchandise items. At a Save-A-Lot store, the majority of the food products offered for sale are custom branded products. The specifications for the Save-A-Lot custom branded product emphasize quality and characteristics that the company believes are comparable to national brands. The company’s attention to the packaging of Save-A-Lot products has resulted in the company registering a number of its custom labels.

At fiscal year end, there were 1,154 extreme value stores, including 445 combination food and general merchandise stores, located in 39 states of which 862 were licensed. These stores are supplied from 16 dedicated distribution centers. Store counts are adjusted for the planned sale of the stand-a-lone Deals stores in the first quarter of fiscal 2007.

Price Superstores . The company’s price superstores hold the number one, two or three market position in most of their markets. The price superstore focus is on providing every day low prices and product selection across all departments. Most of the company’s price superstores offer traditional dry grocery departments, along with strong perishable departments and pharmacies. Price superstores carry over 41,000 items and generally range in size from 45,000 to 100,000 square feet, with an average size of approximately 64,000 square feet.

At fiscal year end, the company owned and operated 163 price superstores under the Cub Foods, Shop ’n Save, Shoppers Food & Pharmacy and bigg’s banners in 12 states; an additional 31 stores were franchised to independent retailers under the Cub Foods banner. In-store pharmacies are operated in 156 of the price superstores.

The owned Cub Foods stores operate primarily in the Minneapolis/St. Paul markets; Shop ’n Save operates primarily in the St. Louis market; Shoppers Food & Pharmacy operates in the Washington D.C. and Baltimore markets; and bigg’s operates primarily in the Cincinnati market.

Supermarkets . The company’s traditional supermarkets hold leading market positions in their principal markets. This format combines a grocery store that offers traditional dry grocery and fresh food departments, and a variety of specialty departments that may include floral, seafood, expanded health and beauty care, video rental, cosmetics, delicatessen, bakery, photo finishing, liquor, as well as an in-store bank and a traditional drug store that includes a pharmacy. A typical supermarket carries approximately 32,000 items and generally ranges in size from 30,000 to 65,000 square feet with an average size of approximately 48,000 square feet.

At fiscal year end, the company operated 64 supermarkets under the Farm Fresh, Scott’s, Hornbacher’s and Sunflower Market banners in five states. The Farm Fresh stores operate primarily in the Virginia Beach, Virginia market; the Scott’s stores operate in the Fort Wayne, Indiana market; the Hornbacher’s stores operate in the Fargo, North Dakota market and the Sunflower store operates in the Indianapolis, Indiana market. In-store pharmacies are operated in 33 of the supermarkets.

Supply Chain Services

Overview . The company provides supply chain services, including distribution and related logistics and support services to retailers for food and non-food products and is the largest public company food wholesaler in the nation. At February 25, 2006, the company was affiliated with approximately 2,200 stores as their primary supplier, excluding the company’s own regional banner store network, and approximately 500 additional stores as a secondary supplier. The company’s distribution customers include single and multiple grocery store independent operators, regional and national chains, mass merchants and the military. Such customers are located in 48 states, and range in size from small convenience stores to 200,000 square foot supercenters. The company also offers third party logistics solutions through its subsidiary, Total Logistics, Inc. (“Total Logistics”), which was acquired in February 2005, and its Advantage Logistics operation, which was formed in 2002. These operations provide customers with a suite of logistics services, including warehouse management, transportation, procurement, contract manufacturing and logistics engineering and management services.

Products Supplied . The company offers and supplies its distribution customers with a wide variety and selection of food and non-food products, including groceries, meats, dairy products, frozen foods, deli, bakery, fresh fruits and vegetables, health and beauty aids, general merchandise, seasonal items and tobacco products. Such products include national and regional brands, the company’s own lines of private label products and the private label products of its independent customers. The company has no significant long-term purchase obligations and considers that it has adequate and alternative sources of supply for most of its purchased products. The company offers three tiers of private label products to its customers: first quality products under such private labels as CUB, FLAVORITE, HOMEBEST, IGA, RICHFOOD, SHOP ‘N SAVE, SUPERCHILL, HEALTHY GENERATIONS, DAILY SOURCE, NUTRIPLAN and STONERIDGE; economy products under the private label of SHOPPERS VALUE; and natural and organic products under the NATURE’S BEST private

label. The company supplies private label merchandise over a broad range of products in the majority of departments in the store. These products are produced to the company’s specifications by many suppliers.

Logistics Network . The company has established a 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 health and beauty care products. The network comprises 25 distribution facilities.

The company believes that its multi-tiered distribution network increases buying scale, improves operating efficiencies and lowers costs of operations. The company is continuing to work on business initiatives that will deliver lower costs of operations. Deliveries to retail stores are made from the company’s distribution centers by company-owned trucks, third party independent trucking companies or customer-owned trucks. In addition, the company provides certain facilitative services between its independent retailers and vendors related to products that are delivered directly by suppliers to retail stores under programs established by the company. These services include sourcing, invoicing and payment services.

The company launched a new produce supply business named W. Newell & Co. in 2005. W. Newell & Co. currently has one distribution center located in Illinois, which is designed to provide the company’s retail stores and independent retailers in the Midwest with a superior produce selection, quality and service.

Trademarks

The company offers some customers the opportunity to franchise a concept or license a service mark. This program helps the customer compete by providing, as part of the franchise or license program, a complete business concept, group advertising, private label products and other benefits. The company is the franchisor or licensor of certain service marks such as CUB FOODS, SAVE-A-LOT, SENTRY, FESTIVAL FOODS, COUNTY MARKET, SHOP ‘N SAVE, NEWMARKET, IGA, FOODLAND, JUBILEE, SUPERVALU and SUPERVALU PHARMACIES. The company registers a substantial number of its trademarks/service marks in the United States Patent and Trademark Office, including many of its private label product trademarks and service marks. See “Retail Food Operations—Extreme Value Stores” and “Supply Chain Services—Products Supplied” for further information. U.S. trademark and service mark registrations are generally for a term of 10 years, renewable every 10 years as long as the trademark is used in the regular course of trade. The company considers certain of its trademarks and service marks to be of material importance to its retail food and supply chain services businesses and actively defends and enforces such trademarks and service marks.

Competition

The company’s retail food and supply chain services businesses are highly competitive. The company believes that the success of its retail food and supply chain services businesses are dependent upon the ability of the company’s retail food operations, and the retail food stores with whom it is affiliated as a supplier, to compete successfully with other retail food stores. Principal competition comes from regional and national chains operating under a variety of formats that devote square footage to selling food (i.e. supercenters, supermarkets, extreme value stores, membership warehouse clubs, dollar stores, drug stores, convenience stores, various formats selling prepared foods, and other specialty and discount retailers), as well as from independent food store operators. The company believes that the principal competitive factors that face its owned stores, as well as the stores owned by retailers it supplies, include the location and image of the store; the price, quality and variety of products; and the quality and consistency of service.

The traditional distribution component of the company’s supply chain services business competes directly with a number of food wholesalers. The company believes it competes in this supply chain on the basis of product price, quality and assortment, schedule and reliability of deliveries, the range and quality of services provided, service fees, and the location of distribution facilities. The company’s third party logistics business

competes nationwide in a highly fragmented marketplace, which includes a number of large international and domestic companies, as well as many smaller, more regional competitors. The company believes that it competes in this business on the basis of warehousing and transportation logistics expertise, cost, and the ability to offer both asset and non-asset based solutions as well as to design and manage a customer’s entire supply chain.

Employees

At February 25, 2006, the company had approximately 52,400 employees. Approximately 20,500 employees are covered by collective bargaining agreements. During fiscal 2006, 18 collective bargaining agreements covering approximately 5,000 employees were re-negotiated. In fiscal 2007, 15 collective bargaining agreements covering approximately 1,500 employees will expire. The company believes that it has generally good relations with its employees.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table provides certain information concerning the executive officers of the company as of May 9, 2006.


Name	Age	Present Position	Year Elected to Present Position	Other Positions Recently Held With the company
Jeffrey Noddle	59	Chairman of the Board of Directors and Chief Executive Officer	2005	Director, Chief Executive Officer and President, 2001-2005; President and Chief Operating Officer, 2000-2001
Michael L. Jackson	52	President and Chief Operating Officer	2005	Executive Vice President; President and Chief Operating Officer, Distribution Food Companies, 2001-2005
David L. Boehnen	59	Executive Vice President	1997
John H. Hooley	54	Executive Vice President; President, Retail Foods	2002	Senior Vice President; President and Chief Executive Officer, Cub Foods, 2000-2002
Pamela K. Knous	52	Executive Vice President and Chief Financial Officer	1997
Roger E. Davidson	52	Senior Vice President; Chief Operating Officer, Retail Food Companies	2004
Janel S. Haugarth	50	Senior Vice President; President and Chief Operating Officer, Supply Chain Services	2005	President, Northern Region, 2000-2005
J. Andrew Herring	47	Senior Vice President	2002	Executive Vice President, Retail Pharmacies 2002-2006; Senior Vice President, Corporate Development 1999-2002
Gregory C. Heying	57	Senior Vice President, Distribution, Supply Chain Services	1994
David E. Pylipow	48	Senior Vice President, Human Resources	2004	Senior Vice President, Human Resources and Management Services, Save-A-Lot, 2000-2004
Sherry M. Smith	44	Senior Vice President, Finance	2002	Senior Vice President, Finance and Treasurer, 2002-2005; Vice President, Corporate Controller, 1998-2002
Leland J. Dake	49	Vice President, Merchandising, Supply Chain Services	1998
Ross J. Eichelberger	45	Vice President, Chief Information Officer	2005	Vice President, General Manager, Fluid Dairy, 2004-2005; Vice President, Chief Information Officer, Eastern Region, 2001-2004
Stephen P. Kilgriff	64	Vice President, Legal	2000
David M. Oliver	48	Vice President, Controller	2004

The term of office of each executive officer is from one annual meeting of the directors until the next annual meeting of directors or until a successor for each is elected. There are no arrangements or understandings between any executive officer of the company and any other person pursuant to which any executive officer was selected as an officer of the company. There are no family relationships between or among any of the executive officers of the company.

Each of the executive officers of the company has been in the employ of the company or its subsidiaries for more than five consecutive years, except for Roger E. Davidson and David M. Oliver.

Mr. Davidson was elected to his current position in December 2004. From December 2003 to December 2004, he was Senior Vice President of Grocery Procurement, Merchandising, and Own Brand for H.E.B. Grocery, a food retailing company. From December 2000 to December 2003, he was Senior Vice President of Non-Perishables, Corporate Brands and Global Sourcing for Ahold USA, a food retailing company.

Mr. Oliver was elected to his current position in April 2004. From November 1999 to April 2004, he was Chief Financial Officer, Arden Group, Inc., a holding company with supermarket operations in Southern California.

ITEM 1A.

RISK FACTORS

Various risks and uncertainties could affect our business. Any of the risks described below or elsewhere in this report or our other SEC filings could have a material impact on our business, financial condition or results of operations. It is not possible to predict or identify all risk factors. Additional risks and uncertainties not presently known to us or that we believe to be immaterial may also impair our business operations. Therefore, the following is not intended to be a complete discussion of all potential risks or uncertainties.

General economic conditions affecting the food industry may affect our business.

The retail food and supply chain services segments are sensitive to a number of economic conditions that may affect our businesses such as: (i) food price inflation or deflation, (ii) softness in national and local economies, (iii) increases in energy costs and commodity prices, (iv) changes in interest rates, (v) the availability of favorable credit and trade terms, and (vi) other economic conditions that may affect consumer spending or buying habits. Any one or more of these economic conditions can affect our retail sales, the demand for products we distribute to our retailer customers, our operating costs and other aspects of our businesses.

Various operating factors may affect our business plans or costs of operations.

The operation of our businesses may be affected by a number of factors, such as: (i) changes in business plans, operations, results and prospects, (ii) potential delays in the development, construction or start-up of planned projects, (iii) labor relations, (iv) changes in operating conditions and costs, including fuel price increases, (v) the level of capital resources required for future acquisitions or operations, (vi) difficulties in developing, maintaining or upgrading information technology systems as needed, and (vii) the outcome of negotiations with partners, governments, suppliers, unions, customers or others, any one or more of which can affect our operating costs, plans for the opening or remodeling of stores, acquisitions and other aspects of our businesses.

Unfavorable outcomes in legal, governmental or administrative proceedings or disputes, or unfavorable changes in government regulations or accounting standards may affect our businesses and operating results.

Unfavorable outcomes in litigation, governmental or administrative proceedings or other disputes may result in significant liability to the company and affect our profitability or impose restrictions on the manner in which

we conduct our business. Our businesses are also subject to various federal, state and local laws and regulations with which we must comply. Our inability to timely obtain permits, comply with government regulations or make capital expenditures required to maintain compliance with governmental regulations may affect our ability to open new stores or expand existing facilities, which could adversely impact our business operations and prospects. Changes in applicable laws and regulations that impose additional requirements or restrictions on the manner in which we operate our businesses could increase our operating costs. In addition, changes in accounting standards could impact our financial statements.

We face a high level of competition in the retail food and supply chain services businesses, which could adversely affect our financial performance.

The industries in which we compete are extremely competitive. Our retail food business faces competition from regional and national chains operating under a variety of formats that devote square footage to selling food (i.e. supercenters, supermarkets, extreme value stores, membership warehouse clubs, dollar stores, drug stores, convenience stores, various formats selling prepared foods, and other specialty and discount retailers), as well as from independent food store operators in the markets where we have retail operations. The company’s third party logistics business competes nationwide in a highly fragmented marketplace, which includes a number of large international and domestic companies, as well as many smaller, more regional competitors.

Both the retail food and supply chain services businesses are subject to competitive practices that may affect: (i) the prices at which we are able to sell products at our retail locations, (ii) sales volume, (iii) the ability of our distribution customers to sell products we supply, which may affect future orders, (iv) changes in demographics and consumer preferences, and (v) our ability to attract and retain customers. In addition, the nature and extent of consolidation in the retail food and food distribution industries could affect our competitive position or that of our distribution customers in the markets we serve.

Threats or potential threats to security or food safety may adversely affect our business.

Wartime activities, threats of terror, acts of terror or other criminal activity directed at the grocery or drug store industry, the transportation industry, or computer or communications systems, could increase security costs, adversely affect our operations, or impact consumer behavior and spending and customer orders. Other events that give rise to actual or potential food contamination, drug contamination, or food-borne illness could have an adverse effect on our operating results.

Severe weather and national disasters can adversely impact the areas in which we conduct business.

Severe weather conditions such as hurricanes or tornadoes, as well as other natural disasters, could damage our properties, adversely impact the areas in which we conduct our business or the suppliers from whom we obtain products or otherwise cause disruptions to operations or affect our supply chain efficiencies.

Our failure to integrate the businesses we are acquiring from Albertsons in a successful and timely manner could have a material adverse effect on our business, financial condition or results of operations.

We have entered into agreements pursuant to which we expect to consummate the Proposed Transaction. We may not be able to successfully consummate the acquisition. If we do consummate the acquisition, we may not be able to realize the expected synergies, business opportunities and growth prospects. We may experience increased competition that limits our ability to expand our business, we may not be able to capitalize on expected business opportunities including retaining the current retail customers of the acquired business, assumptions underlying estimates of expected cost savings may be inaccurate or general industry and business conditions may deteriorate. In addition, integrating operations after the completion of the acquisition will require significant efforts and expenses. Personnel may leave or be terminated because of the transactions. Our management may

have its attention diverted while trying to integrate the acquired businesses. If these factors limit our ability to integrate the operations of the acquired business successfully or on a timely basis, our expectations of future results of operations, including certain cost savings and synergies expected to result from the Proposed Transaction, may not be met. In addition, our growth and operating strategies for the acquired businesses may be different from the strategies that Albertsons currently is pursuing. If such difficulties are encountered or if such synergies, business opportunities and growth prospects are not realized, it could have a material adverse effect on our business, financial condition and results of operations. In addition, there can be no assurance that the Proposed Transaction will be completed.

We will incur substantial additional indebtedness to finance the Proposed Transaction, which will decrease our business flexibility and increase our borrowing costs.

Upon completion of the Proposed Transaction, we will have consolidated indebtedness that will be substantially greater than our indebtedness prior to that completion. The increased indebtedness and higher debt-to-equity ratio of our company, as compared to that which has existed on a historical basis, will have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions and increasing borrowing costs. We have received guidance from ratings agencies to the effect that, after the completion of the Proposed Transaction, our debt will no longer have an investment-grade rating, and on April 13, 2006 Moody’s Investor Service changed the rating of our long-term unsecured debt from Baa3 to Ba3.

Escalating costs of providing employee benefits and other labor relations issues may lead to labor disputes and disruption of our businesses.

Potential work disruptions from labor disputes may affect sales at our stores as well as our ability to distribute products. We contribute to various multiemployer healthcare and pension plans covering certain union-represented employees in both our retail and distribution operations. A significant number of our employees (as well as a significant number of employees that we expect to acquire as part of the Proposed Transaction) are subject to collective bargaining agreements, and a majority of those employees (as well as a majority of the employees that we expect to acquire as part of the Proposed Transaction) are participants in multiemployer pension plans. The costs of providing benefits through such plans have escalated rapidly in recent years. Based upon information available to us, we believe that certain of these multiemployer plans are underfunded. The decline in the value of assets supporting these plans, in addition to the high level of benefits generally provided, has led to the underfunding. As a result, contributions to these plans will continue to increase and the benefit levels and other issues will continue to create collective bargaining challenges, which could increase our costs and materially affect our financial condition and results of operations.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

Retail Food Operations

The following table is a summary of the corporate retail stores operated by the company under its principal retail formats as of February 25, 2006:


Retail Format	Banner	Location and Number of Corporate Stores	Square Footage Owned (Approximate)	Square Footage Leased (Approximate)
Extreme Value Stores	Save-A-Lot ¹	Alabama (1), Arkansas (1), California (16), Connecticut (6), Delaware (5), Florida (75), Georgia (16), Illinois (15), Louisiana (10), Maryland (14), Massachusetts (7), Mississippi (4), Missouri (11), New Jersey (9), New York (7), Ohio (33), Pennsylvania (25), Rhode Island (3), South Carolina (3), Tennessee (5), Texas (13), Vermont (1), Virginia (10), Wisconsin (2)	450,000	4,041,000
	Deals ²	Alabama (3), Arkansas (5), Georgia (3), Illinois (22), Indiana (14), Iowa (2), Kansas (6), Kentucky (12), Michigan (1), Missouri (27), Ohio (31), Oklahoma (3), Pennsylvania (2), Tennessee (5), West Virginia (1), Wisconsin (1)	—	1,494,000
	Save-A-Lot Distribution Centers	California (1), Florida (1), Georgia (1), Illinois (1), Indiana (1), Kentucky (1), Louisiana (1), Maryland (1), Michigan (1), Missouri (1), New York (1), Ohio (2), Tennessee (1), Texas (1), Wisconsin (1)	3,013,000	1,795,000
Price Superstores	Cub Foods ³	Illinois (3), Iowa (3), Minnesota (39), Wisconsin (7)	1,683,000	1,953,000
	Shoppers Food & Pharmacy	Delaware (1) Maryland (39), Virginia (22)	—	3,482,000
	Shop ’n Save ⁴	Illinois (14), Missouri (22), Pennsylvania (12)	471,000	2,128,000
	bigg’s	Indiana (1), Kentucky (1), Ohio (11)	158,000	1,292,000
Supermarkets	Farm Fresh	North Carolina (1), Virginia (39)	—	1,897,000
	Scott’s	Indiana (18)	293,000	690,000
	Hornbacher’s	Minnesota (1), North Dakota (4)	107,000	113,000
	Sunflower	Indiana (1)	—	13,000

¹	Excludes 862 Save-A-Lot stores that are licensed by independent retailers.

²	On March 29, 2006, subsequent to fiscal 2006, the company sold all Deals stores.

³	Excludes 31 Cub Foods stores that are franchised by independent retailers.

⁴	As previously announced, the corporate operated SNS Pittsburgh stores above are planned to be exited in the first half of fiscal 2007.

The extreme value stores that are leased by the company generally have terms of 5 to 10 years plus renewal options. The price superstores and supermarkets that are leased by the company generally have terms of 15 to 25 years plus renewal options.

Supply Chain Services

The following table is a summary of the company’s principal distribution centers and office space utilized in the company’s supply chain services segment as of February 25, 2006:


Region	Location and Number of Distribution Centers	Square Footage Owned (Approximate)	Square Footage Leased (Approximate)
Central Region	Indiana (1), Ohio (1), Pennsylvania (2), West Virginia (1)	2,159,000	265,000
Midwest Region	Illinois (3), Missouri (1), Texas (1), Wisconsin (2)	2,549,000	913,000
Northern Region	Minnesota (1), North Dakota (2)	2,132,000	90,000
Northwest Region	Montana (1), Washington (2)	1,514,000	—
Southeast Region	Alabama (2), Florida (1), Mississippi (1)	1,528,000	473,000
Eastern Region	Maryland (1), Pennsylvania (1), Virginia (1)	1,145,000	926,000

Additional Property

The company’s principal executive offices are located in an 180,000 square foot corporate headquarters facility located in Eden Prairie, Minnesota, a western suburb of Minneapolis, Minnesota. This headquarters facility is located on a site of 140 acres owned by the company. Other facilities allocated for corporate use include approximately 189,000 square feet of leased office space located in Chanhassen, Minnesota, 53,000 square feet of owned office space located in Stillwater, Minnesota, 38,000 square feet of leased space located in Eden Prairie, Minnesota and 35,000 square feet of leased office space in Denver, Colorado.

Additional information on the company’s properties can be found on pages F-26 through F-28 in the Leases note in the accompanying Notes to Consolidated Financial Statements. Management of the company believes its physical facilities and equipment are adequate for the company’s present needs and businesses.

ITEM 3.

LEGAL PROCEEDINGS

The company is a party to various legal proceedings arising from the normal course of business activities, none of which, in management’s opinion, is expected to have a material adverse impact on the company’s consolidated statement of earnings or consolidated financial position.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There was no matter submitted during the fourth quarter of fiscal year 2006 to a vote of the security holders of the Registrant.

PART II

ITEM 5.

MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The company’s common stock is listed on the New York Stock Exchange under the symbol SVU. As of May 1, 2006, there were 136,974,770 shares of common stock outstanding. At that date, there were 6,191 stockholders of record, excluding individual participants in security position listings. The information called for by Item 5 as to the sales price for the company’s common stock on a quarterly basis during the last two fiscal years and dividend information is found under the heading “Common Stock Price” in Part II, Item 7 of this report. The following table sets forth the registrant’s purchase of equity securities for the periods indicated:


Period (1)	Total Number of Shares Purchased (2)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Treasury Stock Purchase Program (3)	Maximum Number of Shares that May Yet be Purchased Under the Treasury Stock Purchase Program (3)
First four weeks
December 4, 2005 to December 31, 2005	3,809	$	32.73	—	3,693,300
Second four weeks
January 1, 2006 to January 28, 2006	22,356	$	32.88	—	3,693,300
Third four weeks
January 29, 2006 to February 25, 2006	125,506	$	31.49	—	3,693,300

Totals	151,671	$	31.72	—	3,693,300

(1)	The reported periods conform to the company’s fiscal calendar composed of thirteen 28-day periods. The fourth quarter of fiscal 2006 contains three 28-day periods.

(2)

These amounts include the deemed surrender by participants in the company’s compensatory stock plans of 151,671 shares of previously issued common stock 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 granted under such plans.

(3)

On May 26, 2004, the company announced a treasury stock purchase program authorized by the Board of Directors to repurchase up to 5,000,000 shares of the company’s common stock to offset the issuance of shares over time under the company’s employee benefit plans. As of February 25, 2006, 3,693,300 shares remained available for purchase under that program.

ITEM 6.

SELECTED FINANCIAL DATA

The information called for by Item 6 is found within the Five Year Financial and Operating Summary on page F-2.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

SUPERVALU is one of the largest grocery companies in the United States. We operate in two segments of the grocery industry, retail food stores and supply chain services, which includes food distribution and related logistics support services. At February 25, 2006, we conducted our retail operations through a total of 1,381 stores of which 862 are licensed locations. Store counts are adjusted for the planned sale of Deals and Shop ’n Save Pittsburgh. Principal formats include extreme value stores, regional price superstores and regional

supermarkets. Our supply chain services operations network spans 48 states and we serve as primary grocery supplier to approximately 2,200 stores, in addition to our own regional banner store network, as well as serving as secondary grocery supplier to approximately 500 stores. Based on revenues for fiscal 2006, we would be ranked as the largest extreme value food retailer, ninth largest grocery retailer, and largest public company food wholesaler in the United States.

The grocery food industry can be characterized as one of consolidation and rationalization, as evidenced by the Proposed Transaction. The industry also continues to experience store saturation driven primarily by increases in square footage devoted to food in supercenters, club stores, mass merchandisers, dollar stores, drug stores and other alternate formats as well as organic growth by traditional supermarket operators. This competition continues to pressure same store sales.

The grocery industry is also affected by the general economic environment and its impact on consumer spending behavior. We would characterize fiscal 2006 as a year with modest economic growth, high fuel price inflation and slightly increased product cost inflation. For fiscal 2007, we expect consumer spending will again be pressured by higher fuel prices and modest food inflation.

In fiscal 2006, most businesses, including the labor intensive grocery industry, were impacted by another year of rising health care and pension costs. Although the rate of increase moderated in fiscal 2006, these rising costs impacted the overall profitability levels of the food industry and remain a pivotal issue in labor negotiations for unionized employees who bargain for health and retirement benefits in addition to wages. Approximately 39 percent of SUPERVALU’s employees are unionized. We did not experience any strikes during fiscal 2006. Approximately 7 percent of our unionized workforce is represented by contracts that are up for renewal in fiscal 2007. Assuming the closing of the Proposed Transaction, approximately 62 percent of our employees will be unionized and approximately 25 percent of our unionized workforce will be represented by contracts that are up for renewal in fiscal 2007.

All of these industry factors impact our food distribution customer base. As a result, we continue to experience customer attrition in our supply chain services operations. The attrition rate in fiscal 2006 was approximately five percent, which is above the historical range of approximately two percent to four percent, due primarily to the impact of cycling of three large customer transactions to other suppliers in the prior year.

All the above factors will continue to impact our industry and our company in fiscal 2007.

We believe we can be successful against this industry backdrop with our regional retail formats that focus on local execution, merchandising and consumer knowledge. In addition, our operations will benefit from our efficient and low-cost supply chain and economies of scale as we leverage our retail and supply chain services operations. Save-A-Lot, our extreme value format, has nationwide potential, and currently operates in 39 states. We plan to expand regional retail banner square footage through selective new store growth in key markets where we have significant market share. The Proposed Transaction will significantly expand our retail presence and the number of stores we operate. In addition, we will supplement regional retail store growth with continued focus on remodel activities. Given the life cycle maturity of our supply chain services business with its inherent attrition rate, future growth in food distribution will be modest and primarily achieved through serving new independent customers, net growth from existing customers and further consolidation opportunities.

RESULTS OF OPERATIONS

Highlights of results of operations as reported and as a percent of net sales are as follows:


	February 25, 2006 (52 weeks)					February 26, 2005 (52 weeks)					February 28, 2004 (53 weeks)
	(In millions)
Net sales	$	19,863.6		100.0	%	$	19,543.2		100.0	%	$	20,209.7		100.0	%
Cost of sales		16,977.3		85.5			16,681.5		85.4			17,372.4		85.9
Selling and administrative expenses		2,446.6		12.3			2,228.9		11.4			2,220.4		11.0
Gain on sale of WinCo Foods, Inc.		—		—			(109.2	)	(0.6	)		—		—
Restructure and other charges		4.5		—			26.4		0.1			15.5		0.1

Operating earnings	$	435.2		2.2		$	715.6		3.7		$	601.4		3.0
Interest expense		138.9		0.7			137.5		0.7			165.6		0.8
Interest income		(32.9	)	(0.2	)		(22.7	)	(0.1	)		(19.1	)	(0.1	)

Earnings before income taxes	$	329.2		1.7		$	600.8		3.1		$	454.9		2.3
Income tax expense		123.0		0.6			215.0		1.1			174.8		0.9

Net earnings	$	206.2		1.1	%	$	385.8		2.0	%	$	280.1		1.4	%

Comparison of fifty-two weeks ended February 25, 2006 (fiscal 2006) with fifty-two weeks ended February 26, 2005 (fiscal 2005):

In fiscal 2006, the company achieved net sales of $19.86 billion compared with $19.54 billion last year. Net earnings for fiscal 2006 were $206.2 million, basic earnings per share were $1.52 and diluted earnings per share were $1.46 compared with net earnings of $385.8 million, basic earnings per share of $2.86 and diluted earnings per share of $2.71 last year. Results for fiscal 2006 include charges of approximately $61.2 million after-tax, or $0.42 per diluted share related to the sale of Cub Foods stores in Chicago in January 2006 (“Chicago”), $38.1 million after-tax, or $0.26 per diluted share related to plans to dispose of twenty corporate operated Shop ‘n Save retail stores in Pittsburgh announced in September 2005 (“Pittsburgh”), $8.7 million after-tax, or $0.06 per diluted share related to asset impairment for technology investments in connection with the planned disposition of stand-alone Deals stores announced in February 2006 (“Deals”) and approximately $3 million after-tax, or $0.02 per diluted share related to impact of Hurricane Katrina primarily at Save-A-Lot locations in Louisiana (“Hurricane”). Results for fiscal 2005 year-to-date include a net after-tax gain on the sale of the company’s minority interest in WinCo Foods, Inc. (“WinCo”), a privately held grocery chain that operates stores primarily in the northwestern United States, of $68.3 million or $0.51 basic earnings per share and $0.47 diluted earnings per share.

Net Sales

Net sales for fiscal 2006 were $19.86 billion compared with $19.54 billion last year, an increase of $0.32 billion or 1.6 percent compared with last year. Retail food sales were approximately 53.5 percent of net sales and supply chain services sales were approximately 46.5 percent of net sales for fiscal 2006, compared to 54.0 percent and 46.0 percent, respectively last year.

Retail food sales for fiscal 2006 were $10.6 billion, an increase of $0.1 billion or 0.8 percent from last year. The increase primarily reflects net new store growth, which was partially offset by negative same store sales. For fiscal 2006, same-store retail sales, defined as stores operating for four full quarters, including store expansions, decreased 0.5 percent.

Fiscal 2006 store activity, including licensed units, resulted in 68 new stores opened and 85 stores closed. Exclusive of the Chicago, Pittsburgh and Deals stores, total retail square footage, including licensed stores, increased approximately two percent over the prior year.

Supply chain services sales for fiscal 2006 were $9.2 billion compared with $9.0 billion last year, an increase of $0.2 billion or 2.6 percent compared with last year, primarily reflecting new business from the traditional food distribution business, the recent acquisition of Total Logistics and temporary new business of approximately three percent, three percent and two percent, respectively, partially offset by customer attrition, which includes the fiscal 2006 impact of cycling three large customer transitions to other suppliers in the prior year.

Gross Profit

Gross profit (calculated as net sales less cost of sales), as a percent of net sales, was 14.5 percent for fiscal 2006 compared with 14.6 percent last year. Gross profit as a percent of net sales primarily reflects the benefits of retail merchandising execution and the acquisition of Total Logistics, a higher margin third party logistics business, which was more than offset by the impact of supply chain costs of approximately $22 million related to costs for new growth initiatives for supply chain technology and the launch of our specialty produce distribution business, W. Newell and Co. (“growth initiatives”) and approximately $0.6 million of losses related to minority owned investments in contrast to $14.3 million of earnings in fiscal 2005.

Selling and Administrative Expenses

Selling and administrative expenses, as a percentage of net sales, were 12.3 percent for fiscal 2006 compared with 11.4 percent last year. The increase primarily reflects approximately $174 million of pre-tax costs related to charges for Chicago, Pittsburgh, Deals and the Hurricane.

Restructure and Other Charges

For fiscal 2006 and fiscal 2005, the company incurred $4.5 million and $26.4 million, respectively, in pre-tax restructure and other charges. These charges primarily reflect changes in estimates on exited real estate for fiscal 2006 and the increased liabilities associated with employee benefits related costs from previously exited distribution facilities as well as changes in estimates on exited real estate for fiscal 2005.

Operating Earnings

Operating earnings for fiscal 2006 were $435.2 million compared with $715.6 million last year. Results for fiscal 2006 include charges of approximately $174 million pre-tax related to Chicago, Pittsburgh, Deals and the Hurricane and $4.5 million of restructuring and other charges. Fiscal 2005 includes a pre-tax gain of approximately $109 million pre-tax gain on the sale of WinCo and $26.4 million of restructure and other charges. Retail food fiscal 2006 operating earnings were $268.8 million, or 2.5 percent of net sales, compared to last year’s operating earnings of $446.3 million, or 4.2 percent of net sales. The decrease in retail food operating earnings, as a percent of net sales, primarily reflects charges of approximately $174 million pre-tax related to Chicago, Pittsburgh, Deals and the Hurricane. Supply chain services fiscal 2006 operating earnings were $214.4 million, or 2.3 percent of net sales compared to last year’s operating earnings of $234.6 million, or 2.6 percent of sales. The decrease in supply chain services operating earnings, as a percent of net sales, primarily reflects the start-up costs related to growth initiatives and losses from minority owned investments, which more than offset the benefit of the higher margin third party logistics business acquired in February 2005.

Net Interest Expense

Net interest expense decreased to $106.0 million for fiscal 2006 compared with $114.8 million last year. The decrease primarily reflects lower borrowing levels partially offset by higher borrowing rates and the absence of the $5.7 million early redemption costs relating to the $250 million notes redeemed in the first quarter of fiscal 2005.

Income Taxes

The effective tax rate was 37.4 percent and 35.8 percent for fiscal 2006 and fiscal 2005, respectively. The fiscal 2005 tax rate reflects the impact of net favorable tax settlements.

Net Earnings

Net earnings were $206.2 million, or $1.52 per basic share and $1.46 per diluted share, for fiscal 2006 compared with net earnings of $385.8 million, or $2.86 per basic share and $2.71 per diluted share last year. Results for fiscal 2006 include charges of $0.42 per diluted share related to Chicago, $0.26 per diluted share related to Pittsburgh, $0.06 per diluted share related to Deals and $0.02 per diluted share related to the Hurricane. Results for fiscal 2005 include a net after-tax gain on the sale of the company’s minority interest in WinCo of $68.3 million or $0.47 per diluted share.

Weighted average basic shares increased to 136.1 million for fiscal 2006 compared with 135.0 million last year and weighted average diluted shares increased to 145.7 million for fiscal 2006 compared with 144.9 million shares last year, reflecting the net impact of stock activity including stock option activity, share repurchases under the treasury plan and dilution impacts.

Comparison of fifty-two weeks ended February 26, 2005 (fiscal 2005) with fifty-three weeks ended February 28, 2004 (fiscal 2004):

In fiscal 2005, the company achieved net sales of $19.5 billion compared with $20.2 billion in fiscal 2004. Net earnings for fiscal 2005 were $385.8 million, basic earnings per share were $2.86 and diluted earnings per share were $2.71 compared with net earnings of $280.1 million, basic earnings per share of $2.09 and diluted earnings per share of $2.01 in fiscal 2004. Results for fiscal 2005 include a net after-tax gain on the sale of the company’s minority interest in WinCo of $68.3 million or $0.51 basic earnings per share and $0.47 diluted earnings per share. On February 7, 2005, the company completed the acquisition of Total Logistics and its results were immaterial to fiscal 2005.

Fiscal 2004 was a 53 week fiscal year, resulting in an extra week in the fourth quarter, which generated approximately $360.0 million in net sales and contributed approximately $0.07 to basic and diluted earnings per share. Fiscal 2004 operating results include the impact of the asset exchange with C&S Wholesale Grocers (“Asset Exchange”), the sale and closure of the company’s Denver based operations that included nine retail stores and a food distribution facility (“Denver Disposition”) and a 28-day strike in St. Louis, where we operate 21 regional supermarkets (“St. Louis Strike”).

Net Sales

Net sales for fiscal 2005 were $19.5 billion compared with $20.2 billion in fiscal 2004, a decrease of $0.7 million or 3.3 percent from fiscal 2004. Retail food sales were 54.0 percent of net sales for fiscal 2005 compared with 52.2 percent in fiscal 2004. Supply chain services sales were 46.0 percent of net sales for fiscal 2005 compared with 47.8 percent in fiscal 2004.

Retail food sales for fiscal 2005 were $10.5 billion, flat compared to fiscal 2004, primarily reflecting net new store and same store sales growth, which was fully offset by the absence of last year’s extra week of approximately $0.2 billion. Fiscal 2005 same store retail sales increased 0.3 percent.

Fiscal 2005 store activity, including licensed units, resulted in 104 new stores opened and 38 stores closed, for a total of 1,549 stores at year end. Total square footage increased approximately 4.2 percent over fiscal 2004.

Supply chain services sales for fiscal 2005 were $9.0 billion compared with $9.7 billion in fiscal 2004, a decrease of $0.7 billion. Supply chain services sales decreased 6.9 percent compared with fiscal 2004, reflecting new business growth of approximately five percent, which was more than offset by customer attrition, the fiscal 2004 Asset Exchange and the absence of the extra week in last year, which accounted for approximately seven percent, three percent and two percent, respectively.

Gross Profit

Gross profit (calculated as net sales less cost of sales), as a percent of net sales, was 14.6 percent for fiscal 2005 compared with 14.1 percent in fiscal 2004. The increase in gross profit, as a percent of net sales, primarily reflects the growing proportion of our retail food business, which operates at a higher gross profit margin as a percentage of net sales than does the supply chain services business, benefits of retail merchandising execution, customer mix and the benefit of volume throughput including labor productivity improvements in supply chain services.

Selling and Administrative Expenses

Selling and administrative expenses, as a percentage of net sales, were 11.4 percent for fiscal 2005 compared with 11.0 percent in fiscal 2004. The increase in selling and administrative expenses, as a percent of net sales, primarily reflects the growing proportion of the company’s retail food business, which operates at a higher selling and administrative expense as a percent of net sales than does the supply chain services business.

Restructure and Other Charges

In fiscal 2005, the company incurred $26.4 million, or 0.1 percent of net sales, in pre-tax restructure and other charges, consisting of $18.0 million for increased liabilities associated with employee benefit related costs from previously exited food distribution facilities and $8.4 million for changes in estimates on exited real estate. In fiscal 2004, the company incurred $15.5 million, or 0.1 percent of net sales in pre-tax restructure and other charges, consisting of $7.0 million for changes in estimates on exited real estate for supply chain services and $8.5 million for increased liabilities associated with employee benefit related costs from previously exited distribution facilities.

Operating Earnings

Operating earnings for fiscal 2005 increased 19.0 percent to $715.6 million compared with $601.4 million in fiscal 2004, primarily reflecting the fiscal 2005 $109.2 million pre-tax gain on the sale of WinCo. Fiscal 2005 operating earnings include $26.4 million in pre-tax restructure and other charges. Fiscal 2004 operating earnings include $15.5 million in pre-tax restructure and other charges. Retail food operating earnings for fiscal 2005 increased 0.5 percent to $446.3 million, or 4.2 percent of net sales, from fiscal 2004 operating earnings of $444.0 million, or 4.2 percent of net sales. The increase in retail food operating earnings primarily reflects the benefits of retail merchandising execution, which offset the absence of the extra week in fiscal 2004 and WinCo earnings. Supply chain services operating earnings for fiscal 2005 increased 5.4 percent to $234.6 million, or 2.6 percent of net sales, from fiscal 2004 operating earnings of $222.5 million, or 2.3 percent of net sales. The increase in supply chain services operating earnings primarily reflects customer mix and the benefit of volume throughput including labor productivity improvements, which more than offset the absence of the extra week in fiscal 2004.

Net Interest Expense

Net interest expense was $114.8 million in fiscal 2005 compared with $146.5 million in fiscal 2004. The decrease primarily reflects lower borrowing levels.

Income Taxes

The overall effective tax rate was 35.8 percent and 38.4 percent in fiscal 2005 and fiscal 2004, respectively. The fiscal 2004 effective tax rate reflects $7.6 million of taxes related to the Asset Exchange. In both fiscal 2005 and fiscal 2004, the effective tax rate reflects the impact of net favorable tax settlements occurring in each year.

Net Earnings

Net earnings were $385.8 million, or $2.86 per basic share and $2.71 per diluted share, in fiscal 2005 compared with net earnings of $280.1 million, or $2.09 per basic share and $2.01 per diluted share in fiscal 2004.

Results for fiscal 2005 include a net after-tax gain on the sale of the company’s minority interest in WinCo of $68.3 million or $0.51 basic earnings per share and $0.47 diluted earnings per share.

Weighted average basic shares increased to 135.0 million in fiscal 2005 compared to 134.0 million in fiscal 2004 and weighted average diluted shares increased to 144.9 million in fiscal 2005 compared with 143.2 million shares in fiscal 2004, reflecting the net impact of stock option activity and shares repurchased under the treasury stock program.

RESTRUCTURE AND OTHER CHARGES

In fiscal 2002, 2001 and 2000, the company commenced restructuring programs designed to reduce costs and enhance efficiencies and included facility consolidation and disposal of non-core assets and assets not meeting return objectives or providing long-term strategic opportunities. The restructuring plans resulted in the company recording pre-tax restructure and other charges in fiscal 2002, 2001 and 2000.

In fiscal 2003, all activity for the fiscal 2002, 2001 and 2000 restructure plans was completed. The company recognized pre-tax restructure and other charges of $4.5 million, $26.4 million and $15.5 million for fiscal years 2006, 2005 and 2004 respectively. These charges reflect changes in liabilities associated with employee benefit related costs from previously exited distribution facilities as well as changes in estimates on exited real estate, including asset impairment. Fiscal 2006 charges related primarily to restructure 2001 and consisted of adjustments for changes in estimates on exited real estate of $1.4 million, asset impairment charges of $1.0 million and property holding costs of $2.1 million. Fiscal 2005 charges related primarily to restructure 2001 and consisted of adjustments of $22.3 million for changes in estimates, asset impairment charges of $0.5 million, and property holding costs of $3.6 million. Fiscal 2004 charges reflect the net adjustments to the restructure reserves of $12.8 million, as well as asset impairment adjustments of $2.7 million for restructure 2001.

The remaining 2001 restructure reserves include $12.4 million for employee benefit related costs and $12.3 million for lease related costs for exited properties.

The table below shows the remaining restructure reserves for the 2002, 2001 and 2000 plans as of February 25, 2006, as well as reserve related activity for the three fiscal years then ended.


Restructure Plan	Fiscal 2003 Reserve Balance		Fiscal 2004 Activity					Fiscal 2004 Reserve Balance		Fiscal 2005 Activity					Fiscal 2005 Reserve Balance		Fiscal 2006 Activity					Fiscal 2006 Reserve Balance
Restructure Plan	Fiscal 2003 Reserve Balance		Usage			Adjustment		Fiscal 2004 Reserve Balance		Usage			Adjustment		Fiscal 2005 Reserve Balance		Usage			Adjustment		Fiscal 2006 Reserve Balance
(In millions)
2002	$	3.4	$	(3.8	)	$	0.6	$	0.2	$	(0.2	)	$	—	$	—	$	—		$	—	$	—
2001	$	32.2	$	(17.3	)	$	11.7	$	26.6	$	(6.6	)	$	22.3	$	42.3	$	(18.7	)	$	1.1	$	24.7
2000	$	11.1	$	(9.1	)	$	0.5	$	2.5	$	(1.4	)	$	—	$	1.1	$	(1.4	)	$	0.3	$	—

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant accounting policies are discussed in the Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements. Management believes the following critical accounting policies reflect its more subjective or complex judgments and estimates used in the preparation of the company’s consolidated financial statements.

Allowances for Losses on Receivables

Management makes estimates of the uncollectibility of its accounts and notes receivable portfolios. In determining the adequacy of the allowances, management analyzes the value of the collateral, customer financial statements, historical collection experience, aging of receivables and other economic and industry factors. Although risk management practices and methodologies are utilized to determine the adequacy of the allowance, it is possible that the accuracy of the estimation process could be materially impacted by different judgments as to collectibility based on the information considered and further deterioration of accounts.

LIFO and Retail Inventory Method

Inventories are stated at the lower of cost or market. Market is replacement value. Substantially all of the company’s inventory is finished goods.

The retail inventory method (“RIM”) is used to value retail inventory. 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 due to its practicality. Inherent in the RIM calculations are certain significant management judgments and estimates, including shrinkage, which significantly impact the ending inventory valuation at cost, as well as the resulting gross margins. These judgments and estimates, coupled with the fact that the RIM is an averaging process, can, under certain circumstances, produce results which differ from actual. Management believes that the company’s RIM provides an inventory valuation which reasonably approximates cost and results in carrying inventory at the lower of cost or market.

The company evaluates inventory shortages throughout the year based on actual physical counts in its facilities. Allowances for inventory shortages are recorded based on the results of these counts to provide for estimated shortages as of the financial statement date.

Reserves for Closed Properties and Asset Impairment Charges

The company maintains reserves for estimated losses on retail stores, distribution warehouses and other properties that are no longer being utilized in current operations. The company provides for closed property lease liabilities using a discount rate to calculate the present value of the remaining noncancellable lease payments after the closing date, net of estimated subtenant income. The closed property lease liabilities usually are paid over the remaining lease terms, which generally range from one to sixteen years. The company estimates subtenant income and future cash flows based on the company’s experience and knowledge of the market in which the closed property is located, the company’s previous efforts to dispose of similar assets and current economic conditions.

Owned properties and capital lease properties that are closed are reduced to their estimated net realizable value. Reduction in the carrying values of property, equipment and leasehold improvements are recognized when expected net future cash flows are less than the assets’ carrying value. The company estimates net future cash flows based on its experience and knowledge of the market in which the closed property is located and, when necessary, utilizes local real estate brokers.

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 expectations on timing of disposition or sublease and the estimated sales price or sublease income associated with closed properties are impacted by variable factors such as inflation, the general health of the economy, resultant demand for commercial property, the ability to secure subleases, the creditworthiness of sublessees and the company’s success at negotiating early termination agreements with lessors. While management believes the current estimates on closed properties are adequate, it is possible that market conditions in the real estate market could cause changes in the company’s assumptions and may require additional reserves and asset impairment charges to be recorded.

Reserves for Self Insurance

The company is primarily self-insured for workers’ compensation, health care for certain employees and general and automobile liability costs. It is the company’s policy to record its self-insurance liabilities based on claims filed and an estimate of claims incurred but not yet reported, discounted at a risk free interest rate. Any projection of losses concerning workers’ compensation, health care and general and automobile liability is subject to a considerable degree of variability. Among the causes of this variability are unpredictable external factors affecting future inflation rates, discount rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns. A 100 basis point change in discount rates would increase the company’s liability by approximately $0.8 million.

Benefit Plans

The company sponsors pension and other post retirement plans in various forms covering substantially all employees who meet eligibility requirements. The determination of the company’s obligation and related expense for company sponsored pension and other post retirement benefits is dependent, in part, on management’s selection of certain assumptions used by its actuaries 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 health care costs. In accordance with generally accepted accounting principles, actual results that differ from the company’s assumptions are accumulated and amortized over future periods and, therefore, affect expense and obligation in future periods. While the company believes that its assumptions are appropriate, significant differences in actual experience or significant changes in assumptions may materially impact non-union pension and other post retirement obligations and future expenses.

For fiscal 2007, when not considering other changes in assumptions or impacts from the Proposed Transaction, the impact to pension expense of each 25 basis point reduction in the discount rate is to increase pension expense by approximately $5 million and the impact of each 25 basis point reduction in expected return on plan assets is to increase pension expense by approximately $1 million. Similarly, for post retirement benefits, a one percent change in the health care cost trend rate would impact the accumulated post retirement benefit obligation by approximately $10 million and the service and interest cost by $0.6 million in fiscal 2007. The actuarial assumptions used by the company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, and longer or shorter life spans of participants.

Goodwill

Management assesses the valuation of goodwill for each of the company’s reporting units on an annual basis through the comparison of the fair value of the respective reporting unit with its carrying value. Fair value is determined primarily based on valuation studies performed by the company, which utilize a discounted cash flow methodology. Valuation analysis requires significant judgments and estimates to be made by management. The company’s estimates could be materially impacted by factors such as competitive forces, customer behaviors, changes in growth trends and specific industry conditions.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $674.1 million, $791.6 million and $846.8 million in fiscal 2006, 2005 and 2004, respectively. The decrease in cash from operating activities in fiscal 2006 from fiscal 2005 is primarily related to changes in working capital.

Net cash used in investing activities was $258.5 million, $161.8 million and $271.6 million in fiscal 2006, 2005 and 2004, respectively. Fiscal 2006 and 2005 investing activities primarily reflect capital spending to fund retail store expansion, store remodeling and technology enhancements. Fiscal 2006 activities also include capital spending related to supply chain growth initiatives. Fiscal 2005 activities also include the acquisition of Total Logistics and the proceeds from the sale of WinCo.

Net cash used in financing activities was $193.4 million, $457.8 million and $312.5 million in fiscal 2006, 2005 and 2004, respectively. Fiscal 2006 financing activities primarily reflect the repayments of long-term debt of $69.8 million, the payment of dividends of $85.8 million and the purchase of treasury shares of 28.8 million. Fiscal 2005 financing activities primarily reflect the early redemption of $250.0 million of the company’s 7.625 percent notes due in September 2004, the payment of approximately $60 million in Total Logistics assumed debt, the payment of dividends of $80.2 million and the purchase of treasury shares of $56.0 million. Fiscal 2004 financing activities primarily reflect the early redemption of $100.0 million of the company’s 8.875 percent notes due in 2022 at the redemption price of 103.956 percent of the principal amount of the notes, the net reduction in notes payable of $80.0 million, the payment of dividends of $77.0 million and the purchase of treasury shares of $14.6 million.

As of February 25, 2006, the company’s current portion of outstanding debt including obligations under capital leases was $111.7 million. The company had no outstanding borrowings under its unsecured $750.0 million revolving credit facility. Letters of credit outstanding under the credit facility were $148.4 million and the unused available credit under the facility was $601.6 million. The company also had $28.4 million of outstanding letters of credit issued under separate agreements with financial institutions.

On February 28, 2005, the company executed a five year unsecured $750.0 million revolving credit agreement replacing the previous $650.0 million revolving credit agreement which was terminated. Amounts utilized under this credit agreement have rates tied to LIBOR plus 0.275 to 0.675 percent and there are facility fees ranging from 0.10 to 0.20 percent on the total amount of the facility, both based on the company’s credit ratings. The agreement contains various financial covenants including ratios for interest coverage and debt leverage. All letters of credit that had been issued and outstanding under the previous credit facility were transferred under the new credit facility.

In August 2005, the company renewed its annual accounts receivable securitization program, under which the company can borrow up to $200.0 million on a revolving basis, with borrowings secured by eligible accounts receivable. No borrowings were outstanding under this program at February 25, 2006 and February 26, 2005. The company had no outstanding borrowings under this program at February 25, 2006 and February 26, 2005. The agreement contains various covenants that are consistent with transactions of this nature, including a requirement that the rating assigned to the company’s long-term unsecured debt by Standard & Poor’s rating service or Moody’s rating service to be BB or higher or Ba2 or higher, respectively. The company has met the covenants under the annual accounts receivable program as of February 25, 2006. See Subsequent Events note.

the company’s common stock on the New York Stock Exchange for twenty of the last thirty trading days of any fiscal quarter exceeds certain levels, at $39.75 per share for the quarter ending June 17, 2006, and rising to $113.29 per share at September 6, 2031, if the rating assigned to the debentures by Standard & Poor’s rating service or Moody’s rating service, are “BB” or lower, or Ba3 or lower, respectively, if the notes are called for redemption, or if certain specified corporate actions occur. See Subsequent Events note. In the event of conversion, 9.6434 shares of the company’s common stock will be issued per $1,000 debenture or approximately 7.8 million shares should all debentures be converted. The debentures have an initial yield to maturity of 4.5 percent, which is being accreted over the life of the debentures using the effective interest method. The company will pay contingent cash interest for the six-month period commencing November 3, 2006 and for any six-month period thereafter if the average market price of the debentures for a five trading day measurement period preceding the applicable six-month period equals 120 percent or more of the sum of the issue price and accrued original issue discount for the debentures. The debentures are classified as long-term debt based on the company’s intent, subject to the Proposed Transaction, to settle with equity shares upon conversion.

The debt agreements contain various financial covenants including ratios for interest coverage and debt leverage as defined in the company’s debt agreements. The company has met the financial covenants under the debt agreements as of February 25, 2006.

The company is party to a synthetic leasing program for one of its major warehouses. The lease expires April 2008, may be renewed with the lessor’s consent through April 2013 and has a purchase option of approximately $60 million.

In connection with the Proposed Transaction, the Royal Bank of Scotland plc has committed to provide the company with senior credit facilities in the amount of $4 billion (the “Facilities”). These Facilities, which will replace the $750 million credit facility described above, consist of a $2 billion five year Revolving Credit Facility, a $1.25 billion five year Term Loan A and a $750 million six year Term Loan B. Rates on the Facilities are tied to LIBOR plus 0.50 to 1.875 percent and with facility fees ranging from 0.10 to 0.50 percent, both based on the company’s credit rating. The Facilities are guaranteed by certain material subsidiaries of the company and the stock of such subsidiaries is pledged as security for such guarantees. The Facilities also include various covenants and restrictions customary for senior secured credit facilities, including ratios for interest coverage and debt leverage. The company expects to have approximately $2 billion drawn on the Facilities simultaneous with the closing of the Proposed Transaction.

Management expects that the company will continue to replenish operating assets with internally generated funds. There can be no assurance, however, that the company’s business will continue to generate cash flow at current levels. The company will continue to obtain short-term financing from its revolving credit agreement with various financial institutions, as well as through its accounts receivable securitization program. Long-term financing will be maintained through existing and new debt issuances. The company’s short-term and long-term financing abilities are believed to be adequate as a supplement to internally generated cash flows to fund its capital expenditures and acquisitions as opportunities arise. 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.

The company repurchases shares of the company’s common stock under programs authorized by the Board of Directors, for re-issuance upon the exercise of employee stock options and for other compensation programs utilizing the company’s stock. The company repurchased 0.9 million, 2.0 million and 0.6 million shares of common stock at an average cost per share of $32.19, $28.30 and $23.80 during fiscal 2006, 2005 and 2004, respectively. As of February 25, 2006, approximately 3.7 million shares remained available for purchase under the 5.0 million share repurchase program authorized by the Board of Directors in May 2004.

SFAS No. 87, “Employers’ Accounting for Pension,” requires that a prepaid pension asset or minimum pension liability, based on the current market value of plan assets and the accumulated benefit obligation of the

plan, be reflected. Based on both performance of the pension plan assets and plan assumption changes, the company’s accumulated other comprehensive loss for minimum pension liability is $128.2 million after-tax as of February 25, 2006. This accumulated other comprehensive loss for minimum pension liability will be revised in future years depending upon market performance and interest rate levels.

Annual cash dividends declared for fiscal 2006, 2005 and 2004, were $0.64, $0.6025 and $0.5775 per common share, respectively. The company’s dividend policy will continue to emphasize a high level of earnings retention for growth.

SUBSEQUENT EVENTS

On March 13, 2006, the pre-merger waiting period for the Proposed Transaction with Albertson’s, Inc. expired, indicating that the Federal Trade Commission (“FTC”) has completed the pre-merger review as required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. No divestiture of retail stores or other assets was required and the FTC imposed no conditions or restrictions on the Proposed Transaction. On April 28, 2006, the SEC declared effective the Form S-4 Joint Proxy Statement / Prospectus in connection with the Proposed Transaction. The merger will be presented for SUPERVALU shareholder approval at a Special Meeting of Stockholders, which is scheduled for May 30, 2006, at which SUPERVALU shareholders who held shares as of the record date of April 21, 2006 will be entitled to vote. The Proposed Transaction also remains subject to the satisfaction of customary closing conditions, including approval of the Proposed Transaction by Albertsons’ stockholders.

On April 13, 2006, the rating of the long-term unsecured debt of the company by Moody’s Investors Service was changed from Baa3 to Ba3. As a result of this rating downgrade, the company’s zero-coupon convertible debentures are now convertible into shares of the company’s common stock. Also as a result of this rating downgrade, the company amended its annual accounts receivable securitization program on April 24, 2006 to allow that the rating assigned to the company’s long-term unsecured debt by Standard & Poor’s rating service or Moody’s rating service to be B+ or higher or B1 or higher, respectively. The amendment resulted in an increase to the facility fees from 0.375 to 0.55 percent on the total amount of the facility. There were no borrowings outstanding on this facility as of April 13, 2006.

COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS

The company has guaranteed certain leases, fixture financing loans and other debt obligations of various retailers at February 25, 2006. These guarantees were generally made to support the business growth of affiliated retailers. The guarantees are generally for the entire term of the lease or other debt obligation with remaining terms that range from less than one year to nineteen years, with a weighted average remaining term of approximately thirteen years. For each guarantee issued, if the affiliated retailer defaults on a payment, the company would be required to make payments under its guarantee. Generally, the guarantees are secured by indemnification agreements or personal guarantees of the affiliated retailer. At February 25, 2006, the maximum amount of undiscounted payments the company would be required to make in the event of default of all guarantees was approximately $226 million and represented approximately $126 million on a discounted basis. No amount has been accrued for the company’s obligation under its guaranty arrangements.

The company is contingently liable for leases that have been assigned to various third parties in connection with facility closings and dispositions. The company 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 the company’s assignments among third parties, and various other remedies available, the company believes the likelihood that it will be required to assume a material amount of these obligations is remote.

The company is party to a synthetic leasing program for one of its major warehouses. The lease expires in April 2008, may be renewed with the lessor’s consent through April 2013, and has a purchase option of $60.0 million. At February 25, 2006, the estimated market value of the property underlying this lease approximately

equaled the purchase option. The company’s obligation under its guaranty arrangements related to this synthetic lease had a carrying balance of $0.4 million, which is reflected as a component of other liabilities in the Consolidated Balance Sheet at February 25, 2006.

The company had $176.8 million of outstanding letters of credit as of February 25, 2006, of which $148.4 million were issued under the credit facility and $28.4 million were issued under separate agreements with financial institutions. These letters of credit primarily support workers’ compensation, merchandise import programs and payment obligations. The company pays fees, which vary by instrument, of up to 0.70 percent on the outstanding balance of the letters of credit.

The company is a party to a variety of contractual agreements under which the company may be obligated to indemnify the other party for certain matters, which indemnities may be secured by operation of law or otherwise, in the ordinary course of business. These contracts primarily relate to the company’s commercial contracts, operating leases and other real estate contracts, financial agreements, agreements to provide services to the company, and agreements to indemnify officers, directors and employees in the performance of their work. While the company’s aggregate indemnification obligation could result in a material liability, the company is aware of no current matter that it expects to result in a material liability.

The following table represents the company’s significant contractual obligations and off-balance sheet arrangements at February 25, 2006.


	Amount of Commitment Expiration Per Period
	Total Amount Committed		Fiscal 2007			Fiscal 2008-2009		Fiscal 2010-2011		Thereafter
	(In thousands)
Contractual Obligations & Off-Balance Sheet Arrangements:
Debt	$	1,049,110	$	74,650		$	19,151	$	368,264	$	587,045
Operating Leases		929,813		154,849			301,752		159,126		314,086
Interest on Long-Term Debt (1)		801,658		54,497			104,884		59,635		582,642
Capital and Direct Financing Leases		515,713		37,071			88,104		80,981		309,557
Benefit Obligations (2)		1,027,404		47,981			96,609		103,413		779,401
Construction Commitments		183,884		183,884			—		—		—
Retailer Loan and Lease Guarantees		226,330		27,248			45,724		34,552		118,806
Deferred Income Taxes		27,738		(18,697	)		17,024		34,363		(4,952	)
Purchase Option on Synthetic Lease		60,000		—			60,000		—		—
Purchase Obligations (3)		39,998		30,410			9,588		—		—

Total	$	4,861,648	$	591,893		$	742,836	$	840,334	$	2,686,585

(1)	The interest on long-term debt for fiscal 2032 reflects the company’s zero-coupon debentures accreted interest for fiscal 2007 through fiscal 2032, should the debentures remain outstanding to maturity.

(2)	The company’s benefit obligations include obligations related to sponsored defined benefit pension and post retirement benefit plans and deferred compensation plans. The defined benefit pension plan has plan assets of approximately $556 million at the end of fiscal 2006.

(3)

The company’s purchase obligations include various obligations that have annual purchase commitments of $1 million or greater. At the end of fiscal 2006, future purchase obligations of approximately $40 million existed that primarily related to technology and advertising. In the ordinary course of business, the company enters into supply contracts to purchase products for resale. These supply contracts typically include either a volume commitment or a fixed expiration date, termination provisions and other standard contractual considerations. These supply contracts are cancelable and therefore no amounts have been included above.

In addition, see the Subsequent Event footnote for additional discussion of the Proposed Transaction.

COMMON STOCK PRICE

SUPERVALU’s common stock is listed on the New York Stock Exchange under the symbol SVU. At fiscal 2006 year end, there were 6,206 shareholders of record compared with 6,483 at the end of fiscal 2005.


	Common Stock Price Range								Dividends Per Share
	2006				2005				2006		2005
Fiscal	High		Low		High		Low
First Quarter	$	34.72	$	30.64	$	32.49	$	27.25	$	0.1525	$	0.1450
Second Quarter		35.88		30.90		31.99		25.70		0.1625		0.1525
Third Quarter		33.93		29.55		32.59		26.59		0.1625		0.1525
Fourth Quarter		34.75		30.60		35.15		31.30		0.1625		0.1525
Year		35.88		29.55		35.15		25.70		0.6400		0.6025

Dividend payment dates are on or about the 15th day of March, June, September and December, subject to the Board of Directors approval.

NEW ACCOUNTING STANDARDS

In December 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Statement 123 (Revised 2004), “Share-Based Payment.” This revised statement, which is effective for fiscal years beginning after June 15, 2005, requires all share-based payments to employees to be recognized in the financial statements based on their fair values. The company currently accounts for its share-based payments to employees under the intrinsic value method of accounting set forth in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issues to Employees.” Additionally, the company complies with the stock-based employer compensation disclosure requirements of SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123.” The company plans to adopt the revised statement in its first quarter of its fiscal year 2007, which begins on February 26, 2006. For previously issued awards, the company will adopt SFAS 123(R) on a modified prospective basis and recognize compensation expense on the unvested portion of the awards over the remaining vesting period. The company estimates that earnings per share for the year ending February 24, 2007 will be reduced by approximately $0.10 per diluted share as a result of the incremental compensation expense to be recognized from implementing SFAS No. 123(R). These estimates will change if the company completes the Proposed Transaction, as described above.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29” (“SFAS 153”). SFAS 153 amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The company is required to adopt the provisions of SFAS 153 during the first quarter of fiscal year 2007, which begins on February 26, 2006. The provisions of SFAS 153 are not expected to have a material impact on the consolidated financial statements.

In May 2005 the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—a Replacement of APB Opinion No. 20 and FASB Statement No. 3” (SFAS No. 154). SFAS No. 154 requires retrospective application as the required method for reporting a change in accounting principle, unless impracticable or unless a pronouncement includes alternative transition provisions. SFAS No. 154 also requires that a change in depreciation, amortization or depletion method for long-lived, non-financial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. This statement carries forward the guidance in APB Opinion No. 20, “Accounting Changes,” for the reporting of a correction of an error and a change in accounting estimate. SFAS No. 154 is effective for the year beginning February 26, 2006.

In March 2005 the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations—an Interpretation of FASB Statement No. 143” (“FIN 47”). FIN 47 clarifies that the term “conditional asset retirement obligation” as used in FASB Statement No. 143, “Accounting for Asset Retirement Obligations,” refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 became effective for the company during the fiscal year ended February 25, 2006 and did not have a material effect on the company’s consolidated financial statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The company is exposed to market pricing risk consisting of interest rate risk related to debt obligations outstanding, its investment in notes receivable and, from time to time, derivatives employed to hedge interest rate changes on variable and fixed rate debt. The company does not use financial instruments or derivatives for any trading or other speculative purposes.

The company manages interest rate risk through the strategic use of fixed and variable rate debt and, to a limited extent, derivative financial instruments. Variable interest rate debt (commercial paper, bank loans, industrial revenue bonds and other variable interest rate debt) is utilized to help maintain liquidity and finance business operations. Long-term debt with fixed interest rates is used to assist in managing debt maturities and to diversify sources of debt capital.

The company makes long-term loans to certain retail customers (see Notes Receivable in the accompanying Notes to Consolidated Financial Statements for further information) and as such, holds notes receivable in the normal course of business. The notes generally bear fixed interest rates negotiated with each retail customer. The market value of the fixed rate notes is subject to change due to fluctuations in market interest rates.

The table below provides information about the company’s financial instruments that are sensitive to changes in interest rates, including notes receivable, debt obligations and interest rate swap agreements. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For notes receivable, the table presents the expected collection of principal cash flows and weighted average interest rates by expected maturity dates. For interest rate swap agreements, the table presents the estimate of the differential between interest payable and interest receivable under the swap agreements implied by the yield curve utilized to compute the fair value of the interest rate swaps.


	Summary of Financial Instruments
	February 25, 2006					Aggregate payments by fiscal year
	Fair Value		Total			2007			2008			2009			2010			2011			Thereafter
	(in millions, except rates)
Notes receivable
Principal receivable	$	50.9	$	50.8		$	18.0		$	12.0		$	7.5		$	4.1		$	2.2		$	7.0
Average Rate receivable				7.5	%		6.7	%		8.8	%		9.2	%		9.5	%		9.7	%		3.8	%
Debt with variable interest rates
Principal payable	$	53.9	$	53.9		$	3.0		$	2.4		$	7.2		$	12.4		$	0.4		$	28.5
Average variable rate payable				3.4	%		3.8	%		3.9	%		3.4	%		3.4	%		6.7	%		3.3	%
Debt with fixed interest rates
Principal payable	$	1,029.9	$	994.1		$	71.6		$	4.7		$	4.9		$	353.9		$	0.4		$	558.6
Average fixed rate payable				6.8	%		6.8	%		8.1	%		8.1	%		7.9	%		6.8	%		6.0	%
Fixed-to-variable interest rate swaps
Amount receivable	$	1.1	$	1.1		$	0.3		$	0.3		$	0.3		$	0.2
Average variable rate payable				7.3	%
Average fixed rate receivable				7.9	%

Cautionary Statements for Purposes of the Safe Harbor Provisions of the Securities Litigation Reform Act

Any statements contained in this report regarding the outlook for our businesses and their respective markets, such as projections of future performance, statements of our plans and objectives, forecasts of market trends and other matters, are forward-looking statements based on our assumptions and beliefs. Such statements may be identified by such words or phrases as “will likely result,” “are expected to,” “will continue,” “outlook,” “will benefit,” “is anticipated,” “estimate,” “project,” “management believes” 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, the company 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 we disclaim 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 our future results to differ materially from those expressed or implied in any forward-looking statements contained in this report. These factors include the factors discussed in Item 1A of this report under the heading “Risk Factors,” the factors discussed below 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 not possible to foresee all such factors, these factors should not be considered as complete or exhaustive.

Economic and Industry Conditions

•

Adverse changes in economic conditions that affect consumer spending or buying habits

•

Food price inflation or deflation

•

Increases in energy costs and commodity prices

•

The availability of favorable credit and trade terms

•

Changes in interest rates

Competitive Practices

•

Competition from other retail chains, supercenters, non-traditional competitors and emerging alterative formats in our retail markets

•

The impact of consolidation in the retail food and supply chain services industries

•

Declines in the retail sales activity of our supply chain services customers due to competition or increased self-distribution

•

Changes in demographics or consumer preferences that affect consumer spending habits

Security and Food Safety

•

Business disruptions or losses resulting from wartime activities, acts or threats of terror, or other criminal activity directed at the grocery industry, the transportation industry, or computer or communications systems

•

Other events that give rise to actual or potential food contamination, drug contamination or food-borne illness

Labor Relations and Employee Benefit Cost s

•

Potential work disruptions resulting from labor disputes

•

Increased operating costs resulting from rising employee benefit costs or pension funding obligations

•

The ability to hire, train or retain employees

Expansion and Acquisitions

•

Our ability to successfully combine our operations with the acquired businesses of Albertsons, pursuant to the Proposed Transaction, to achieve expected synergies and to minimize the diversion of management’s attention and resources

•

The adequacy of our capital resources for future acquisitions, the expansion of existing operations or improvements to facilities

•

Our ability to locate suitable store or distribution center sites, negotiate acceptable purchase or lease terms, and build or expand facilities in a manner that achieves appropriate returns on our capital investment

•

Our ability to make acquisitions at acceptable rates of return, assimilate acquired operations and integrate the personnel of the acquired business

Liquidity

•

Additional funding requirements to meet anticipated capital needs

•

The impact of acquisitions, including the Proposed Transaction on borrowing costs and future financial flexibility

Legal and Administrative Proceedings, Regulatory and Accounting Matters

•

Unfavorable outcomes in litigation, governmental or administrative proceedings, or other disputes

•

Changes in applicable laws and regulations that impose additional requirements or restrictions on the operation of our businesses

•

Changes in accounting standards that impact our financial statements

Operating Conditions

•

Changes in our business plans, operations, results and prospects

•

Potential delays in the development, construction or start-up of planned projects

•

Difficulties in developing, maintaining or upgrading information technology systems

•

The outcome of negotiations with partners, governments, suppliers, unions, or customers

•

Property damage or business disruption resulting from severe weather conditions that affect the company, its customers or suppliers

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by Item 7A is found under the heading of “Quantitative and Qualitative Disclosure About Market Risk” under Part II, Item 7 of this report.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by Item 8 is found in a separate section of this report on pages F-1 through F-40. See “Index of Selected Financial Data and Financial Statements and Schedules” on page F-1.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The company carried out an evaluation, under the supervision and with the participation of the company’s management, including the company’s chief executive officer and its chief financial officer, of the effectiveness of the design and operation of the company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of February 25, 2006, the end of the period covered by this report. Based upon that evaluation, the chief executive officer and chief financial officer concluded that as of the Evaluation Date, the company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

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 the company’s management, which is responsible for establishing and maintaining adequate internal control over financial reporting.

The company’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. The company’s internal control over financial reporting includes those policies and procedures that:

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

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 the company are being made only in accordance with authorizations of management and directors of the company; and

iii.

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition and use or disposition of the company’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 controls can provide only reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal controls may vary over time.

Management assessed the design and effectiveness of the company’s internal control over financial reporting as of February 25, 2006. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework . Based on management’s assessment using this framework, it believes that, as of February 25, 2006, the company’s internal control over financial reporting is effective.

Management’s assessment of the effectiveness of the company’s internal control over financial reporting as of February 25, 2006, has been audited by KPMG LLP, an independent registered public accounting firm. Their report, which is set forth on pages F-5–F-6 of this report, expresses an unqualified opinion on management’s assessment and on the effectiveness of the company’s internal control over financial reporting as of February 25, 2006.

Changes in Internal Control Over Financial Reporting

During the fiscal quarter ended February 25, 2006, there has been no change in the company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

ITEM 9B.

OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information called for by Item 10, as to compliance with Section 16(a) of the Exchange Act, is incorporated by reference to the Registrant’s definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with the Registrant’s 2006 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 the Registrant’s definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with the Registrant’s 2006 Annual Meeting of Stockholders under the heading “Meetings of the Board of Directors and Committees of the Board—Audit Committee.” The information called for by Item 10, as to executive officers, is set forth under “Executive Officers of the Registrant” in Part I, Item 1 of this report. The information called for by Item 10, as to directors, is incorporated by reference to the Registrant’s definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with the Registrant’s 2006 Annual Meeting of Stockholders under the heading “Election of Directors (Items 1).”

The company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and all other employees and non-employee directors of the company. This code of ethics is posted on the company’s website ( www.supervalu.com ). The company intends 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 the company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on the company’s website, at the address specified above.

The company’s Corporate Governance Principles and charters for each Committee of its Board of Directors are also available on the company’s website. The code of ethics, Corporate Governance Principles and charters are also available in print to any stockholder who submits a request to: SUPERVALU INC., P.O. Box 990, Minneapolis, Minnesota 55440.

Information on the company’s 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 the Registrant’s definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with the Registrant’s 2006 Annual Meeting of Stockholders under the headings “Compensation of Directors,” “Compensation of Executive Officers” and “Change-of-Control Agreements.”

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information called for by Item 12, as to security ownership of certain beneficial owners, directors and management, is incorporated by reference to the Registrant’s definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with the Registrant’s 2006 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 25, 2006 about the company’s common stock that may be issued under all of its equity compensation plans:

Equity Compensation Plan Information


	(a)	(b)			(c)
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))
Equity compensation plans approved by security holders (1)	7,194,146	$	25.91	(3)	10,156,921	(4)
Equity compensation plans not approved by security holders (2)(6)	5,126,540	$	26.40		261,437	(5)

Total	12,320,686	$	26.12	(3)	10,418,358	(4)(5)

1)	Includes the company’s 1989 Stock Appreciation Rights Plan, 1983 Employee Stock Option Plan, 1993 Stock Plan, 2002 Stock Plan, SUPERVALU/Richfood Stock Incentive Plan and the Long-Term Incentive Plan.

2)	Includes the company’s 1997 Stock Plan and Restricted Stock Plan.

3)	Excludes 200,000 restricted stock units included in column (a) which do not have an exercise price. Such units vest and are payable in shares after the expiration of the time periods set forth in their restricted stock unit agreements.

In addition to grants of options, warrants or rights, includes the following shares available for issuance in the form of restricted stock, performance awards and other types of stock-based awards: 2002 Stock Plan, 9,523,197 shares; SUPERVALU/Richfood Stock Incentive Plan, 9,580 shares; and the Long-Term Incentive Plan, 624,144 shares.

Includes 205,937 shares under the 1997 Stock Option Plan available for issuance in the form of restricted stock, performance awards and other types of stock-based awards in addition to the granting of options, warrants or stock appreciation rights and 55,500 shares under the Restricted Stock Plan available for issuance as restricted stock.

6)	Does not include outstanding options for 28,428 shares of common stock at a weighted average exercise price of $27.79 per share that were assumed in connection with the merger of Richfood Holdings, Inc. into the company effective August 31, 1999.

1997 Stock Plan. The Board of Directors adopted the 1997 Stock Plan on April 9, 1997 to provide for the granting of non-qualified stock options, restoration options, stock appreciation rights, restricted stock, restricted stock units and performance awards to key employees of the company or any of its subsidiaries. A total of 10,800,000 shares are authorized and may be issued as awards under the plan. The Board amended this plan August 18, 1998, March 14, 2000, and April 10, 2002, and it will terminate on April 9, 2007.

All employees, consultants or independent contractors providing services to the company, other than officers or directors of the company or any of its affiliates who are subject to Section 16 of the Securities Exchange Act of 1934, are eligible to participate in the plan. The Board administers the plan and has discretion to set the terms of all awards made under the plan, except as otherwise expressly provided in the plan. Options granted under the plan may not have an exercise price less than 100 percent of the fair market value of the

company’s common stock on the date of the grant. Stock appreciation rights may not be granted at a price less than 100 percent of the fair market value of the common stock on the date of the grant. Unless the Board otherwise specifies, restricted stock and restricted stock units will be forfeited and reacquired by the company if an employee is terminated. Performance awards granted under the plan may be payable in cash, shares, restricted stock, other securities, other awards under the plan or other property when the participant achieves performance goals set by the Board.

Restricted Stock Plan. The Board of Directors adopted the Restricted Stock Plan on April 10, 1991 to provide for the granting of restricted stock to management employees of the company or any of its subsidiaries who are not subject to the provisions of Section 16 of the Securities Exchange Act of 1934 at the time of an award. The Board amended this plan on February 24, 2001 to increase the total shares available for issuance to 300,000. This plan has no expiration date. The chief executive officer administers this plan and may determine who is eligible to participate in the plan, the number of shares to be covered by each award and the terms and conditions of any award or agreement under the plan (including the forfeiture, transfer or other restrictions relating to such award).

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information called for by Item 14 is incorporated by reference to the Registrant’s definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with the Registrant’s 2006 Annual Meeting of Stockholders under the heading “Independent Registered Public Accountants’ Fees.”

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)

Financial Statements:

The consolidated financial statements of the Registrant listed in the accompanying “Index of Selected Financial Data and Financial Statements and Schedules” together with the reports of KPMG LLP, independent registered public accountants, are filed as part of this report.

(2)

Financial Statement Schedules:

The consolidated financial statement schedules of the Registrant listed in the accompanying “Index of Selected Financial Data and Financial Statements and Schedules” together with the reports of KPMG LLP, independent registered public accountants, are filed as part of this report.

(3)

Exhibits:

(3)

Articles of Incorporation and Bylaws:

(3)(i)

Restated Certificate of Incorporation is incorporated by reference to Exhibit (3)(i) to the Registrant’s Annual Report on Form 10-K for the year ended February 28, 2004.

(3)(ii)

Restated Bylaws, as amended, is incorporated by reference to Exhibit (3)(ii) to the Registrant’s Current Report on Form 8-K dated April 12, 2006.

(4)

Instruments defining the rights of security holders, including indentures:

4.1.

Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, relating to certain outstanding debt securities of the Registrant, is incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-3, Registration No. 33-52422.

4.2.

First Supplemental Indenture dated as of August 1, 1990, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-3, Registration No. 33-52422.

4.3.

Second Supplemental Indenture dated as of October 1, 1992, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated November 13, 1992.

4.4.

Third Supplemental Indenture dated as of September 1, 1995, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated October 2, 1995.

4.5.

Fourth Supplemental Indenture dated as of August 4, 1999, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (16 weeks) ended September 11, 1999.

4.6.

Fifth Supplemental Indenture dated as of September 17, 1999, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, is incorporated by reference to Exhibit 4.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (16 weeks) ended September 11, 1999.

4.7.

Letter of Representations dated November 12, 1992, between the Registrant, Bankers Trust Company, as Trustee, and The Depository Trust Company relating to certain outstanding debt securities of the Registrant, is incorporated by reference to Exhibit 4.5 to the Registrant’s Current Report on Form 8-K dated November 13, 1992.

4.8.

Rights Agreement dated as of April 12, 2000, between SUPERVALU INC. and Wells Fargo Bank Minnesota, N.A. (formerly Norwest Bank Minnesota, N.A.) as Rights Agent, including as Exhibit B the forms of Rights Certificate and Election to Exercise, is incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated April 17, 2000.

4.9.

Indenture dated as of November 2, 2001, between SUPERVALU INC. and The Chase Manhattan Bank, as Trustee, including form of Liquid Yield Option ^™ Note due 2031 (Zero Coupon—Senior), is incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-3, Registration No. 333-81252.

4.10.

Registration Rights Agreement dated as of November 2, 2001, by and among SUPERVALU INC., Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, is incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-3, Registration No. 333-81252.

4.11.

Form of Credit Agreement, dated as of February 28, 2005, among the Registrant, the Lenders named therein, JPMORGAN CHASE BANK, N.A., as Administrative Agent, and BANK OF AMERICA, N.A., as Syndication Agent, is incorporated by reference to Exhibit 4.11 to the Registrant’s Current Report on Form 8-K dated February 28, 2005.

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of certain instruments defining the rights of holders of certain long-term debt of the Registrant and its subsidiaries are not filed and, in lieu thereof, the Registrant agrees to furnish copies thereof to the Securities and Exchange Commission upon request.

(10)

Material Contracts:

10.1.

SUPERVALU INC. 2002 Stock Plan, as amended, is incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated April 6, 2005.*

10.2.

SUPERVALU INC. 1997 Stock Plan, as amended, is incorporated by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for the year ended February 22, 2003.*

10.3.

SUPERVALU INC. 1993 Stock Plan, as amended, is incorporated by reference to Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the year ended February 27, 1999.*

10.4.

SUPERVALU/Richfood Stock Incentive Plan, as amended, is incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended February 23, 2002.*

10.5.

Resolutions of SUPERVALU INC. Board of Directors, amending the SUPERVALU INC. Restricted Stock Plan, as amended, are incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K for the year ended February 24, 2001.*

10.6.

SUPERVALU INC. 1983 Employee Stock Option Plan, as amended, is incorporated by reference to Exhibit (10)a. to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 12, 1998.*

10.7.

SUPERVALU INC. 1989 Stock Appreciation Rights Plan is incorporated by reference to Exhibit (10)g. to the Registrant’s Annual Report on Form 10-K for the year ended February 25, 1989.*

10.8.

SUPERVALU INC. Executive Incentive Bonus Plan is incorporated by reference to Exhibit (10)c. to the Registrant’s Annual Report on Form 10-K for the year ended February 22, 1997.*

10.9.

SUPERVALU INC. Annual Cash Bonus Plan for Designated Corporate Officers, as amended, is incorporated by reference to Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the year ended February 24, 2001.*

10.10.

SUPERVALU INC. Long-Term Incentive Plan, as amended.*

10.11.

SUPERVALU INC. Deferred Compensation Plan for Non-Employee Directors, as amended, is incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K for the year ended February 22, 2003.*

10.12.

SUPERVALU INC. Excess Benefit Plan Restatement, as amended, is incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the year ended February 22, 2003.*

10.13.

SUPERVALU INC. Deferred Compensation Plan as amended, is incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K for the year ended February 22, 2003.*

10.14.

SUPERVALU INC. Executive Deferred Compensation Plan, as amended, is incorporated by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K for the year ended February 22, 2003.*

10.15.

SUPERVALU INC. Executive Deferred Compensation Plan II, as amended, is incorporated by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K for the year ended February 22, 2003.*

10.16.

Form of Agreement used in connection with the Registrant’s Executive Post Retirement Survivor Benefit Program is incorporated by reference to Exhibit (10)i. to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 12, 1998.*

10.17.

Form of Change of Control Severance Agreements entered into with certain officers of the Registrant, as amended.*

10.18.

SUPERVALU INC. Directors Retirement Program, as amended, is incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the year ended February 22, 2003.*

10.19.

SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan is incorporated by reference to Exhibit (10)r. to the Registrant’s Annual Report on Form 10-K for the year ended February 24, 1990.*

10.20.

First Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan is incorporated by reference to Exhibit (10)a. to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 7, 1996.*

10.21.

Second Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan is incorporated by reference to Exhibit (10)r. to the Registrant’s Annual Report on Form 10-K for the year ended February 28, 1998.*

10.22

Third Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan is incorporated by reference to Exhibit (10)h. to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 12, 1998.*

10.23.

Fourth Amendment to SUPERVALU INC. Non-Qualified Supplement Executive Retirement Plan is incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended February 22, 2003.*

10.24.

SUPERVALU INC. Non-Employee Directors Deferred Stock Plan, as amended, is incorporated by reference to Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K for the year ended February 22, 2003.*

10.25.

Restricted Stock Unit Award Agreement for David L. Boehnen, as amended, is incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the year ended February 28, 2004.*

10.26.

Restricted Stock Unit Award Agreement for Pamela K. Knous, as amended, is incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K for the year ended February 28, 2004.*

10.27.

Restricted Stock Unit Award Agreement for John H. Hooley is incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the year ended February 28, 2004.*

10.28.

Restricted Stock Unit Award Agreement for Michael L. Jackson is incorporated by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K for the year ended February 28, 2004.*

10.29.

Restricted Stock Unit Award Agreement for Jeffrey Noddle is incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the year ended February 22, 2003.*

10.30.

Amended and Restated SUPERVALU INC. Grantor Trust dated as of May 1, 2002 is incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (16 weeks) ended June 15, 2002.*

10.31

Form of SUPERVALU INC. 2002 Stock Plan Stock Option Agreement and Stock Option Terms and Conditions for Key Executives, as amended.*

10.32

Form of SUPERVALU INC. 2002 Stock Plan Restoration Stock Option Agreement and Restoration Stock Option Terms and Conditions for Key Executives, as amended.*

10.33

Form of SUPERVALU INC. 2002 Stock Plan Stock Option Agreement for Non-Employee Directors and Stock Option Terms and Conditions for Non-Employee Directors is incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 11, 2004.*

10.34

Form of SUPERVALU INC. 2002 Stock Plan Restoration Stock Option Agreement for Non-Employee Directors and Restoration Stock Option Terms and Conditions for Non-Employee Directors is incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 11, 2004.*

10.35

Form of SUPERVALU INC. 2002 Stock Plan Supplemental Non-Qualified Stock Option Agreement for Non-Employee Directors and Terms and Conditions for Supplemental Stock Options for Non-Employee Directors is incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 11, 2004.*

10.36

Form of SUPERVALU INC. Long-Term Incentive Plan Restricted Stock Award Certificate and Long-Term Incentive Plan Restricted Stock Award Terms and Conditions is incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended September 11, 2004.*

10.37

Form of SUPERVALU INC. 2002 Stock Plan Restricted Stock Award Certificate and Restricted Stock Award Terms and Conditions, as amended.*

10.38

Performance Criteria for Awards Under the Company’s Annual Cash Bonus Plan for Designated Corporate Officers and the Executive Incentive Bonus Plan is incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended December 4, 2004.*

10.39

Performance Criteria for Awards Under the Company’s Long-Term Incentive Plan is incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended December 4, 2004.*

10.40

Annual discretionary CEO Bonus Pool. *

10.41

Purchase and Separation Agreement by and among Albertson’s, Inc., New Aloha Corporation, SUPERVALU INC. and AB Acquisition LLC, dated January 22, 2006 is incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated January 22, 2006.

10.42

Asset Purchase Agreement among CVS Corporation, CVS Pharmacy, Inc., Albertson’s, Inc., SUPERVALU INC., New Aloha Corporation, and The Sellers Listed on Annex A Attached Thereto, dated January 22, 2006 is incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated January 22, 2006.

(12)

Statement re Computation of Ratios.

12.1.

Ratio of Earnings to Fixed Charges.

(21)

Subsidiaries of the Registrant.

21.1.

SUPERVALU INC. Subsidiaries.

(23)

Consents of Experts and Counsel.

23.1.

Consent of KPMG LLP.

(24)

Power of Attorney.

24.1.

Power of Attorney.

(31)

Rule 13a-14(a)/15d-14(a) Certifications.

31.1.

Chief Executive Officer Certification of Periodic Financial Report pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2.

Chief Financial Officer Certification of Periodic Financial Report pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32)

Section 1350 Certifications.

32.1.

Chief Executive Officer Certification of Periodic Financial Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2.

Chief Financial Officer Certification of Periodic Financial Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Indicates management contracts, compensatory plans or arrangements required to be filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:


Signature	Title	Date

/s/ J EFFREY N ODDLE Jeffrey Noddle	Chairman of the Board; Chief Executive Officer; and Director (principal executive officer)	May 9, 2006

/s/ P AMELA K. K NOUS Pamela K. Knous	Executive Vice President, Chief Financial Officer (principal financial and accounting officer)	May 9, 2006

/s/ I RWIN C OHEN * Irwin Cohen	Director

/s/ R ONALD E. D ALY * Ronald E. Daly	Director

/s/ L AWRENCE A. D EL S ANTO * Lawrence A. Del Santo	Director

/s/ S USAN E. E NGEL * Susan E. Engel	Director

/s/ P HILIP L. F RANCIS * Philip L. Francis	Director

/s/ E DWIN C. G AGE * Edwin C. Gage	Director

/s/ G ARNETT L. K EITH , J R .* Garnett L. Keith, Jr.	Director

/s/ C HARLES M. L ILLIS * Charles M. Lillis	Director

/s/ M ARISSA P ETERSON * Marissa Peterson	Director

/s/ S TEVEN S. R OGERS * Steven S. Rogers	Director

*	Executed this 9th day of May 2006, on behalf of the indicated Directors by John P. Breedlove, duly appointed Attorney-in-Fact.



By:		/s/ J OHN P. B REEDLOVE
		John P. Breedlove
		Attorney-in-Fact

Exhibit 31.1

Certification Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Jeffrey Noddle, certify that:

1. I have reviewed this annual report on Form 10-K of SUPERVALU INC. for the fiscal year ended February 25, 2006;

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 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: May 9, 2006								/s/ J EFFREY N ODDLE
								Chief Executive Officer

Exhibit 31.2

Certification Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Pamela K. Knous, certify that:

1. I have reviewed this annual report on Form 10-K of SUPERVALU INC. for the fiscal year ended February 25, 2006;

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: May 9, 2006		/s/ P AMELA K. K NOUS
		Executive Vice President, 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 25, 2006, 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 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: May 9, 2006								/s/ J EFFREY N ODDLE
								Jeffrey Noddle
								Chief Executive Officer

Exhibit 32.2

Certification Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002


Dated: May 9, 2006								/s/ P AMELA K. K NOUS
								Pamela K. Knous
								Executive Vice President, Chief Financial Officer

SUPERVALU INC.

Annual Report on Form 10-K

Items 6, 8 and 15(a)

Index of Selected Financial Data and Financial Statements and Schedules


		Page(s)
Selected Financial Data:

Five Year Financial and Operating Summary		F-2–F-3

Financial Statements:

Reports of Independent Registered Public Accounting Firm		F-4–F-6

Consolidated composition of net sales and operating earnings for the fiscal years ended February 25, 2006, February 26, 2005 and February 28, 2004		F-7

Consolidated statements of earnings for the fiscal years ended February 25, 2006, February 26, 2005 and February 28, 2004		F-8

Consolidated balance sheets as of February 25, 2006 and February 26, 2005		F-9

Consolidated statements of stockholders’ equity for the fiscal years ended February 25, 2006, February 26, 2005 and February 28, 2004		F-10

Consolidated statements of cash flows for each of the three years ended February 25, 2006, February 26, 2005 and February 28, 2004		F-11–F12

Notes to consolidated financial statements		F-13–F-38

Unaudited quarterly financial information		F-39

Financial Schedule:

Schedule II: Valuation and qualifying accounts		F-40

All other schedules are omitted because they are not applicable or not required.

F-1

SUPERVALU INC. and Subsidiaries

FIVE YEAR FINANCIAL AND OPERATING SUMMARY


	2006			2005			2004			2003			2002
Statement of Earnings Data (a)
Net sales	$	19,863,599		$	19,543,240		$	20,209,679		$	19,160,368		$	20,293,040
Cost of sales		16,977,352			16,681,472			17,372,429			16,567,397			17,704,197
Selling and administrative expenses		2,446,634			2,228,944			2,220,329			2,020,110			2,037,771
Gain on sale of WinCo Foods, Inc.		—			(109,238	)		—			—			—
Restructure and other charges		4,455			26,416			15,523			2,918			46,300
Operating earnings		435,158			715,646			601,398			569,943			504,772
Interest, net		106,010			114,782			146,518			161,939			172,774
Earnings before income taxes		329,148			600,864			454,880			408,004			331,998
Provision for income taxes		122,979			215,041			174,742			150,962			133,672
Net earnings		206,169			385,823			280,138			257,042			198,326
Net earnings per common share—basic		1.52			2.86			2.09			1.92			1.49
Net earnings per common share—diluted		1.46			2.71			2.01			1.86			1.47

Balance Sheet Data (a)
Inventories (FIFO) (b)	$	1,114,164		$	1,180,602		$	1,214,122		$	1,194,791		$	1,178,817
Working capital (b)		821,335			643,477			361,394			288,572			36,031
Net property, plant and equipment		1,968,872			2,190,888			2,126,429			2,209,046			2,197,425
Total assets		6,038,271			6,273,962			6,161,771			5,896,245			5,796,249
Long-term debt (c)		1,405,971			1,578,867			1,633,721			2,019,658			1,875,873
Stockholders’ equity		2,619,453			2,510,561			2,209,574			2,009,240			1,899,138

Other Statistics (a)
Net earnings as a percent of net sales		1.04	%		1.97	%		1.39	%		1.34	%		0.98	%
Return on average stockholders’ equity		7.95	%		16.24	%		13.29	%		12.97	%		10.70	%
Book value per common share	$	19.20		$	18.53		$	16.40		$	15.03		$	14.29
Current ratio (b)		1.55:1			1.40:1			1.20:1			1.19:1			1.02:1
Debt to capital ratio (d)		36.7	%		40.1	%		46.7	%		51.8	%		54.3	%
Dividends declared per common share	$	0.64		$	0.60 ¹ / 4		$	0.57 ³ / 4		$	0.56 ³ / 4		$	0.55 ³ / 4
Weighted average common shares outstanding—basic		136,077			135,003			133,975			133,730			132,940
Weighted average common shares outstanding—diluted		145,699			144,924			143,236			142,695			136,405
Depreciation and amortization	$	310,678		$	303,039		$	301,589		$	297,056		$	340,750
Capital expenditures (e)	$	365,332		$	325,688		$	371,464		$	439,438		$	388,658
Net cash provided by operating activities	$	674,057		$	791,566		$	846,826		$	583,510		$	702,964
Net cash used in investing activities	$	(258,476	)	$	(161,814	)	$	(271,604	)	$	(330,623	)	$	(235,129	)
Net cash used in financing activities	$	(193,397	)	$	(457,793	)	$	(312,454	)	$	(235,870	)	$	(466,060	)

Notes:

(a)	Fiscal 2004 statement of earnings data includes 53 weeks, and all other years include 52 weeks. Dollars in thousands except per share and percentage data.

F-2

Historical data is not necessarily indicative of the company’s future results of operations or financial condition. See discussion of “Risk factors” in Item 1A of this report.

(b)

Inventories (FIFO), working capital and current ratio are calculated after adding back the LIFO reserve. The LIFO reserve for each year is as follows: $160.0 million for fiscal 2006, $148.6 million for fiscal 2005, $135.8 million for fiscal 2004, $145.5 million for fiscal 2003 and $140.8 million for fiscal 2002.

(c)	Long-term debt includes long-term debt and long-term obligations under capital leases.

(d)	The debt to capital ratio is calculated as debt, which includes notes payable, current debt, current obligations under capital leases, long-term debt and long-term obligations under capital leases, divided by the sum of debt and stockholders’ equity.

(e)	Capital expenditures include cash expenditures and non-cash capital lease asset additions.

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

SUPERVALU INC.:

We have audited the accompanying consolidated balance sheets of SUPERVALU INC. and subsidiaries (the Company) as of February 25, 2006 and February 26, 2005, and the related consolidated statements of earnings, cash flows and stockholders’ equity for each of the fiscal years in the three-year period ended February 25, 2006. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SUPERVALU INC. and subsidiaries as of February 25, 2006 and February 26, 2005, and the results of their operations and their cash flows for each of the fiscal years in the three-year period ended February 25, 2006, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of SUPERVALU INC.’s internal control over financial reporting as of February 25, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated May 9, 2006 expressed an unqualified opinion on management’s assessment of, and an unqualified opinion on the effective operation of, internal control over financial reporting.

/ S / KPMG LLP

Minneapolis, Minnesota

May 9, 2006

F-4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

SUPERVALU INC.:

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that SUPERVALU INC. maintained effective internal control over financial reporting as of February 25, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). SUPERVALU INC.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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 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.

In our opinion, management’s assessment that SUPERVALU INC. maintained effective internal control over financial reporting as of February 25, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, SUPERVALU INC. maintained, in all material respects, effective internal control over financial reporting as of February 25, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

F-5

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of SUPERVALU INC. and subsidiaries as of February 25, 2006 and February 26, 2005, and the related consolidated statements of earnings, cash flows and stockholders’ equity for each of the fiscal years in the three-year period ended February 25, 2006, and our report dated May 9, 2006 , expressed an unqualified opinion on those consolidated financial statements.

/ S / KPMG LLP

Minneapolis, Minnesota

May 9, 2006

F-6

SUPERVALU INC. and Subsidiaries

CONSOLIDATED COMPOSITION OF NET SALES AND OPERATING EARNINGS

(In thousands, except percent data)


	February 25, 2006 (52 weeks)			February 26, 2005 (52 weeks)			February 28, 2004 (53 weeks)
Net sales
Retail food	$	10,634,954		$	10,549,478		$	10,551,235
		53.5	%		54.0	%		52.2	%
Supply chain services		9,228,645			8,993,762			9,658,444
		46.5	%		46.0	%		47.8	%

Total net sales	$	19,863,599		$	19,543,240		$	20,209,679
		100.0	%		100.0	%		100.0	%

Operating earnings
Retail food operating earnings	$	268,820		$	446,303		$	443,968
Supply chain services operating earnings		214,371			234,585			222,462
General corporate expenses		(43,578	)		(48,064	)		(49,509	)
Gain on sale of WinCo Foods, Inc.		—			109,238			—
Restructure and other charges		(4,455	)		(26,416	)		(15,523	)

Total operating earnings		435,158			715,646			601,398
Interest expense, net		(106,010	)		(114,782	)		(146,518	)

Earnings before income taxes	$	329,148		$	600,864		$	454,880

Identifiable assets
Retail food	$	2,826,098		$	3,269,793		$	3,448,117
Supply chain services		2,543,093			2,550,535			2,440,692
Corporate		669,080			453,634			272,962

Total	$	6,038,271		$	6,273,962		$	6,161,771

Depreciation and amortization
Retail food	$	216,480		$	207,523		$	200,367
Supply chain services		93,535			94,943			99,322
Corporate		663			573			1,900

Total	$	310,678		$	303,039		$	301,589

Capital expenditures
Retail food	$	247,823		$	219,069		$	304,774
Supply chain services		116,816			105,435			65,878
Corporate		693			1,184			812

Total	$	365,332		$	325,688		$	371,464

The company’s business is classified by management into two reportable segments: Retail food and supply chain services. Retail food operations include three retail formats: extreme value stores, regional price superstores and regional supermarkets. The retail formats include results of food stores owned and results of sales to extreme value stores licensed by the company. Supply chain services operations include results of sales to affiliated food stores, mass merchants and other customers and logistics arrangements. Substantially all of the company’s operations are domestic. Management utilizes more than one measurement and multiple views of data to assess segment performance and to allocate resources to the segments. However, the dominant measurements are consistent with the consolidated financial statements.

F-7

SUPERVALU INC. and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)


	February 25, 2006 (52 weeks)			February 26, 2005 (52 weeks)			February 28, 2004 (53 weeks)
Net sales	$	19,863,599		$	19,543,240		$	20,209,679
Costs and expenses
Cost of sales		16,977,352			16,681,472			17,372,429
Selling and administrative expenses		2,446,634			2,228,944			2,220,329
Gain on sale of WinCo Foods, Inc.		—			(109,238	)		—
Restructure and other charges		4,455			26,416			15,523

Operating earnings		435,158			715,646			601,398

Interest
Interest expense		138,928			137,500			165,581
Interest income		32,918			22,718			19,063

Interest expense, net		106,010			114,782			146,518

Earnings before income taxes		329,148			600,864			454,880
Provision for income taxes
Current		168,108			168,586			123,026
Deferred		(45,129	)		46,455			51,716

Income tax expense		122,979			215,041			174,742

Net earnings	$	206,169		$	385,823		$	280,138

Net earnings per common share—basic	$	1.52		$	2.86		$	2.09
Net earnings per common share—diluted	$	1.46		$	2.71		$	2.01
Weighted average number of common shares outstanding
Basic		136,077			135,003			133,975
Diluted		145,699			144,924			143,236

See Notes to Consolidated Financial Statements.

F-8

SUPERVALU INC. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


	February 25, 2006			February 26, 2005
ASSETS
Current assets
Cash and cash equivalents	$	686,099		$	463,915
Receivables, less allowance for losses of $15,732 in 2006 and $22,523 in 2005		439,168			464,249
Inventories		954,200			1,032,034
Other current assets		88,573			161,922

Total current assets		2,168,040			2,122,120

Long-term notes receivable, less allowance for losses of $11,360 in 2006 and $11,240 in 2005		31,781			35,115
Long-term investment in direct financing leases		34,121			53,436
Property, plant and equipment
Land		130,694			154,548
Buildings		1,175,920			1,114,863
Property under construction		60,100			18,522
Leasehold improvements		427,620			453,130
Equipment		1,849,073			1,727,094
Assets under capital leases		452,046			554,426

		4,095,453			4,022,583
Less accumulated depreciation and amortization		2,126,581			1,831,695

Net property, plant and equipment		1,968,872			2,190,888

Goodwill		1,613,603			1,627,847
Other assets		221,854			244,556

Total assets	$	6,038,271		$	6,273,962

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	1,031,482		$	1,106,860
Accrued vacation, compensation and benefits		230,319			240,862
Current maturities of long-term debt		74,650			64,320
Current obligations under capital leases		37,071			35,143
Income taxes currently payable		23,120			52,208
Other current liabilities		110,027			127,818

Total current liabilities		1,506,669			1,627,211

Long-term debt		974,460			1,051,888
Long-term obligations under capital leases		431,511			526,979
Deferred income taxes		53,704			150,654
Other liabilities		452,474			406,669
Commitments and contingencies
Stockholders’ equity
Common stock, $1.00 par value: Authorized 400,000 shares
Shares issued, 150,670 in 2006 and 2005		150,670			150,670
Capital in excess of par value		132,717			116,047
Accumulated other comprehensive losses		(128,227	)		(104,581	)
Retained earnings		2,776,896			2,658,012
Treasury stock, at cost, 14,233 shares in 2006 and 15,192 shares in 2005		(312,603	)		(309,587	)

Total stockholders’ equity		2,619,453			2,510,561

Total liabilities and stockholders’ equity	$	6,038,271		$	6,273,962

See Notes to Consolidated Financial Statements.

F-9

SUPERVALU INC. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except per share data)


	Common Stock			Capital in Excess of Par Value			Treasury Stock					Accumulated Other Comprehensive Losses			Retained Earnings			Total
	Shares	Amount		Capital in Excess of Par Value			Shares		Amount			Accumulated Other Comprehensive Losses			Retained Earnings			Total
BALANCES AT FEBRUARY 24, 2003	150,670	$	150,670	$	114,028		(16,982	)	$	(327,327	)	$	(79,063	)	$	2,150,932		$	2,009,240
Net earnings	—		—		—		—			—			—			280,138			280,138
Other comprehensive loss	—		—		—		—			—			(19,669	)		—			(19,669	)
Sales of common stock under option plans	—		—		(11,047	)	1,596			41,508			—			—			30,461
Cash dividends declared on common stock $0.5775 per share	—		—		—		—			—			—			(77,495	)		(77,495	)
Compensation under employee incentive plans	—		—		(629	)	93			2,127			—			—			1,498
Purchase of shares for treasury	—		—		—		(617	)		(14,599	)		—			—			(14,599	)

BALANCES AT FEBRUARY 28, 2004	150,670		150,670		102,352		(15,910	)		(298,291	)		(98,732	)		2,353,575			2,209,574

Net earnings	—		—		—		—			—			—			385,823			385,823
Other comprehensive loss	—		—		—		—			—			(5,849	)		—			(5,849	)
Sales of common stock under option plans	—		—		12,522		2,646			44,143			—			—			56,665
Cash dividends declared on common stock $0.6025 per share	—		—		—		—			—			—			(81,386	)		(81,386	)
Compensation under employee incentive plans	—		—		1,173		49			520			—			—			1,693
Purchase of shares for treasury	—		—		—		(1,977	)		(55,959	)		—			—			(55,959	)

BALANCES AT FEBRUARY 26, 2005	150,670		150,670		116,047		(15,192	)		(309,587	)		(104,581	)		2,658,012			2,510,561

Net earnings	—		—		—		—			—			—			206,169			206,169
Other comprehensive loss	—		—		—		—			—			(23,646	)		—			(23,646	)
Sales of common stock under option plans	—		—		14,079		1,670			22,429			—			—			36,508
Cash dividends declared on common stock $0.6400 per share	—		—		—		—			—			—			(87,285	)		(87,285	)
Compensation under employee incentive plans	—		—		2,591		184			3,367			—			—			5,958
Purchase of shares for treasury	—		—		—		(895	)		(28,812	)		—			—			(28,812	)

BALANCES AT FEBRUARY 25, 2006	150,670	$	150,670	$	132,717		(14,233	)	$	(312,603	)	$	(128,227	)	$	2,776,896		$	2,619,453


	2006			2005			2004
Comprehensive income:
Net earnings	$	206,169		$	385,823		$	280,138
Derivative financial instrument—unrealized loss, net of tax of $4.2 million in 2004		—			—			6,735
Minimum pension liability, net of tax of $16.1 million in 2006, $(2.5) million in 2005 and $17.1 million in 2004		(23,646	)		(5,849	)		(26,404	)

Comprehensive income	$	182,523		$	379,974		$	260,469

See Notes to Consolidated Financial Statements.

F-10

SUPERVALU INC. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	February 25, 2006 (52 weeks)			February 26, 2005 (52 weeks)			February 28, 2004 (53 weeks)
Cash flows from operating activities
Net earnings	$	206,169		$	385,823		$	280,138
Adjustments to reconcile net earnings to net cash provided by operating activities:
Gain on sale of WinCo Foods, Inc.		—			(109,238	)		—
Loss on sale of Cub Chicago		94,531			—			—
Restructure and other charges		4,455			26,416			15,523
Impairment charges		72,952			—			—
Depreciation and amortization		310,678			303,039			301,589
LIFO expense		13,153			6,112			4,734
Provision for losses on receivables		3,467			10,338			10,479
Loss (gain) on sale of property, plant and equipment		5,564			7,445			(1,802	)
Deferred income taxes		(61,237	)		48,962			38,761
Equity in (earnings) losses of unconsolidated subsidiaries		616			(14,325	)		(39,215	)
Other adjustments, net		5,621			3,154			4,339
Changes in assets and liabilities, net of effects from acquisition and dispositions of businesses:
Receivables		19,009			22,429			23,407
Inventories		28,177			34,943			(19,331	)
Long-term notes receivable, net		3,229			24,880			14,620
Accounts payable		(82,265	)		22,610			1,361
Income taxes currently payable		(21,476	)		(67,449	)		82,781
Other assets and liabilities		71,414			86,427			129,442

Net cash provided by operating activities		674,057			791,566			846,826

Cash flows from investing activities
Proceeds from sale of assets		49,430			34,896			56,552
Proceeds from sale of WinCo Foods, Inc.		—			229,846			—
Purchases of property, plant and equipment		(307,906	)		(262,790	)		(328,156	)
Purchase of Total Logistics, Inc.		—			(163,766	)		—

Net cash used in investing activities		(258,476	)		(161,814	)		(271,604	)

Cash flows from financing activities
Net (reduction) issuance of notes payable		—			—			(80,000	)
Proceeds from issuance of long-term debt		—			3,813			—
Repayment of long-term debt		(69,813	)		(331,798	)		(131,063	)
Reduction of obligations under capital leases		(34,564	)		(33,004	)		(32,884	)
Dividends paid		(85,775	)		(80,220	)		(77,035	)
Net proceeds from the sale of common stock under option plans		25,567			39,375			23,127
Payment for purchase of treasury shares		(28,812	)		(55,959	)		(14,599	)

Net cash used in financing activities		(193,397	)		(457,793	)		(312,454	)

Net increase in cash and cash equivalents		222,184			171,959			262,768
Cash and cash equivalents at beginning of year		463,915			291,956			29,188

Cash and cash equivalents at end of year	$	686,099		$	463,915		$	291,956

F-11

SUPPLEMENTAL CASH FLOW INFORMATION

The company’s non-cash activities were as follows:


Leased asset additions and related obligations	$	57,426	$	62,898	$	43,308
Minimum pension liability, net of deferred taxes	$	23,646	$	5,849	$	26,404
Interest and income taxes paid:
Interest paid (net of amount capitalized)	$	116,902	$	122,131	$	143,088
Income taxes paid (net of refunds)	$	172,231	$	216,572	$	29,081

See Notes to Consolidated Financial Statements.

F-12

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BUSINESS DESCRIPTION

Definitive Agreement to Purchase Company

On January 23, 2006, SUPERVALU announced that SUPERVALU, CVS Corporation (“CVS”) and an investment group led by Cerberus Capital Management, L.P. (the “Cerberus Group”) had reached definitive agreements to acquire Albertson’s, Inc (“Albertsons”). Each Albertsons stockholder will ultimately be entitled to receive $20.35 in cash and 0.182 shares of SUPERVALU common stock for each share of Albertsons’ common stock that they held before the transaction. Pursuant to those agreements, SUPERVALU will acquire the operations of Acme Markets, Bristol Farms, Jewel-Osco, Shaw’s Supermarkets, Star Markets, and the Albertsons’ banner stores in the Intermountain, Northwest and Southern California regions, and the related in-store pharmacies under the Osco and Save-On banners, for a total of approximately 1,125 stores (the “Proposed Transaction”). The total consideration to be paid by SUPERVALU is approximately $12.4 billion (based on a $32.65 average stock price using the 20 day trading average of the closing price of SUPERVALU stock through January 20, 2006) including approximately $3.8 billion in cash and $2.5 billion in stock and the assumption of approximately $6.1 billion of Albertsons’ debt. Following the Proposed Transaction, which is expected to close during June 2006, approximately 65 percent of SUPERVALU will be held by existing SUPERVALU stockholders and approximately 35 percent will be held by former Albertsons’ stockholders, on a fully diluted basis, including the settlement of the Albertsons’ 7.25 percent mandatory convertible securities. The “new” SUPERVALU will have approximately 224 million fully diluted common shares outstanding, compared to approximately 146 million fully diluted shares outstanding as of February 25, 2006. After the Proposed Transaction, SUPERVALU is expected to have revenues of approximately $44 billion (of which approximately 80% will be retail), approximately 194,000 employees, 2,505 owned and licensed stores, 878 in-store pharmacies and 117 fuel centers. The transaction is subject to approval by SUPERVALU stockholders and Albertsons’ stockholders, the contemporaneous closing of the agreements with the Cerberus Group and CVS, and the satisfaction or waiver of customary closing conditions. On April 28, 2006, the Securities and Exchange Commission (“SEC”) declared effective the Form S-4 Joint Proxy Statement/Prospectus in connection with the Proposed Transaction.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation:

The consolidated financial statements include the accounts of the company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. References to the company refer to SUPERVALU INC. and Subsidiaries.

F-13

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fiscal Year:

The company’s fiscal year ends on the last Saturday in February. The company’s first quarter consists of 16 weeks, while the second, third and fourth quarters each consist of 12 weeks, except for the fourth quarter of fiscal 2004, which consisted of 13 weeks. The last three fiscal years consist of the 52-week period ending February 25, 2006, the 52-week period ending February 26, 2005, and the 53-week period ending February 28, 2004.

Revenue Recognition:

Revenues from product sales are recognized at the point of sale for retail food and upon shipment of the product for food distribution. Revenues from services rendered are recognized immediately after such services have been provided.

Revenues and costs from third party logistic operations are recorded in accordance with EITF issue No. 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent”. Generally, when the company is the primary obligor in a transaction, is subject to inventory and/or credit risk, has latitude in establishing price and selecting suppliers, or has several, but not all of these indicators, revenue is recorded gross. If the company is not the primary obligor and amounts earned have little or no credit risk, the company generally records the net amounts as management fees earned.

Cost of Sales:

Cost of sales includes cost of inventory sold during the period, including purchasing and distribution costs and shipping and handling fees.

Advertising expenses are a component of cost of sales in the Consolidated Statements of Earnings and are expensed as incurred. Advertising expenses were $79.2 million, $80.8 million and $83.4 million for fiscal 2006, 2005 and 2004, respectively.

The company receives allowances and credits from suppliers 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. Volume incentives and promotional allowances earned, based on quantities purchased, and new product allowances are recorded as a reduction to the cost of purchased inventory and recognized when the related inventory is sold. Promotional allowances that are based on the sell-through of products are recognized as a reduction of cost of sales when the products are sold.

Cash and Cash Equivalents:

The company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

Allowances for Losses on Receivables:

Management makes estimates of the uncollectibility of its accounts and notes receivable portfolios. In determining the adequacy of its allowances, management analyzes the value of the collateral, customer financial statements, historical collection experience, aging of receivables and other economic and industry factors. Although risk management practices and methodologies are utilized to determine the adequacy of the allowance, it is possible that the accuracy of the estimation process could be materially impacted by different judgments as to collectibility based on the information considered and further deterioration of accounts.

F-14

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

LIFO and Retail Inventory Method:

Inventories are stated at the lower of cost or market. Market is replacement value. Substantially all of the company’s inventory is finished goods.

For a significant portion of the company’s inventory, cost is determined through use of the last-in, first-out (LIFO) method. The company utilized LIFO to value approximately 65 percent and 64 percent of the company’s consolidated inventories for fiscal 2006 and 2005, respectively. The first-in, first-out method (FIFO) is used to determine cost for some of the remaining highly consumable inventories. If the FIFO method had been used to determine cost of inventories for which the LIFO method is used, the company’s inventories would have been higher by approximately $160.0 million at February 25, 2006 and $148.6 million at February 26, 2005.

Reserves for Closed Properties and Asset Impairment Charges:

The company maintains reserves for estimated losses on retail stores, distribution warehouses and other properties that are no longer being utilized in current operations. The company provides for closed property operating lease liabilities using a discount rate to calculate the present value of the remaining noncancellable lease payments after the closing date, net of estimated subtenant income. The closed property lease liabilities usually are paid over the remaining lease terms, which generally range from one to sixteen years. The company estimates subtenant income and future cash flows based on the company’s experience and knowledge of the market in which the closed property is located, the company’s previous efforts to dispose of similar assets and existing economic conditions.

Owned properties and capital lease properties that are closed are reduced to their estimated fair value. Reduction in the carrying values of property, equipment and leasehold improvements are recognized when expected net future cash flows are less than the assets’ carrying value. The company estimates net future cash flows based on its experience and knowledge of the market in which the closed property is located and, when necessary, utilizes local real estate brokers.

F-15

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Reserves for Self Insurance:

Property, Plant and Equipment:

Property, plant and equipment are carried at cost. Depreciation, as well as amortization of assets under capital leases, is based on the estimated useful lives of the assets using the straight-line method. Estimated useful lives generally are 10 to 40 years for buildings and major improvements, 3 to 10 years for equipment, and the shorter of the term of the lease or expected life for leasehold improvements. Interest on property under construction of $1.9 million, $0.2 million and $0.4 million was capitalized in fiscal years 2006, 2005 and 2004, respectively.

Goodwill and Other Intangible Assets:

Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead are tested for impairment at least annually. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and are reviewed for impairment.

Impairment of Long-Lived Assets:

In accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the company monitors the carrying value of long-lived assets for potential impairment each quarter based on whether certain trigger events have occurred. These events include current period losses combined with a history of losses or a projection of continuing losses or a significant decrease in the market value of an asset. When a trigger event occurs, an impairment calculation is performed by comparing projected undiscounted future cash flows rates to the carrying value of the asset or group of assets as defined in SFAS No. 144. If impairment is identified for long-lived assets to be held and used, discounted future cash flows are compared to the asset’s current carrying value. Impairment is recorded when the carrying value exceeds the discounted cash flows. Impairment charges are a component of selling and administrative expenses in the Consolidated Statement of Earnings.

Deferred Rent:

The company recognizes rent holidays, including the time period during which the company has 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 lease. The deferred rents are included in other current liabilities and other long-term liabilities on the Consolidated Balance Sheets.

Benefit Plans:

The company sponsors pension and other retirement plans in various forms covering primarily non-union employees who meet eligibility requirements. The determination of the company’s obligation and expense for

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SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

company sponsored pension and other post retirement benefits is dependent, in part, on management’s selection of certain assumptions used by actuaries in calculating such amounts. These assumptions are described in the Benefit Plans note in the Notes to Consolidated Financial Statements and include, among other things, the discount rate, the expected long-term rate of return on plan assets, and the rates of increases in compensation and healthcare costs.

Derivatives:

The company accounts for derivatives pursuant to SFAS No. 133, “Accounting for Derivatives and Hedging Activities”, and SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activity, an Amendment of SFAS No. 133”. SFAS No. 133 and No. 138 require that all derivative financial instruments are recorded on the balance sheet at their respective fair value.

The company has limited involvement with derivatives, primarily interest rate swap agreements, and uses them only to manage well-defined interest rate risks. The company does not use financial instruments or derivatives for any trading or other speculative purposes.

Stock-based Compensation:

The company has stock based employee compensation plans, which are described more fully in the Stock Option Plans note in the Notes to Consolidated Financial Statements. The company utilizes the intrinsic value-based method, per Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” for measuring the cost of compensation paid in company common stock. This method defines the company’s cost as the excess of the stock’s market value at the time of the grant over the amount that the employee is required to pay. In accordance with APB Opinion No. 25, no compensation expense was recognized for options issued under the stock option plans in fiscal 2006, 2005 or 2004 as the exercise price of all options granted was not less than 100 percent of fair market value of the common stock on the date of grant.

F-17

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table illustrates the effect on net earnings and net earnings per share if the company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation,” to stock-based employee compensation:


	2006			2005			2004
	(In thousands, except per share data)
Net earnings, as reported	$	206,169		$	385,823		$	280,138
Add: stock-based compensation expense included in reported net earnings, net of related tax effect		1,849			7,732			1,385
Deduct: total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effect		(17,892	)		(23,733	)		(11,643	)

Pro forma net earnings		190,126			369,822			269,880
Add: interest and amortization on dilutive convertible debentures, net of related tax effect		7,070			6,786			7,678

Pro forma net earnings for diluted earnings per share	$	197,196		$	376,608		$	277,558

Earnings per share—basic:
As reported	$	1.52		$	2.86		$	2.09
Pro forma	$	1.40		$	2.74		$	2.01
Earnings per share—diluted:
As reported	$	1.46		$	2.71		$	2.01
Pro forma	$	1.36		$	2.60		$	1.93

For more information on the method and assumptions used in determining the fair value of stock-based compensation, see the Stock Option Plans note in the Notes to Consolidated Financial Statements.

Income Taxes:

The company provides for deferred income taxes during the year in accordance with SFAS No. 109, “Accounting for Income Taxes”. Deferred income taxes represent future net tax effects resulting from temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to be settled or realized. The major temporary differences and their net effect are included in the Income Taxes note in the Notes to Consolidated Financial Statements.

Net Earnings Per Share (EPS):

Basic EPS is calculated using income available to common shareholders divided by the weighted average number of common shares outstanding during the year. Diluted EPS is similar to basic EPS except that the weighted average number of common shares outstanding is after giving affect to the dilutive impacts, if any, of stock options, restricted stock, and outstanding contingently convertible debentures. In addition, for the calculation of diluted earnings per share, net income is adjusted to eliminate the after tax interest expense recognized during the year related to contingently convertible debentures, when the contingently convertible debentures are dilutive. See the Earnings Per Share note in the Notes to Consolidated Financial Statements.

F-18

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Comprehensive Income:

The company reports comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive Income”. Comprehensive income refers to revenues, expenses, gains and losses that are not included in net earnings but rather are recorded directly in stockholders’ equity in the Consolidated Statements of Stockholders’ Equity.

Use of Estimates:

Reclassifications:

Certain reclassifications have been made to conform prior years’ data to the current presentation. These reclassifications had no effect on reported earnings.

New Accounting Standards

In May 2005 the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—a Replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS No. 154”). SFAS No. 154 requires retrospective application as the required method for reporting a change in accounting principle, unless impracticable or unless a pronouncement includes alternative transition provisions. SFAS No. 154 also requires that a change in

F-19

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

depreciation, amortization or depletion method for long-lived, non-financial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. This statement carries forward the guidance in APB Opinion No. 20, “Accounting Changes,” for the reporting of a correction of an error and a change in accounting estimate. SFAS No. 154 is effective for the year beginning February 26, 2006.

RESTRUCTURE AND OTHER CHARGES

The remaining 2001 restructure reserves include $12.4 million for employee benefit related costs and $12.3 million for lease related costs for exited properties.

The table below shows the remaining restructure reserves for the 2002, 2001 and 2000 plans as of February 25, 2006, as well as reserve related activity for the three fiscal years then ended.


Restructure Plan	Fiscal 2003 Reserve Balance		Fiscal 2004 Activity					Fiscal 2004 Reserve Balance		Fiscal 2005 Activity					Fiscal 2005 Reserve Balance		Fiscal 2006 Activity					Fiscal 2006 Reserve Balance
Restructure Plan	Fiscal 2003 Reserve Balance		Usage			Adjustment		Fiscal 2004 Reserve Balance		Usage			Adjustment		Fiscal 2005 Reserve Balance		Usage			Adjustment		Fiscal 2006 Reserve Balance
	(In millions)
2002	$	3.4	$	(3.8	)	$	0.6	$	0.2	$	(0.2	)	$	—	$	—	$	—		$	—	$	—
2001	$	32.2	$	(17.3	)	$	11.7	$	26.6	$	(6.6	)	$	22.3	$	42.3	$	(18.7	)	$	1.1	$	24.7
2000	$	11.1	$	(9.1	)	$	0.5	$	2.5	$	(1.4	)	$	—	$	1.1	$	(1.4	)	$	0.3	$	—

RESERVES FOR CLOSED PROPERTIES AND ASSET IMPAIRMENT CHARGES

During fiscal 2006, the company announced the plans to dispose of twenty corporate operated Shop ‘n Save retail stores in Pittsburgh. Related to this disposition, the company recorded a charge of $64.6 million, which

F-20

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

included property, plant and equipment related impairment charges of $52.4 million, goodwill impairment charges of $6.7 million and other charges of $5.5 million. During the fourth quarter of fiscal 2006, the company recorded a charge of $7.3 million related to this disposition. The company anticipates completing the disposition in fiscal 2007.

Reserves for Closed Properties:

The company maintains reserves for estimated losses on retail stores, distribution warehouses and other properties that are no longer being utilized in current operations. Included in this activity is the Pittsburgh activity discussed above. The reserves for closed properties include management’s estimates for lease subsidies, lease terminations and future payments on exited real estate. Details of the activity in the closed property reserves for fiscal 2006, 2005 and 2004 are as follows:


	2006			2005			2004
	(in thousands)
Beginning balance	$	37,446		$	47,205		$	49,873
Additions		10,404			12,889			10,809
Usage		(10,076	)		(22,648	)		(13,477	)

Ending balance	$	37,774		$	37,446		$	47,205

Asset Impairment:

The company recognized asset impairment charges of $66.5 million during fiscal 2006 on the write-down of property, plant and equipment for closed properties, primarily related to the plan to dispose of corporate operated Shop ‘n Save retail stores in Pittsburgh and the impairment of certain assets following the planned disposition of Deals stores, including charges of $12.7 million in the fourth quarter. For fiscal 2006, the asset impairment charges related to the retail food segment. The company recognized asset impairment charges of $4.8 million and $7.6 million in fiscal 2005 and 2004, respectively, on the write-down of property, plant and equipment for closed properties. For fiscal 2005, the asset impairment charge related to the retail food segment. For fiscal 2004, of the $7.6 million asset impairment charge recognized, $6.2 million related to the retail food segment and $1.4 million related to the supply chain services segment. Impairment charges, a component of selling and administrative expenses in the Consolidated Statements of Earnings, reflect the difference between the carrying value of the assets and the estimated fair values, which were based on the estimated market values for similar assets.

SALE OF CUB FOODS—CHICAGO

Concurrent with the Proposed Transaction, the company sold 26 Cub Foods stores located primarily in the Chicago area in January 2006 to the Cerberus Group for a pretax and after tax loss of approximately $95 million and $61 million, respectively. The pretax loss is included in selling and administrative expenses on the Consolidated Statements of Earnings.

NOTES RECEIVABLE

Notes receivable arise from financing activities with independent retail food customers. Loans to retailers, as well as trade accounts receivable, are primarily collateralized by the retailers’ inventory, equipment and fixtures. The notes range in length from one to seventeen years with an average term of six years, and may be non-interest bearing or bear interest at rates ranging from approximately 4.5 to 10.7 percent.

Notes receivable, net due within one year of $18.0 million and $13.8 million at February 25, 2006 and February 26, 2005, respectively, are included in current receivables, net in the Consolidated Balance Sheets.

F-21

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

GOODWILL AND OTHER ACQUIRED INTANGIBLE ASSETS

On February 7, 2005, the company acquired Total Logistics, a national provider of third party logistics services for approximately $234 million comprised of $164 million of cash and $70 million of assumed debt. The purchase price allocation resulted in approximately $14.7 million of intangible assets related to trademarks, tradenames and customer relationships and approximately $116.6 million of goodwill.

At February 25, 2006 and at February 26, 2005, the company had approximately $0.8 billion of goodwill related to retail food and $0.8 billion related to supply chain services.

A summary of changes in the company’s goodwill and other acquired intangible assets during fiscal 2006 and fiscal 2005 follows:


	February 28, 2004			Amorti- zation			Additions		Other net adjustments			February 26, 2005			Amorti- zation			Additions		Other net adjustments			February 25, 2006
	(in thousands)
Goodwill	$	1,557,057					$	116,606	$	(45,816	)	$	1,627,847					$	6,454	$	(20,698	)	$	1,613,603
Other acquired intangible assets:
Trademarks and tradenames		15,269						8,042		(1,057	)		22,254						236		—			22,490
Leasehold Rights, Customer lists and other (accumulated amortization of $23,704 and $20,573, at February 25, 2006 and February 26, 2005, respectively)		49,369						510		(594	)		49,285						589		(97	)		49,777
Customer relationships (accumulated amortization of $5,220 and $2,492 at February 25, 2006 and February 26, 2005, respectively)		43,361						6,700		(2,992	)		47,069						564		—			47,633
Non-compete agreements (accumulated amortization of $5,105 and $4,329 at February 25, 2006 and February 26, 2005)		7,219						1,625		(550	)		8,294						—		—			8,294

Total other acquired intangible assets		115,218						16,877		(5,193	)		126,902						1,389		(97	)		128,194
Accumulated amortization		(22,290	)	$	(6,166	)		—		1,062			(27,394	)	$	(6,702	)		—		67			(34,029	)

Total goodwill and other acquired intangible assets, net	$	1,649,985		$	(6,166	)	$	133,483	$	(49,947	)	$	1,727,355		$	(6,702	)	$	7,843	$	(20,728	)	$	1,707,768

F-22

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fiscal 2006 additions primarily reflect the acquisition of certain retail properties. Fiscal 2005 additions primarily reflect the acquisition of Total Logistics. Fiscal 2006 other net adjustments of $20.7 million primarily reflect purchase accounting adjustments between deferred income taxes and goodwill related to former acquisitions of $29.5 million, reductions of goodwill of $11.2 million primarily related to Shop ’n Save Pittsburgh, which were partially offset by purchase accounting adjustments to increase goodwill $20.0 million for the finalization of the valuation related to the acquisition of Total Logistics in fiscal 2005. Fiscal 2005 other net adjustments of $49.9 million primarily reflect purchase accounting adjustments between deferred income taxes and goodwill relating to former acquisitions of $45.8 million and $4.0 million related to the Asset Exchange.

Other acquired intangible assets are a component of other assets in the Consolidated Balance Sheets. Amortization expense of $6.7 million, $6.2 million and $4.5 million was recorded in fiscal 2006, 2005 and 2004, respectively. Future amortization expense will approximate $6.3 million per year for each of the next five years. Intangible assets with a definite life are amortized on a straight-line basis with estimated useful lives generally ranging from five to twenty years. All intangible assets are amortizable with the exception of the trademarks and trade names.

INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES

The company reflected in net sales in the Consolidated Statements of Earnings equity in earnings (losses) of ($0.6) million, $14.3 million and $39.2 million from investments in unconsolidated subsidiaries in fiscal 2006, 2005 and 2004, respectively. The equity method of accounting is used for companies and other investments in which the company has significant influence, which generally represents common stock ownership or partnership equity of at least 20 percent and not more than 50 percent. At year-end 2006, the supply chain services segment’s primary investment in unconsolidated subsidiaries included a 25.5 percent interest in International Data, LLC, a strategic outsourcing services provider, specializing in, among other things, data services, check and remittance processing and coupon promotions processing. At year-end 2006, the retail food segment held investments in various retail properties. The supply chain services segment recognized $(9.5) million, $4.4 million, and $10.0 million of equity in earnings (loss) from investments in unconsolidated subsidiaries in fiscal 2006, 2005 and 2004, respectively, with total investments in unconsolidated subsidiaries of $7.4 million and $21.2 million as of the end of fiscal 2006 and 2005, respectively. The retail food segment recognized $8.9 million, $9.9 million and $29.2 million of equity in earnings from investments in unconsolidated subsidiaries in fiscal 2006, 2005 and 2004, respectively. The amount of investments in unconsolidated subsidiaries was $2.9 million and $3.9 million as of the end of fiscal 2006 and 2005, respectively. Investments in unconsolidated subsidiaries are included in other assets in the Consolidated Balance Sheet.

FINANCIAL INSTRUMENTS

Interest Rate Swap Agreements

In fiscal 2003, the company entered into swap agreements in the notional amount of $225.0 million that exchange a fixed interest rate payment obligation for a floating interest rate payment obligation. The swaps have been designated as a fair value hedge on long-term fixed rate debt of the company and are components of other assets in the Consolidated Balance Sheets. At February 25, 2006, and February 26, 2005, the hedge was highly effective. Changes in the fair value of the swaps and debt are reflected as a component of selling and administrative expenses in the Consolidated Statements of Earnings, and through February 25, 2006, the net earnings impact was zero.

The company has limited involvement with derivative financial instruments and uses them only to manage well-defined interest rate risks. The company does not use financial instruments or derivatives for any trading or other speculative purposes.

F-23

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair Value Disclosures of Financial Instruments

For certain of the company’s financial instruments, including cash and cash equivalents, receivables and notes payable, the carrying amounts approximate fair value due to their short maturities.

The estimated fair value of notes receivable was in excess of the carrying value by approximately $0.1 million at February 25, 2006. Notes receivable are valued based on a discounted cash flow approach applying a rate that is comparable to publicly traded debt instruments of similar credit quality.

The estimated fair value of the company’s long-term debt (including current maturities) was in excess of the carrying value by approximately $35.8 million at February 25, 2006. The estimated fair value was based on market quotes, where available, or market values for similar instruments.

The estimated fair value of the company’s interest rate swaps is the carrying value at February 25, 2006. The fair value of interest rate swaps is the amount at which they could be settled and is estimated by obtaining quotes from brokers.

DEBT

Notes, debentures and other debt were composed of the following at year-end:


	February 25, 2006		February 26, 2005
	(In thousands)
7.875% promissory note due fiscal 2010	$	350,000	$	350,000
7.5% promissory note due fiscal 2013		300,000		300,000
Zero-coupon convertible debentures		258,548		247,325
6.64% medium-term notes due fiscal 2007		64,800		103,500
Variable rate industrial revenue bonds		51,680		59,530
8.28%-9.46% promissory notes due fiscal 2007-2011		10,543		15,252
8.02% and 8.57% obligations with quarterly payments of principal and interest due fiscal 2007		2,401		18,495
Other debt		11,138		22,106

		1,049,110		1,116,208
Less current maturities		74,650		64,320

Long-term debt	$	974,460	$	1,051,888

Aggregate maturities of long-term debt are:


	(In thousands)
2007	$	74,650
2008		7,109
2009		12,042
2010		367,458
2011 and thereafter		587,851

F-24

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At February 25, 2006, the company had an unsecured $750.0 million revolving credit agreement with rates tied to LIBOR plus 0.275 to 0.675 percent and with facility fees ranging from 0.10 to 0.20 percent on the total amount of the facility, both based on the company’s credit ratings. The company had no outstanding borrowings under the credit facility at February 25, 2006 and February 26, 2005. As of February 25, 2006, letters of credit outstanding under the credit facility were $148.4 million and the unused available credit under the facility was $601.6 million. The agreement contains various financial covenants including ratios for interest coverage and debt leverage. The company has met the financial covenants under the revolving credit agreements as of February 25, 2006.

In August 2005, the company renewed its annual accounts receivable securitization program, under which the company can borrow up to $200.0 million on a revolving basis, with borrowings secured by eligible accounts receivable. Facility fees related to the accounts receivable securitization program incurred by the company during Fiscal 2006 were 0.175 to 0.20 percent on the total amount of the facility. The company had no outstanding borrowings under this program at February 25, 2006 and February 26, 2005. The agreement contains various covenants that are consistent with transactions of this nature, including a requirement that the rating assigned to the company’s long-term unsecured debt by Standard & Poor’s rating service or Moody’s rating service to be BB or higher or Ba2 or higher, respectively. The company has met the covenants under the annual accounts receivable program as of February 25, 2006. See Subsequent Events note in the Notes to the Consolidated Financial Statements for additional discussion.

On May 3, 2004, the company voluntarily redeemed $250.0 million of 7.625 percent notes due September 15, 2004, in accordance with the note redemption provisions. The company incurred $5.7 million in pre-tax costs related to this early redemption, which is included in interest expense.

In November 2001, the company sold zero-coupon convertible debentures having an aggregate principal amount at maturity of $811.0 million. The proceeds from the offering, net of approximately $5.0 million of expenses, were $208.0 million. The debentures mature in 30 years and are callable at the company’s option on or after October 1, 2006. Holders may require the company to purchase all or a portion of their debentures on October 1, 2006 or October 1, 2011 at a purchase price equal to the accreted value of the debentures, which includes accrued and unpaid cash interest. If the option is exercised, the company has the choice of paying the holder in cash, common stock or a combination of the two. The debentures are convertible if the closing price of the company’s common stock on the New York Stock Exchange for twenty of the last thirty trading days of any fiscal quarter exceeds certain levels, at $39.75 per share for the quarter ending June 17, 2006, and rising to $113.29 per share at September 6, 2031, if the rating assigned to the debentures by Standard & Poor’s rating service or Moody’s rating service, are BB or lower, or Ba3 or lower, respectively, if the notes are called for redemption, or if certain specified corporate actions occur. In the event of conversion, 9.6434 shares of the company’s common stock will be issued per $1,000 debenture or approximately 7.8 million shares should all debentures be converted. The debentures have an initial yield to maturity of 4.5 percent, which is being accreted over the life of the debentures using the effective interest method. The company will pay contingent cash interest for the six-month period commencing November 3, 2006 and for any six-month period thereafter if the average market price of the debentures for a five trading day measurement period preceding the applicable six-month period equals 120 percent or more of the sum of the issue price and accrued original issue discount for the debentures. The debentures are classified as long-term debt based on the company’s intent, subject to the Proposed Transaction, to settle with equity shares upon conversion.

F-25

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

LEASES

Capital and operating leases:

The company leases certain retail food stores, food distribution warehouses and office facilities. Many of these leases include renewal options, and to a limited extent, include options to purchase. Amortization of assets under capital leases was $31.7 million, $34.5 million and $35.1 million in fiscal 2006, 2005 and 2004, respectively. Accumulated amortization of assets under capital leases was $133.6 million and $144.9 million as of February 25, 2006 and February 26, 2005, respectively.

Future minimum obligations under capital leases in effect at February 25, 2006 are as follows:


	Lease Obligations
	(In thousands)
Fiscal Year
2007	$	67,741
2008		67,240
2009		64,751
2010		62,658
2011		60,940
Later		464,767

Total future minimum obligations		788,097
Less interest		372,258

Present value of net future minimum obligations		415,839
Less current obligations		30,095

Long-term obligations	$	385,744

The present values of future minimum obligations shown are calculated based on interest rates determined at the inception of the lease ranging from approximately 6 percent to 14 percent, with a weighted average rate of 7.8 percent.

In addition to its capital leases, the company is obligated under operating leases, primarily for buildings, warehouses and transportation and computer equipment. Future minimum obligations under operating leases in effect at February 25, 2006 are as follows:


	Operating Lease Obligations
	(In thousands)
Fiscal Year
2007	$	154,849
2008		134,069
2009		167,683
2010		86,971
2011		72,155
Later		314,086

Total future minimum obligations	$	929,813

F-26

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The company is party to a synthetic leasing program for one of its major warehouses. The lease qualifies for operating lease accounting treatment under SFAS No. 13, “Accounting for Leases.” For additional information on the synthetic lease, refer to the Commitments, Contingencies and Off-Balance Sheet Arrangements note in the Notes to Consolidated Financial Statements.

Total rent expense, net of sublease income, relating to all operating leases with terms greater than one year was $121.9 million, $115.6 million and $119.7 million in fiscal 2006, 2005 and 2004, respectively.

Future minimum receivables under operating leases and subleases in effect at February 26, 2005 are as follows:


	Owned Property		Leased Property		Total
	(In thousands)
Fiscal Year
2007	$	1,026	$	21,974	$	23,000
2008		1,016		17,588		18,604
2009		513		13,887		14,400
2010		246		10,556		10,802
2011		81		7,120		7,201
Later		—		26,367		26,367

Total future minimum receivables	$	2,882	$	97,492	$	100,374

Owned property leased to third parties is as follows:


	February 25, 2006		February 26, 2005
	(In thousands)
Land, buildings and equipment	$	11,782	$	10,055
Less accumulated depreciation		7,285		5,566

Net land, buildings and equipment	$	4,497	$	4,489

F-27

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Direct financing leases:

Under direct financing capital leases, the company leases buildings to independent retailers with terms ranging from 5 to 20 years. Future minimum rentals to be received under direct financing leases and related future minimum obligations under capital leases in effect at February 25, 2006, are as follows:


	Direct Financing Lease Receivables		Direct Financing Capital Lease Obligations
	(In thousands)
Fiscal Year
2007	$	11,273	$	10,630
2008		10,244		9,628
2009		9,487		8,931
2010		8,601		8,111
2011		6,959		6,576
Later		17,050		28,688

Total minimum lease payments		63,614		72,564
Less unearned income		22,572		—
Less interest		—		19,821

Present value of net minimum lease payments		41,042		52,743
Less current portion		6,922		6,976

Long-term portion	$	34,120	$	45,767

INCOME TAXES

The provision for income taxes consists of the following:


	2006			2005			2004
	(In thousands)
Current
Federal	$	147,720		$	151,003		$	110,031
State		22,186			19,227			14,495
Tax credits		(1,798	)		(1,644	)		(1,500	)

Total current		168,108			168,586			123,026
Deferred		(45,129	)		46,455			51,716

Total provision	$	122,979		$	215,041		$	174,742

The difference between the actual tax provision and the tax provision computed by applying the statutory federal income tax rate to earnings before income taxes is attributable to the following:


	2006			2005			2004
	(In thousands)
Federal taxes based on statutory rate	$	115,202		$	210,302		$	159,208
State income taxes, net of federal benefit		10,556			15,800			13,394
Audit settlements		—			(6,700	)		(2,214	)
Other		(2,779	)		(4,361	)		4,354

Total provision	$	122,979		$	215,041		$	174,742

F-28

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Temporary differences which give rise to significant portions of the net deferred tax asset (liability) as of February 25, 2006 and February 26, 2005 are as follows:


	2006			2005
	(In thousands)
Deferred tax assets:
Restructure	$	31,558		$	25,845
Net operating loss from acquired subsidiaries		14,546			16,191
Pension liability		52,756			41,580
Other health and benefit plans		123,173			92,054
Other		7,114			13,117

Total deferred tax assets		229,147			188,787
Deferred tax liabilities:
Accelerated deductions primarily depreciation and amortization		(166,088	)		(218,442	)
Acquired assets basis differences		(72,012	)		(52,220	)
Accelerated interest deductions		(15,760	)		(11,293	)
Other		(3,025	)		(24,769	)

Total deferred tax liabilities		(256,885	)		(306,724	)

Net deferred tax liability	$	(27,738	)	$	(117,937	)

The company currently has net operating loss (NOL) carryforwards from acquired companies of $40 million for tax purposes, which expire beginning in 2007 and continuing through 2018.

Based on management’s assessment, it is more likely than not that all of the deferred tax assets will be realized; therefore, no valuation allowance is considered necessary.

ACCUMULATED OTHER COMPREHENSIVE LOSSES

The accumulated balances, net of income taxes, for each classification of accumulated other comprehensive losses are as follows:


	Minimum Pension Liability Adjustment			Accumulated Other Comprehensive Losses
	(In thousands)
Balances at February 28, 2004	$	(98,732	)	$	(98,732	)
Minimum pension liability		(5,849	)		(5,849	)

Balances at February 26, 2005		(104,581	)		(104,581	)
Minimum pension liability		(23,646	)		(23,646	)

Balances at February 25, 2006	$	(128,227	)	$	(128,227	)

F-29

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

STOCK OPTION PLANS

The company’s 2002 Stock Plan and the SUPERVALU/Richfood Stock Incentive Plan allow the granting of non-qualified stock options and incentive stock options to purchase shares of the company’s common stock, to key salaried employees at prices not less than 100 percent of their fair market value, determined based on the average of the opening and closing sale price of a share on the date of grant. The company’s 1997 stock plan allows only the granting of non-qualified stock options to purchase common shares to salaried employees at fair market value determined on the same basis. In April 2002, the Board of Directors reserved an additional 3.8 million shares for issuance under the 1997 plan. In April 2005, the Board of Directors reserved an additional 9.0 million shares for issuance under the 2002 plan, which was approved by the shareholders of the company on June 15, 2005. 7.5 million of these shares are reserved for issuance as stock options and the remaining 1.5 million shares are reserved for restricted stock awards. The company also has options outstanding under its 1983 and 1993 plans, but no further options may be granted under these plans. The plans provide that the Board of Directors or the Executive Personnel and Compensation Committee of the Board (the “Committee”) may determine at the time of granting whether each option granted, except those granted under the 1997 plan, will be a non-qualified or incentive stock option under the Internal Revenue Code. The terms of each option will be determined by the Board of Directors or the Committee. Generally, options issued prior to fiscal 2006 have a term of ten years. Effective in fiscal 2006, options issued shall not be for more than a term of seven years. Generally, options vest over four years. Options may be exercised in installments or otherwise, as the Board of Directors or the Committee, may determine.

Changes in the options granted, exercised and outstanding under such plans are as follows:


	Shares		Weighted Average Price per Share
	(In thousands)
Outstanding, February 22, 2003	13,005		$	23.10
Granted	2,716			17.70
Exercised	(2,103	)		17.36
Canceled and forfeited	(1,779	)		36.18

Outstanding, February 28, 2004	11,839		$	20.92
Granted	3,154			30.37
Exercised	(3,550	)		19.68
Canceled and forfeited	(139	)		25.57

Outstanding, February 26, 2005	11,304		$	23.88
Granted	3,228			33.32
Exercised	(2,377	)		21.15
Canceled and forfeited	(355	)		27.73

Outstanding, February 25, 2006	11,800		$	26.89

F-30

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes stock option information at year-end 2006:


	Options Outstanding				Options Exercisable
Range of Exercise Price	Number of Options	Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Price		Number of Options	Weighted- Average Exercise Price
$12.25 to $15.90	1,896,974	5.66 years	$	15.38	1,279,380	$	15.14
16.08 to 23.08	1,768,197	3.71		20.79	1,644,197		20.94
23.09 to 29.21	1,800,999	5.18		27.66	1,484,214		27.62
29.29 to 29.90	1,737,936	8.04		29.89	699,156		29.89
29.96 to 33.45	2,312,485	4.86		31.53	1,858,568		31.43
33.46 to 35.67	2,283,573	5.98		33.59	642,213		33.86

$12.25 to $35.67	11,800,164	5.55		26.89	7,607,728		25.74

Option shares available for grant were 9.7 million and 3.2 million at February 25, 2006 and February 26, 2005, respectively. As of February 25, 2006, the company has reserved 10.4 million shares, in aggregate, for the plans.

As of February 25, 2006, limited stock appreciation rights have been granted and are outstanding under the 1989 stock appreciation rights plan and the 1993 stock plan. Such rights relate to options granted to purchase 202,100 shares of common stock and are exercisable only upon a “change in control.” See the Shareholder Rights Plan note in the Notes to the Consolidated Financial Statements.

In addition to the stock plans described above, the company incurs expenses under long-term incentive and restricted stock plans at the discretion of the Board of Directors. Compensation expense under these plans was $2.9 million, $12.2 million and $2.2 million for fiscal 2006, 2005 and 2004, respectively.

See Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements for the impact of stock based compensation on pro forma net earnings and earnings per common share.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions and results:


	2006	2005	2004
Dividend yield	2.00%	2.00%	2.00%
Risk free interest rate	3.89%	3.07%	2.10%
Expected life	4.8 years	4.5 years	4.5 years
Expected volatility	28.87%	31.79%	32.04%
Estimated fair value of options granted per share	$8.42	$7.80	$4.25

F-31

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

TREASURY STOCK PURCHASE PROGRAM

In October 2001, the Board of Directors authorized a treasury stock purchase program under which the company was authorized to purchase up to 5.0 million shares of the company’s common stock for re-issuance upon the exercise of employee stock options and for other compensation programs utilizing the company’s stock. In fiscal 2002, the company purchased 1.3 million shares under the program at an average cost of $22.16 per share. In fiscal 2003, the company purchased 1.5 million shares under the program at an average cost of $27.94 per share. In fiscal 2004, the company purchased 0.6 million shares under the program at an average cost of $23.80 per share. In fiscal 2005, the company completed the program by purchasing the remaining 1.6 million shares under the program at an average cost of $28.45 per share.

In May 2004, the Board of Directors authorized a treasury stock purchase program under which the company is authorized to purchase up to 5.0 million shares of the company’s common stock for reissuance upon the exercise of employee stock options and for other compensation programs utilizing the company’s stock. In fiscal 2005, the company purchased approximately 0.4 million shares under the program at an average cost of $27.73 per share. In fiscal 2006, the company purchased approximately 0.9 million shares under the program at an average cost of $32.19 per share. As of February 25, 2006, approximately 3.7 million shares remained available for purchase under this program.

EARNINGS PER SHARE

The following table reflects the calculation of basic and diluted earnings per share:


	2006		2005		2004
	(In thousands, except per share amounts)
Earnings per share—basic:
Net earnings	$	206,169	$	385,823	$	280,138
Weighted average shares outstanding—basic		136,077		135,003		133,975
Earnings per share—basic	$	1.52	$	2.86	$	2.09
Earnings per share—diluted:
Net earnings	$	206,169	$	385,823	$	280,138
Interest and amortization related to dilutive contingently convertible debentures, net of tax		7,070		6,786		7,678

Net earnings used for diluted earnings per share calculation	$	213,239	$	392,609	$	287,816

Weighted average shares outstanding		136,077		135,003		133,975
Dilutive impact of options outstanding		1,804		2,103		1,443
Dilutive impact of contingently convertible debentures		7,818		7,818		7,818

Weighted average shares—diluted		145,699		144,924		143,236

Earnings per share—diluted	$	1.46	$	2.71	$	2.01

COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS

F-32

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

terms that range from less than one year to nineteen years, with a weighted average remaining term of approximately thirteen years. For each guarantee issued, if the affiliated retailer defaults on a payment, the company would be required to make payments under its guarantee. Generally, the guarantees are secured by indemnification agreements or personal guarantees of the affiliated retailer. At February 25, 2006, the maximum amount of undiscounted payments the company would be required to make in the event of default of all guarantees was approximately $226 million and represented approximately $126 million on a discounted basis. No amount has been accrued for the company’s obligation under its guaranty arrangements.

The company is party to a synthetic leasing program for one of its major warehouses. The lease expires in April 2008 and may be renewed with the lessor’s consent through April 2013, and has a purchase option of $60.0 million. At February 26, 2005, the estimated market value of the property underlying this lease approximately equaled the purchase option. The company’s obligation under its guaranty arrangements related to this synthetic lease had a carrying balance of $0.4 million, which is included in other liabilities in the Consolidated Balance Sheets at February 25, 2006.

The company had $176.8 million of outstanding letters of credit as of February 25, 2006, of which $148.4 million were issued under the credit facility and $28.4 million were issued under separate agreements with financial institutions. These letters of credit primarily support workers’ compensation programs, merchandise import programs, and payment obligations. The company pays fees, which vary by instrument, of up to 0.70 percent on the outstanding balance of the letter of credit.

The company has entered into a Proposed Transaction to acquire certain assets of Albertson’s, Inc. See additional discussion of the Proposed Transaction in the Subsequent Events note in the Notes to the Consolidated Financial Statement.

BENEFIT PLANS

Substantially all employees of the company and its subsidiaries are covered by various contributory and non-contributory pension or profit sharing plans.

F-33

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Benefit calculations for the company’s sponsored defined benefit pension plans for primarily non-union eligible participants are generally based on years of service and the participants’ highest compensation during five consecutive years of employment. Annual payments to the pension trust fund are determined in compliance with the Employee Retirement Income Security Act (ERISA). Plan assets are held in trust and invested in separately managed accounts and publicly traded mutual funds holding equity, fixed income securities and alternative investment classes. In addition to providing pension benefits, the company provides health care and life insurance benefits for eligible retired employees upon meeting certain age and service requirements.

The following tables set forth the changes in benefit obligations and plan assets, a reconciliation of the accrued benefit costs and total benefit costs for the fiscal years for the company’s defined benefit pension plans and the post retirement benefit plans which have a plan measurement date of November 30:


	Pension Benefits						Post Retirement Benefits
	February 25, 2006			February 26, 2005			February 25, 2006			February 26, 2005
	(In thousands)
CHANGES IN BENEFIT OBLIGATIONS
Benefit obligations at beginning of year	$	686,545		$	618,570		$	148,557		$	125,081
Service cost		20,748			19,370			1,818			1,443
Interest cost		40,503			37,957			8,649			6,899
Actuarial loss (gain)		60,204			33,894			(9,077	)		23,375
Benefits paid		(28,136	)		(23,246	)		(9,131	)		(8,241	)

Benefit obligations at end of year	$	779,864		$	686,545		$	140,816		$	148,557

CHANGES IN PLAN ASSETS
Fair value of plan assets at beginning of year	$	520,443		$	466,809		$	—		$	—
Actual return on plan assets		39,036			51,880			—			—
Company contributions		25,000			25,000			9,131			8,241
Plan participants’ contributions		—			—			5,507			5,464
Benefits paid		(28,136	)		(23,246	)		(14,638	)		(13,705	)

Fair value of plan assets at end of year	$	556,343		$	520,443		$	—		$	—

RECONCILIATION OF PREPAID (ACCRUED) COST AND TOTAL AMOUNT RECOGNIZED
Funded status	$	(223,521	)	$	(166,101	)	$	(140,816	)	$	(148,557	)
Unrecognized net loss		260,260			221,880			63,647			79,376
Unrecognized prior service cost		6,862			7,766			(6,179	)		(8,084	)

Prepaid (accrued) cost	$	43,601		$	63,545		$	(83,348	)	$	(77,265	)

Accrued benefit liability	$	(162,418	)	$	(107,159	)
Intangible asset		6,862			7,766
Accumulated other comprehensive loss		199,157			162,938

Total recognized	$	43,601		$	63,545

F-34

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The accumulated benefit obligation for the defined benefit pension plan was $718,761 and $627,602 at February 25, 2006 and February 26, 2005, respectively.


	Pension Benefits									Post Retirement Benefits
	2006			2005			2004			2006			2005			2004
	(In thousands)
NET BENEFIT COSTS FOR THE FISCAL YEAR
Service cost	$	20,748		$	19,370		$	18,243		$	1,818		$	1,443		$	1,350
Interest cost		40,503			37,957			35,003			8,649			6,899			7,457
Expected return on plan assets		(40,774	)		(41,843	)		(40,970	)		—			—			—
Amortization of:
Unrecognized net loss		23,173			18,895			7,898			6,652			3,722			3,305
Unrecognized prior service cost		1,294			1,261			1,106			(1,905	)		(1,949	)		(1,200	)

Net benefit costs for the fiscal year	$	44,944		$	35,640		$	21,280		$	15,214		$	10,115		$	10,912

The company utilized the following assumptions in the calculations for pension and post retirement benefit plans:


	2006		2005		2004
Weighted-average assumptions used to determine benefit obligations:
Discount rate	5.75	%	6.00	%	6.25	%
Rate of compensation increase	3.00	%	3.00	%	3.00	%
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate	6.00	%	6.25	%	7.00	%
Rate of compensation increase	3.00	%	3.00	%	3.25	%
Expected return on plan assets	8.00	%	8.75	%	9.00	%

The assumed health care cost trend rate used in measuring the accumulated post retirement benefit obligation was 11.0 percent in fiscal 2006. The assumed health care cost trend rate will decrease by one percent each year for the next six years until it reaches the ultimate trend rate of 5.0 percent. The health care cost trend rate assumption has a significant impact on the amounts reported. For example, a one percent change in the trend rate would impact the accumulated post retirement benefit obligation by approximately $10 million and the service and interest cost by approximately $0.6 million in fiscal 2007.

The company also maintains non-contributory unfunded pension plans to provide certain employees with pension benefits in excess of limits imposed by federal tax law. The projected benefit obligation of the unfunded plans was $21.5 million and $18.1 million at February 25, 2006 and February 26, 2005, respectively. The accumulated benefit obligation of these plans totaled $17.8 million and $14.2 million at February 25, 2006 and February 26, 2005, respectively. Net periodic pension cost was $2.9 million, $3.6 million and $3.6 million for fiscal 2006, 2005 and 2004, respectively.

F-35

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The company employs a total return approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Alternative investments, including hedge funds, private equity and real estate are also used judiciously to enhance risk adjusted long-term returns while improving portfolio diversification. The overall investment strategy and policy has been developed based on the need to satisfy the long-term liabilities of the company’s pension plans. Risk management is accomplished 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 the company’s financial condition. This asset allocation policy mix is reviewed annually and actual allocations are rebalanced on a regular basis.

Plan assets are invested using a combination of active and passive investment strategies. Passive strategies invest in broad sectors of the market primarily through the use of indexing. Indexing is an investment management approach based on investing in exactly the same securities, in the same proportions, as an index, such as the S&P 500. The management style is considered passive because portfolio managers don’t make decisions about which securities to buy and sell, they simply mimic the composition and weightings of the appropriate stock or bond market index. Active 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 bets (fixed income) versus benchmark indices while focusing primarily on security selection as a means to add value. 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 following table summarizes the actual allocation of our pension plan assets at the November 30 measurement date as well as our target allocation.


Asset Category	Target Allocation Ranges					Plan Assets Fiscal 2006		Plan Assets Fiscal 2005
Domestic Equity	45.0	%	—	70.0	%	60.1	%	60.7	%
International Equity	7.0	%	—	20.0	%	9.9	%	10.1	%
Domestic Fixed Income	25.0	%	—	35.0	%	24.5	%	23.5	%
Cash and Other	0.0	%	—	15.0	%	5.5	%	5.7	%

Total						100.0	%	100.0	%

The expected long-term rate of return for plan assets was determined based on the projection of asset class return expectations applied to the target asset allocation of the plan assets. Consideration was given to widely-accepted capital market principles, long-term return analysis for global fixed income and equity markets, the active total return oriented portfolio management style as well as the diversification needs and rebalancing characteristics of the plan. Long-term trends were evaluated relative to market factors such as inflation, interest rates and fiscal and monetary polices in order to assess the capital market assumptions.

The company reviews and selects the discount rate to be used in connection with its postretirement obligations annually. In determining the discount rate, the company uses 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

F-36

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

stream of future cash flows. This resulting weighted-average discount rate is then used in evaluating the final discount rate to be used by the company. Prior to using the yield curve approach, the discount rate assumptions were based on investment yields of Aa rated long-term corporate bonds on the date of determination. The discount rate as of the November 30, 2005 measurement date was 5.75%, compared to 6.00% as of November 30, 2004.

The company expects to contribute approximately $26.0 million to its non-union defined benefit pension plans during fiscal 2007.

The following table summarizes the estimated future benefit payments, which reflect expected future service as appropriate, that are expected to be paid:


	Pension Benefits		Post Retirement Benefits
	(In thousands)
Fiscal Year
2007	$	26,530	$	9,900
2008		26,530		10,400
2009		28,730		10,900
2010		31,230		11,300
2011		34,130		11,700
2012-2016		221,850		65,300

The pension benefits also reflect the estimated future benefit payments for the non-contributory, unfunded pension plans sponsored by the company.

Employer contributions under the defined contribution 401(k) and profit sharing plans are determined by plan provisions or at the discretion of the company’s Retirement Committee and were $16.3 million, $18.3 million and $17.1 million for fiscal 2006, 2005 and 2004, respectively. Under the defined contribution 401(k) plan, employees have the option of contributing between 2 percent and 15 percent of pretax earnings. Plan assets also include 2.8 and 3.0 million shares of the company’s common stock at February 25, 2006 and February 26, 2005, respectively.

The company also participates in several multi-employer plans providing defined benefits to union employees under the provisions of collective bargaining agreements. These plans require the company to make contributions thereto as negotiated in such collective bargaining agreements. The company incurred expense related to the union pension plans of $37.0 million, $37.0 million and $34.2 million for fiscal 2006, 2005 and 2004, respectively. Currently, some of these plans are underfunded in that the present value of accrued liabilities exceeds the current value of the assets held in trust to pay benefits. If the company were to exit certain markets or otherwise cease making contributions to these plans at this time, it could trigger a withdrawal liability that would require the company to fund its proportionate share of a plan’s unfunded vested benefits. There are many variables that affect future funding requirements such as investment returns and benefit levels.

SHAREHOLDER RIGHTS PLAN

On April 24, 2000, the company announced that the Board of Directors adopted a Shareholder Rights Plan under which one preferred stock purchase right is distributed for each outstanding share of common stock. The

F-37

SUPERVALU INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

rights, which expire on April 12, 2010, are exercisable only under certain conditions, and may be redeemed by the Board of Directors for $0.01 per right. The plan contains a three-year independent director evaluation provision whereby a committee of the company’s independent directors will review the plan at least once every three years. The rights become exercisable, with certain exceptions, after a person or group acquires beneficial ownership of 15 percent or more of the outstanding voting stock of the company.

SUBSEQUENT EVENTS

SEGMENT INFORMATION

Refer to page F-7 for the company’s segment information.

F-38

UNAUDITED QUARTERLY FINANCIAL INFORMATION

(In thousands, except per share data)

Unaudited quarterly financial information for SUPERVALU INC. and subsidiaries is as follows:


	Fiscal Year Ended February 25, 2006
	First (16 wks)		Second (12 wks)		Third (12 wks)		Fourth (12 wks)		Year (52 wks)
Net sales	$	5,972,290	$	4,556,218	$	4,694,987	$	4,640,104	$	19,863,599
Gross profit	$	869,551	$	660,988	$	674,699	$	681,009	$	2,886,247
Net earnings	$	91,202	$	33,773	$	75,192	$	6,002	$	206,169
Net earnings per common share—basic (a)	$	0.67	$	0.25	$	0.55	$	0.04	$	1.52
Net earnings per common share—diluted (a)	$	0.64	$	0.24	$	0.53	$	0.04	$	1.46
Dividends declared per common share	$	0.1525	$	0.1625	$	0.1625	$	0.1625	$	0.6400
Weighted average shares—basic		135,774		136,125		136,199		136,313		136,077
Weighted average shares—diluted (b)		145,603		145,948		145,549		137,921		145,699


	Fiscal Year Ended February 26, 2005
	First (16 wks)		Second (12 wks)		Third (12 wks)		Fourth (12 wks)		Year (52 wks)
Net sales	$	5,910,649	$	4,486,963	$	4,555,122	$	4,590,506	$	19,543,240
Gross profit	$	845,037	$	655,138	$	660,197	$	701,396	$	2,861,768
Net earnings	$	149,411	$	78,536	$	64,943	$	92,933	$	385,823
Net earnings per common share—basic (a)	$	1.10	$	0.58	$	0.48	$	0.69	$	2.86
Net earnings per common share—diluted (a)	$	1.04	$	0.55	$	0.46	$	0.65	$	2.71
Dividends declared per common share	$	0.1450	$	0.1525	$	0.1525	$	0.1525	$	0.6025
Weighted average shares—basic		135,244		135,230		134,343		135,116		135,003
Weighted average shares—diluted		145,378		144,888		144,058		145,243		144,924

Notes:

(a)	Fiscal 2006 and fiscal 2005 net earnings include after-tax restructure and other items of $2.8 million and $16.7 million, respectively.

(b)	The decrease in fiscal 2006 fourth quarter weighted average shares-diluted is primarily due to the anti-dilutive impact of 7.8 million of contingently convertible debentures.

F-39

SUPERVALU INC. and Subsidiaries

SCHEDULE II—Valuation and Qualifying Accounts

(In thousands)


COLUMN A	COLUMN B		COLUMN C	COLUMN D	COLUMN E
Description	Balance at beginning of year		Additions	Deductions	Balance at end of year
Allowance for doubtful accounts:
Year ended:
February 25, 2006	$	22,523	3,361	10,152	$	15,732
February 26, 2005		18,531	9,755	5,763		22,523
February 28, 2004		21,913	8,396	11,778		18,531

Allowance for notes receivable accounts:
Year ended:
February 25, 2006	$	11,240	452	332	$	11,360
February 26, 2005		15,913	583	5,256		11,240
February 28, 2004		13,948	2,083	118		15,913

Closed properties reserves:
Year ended:
February 25, 2006	$	37,446	10,404	10,076	$	37,774
February 26, 2005		47,205	12,889	22,648		37,446
February 28, 2004		49,873	10,809	13,477		47,205

F-40

EXHIBIT INDEX


Exhibit Number		Exhibit
*(3) (i)		Restated Certificate of Incorporation.

*(3) (ii)		Restated Bylaws, as amended.

*4.1.		Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee, relating to certain outstanding debt securities of the Registrant.

*4.2.		First Supplemental Indenture dated as of August 1, 1990, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee.

*4.3.		Second Supplemental Indenture dated as of October 1, 1992, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee.

*4.4.		Third Supplemental Indenture dated as of September 1, 1995, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee.

*4.5.		Fourth Supplemental Indenture dated as of August 4, 1999, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee.

*4.6.		Fifth Supplemental Indenture dated as of September 17, 1999, between the Registrant and Bankers Trust Company, as Trustee, to Indenture dated as of July 1, 1987, between the Registrant and Bankers Trust Company, as Trustee.

*4.7.		Letter of Representations dated November 12, 1992, between the Registrant, Bankers Trust Company, as Trustee, and The Depository Trust Company relating to certain outstanding debt securities of the Registrant.

*4.8.		Rights Agreement dated as of April 12, 2000, between SUPERVALU INC. and Wells Fargo Bank Minnesota, N.A. (formerly Norwest Bank Minnesota, N.A.) as Rights Agent, including as Exhibit B the forms of Rights Certificate and Election to Exercise.

*4.9.		Indenture dated as of November 2, 2001, between SUPERVALU INC. and The Chase Manhattan Bank, as Trustee, including form of Liquid Yield Option ^™ Note due 2031 (Zero Coupon—Senior).

*4.10.		Registration Rights Agreement dated as of November 2, 2001, by and among SUPERVALU INC., Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated.

*4.11.		Form of Credit Agreement, dated as of February 28, 2005, among the Registrant, the Lenders named therein, JPMORGAN CHASE BANK, N.A., as Administrative Agent, and BANK OF AMERICA, N.A., as Syndication Agent.

*10.1.		SUPERVALU INC. 2002 Stock Plan, as amended.

*10.2.		SUPERVALU INC. 1997 Stock Plan, as amended.


*10.3.		SUPERVALU INC. 1993 Stock Plan, as amended.

*10.4.		SUPERVALU/Richfood Stock Incentive Plan, as amended.

*10.5.		Resolutions of SUPERVALU INC. Board of Directors, amending the SUPERVALU INC. Restricted Stock Plan, as amended.

*10.6.		SUPERVALU INC. 1983 Employee Stock Option Plan, as amended.

*10.7.		SUPERVALU INC. 1989 Stock Appreciation Rights Plan.

*10.8.		SUPERVALU INC. Executive Incentive Bonus Plan.

*10.9.		SUPERVALU INC. Annual Cash Bonus Plan for Designated Corporate Officers, as amended.

10.10.		SUPERVALU INC. Long-Term Incentive Plan, as amended.

*10.11.		SUPERVALU INC. Deferred Compensation Plan for Non-Employee Directors, as amended.

*10.12.		SUPERVALU INC. Excess Benefit Plan Restatement, as amended.

*10.13.		SUPERVALU INC. Deferred Compensation Plan as amended.

*10.14.		SUPERVALU INC. Executive Deferred Compensation Plan, as amended.

*10.15.		SUPERVALU INC. Executive Deferred Compensation Plan II, as amended.

*10.16.		Form of Agreement used in connection with the Registrant’s Executive Post Retirement Survivor Benefit Program.

10.17.		Form of Change of Control Severance Agreements entered into with certain officers of the Registrant, as amended.

*10.18.		SUPERVALU INC. Directors Retirement Program, as amended.

*10.19.		SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan.

*10.20.		First Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan.

*10.21.		Second Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan.

*10.22		Third Amendment to SUPERVALU INC. Non-Qualified Supplemental Executive Retirement Plan.

*10.23.		Fourth Amendment to SUPERVALU INC. Non-Qualified Supplement Executive Retirement Plan.

*10.24.		SUPERVALU INC. Non-Employee Directors Deferred Stock Plan.

*10.25.		Restricted Stock Unit Award Agreement for David L. Boehnen, as amended.

*10.26.		Restricted Stock Unit Award Agreement for Pamela K. Knous, as amended.

*10.27.		Restricted Stock Unit Award Agreement for John H. Hooley.

*10.28.		Restricted Stock Unit Award Agreement for Michael L. Jackson.

*10.29.		Restricted Stock Unit Award Agreement for Jeffrey Noddle.


*10.30.		Amended and Restated SUPERVALU INC. Grantor Trust dated as of May 1, 2002.

10.31		Form of SUPERVALU INC. 2002 Stock Plan Stock Option Agreement and Stock Option Terms and Conditions for Key Executives, as amended.

10.32		Form of SUPERVALU INC. 2002 Stock Plan Restoration Stock Option Agreement and Restoration Stock Option Terms and Conditions for Key Executives, as amended.

*10.33		Form of SUPERVALU INC. 2002 Stock Plan Stock Option Agreement for Non-Employee Directors and Stock Option Terms and Conditions for Non-Employee Directors.

*10.34		Form of SUPERVALU INC. 2002 Stock Plan Restoration Stock Option Agreement for Non-Employee Directors and Restoration Stock Option Terms and Conditions for Non-Employee Directors.

*10.35		Form of SUPERVALU INC. 2002 Stock Plan Supplemental Non-Qualified Stock Option Agreement for Non-Employee Directors and Terms and Conditions for Supplemental Stock Options for Non-Employee Directors.

*10.36		Form of SUPERVALU INC. Long-Term Incentive Plan Restricted Stock Award Certificate and Long-Term Incentive Plan Restricted Stock Award Terms and Conditions.

10.37		Form of SUPERVALU INC. 2002 Stock Plan Restricted Stock Award Certificate and Restricted Stock Award Terms and Conditions, as amended.

*10.38		Performance Criteria for Awards under the Company’s Annual Cash Bonus Plan for Designated Corporate Officers and the Executive Incentive Bonus Plan.

*10.39		Performance Criteria for Awards under the Company’s Long-Term Incentive Plan.

10.40		Annual discretionary CEO Bonus Pool.

*10.41		Purchase and Separation Agreement by and among Albertson’s, Inc., New Aloha Corporation, Supervalu Inc. and AB Acquisition LLC, dated January 22, 2006.

*10.42		Asset Purchase Agreement among CVS Corporation, CVS Pharmacy, Inc., Albertson’s, Inc., Supervalu Inc., New Aloha Corporation, and the Sellers Listed on Annex A attached thereto, Dated January 22, 2006.

12.1.		Ratio of Earnings to Fixed Charges.

21.1.		SUPERVALU INC. Subsidiaries.

23.1.		Consent of KPMG LLP.

24.1.		Power of Attorney.

31.1.		Chief Executive Officer Certification of Periodic Financial Report pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2.		Chief Financial Officer Certification of Periodic Financial Report pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1.		Chief Executive Officer Certification of Periodic Financial Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2.		Chief Financial Officer Certification of Periodic Financial Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Incorporated by reference

Exhibit 10.10

SUPERVALU INC.

LONG-TERM INCENTIVE PLAN, as amended

SECTION I.

ESTABLISHMENT

On February 13, 2002, the Board of Directors of SUPERVALU INC. (the “Company”), upon recommendation by the Executive Personnel and Compensation Committee (the “Committee”), approved an incentive plan for executives as described herein, which plan shall be known as the “SUPERVALU INC. Long-Term Incentive Plan” (the “Plan”). The Plan shall be submitted for approval by the stockholders of the Company at the 2002 Annual Meeting of Stockholders. The Plan shall be effective as of February 13, 2002, subject to its approval by the stockholders of the Company, and no shares shall be issued pursuant to the Plan until after the Plan has been approved by the stockholders of the Company.

SECTION II.

PURPOSE

The purpose of the Plan is to advance the interests of the Company and its stockholders by attracting and retaining key employees, and by stimulating the efforts of such employees to contribute to the continued success and progress of the business. The Plan is further intended to provide such employees with an opportunity to increase their ownership of the Company’s common stock with the increased personal interest in the long-term success of the business that such stock ownership can produce.

SECTION III.

ADMINISTRATION

3.1 Composition of the Committee . The Plan shall be administered by the Committee, which shall consist of members appointed from time to time by the Board of Directors and shall be comprised of not less than such number of directors as shall be required to permit Awards granted under the Plan to qualify under Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any successor rule or regulation (“Rule 16b-3”). All members of the Committee shall be members of the Board of Directors of the Company who are “Non-Employee Directors” within the meaning of Rule 16b-3. To the extent required by Section 162(m) of the Internal Revenue Code of 1986, as amended (such statute, as it may be amended from time to time and all proposed, temporary or final Treasury Regulations promulgated thereunder shall be referred to as the “Code”), the Committee administering the Plan shall be composed solely of “outside directors” within the meaning of Section 162(m) of the Code.

3.2 Power and Authority of the Committee . The Committee shall have full power and authority, subject to all the applicable provisions of the Plan and applicable law, to (a) establish, amend, suspend or waive such rules and regulations and appoint such agents as it deems necessary or advisable for the proper administration of the Plan, (b) construe, interpret and administer the Plan and any instrument or agreement relating to, or Award (as defined below in Section 4.2) made under, the Plan, and (c) make all other determinations and take all other

actions necessary or advisable for the administration of the Plan. Unless otherwise expressly provided in the Plan, each determination made and each action taken by the Committee pursuant to the Plan or any instrument or agreement relating to, or Award made under, the Plan shall be (x) within the sole discretion of the Committee, (y) may be made at any time and (z) shall be final, binding and conclusive for all purposes on all persons, including, but not limited to, holders of Awards, and their legal representatives and beneficiaries, and employees of the Company or of any “Affiliate” of the Company. For purposes of the Plan and any instrument or agreement relating to, or Award made under, the Plan, the term “Affiliate” shall mean any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and any entity in which the Company has a significant equity interest, in each case as determined by the Committee in its sole discretion.

3.3 Delegation . The Committee may delegate its powers and duties under the Plan to one or more officers of the Company or any Affiliate or a committee of such officers, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion; provided, however, that the Committee shall not delegate its power (i) to amend the Plan as provided in Section XI hereof (ii) with respect to any Performance Based Awards pursuant to Section 6.7 of the Plan, (iii) to make determinations regarding officers or directors of the Company or any Affiliate who are subject to Section 16 of the Exchange Act, and (iv) in such a manner as would contravene Section 157 of the Delaware General Corporation Law.

SECTION IV.

ELIGIBILITY AND PARTICIPATION

4.1 Eligibility . The Plan is unfunded and is maintained by the Company for a select group of management or highly compensated employees. In order to be eligible to participate in the Plan, an employee of the Company or of its Affiliates must be selected by the Committee. In determining the employees who will participate in the Plan, the Committee may take into account the nature of the services rendered by the respective employees, their present and potential contributions to the success of the Company and such other factors as the Committee, in its sole discretion, shall deem relevant. A director of the Company or of an Affiliate who is not also an employee of the Company or an Affiliate shall not be eligible to participate in the Plan.

4.2 Participation . The Committee shall determine the employees to be granted an award opportunity (the “Award”), the amount of each Award, the time or times when Awards will be made, the period of time over which such Awards are intended to be earned, and all other terms and conditions of each Award. The provisions of the Awards need not be the same with respect to any recipient of an Award (the “Participant”) or with respect to different Participants. The Committee’s decision to approve an Award to an employee in any year shall not require the Committee to approve a similar Award or any Award at all to that employee or any other employee or person at any future date. The Company and the Committee shall not have any obligation for uniformity of treatment of any person, including, but not limited to, Participants and their legal representatives and beneficiaries and employees of the Company or of any Affiliate of the Company.

4.3 Award Agreement . Any employee selected for participation by the Committee shall, as a condition of participation, execute and return to the Committee a written agreement

setting forth the terms and conditions of the Award (the “Award Agreement”). A separate Award Agreement will be entered into between the Company and each Participant for each Award.

4.4 Employment . In the absence of any specific agreement to the contrary, no Award to a Participant under the Plan shall affect any right of the Company, or of any Affiliate of the Company, to terminate, with or without cause, the Participant’s employment at any time.

SECTION V.

SHARES SUBJECT TO THE PLAN

5.1 Shares Subject to Plan . Subject to adjustment as provided in Section 5.3 hereof, the maximum number of shares or units equivalent to shares with respect to which Awards may be granted under the Plan shall not exceed in the aggregate 800,000 shares (the “Shares”) of the Company’s common stock, par value $1.00 per Share (the “Common Stock”). The payment of cash dividends or dividend equivalents in conjunction with an Award shall not be counted against the Shares available for grant. Shares to be issued pursuant to the Plan shall be made available from treasury, from authorized but unissued shares of Common Stock, or from shares reacquired by the Company, including shares purchased in the open market. For purposes of this Section V, the maximum number of Shares to which an Award relates shall be counted on the date such Award was made against the aggregate number of Shares available for grant under the Plan.

5.2 Reacquired Shares . If any Shares to which an Award relates are forfeited, or if an Award is otherwise canceled or terminated or expires without delivery of the maximum number of Shares (or cash for the maximum number of Shares) to which such Award relates, then the number of Shares with respect to such Award, to the extent of any such forfeiture, cancellation, termination or expiration, shall again be available for grant under the Plan.

5.3 Adjustments Upon Changes In Capitalization . In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Common Stock, other securities or other property), stock split, reverse stock split, reorganization, recapitalization, merger, consolidation, combination, split-up, spin-off, repurchase or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event affects the Common Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may make such adjustments, if any, as it may deem appropriate in the aggregate number of and class of Shares (or other securities or other property) issuable pursuant to Section 5.1 and pursuant to any outstanding Award under the Plan. The Committee’s determination of such adjustments shall be final, binding and conclusive.

SECTION VI.

AWARDS

6.1 General . The Committee shall determine the Award or Awards to be made to each Participant, and each Award shall be subject to the terms and conditions of the Plan and the applicable Award Agreement. An Award may be made in the form of Shares or in the form of units equivalent to Shares (the “Stock Units”). Awards may be granted singly or in

combination, or in addition to, in tandem with or in substitution for any grants or rights under any employee or compensation plan of the Company or of any Affiliate. All or part of an Award may be subject to conditions and forfeiture provisions established by the Committee, and set forth in the Award Agreement, which may include, but are not limited to, continuous service with the Company or an Affiliate, achievement of specific business objectives, and other measurement of individual, business unit or Company performance.

6.2 Award of Shares . If an Award is granted in the form of Shares, such Award shall, at the option of the Company, be evidenced by book entry Shares held in the Participant’s name on the records of the Company’s transfer agent or by the issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company. Such book entry Shares or certificate or certificates shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Award to indicate restriction on transferability (“Restricted Stock”) until the Participant has met designated performance and/or length of employment requirements, if any, and the determination of the number of Shares, if any, that are to be forfeited pursuant to the terms of the Award is made. Until such time as all restrictions are removed, Restricted Stock shall not be transferable.

6.3 Award of Stock Units . If an Award is granted in the form of Stock Units, no certificates shall be issued with respect to such Stock Units, but the Company shall maintain a bookkeeping account in the name of the Participant to which the Stock Units shall relate. Each Stock Unit shall represent the right to receive a payment of one Share, or cash of equivalent value to the “fair market value” of the Company’s Common Stock at the time payment is made, or a continuing Stock Unit, or other Awards, or a combination thereof, with such restrictions and conditions as the Committee may determine in its sole discretion, including, but not limited to, the restriction of such Shares as Restricted Stock. For purposes of the Plan, “fair market value” shall be determined by such methods or procedures as may be established from time to time by the Committee in its sole discretion.

6.4 Voting Rights, Dividends and Dividend Equivalents . The Committee, in its sole discretion, may provide that Awards of Shares may contain voting rights and may earn dividends and that any Award may earn dividend equivalents. Such dividends or dividend equivalents may be paid currently or may be credited to an account established by the Committee under the Plan in the name of the Participant. Any crediting of dividend or dividend equivalents may be subject to such restrictions and conditions as the Committee may establish in its sole discretion, including reinvestment in additional Shares or Share equivalents.

6.5 Payment of Awards . Payment of Awards may be made at such times, with such restrictions and conditions, and in such forms (cash, stock, including Restricted Stock, Stock Units, other Awards, or combinations thereof) as the Committee in its sole discretion may determine at the time of grant of the Awards.

6.6 Securities Matters . No Shares shall be issued under the Plan prior to such time as counsel to the Company shall have determined that the issuance and delivery of such Shares will not violate any federal or state securities or other laws. Participants may be required by the Company, as a condition to the grant of an Award or the issuance of Shares under the Plan, to agree in writing that all Shares to be acquired pursuant to the Plan shall be held for his

or her own account without a view to any further distribution thereof, that the certificates for the Shares shall bear an appropriate legend to that effect, and that such Shares will not be transferred or disposed of except in compliance with applicable federal and state laws. The Company may, in its sole discretion, defer the effectiveness of any Award or the payment of any Award under the Plan in order to allow the issuance of Shares pursuant thereto to be made pursuant to registration or an exemption from registration or other methods for compliance available under federal or state securities laws. The Company shall be under no obligation to effect the registration pursuant to the Securities Act of 1933, as amended, of any Shares to be issued under the Plan or to effect similar compliance under any state law. If Shares are traded on a securities exchange, the Company shall not be required to deliver to the Participant certificates representing any Shares unless and until such Shares have been admitted for trading on such securities exchange.

6.7 Qualified Performance-Based Compensation . From time to time, the Committee may designate an Award granted pursuant to the Plan as an award of “qualified performance-based compensation” within the meaning of Section 162(m) of the Code (hereinafter referred to as a “Performance-Based Award(s)”). Notwithstanding any other provision of the Plan to the contrary, the following additional requirements shall apply to all Performance-Based Awards made to any Participant under the Plan:

(a) Any Performance Based Award shall be null and void and have no effect whatsoever unless the Plan shall be approved by the stockholders of the Company at the 2002 annual meeting of stockholders.

(b) For purposes of Section 162(m) of the Code, the only employees eligible to receive Performance-Based Awards shall be the employee’s identified in Section 4.1 hereof.

(c) The right to obtain Restricted Stock or the right to have a Stock Unit become payable in any fashion pursuant to a Performance-Based Award shall be determined solely on account of the attainment of one or more preestablished, objective performance goals for a performance period selected by the Committee at the time of the grant of the Performance-Based Award. Such goals shall be based solely on one or more of the following business criteria, which may apply to the individual in question, an identifiable business unit or the Company as a whole: stock price, market share, sales, earnings per share, return ratios, cumulative total return to shareholders, consolidated pre-tax earnings, net revenues, net earnings, operating income, earnings before interest and taxes, and cash flow, for the applicable performance period based on absolute Company or business unit performance and/or performance as compared to a pre-selected peer group of companies or external financial index and subject to such other special rules and conditions as the Committee may establish at any time ending on or before the 90th day of the applicable performance period. The foregoing shall constitute the sole business criteria upon which the performance goals under this Plan shall be based.

(d) The maximum number of Shares, whether or not in the form of Restricted Stock, which may be issued to any Participant pursuant to any Performance-Based Award in any calendar year period beginning with the period commencing January 1, 2002, shall not exceed 100,000 shares (subject to adjustment as provided for in Section 5.3).

(e) Not later than 90 days after the beginning of each performance period selected by the Committee for a Performance-Based Award, the Committee shall:

(i)

designate all Participants for such performance period; and

(ii)

establish the objective performance factors for each Participant for that performance period on the basis of one or more of the business criteria set forth herein.

(f) Following the close of each performance period and prior to payment of any amount to any Participant under a Performance-Based Award, the Committee must certify in writing as to the attainment of all factors (including the performance factors for a Participant) upon which any payments to a Participant for that performance period are to be based.

(g) Each of the foregoing provisions and all of the other terms and conditions of the Plan as it applies to any Performance-Based Award shall be interpreted in such a fashion so as to qualify all compensation paid thereunder as “qualified performance-based compensation” within the meaning of Section 162(m) of the Code.

SECTION VII.

TERMINATION OF EMPLOYMENT

Each Award Agreement shall include provisions governing the disposition of an Award in the event of the retirement, disability, death or other termination of a Participant’s employment with the Company or an Affiliate.

SECTION VIII.

CHANGE IN CONTROL

Notwithstanding any other provision in the Plan to the contrary, at the time of the grant of an Award, the Committee may determine to include provisions in such Award providing that upon the occurrence of a “Change in Control,” (i) all outstanding Awards (including Restricted Stock and Stock Units) shall immediately become fully vested (which, in the case of any Award which is subject to the achievement of designated performance objectives during a designated performance period, shall mean vested as if all such performance objectives had been achieved at the 100% award level at the end of such performance period) and (ii) all restrictions, conditions and limitations on all Awards (including Restricted Stock and Stock Units) which are outstanding at the time of such “Change in Control” or become outstanding by virtue of the operation of clause (i) hereof shall immediately lapse, provided that the provisions of clauses (i) and (ii) may be subject to such restrictions, conditions and limitations as the Committee may determine at the time of grant of the Award as set forth in the Award Agreement relating thereto.

For purposes of the Plan, “Change in Control” shall mean any of the following events:

1. 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 1, the following acquisitions shall not constitute a Change in Control; (A) any acquisition directly from the Company or (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or

2. The consummation of any merger or other business combination of the Company, sale or lease of all or substantially all of the Company’s assets or combination of the foregoing transactions (the “Transactions”) other than a Transaction immediately following which the 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

3. 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 of Directors of the Company 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 of Directors of the Company 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 in Control or engage in a proxy or other control contest); or

4. Such other event or transaction as the Board of Directors of the Company shall determine constitutes a Change in Control.

SECTION IX.

NON-TRANSFERABILITY

Except as otherwise determined by the Committee or set forth in the applicable Award Agreement, no Restricted Stock or Stock Unit, and no right under such Restricted Stock or Stock Unit, shall be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of during the time in which the requirement of continued employment or attainment of performance objectives has not been achieved. Each right under any Award shall be exercisable during the Participant’s lifetime only by the Participant or, if permissible under applicable law, by the Participant’s legal representatives.

SECTION X.

TAXES

In order to comply with all applicable federal or state income, social security, payroll, withholding or other tax laws or regulations, the Company may take such action, and may require a Participant to take such action, as it deems appropriate to ensure that all applicable federal or state income, social security, payroll, withholding or other taxes, which are the sole and absolute responsibility of the Participant, are withheld or collected from such Participant. In order to assist a Participant in paying all or part of the federal and state taxes to be withheld or collected upon receipt or payment of (or the lapse of restrictions relating to) an Award, the

Committee, in its sole discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (a) electing to have the Company withhold a portion of the shares of Common Stock otherwise to be delivered upon receipt or payment of (or the lapse of restrictions relating to) such Award with a fair market value equal to the amount of such taxes or (b) delivering to the Company shares of Common Stock other than the shares issuable upon receipt or payment of (or the lapse of restrictions relating to) such Award with a fair market value equal to the amount of such taxes.

SECTION XI.

AMENDMENT AND TERMINATION

11.1 Term of Plan . Unless the Plan shall have been discontinued or terminated as provided in Section 11.2 hereof, the Plan shall terminate on the last day of the Company’s fiscal year ending in 2008. No Awards may be granted after such termination, but termination of the Plan shall not alter or impair any rights or obligations under any Award theretofore granted, without the consent of the Participant or holder or beneficiary thereof, except as otherwise provided in the Plan or the Award Agreement.

11.2 Amendments to Plan . Except to the extent prohibited by applicable law and unless otherwise expressly provided in the Plan, the Committee may amend, alter, suspend, discontinue or terminate the Plan; provided, however, that notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the stockholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such approval:

(a) would cause Performance-Based Awards not to qualify as “qualified performance-based compensation” within the meaning of Section 162(m) of the Code; or

(b) would violate the rules or regulations of any securities exchange that are applicable to the Company.

11.3 Amendments to Awards . Except to the extent prohibited by applicable law and unless otherwise expressly provided in the Plan or an Award Agreement, the Committee may waive any condition of, or rights of the Company under, any outstanding Award, prospectively or retroactively. The Committee may not amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, in any manner that adversely affects any Award, without the consent of the Participant or holder or beneficiary thereof, except as otherwise provided in the Plan or the Award Agreement.

11.4 Correction of Defects, Omissions and Inconsistencies . Except to the extent prohibited by applicable law and unless otherwise expressly provided in the Plan or an Award Agreement, the Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan, any Award or any Award Agreement in the manner and to the extent it shall deem desirable to carry the Plan into effect.

SECTION XII.

MISCELLANEOUS

12.1 Governing Law . The Plan and any Award Agreement shall be governed by and construed in accordance with the internal laws, and not the laws of conflicts, of the State of Delaware.

12.2 Severability. If any provision of the Plan, any Award or any Award Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan, any Award or any Award Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan, the Award or the Award Agreement, such provision shall be stricken as to such jurisdiction, and the remainder of the Plan, any such Award or any such Award Agreement shall remain in full force and effect.

12.3 No Trust or Fund Created . Neither the Plan nor any Award or Award Agreement shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or of any Affiliate.

12.4 Headings . Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

Adopted April 30, 2002

Exhibit 10.17

CHANGE OF CONTROL SEVERANCE AGREEMENT, AS AMENDED

[ TIERS I, II & III ]

This Agreement (“Agreement”) is dated as of , 200 , by and between SUPERVALU INC., a Delaware corporation (the “Company”), and (the “Executive”).

WHEREAS, the Company’s Board of Directors (the “Board”) considers the continued services of key executives of the Company to be in the best interests of the Company and its stockholders; and

WHEREAS, the Board desires to assure, and has determined that it is appropriate and in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of key executives of the Company to their duties of employment without personal distraction or conflict of interest in circumstances arising from the possibility or occurrence of a change of control of the Company; and

WHEREAS, the Board has authorized the Company to enter into continuity agreements with those key executives of the Company who are designated by the Executive Personnel and Compensation Committee of the Board of Directors (the “Committee”), such agreements to set forth the severance compensation which the Company agrees under certain circumstances to pay such executives; and

WHEREAS, the Executive is a key executive of the Company and has been designated by the Committee as an executive to be offered such a continuity compensation agreement with the Company.

NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive agree as follows:

1. General Principles . This Agreement is effective on the date that it is signed by the Company and the Executive. For the purpose of this Agreement, the date on which a Change of Control occurs is the “COC Date.” If Executive ceases to be employed prior to a Change of Control by reason of an Anticipatory Separation (as defined in Section 3(c)), then Executive shall receive the severance benefits provided herein as if the COC Date for the Executive were the date immediately preceding the occurrence of that Anticipatory Separation. If Executive ceases to be employed prior to

a Change of Control for any reason other than an Anticipatory Separation, this Agreement shall terminate and have no effect and Executive shall receive such severance payments, if any, as are provided in any existing agreement between the Executive and the Company.

If a Change of Control occurs, the Executive’s employment shall be continued hereunder for the period (the “Employment Period”) commencing on the COC Date and ending on the second anniversary of the COC Date, subject to the Executive’s Separation from Service as described hereinafter. Any existing employment agreement between the Executive and the Company shall continue to be effective following the Change of Control, but severance amounts under this Agreement shall be reduced by amounts payable under any such employment agreement.

For purposes of this Agreement, 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 or any corporation controlled by the Company; or

(ii) the consummation of any merger or other business combination of the Company, sale or lease of all or substantially all of the Company’s assets or combination of the foregoing transactions (the “Transactions”) other than a Transaction immediately following which the 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 of Control.

2. Employment following Change of Control . Executive shall have at least the same titles and responsibilities as those in effect immediately prior to the Change of Control. Executive shall receive an annual base salary which is not less than the highest base salary in effect for Executive at any time in the 12 months preceding the Change of Control, and the Company shall review the salary annually with a view to increasing it; provided any such increase shall be in the sole discretion of the Board. Once increased, base salary cannot be decreased. If Executive has not been terminated, for the year of the Change of Control and for each year thereafter during which Executive is employed, the Executive shall be paid an annual bonus which shall be no less than the higher of (i) the bonus which the Executive would have received under the Company’s bonus plans as they were in effect prior to the Change of Control (based upon actual performance in the year up to the Change of Control), (ii) the average of the annual bonuses paid or payable in respect of the three years prior to the Change of Control, or (iii) the Executive’s target bonus immediately prior to the Change of Control (the highest of (i), (ii) and (iii) being the “Bonus”). In addition, the Executive shall be provided with incentive compensation, pension, general insurance, vacation, fringe benefits, perquisites (including an automobile allowance, if any), the use of an office and support staff that are commensurate with the benefits, vacation, expense reimbursement, fringe benefits, perquisites, office and support staff provided to Executive immediately prior to the Change of Control or, if more favorable to Executive, at the level made available to other similarly situated executive officers of the Company after the Change of Control. In addition, the Executive’s place of employment following a Change of Control shall be no farther than 45 miles from the Executive’s place of employment prior to the Change of Control.

3. Separation from Service Following Change of Control .

(a) The Executive shall be entitled to the severance benefits provided in Section 4 hereof if the Executive’s Separation from Service occurs (A) within two years following a Change of Control (i) by the Company without Cause, or (ii) by Executive for Good Reason, or (B) prior to a Change of Control, as a result of an Anticipatory Separation.

Notwithstanding the foregoing, Executive shall not be entitled to severance benefits under this Agreement if Executive’s Separation from Service is on account of Executive’s death or Disability. Executive’s death or Disability subsequent to a Separation from Service which would otherwise give rise to severance benefits under this Agreement will not disqualify Executive from receiving the severance benefits. For purposes of this Agreement:

(i) “Disability” shall have the same meaning as in the Company’s long-term disability plan.

(ii) “Retirement” shall mean a termination of employment by Executive pursuant to late, normal or early retirement under a pension plan sponsored by the Company, as defined in such plan.

(ii) “Separation from Service” shall mean a severance of the Executive’s employment under circumstances that would qualify as a separation from service as that term is used and defined under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

(b) Cause . For purposes of this Agreement, “Cause” shall mean:

(i) the willful and continued failure of Executive to perform substantially Executive’s 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 Executive by the Board or an officer of the Company which specifically identifies the manner in which the Board or the officer believes that Executive has not substantially performed Executive’s duties;

(ii) (A) the conviction of, or plea of guilty or nolo contendere to, a felony or (B) the willful engaging by Executive in gross misconduct which is materially and demonstrably injurious to the Company; or

(iii) Executive’s commission of an act or acts of personal dishonesty intended to result in substantial personal enrichment of the Executive at the expense of the Company;

provided , however , that in no event shall Cause exist by virtue of any action taken by the Executive (A) in compliance with express written directions of the Board, [the Company’s Chief Executive Officer or the officer to whom the Executive reports,] ¹

¹	Not to be included in CEO's Agreement, and, for those Executives reporting directly to the CEO, "the officer to whom the Executive reports" shall not be included.

or (B) in reliance upon the express written consent of the Company’s counsel. In each case above, for a Separation from Service to be for Cause: (a) the Executive must be provided with a Notice of Termination (as described in Section 3(d)) within six (6) months after the Company has actual knowledge of the act or omission constituting Cause; (b) the Executive must be provided with an opportunity to be heard by the Board no earlier than 30 days following the Notice of Termination (during which notice period Executive has failed to cure or resolve the behavior in question); and (c) there must be a good faith determination of Cause by at least 2/3rds of the non-employee outside directors of the Company.

(i) Executive’s annual base salary is reduced below the higher of (A) the amount in effect on the COC Date, or (B) the highest amount in effect at any time thereafter;

(ii) Executive’s annual bonus is reduced below the Bonus;

(iii) Executive’s duties and responsibilities or the program of incentive compensation (including, without limitation, long term incentive plans and equity incentive programs), vacation, fringe benefits, perquisites, retirement and general insurance benefits offered to Executive are materially and adversely diminished in comparison to the duties and responsibilities or the program of such benefits enjoyed by Executive on the COC Date;

(iv) Executive is required to be based at a location more than 45 miles from the location where Executive was based and performed services on the COC Date or Executive’s business travel obligations are significantly increased over those in effect immediately prior to the COC Date; [or] ²

(v) failure to provide for the assumption of this Agreement by any successor entity; [or

(vi) Executive’s termination of employment for any reason during the seventh month following the Change of Control;] ³

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 shall not, in and of itself, constitute Good Reason.

²	Not to be included in CEO’s agreement.

³	For CEO only.

Any event or condition described in clauses (i) through (iv) or a Separation from Service without Cause, either of which occurs prior to a Change of Control but which Executive reasonably demonstrates (A) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change of Control (a “Third Party”), or (B) otherwise arose in connection with, or in anticipation of a Change of Control, shall constitute Good Reason for purposes of this Agreement, notwithstanding that it occurred prior to a Change of Control (“Anticipatory Separation”).

Executive shall give the Company written notice of any event which Executive claims is the basis for Good Reason [(other than a Separation from Service pursuant to Section 3(c)(vi))] ⁴ , within 6 months of such event, and the Company shall have 30 days from its receipt of such notice within which to cure or resolve the behavior in question before Executive can terminate for Good Reason.

(d) Notice of Termination . Any purported termination of the Executive’s employment with the Company [(other than a Separation from Service pursuant to Section 3(c)(vi))] ⁵ shall be communicated by a Notice of Termination to the Executive, if such termination is by the Company, or to the Company, if such termination is by the Executive. For purposes of this Agreement, “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 termination of the Executive’s employment under the provisions so indicated. For purposes of this Agreement, no purported termination of Executive’s employment with the Company shall be effective without such a Notice of Termination having been given.

(e) Dispute Resolution . Disputes arising from the operation of this Agreement, including, but not necessarily being limited to, the manner of giving the Notice of Termination, the reasons or cause for the Executive’s termination or the amount of severance compensation due to the Executive subsequent to the Executive’s termination, shall be resolved by arbitration; provided, however , that disputes arising under Section 11 of this Agreement shall not be resolved under this Section 3(e). In the event that any dispute which shall be resolved by arbitration is not able to be resolved by mutual agreement of the parties within sixty calendar (60) days of the giving of such notice, the Executive and the Company hereby agree to promptly submit such a dispute to binding arbitration in Minnesota in accordance with Delaware law and the rules and procedures of the American Arbitration Association. During any period in which a dispute is pending, the Executive shall continue to receive Executive’s salary (including any Bonus) and benefits as if Executive’s employment with the Company had continued through the date of the arbiters’ determination, and any such payments or benefits shall not be offset against any severance, either under this Agreement or otherwise, to which Executive may be entitled.

⁴	For CEO only.

⁵	For CEO only.

4. Compensation Upon Separation from Service After a Change of Control .

If within two (2) years after the COC Date, the Executive has a Separation from Service, the Executive shall be entitled to the following payments and benefits:

(a) Severance . On the 10 ^th business day following such Separation from Service (or at such later time as may be provided under Section 4(g)), the Company shall pay or cause to be paid to the Executive a lump sum cash amount equal to [three (3) times][two (2) times] ⁶ the sum of (i) the Executive’s annual base salary on the COC Date (the “Base Salary”), (ii) the Bonus, and (iii) the value of the perquisites (e.g., car allowance, club dues, etc., including any ordinary tax gross-ups for perquisites) provided to Executive in respect of the year prior to the Change of Control. In addition, at the time of the above payment, the Executive shall be entitled to an additional lump sum cash payment equal to the sum of (A) Executive’s earned but unpaid salary through the date of Separation from Service, (B) a pro rata portion of the Bonus (calculated through the date of Separation from Service), and (C) an amount, if any, of accrued vacation pay, in each case, in full satisfaction of Executive’s rights thereto.

Except as specifically provided in this Agreement, nothing in this Agreement shall be interpreted or relied upon as a basis to amend, modify, accelerate or defer, or otherwise change any contributions to or payments that may be due from any other deferred compensation plan subject to Section 409A of the Code.

(b) Welfare Benefits . The Executive shall be entitled to continued medical, dental and life insurance coverage for the Executive and the Executive’s eligible dependents on the same basis as in effect prior to the Change of Control or the Executive’s Separation from Service, whichever is deemed to provide for more substantial benefits, until the earlier of (A) [thirty-six (36)][twenty-four (24)][twelve (12)] ⁷ months (the “Separation Period”) after the Executive’s Separation from Service or (B) the commencement of comparable coverage with a subsequent employer; provided, however , that such continued coverage shall not count against any continued coverage required by law; provided, further , that if the Company is not able to provide the coverage required above under the general terms and provisions of the Company’s plans, then the Company shall reimburse Executive for the cost of obtaining substantially similar benefits (the “Benefit Payment”) and shall pay Executive an additional amount, such that after payment of all applicable federal, state and local income and payroll taxes imposed upon Executive as a result of the Benefit Payment, the Executive retains an amount equal to the amount of the Benefit Payment.

⁶	Three times for Tier I (CEO & EVPs); Two times for Tier II (SVPs); and one time for Tier III (remaining participants).

⁷	Thirty-six months for Tier I; twenty-four months for Tier II; twelve months for Tier III.

(c) Pension Benefits . The Executive shall also receive additional credit for service and age (including, benefit accrual and vesting credit) for the Separation Period under any Company pension plan in which Executive participates based on the Executive’s Base Salary and Bonus in effect at the of termination of employment; provided, however , that in the case of a qualified pension plan, the Executive shall be paid on the 30 ^th day after Executive’s last day of employment (or at such later time as may be provided under Section 4(g)) a cash lump sum equal to the present value of the additional benefits Executive would have accrued if Executive had been credited for all purposes with the additional years of service and age under such plan. In addition, at the time of the above payment, the Executive shall receive an additional payment (the “401(k) Payment”) equal to the product of (i) [three (3)] [two (2)][one (1)] ⁸ , (ii) 0.0225, and (iii) the sum of the Base Salary and the Bonus.

(d) Outplacement . If so requested by the Executive, outplacement services shall be provided by a professional outplacement provider at a cost to the Company of not more than 10% of the Executive’s Base Salary. Such services may be provided either by direct payment to the outplacement provider or by reimbursement to Executive. However, services shall be paid or reimbursed only if the services are provided during the period beginning with the Separation from Service and ending on the December 31 of the second calendar year following the calendar year in which the Separation from Service occurred.

(e) Indemnification; Liability Insurance . The Company shall maintain, for a period not less than 6 years following Executive’s termination of employment, indemnification policies and liability insurance coverage for Executive’s benefit comparable to those indemnification policies and liability insurance coverage provided by the Company for Executive’s benefit prior to the Change of Control.

(f) Withholding . Payments and benefits provided pursuant to this Section 4 or any other provision of this Agreement shall be subject to any applicable payroll and other taxes required to be withheld.

(g) Limitations on Payment of Deferred Compensation . To the extent that any payments or benefits to be provided to the Executive under this Agreement would be considered deferred compensation under Section 409A of the Code and the Executive is a “Key Employee” as defined in Section 416(i) of the Code, then any such payments that would otherwise be due and payable during the first six months following and on account of a Separation from Service shall instead be paid to the Executive

⁸	Three for Tier I; two for Tier II; and one for Tier III.

upon the earlier of (i) six months and one day after the date the Executive’s Separation from Service 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 Executive under this Agreement would be considered deferred compensation under Section 409A of the Code, the provisions of this Agreement pertaining thereto shall be construed and administered to comply with Section 409A. Neither the Company nor any of its officers, directors, agents or affiliates shall be obligated, directly or indirectly, to any Participant or any other person for any taxes, penalties, interest or like amounts that may be imposed on the Participant or other person on account of any amounts paid or payable under this Plan or on account of any failure to comply with Section 409A.

5. Certain Additional Payments by the Company :

(a) Anything in this Agreement to the contrary notwithstanding, if it is determined (as hereafter provided) that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being “contingent on a change in ownership or control” of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment or payments (a “Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

(b) Subject to the provisions of Section 5(f) hereof, all determinations required to be made under this Section 5, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the nationally recognized firm of certified public accountants (the “Accounting Firm”) used by the Company prior to the Change of Control (or, if such Accounting Firm declines to serve, the Accounting Firm shall be a nationally recognized firm of certified public accountants selected by the Executive). The Accounting Firm shall be directed by the Company or the Executive to submit its determination and detailed supporting calculations to both

the Company and the Executive within 15 calendar days after the Separation from Service, if applicable, and any other such time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to the Executive on the fifth business day after receipt of such determination and calculations. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Executive with an opinion that Executive has substantial authority not to report any Excise Tax on Executive’s federal, state, local income or other tax return. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 5(f) hereof and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive on the fifth business day after receipt of such determination and calculations.

(c) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by Section 5(b) hereof.

(d) The federal, state and local income or other tax returns filed by the Executive and the Company (or any filing made by a consolidated tax group which includes the Company) shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of Executive’s federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive’s federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business days pay to the Company the amount of such reduction.

(e) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections 5(b) and (d) hereof shall be borne by the Company. If such fees and expenses are initially advanced by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses on the fifth business day after receipt from the Executive of a statement therefore and reasonable evidence of Executive’s payment thereof.

(f) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as promptly as practicable but no later than 10 business days after the Executive actually receives notice of such claim and the Executive shall further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by the Executive). The Executive shall not pay such claim prior to the earlier of (a) the expiration of the 30-calendar-day period following the date on which Executive gives such notice to the Company and (b) the date that any payment of amount with respect to such claim is due. If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

(i) provide the Company with any written records or documents in Executive’s possession relating to such claim reasonably requested by the Company;

(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company;

(iii) cooperate with the Company in good faith in order to effectively contest such claim; and

(iv) permit the Company to participate in any proceedings relating to such claim;

provided, however , that the Company shall bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and shall indemnify and hold harmless the Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect

thereto, imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Section 5(f), the Company shall control all proceedings taken in connection with the contest of any claim contemplated by this Section 5(f) and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim ( provided, however , that the Executive may participate therein at Executive’s own cost and expense) and may, at its option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however , that if the Company directs the Executive to pay the tax claimed and sue for a refund, the Company shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect thereto; and provided further, however , that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of any such contested claim shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(g) If the Executive receives any refund with respect to such claim, the Executive shall be entitled to retain same (together with any interest paid or credited thereon after any taxes applicable thereto).

6. Obligations Absolute; No Mitigation; No Effect On Other Rights .

(a) The obligations of the Company to make the payment to the Executive, and to make the arrangements, provided for herein are absolute and unconditional and may not be reduced by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or any third party at any time.

(b) The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment.

(c) The provisions of this Agreement, and any payment provided for herein, shall not supersede or in any way limit the rights, benefits, duties or obligations which the Executive may now or in the future have under any benefit, incentive or other plan or arrangement of the Company or any other agreement with the Company.

7. Not an Employment Agreement . Subject to the terms of this or any other agreement or arrangement between the Company and the Executive that may then be in effect, nothing herein shall prevent the Company from terminating the Executive’s employment.

8. Successors; Binding Agreement, Assignment .

(a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business of the Company, by agreement to expressly, absolutely and unconditionally assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive’s employment with the Company or such successor for Good Reason immediately prior to or at any time after such succession. As used in this Agreement, “Company” shall mean (i) the Company as hereinbefore defined, and (ii) any successor to all or substantially all of the Company’s business or assets which executes and delivers an agreement provided for in this Section 8(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, including any parent or subsidiary of such a successor.

(b) This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s estate or designated beneficiary. Neither this Agreement nor any right arising hereunder may be assigned or pledged by the Executive.

9. Notice . For purpose of this Agreement, notices and all other communications provided for in this Agreement or contemplated hereby 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 the Executive, to the Executive at the most current address shown on the Executive’s 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.

10. Expenses . In addition to all other amounts payable to the Executive under this Agreement, the Company shall pay or reimburse the Executive for legal fees (including without limitation, any and all court costs and attorneys’ fees and expenses), incurred by the Executive in connection with or as a result of any claim, action or proceeding brought by the Company or the Executive with respect to or arising out of this Agreement or any provision hereof; unless, (i) in the case of an action brought by the Executive, it is determined by an arbitrator or by a court of competent jurisdiction that such action was frivolous and was not brought in good faith, or (ii) in the case of a claim arising under section 11 hereof, the Company prevails on the merits of such claim.

11. Nondisclosure of Confidential Information; Non-Competition .

(a) Executive shall not, without the prior written consent of the Company, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity any Confidential Information pertaining to the business of the Company or any of its affiliates, except (i) while employed by the Company, in the business of and for the benefit of the Company, or (ii) when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of the Company, or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information. For purposes of this Section 11(a), “Confidential Information” shall mean non-public information concerning the financial data, strategic business plans, product development (or other proprietary product data), customer lists, marketing plans and other non-public, proprietary and confidential information of the Company or its affiliates (the “Restricted Group”) or customers, that, in any case, is not otherwise available to the public (other than by Executive’s breach of the terms hereof).

[Note: Sections 11(b-d) below shall apply only to those Executives in Tier I (the CEO, President or any Executive Vice President of the Company ); or Tier II (Senior Vice Presidents of the Company) who have executed this Agreement in the form hereof.]

(b) During the period of Executive’s employment hereunder and for one (1) year thereafter, Executive agrees that, without the prior written consent of the

Company, (A) Executive will not, directly or indirectly, either as principal, manager, agent, consultant, officer, stockholder, partner, investor, lender or employee or in any other capacity, carry on, be engaged in or have any financial interest in, any business which is in competition with the business of the Restricted Group and (B) Executive shall not, on Executive’s own behalf or on behalf of any person, firm or company, directly or indirectly, solicit or offer employment to any person who has been employed by the Restricted Group at any time during the 12 months immediately preceding such solicitation.

(c) For purposes of this Section 11, a business shall be deemed to be in competition with the Restricted Group if it or any of its material affiliates is in the business of selling food (fresh, packaged and/or frozen), retail or wholesale, within the continental United States. Nothing in this Section 11 shall be construed so as to preclude Executive from investing in any publicly or privately held company, provided Executive’s beneficial ownership of any class of such company’s securities does not exceed 1% of the outstanding securities of such class. Executive shall retain the right to seek the written approval of the Company’s [successor] ⁹ Chief Executive Officer waiving the requirements of Section 11(b) with respect to any particular activity in which Executive seeks to engage.

(d) Executive and the Company agree that this covenant not to compete is a reasonable covenant under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction such restraint is not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of this covenant as to the court shall appear not reasonable and to enforce the remainder of the covenant as so amended.

(e) Executive agrees that any breach of the covenants contained in this Section 11 would irreparably injure the Company. Accordingly, Executive agrees that the Company may, in addition to pursuing any other remedies it may have in law or in equity, cease making any payments otherwise required by this Agreement and obtain an injunction against Executive from any court having jurisdiction over the matter restraining any further violation of this Agreement by Executive; provided, however , that the Company may not cease making any payments required by this Agreement until a court or arbitrator(s) having jurisdiction over the matter has made a final non-appealable determination on the merits of such action in the Company’s favor.

12. Miscellaneous . No provision of this Agreement may be amended, altered, modified, waived or discharged unless such amendment, alteration, modification, waiver or discharge is agreed to in writing signed by the Executive and such officer of the Company as shall be specifically designated by the Committee or by the Board. No waiver by either party, at any time, of any breach by the other party of, or of compliance by the other party with, any condition or provision of this Agreement to be performed or complied with by such other party shall be deemed a waiver of any

⁹	For CEO only.

similar or dissimilar provision or condition of this Agreement or any other breach of or failure to comply with the same condition or provision at the same time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to its conflict of laws rules. Any action brought by the Executive or the Company shall be brought and maintained in a court of competent jurisdiction in the State of Minnesota.

13. Severability . If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party hereto waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect.

14. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

15. Entire Agreement . This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior oral or written agreements, commitments or understanding with respect to the matters provided for herein (except that any other non-disclosure, non-competition or non-solicitation agreements or provisions the parties hereto have entered into shall continue to be in effect).

16. Grantor Trust . Immediately prior to a Change of Control, the Company shall contribute to a grantor trust an amount equal to 125% of the payments Executive would receive from the Company, pursuant to Section 4 hereof, if Executive were terminated without Cause by the Company or if Executive were to terminate Executive’s employment for Good Reason, in either case, immediately following the Change of Control.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.


				SUPERVALU INC.


Witnesses:



				Name:

				Title:


				Executive

Exhibit 10.31

SUPERVALU INC.

2002 STOCK PLAN

STOCK OPTION AGREEMENT

This agreement is made and entered into as of the Grant Date indicated below, by and between SUPERVALU INC. and the individual whose name and signature appears below (“Optionee”).

The Company has established the 2002 Stock Plan (the “Plan”), under which key employees of the Company and its Affiliates may be granted options to purchase shares of the Company’s common stock. Optionee has been selected by the Company to receive an Option subject to the provisions of this agreement. Capitalized terms that are used in this agreement, that are not defined, shall have the meanings ascribed to them in the Plan.

The Company and Optionee hereby agree as follows:

Option Grant. The Company hereby grants to Optionee, subject to Optionee’s acceptance hereof, the right and option to purchase the number of Shares indicated below at the exercise price per Share indicated below. The Option has been designated as a Non-Qualified Stock Option (“NQ”) or Incentive Stock Option (“ISO”) for tax purposes, the consequences of which are set forth in the prospectus that describes the Plan.

Acceptance of Option and Stock Option Terms and Conditions. The Option is subject to and governed by the Stock Option Terms and Conditions attached hereto as Exhibit A, and the Plan. To accept the Option, Optionee must sign and return a copy of this agreement to the Company within ninety (90) days after the Grant Date. By so doing, Optionee agrees to be bound by the Stock Option Terms and Conditions and the provisions of the Plan.

Vesting, Exercise Rights and Expiration. Twenty percent (20%) of the Option shall vest on the Grant Date and the remaining portion shall vest in four (4) equal annual installments commencing on each anniversary of the Grant Date. The vested portion of the Option may be exercised in whole or part, subject to the Stock Option Terms and Conditions. Except as otherwise provided in the Stock Option Terms and Conditions, the Option will expire on the Expiration Date indicated below.

Grant Number

Grant Date

Number of Shares

Type of Option

NQ or ISO

Exercise Price

Expiration Date


SUPERVALU INC.								OPTIONEE

By:
								[Insert Name]
								SS# [Insert SSN]

SUPERVALU INC.

2002 STOCK PLAN

STOCK OPTION TERMS AND CONDITIONS

(KEY EXECUTIVES), as amended

These Stock Option Terms and Conditions (“Terms and Conditions”) apply to the Option granted to you under the 2002 Stock Plan, pursuant to the Stock Option Agreement to which this document is attached. Capitalized terms that are used in this document, but are not defined, shall have the meanings ascribed to them in the Plan or the Stock Option Agreement.

1. Vesting and Exercisability. The Option shall vest in cumulative installments as follows:

As of the Grant Date, twenty percent (20%) of the Option shall immediately vest and twenty percent (20%) of the Shares subject to the Option shall then be available for purchase, provided you have signed and returned your Stock Option Agreement within the time period specified.

On each anniversary of the Grant Date, an additional twenty percent (20%) of the Option shall vest and an additional twenty percent (20%) of the Shares subject to the Option shall then be available for purchase.

The vested portion of the Option may be exercised at any time, or from time to time, to purchase Shares. If in any year the full amount of Shares that may be purchased pursuant to the vested portion of the Option is not purchased, the remaining amount of such Shares shall be available for purchase during the remainder of the term of the Option.

2. Manner of Exercise. Except as provided in Section 8 below, you cannot exercise the Option unless at the time of exercise you are an employee of the Company or an Affiliate. Prior to your death, only you may exercise the Option. You may exercise the Option as follows:

By delivering a “Notice of Exercise of Stock Option” to the Company at its principal office, attention: Corporate Secretary, stating the number of Shares being purchased and accompanied by payment of the full purchase price for such Shares (determined by multiplying the Exercise Price by the number of Shares to be purchased). [Note: In the event the Option is exercised by any person other than you pursuant to any of the provisions of Section 8 below, the Notice must be accompanied by appropriate proof of such person’s right to exercise the Option.]; or

By entering an order to exercise the Option using E*TRADE’s OptionsLink website.

3. Method of Payment. The full purchase price for the Shares to be purchased upon exercise of the Option must be paid as follows:

By delivering directly to the Company, cash or its equivalent payable to the Company;

By delivering indirectly to the Company, cash or its equivalent payable to the Company through E*TRADE’s OptionsLink website; or

By delivering Shares having a Fair Market Value as of the Exercise Date equal to the purchase price (commonly known as a “Stock Swap”); or

By delivering the full purchase price in a combination of cash and shares.

4. Delivery of Shares. You shall not have any of the rights of a stockholder with respect to any Shares subject to the Option until such Shares are purchased by you upon exercise of the Option. Such Shares shall then be issued and delivered to you by the Company as follows:

In the form of a stock certificate registered in your name or your name and the name of another adult person (21 years of age or older) as joint tenants, and mailed to your address; or

In “book entry” form, i.e. registered with the Company’s stock transfer agent, in your name or your name and the name of another adult person (21 years of age or older) as joint tenants, and sent by electronic delivery to your brokerage account.

5. Withholding Taxes. You are responsible for the payment of any federal, state, local or other taxes that are required to be withheld by the Company upon exercise of the Option and you must promptly remit such taxes to the Company. You may elect to remit these taxes by:

Delivering directly to the Company, cash or its equivalent payable to the Company;

Delivering indirectly to the Company, cash or its equivalent payable to the Company through E*TRADE’s OptionsLink website;

Having the Company withhold a portion of the Shares to be issued upon exercise of the Option having a Fair Market Value equal to the amount of federal and state income tax required to be withheld upon such exercise (commonly referred to as a “Tax Swap” or “Stock for Tax”); or

Delivering Shares to the Company, other than the Shares issuable upon exercise of the Option, having a Fair Market Value equal to such taxes. [Note: In addition to delivering Shares to satisfy required tax withholding obligations, you may also elect to deliver additional Shares to the Company, other than the Shares issuable upon exercise of the Option, having a Fair Market Value equal to the amount of any additional federal or state income taxes imposed on you in connection with the exercise of the Option, provided such Shares have been held by you for a minimum of six (6) months.]

6. Change of Control. In the event of the occurrence of a Change of Control of the Company, the unvested portion of the Option shall immediately vest and the Option shall become immediately exercisable in full. The term “Change of Control”, means any of the following events:

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 twenty percent (20%) or more of either (A) the then outstanding shares of common stock of the Company or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, that for purposes of this subsection (a), the following share acquisitions shall not constitute a Change of Control; (A) any acquisition directly from the Company or (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or

The consummation of any merger or other business combination of the Company, the sale or lease of all or substantially all the Company’s assets or any combination of the foregoing transactions (each a “Transaction”) other than a Transaction immediately following which the stockholders of the Company and any trustee or fiduciary of any Company employee benefit plan immediately prior to the Transaction own at least sixty percent (60%) of the voting power, directly or indirectly, of (A) the surviving corporation in any such merger or other business combination; (B) the purchaser or lessee of the Company’s assets; or (C) both the surviving corporation and the purchaser or lessee in the event of any combination of Transactions; or

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 of Directors of the Company 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.

Such other event or transaction as the Board of Directors of the Company shall determine constitutes a Change of Control.

You acknowledge that as a result of the foregoing acceleration of vesting and exercisability, to the extent that the aggregate Fair Market Value of all Shares subject to stock options that are Incentive Stock Options which are exercisable for the first time by you during any calendar year (under all plans of the Company and its subsidiaries, if any) exceeds $100,000, all or any portion of the Option, as well as any other stock option held by you, may become a stock option which is not an Incentive Stock Option.

7. Transferability. Unless otherwise determined by the Committee, the Option shall not be transferable other than by will or the laws of descent and distribution. More particularly, the Option may not be assigned, transferred, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to these provisions, or the levy of an execution, attachment or similar process upon the Option, shall be void.

You may designate a beneficiary or beneficiaries to exercise your rights with respect to the Option upon your death. In the absence of any such designation, benefits remaining unpaid at your death shall be paid to your estate.

8. Effect of Termination of Employment. Following the termination of your employment with the Company or an Affiliate for any of the reasons set forth below, your right to exercise the Option, as well as that of your beneficiary or beneficiaries, shall be as follows:

Voluntary or Involuntary . In the event your employment is terminated voluntarily or involuntarily for any reason other than retirement, death or permanent disability, you may exercise the Option prior to its Expiration Date, at any time within a period of up to two (2) years after such termination of employment, to the full extent of the number of Shares you were entitled to purchase under that portion of the Option which was vested as of the date of termination of your employment. However, the Committee may, in its sole and absolute discretion, except in the case of the termination of your employment following the occurrence of a Change of Control, during a period of seventy-five (75) days after such termination of employment and following ten (10) days’ written notice to you, reduce the period of time during which the Option may be exercised to any period of time designated by the Committee, provided such period is not less than ninety (90) days following termination of your employment.

Retirement . You shall be deemed to have retired, solely for purposes of this Agreement, in the event that your employment terminates for any reason other than death or disability and you are at least 55 years of age.

(i)

In the event you retire and you have completed ten (10) or more years of service with the Company or an Affiliate, the unvested portion of the Option shall immediately vest in full. Thereafter, you may exercise the Option at any time prior to its Expiration Date, to the full extent of the Shares covered by the Option that were not previously purchased.

(ii)

In the event you retire and you have completed less than ten (10) years of service with the Company or an Affiliate, you may exercise the Option prior to its Expiration Date, at any time within a period of up to two (2) years after the date of your retirement, to the full extent of the number of Shares you were entitled to purchase under that portion of the Option which was vested as of the date of your retirement.

Death Prior to Age 55. In the event your death occurs before you attain the age of fifty-five (55), while you are employed by the Company or an Affiliate, or within three (3) months after the termination of your employment, the unvested portion of the Option shall immediately vest in full. Thereafter, the Option may be exercised prior to its Expiration Date, by your beneficiary(ies), or a legatee(s) under your last will, or your personal representative(s) or the distributee(s) of your estate, to the full extent of the Shares covered by the Option that were not previously purchased:

(i)

At any time within a period of up to two (2) years after your death if such occurs while you are employed, or

(ii)

At any time within a period of up to two (2) years following the termination of your employment if your death occurs within three (3) months thereafter.

Death After Age 55. In the event your death occurs after you attain the age of fifty-five (55), while you are employed by the Company or an Affiliate, or within three (3) months after the termination of your employment, the unvested portion of the Option shall immediately vest in full. Thereafter, the Option may be exercised prior to its Expiration Date, by your beneficiary(ies), or a legatee(s) under your last will, or your personal representative(s) or the distributee(s) of your estate, to the full extent of the Shares covered by the Option that were not previously purchased:

(i)

At any time, if you have completed ten (10) or more years of service with the Company or an Affiliate; or

(ii)

If you have completed less than ten (10) years of service with the Company or an Affiliate, then at any time within a period of up to two (2) years after the date of your death if such occurs while you are employed, or within a period of up to two (2) years after the date of termination of your employment if your death occurs within three (3) months thereafter.

Disability Prior to Age 55 . In the event your employment terminates before you attain the age of fifty-five (55), as a result of a permanent disability, the unvested portion of the Option shall immediately vest in full. Thereafter, the Option may be exercised prior to its Expiration Date, by you or by your personal representative(s), at any time within a period of up to two (2) years after your employment terminates due to such permanent disability, to the full extent of the Shares covered by the Option that were not previously purchased.

You shall be considered permanently disabled if 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.

Disability After Age 55 . In the event your employment terminates as a result of a permanent disability after you attain the age of fifty-five (55), the unvested portion of the Option shall immediately vest in full. Thereafter, the Option may be exercised prior to its Expiration Date, by you or by your personal representative(s), to the full extent of the Shares covered by the Option that were not previously purchased:

(i)

At any time, if you have completed ten (10) or more years of service with the Company or an Affiliate; or

(ii)

If you have completed less than ten (10) years of service with the Company or an Affiliate, then at any time within a period of two (2) years after your employment terminates due to such permanent disability.

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.

Change in Duties/Leave of Absence . The Option 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.

9. Repurchase Rights. If you exercise the Option within six (6) months prior to or three (3) months after the date your employment with the Company or an Affiliate terminates for any reason, whether voluntary or involuntary, with or without cause (except as a result of death, permanent disability or retirement pursuant to the Company’s retirement plans then in effect), the Company shall have the right and option to repurchase from you, that number of Shares which is equal to the number you purchased upon such exercise(s) within such time periods, and you agree to sell such Shares to the Company.

The Company may exercise its repurchase rights 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 (i) within thirty (30) days following the termination of your employment for the repurchase of Shares purchased prior to such termination, or (ii) within thirty (30) days after any exercise of the Option for the repurchase of Shares purchased after your termination of employment. Within thirty (30) days after the mailing of such notice, you shall deliver to the Company the number of Shares the Company has elected to repurchase and the Company shall pay to you in cash, as the repurchase price for such Shares upon their delivery, an amount which shall be equal to the purchase price paid by you for the Shares. If you have disposed of the Shares, then in lieu of delivering an equivalent number of Shares to the Company, you must pay to the Company the amount of gain realized by you from the disposition of the Shares exclusive of any taxes due and payable or commissions or fees arising from such disposition.

The Company may exercise its repurchase rights described above only in the event you are terminated for cause, or if you breach any of the covenants contained in Section 10 below.

If the Company exercises its repurchase option prior to the actual issuance and delivery to you of any Shares pursuant to the exercise of the Option, no Shares need be issued or delivered. In lieu thereof, the Company shall return to you the purchase price you tendered upon the exercise of the Option to the extent that it was actually received from you by the Company.

Following the occurrence of a Change of Control, the Company shall have no right to exercise the repurchase rights set forth in this Section.

10. Employee Covenants. In consideration of benefits described elsewhere in these Terms and Conditions and the Stock Option Agreement to which they apply, 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 accompanying the Stock Option Agreement, as follows:

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 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.

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 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.

Non-Solicitation of Existing or Prospective Customers, Vendors, and Suppliers . You specifically acknowledge that the Confidential Information described in Section 10(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 the their businesses depends upon the 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 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 10(e)(i)) or cause such customer, supplier, or vendor to materially change or terminate its business or commercial relationship with the Company or its Affiliates.

Non-Solicitation of Employees . You specifically acknowledge that the Confidential Information described in Section 10(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.

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. This Section 10(e) shall not apply in the event of a Change in Control as described in Section 6 above.

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.

ii)

To “engage in or carry on” shall mean to have ownership in such business (excluding ownership of up to 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.

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.

Remedies for Breach of These Covenants . Any breach of the covenants in this Section 10 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 Company or any of its Affiliates for any breach by you of this Section 10, 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, the Option, and any other unexercised options issued under the Plan or any other stock option plans of the Company will immediately terminate.

Enforceability of These Covenants . It is further agreed and understood by you and the Company that if any part, term, or provision of these Terms and Conditions 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 these Terms and Conditions shall not be affected or impaired in any way.

11. Arbitration. You and the Company agree that any controversy, claim, or dispute arising out of or relating to the Stock Option Agreement or the breach of any of these Stock Option Terms and Conditions, 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 binding arbitration before a neutral arbitrator under rules set forth in the Federal Arbitration Act, except for claims by the Company relating to your breach of any of the employee covenants set forth in Section 10 above. By way of example only, claims subject to this agreement to arbitrate include claims litigated under federal, state and local statutory or common law, such as the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, including the Civil Rights Act of 1994, the Americans with Disabilities Act, the law of contract and the law of tort. You and the Company agree that such claims may be brought in an appropriate administrative forum, but at the point at which you or the Company seek a judicial forum to resolve the matter, this agreement for binding arbitration becomes effective, and you and the Company hereby knowingly and voluntarily waive any right to have any such dispute tried and adjudicated by a judge or jury. The foregoing not to the contrary, the Company may seek to enforce the employee covenants set forth in Section 10 above, in any court of competent jurisdiction.

This agreement to arbitrate shall continue in full force and effect despite the expiration or termination of your Option or your employment relationship with the Company or any of its Affiliates. You and the Company agree that any award rendered by the arbitrator 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, the

Company or any of its Affiliates had the matter been heard in court. All expenses of the 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 unless the law provides otherwise.

12. Severability. In the event that any portion of these Terms and Conditions shall be held to be invalid, the same shall not affect in any respect whatsoever the validity and enforceability of the remainder of these Terms and Conditions.

Exhibit 10.32

SUPERVALU INC.

2002 STOCK PLAN

RESTORATION STOCK OPTION AGREEMENT

This Restoration Stock Option Agreement is made and entered into as of the Grant Date listed below, by and between SUPERVALU INC. (the “Company”) and the individual whose name and address appears in the signature space below (“Optionee”).

The Company has established the 2002 Stock Plan, as amended (the “Plan”), under which certain key employees of the Company may be granted restoration stock options (each a “Restoration Option”) to purchase shares of the Company’s common stock, par value $1.00 per share (each a “Share”), in consideration for tendering Shares in payment for the exercise price and withholding tax, if applicable, due on the exercise of a stock option previously granted by the Company. Optionee has tendered Shares in payment of the exercise price and withholding tax, if applicable, of a stock option and has been granted a Restoration Option to purchase additional shares of common stock of the Company as follows:

In consideration of the foregoing, the Company and Optionee hereby agree as follows:

1. Grant. The Company hereby grants Optionee a Restoration Option to purchase the number of Shares set forth in the table below, effective as of the Grant Date indicated therein. The Restoration Option shall be a non-qualified, having an exercise price and expiration date as indicated in the table below. Subject to the Restoration Stock Option Terms and Conditions attached hereto (the “Terms and Conditions”), the Restoration Option is immediately exercisable, with respect to all of the Shares subject thereto, as of the Grant Date.


Grant No.	Grant Date	Number of Shares	Type of Option	Exercise Price	Expiration Date

2. Acceptance of Restoration Option and Terms and Conditions. The Restoration Option is governed by and subject to the Terms and Conditions attached hereto and the provisions of the Plan. Optionee hereby acknowledges receipt of the Terms and Conditions, and the Plan, and represents that he or she has read and understands same. Optionee hereby accepts the Restoration Option and agrees to be bound by all of the Terms and Conditions and the provisions of the Plan.

In witness whereof, this Restoration Stock Option Agreement has been executed by the Company and Optionee as of the Grant Date listed above.


SUPERVALU INC.						OPTIONEE:

By:

SUPERVALU INC.

2002 STOCK PLAN

RESTORATION STOCK OPTION TERMS & CONDITIONS

(KEY EXECUTIVES), as amended

These Restoration Stock Option Terms and Conditions (“Terms and Conditions”) apply to the Restoration Option granted under the SUPERVALU INC. 2002 Stock Plan, pursuant to the Restoration Stock Option Agreement to which this document is attached. Capitalized terms that are used in this document, but are not defined, shall have the meanings ascribed to them in the Plan or the Restoration Stock Option Agreement.

1. Vesting and Exercisability. The Restoration Option shall vest as follows:

As of the Grant Date, one hundred percent (100%) of the Restoration Option shall immediately vest.

The Restoration Option may be exercised at any time, or from time to time, as to any or all full shares.

The term of the Restoration Option shall expire at the close of business on the expiration date set forth in the attached Agreement (the “Expiration Date”) or such shorter period as is prescribed in Section 7.

2. Manner of Exercise. Except as provided in Section 7 below, you cannot exercise the Restoration Option unless at the time of exercise you are an employee of the Company or an Affiliate. Prior to your death, only you may exercise the Restoration Option. You may exercise the Restoration Option as follows:

By delivering a “Notice of Exercise of Stock Restoration Option” to the Company at its principal office, attention: Corporate Secretary, stating the number of Shares being purchased and accompanied by payment of the full purchase price for such Shares (determined by multiplying the Exercise Price by the number of Shares to be purchased). [Note: In the event the Restoration Option is exercised by any person other than you pursuant to any of the provisions of Section 7 below, the Notice must be accompanied by appropriate proof of such person’s right to exercise the Restoration Option.]; or

By entering an order to exercise the Restoration Option using E*TRADE’s OptionsLink website.

3. Method of Payment. The full purchase price for the Shares to be purchased upon exercise of the Restoration Option must be paid as follows:

By delivering directly to the Company, cash or its equivalent payable to the Company;

By delivering indirectly to the Company, cash or its equivalent payable to the Company through E*TRADE’s OptionsLink website; or

By delivering Shares having a Fair Market Value as of the Exercise Date equal to the purchase price (commonly known as a “Stock Swap”); or

By delivering the full purchase price in a combination of cash and shares.

4. Delivery of Shares. You shall not have any of the rights of a stockholder with respect to any Shares subject to the Restoration Option until such Shares are purchased by you upon exercise of the Restoration Option. Such Shares shall then be issued and delivered to you by the Company as follows:

In the form of a stock certificate registered in your name or your name and the name of another adult person (21 years of age or older) as joint tenants, and mailed to your address; or

5. Withholding Taxes. You are responsible for the payment of any federal, state, local or other taxes that are required to be withheld by the Company upon exercise of the Restoration Option and you must promptly remit such taxes to the Company. You may elect to remit these taxes by:

Delivering directly to the Company, cash or its equivalent payable to the Company;

Delivering indirectly to the Company, cash or its equivalent payable to the Company through E*TRADE’s Restoration OptionsLink website;

Having the Company withhold a portion of the Shares to be issued upon exercise of the Restoration Option having a Fair Market Value equal to the amount of federal and state income tax required to be withheld upon such exercise (commonly referred to as a “Tax Swap” or “Stock for Tax”); or

Delivering Shares to the Company, other than the Shares issuable upon exercise of the Restoration Option, having a Fair Market Value equal to such taxes. [Note: In addition to delivering Shares to satisfy required tax withholding obligations, you may also elect to deliver additional Shares to the Company, other than the Shares issuable upon exercise of the Restoration Option, having a Fair Market Value equal to the amount of any additional federal or state income taxes imposed on you in connection with the exercise of the Restoration Option, provided such Shares have been held by you for a minimum of six (6) months.]

6. Transferability. Unless otherwise determined by the Committee, the Restoration Option shall not be transferable other than by will or the laws of descent and distribution. More particularly, the Restoration Option may not be assigned, transferred, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Restoration Option contrary to these provisions, or the levy of an execution, attachment or similar process upon the Restoration Option, shall be void.

You may designate a beneficiary or beneficiaries to exercise your rights with respect to the Restoration Option upon your death. In the absence of any such designation, benefits remaining unpaid at your death shall be paid to your estate.

7. Effect of Termination of Employment. Following the termination of your employment with the Company or an Affiliate for any of the reasons set forth below, your right to exercise the Restoration Option, as well as that of your beneficiary or beneficiaries, shall be as follows:

Voluntary or Involuntary . In the event your employment is terminated voluntarily or involuntarily for any reason other than retirement, death or permanent disability, you may exercise the Restoration Option prior to its Expiration Date, at any time within a period of up to two (2) years after such termination of employment. However, the Committee may, in its sole and absolute discretion, except in the case of the termination of your employment following the occurrence of a Change of Control as defined in Section 12 below, during a period of seventy-five (75) days after such termination of employment and following ten (10) days’ written notice to you, reduce the period of time during which the Restoration Option may be exercised to any period of time designated by the Committee, provided such period is not less than ninety (90) days following termination of your employment.

Retirement. You shall be deemed to have retired, solely for purposes of this Agreement, in the event that your employment terminates for any reason other than death or disability and you are at least 55 years of age.

(i)

In the event you retire and you have completed ten (10) or more years of service with the Company or an Affiliate, you may exercise the Option at any time prior to its Expiration Date, to the full extent of the Shares covered by the Option that were not previously purchased.

(ii)

In the event you retire and you have completed less than ten (10) years of service with the Company or an Affiliate, you may exercise the Option prior to its Expiration Date, at any time within a period of up to two (2) years after the date of your retirement, to the full extent of the Shares covered by the Option that were not previously purchased.

Death Prior to Age 55. In the event your death occurs before you attain the age of fifty-five (55), while you are employed by the Company or an Affiliate, or within three (3) months after the termination of your employment, the Restoration Option may be exercised prior to its Expiration Date, by your beneficiary(ies), or a legatee(s) under your last will, or your personal representative(s) or the distributee(s) of your estate, to the full extent of the Shares covered by the Restoration Option that were not previously purchased:

(i)

At any time within a period of up to two (2) years after your death if such occurs while you are employed, or

(ii)

At any time within a period of up to two (2) years following the termination of your employment if your death occurs within three (3) months thereafter.

Death After Age 55. In the event your death occurs after you attain the age of fifty-five (55), while you are employed by the Company or an Affiliate, or within three (3) months after the termination of your employment, the Restoration Option may be exercised prior to its Expiration Date, by your beneficiary(ies), or a legatee(s) under your last will, or your personal representative(s) or the distributee(s) of your estate, to the full extent of the Shares covered by the Restoration Option that were not previously purchased:

(i)

At any time, if you have completed ten (10) or more years of service with the Company or an Affiliate; or

(ii)

Disability Prior to Age 55 . In the event your employment terminates before you attain the age of fifty-five (55), as a result of a permanent disability, the Restoration Option may be exercised prior to its Expiration Date, by you or by your personal representative(s), at any time within a period of up to two (2) years after your employment terminates due to such permanent disability, to the full extent of the Shares covered by the Restoration Option that were not previously purchased.

Disability After Age 55 . In the event your employment terminates as a result of a permanent disability after you attain the age of fifty-five (55), the Restoration Option may be exercised prior to its Expiration Date, by you or by your personal representative(s), to the full extent of the Shares covered by the Restoration Option that were not previously purchased:

(i)

At any time, if you have completed ten (10) or more years of service with the Company or an Affiliate; or

(ii)

Change in Duties/Leave of Absence . The Restoration Option 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.

8. Repurchase Rights. If you exercise the Restoration Option within six (6) months prior to or three (3) months after the date your employment with the Company or an Affiliate terminates for any reason, whether voluntary or involuntary, with or without cause (except as a result of death, permanent disability or retirement pursuant to the Company’s retirement plans then in effect), the Company shall have the right and Restoration Option to repurchase from you, that number of Shares which is equal to the number you purchased upon such exercise(s) within such time periods, and you agree to sell such Shares to the Company.

The Company may exercise its repurchase rights 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 (i) within thirty (30) days following the termination of your employment for the repurchase of Shares purchased prior to such termination, or (ii) within thirty (30) days after any exercise of the Restoration Option for the repurchase of Shares purchased after your termination of employment. Within thirty (30) days after the mailing of such notice, you shall deliver to the Company the number of Shares the Company has elected to repurchase and the Company shall pay to you in cash, as the repurchase price for such Shares upon their delivery, an amount which shall be equal to the purchase price paid by you for the Shares. If you have disposed of the Shares, then in lieu of delivering an equivalent number of Shares to the Company, you must pay to the Company the amount of gain realized by you from the disposition of the Shares exclusive of any taxes due and payable or commissions or fees arising from such disposition.

The Company may exercise its repurchase rights described above only in the event you are terminated for cause, or if you breach any of the covenants contained in Section 9 below.

If the Company exercises its repurchase Restoration Option prior to the actual issuance and delivery to you of any Shares pursuant to the exercise of the Restoration Option, no Shares need be issued or delivered. In lieu thereof, the Company shall return to you the purchase price you tendered upon the exercise of the Restoration Option to the extent that it was actually received from you by the Company.

Following the occurrence of a Change of Control as defined in Section 12 below, the Company shall have no right to exercise the repurchase rights set forth in this Section.

9. Employee Covenants. In consideration of benefits described elsewhere in these Terms and Conditions and the Stock Option Agreement to which they apply, 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 accompanying the Stock Option Agreement, as follows:

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 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.

Non-Solicitation of Existing or Prospective Customers, Vendors, and Suppliers . You specifically acknowledge that the Confidential Information described in Section 9(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 the their businesses depends upon the 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 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 9(e)(i)) or cause such customer, supplier, or vendor to materially change or terminate its business or commercial relationship with the Company or its Affiliates.

Non-Solicitation of Employees . You specifically acknowledge that the Confidential Information described in Section 9(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.

in any other capacity, a business competitive with the Business of the Company. This Section 9(e) shall not apply in the event of a Change in Control as described in Section 12 below.

ii)

Remedies for Breach of These Covenants . Any breach of the covenants in this Section 9 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 Company or any of its Affiliates for any breach by you of this Section 9, 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, the Option, and any other unexercised options issued under the Plan or any other stock option plans of the Company will immediately terminate.

10. Arbitration . You and the Company agree that any controversy, claim, or dispute arising out of or relating to the Stock Option Agreement or the breach of any of these Stock Option Terms and Conditions, 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 binding arbitration before a neutral arbitrator under rules set forth in the Federal Arbitration Act, except for claims by the Company relating to your breach of any of the employee covenants set forth in Section 9 above. By way of example only, claims subject to this agreement to arbitrate include claims litigated under federal, state and local statutory or common law, such as the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, including the Civil Rights Act of 1994, the Americans with Disabilities Act, the law of contract and the law of tort. You and the Company agree that such claims may be brought in an appropriate administrative forum, but at the point at which you or the Company seek a judicial forum to resolve the matter, this agreement for binding arbitration becomes effective, and you and the Company hereby knowingly and voluntarily waive any right to have any such dispute tried and adjudicated by a judge or jury. The foregoing not to the contrary, the Company may seek to enforce the employee covenants set forth in Section 9 above, in any court of competent jurisdiction.

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, the Company or any of its Affiliates had the matter been heard in court. All expenses of the 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 unless the law provides otherwise.

11. Severability. In the event that any portion of these Terms and Conditions shall be held to be invalid, the same shall not affect in any respect whatsoever the validity and enforceability of the remainder of these Terms and Conditions.

12. Change of Control. The term “Change of Control”, means any of the following events:

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 of Directors of the Company 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 of Directors of the Company 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.

Such other event or transaction as the Board of Directors of the Company shall determine constitutes a Change of Control.

Exhibit 10.37

SUPERVALU INC.

2002 STOCK PLAN

RESTRICTED STOCK AWARD CERTIFICATE

Certification of Award

This certifies that the individual named below as a “Recipient”, has been awarded restricted shares of the common stock of SUPERVALU INC. (the “Company”) pursuant to the Company’s 2002 Stock Plan (the “Plan”). The number of shares awarded, the effective date of the award, and the date on which the restrictions lapse (the “Vesting Date”), are set forth below. The award is non-transferable and is subject to all of the terms and conditions of the Plan, and the Restricted Stock Award Terms and Conditions attached hereto.

Name of Recipient:

Effective Date:

Number of Shares Awarded:

Vesting Date:

This Certificate has been executed by an authorized officer of the Company pursuant to the authority granted by the Executive Personnel and Compensation Committee of its Board of Directors.





		Date

Recipient’s Acknowledgement of Receipt

I hereby acknowledge receipt of the award of restricted shares of the common stock of SUPERVALU INC. as described above, the Restricted Stock Award Terms and Conditions that are attached, and a copy of the Plan and the Prospectus relating thereto. I accept the award subject to the Plan provisions and the Restricted Stock Award Terms and Conditions.





		Date

SUPERVALU INC.

2002 STOCK PLAN

RESTRICTED STOCK AWARD TERMS AND CONDITIONS, As Amended

SUPERVALU INC. (the “Company”) has established the 2002 Stock Plan (as amended from time to time, the “Plan”), pursuant to which certain key employees of the Company may receive awards (each an “Award”) of restricted shares of the Company’s common stock (each a “Share”). Each Award is evidenced by a Restricted Stock Award Certificate (the “Certificate”) setting forth the employee’s name, the date the Award is granted, the number of Shares subject thereto, and the date all rights to the Shares fully vest in favor of the employee and the restrictions thereon lapse. The Award is governed by and subject to, the terms and conditions of the Plan and those set forth herein.

1. Award of Restricted Stock

The Company has granted you an Award of Restricted Stock for the number of Shares set forth in the Certificate attached hereto. The Award shall become effective as of the date set forth in the Certificate, after you have signed and returned the Certificate to the Company.

2. Vesting; Change of Control

(a) The Shares shall vest in full in favor of you on the date set forth in the Certificate provided you remain continuously employed by the Company or any of its affiliates until such date.

(b) Notwithstanding the foregoing, in the event of a Change of Control prior to the vesting of the Shares, all Shares shall vest in full as of the date of such Change of Control if you have been continuously employed by the Company or any of its affiliates until the date of such Change of Control. For purposes of hereof, the term “Change of Control” means any of the following events:

II.

III.

IV.

Such other event or transaction as the Board of Directors of the Company shall determine constitutes a Change of Control.

3. Forfeiture; Early Vesting in Event of Death, Disability or Retirement

(a) If you cease to be an employee of the Company or any of its affiliates for any reason other than death, Disability (as defined below) or Retirement (as defined below), prior to the vesting of the Shares pursuant to Section 2 hereof, then your rights to all of the Shares not theretofore vested shall be immediately and irrevocably forfeited.

(b) If you cease to be an employee of the Company or any of its affiliates by reason of death, Disability or Retirement prior to the vesting of the Shares pursuant to Section 2 hereof, then you or your estate shall become immediately vested, as of the date of such death, Disability or Retirement, in all unvested Shares; provided , however , that the vesting upon Retirement of all unvested Shares shall require the approval of the Executive Personnel and Compensation Committee of the Board of Directors of the Company (the “Committee”). No transfer by will or by laws of descent and distribution of any Shares which vest by reason of your death shall be effective to bind the Company, unless the Company shall have been furnished with written notice of such transfer and a copy of the will or such other evidence as the Company may deem necessary to establish the validity of the transfer.

For purposes hereof, “Disability” is defined as eligibility for long-term disability payments under the applicable Long-Term Disability Plan of the Company; and “Retirement” is defined as severance of employment after age 55, with ten (10) or more years of service with the Company or its affiliates.

4. Restrictions on Transfer

Except as may be otherwise determined by the Committee, until the Shares vest pursuant to Section 2 or 3 hereof, none of the Shares may be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of or encumbered by you, and no attempt to transfer the Shares, whether voluntary or involuntary, by operation of law or otherwise, shall vest the transferee with any interest or right in or with respect to the Shares.

5. Issuance and Custody of Certificate

(a) The Company shall, at its option, cause the Shares to be issued in “book entry” form, i.e. registered with the company’s stock transfer agent, in your name, or in the form of a certificate registered in your name, in each case, with the following legend or a legend containing words substantially similar thereto:

“The shares of Common Stock represented by this book entry or certificate are subject to forfeiture, and the transferability of this entry or certificate and the shares of Common Stock represented thereby are subject to the restrictions, terms and conditions (including restrictions against transfer) contained in the SUPERVALU INC. 2002 Stock Plan and a Restricted Stock Award Certificate executed by SUPERVALU INC. and the registered owner of such shares. Copies of such Plan and Certificate are on file in the office of the Secretary of SUPERVALU INC., 11840 Valley View Road, Eden Prairie, Minnesota.”

(b) Any certificate issued pursuant to Section 5(a) hereof shall be deposited by the Company with the Secretary of the Company or a custodian designated by the Secretary. Upon request, the Secretary or such custodian shall issue a receipt to you evidencing the certificate or certificates held which are registered in your name.

(c) After Shares vest pursuant to Sections 2 or 3 hereof, the Company shall promptly cause: (i) a certificate or certificates evidencing such vested Shares to be issued and registered in your name or your name and the name of another adult person (21 years of age or older) as joint tenants, and delivered to you or your legal representative(s), beneficiary(ies) or heir(s); or, (ii) such Shares to be registered in book entry form in your name or your name and the name of another adult person (21 years of age or older) as joint tenants, and sent by electronic delivery to your brokerage account or that of your legal representative(s), beneficiary(ies) or heir(s); in each case, together with any other property held in custody with respect to such Shares pursuant to Section 6(c) hereof and free of the legend provided in Section 5(a) hereof.

Only whole Shares shall be issued to you pursuant to a certificate; the value of any fractional Share shall be paid in cash at the time a certificate evidencing such fractional Share would otherwise have been delivered to you hereunder and shall be based on the Fair Market Value (as defined below) of the Common Stock.

6. Distributions and Adjustments

(a) If the Shares vest in your favor subsequent to any change in the number or character of the outstanding Shares of the Common Stock (through merger, consolidation, reorganization, recapitalization, stock dividend or otherwise), you shall then receive upon such vesting the number and type of securities or other consideration which you would have received if the Shares had vested prior to the event changing the number or character of outstanding Shares of Common Stock.

(b) Any additional Shares, any other securities of the Company and any other property (except for cash dividends or other cash distributions) distributed with respect to the Shares prior to the date the Shares vest shall be subject to the same restrictions, terms and conditions as the Shares. Any cash dividends or other cash distributions payable with respect to the Shares shall be distributed to you at the same time cash dividends or other cash distributions are distributed to stockholders of the Company generally.

(c) Any additional Shares, any securities and any other property (except for cash dividends or other cash distributions) distributed with respect to the Shares prior to the date such Shares vest shall be promptly deposited with the Secretary or the custodian designated by the Secretary to be held in custody in accordance with Section 5(c) hereof.

7. Taxes

(a) In order to comply with all applicable federal or state 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 or state income, social security, payroll, withholding or other taxes, which are your sole and absolute responsibility, are withheld or collected from you.

(b) You may elect to satisfy any federal and state income tax withholding obligations arising upon the vesting of any Shares pursuant to Sections 2 or 3 hereof by (i) having the Company withhold a portion of the Shares otherwise to be delivered by you upon such vesting having a Fair Market Value (as defined below) equal to the amount of federal and state income taxes required to be withheld on such vesting, or (ii) delivering to the Company shares of Common Stock, other than the Shares issuable upon such vesting, having a Fair Market Value equal to such taxes. You may elect to satisfy any federal and state income tax withholding obligations arising prior to the vesting of any Shares pursuant to Sections 2 or 3 hereof by delivering to the Company Shares other than the Shares issuable upon such vesting having a Fair Market Value equal to such taxes. For purposes hereof, the term “Fair Market Value” shall mean the average of the opening and closing sale price of a Share as reported on the New York Stock Exchange on the date of determination, or, if no trading in the Common Stock occurred on the date of determination, on the day closest to the date of determination when such trading did occur. Any election pursuant to this paragraph (b) will be subject to such rules as may be adopted from time to time by the Committee.

8. Employee Covenants . In consideration of benefits described elsewhere in these Restricted Stock Award Terms and Conditions and the Certificate to which they apply, 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 an Award of Restricted Stock, and the benefits described elsewhere in these Restricted Stock Award Terms and Conditions and accompanying the Certificate, as follows:

(a)

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)

(c)

Non-Solicitation of Existing or Prospective Customers, Vendors, and Suppliers . You specifically acknowledge that the Confidential Information described in Section 10(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 the their businesses depends upon the 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 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)(i)) 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. This Section 8(e) shall not apply in the event of a Change of Control.

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.

ii)

(f)

(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 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, your Award shall be immediately forfeited.

(h)

Enforceability of These Covenants . It is further agreed and understood by you and the Company that if any part, term, or provision of these Restricted Stock Award Terms and Conditions 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 these Restricted Stock Award Terms and Conditions 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 the Restricted Stock Award Certificate or the breach of any of these Restricted Stock Award Terms and Conditions, 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 binding arbitration before a neutral arbitrator under rules set forth in the Federal Arbitration Act. By way of example only, such claims include claims litigated under federal, state and local statutory or common law, such as the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, including the Civil Rights Act of 1994, the Americans with Disabilities Act, the law of contract and the law of tort. You and the Company agree that such claims may be brought in an appropriate administrative forum, but at the point at which you or the Company seek a judicial forum to resolve the matter, this agreement for binding arbitration becomes effective. This agreement to arbitrate shall continue in full force and effect despite the forfeiture of your Award or the termination of your employment relationship with the Company or any of its affiliates. You and the Company agree that any award rendered by the arbitrator shall be final and binding and that judgment upon the final award may be entered in any court having jurisdiction thereof. You and the Company hereby knowingly and voluntarily waive any right to have any such dispute tried and adjudicated by a judge or jury. 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, the Company or any of its affiliates had the matter been heard in court. All expenses of the 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 unless the law provides otherwise.

10. Severability In the event that any portion of these Restricted Stock Award Terms and Conditions shall be held to be invalid, the same shall not affect in any respect whatsoever the validity and enforceability of the remainder of these Restricted Stock Award Terms and Conditions.

11. Miscellaneous

(a) The terms and conditions set forth herein are subject in all respects to the terms of the Plan. In the event that any provision of hereof is inconsistent with the terms of the Plan, the terms of the Plan shall govern. Any question of administration or interpretation arising hereunder shall be determined by the Committee or its delegates, and such determination shall be final and conclusive upon all parties in interest.

(b) Nothing in the Certificate or herein shall confer on you any right with respect to continuance of employment by the Company or any of its affiliates, nor will it interfere in any way with the right of the Company to terminate such employment at any time with or without cause.

(c) You shall have none of the rights of a shareholder with respect to the Shares until the Shares have vested in your favor as provided herein, except the rights to receive all cash dividends or other cash distributions and the right to vote.

(d) Any compensation realized from the receipt or payment of (or the lapse of restrictions relating to) the Award shall constitute a special long-term incentive payment to you and shall not be taken into account as compensation in determining the amount of any benefit under any retirement or other employee benefit plan of the Company or any of its Affiliates.

Exhibit 10.40

ANNUAL DISCRETIONARY CEO BONUS POOL

Pursuant to the approval granted by the Executive Personnel and Compensation Committee of the Board of Directors on April 6, 2005, there is hereby established an Annual Discretionary CEO Bonus Pool in an aggregate amount that shall not exceed $500,000 during any fiscal year. Awards from the Pool may be made at the discretion of the Chief Executive Officer of the Company to officers of the Company (excluding the Chief Executive Officer) in recognition of their extraordinary achievements during any given fiscal year. The amount of any individual award may not exceed $100,000 during any fiscal year and the aggregate amount of all awards made to such officers as a group, may not exceed $500,000 during any fiscal year.

Adopted effective April 6, 2005

Amended effective February 7, 2006

Exhibit 12.1

SUPERVALU INC.

Ratio of Earnings to Fixed Charges

(unaudited)


	Fiscal Year-to-Date		Fiscal Year End		Fiscal Year End			Fiscal Year End			Fiscal Year End
	February 25, 2006		February 26, 2005		February 28, 2004			February 22, 2003			February 23, 2002
	(In thousands, except ratios)
Earnings before income taxes	$	329,148	$	600,864	$	454,880		$	408,004		$	331,998
Less undistributed earnings of less than fifty percent owned affiliates		12,123		2,587		(15,793	)		(16,368	)		(13,450	)

Earnings before income taxes		341,271		603,451		439,087			391,636			318,548
Interest expense		138,928		137,500		165,581			182,499			194,294
Interest on operating leases		48,268		45,121		44,280			44,864			35,971

Subtotal		528,467		786,072		648,948			618,999			548,813

Total fixed charges	$	187,196	$	182,621	$	209,861		$	227,363		$	230,265

Ratio of earnings to fixed charges		2.82		4.30		3.09			2.72			2.38

Exhibit 21.1

SUPERVALU INC.

Subsidiaries

As of April 26, 2006

(All are Subsidiary Corporations 100% Owned Directly or Indirectly, Except as Noted)


	JURISDICTION OF ORGANIZATION	PERCENTAGE OF VOTING SECURITIES OWNED BY IMMEDIATE PARENT
SUPERVALU INC.
Advantage Logistics USA, Inc.	Delaware	100	%
Advantage Logistics USA West L.L.C.	Delaware Limited Liability Company	100	%
Arden Hills 2003 L.L.C.	Delaware Limited Liability Company	90	%
Blaine North 1996 L.L.C.	Delaware Limited Liability Company	70	%
Bloomington 1998 L.L.C.	Delaware Limited Liability Company	40	%
Burnsville 1998 L.L.C.	Delaware Limited Liability Company	77.5	%
Cambridge 2006 L.L.C.	Delaware Limited Liability Company	51	%
Champlin 2005 L.L.C.	Delaware Limited Liability Company	51	%
Coon Rapids 2002 L.L.C.	Delaware Limited Liability Company	64	%
Diamond Lake 1994 L.L.C.	Delaware Limited Liability Company	25	%
Diamond Lake 2004, LLC	Minnesota Limited Liability Company	100	%
Emerald Acquisition Sub, Inc.	Delaware	100	%
Forest Lake 2000 L.L.C.	Delaware Limited Liability Company	65	%
Fridley 1998 L.L.C.	Delaware Limited Liability Company	74.5	%
Hastings 2002 L.L.C.	Delaware Limited Liability Company	51.0	%
Inver Grove Heights 2001 L.L.C.	Delaware Limited Liability Company	66.0	%
Keltsch Bros., Inc.	Indiana	100	%
Maplewood East 1996 L.L.C.	Delaware Limited Liability Company	70	%
Monticello 1998 L.L.C.	Delaware Limited Liability Company	90	%
NAFTA Industries Consolidated, Inc.	Texas	51	%
NC & T Supermarkets, Inc.	Ohio	100	%
Nevada Bond Investment Corp. I	Nevada	100	%
Northfield 2002 L.L.C.	Delaware Limited Liability Company	51	%
Planmark Architecture of Oregon, P.C.	Oregon	100	%
Planmark, Inc.	Minnesota	100	%
Plymouth 1998 L.L.C.	Delaware Limited Liability Company	62.5	%
Preferred Products, Inc.	Minnesota	100	%
Richfood Holdings, Inc.	Delaware	100	%
Market Company, Ltd.	Bermuda	100	%
Market Funding, Inc.	Delaware	100	%
Richfood, Inc.	Virginia	100	%
Discount Books East Corporation	Delaware	100	%
Eastern Region Management Corporation	Virginia	100	%
Great Valu, L.L.C.	Virginia Limited Liability Company	100	%
G.W.M. Holdings, Inc.	Virginia	100	%
Market Brands, Inc.	Delaware	100	%
Market Improvement Corporation	Virginia	100	%
Market Insurance Agency, Inc.	Virginia	100	%
Rich-Temps, Inc.	Virginia	100	%
SFW Holding Corp.	Delaware	100	%
Shoppers Food Warehouse Corp.	Delaware	100	%
SFW Licensing Corp.	Delaware	100	%
Shoppers Charitable Foundation, Inc.	Maryland	100	%
Super Rite Foods, Inc.	Delaware	100	%
FF Acquisition, L.L.C.	Virginia Limited Liability Company	100	%
FF Construction L.L.C.	Virginia Limited Liability Company	100	%
Foodarama LLC	Delaware Limited Liability Company	100	%
Foodarama, Inc.	Maryland	100	%
Foodarama Group, Inc.	Maryland	100	%


	JURISDICTION OF ORGANIZATION	PERCENTAGE OF VOTING SECURITIES OWNED BY IMMEDIATE PARENT
Food-A-Rama G.U., Inc.	Maryland	100	%
Richfood Procurement, L.L.C.	Virginia Limited Liability Company	100	%
Risk Planners, Inc.	Minnesota	100	%
Savage 2002 L.L.C.	Delaware Limited Liability Company	51	%
Shakopee 1997 L.L.C.	Delaware Limited Liability Company	25	%
Shorewood 2001 L.L.C.	Delaware Limited Liability Company	59	%
Silver Lake 1996 L.L.C.	Delaware Limited Liability Company	51	%
SUPERVALU Finance, Inc.	Minnesota	100	%
SUPERVALU Holdings, Inc.	Missouri	0.1	%
SUPERVALU Management Corp.	Delaware	100	%
SUPERVALU Pharmacies, Inc.	Minnesota	100	%
SUPERVALU Receivables, Inc.	Delaware	100	%
SUPERVALU Transportation, Inc.	Minnesota	100	%
Sweet Life Products Corporation	New York	75	%
Tidyman’s, LLC	Delaware Limited Liability Company	40	%
Total Logistics, Inc.	Wisconsin	100	%
TLC Holdings, Inc.	Wisconsin	100	%
TLC Resources, LLC	Delaware Limited Liability Company	1	%
Total Logistic Control, LLC	Delaware Limited Liability Company	100	%
Integrated Transportation Logistics, L.L.C.	Michigan Limited Liability Company	45	%
TLC Resources, LLC	Delaware Limited Liability Company	99	%
Valu Ventures, Inc.	Minnesota	100	%
W. Newell & Co., LLC	Delaware Limited Liability Company	100	%
Supermarket Operators of America Inc.	Delaware	100	%
Advantage Logistics - Southeast, Inc.	Alabama	100	%
Clyde Evans Markets, Inc.	Ohio	100	%
Scott’s Food Stores, Inc.	Indiana	100	%
SV Ventures*	Indiana General Partnership	50	%
SUPERVALU Receivables Funding Corporation	Delaware	100	%
SUPERVALU Holdings, Inc.	Missouri	99.5	%
Advantage Logistics Southwest, Inc.	Arizona	100	%
Advantage Logistics – PA LLC	Pennsylvania Limited Liability Company	100	%
Advantage Logistics USA East L.L.C.	Delaware Limited Liability Company	100	%
Southstar LLC	Delaware Limited Liability Company	100	%
Butson’s Enterprises, Inc.	New Hampshire	100	%
Butson’s Enterprises of Massachusetts, Inc.	Massachusetts	100	%
Butson’s Enterprises of Vermont, Inc.	Vermont	100	%
Keatherly, Inc.	New Hampshire	100	%
SUPERVALU Holdings, Inc.	Missouri	0.1	%
Peoples Market, Incorporated	New Hampshire	100	%
East Main Development, Inc.	Rhode Island	100	%
John Alden Industries, Inc.	Rhode Island	100	%
Livonia Holding Company, Inc.	Michigan	100	%
Foodland Distributors	Michigan General Partnership	50	%
Moran Foods, Inc.	Missouri	100	%
Save-A-Lot Food Stores, Inc.	Missouri	100	%
SUPERVALU Holdings, Inc.	Missouri	0.1	%
Save-A-Lot Holdings, Inc.	Delaware	100	%
Save-A-Lot Food Stores, Ltd.	Bermuda	100	%
R&M Kenosha LLC	Delaware Limited Liability Company	100	%
Shop ‘N Save Warehouse Foods, Inc.	Missouri	100	%
Shop ‘N Save St. Louis, Inc.	Missouri	100	%


	JURISDICTION OF ORGANIZATION	PERCENTAGE OF VOTING SECURITIES OWNED BY IMMEDIATE PARENT
SUPERVALU Holdings, Inc.	Missouri	0.1	%
WSI Satellite, Inc.	Missouri	100	%
Sunflower Markets, LLC	Delaware Limited Liability Company	100	%
SUPERVALU Holdings – PA LLC	Pennsylvania Limited Liability Company	100	%
SUPERVALU Terre Haute Limited Partnership	Indiana Limited Partnership	12	%
SV Markets, Inc.	Ohio	100	%
SV Ventures*	Indiana General Partnership	50	%
SUPERVALU Holdings, Inc.	Missouri	0.1	%
SVH Holding, Inc.	Delaware	100	%
SVH Realty, Inc.	Delaware	100	%
TC Michigan LLC	Michigan Limited Liability Company	100	%
Ultra Foods, Inc.	New Jersey	100	%
WC&V Supermarkets, Inc.	Vermont	100	%
Wetterau Finance Co.	Missouri	100	%
Wetterau Insurance Co. Ltd.	Bermuda	100	%

*	SV Ventures is a general partnership between SUPERVALU Holdings, Inc. and Scott’s Food Stores, Inc. each of which holds a 50% interest. Both general partners are direct subsidiaries of Supermarket Operators of America, Inc.

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

SUPERVALU INC.:

We consent to the incorporation by reference in the Registration Statements No. 33-16934, No. 33-50071, No. 333-10151, No. 333-24813, No. 333-61365, No. 333-72851, No. 333-89157, No. 333-32354, No. 333-32356, No. 333-44570, No. 333-100912, No. 333-100913, No. 333-100915, No. 333-100917, No. 333-100919 and No. 333-131759 on Form S-8; No. 33-56415, No. 333-94965, No. 333-43538 and No. 333-81252 on Form S-3 and No. 333-132397 on Form S-4 of SUPERVALU INC. of our reports dated May 9, 2006, with respect to the consolidated balance sheets of SUPERVALU INC. as of February 25, 2006 and February 26, 2005, and the related consolidated statements of earnings, cash flows and stockholders’ equity for each of the fiscal years in the three-year period ended February 25, 2006, and the related financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting as of February 25, 2006 and the effectiveness of internal control over financial reporting as of February 25, 2006, which reports appear in the February 25, 2006 annual report on Form 10-K of SUPERVALU INC.

/s/ KPMG LLP

Minneapolis, Minnesota

May 9, 2006

Exhibit 24.1

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints David L. Boehnen, John P. Breedlove and Warren E. Simpson, and each of them, the undersigned’s true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in such person’s name, place and stead, in any and all capacities (including the undersigned’s capacity as Director and/or Principal Executive Officer 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 25, 2006, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, this Power of Attorney has been signed as of the 12th day of April 2006, by the following persons:



/s/ Irwin Cohen				/s/ Garnett L. Keith, Jr.
Irwin Cohen				Garnett L. Keith, Jr.

/s/ Ronald E. Daly				/s/ Charles M. Lillis
Ronald E. Daly				Charles M. Lillis

/s/ Lawrence A. Del Santo				/s/ Jeffrey Noddle
Lawrence A. Del Santo				Jeffrey Noddle

/s/ Susan E. Engel				/s/ Marissa Peterson
Susan E. Engel				Marissa Peterson

/s/ Philip L. Francis				/s/ Steven S. Rogers
Philip L. Francis				Steven S. Rogers

/s/ Edwin C. Gage
Edwin C. Gage

Exhibit 31.1

Certification Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Jeffrey Noddle, certify that:

1. I have reviewed this annual report on Form 10-K of SUPERVALU INC. for the fiscal year ended February 25, 2006;

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: May 9, 2006				/s/ J EFFREY N ODDLE
				Chief Executive Officer

Exhibit 31.2

Certification Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Pamela K. Knous, certify that:

1. I have reviewed this annual report on Form 10-K of SUPERVALU INC. for the fiscal year ended February 25, 2006;

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: May 9, 2006				/s/ P AMELA K. K NOUS
				Executive Vice President, Chief Financial Officer

Exhibit 32.1

Certification Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002



Dated: May 9, 2006				/s/ J EFFREY N ODDLE
				Jeffrey Noddle Chief Executive Officer

Exhibit 32.2

Certification Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002



Dated: May 9, 2006				/s/ P AMELA K. K NOUS
				Pamela K. Knous Executive Vice President, Chief Financial Officer