<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 21, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ASSOCIATED WHOLESALE GROCERS GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
KANSAS 5141 APPLIED FOR
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION OR
ORGANIZATION) 5000 KANSAS AVENUE
KANSAS CITY, KANSAS 66106
(913) 321-1313
(ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
FRANCES PELLEGRINO PUHL, ESQ.
5000 KANSAS AVENUE
KANSAS CITY, KANSAS 66106
(913) 321-1313
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
SHARI L. WRIGHT, ESQ.
BLACKWELL SANDERS MATHENY WEARY & LOMBARDI L.C.
TWO PERSHING SQUARE
2300 MAIN, SUITE 1100
KANSAS CITY, MISSOURI 64108
(816) 274-6800
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this registration statement is declared
effective and all other conditions to the Merger (as defined herein) have been
satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(2) PER SHARE PRICE FEE(3)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 25,000,000
$.01 per share(1)............. shares N/A $27,747,479 $9,568.10
- -------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Also hereby registered is an equal number of Rights issuable pursuant to
the Company's Shareholder Rights Plan. Under the Shareholder Rights Plan,
each share of Common Stock issued is coupled with a Right for which no
separate consideration is paid.
(2) Based upon the terms of the Agreement and Plan of Merger included in the
Prospectus.
(3) Computed based on Rule 457(f)(2). Based on the book value of the shares of
AWG Common Stock to be exchanged in the Merger, which as of June 15, 1996
was $27,747,479.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
ASSOCIATED WHOLESALE GROCERS GROUP, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT/PROSPECTUS
-------------------------------- -------------------------------------------
<S> <C>
A. INFORMATION ABOUT THE
TRANSACTION
1. Forepart of Registration
Statement and Outside Front Facing Page of Registration Statement;
Cover Page of Prospectus...... Cross-Reference Sheet; Outside Front Cover
Page
2. Inside Front and Outside Back
Cover Pages of Prospectus..... Additional Information; Table of Contents
3. Risk Factors, Ratio of
Earnings to Fixed Charges, and Summary of Proxy Statement/Prospectus; Risk
Other Information............. Factors
4. Terms of the Transaction...... Summary of Proxy Statement/Prospectus; The
Merger; Description of AWG Group Common
Stock; Comparison of Shareholder Rights
5. Pro Forma Financial
Information................... Pro Forma Financial Statements
6. Material Contacts with the
Company Being Acquired........ *
7. Additional Information
Required for Reoffering by
Persons and Parties Deemed to
be Underwriters............... *
8. Interests of Named Experts and
Counsel....................... Legal Matters; Experts
9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... *
B. INFORMATION ABOUT THE
REGISTRANT
10. Information with Respect to S-
3 Registrants................. *
11. Incorporation of Certain
Information by Reference...... *
12. Information with Respect to S-
2 or S-3 Registrants.......... *
13. Incorporation of Certain
Information by Reference...... *
14. Information with Respect to
Registrants Other Than S-3 or Selected Consolidated Historical and Pro
S-2 Registrants............... Forma Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations; Recent
Developments; Business; Financial
Statements
C. INFORMATION ABOUT THE COMPANY
BEING ACQUIRED
15. Information with Respect to S-
3 Companies................... *
16. Information with Respect to S-
2 or S-3 Companies............ *
17. Information with Respect to
Companies Other Than S-3 or S- Selected Consolidated Historical and Pro
2 Companies................... Forma Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations; Recent
Developments; Business; Market for Common
Stock; Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT/PROSPECTUS
-------------------------------- -------------------------------------------
<S> <C>
D. VOTING AND MANAGEMENT
INFORMATION
18. Information if Proxies,
Consents or Authorizations are Outside Front Cover Page; Summary of Proxy
to be Solicited............... Statement/Prospectus; The Special Meeting;
The Merger; Management of AWG Group;
Executive Compensation; Certain
Transactions; Security Ownership of Certain
Beneficial Owners and Management
19. Information if Proxies,
Consents or Authorizations are
not to be Solicited or in an
Exchange Offer................. *
</TABLE>
- --------
* Inapplicable or the answer is negative and such information is omitted from
the Proxy Statement/Prospectus.
<PAGE>
(LOGO)
ASSOCIATED WHOLESALE GROCERS, INC.
5000 KANSAS AVENUE
KANSAS CITY, KANSAS 66106
, 1996
To Our AWG Shareholders:
You are cordially invited to attend a Special Meeting of the shareholders
("Shareholders") of Associated Wholesale Grocers, Inc. ("AWG") to be held on
[date] at [time] local time, at [place] , [address] , [city] , [state] .
At this important meeting, you will be asked to consider and to vote upon a
merger (the "Merger") between AWG and a subsidiary of AWG that will result in
the conversion of AWG from a retailer-owned corporation operating in a
cooperative manner to a publicly traded general business corporation that will
continue to be controlled initially by the retailers. Specifically, you are
being asked to approve an Agreement and Plan of Merger pursuant to which (i)
all outstanding shares of AWG common stock will be converted into the right to
receive shares of common stock of Associated Wholesale Grocers Group, Inc.
("AWG Group" or the "Company"), a newly-formed Kansas corporation, and (ii)
AWG will become a wholly-owned subsidiary of AWG Group by merging with AWG
Merger Corp. ("Merger Corp."), a wholly-owned subsidiary of AWG Group. AWG
will be the surviving corporation in the Merger. The Merger will only be
effected simultaneously with an underwritten initial public offering of shares
of common stock of AWG Group. The initial public offering is presently
anticipated to generate gross proceeds of $200 million for AWG Group. As a
result of these transactions, immediately after the Merger and initial public
offering, current AWG Shareholders will own a controlling interest, presently
anticipated to be approximately 71%, in a publicly traded general business
corporation. Your Board of Directors recommends approval of the Merger for the
reasons set forth in the accompanying Proxy Statement/Prospectus.
Your Board of Directors believes the combined Merger and initial public
offering will provide significant benefits to AWG Shareholders. The funds
raised through the initial public offering will be used by AWG Group to redeem
a portion of the patronage certificates, repay member deposits, reduce
obligations under AWG's line of credit, fund expansion activities, fund a
retailer loan program, and for potential strategic acquisitions and general
corporate purposes. In addition, because the Company's stock will be traded on
the New York Stock Exchange, Shareholders will be able to use their shares as
collateral for loans in connection with certain store development financing
transactions and the Company will have access to additional financing sources
through public capital markets for the continued growth of AWG. Presently,
Shareholders who wish to sell their shares of AWG common stock must sell such
shares to AWG at a price equal to their book value. The transaction will
provide Shareholders the opportunity to realize the full public equity market
value of AWG.
The proposed Merger is more fully described in the accompanying Proxy
Statement/Prospectus and its various attachments. I encourage you to study
these materials carefully.
YOUR BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS AND
CONDITIONS OF THE MERGER AGREEMENT, BELIEVES THAT IT IS IN THE BEST INTERESTS
OF AWG AND ITS SHAREHOLDERS AND RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
MERGER AGREEMENT AS DESCRIBED IN THE ATTACHED PROXY STATEMENT/PROSPECTUS.
The vote of two-thirds of the outstanding shares of AWG Class A and B common
stock, voting as separate classes, is required to approve the Merger
Agreement. Therefore, your vote is very important. PLEASE KEEP IN MIND THAT,
UNDER MISSOURI LAW, THE FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE MERGER AGREEMENT. Therefore, to ensure your shares will be
represented at the meeting, whether or not you plan to
<PAGE>
attend, I urge you to complete and mail your proxy card promptly in the
enclosed self-addressed envelope, which requires no postage. If you attend the
meeting and so desire, your proxy card will be returned to you so you can vote
in person.
The other directors and I look forward to meeting with you at the Special
Meeting.
Sincerely,
J. Fred Ball
Chairman of the Board
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that a Special Meeting of the shareholders
("Shareholders") of Associated Wholesale Grocers, Inc., a Missouri corporation
("AWG"), will be held at , , on ,
, 1996, commencing at .m., for the following purposes:
(1) To consider and to vote upon an Agreement and Plan of Merger (the
"Merger Agreement"), a copy of which is attached as Annex A to the Proxy
Statement/Prospectus, pursuant to which (a) the Shareholders of AWG will
become shareholders of Associated Wholesale Grocers Group, Inc. ("AWG
Group"), and (b) AWG will become a wholly-owned subsidiary of AWG Group by
merging with AWG Merger Corp. ("Merger Corp."), a wholly-owned subsidiary
of AWG Group (the "Merger"). Pursuant to the Merger Agreement, all
outstanding shares of common stock of AWG (except those held by dissenting
Shareholders, if any) will be converted into shares of common stock of AWG
Group in accordance with the formula described in the accompanying Proxy
Statement/Prospectus.
(2) To transact such other business as may properly come before the
meeting.
Shareholders who hold shares of Class A common stock of record at the close
of business on September 7, 1996, are entitled to notice of and to vote on
each matter presented at the Special Meeting, voting as a separate class.
Shareholders who hold shares of AWG Class B common stock of record at the
close of business on September 7, 1996, are entitled to notice of and to vote
on the proposal to approve the Merger Agreement, voting as a separate class.
Shareholders who comply with certain provisions of the Missouri General and
Business Corporation Law (the "MGBCL") may dissent from the Merger and demand
payment of the fair value of their shares. A copy of the applicable provisions
of the MGBCL is attached as Annex C to the accompanying Proxy
Statement/Prospectus.
Whether or not you plan to attend the Special Meeting in person, you are
requested to sign, date and return the enclosed proxy card in the enclosed
prepaid envelope as soon as possible. Shareholders attending the Special
Meeting may vote in person even if they have returned a proxy card.
By Order of the Board of Directors,
Joseph L. Campbell, II
Vice President, Treasurer and
Secretary
Kansas City, Kansas
, 1996
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROXY STATEMENT/PROSPECTUS SHALL NOT CONSTITUTE AN +
+OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY +
+SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR +
+SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 21, 1996
PROXY STATEMENT
OF
ASSOCIATED WHOLESALE GROCERS, INC.
AND
PROSPECTUS OF
ASSOCIATED WHOLESALE GROCERS GROUP, INC.
This Proxy Statement/Prospectus is being furnished to the holders of
outstanding shares of Class A common stock, $100 par value ("AWG Class A Common
Stock") and Class B common stock, $100 par value ("AWG Class B Common Stock")
(collectively, "AWG Common Stock"), of ASSOCIATED WHOLESALE GROCERS, INC., a
Missouri corporation ("AWG" or the "Company"), in connection with the
solicitation by the Board of Directors of AWG (the "AWG Board") of proxies for
use at the Special Meeting of the shareholders of AWG ("Shareholders") to be
held on , 1996, at p.m., local time, at
,
, , and at any adjournments
thereof (the "Special Meeting").
At the Special Meeting, Shareholders will be asked to approve an Agreement
and Plan of Merger (the "Merger Agreement") pursuant to which (i) outstanding
shares of AWG Common Stock will be converted into the right to receive an
aggregate of 25 million shares of common stock, $.01 par value, ("AWG Group
Common Stock") of Associated Wholesale Grocers Group, Inc., a Kansas
corporation ("AWG Group") and (ii) AWG Merger Corp. ("Merger Corp."), a wholly-
owned subsidiary of AWG Group, will be merged with and into AWG with AWG as the
surviving corporation (the "Merger"). See "THE MERGER--Terms of the Merger."
Shares of AWG Group Common Stock will be entitled to one vote per share on all
matters submitted to a vote of shareholders, and are subject to certain
restrictions on transfer. See "DESCRIPTION OF AWG GROUP CAPITAL STOCK." A copy
of the Merger Agreement appears as Annex A to this Proxy Statement/Prospectus
and should be read in its entirety.
This Proxy Statement/Prospectus also constitutes the prospectus of AWG Group
with respect to 25 million shares of AWG Group Common Stock to be issued in the
Merger to the holders of AWG Common Stock. See "THE MERGER --Terms of the
Merger."
If the Merger Agreement is approved by the Shareholders, the Board of
Directors of AWG Group intends to proceed with an initial public offering in
which shares of AWG Group Common Stock will be sold to the public (the "Initial
Public Offering"). The Initial Public Offering is presently anticipated to
consist of 10 million shares of AWG Group Common Stock and to generate gross
proceeds of approximately $200 million for AWG Group. See "THE INITIAL PUBLIC
OFFERING." It is presently anticipated that, immediately following
effectiveness of the Merger Agreement and consummation of the Initial Public
Offering, the shares of AWG Group Common Stock held by AWG's Shareholders will
constitute approximately 71% of the outstanding shares of AWG Group Common
Stock. See "THE INITIAL PUBLIC OFFERING."
SEE "CERTAIN CONSIDERATIONS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY A PROSPECTIVE INVESTOR.
THE SECURITIES TO BE ISSUED PURSUANT TO THE MERGER AGREEMENT HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS
THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
No person is authorized to give any information or to make any representation
other than those contained or incorporated by reference in this Proxy
Statement/Prospectus, and, if given or made, such information or representation
should not be relied upon as having been authorized. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, the securities offered by this Proxy
Statement/Prospectus, or the solicitation of a proxy, in any jurisdiction, to
or from any person to whom or from whom it is unlawful to make such offer,
solicitation of an offer or proxy solicitation in such jurisdiction. Neither
the delivery of this Proxy Statement/Prospectus nor any distribution of
securities pursuant to this Proxy Statement/Prospectus, under any
circumstances, creates an implication that there has been a change in the
affairs of AWG, AWG Group or Merger Corp. or in the information set forth
herein since the date of this Proxy Statement/Prospectus.
<PAGE>
This Proxy Statement/Prospectus does not cover any resale of the securities
to be received by Shareholders of AWG upon consummation of the Merger, and no
person is authorized to make any use of this Proxy Statement/Prospectus in
connection with any such resale.
The date of this Proxy Statement/Prospectus is , 1996. This
Proxy Statement/Prospectus is first being mailed to the Shareholders of AWG on
or about , 1996.
ADDITIONAL INFORMATION
AWG Group has filed a registration statement on Form S-4 (together with all
amendments, schedules and exhibits thereto, the "Registration Statement") with
the Securities and Exchange Commission (the "SEC") pursuant to the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the shares of
AWG Group Common Stock to be issued in connection with the Merger. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the SEC. The Registration Statement is
available for inspection and copying at the Public Reference Room of the SEC
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Statements contained in this Proxy Statement/Prospectus as
to the contents of any contract or other document referred to herein or
therein are not necessarily complete, and, in each instance, reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement or such other document, each such statement being
qualified in all respects by such reference.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF PROXY STATEMENT/PROSPECTUS....................................... 6
Overview of Proposed Transactions......................................... 6
The Special Meeting....................................................... 6
Parties to the Merger..................................................... 7
The Merger................................................................ 8
Conditions to the Merger; Effective Time.................................. 8
Recommendation of Board of Directors...................................... 8
The Initial Public Offering............................................... 9
Current Year Patronage Rebate............................................. 9
Treatment of Outstanding Patronage Certificates and Member Deposits....... 9
Recent Shareholder Option Program......................................... 9
New Retailer Incentive Program............................................ 10
Market for Common Stock and Dividends..................................... 10
Rights of Shares Before and After the Merger.............................. 10
Dissenters' Rights........................................................ 11
Federal Income Tax Consequences........................................... 11
CERTAIN CONSIDERATIONS...................................................... 12
THE COMPANIES............................................................... 13
THE SPECIAL MEETING......................................................... 14
Purpose of Special Meeting................................................ 14
Voting at the Special Meeting............................................. 15
Proxies................................................................... 15
Proxy Solicitation........................................................ 15
Other Matters to be Considered............................................ 15
THE MERGER.................................................................. 16
Reasons for the Merger; Recommendation of the Board of Directors.......... 16
Valuation by Underwriters................................................. 17
Terms of the Merger; Directors and Executive Officers..................... 18
Conversion Formula........................................................ 19
Treatment of Patronage Certificates....................................... 21
Interests of Certain Persons in the Merger................................ 21
Merger Procedures......................................................... 21
Operations after the Merger............................................... 21
Dissenters' Rights........................................................ 22
Federal Income Tax Consequences of the Merger............................. 23
Abandonment and Termination; Amendment of the Merger Agreement............ 23
RETAILER INCENTIVE PROGRAMS................................................. 23
New Retailer Incentive Program............................................ 24
Recent Shareholder Option Program......................................... 24
Federal Income Tax Consequences of Retailer Incentive Programs............ 24
THE INITIAL PUBLIC OFFERING................................................. 25
CAPITALIZATION.............................................................. 26
SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA............... 27
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS............. 29
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........................................ 32
Overview.................................................................. 32
Twenty-Four Weeks Ended June 15, 1996, Compared to Twenty-Four Weeks
Ended June 17, 1995...................................................... 33
1995 Compared to 1994..................................................... 33
1994 Compared to 1993..................................................... 34
Liquidity and Capital Resources........................................... 34
BUSINESS.................................................................... 35
General................................................................... 35
Business Strategy......................................................... 36
Growth Strategy........................................................... 36
Store Development Services................................................ 37
Concept Stores............................................................ 39
Valu Merchandisers........................................................ 39
Private Label Programs.................................................... 40
Retailer Support Services................................................. 40
Corporate Sales Development............................................... 41
Pricing Policy............................................................ 42
Procurement............................................................... 42
Distribution Centers...................................................... 43
Transportation............................................................ 44
Management Operating Systems.............................................. 45
Competition............................................................... 46
Facilities................................................................ 46
Employee Relations........................................................ 47
Material Customer......................................................... 47
Legal Proceedings......................................................... 47
Regulation................................................................ 47
MANAGEMENT.................................................................. 48
Directors, Executive Officers and Certain Key Personnel of AWG Group...... 48
Directors and Executive Officers.......................................... 48
Certain Key Personnel..................................................... 49
EXECUTIVE COMPENSATION...................................................... 50
Pension Plans............................................................. 50
Equity Incentive Plan..................................................... 51
Director Compensation..................................................... 51
CERTAIN TRANSACTIONS........................................................ 51
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............. 52
DESCRIPTION OF AWG GROUP CAPITAL STOCK...................................... 53
Common Stock.............................................................. 53
Preferred Stock........................................................... 54
Shareholder Rights Plan................................................... 54
Limitations on Change of Control.......................................... 55
Transfer Restrictions..................................................... 56
COMPARISON OF SHAREHOLDER RIGHTS............................................ 56
General................................................................... 56
Number of Directors....................................................... 56
Vacancies on the Board of Directors....................................... 57
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Removal of Directors..................................................... 57
Voting................................................................... 57
Special Meetings......................................................... 57
Indemnification; Limitation of Liability................................. 57
Shareholder Inspection................................................... 58
Amendment of Articles of Incorporations.................................. 58
Amendment of Bylaws...................................................... 59
Notice of Shareholder Proposals; Nominations of Directors................ 59
Shareholders' Vote for Mergers........................................... 59
Appraisal Rights......................................................... 60
Anti-takeover Statutes................................................... 60
MARKET FOR COMMON STOCK.................................................... 60
SHARES ELIGIBLE FOR FUTURE SALE............................................ 61
LEGAL MATTERS.............................................................. 61
EXPERTS.................................................................... 61
REPORTS TO SECURITIES HOLDERS.............................................. 62
INDEX TO FINANCIAL STATEMENTS.............................................. F-1
AGREEMENT AND PLAN OF MERGER........................................... ANNEX A
AWG GROUP ARTICLES OF INCORPORATION.................................... ANNEX B
SECTION 351.455 OF THE MGBCL........................................... ANNEX C
AWG GROUP BYLAWS....................................................... ANNEX D
</TABLE>
5
<PAGE>
SUMMARY OF PROXY STATEMENT/PROSPECTUS
The following is a summary of certain important terms and conditions of the
Merger and related information. This summary does not purport to be complete
and is qualified in its entirety by reference to the more detailed information
appearing in this Proxy Statement/Prospectus, including the Annexes hereto.
Shareholders are urged to read this Proxy Statement/Prospectus and the Annexes
in their entirety. References to AWG herein shall include AWG and its direct
and indirect subsidiaries.
OVERVIEW OF PROPOSED TRANSACTIONS
The AWG Board, together with management and with the advice of the Company's
financial and legal advisors, has been studying the possibility of converting
AWG from a corporation operating as a cooperative to a general business
corporation and undertaking an initial public stock offering. The Merger to be
acted upon at the Special Meeting is an essential element of the conversion and
public offering. The proposed conversion will not occur unless AWG Group has
entered into a firm commitment underwriting agreement with respect to the
Initial Public Offering.
The AWG Board has carefully considered the formula included in the Merger
Agreement that provides for the manner of converting shares of AWG Common Stock
into shares of AWG Group Common Stock and believes the formula is a reasonable
and appropriate way to allocate the value of AWG among its Shareholders. The
formula considers both current stock ownership and the relative purchasing
levels of Shareholders since January 1, 1989. See "THE MERGER--Conversion
Formula."
Following the Merger, a significant amount of cash will be made available to
Shareholders through the payment in the spring of 1997 of 100% of 1996
patronage rebates in cash (approximately $57 million, based on 1996 projected
operating results). In addition, a portion of the proceeds of the Initial
Public Offering will be used to repay all member deposit certificates ("Member
Deposit Certificates") (approximately $12 million) and redeem all patronage
rebate certificates ("Patronage Certificates") held by Shareholders holding
Patronage Certificates with an aggregate principal amount of less than $1
million (approximately $56 million). The Company believes this capital
(approximately $125 million in the aggregate) will allow its retailers to
facilitate additional store openings and remodeling programs, which are
expected to stimulate increased revenue growth for the retailers and, in turn,
for the Company.
Immediately following the Merger and the Initial Public Offering, AWG will
continue to be controlled by its current Shareholders, who will own
approximately 71% of the outstanding AWG Group Common Stock. See "THE INITIAL
PUBLIC OFFERING." The AWG Board believes that retailer ownership is
strategically important to the continued success of AWG. As a result, the AWG
Board has implemented several protections against the loss of such control,
including various corporate anti-takeover provisions and a two-year restriction
on sales of AWG Group Common Stock received by the Shareholders in the Merger.
See "DESCRIPTION OF AWG GROUP CAPITAL STOCK."
THE AWG BOARD RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE MERGER AGREEMENT.
THE SPECIAL MEETING
The Special Meeting will be held on , , at .m.,
local time, at , to consider and to vote upon approval
of the Merger Agreement and such other matters as may properly come before the
Special Meeting. Only Shareholders of record at the close of business on
September 7, 1996 (the "Record Date") will be entitled to notice of, and to
vote at, the Special Meeting. Each outstanding share of AWG Class A Common
Stock is entitled to one vote upon each matter presented at
6
<PAGE>
the Special Meeting, voting as a separate class. Each outstanding share of AWG
Class B Common Stock is entitled to one vote upon the proposal to approve the
Merger Agreement, voting as a separate class. The presence, in person or by
properly executed proxy, of a majority of the voting power of the shares of AWG
Class A Common Stock issued, outstanding and entitled to vote is necessary to
constitute a quorum of AWG Class A Common Stock at the Special Meeting. The
presence, in person or by properly executed proxy, of a majority of the voting
power of the shares of AWG Class B Common Stock issued, outstanding and
entitled to vote is necessary to constitute a quorum of AWG Class B Common
Stock at the Special Meeting. At the close of business on the Record Date,
and shares of AWG Class A Common Stock and AWG Class B Common
Stock, respectively, were issued, outstanding and entitled to vote. See "THE
SPECIAL MEETING."
Under the Missouri General Business Corporation Law (the "MGBCL"), the
affirmative vote of holders of (i) two-thirds of the outstanding shares of AWG
Class A Common Stock, and (ii) two-thirds of the outstanding shares of AWG
Class B Common Stock, voting as separate classes, is required to approve the
Merger Agreement. All of the members of the Board of Directors of AWG are
affiliated with Shareholders of AWG, constituting % of the shares of AWG
Class A Common Stock and % of the shares of AWG Class B Common Stock entitled
to vote at the Special Meeting. Directors affiliated with Shareholders holding
% of the shares of AWG Class A Common Stock and % of the shares of AWG
Class B Common Stock have indicated to AWG that such Shareholders will vote to
approve the Merger Agreement. Shareholders who do not vote to approve the
Merger Agreement and who otherwise comply with the requirements of the MGBCL
may dissent from the Merger and demand payment of the fair value of their
shares of AWG Common Stock. See "THE MERGER--Dissenters' Rights."
PARTIES TO THE MERGER
AWG. AWG, a Missouri corporation, is a retailer-owned wholesale food
distributor operating on a cooperative basis supplying a wide variety of food
products and non-food items and services to approximately 820 retail grocery
stores and supermarkets located in Arkansas, Illinois, Iowa, Kansas, Kentucky,
Missouri, Nebraska, Oklahoma, Tennessee and Texas. AWG buys, sells and delivers
a wide variety of groceries, frozen foods, meats, produce, dairy products,
bakery, deli, health and beauty products and general merchandise to its
Shareholders. As an integral part of its business and growth strategy, AWG
offers a variety of value-added support services to its Shareholders, including
store development and engineering services, financing assistance, merchandising
and advertising services, technological support and insurance services, all of
which are designed to enhance the Shareholders' retail capabilities. AWG's
principal executive offices are located at 5000 Kansas Avenue, Kansas City,
Kansas 66106 and its telephone number is (913) 321-1313.
AWG Group. AWG Group was formed in August 1996 under Kansas law as a general
business corporation and, prior to the Merger, will be a wholly-owned
subsidiary of AWG. Before the Merger, AWG Group will have only nominal assets
and liabilities and no income. After the Merger, AWG Group will be a holding
company not directly engaged in the operation of any business. AWG Group's
consolidated financial position immediately after the Merger will be
substantially identical to that of AWG immediately before the Merger. AWG
Group's principal executive offices are located at 5000 Kansas Avenue, Kansas
City, Kansas 66106, and its telephone number is (913) 321-1313.
Merger Corp. Merger Corp. was formed in August 1996 under Missouri law as a
general business corporation in order to effect the Merger and, immediately
prior to the Merger, will be a wholly-owned subsidiary of AWG Group. Before the
Merger, Merger Corp. will have only nominal assets and liabilities and no
income. After the Merger, Merger Corp. will be merged with and into AWG and
thereafter will cease to exist. Merger Corp.'s principal executive offices are
located at 5000 Kansas Avenue, Kansas City, Kansas 66106, and its telephone
number is (913) 321-1313.
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THE MERGER
Subject to the approval of the Merger Agreement by the Shareholders and the
satisfaction of certain other conditions, each outstanding share of AWG Common
Stock, except for shares of AWG Common Stock held by Shareholders dissenting
from the Merger ("Dissenting Shares"), will be converted automatically into the
right to receive shares of AWG Group Common Stock in accordance with the
conversion formula included in the Merger Agreement and described herein. A
total of 25 million shares of AWG Group Common Stock will be issued to
Shareholders in the Merger. The conversion formula essentially provides that
outstanding shares of AWG Common Stock will be converted into (i) approximately
6% of the shares of AWG Group Common Stock issued in the Merger based upon the
book value of the AWG Common Stock as of June 15, 1996, and (ii) the balance of
the shares of AWG Group Common Stock to be issued in the Merger based upon the
relative volume of qualifying purchases of each Shareholder from AWG during the
seven fiscal years ended December 30, 1995 and for the year-to-date period
ending September 7, 1996. See "THE MERGER--Conversion Formula."
An informational statement accompanying this Proxy Statement/Prospectus
describes, for the individual Shareholder to whom this Proxy
Statement/Prospectus has been sent, AWG's calculation of such Shareholder's
qualifying purchases and current stock ownership, together with the percentage
of shares of AWG Group Common Stock tentatively issuable to such Shareholder in
the Merger. The actual percentage of shares of AWG Group Common Stock issued to
each Shareholder in the Merger will vary from the percentage shown on the
informational statement in the event there are any Dissenting Shares, any
change in AWG's calculation of qualifying purchases for a particular
Shareholder or any change in outstanding shares of AWG Common Stock. See "THE
MERGER--Conversion Formula."
A copy of the Merger Agreement appears as Annex A to this Proxy
Statement/Prospectus and should be read in its entirety. Upon consummation of
the Merger, AWG will be merged with Merger Corp. with AWG as the surviving
corporation and AWG will become a wholly-owned subsidiary of AWG Group.
CONDITIONS TO THE MERGER; EFFECTIVE TIME
Consummation of the Merger is subject to certain conditions, including
approval of the Merger Agreement by the Shareholders at the Special Meeting and
the execution by AWG Group of a firm commitment underwriting agreement with
respect to the Initial Public Offering. See "THE INITIAL PUBLIC OFFERING." The
Merger will become effective (the "Effective Time") upon the issuance of a
certificate of merger from the Secretary of State of the State of Missouri.
RECOMMENDATION OF BOARD OF DIRECTORS
The AWG Board has approved the Merger Agreement and recommends that
Shareholders vote FOR the Merger Agreement. In arriving at its recommendation,
the AWG Board considered a number of factors, including (a) the changing nature
of the wholesale food business, (b) the need for AWG to create a permanent
equity base and to have access to the public capital markets to provide
additional resources to promote continued growth, (c) the desirability of
providing Shareholders a vehicle to realize the full public equity market value
of AWG, (d) the ability to generate significant cash to redeem approximately
$68 million in Member Deposit Certificates and Patronage Certificates, which
will provide capital to retailers to allow them to facilitate additional store
openings and remodeling programs, (e) AWG's continuing commitment to the
concept of a retailer-controlled distribution system, (f) AWG's continuing
commitment to maintaining its competitive low-cost position, (g) the ability to
use AWG Group Common Stock as consideration for potential acquisitions, and (h)
the public equity market valuation of AWG provided by the Underwriters (as
defined below). See "THE MERGER--Reasons for the Merger; Recommendation of the
Board of Directors."
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THE INITIAL PUBLIC OFFERING
If the Merger Agreement is approved by the Shareholders, AWG Group will
proceed with the Initial Public Offering of an anticipated 10 million shares of
AWG Group Common Stock. AWG Group expects that the net proceeds of the Initial
Public Offering will be used (i) to redeem a portion of the outstanding
Patronage Certificates and repay outstanding Member Deposit Certificates, (ii)
to reduce amounts outstanding under AWG's revolving credit line that were
borrowed to fund various recently completed capital projects, (iii) to fund
expansion of existing facilities or construction of new facilities, (iv) for
potential strategic acquisitions, (v) to provide financing to retailers for
store development, and (vi) for general corporate purposes. See "THE INITIAL
PUBLIC OFFERING."
CURRENT YEAR PATRONAGE REBATE
AWG's Bylaws provide that patronage rebates shall be declared following the
end of each fiscal year. The Merger will result in a cessation of AWG's
operations as a cooperative, thus creating a short year for the calculation of
patronage rebates. Patronage rebates will be calculated for this short year on
the same basis as in the past; however, 100% of the rebates associated with the
short year will be paid to the Shareholders in cash. Based on 1996 projected
operating results, this payment will be approximately $57 million, is
anticipated to be made in the spring of 1997, and will provide a significant
cash infusion to retailers that will be available for additional store openings
and remodeling programs. Following the Merger, AWG will no longer operate as a
cooperative and, accordingly, will no longer pay rebates to its Shareholders.
See "THE MERGER--Treatment of Patronage Certificates."
TREATMENT OF OUTSTANDING PATRONAGE CERTIFICATES AND MEMBER DEPOSITS
Following consummation of the Initial Public Offering, AWG Group will use a
portion of the proceeds to effect the redemption of certain outstanding
Patronage Certificates and to repay all Member Deposit Certificates. Present
and former Shareholders holding outstanding Patronage Certificates having an
aggregate face value per holder of less than $1 million will have those
Certificates redeemed at face value. The great majority of these funds will be
paid to the Company's smaller retailers and is expected to provide a
significant cash infusion to such retailers that will be available for
additional store openings and remodeling programs. Present and former
Shareholders holding outstanding Patronage Certificates having an aggregate
face value of $1 million or more will not have those Certificates redeemed from
the proceeds of the Initial Public Offering; such Certificates will be paid as
they mature, bearing interest at a fixed rate of 6% per annum. See "THE
MERGER--Treatment of Patronage Certificates."
RECENT SHAREHOLDER OPTION PROGRAM
The retention of existing retailers will be fundamental to the business of
AWG Group. Retailers who became Shareholders in 1996 will receive a smaller
allocation of AWG Group Common Stock than if they had been Shareholders
throughout the purchase allocation measurement period. To encourage such
Shareholders to remain customers, AWG Group will issue stock options to
retailers who became Shareholders subsequent to January 1, 1996. The number of
shares that will be subject to options will, for each recent Shareholder, equal
the difference between the number of shares of AWG Group Common Stock actually
received by such Shareholder in the Merger and the number of shares such
Shareholder would have received in the Merger had it become a Shareholder on
January 1, 1996. The options will be exercisable on the third anniversary of
the date of grant at the price at which shares of AWG Group Common Stock are
sold in the Initial Public Offering and will be forfeited if the retailer does
not maintain a certain level of purchase activity (80% of 1996 annualized
purchases) from AWG each year throughout the three-year period. See "RETAILER
INCENTIVE PROGRAMS."
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NEW RETAILER INCENTIVE PROGRAM
Continuing to attract new retailers after the conversion will also be
important to the business of AWG Group. To encourage retailers to become
customers of AWG after the conversion, AWG Group will implement a program to
grant new customers options to purchase AWG Group Common Stock. AWG Group will
reserve a number of shares equal to 5% of the shares outstanding after the
Initial Public Offering for issuance under this program. The recipients of
options, and the number of shares subject to such options, will be determined
in the sole discretion of the AWG Group Board of Directors. The options will be
exercisable on the third anniversary of the date of grant at the fair market
value of the AWG Group Common Stock on the date of grant and will be forfeited
if the retailer does not maintain a certain level of purchase activity
(currently set at 80% of anticipated purchases) from AWG each year throughout
the three-year period. See "RETAILER INCENTIVE PROGRAMS."
MARKET FOR COMMON STOCK AND DIVIDENDS
No public trading market currently exists for shares of AWG Common Stock.
Shares of AWG Group Common Stock to be received by Shareholders in the Merger
will not be transferable for a period of two years except in certain limited
circumstances. Shares of AWG Group Common Stock to be sold to the public
following the Merger or purchased by Shareholders in the Initial Public
Offering will be freely transferable (subject to applicable securities laws and
regulations) and will be listed on the New York Stock Exchange. No assurance
can be given, however, that a public market will develop for shares of AWG
Group Common Stock. See "DESCRIPTION OF AWG GROUP CAPITAL STOCK."
AWG has operated throughout most of its 70-year history as a retailer-owned
cooperative distributing a portion of profits in the form of patronage rebates
in accordance with the quantity of purchases by each Shareholder during the
prior fiscal year. This practice will be discontinued after the Merger, and AWG
Group will pay dividends on shares of AWG Group Common Stock when and if
declared by the Board of Directors of AWG Group. AWG Group presently
anticipates declaring dividends on shares of AWG Group Common Stock at the
initial annual rate of $.20 per share.
RIGHTS OF SHARES BEFORE AND AFTER THE MERGER
AWG's Bylaws currently provide that shares of AWG Common Stock may be owned
only by retail store owners ("retailers"), who must hold a minimum of 15 shares
of AWG Common Stock and maintain active purchasing accounts. The Bylaws further
provide that any Shareholder who desires to dispose of its shares of AWG Common
Stock must first offer such shares to AWG, and AWG must accept such offer, at a
price equal to their book value. AWG's Articles of Incorporation provide that
each share of AWG Class A Common Stock is entitled to one vote on all corporate
matters. Shares of AWG Class B Common Stock do not vote on most corporate
matters. Shares of AWG Class B Common Stock will be entitled to vote on the
Merger as a separate class from the AWG Class A Common Stock.
AWG Group's Articles of Incorporation authorize the issuance of up to 500
million shares of AWG Group Common Stock. Shares of AWG Group Common Stock sold
in the Initial Public Offering will be freely transferable (subject to
applicable securities laws and regulations). Shares of AWG Group Common Stock
to be issued to Shareholders in the Merger will not be transferable for a
period of two years, except (i) as collateral in connection with certain store
development financing transactions if approved by the Company, (ii) in
conjunction with the sale of substantially all of the assets or stock (if a
corporation) of a Shareholder, or (iii) by way of a bona-fide gift, to a family
trust or pursuant to the death of a Shareholder. In each case, with the
exception of persons who acquire shares pursuant to the foreclosure of a
security interest or, in certain circumstances, pursuant to the transferor's
death, the transferee will remain subject to the remaining term of the two-year
transfer restriction. All shares of AWG Group Common Stock are entitled to one
vote per share on all corporate matters. See "DESCRIPTION OF AWG GROUP CAPITAL
STOCK."
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AWG Group's Articles of Incorporation authorize AWG Group's Board to fix the
rights and preferences and to authorize the issuance of up to 50 million shares
of preferred stock. AWG Group has no plans at this time to issue Preferred
Stock, other than as necessary in conjunction with the Shareholder Rights Plan.
See "DESCRIPTION OF AWG GROUP CAPITAL STOCK--Shareholder Rights Plan." A copy
of the Articles of Incorporation of AWG Group appears as Annex B to this Proxy
Statement/Prospectus and should be read in its entirety. See "DESCRIPTION OF
AWG GROUP CAPITAL STOCK" and "COMPARISON OF SHAREHOLDER RIGHTS."
The Articles of Incorporation of AWG Group provide for the indemnification of
directors and officers and the elimination of their liability for monetary
damages under certain circumstances. See "DESCRIPTION OF AWG GROUP CAPITAL
STOCK."
DISSENTERS' RIGHTS
Under the MGBCL, each Shareholder who dissents from the Merger (a "Dissenting
Shareholder") has the right to have the fair value of such Shareholder's shares
appraised by judicial determination and paid to it in cash. In order to perfect
such dissenters' rights, Dissenting Shareholders must comply with the
procedural requirements of the MGBCL, including, without limitation, filing a
written objection to the Merger Agreement prior to the Special Meeting and,
within 20 days after the Effective Time of the Merger, making a written demand
for payment of the fair value of their shares. See "THE MERGER--Dissenters'
Rights." A copy of the applicable provisions of the MGBCL is attached as Annex
C. The Company believes that the fair value of Dissenting Shares will be equal
to the book value of such shares because, under the AWG Bylaws, that is the
price that a selling Shareholder would receive for its AWG shares absent the
Merger and the Initial Public Offering.
Dissenting Shares will not be converted into shares of AWG Group Common Stock
in the Merger and after the Effective Time of the Merger will represent only
the right to receive such consideration as is determined to be due such
Dissenting Shareholder pursuant to the MGBCL. AWG Common Stock outstanding
immediately prior to the Effective Time and held by a Dissenting Shareholder
who withdraws its demand for dissenters' rights or fails to perfect such rights
will be deemed to be converted at the Effective Time into the right to receive
shares of AWG Group Common Stock, without interest.
FEDERAL INCOME TAX CONSEQUENCES
AWG has received an opinion from KPMG Peat Marwick LLP and an opinion from
Blackwell Sanders Matheny Weary & Lombardi L.C. that the exchange of shares of
AWG Common Stock for shares of AWG Group Common Stock in the Merger will
qualify as a tax-free exchange for federal income tax purposes. See "THE
MERGER--Federal Income Tax Consequences of the Merger."
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CERTAIN CONSIDERATIONS
In addition to the other information set forth in this Proxy
Statement/Prospectus, the following matters should be considered carefully
before Shareholders determine their vote on the Merger.
Effect of Reorganization on Operations. Throughout most of its 70 year
history, AWG has operated as a cooperative. As a cooperative, the substantial
majority of its sales were made to Shareholders who received patronage rebates
with respect to their purchases. AWG believes, based on its analysis of market
conditions within its geographic competitive region, that, following the
Merger and Initial Public Offering and the elimination of patronage rebates,
its pricing structure and service levels will enable it to retain its retailer
base. Failure of a significant number of retailers to continue their
historical level of purchases after the Merger could have a material adverse
effect on the financial condition and results of operations of AWG Group.
Transfer Restrictions. The shares of AWG Group Common Stock received by
Shareholders in the Merger will not be transferable for a period of two years
from the Effective Date of the Merger except in certain limited circumstances.
See "DESCRIPTION OF AWG GROUP CAPITAL STOCK--Transfer Restrictions." In
addition, there can be no assurance that an active trading market in AWG Group
Common Stock will develop, that the market price of AWG Group Common Stock
will be greater than the price at which AWG Group Common Stock is initially
sold to the public in the Initial Public Offering, or that Shareholders will
be able to sell such shares immediately upon termination of the transfer
restrictions. See "SHARES ELIGIBLE FOR FUTURE SALE."
Competition. Generally, food products are commodities and retailers base
their purchasing decisions principally on the delivered price of the product.
As a result, the grocery industry, including the wholesale food distribution
business, is characterized by intense competition and low profit margins. AWG
competes with a number of local, regional and national grocery wholesalers and
with a number of major businesses that market their products directly to
retailers, including companies having greater assets and larger sales volumes
than AWG. AWG's customers also compete at the retail level with independent
grocery and food retailers and several chain grocery store organizations, some
of which have integrated wholesale and retail operations. Competition among
retailers is intense, based primarily on price, quality and selection of
merchandise. Retailers' ability to compete effectively cannot be assured. See
"BUSINESS--Competition."
No Prior Public Market; Shares Eligible for Future Sale. It is expected that
AWG Group Common Stock will be approved for listing on the New York Stock
Exchange. There has been no public market for AWG Group Common Stock and there
can be no assurance that an active market will develop following the Initial
Public Offering. The initial public offering price will be determined at the
time of the offering by negotiation between AWG Group and its underwriters and
will not necessarily reflect current valuations, the market price of AWG Group
Common Stock after the Initial Public Offering or the price at which AWG Group
Common Stock may be sold in the future. In addition, the public markets
experience price and volume volatility. These fluctuations may be unrelated to
the operating performance of particular companies whose shares are traded on
such markets and may adversely affect the market price of AWG Group Common
Stock. The market price could also be subject to significant fluctuations in
response to AWG Group's operating results, the operating results of its
competitors, government regulation, litigation and other factors. Market
prices of AWG Group Common Stock may be adversely affected by sales of shares
of AWG Group Common Stock which become eligible for sale after the Initial
Public Offering. See "SHARES ELIGIBLE FOR FUTURE SALE."
Limitations on Change in Control. AWG Group has implemented a shareholder
rights plan that may have the effect of delaying, deferring or preventing a
change in control of AWG Group or the removal of its existing management.
Additionally, certain provisions in the Articles of Incorporation and Bylaws
of AWG Group could have the same effect. Such anti-takeover provisions may
benefit AWG Group shareholders if a takeover were attempted with a view to
impose a merger, a sale of all or any part of the assets of AWG Group or a
similar transaction that may not be in the best interests of all of the
shareholders. On the other hand, anti-takeover provisions could adversely
affect shareholders of AWG Group by discouraging takeovers that are structured
in a
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way that would be favorable to the interests of the shareholders, including
the receipt of a premium for their shares of AWG Group Common Stock. See
"DESCRIPTION OF AWG GROUP CAPITAL STOCK."
New Board of Directors. The current AWG Board of Directors consists entirely
of representatives of AWG's retailers. Effective upon consummation of the
Merger and Initial Public Offering, the Board of Directors of AWG Group will
consist of Mike DeFabis and Doug Carolan, executive officers of AWG Group, J.
Fred Ball, Jim Queen and Don Woods, Jr., representatives of AWG's retailers,
and four directors who are not affiliated with AWG or its retailers.
Accordingly, the Board of Directors of AWG Group will not consist entirely of
retailer representatives as is the case with the current AWG Board. See
"MANAGEMENT."
Retention of Key Personnel. Continued profitability of AWG is dependent on
the experience and abilities of its senior management, including Mike DeFabis,
President and Chief Executive Officer; Doug Carolan, Executive Vice President
and Chief Operating Officer; Tom Williams, Executive Vice President of
Division Operations; Gary Phillips, Executive Vice President of Finance and
Administration and Chief Financial Officer and Joe Campbell, Vice President,
Secretary and Treasurer. None of these persons is subject to a written
employment or non-compete agreement. There would likely be a difficult
transition period if the services of any of these persons were lost. Moreover,
given the growth plans of AWG, it may be necessary in the future to engage the
services of additional skilled key employees and officers. There is
competition in the wholesale grocery business for qualified personnel and
thus, there is no assurance that AWG will be able to retain its current key
management or attract additional qualified key persons as needed. See
"MANAGEMENT."
Dependence on Homeland. Approximately 50% of sales originated by AWG's
Oklahoma distribution center in 1996 to date have been made to Homeland
Stores, Inc. ("Homeland"). For the 24 weeks ended June 15, 1996, sales to
Homeland represented approximately 10% of the sales of AWG as a whole. The
loss of Homeland as a customer or a substantial decrease in the number of
stores operated by Homeland would significantly reduce the profitability of
AWG's Oklahoma division and could have an adverse impact on the profitability
of AWG as a whole. AWG has entered into a long term supply agreement with
Homeland pursuant to which Homeland has agreed to utilize AWG as its primary
supplier through April 22, 2002. On May 13, 1996, Homeland filed a voluntary
Chapter 11 petition for bankruptcy reorganization. In its plan of
reorganization, which was also filed on May 13, Homeland proposed to assume
most of its pending contracts, including the supply agreement with AWG.
Homeland's plan was confirmed by the bankruptcy court on July 19, 1996. As a
result, Homeland's obligations under the supply agreement remain in force, and
Homeland is continuing to perform such obligations.
Customer Control. Following the Initial Public Offering, shares of AWG Group
Common Stock received by Shareholders in the Merger will constitute
approximately 71% of all outstanding shares and votes eligible to be cast in
any vote of AWG Group's shareholders. See "THE INITIAL PUBLIC OFFERING." These
Shareholders constitute virtually all of AWG's retailers. Accordingly, certain
conflicts of interest may arise between Shareholders and the holders of AWG
Group Common Stock who are not AWG retailers. Such holders of AWG Group Common
Stock will be relying on the Company's management and Board of Directors to
maximize value for all shareholders and to act in accordance with their
fiduciary duties to the Company if such conflicts arise. See "MANAGEMENT."
Loss of a Major Retailer. AWG's five largest retailers accounted for
approximately 34% of its sales in fiscal 1995. Management believes that the
loss of any one of these retailers could have an adverse impact on the
profitability of AWG. Management believes that the equity interest of these
retailers in the Company, together with AWG's price structure and service
history, provide significant incentives to remain AWG retailers.
THE COMPANIES
AWG. AWG is a retailer-owned wholesale food distributor operating on a
cooperative basis supplying a wide variety of food products and non-food items
and services to approximately 820 retail grocery stores and supermarkets
located in Arkansas, Illinois, Iowa, Kansas, Kentucky, Missouri, Nebraska,
Oklahoma, Tennessee
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and Texas. AWG buys, sells and delivers a wide variety of groceries, frozen
foods, meats, produce, dairy products, bakery, deli, health and beauty
products and general merchandise to its Shareholders. As an integral part of
its business and growth strategy, AWG offers a variety of value added support
services to its Shareholders, including store development and engineering
services, financing assistance, merchandising and advertising services,
technological support and insurance services, all of which are designed to
enhance the Shareholder's retail capabilities. AWG's principal executive
offices are located at 5000 Kansas Avenue, Kansas City, Kansas 66106 and its
telephone number is (913) 321-1313.
AWG Group. AWG Group was formed in August 1996 under Kansas law as a general
business corporation in order to effect the Merger and, immediately prior to
the Effective Time, will be wholly-owned by AWG. Before the Merger, AWG Group
will have only nominal assets and liabilities and no income. After the Merger,
AWG Group will be a holding company not directly engaged in the operation of
any business. AWG Group's consolidated financial position immediately after
the Merger will be substantially identical to that of AWG immediately before
the Merger. AWG Group's principal executive offices are located at 5000 Kansas
Avenue, Kansas City, Kansas 66106, and its telephone number is (913) 321-1313.
Merger Corp. Merger Corp. was formed in August 1996 under Missouri law as a
general business corporation in order to effect the Merger and, immediately
prior to the Effective Time, will be wholly-owned by AWG Group. Before the
Merger, Merger Corp. will have only nominal assets and liabilities and no
income. In the Merger, Merger Corp. will be merged with and into AWG and will
cease to exist. Merger Corp.'s principal executive offices are located at 5000
Kansas Avenue, Kansas City, Kansas 66106, and its telephone number is (913)
321-1313.
THE SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to Shareholders in
connection with the solicitation of proxies by the AWG Board from Shareholders
for use at the Special Meeting. This Proxy Statement/ Prospectus is also being
furnished to Shareholders in connection with the offer of the AWG Group Common
Stock to be issued in the Merger.
PURPOSE OF SPECIAL MEETING
The purpose of the Special Meeting is to consider and vote upon (i) a
proposal to approve the Merger Agreement, and (ii) such other matters, if any,
as may properly come before the Special Meeting or any adjournment or
postponement thereof. The AWG Board is not aware of, as of the date of mailing
of this Proxy Statement/Prospectus, any other business to be brought before
the Special Meeting. The enclosed proxy card authorizes the voting of shares
represented by the proxy on all other matters that may properly come before
the Special Meeting, and any adjournment or postponement thereof, and it is
the intention of the proxy holders to take such action in connection therewith
as shall be in accordance with their best judgment.
At the Effective Time, each share of AWG Common Stock outstanding
immediately prior to the Merger held by Shareholders who do not exercise their
statutory right to dissent from the Merger will be converted into the right to
receive shares of AWG Group Common Stock in accordance with the conversion
formula set forth in the Merger Agreement and more fully described below. See
"THE MERGER--Conversion Formula." AWG and Merger Corp. will merge and AWG will
become a wholly-owned subsidiary of AWG Group. Dissenting Shareholders will
only be entitled to receive the "fair value" of their shares as defined by the
MGBCL. See "THE MERGER--Dissenters' Rights."
AWG Group will file a Certificate of Merger with the Secretary of State of
the State of Missouri only if it has entered into a firm commitment
underwriting agreement with respect to the sale of shares of AWG Group Common
Stock to the public. See "THE INITIAL PUBLIC OFFERING."
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THE AWG BOARD HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, AUTHORIZED THE EXECUTION AND DELIVERY OF THE MERGER
AGREEMENT, AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
VOTING AT THE SPECIAL MEETING
Only Shareholders who hold shares of AWG Common Stock of record as of the
Record Date will be entitled to notice of and to vote at the Special Meeting.
Each share of AWG Class A Common Stock outstanding as of the Record Date is
entitled to one vote upon each matter presented at the Special Meeting,
exercisable at the Special Meeting in person or by properly executed proxy. As
of the Record Date, there were shares of AWG Class A Common Stock
entitled to vote at the Special Meeting. Each share of AWG Class B Common
Stock outstanding as of the Record Date is entitled to one vote upon the
proposal to approve the Merger Agreement, exercisable at the Special Meeting
in person or by properly executed proxy. As of the Record Date, there were
shares of AWG Class B Common Stock entitled to vote at the Special
Meeting. Shares of AWG Class B Common Stock are not entitled to vote upon any
other matter presented at the Special Meeting.
The presence, in person or by properly executed proxy, of a majority of the
shares of AWG Class A Common Stock entitled to vote is necessary to constitute
a quorum of the AWG Class A Common Stock at the Special Meeting. The presence,
in person or by properly executed proxy, of a majority of the shares of AWG
Class B Common Stock entitled to vote is necessary to constitute a quorum of
the AWG Class B Common Stock at the Special Meeting. Under Missouri law, the
affirmative vote of the holders of (i) two-thirds of the shares of AWG Class A
Common Stock, and (ii) two-thirds of the shares of AWG Class B Common Stock,
voting as separate classes, is required to approve the Merger Agreement.
Abstentions and failures to vote will have the same effect as votes cast
against approval of the Merger Agreement.
PROXIES
Shareholders are requested to complete, date, sign and promptly return the
accompanying proxy card in the enclosed envelope. All shares of AWG Common
Stock represented at the Special Meeting by properly executed proxies received
by AWG prior to or at the Special Meeting, unless such proxies have been
revoked, will be voted at the Special Meeting in accordance with the
instructions on the proxy card. If no instructions are specified on the proxy
card, the proxy granted therein will be voted FOR approval of the Merger
Agreement.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted (i) by filing with the Secretary of
AWG written notice of such revocation bearing a later date than the proxy
card, (ii) by duly executing a subsequent proxy card relating to the same
shares and delivering it to the Secretary of AWG, or (iii) by attending the
Special Meeting and voting in person (although attendance at the Special
Meeting will not in and of itself constitute revocation of a proxy). Any
written notice revoking a proxy should be sent to AWG, 5000 Kansas Avenue,
P.O. Box 2932 Kansas City, Kansas 66110-2932, Attention: Joseph L. Campbell,
II, Secretary.
PROXY SOLICITATION
All expenses of this solicitation, including the cost of preparing and
mailing the proxy materials furnished to Shareholders in connection with the
Special Meeting, will be borne by AWG. In addition to solicitation by use of
the mails, proxies may also be solicited on behalf of AWG by certain
directors, officers and regular employees of AWG in person or by telephone or
telegram. Such persons will receive no additional compensation for their
services. AWG anticipates holding a series of regional and individual
informational meetings with Shareholders before the Special Meeting.
OTHER MATTERS TO BE CONSIDERED
AWG is not aware of any matters other than as described in the accompanying
Notice of Special Meeting that are to come before the Special Meeting. If any
other matters are properly presented to the Special Meeting for action, the
persons named as proxies will have discretion to vote on such matters in
accordance with their best judgment.
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THE MERGER
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
AWG has operated as a retailer-owned cooperative grocery wholesaler
throughout most of its 70-year history. In the fall of 1995, as part of its
long-range planning process, the AWG Board began to study the Company's long
range operating plans and the appropriate financing alternatives for meeting
those plans.
The AWG Board believes that the continued success of AWG depends upon the
success, growth and profitability of its retailers which, in turn, depend upon
access to capital for expansion and to a reliable and economical product
distribution source. The AWG Board has considered industry trends toward
modernizing distribution facilities and improving efficiencies that have
resulted in industry consolidation and increased competition at the retail and
wholesale levels. AWG believes it must retain existing customers and attract
new customers to maintain and increase its purchasing power and operating
efficiencies.
At a meeting of the AWG Board on September 19, 1995, management of AWG
presented its preliminary analysis of the Merger and Initial Public Offering.
The AWG Board authorized management to continue to explore the issues raised
by the Merger and Initial Public Offering, the feasibility of such a
transaction and the impact on the Shareholders. The AWG Board authorized
management to seek such professional advice as it deemed desirable.
Management has had various discussions with Lazard Freres & Co. LLC
("Lazard"), AWG's financial advisor, and with the Company's legal advisors and
accountants, concerning the numerous issues raised by a public offering,
including the method of conversion, the applicable legal requirements, the
public equity market valuation of AWG and the operations of AWG after the
Merger and Initial Public Offering. On June 4, 1996, the AWG Board held a
meeting to discuss the outcome of management's deliberations. At this meeting,
oral presentations were given by the Company's advisors and AWG's management
concerning the mechanics of the Merger and Initial Public Offering, a
preliminary public equity market valuation of AWG and other legal and
financial issues. The AWG Board authorized management to continue its analysis
and to finalize specific details of the Merger and the Initial Public
Offering.
On June 24, 1996, the AWG Board held a meeting at which management presented
its additional analysis. The AWG Board approved the Merger and the Initial
Public Offering, subject to approval of the details of the conversion formula
and the Merger Agreement.
On August 13, 1996, representatives of Lazard, Smith Barney Inc. and George
K. Baum & Company (collectively the "Underwriters") met with the AWG Board to
review and update their financial analysis and valuation of AWG. The
Underwriters reviewed with the directors the performance of the United States
equity markets in general, and of certain selected publicly traded grocery
wholesalers, during the period since the June 4, 1996 Board meeting. In
particular, the Underwriters discussed the changes in the public equity prices
and trading multiples of those selected companies. The Underwriters reviewed
with the directors the methodologies used to determine a public equity market
valuation range for AWG and the process by which a public offering is
completed and an offering price obtained. After discussing the presentation of
the Underwriters and reviewing the valuation and related issues with
management and the Company's legal advisors, the AWG Board approved the Merger
Agreement, including the conversion formula, and authorized management to
proceed with the Merger. See "THE MERGER--Conversion Formula" and "--Valuation
by Underwriters."
In approving the Merger Agreement, the AWG Board structured the Merger and
Initial Public Offering in an attempt to provide the Shareholders with
significant capital and liquidity through the combination of AWG Group Common
Stock and the use of a portion of the Initial Public Offering proceeds to
redeem Patronage Certificates.
In reaching its decision, the AWG Board analyzed industry trends and
considered the advice of management and AWG's professional advisors. The AWG
Board concluded that it is in the best interests of AWG and its Shareholders
to reorganize AWG to enable it to obtain public equity financing. The AWG
Board believes that
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<PAGE>
such financing will provide a permanent equity base upon which AWG can finance
future growth and expansion and increase its customer base.
In addition, the AWG Board anticipates that a public equity offering will
provide AWG Shareholders a vehicle for realizing the full public equity market
value of AWG. The AWG Bylaws provide that a Shareholder who wishes to sell its
AWG Common Stock must first offer to sell it to AWG at a price equal to the
book value of such shares, and that AWG must accept such offer. Thus, AWG's
Shareholders cannot realize the full public equity market value of AWG to the
extent that value exceeds AWG's book value which, as of June 15, 1996, was
$27.7 million.
In approving the Merger Agreement, the AWG Board considered the
recommendations of management, together with a number of other factors,
including the following: (a) the changing nature of the wholesale food
business, (b) the need for AWG to create a permanent equity base and to have
access to the public capital markets to provide it with additional resources
to promote continued growth, (c) the desirability of providing Shareholders a
vehicle to realize the full public equity market value of AWG, (d) the ability
to generate significant cash to redeem approximately $68 million in Member
Deposit Certificates and Patronage Certificates, which will provide capital to
retailers to allow them to facilitate additional store openings and remodeling
programs, (e) AWG's continuing commitment to the concept of a retailer-
controlled distribution system, (f) AWG's continuing commitment to maintaining
its competitive low-cost position, (g) the ability to use AWG Group Common
Stock as consideration for potential acquisitions, and (h) the public equity
market valuation of AWG provided by the Underwriters.
AFTER CONSIDERING SUCH MATTERS, THE BOARD OF DIRECTORS OF AWG RECOMMENDS
THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
VALUATION BY UNDERWRITERS
At the August 13 meeting of the AWG Board, representatives of the
Underwriters expressed their views to the AWG Board concerning the potential
range of public equity market values of AWG as of such date based upon certain
considerations and assumptions and upon historical and forecasted financial
information, the pro forma historical financial information appearing
elsewhere in this Proxy Statement/Prospectus and other information provided by
AWG, as well as publicly available information.
The Underwriters assumed and relied upon the accuracy and completeness of
publicly available information and all information provided by AWG and did not
independently verify such information. The Underwriters assumed that the
financial forecasts and pro forma historical financial information were
reasonably prepared on bases reflecting the best available estimates and
judgments of AWG's management. The Underwriters did not express any view as to
what the value of the AWG Group Common Stock would be if and when issued or
the price at which it would trade thereafter. The Underwriters did not make or
obtain an independent valuation or appraisal of the assets or liabilities
(contingent or otherwise) of AWG Group or AWG, nor did the Underwriters make
any physical inspection of the properties or assets of AWG Group or AWG.
Based on a comparison with the reported and publicly estimated financial
performance and current public equity market values and trading multiples of
selected publicly traded wholesale food distribution companies and based on
public equity market, economic and other conditions that existed at the time,
the Underwriters advised the AWG Board that they had jointly derived an
implied public equity market valuation for AWG in the range of $450 million to
$550 million as of August 13, 1996.
The Underwriters selected five publicly traded companies that they deemed
comparable to AWG: Fleming Companies, Inc., Nash-Finch Company, Richfood
Holdings, Inc., Super Food Services, Inc. and SuperValu, Inc. Although the
Underwriters used these companies for comparison purposes, none of them is
identical to AWG. The Underwriters examined certain publicly available data
for each of such companies, including sales, gross margin, earnings before
interest, taxes, depreciation and amortization ("EBITDA"), earnings before
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interest and taxes ("EBIT") and earnings per share ("EPS") for fiscal 1991
through fiscal 1995, as well as estimates of EPS for fiscal 1996 and 1997 (as
estimated by research analysts and compiled by Institutional Brokers Estimate
System). The Underwriters analyzed the ratio of each such company's share
price to its EPS ("P/E Ratio") for the latest twelve months and to estimates,
where available, of its EPS for fiscal 1996 and 1997. The Underwriters also
analyzed the ratio of the aggregate value of common stock and net debt of each
such company to its sales, EBITDA and EBIT for the latest twelve months.
The Underwriters compared AWG's (i) compounded annual growth rate of sales,
(ii) gross margin, (iii) EBITDA, and (iv) EBIT for fiscal 1991 through 1995
with comparable data, together with P/E Ratios for the latest twelve months
and P/E Ratios derived from estimates, where available, of EPS for 1996 and
1997, for each of the comparable companies, and, after applying a discount for
the Initial Public Offering, derived a range of P/E Ratios deemed appropriate
for AWG as a public company. The Underwriters applied this range to AWG's
latest twelve months net income and AWG's projected 1996 and 1997 net income
to derive the implied public equity market value for AWG.
The Underwriters' public equity market valuation was directed solely to the
AWG Board and does not constitute a recommendation as to how Shareholders
should vote with respect to the Merger. The public equity market valuation was
based on information, assumptions, facts and conditions prevailing at the time
and there can be no assurance that, following the Initial Public Offering, the
trading value of AWG Group Common Stock will be consistent with the range of
implied public equity market values derived by the Underwriters.
There can be no assurance that the public equity market value of AWG at the
time of the Merger and Initial Public Offering will be within the range of
implied public equity market values derived by the Underwriters. In the event
the Shareholders approve the Merger, the AWG Board will retain the authority
to consummate the Merger and to proceed with the Initial Public Offering with
an aggregate offering price that the AWG Board believes to be in the best
interest of AWG and the Shareholders, including an aggregate offering price
that indicates a public equity market value for AWG that is below the range of
implied public equity market values derived by the Underwriters.
The AWG Board engaged the Underwriters because they are nationally-
recognized investment banking firms regularly engaged in the underwriting of
securities. In connection with such engagement, AWG agreed to appoint the
Underwriters as co-managers of the Initial Public Offering if AWG elects to
proceed with the Initial Public Offering and if the Underwriters agree at that
time to act in such capacity. The Underwriters will not receive any
compensation for their advice, other than in connection with such Initial
Public Offering. AWG has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the federal securities laws, to which
such persons may become subject in connection with such engagement.
TERMS OF THE MERGER; DIRECTORS AND EXECUTIVE OFFICERS
If approved by the Shareholders, the Merger will become effective (the
"Effective Time") upon the issuance of a certificate of merger by the
Secretary of State of the State of Missouri. Subject to the terms and
conditions of the Merger Agreement, it is presently contemplated that the
Effective Time will be as soon as practicable following the Special Meeting
and commencement of the Initial Public Offering. However, the AWG Board will
retain the authority to delay the effectiveness of the Merger until such time,
if any, that the AWG Board determines to be in the best interest of AWG and
its Shareholders.
At the Special Meeting, Shareholders of AWG will be asked to approve the
Merger Agreement pursuant to which (i) all outstanding shares of AWG Common
Stock will be converted into the right to receive shares of AWG Group Common
Stock, (ii) Merger Corp., a wholly-owned subsidiary of AWG Group, will merge
with and into AWG with AWG as the surviving corporation, (iii) all outstanding
shares of AWG Group Common Stock held by AWG will be canceled, and (iv) all
outstanding shares of Merger Corp. will be converted into shares of AWG Class
A Common Stock. A copy of the Merger Agreement appears as Annex A to this
Proxy Statement/Prospectus and should be read in its entirety.
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<PAGE>
The Articles of Incorporation and Bylaws of AWG Group are attached as
Annexes B and D hereto. Upon consummation of the Merger, the Board of
Directors of AWG Group will consist of Mike DeFabis and Doug Carolan,
executive officers of AWG Group, J. Fred Ball, Jim Queen and Don Woods, Jr.
representatives of AWG's retailers and four directors who are not affiliated
with AWG or any of its retailers. See "MANAGEMENT." The Board of Directors of
AWG Group will appoint the executive officers of AWG Group. The Board of
Directors of AWG Group will also elect the board of directors of AWG following
the Merger.
CONVERSION FORMULA
In determining the appropriate method by which shares of AWG Common Stock
will be converted in the Merger into shares of AWG Group Common Stock, the AWG
Board first determined a reasonable estimate of the public equity market value
of AWG prior to the Initial Public Offering. After reviewing the public equity
market valuation presented by the Underwriters, the AWG Board concluded that
$500 million, the midpoint of the valuation range, was a reasonable estimate
of AWG's equity value on a public company basis as of August 13, 1996. See
"THE MERGER--Valuation by Underwriters." The AWG Board determined that the
initial share price in the public offering should be approximately $20 per
share. Accordingly, the Merger Agreement provides that an aggregate of 25
million shares of AWG Group Common Stock will be issued to Shareholders in the
Merger (the "Merger Shares"). The number of shares received by a Shareholder
will not change if the Initial Public Offering price is greater or less than
$20 or if the final valuation of AWG is different than the public equity
market valuation presented by the Underwriters.
AWG operates on a cooperative basis. AWG Common Stock represents a
retailer's participation and membership interest in the cooperative and does
not enable holders to participate, as shareholders, in the earnings of AWG or
in its value as an enterprise to the extent that value exceeds AWG's aggregate
book value. As is customary for cooperatives, AWG has distributed to its
Shareholders a large percentage of its net earnings each year; these
distributions were not made on a per share basis, but were based on each
Shareholder's relative contribution to the total purchases from AWG by all
Shareholders. Also, under AWG's Articles of Incorporation and Bylaws,
Shareholders that wish to sell their shares of AWG Common Stock must offer
such shares to AWG, and AWG must purchase such shares at their book value.
The AWG Board took account of these factors when determining the terms of
the conversion formula for converting AWG Common Stock into the Merger Shares.
The AWG Board believes that the conversion formula adequately reflects AWG's
cooperative status and economic structure and the relative contributions of
its Shareholders to its value as an enterprise and, accordingly, reasonably
and appropriately converts the AWG Common Stock into the Merger Shares.
The conversion formula provides that shares of AWG Common Stock outstanding
immediately before the Effective Time and held by Shareholders that have not
properly dissented from the Merger ("Nondissenting Shareholders") will be
converted into the Merger Shares in two steps. First, the AWG Common Stock
held by Nondissenting Shareholders will be converted into Merger Shares based
on the aggregate book value of the shares of AWG Common Stock as of June 15,
1996, which was $27,747,479. Accordingly, shares of AWG Common Stock will be
converted, first, on the basis of book value, into 1,389,570 Merger Shares
(the "Book Value Conversion"). These Merger Shares will be distributed to
Nondissenting Shareholders based on the percentage that their shares of AWG
Common Stock bears to all such shares held by Nondissenting Shareholders.
Based on the number of shares of AWG Common Stock outstanding on June 15,
1996, Shareholders may calculate the number of Merger Shares they will receive
in the Book Value Conversion, assuming there are no Dissenting Shareholders,
by multiplying the number of shares of AWG Common Stock they hold by $1,365
(the book value per share as of June 15, 1996), dividing the result by 20 and
rounding down any fractional shares.
Second, the outstanding shares of AWG Common Stock held by Nondissenting
Shareholders will be converted into 23,610,430 Merger Shares (the "Purchase
Level Conversion"); such conversion will be based on each Nondissenting
Shareholder's relative percentage of qualifying purchases from AWG for the
fiscal years
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1989 through 1995 and for the year-to-date period of 1996 ending on September
7, 1996. The total dollar amount of qualifying purchases by each Nondissenting
Shareholder during each of the measured periods ("Annual Purchase Amount")
will be determined from AWG historical retailer purchase records. Qualifying
purchases are defined as purchases for products billed or sold through AWG
distribution facilities which are carried in AWG's warehouses, subject to
certain exclusions in accordance with AWG's past practices for determining
year-end patronage rebates. The Annual Purchase Amount for each period (the
"Individual Year Conversion") will then be multiplied by a percentage, as
follows: 1996 purchases--25%, 1995 purchases--25%, 1994 purchases--14%, 1993
purchases--11%, 1992 purchases--9%, 1991 purchases--7%, 1990 purchases--5%,
1989 purchases--4%. The sum of each Nondissenting Shareholder's Individual
Year Conversion will equal its "Total Purchase Conversion." The ratio of a
Nondissenting Shareholder's Total Purchase Conversion to the Total Purchase
Conversions of all Nondissenting Shareholders will determine each
Nondissenting Shareholder's percentage of the Purchase Level Conversion. The
sum of the Book Value Conversion and the Purchase Level Conversion for each
Nondissenting Shareholder will determine the aggregate number of shares of AWG
Group Common Stock into which such Nondissenting Shareholder's AWG Common
Stock will be converted in the Merger.
For example, if a Nondissenting Shareholder had $1,000,000 of purchases in
each period, its Individual Year Conversions would be as follows:
<TABLE>
<S> <C> <C> <C>
1996 (through September 7).................. 1,000,000 x 25% = 250,000
1995........................................ 1,000,000 x 25% = 250,000
1994........................................ 1,000,000 x 14% = 140,000
1993........................................ 1,000,000 x 11% = 110,000
1992........................................ 1,000,000 x 9% = 90,000
1991........................................ 1,000,000 x 7% = 70,000
1990........................................ 1,000,000 x 5% = 50,000
1989........................................ 1,000,000 x 4% = 40,000
---------
1,000,000
=========
</TABLE>
The Nondissenting Shareholder's Total Purchase Conversion would therefore be
$1,000,000. If the Total Purchase Conversions for all Nondissenting
Shareholders is $1,000,000,000, this Nondissenting Shareholder's Total
Purchase Conversion would represent 0.1% of such total and such Nondissenting
Shareholder would therefore receive 0.1% of the Purchase Level Conversion or
23,610 Merger Shares. Based on the number of shares of AWG Common Stock
outstanding on June 15, 1996, and assuming that there are no Dissenting
Shareholders and that such Nondissenting Shareholder held 15 shares of AWG
Common Stock, such Shareholder would receive approximately 24,633 Merger
Shares (the sum of 1,023 Merger Shares based on the Book Value Conversion and
23,610 Merger Shares based on the Purchase Level Conversion).
AWG has operated as a cooperative throughout most of its history, paying
patronage rebates according to the relative volume of qualifying purchases by
each Shareholder during the preceding fiscal year. In the absence of any
express Missouri statutory provision with respect to the manner of converting
cooperative shareholder interests into shares of an ordinary stock
corporation, the AWG Board has established the conversion formula based upon
its determination of a reasonable and appropriate division of the fair value
of a Shareholder's interest in AWG.
An informational statement accompanying this Proxy Statement/Prospectus
describes, for the individual Shareholder to whom this Prospectus has been
sent, AWG's present calculation of such Shareholder's Book Value Conversion,
Purchase Level Conversion, current stock ownership and the percentage and
number of Merger Shares tentatively issuable to such Shareholder in the
Merger. The actual percentage and number of Merger Shares issued to each
Shareholder will vary from the percentage and number shown on the
informational statement in the event there are Dissenting Shares, or there is
any change in AWG's calculation of qualifying purchases for a particular
Shareholder or any change in outstanding shares of AWG Common Stock.
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TREATMENT OF PATRONAGE CERTIFICATES
AWG Group expects that approximately $68 million of the net proceeds of the
Initial Public Offering will be used by AWG to effect an early redemption of
certain Patronage Certificates and the repayment of all member deposit
certificates. Assuming that 10 million shares of AWG Group Common Stock are
sold in the Initial Public Offering at a price of $20 per share, 30% of the
estimated net proceeds would be used to redeem approximately $56.0 million
aggregate principal amount of Patronage Certificates, constituting
approximately 47% of the aggregate principal amount of certificates
outstanding at June 15, 1996. All Member Deposit Certificates, having an
aggregate principal amount of approximately $12.0 million, will be paid.
Patronage Certificates having an aggregate face value of less than $1 million
will be redeemed by the Company at face value. Patronage Certificates having
an aggregate face value of $1 million or more will not be redeemed and will be
paid as they mature, bearing interest at a fixed rate of 6% per annum.
AWG's Bylaws provide that patronage rebates shall be declared following the
end of each fiscal year. The Merger will result in a termination of the
operation of AWG as a cooperative as of the Effective Time. Patronage rebates
will be calculated for the period January 1 through the Effective Time on the
same basis as in the past; however, 100% of the rebate will be paid to the
Shareholders in cash. This payment, which, based on 1996 projected operating
results will aggregate approximately $57 million, is anticipated to be made in
the spring of 1997. Following the Effective Time, neither AWG nor AWG Group
will operate as a cooperative and, accordingly, will not pay rebates to
retailers.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Each director of AWG is affiliated with a Shareholder of AWG and, as such,
may be deemed to have an interest in those shares of AWG Common Stock held by
such Shareholder that will be converted into shares of AWG Group Common Stock
in the Merger. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT."
MERGER PROCEDURES
Promptly after the Effective Time, AWG will cause to be mailed to each
person who was, at the Effective Time, a qualified holder of shares of AWG
Common Stock, a letter of transmittal and instructions for use in effecting
the receipt of shares of AWG Group Common Stock. Each holder will be required
to deliver a sworn statement acknowledging that AWG is in possession of its
stock certificate. Upon receipt of such acknowledgment, together with a
properly executed letter of transmittal, the holder will be entitled to
receive a certificate evidencing the number of shares of AWG Group Common
Stock to which it is entitled pursuant to the Merger Agreement. No fractional
Shares will be paid; the number of Shares of AWG Group Common Stock to which a
Shareholder is entitled shall be rounded down to the nearest whole share. Each
certificate that represented shares of AWG Common Stock immediately before the
Effective Time shall be deemed for all purposes to evidence ownership of the
number of shares of AWG Group Common Stock for which such shares of AWG Common
Stock shall have been converted pursuant to the Merger Agreement, unless the
owner thereof has properly exercised its dissenters' rights. Unless and until
the exchange procedures have been satisfied, no dividend or other
distribution, if any, payable to the holders of shares of AWG Group Common
Stock as of any date on or after the Effective Time, shall be paid to the
owner of such AWG Group Common Stock. Upon compliance with all procedures,
there shall be paid to the record holder the amount, without interest thereon,
of dividends and other distributions, if any, which subsequent to the
Effective Time have become payable with respect to the number of shares of AWG
Group Common Stock represented thereby. Notwithstanding the foregoing, no
person shall be liable to any holder of certificates formerly representing
shares of AWG Common Stock for any amounts paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
OPERATIONS AFTER THE MERGER
AWG does not anticipate any changes in the day-to-day operations, personnel
or management of its business following the Merger and historical levels of
service and product selection should not be affected by the Merger.
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At the Effective Time, AWG will cease to operate as a cooperative and will not
pay patronage rebates with respect to its operations after the Effective Time.
All other discounts and allowances, such as Concentrated Purchase Allowance,
Store Order Load Option and pallet allowances, are expected to continue as in
the past.
DISSENTERS' RIGHTS
Section 351.455 of the MGBCL, a copy of which is attached hereto as Annex C,
entitles each holder of AWG Common Stock who dissents from the Merger and who
follows the procedures set forth in Section 351.455 to receive the fair value
of the holder's shares in cash. Under Section 351.455, a holder of AWG Common
Stock may dissent and AWG will pay to such Shareholder, upon surrender of its
certificate or certificates representing such shares, the fair value of such
Shareholder's shares as of the day prior to the Special Meeting, if such
Shareholder (i) files with AWG prior to or at the Special Meeting a written
objection to the Merger; (ii) does not vote in favor thereof; and (iii) within
20 days after the Effective Time makes a written demand to AWG for payment of
the fair value of the shares held by such Shareholder as of the day prior to
the date of the Special Meeting. Such demand shall state the number and class
of the shares owned by such Dissenting Shareholder. Written objections to the
Merger and demands for the payment of fair value should be addressed to: AWG,
5000 Kansas Avenue, Kansas City, Kansas 66106, Attention: General Counsel.
Shareholders who have not complied with all of these requirements shall be
conclusively presumed to have consented to the Merger and shall be bound by
the terms thereof. AWG will provide written notice of the Effective Time of
the Merger to all Shareholders who have timely filed written notice of
objection and not voted in favor of the Merger.
A proxy marked "against" the Merger will not be deemed to be a written
notice of objection to the Merger. A Shareholder who wishes to dissent from
the Merger must provide a separate written notice of objection at or prior to
the Special Meeting, must not vote "for" the Merger and must make written
demand for payment within 20 days after the Effective Time of the Merger. A
proxy marked "against" or "abstain" or a Shareholder's failure to vote with
respect to the Merger will suffice as not voting in favor of the Merger.
A beneficial owner of shares who is not the record owner may not assert
dissenters' rights. If the stock is owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, or by a nominee, the written
demand asserting dissenters' rights must be executed by the fiduciary or
nominee. If the stock is owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand must be executed by all joint
owners. An authorized agent, including an agent for two or more joint owners,
may execute the demand for a shareholder of record; however, the agent must
identify the record owner and expressly disclose the fact that, in executing
the demand, he is acting as agent for the record owner.
If, within 30 days after the Effective Time, the value of such shares is
agreed upon between the Dissenting Shareholder and AWG, payment therefor will
be made within 90 days after the Effective Time upon the surrender by such
Shareholder of the certificate or certificates representing such shares. Upon
payment of the agreed value, the Dissenting Shareholder will cease to have any
interest in such shares or in AWG.
If, within such 30-day period, a Dissenting Shareholder and AWG do not agree
as to value, then the Dissenting Shareholder may, within 60 days after the
expiration of the 30-day period, file a petition in any court of competent
jurisdiction asking for a finding and determination of the fair value of such
shares, and shall be entitled to judgment against AWG for the amount of such
fair value as of the day prior to the date of the Special Meeting, together
with interest thereon to the date of such judgment. The judgment will be
payable only upon, and simultaneously with, the surrender to AWG of the
certificate or certificates representing shares with respect to which
dissenters' rights have been exercised. Upon the payment of the judgment, the
Dissenting Shareholder will cease to have any interest in such shares or in
AWG. Unless the Dissenting Shareholder shall file such petition within the 60-
day period, such shareholder and all persons claiming under such shareholder
will be conclusively presumed to have approved and ratified the Merger and
shall be bound by the terms thereof. The Company believes that the fair value
of shares of AWG Common Stock will be equal to the book value of such shares
at June 15, 1996.
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The right of a Dissenting Shareholder to be paid the fair value of its
shares will cease if the Shareholder fails to comply with the procedures set
forth in Section 351.455 or if the Merger Agreement is terminated for any
reason.
The foregoing does not purport to be a complete statement of the procedures
to be followed by Shareholders desiring to exercise appraisal rights. In view
of the fact that exercise of such rights requires strict adherence to the
relevant provisions of the MGBCL, Shareholders who desire to exercise
appraisal rights are advised to review with care all applicable provisions of
law and to obtain legal counsel concerning proper compliance with applicable
provisions of the MGBCL.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of the opinions of KPMG Peat Marwick LLP and
Blackwell Sanders Matheny Weary & Lombardi L.C. about the material federal
income tax consequences of the Merger to AWG and the Shareholders. Neither AWG
nor AWG Group has requested, nor will they request, an advance ruling from the
Internal Revenue Service as to the federal income tax consequences of the
Merger. Therefore, there can be no assurance that the Merger will constitute a
tax-free exchange, or that other favorable tax treatment will be made
available to AWG or the Shareholders. This summary is not a complete
description of all the tax consequences of the Merger. Shareholders'
individual circumstances may affect the tax consequences of the Merger under
applicable foreign, state or local laws. Accordingly, Shareholders are advised
to consult their own tax advisors as to the specific tax consequences of the
Merger to them.
The Merger and the public offering of the shares of AWG Group will
constitute parts of a tax-free exchange described in section 351(a) of the
Internal Revenue Code. Consequently: (i) Shareholders of AWG will not
recognize gain or loss on the receipt of AWG Group Common Stock in the Merger;
(ii) AWG will not recognize gain or loss as a result of the Merger; (iii) the
basis of the AWG Group Common Stock in the hands of Shareholders will equal
the basis of stock of AWG Common Stock exchanged; (iv) the holding period of
the AWG Group Common Stock received by Shareholders upon consummation of the
Merger will include the holding period of the AWG Common Stock exchanged; and
(v) the Merger will not affect the basis or holding period of the assets of
AWG.
ABANDONMENT AND TERMINATION; AMENDMENT OF THE MERGER AGREEMENT
The Merger Agreement may be abandoned and terminated before the Effective
Time by the AWG Board if, in its sole judgment, it deems consummation of the
Merger to be inadvisable for any reason. The Merger Agreement may be amended
at any time before the Effective Time with the approval of the boards of
directors of AWG, AWG Group and Merger Corp. but no such amendment may (i)
alter or change the amount or kind of shares to be received by holders of AWG
Common Stock, (ii) alter or change any of the terms or conditions of the
Merger Agreement if such alteration or change would adversely affect the
shares of AWG Group Common Stock, or (iii) alter or change any term of AWG
Group's Articles of Incorporation.
RETAILER INCENTIVE PROGRAMS
Because AWG operates in a cooperative manner, a retailer that wants to
purchase from AWG must become a Shareholder. When AWG becomes a wholly-owned
subsidiary of AWG Group, and operates as a stock corporation, such ownership
will no longer be required. Obtaining new retailers, and retention of
retailers that have recently joined, will nevertheless be just as important to
AWG Group as retention of retailers that have been Shareholders for a long
period of time. However, such persons will either receive no stock allocation,
because they became a retailer after the Initial Public Offering, or will
receive only a small allocation of stock in the Merger because they had not
been a Shareholder for a significant number of years. In order to provide an
additional incentive to encourage additional retailers to purchase from AWG
after the Merger and to encourage recent Shareholders to remain customers, AWG
Group plans to institute two retailer stock option plans, effective upon the
consummation of the Initial Public Offering.
23
<PAGE>
NEW RETAILER INCENTIVE PROGRAM
Pursuant to the terms of the New Retailer Incentive Program, AWG Group will
reserve a number of shares equal to approximately 5% of the total shares
outstanding after the Initial Public Offering for issuance under options
granted to new retailers. AWG Group will have complete discretion as to the
recipients and the number of shares subject to options. The options will be
granted at the market price of the AWG Group Common Stock at the date of grant
and will be exercisable for a 90-day period at the end of three years from the
date the option is granted. At the time an option is granted, AWG Group will
establish an anticipated purchasing level for the new retailer. The retailer
must meet a minimum percentage (currently set at 80%) of that level throughout
each of the years during the three year option period in order for the option
to remain exercisable. If the option is not or cannot be exercised at the end
of its term, it will expire. All options granted under this program are non-
transferable.
RECENT SHAREHOLDER OPTION PROGRAM
Retailers who became Shareholders after January 1, 1996 ("Recent
Shareholders") will be eligible to receive stock options under the Recent
Shareholder Option Program on the Effective Date. The number of options
granted to a Recent Shareholder will be determined by comparing the number of
shares actually received by such Recent Shareholder under the stock conversion
allocation formula with the number of shares that would have been received
under the formula had the retailer become a Shareholder on January 1, 1996.
The number of options granted will equal the difference between these two
numbers. For example, if such Shareholder would have been allocated 15,000
shares under the conversion formula if it had become a Shareholder on January
1, 1996, but received only 10,000 shares under the formula because it became a
Shareholder on April 1, 1996, this Recent Shareholder would receive an option
to purchase an additional 5,000 shares. The options will be granted at the
Effective Time and will be exercisable at the price at which shares are sold
to the public in the Initial Public Offering. The options will be exercisable
only during a 90-day period beginning three years after the date of grant. If,
at any time throughout each of the years during the three year period,
purchases by such Shareholder decline below 80% of the level of purchases used
to calculate the number of option shares, the option will lapse and will no
longer be exercisable. All options granted under this program are non-
transferable.
FEDERAL INCOME TAX CONSEQUENCES OF RETAILER INCENTIVE PROGRAMS
The proper tax treatment of the retailer incentive programs is not clear.
AWG Group plans to rely on an analogy to stock options provided to employees
and other service providers. It will not treat deliveries of options to
purchase AWG Group Common Stock as causing recipients to recognize income and
will not claim any deductions for such deliveries. It will treat the exercise
of any option under the programs as a taxable event requiring optionees to
treat the excess of the fair market value of the AWG Group Common Stock
received over the option price as ordinary income and will claim deductions
for equal amounts as if they were rebates on the sale of inventory.
Information returns on Form 1099 will be issued for all income that optionees
realize from the exercise of options, unless the amount of reportable income
on any such return does not exceed $600 for the year.
Participants in the retail incentive programs should consult their tax
advisors about the programs because they may wish to adopt a different
interpretation of the income tax laws as they apply to the programs. The most
likely alternative would be to recognize income (which would be ordinary
income in the case of the New Retailer Incentive Program but might be capital
gain in the case of the Recent Shareholder Option Program) equal to the fair
market value of an option when received and recognize no income at the time an
option was exercised. Under this interpretation, AWG Group's deduction would
be limited to the amount of ordinary income that an optionee realized, but
since AWG would not be reporting those amounts on information returns, the
Internal Revenue Service might take the position that it was not entitled to
any deduction. If this interpretation were correct, optionees' basis for their
stock would be limited to the amount they paid plus the amount of income, if
any, recognized on receipt of the option; if the interpretation that AWG Group
plans to adopt is correct, the basis of shares in optionees' hands will be the
fair market value on the date of exercise.
24
<PAGE>
Since the applicable legal authority with respect to the tax treatment of
the retail incentive programs may change, there can be no assurance that AWG
Group's intentions with respect to the reporting of transactions under the
program will not change. AWG Group does not plan to seek a ruling or other
official sanction for the interpretation it adopts.
THE INITIAL PUBLIC OFFERING
It is expected that approximately 10 million shares of AWG Group Common
Stock will be offered in the Initial Public Offering. Such shares will
constitute approximately 29% of the number of shares of the AWG Group Common
Stock outstanding immediately following the Merger and consummation of the
Initial Public Offering. In connection with the Initial Public Offering, AWG
Group will grant the underwriters an option to purchase up to an additional
1.5 million shares of AWG Group Common Stock solely to cover over-allotments.
In the event the over-allotment option is exercised, shares purchased in the
Initial Public Offering will constitute approximately 32% of the outstanding
shares of AWG Group Common Stock. Management of AWG expects that the Initial
Public Offering will occur as soon as practicable after approval of the Merger
Agreement. However, the AWG Board will retain the authority to delay the
effectiveness of the Merger until such time, if any, that the AWG Board
determines to be in the best interest of AWG and its Shareholders. AWG will
not file a certificate of merger with the Secretary of State of the State of
Missouri to effect the Merger unless AWG Group has entered into a firm
commitment underwriting agreement with respect to the Initial Public Offering.
The AWG Board may terminate the Merger Agreement following its approval by the
Shareholders in the event that AWG Group does not enter into a firm commitment
underwriting agreement within a reasonable time following the Special Meeting.
AWG Group currently expects that the offering price for the shares of AWG
Group Common Stock to be sold in the Initial Public Offering will be
approximately $20 per share, but there can be no assurance that AWG Group will
be able to sell the expected number of shares of AWG Group Common Stock at
that price. The final public equity market valuation of AWG Group and
resulting per share price used in the Initial Public Offering will be
determined by the Board of Directors of AWG Group and the underwriters at the
time of the Initial Public Offering and may be above or below $500 million and
$20 per share, respectively. The net proceeds of the Initial Public Offering,
after deduction of negotiated underwriters' commissions, filing fees and other
costs associated with the offering, will be used by AWG Group (i) to redeem a
portion of the outstanding Patronage Certificates and repay outstanding Member
Deposit Certificates, (ii) to reduce amounts outstanding under AWG's revolving
credit line that were borrowed to fund various recently completed capital
projects, (iii) to fund expansion of existing facilities or construction of
new facilities, (iv) for potential strategic acquisitions, (v) to provide
financing to retailers for store development, and (vi) for general corporate
purposes.
25
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of AWG as of June 15,
1996, and the estimated pro forma adjustments and pro forma capitalization of
AWG Group after giving effect to the Merger and the sale of 10 million shares
of AWG Group Common Stock in the Initial Public Offering at the assumed price
of $20 per share less estimated offering expenses, including underwriters'
commissions. See "THE INITIAL PUBLIC OFFERING." The historical financial data
upon which the following table is based is included in its entirety elsewhere
in this Prospectus. The pro forma adjustments assume that the Merger occurred
and the Initial Public Offering was consummated as of the date thereof, and
that a portion of the net proceeds from the Initial Public Offering was used
to redeem as of the date thereof approximately $68 million aggregate principal
amount of outstanding Patronage Certificates and Member Deposit Certificates
and that $53 million was used to repay other long-term debt.
<TABLE>
<CAPTION>
JUNE 15, 1996
-----------------------------
PRO FORMA PRO
ACTUAL ADJUSTMENTS FORMA
-------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt:
Revolving credit agreement..................... $ 53,000 $ (53,000) $ --
Obligations under supply agreement............. 19,045 -- 19,045
Patronage certificates......................... 109,239 (49,119) 60,120
Member deposit certificates.................... 12,041 (12,041) --
Other.......................................... 7,544 -- 7,544
-------- --------- --------
Total long-term debt......................... $200,869 $(114,160) $ 86,709
Shareholders' equity:
Preferred stock................................ N/A -- --
Class A common stock, par value $100.00 per
share, 12,000 shares authorized, 5,400 shares
issued and outstanding........................ $ 540 $ (540) $ --
Class B common stock, par value $100.00 per
share, 150,000 shares authorized, 14,945
shares issued and outstanding................. 1,494 (1,494) --
Common stock, par value $0.01, 500 million
shares authorized, issued 35 million shares... -- 350 350
Additional paid-in capital..................... 1,932 187,684 189,616
Retained earnings.............................. 23,781 -- 23,781
-------- --------- --------
Total shareholders' equity................... $ 27,747 $ 186,000 $213,747
-------- --------- --------
Total capitalization......................... $228,616 $ 71,840 $300,456
======== ========= ========
</TABLE>
26
<PAGE>
SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
The summary below sets forth selected consolidated historical financial data
and selected consolidated pro forma financial data with respect to AWG and AWG
Group, respectively. The financial data should be read in conjunction with the
historical consolidated financial statements and related notes thereto of AWG
and in conjunction with the pro forma condensed consolidated financial
statements and related notes thereto of AWG Group included elsewhere in this
Proxy Statement/Prospectus. See "Pro Forma Condensed Consolidated Financial
Statements" and "Consolidated Financial Statements."
The selected financial data presented below under the captions "Historical
Income Statement Data" and "Historical Balance Sheet Data" as of and for each
of the fiscal years in the five-year period ended December 30, 1995 are
derived from the audited consolidated financial statements of AWG. The
consolidated financial statements as of December 31, 1994 and December 30,
1995 and for each of the fiscal years in the three-year period ended December
30, 1995 and the independent auditors' report thereon, are included elsewhere
in this Proxy Statement/Prospectus. The selected financial data under the
captions "Historical Income Statement Data" and "Historical Balance Sheet
Data" as of June 17, 1995 and June 15, 1996 and for each of the twenty-four
week periods then ended are derived from unaudited condensed consolidated
financial statements which are included elsewhere in this Proxy
Statement/Prospectus. The data set forth below should be read in conjunction
with the Consolidated Financial Statements and Notes thereto included
elsewhere in this Proxy Statement/Prospectus. No historical financial
statements of AWG Group are included in this Proxy Statement/Prospectus as AWG
Group has no significant assets or liabilities and no operating history.
27
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------------------------------------------------
TWENTY-FOUR
FISCAL YEAR ENDED(1) WEEKS ENDED
---------------------------------------------------------------- -----------------
DECEMBER 28, DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 30, JUNE 17, JUNE 15,
1991 1992 1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------ -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales.............. $2,124.7 $2,279.9 $2,419.2 $2,484.6 $2,836.2 $1,213.5 $1,399.2
Cost of goods sold..... 2,015.2 2,149.5 2,276.5 2,335.4 2,658.5 1,138.8 1,305.5
-------- -------- -------- -------- -------- -------- --------
Gross profit........... 109.5 130.4 142.7 149.2 177.7 74.7 93.7
General &
administrative
expenses.............. 57.3 72.4 84.4 90.5 113.8 44.2 54.6
-------- -------- -------- -------- -------- -------- --------
Operating income....... 52.2 58.0 58.3 58.7 63.9 30.5 39.1
Interest expense....... 9.4 8.1 8.4 6.8 9.3 3.9 5.8
Other income, net...... 4.9 2.8 4.7 5.3 4.8 2.3 3.4
Income tax expense
(benefit)............. 2.5 2.1 1.7 1.9 (0.2) 0.4 1.1
-------- -------- -------- -------- -------- -------- --------
Net income............. $ 45.2 $ 50.6 $ 52.9 $ 55.3 $ 59.6 $ 28.5 $ 35.6
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA(2)
------------------------------
TWENTY-FOUR
FISCAL YEAR WEEKS ENDED
ENDED -----------------
DECEMBER 30, JUNE 17, JUNE 15,
1995 1995 1996
------------ -------- --------
(DOLLARS IN MILLIONS, EXCEPT
PER SHARE INFORMATION)
<S> <C> <C> <C>
Pro forma income statement data:
Operating income............................... $63.9 $30.5 $39.1
Interest expense............................... 4.1 1.8 2.4
Other income, net.............................. 4.7 2.3 3.4
Income taxes................................... 25.8 12.4 16.0
----- ----- -----
Net income..................................... $38.7 $18.6 $24.1
===== ===== =====
Pro forma net income per share................. $1.11 $0.53 $0.69
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------------------------------------
TWENTY-FOUR
FISCAL YEAR ENDED(1) WEEKS ENDED
---------------------------------------------------------------- --------------------
DECEMBER 28, DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 30, JUNE 17, JUNE 15,
1991 1992 1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------ -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Other Data:
Depreciation and
amortization.......... $ 7.4 $ 9.5 $ 9.1 $ 9.3 $ 14.0 $ 4.9 $ 7.5
Capital expenditures
(3)................... 12.8 21.3 5.5 15.1 18.7 4.9 9.6
Statistical Data:
Revenue growth (4)..... 6.47% 7.30% 6.11% 2.70% 14.15% 10.59% 15.30%
Net income growth...... 5.85% 11.95% 4.55% 4.54% 7.78% 13.55% 24.91%
Gross margin........... 5.15% 5.72% 5.90% 6.00% 6.26% 6.15% 6.70%
Operating income
margin................ 2.46% 2.54% 2.41% 2.36% 2.25% 2.51% 2.79%
Inventory turnover..... 25.47x 23.38x 23.23x 23.76x 22.22x 26.01x(5) 24.16x(5)
Balance Sheet Data:
Cash and cash
equivalents........... $ 33.9 $ 27.6 $ 27.1 $ 16.9 $ 18.1 $ 18.9 $ 12.1
Working capital........ 49.1 44.1 54.0 29.9 28.1 12.4 68.3
Total assets........... 309.5 302.7 320.6 339.2 463.9 407.4 456.3
Long-term obligations.. 2.4 1.7 1.2 0.7 52.5 49.3 72.0
Patronage
certificates--long
term.................. 80.9 88.2 94.4 102.0 112.4 112.0 109.2
</TABLE>
- --------
(1) AWG's fiscal year consists of thirteen four-week periods ending on the
last Saturday of December. Fiscal 1994 consisted of 53 weeks.
(2) Pro forma net income reflects reduction of interest expense as a result of
application of a portion of the proceeds from the Initial Public Offering
and provision for income taxes.
(3) Capital expenditures in 1992 included costs of an expansion to the
Springfield warehouse and office expansion in Kansas City.
(4) Revenue growth in 1992 reflects the addition of the Food Barn volume which
peaked and then declined until the Food Barn stores were purchased by AWG
retailers in April of 1994. Revenue growth in 1995 reflects the opening in
April of the Oklahoma City division.
(5) On an annualized basis.
28
<PAGE>
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma condensed consolidated financial statements of AWG
Group have been prepared on the assumption that the Merger had occurred and
the contemplated Initial Public Offering had been completed as of the
beginning of the 1995 fiscal year and the beginning of the periods for the
twenty-four week periods ended June 17, 1995 and June 15, 1996 for the pro
forma condensed consolidated statements of earnings and as of the balance
sheet date for the pro forma condensed consolidated balance sheets.
Adjustments have been made to reflect the Merger, the Initial Public Offering
and the other assumptions described in the notes to the unaudited pro forma
condensed consolidated financial statements. Management believes that, on the
basis of the assumptions described in the notes to the unaudited pro forma
condensed consolidated financial statements, the pro forma condensed
consolidated financial statements reflect a reasonable estimate of the effects
of the Merger and Initial Public Offering, but are not necessarily indicative
of the financial position or results of operations of the Company, if the
Merger and Initial Public Offering had taken place on the dates indicated and
are not intended to project future financial position or results of
operations.
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWENTY-FOUR WEEKS ENDED TWENTY-FOUR WEEKS ENDED
DECEMBER 30, 1995 JUNE 17, 1995 JUNE 15, 1996
-------------------------------- ------------------------------- --------------------------------
PRO PRO PRO
FORMA FORMA FORMA
ADJUST- ADJUST- ADJUST-
ACTUAL MENTS PRO FORMA ACTUAL MENTS PRO FORMA ACTUAL MENTS PRO FORMA
---------- -------- ---------- ---------- ------- ---------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $2,836,216 -- $2,836,216 $1,213,508 -- $1,213,508 $1,399,223 -- $1,399,223
Cost of goods sold..... 2,658,478 -- 2,658,478 1,138,839 -- 1,138,839 1,305,522 -- 1,305,522
---------- -------- ---------- ---------- ------- ---------- ---------- -------- ----------
Gross profit.......... 177,738 -- 177,738 74,669 -- 74,669 93,701 -- 93,701
General and
administrative
expenses.............. 113,782 -- 113,782 44,155 -- 44,155 54,565 -- 54,565
---------- -------- ---------- ---------- ------- ---------- ---------- -------- ----------
Operating income...... 63,956 -- 63,956 30,514 -- 30,514 39,136 -- 39,136
Other income
(expenses):
Interest income....... 4,809 -- 4,809 2,301 -- 2,301 2,329 -- 2,329
Interest expense (note
3)................... (9,330) 5,212 (4,118) (3,859) 2,028 (1,831) (5,794) 3,386 (2,408)
Other, net............ (66) -- (66) 4 -- 4 1,028 -- 1,028
---------- -------- ---------- ---------- ------- ---------- ---------- -------- ----------
(4,587) 5,212 625 (1,554) 2,028 474 (2,437) 3,386 949
---------- -------- ---------- ---------- ------- ---------- ---------- -------- ----------
Income before income
taxes................. 59,369 5,212 64,581 28,960 2,028 30,988 36,699 3,386 40,085
Income taxes
(note 4).............. (203) 26,035 25,832 429 11,966 12,395 1,110 14,924 16,034
---------- -------- ---------- ---------- ------- ---------- ---------- -------- ----------
Net income............ $ 59,572 $(20,823) $ 38,749 $ 28,531 $(9,938) $ 18,593 $ 35,589 $(11,538) $ 24,051
========== ======== ========== ========== ======= ========== ========== ======== ==========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
29
<PAGE>
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 30, 1995 JUNE 15, 1996
----------------------------- ------------------------------
PRO FORMA PRO PRO FORMA PRO
ASSETS ACTUAL ADJUSTMENTS FORMA ACTUAL ADJUSTMENTS FORMA
------ -------- ----------- -------- --------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents
(note 1).................. $ 18,056 $ 80,871 $ 98,927 $ 12,133 $ 62,315 $ 74,448
Receivables, net........... 82,045 -- 82,045 88,961 -- 88,961
Inventories................ 144,754 -- 144,754 131,900 -- 131,900
Other current assets....... 33,327 -- 33,327 26,395 -- 26,395
-------- -------- -------- --------- -------- --------
Total current assets..... 278,182 80,871 359,053 259,389 62,315 321,704
-------- -------- -------- --------- -------- --------
Notes receivable from
shareholders, maturing after
one year.................... 30,236 -- 30,236 37,851 -- 37,851
Property and equipment, net.. 89,655 -- 89,655 94,144 -- 94,144
Intangibles, net of
accumulated amortization.... 55,768 -- 55,768 52,942 -- 52,942
Other assets................. 10,041 -- 10,041 12,000 -- 12,000
-------- -------- -------- --------- -------- --------
Total assets............. $463,882 $ 80,871 $544,753 $ 456,326 $ 62,315 $518,641
======== ======== ======== ========= ======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS'
EQUITY
- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Current Liabilities:
Accounts payable........... $160,033 -- $160,033 $ 141,414 -- $141,414
Patronage payable:
Cash portion of current
year patronage (notes 1
and 5).................. 35,257 -- 35,257 -- 35,589 35,589
Patronage certificates
payable within one year. 12,472 (6,881) 5,591 10,433 (6,881) 3,552
Accrued expenses and other
current liabilities (note
1)........................ 42,346 (4,686) 37,660 39,210 (2,644) 36,566
-------- -------- -------- --------- -------- --------
Total current
liabilities........... 250,108 (11,567) 238,541 191,057 26,064 217,121
-------- -------- -------- --------- -------- --------
Long-term obligations
maturing after one year
(note 1).................... 52,531 (31,800) 20,731 72,045 (53,000) 19,045
Members' certificates (note
1):
Patronage certificates..... 112,389 (49,119) 63,270 109,239 (49,119) 60,120
Deposits................... 12,643 (12,643) -- 12,041 (12,041) --
Deferred income and other
liabilities................. 7,334 -- 7,334 8,608 -- 8,608
-------- -------- -------- --------- -------- --------
Total liabilities...... 435,005 (105,129) 329,876 392,990 (88,096) 304,894
Interim net income (notes 1
and 5) -- -- -- 35,589 (35,589) --
Shareholders' equity (notes 1
and 2):
Preferred stock............ N/A -- -- N/A -- --
Common stock, $100 par
value:
Class A, voting.......... 537 (537) -- 540 (540) --
Class B, nonvoting....... 1,598 (1,598) -- 1,494 (1,494) --
Common stock, $.01 par
value..................... -- 350 350 -- 350 350
Additional paid-in capital. 1,602 187,785 189,387 1,932 187,684 189,616
Retained earnings.......... 25,140 -- 25,140 23,781 -- 23,781
-------- -------- -------- --------- -------- --------
Total shareholders'
equity................ 28,877 186,000 214,877 27,747 186,000 213,747
-------- -------- -------- --------- -------- --------
Total liabilities and
shareholders' equity.. $463,882 $ 80,871 $544,753 $ 456,326 $ 62,315 $518,641
======== ======== ======== ========= ======== ========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
30
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Reflects the receipt of the net proceeds from the Initial Public Offering
and application of a portion of those proceeds to repay the outstanding
balances of the revolving credit agreement, mortgage note payable, Member
Deposit Certificates, and to redeem certain Patronage Certificates and
accrued interest thereon.
2. Reflects the exchange of existing Class A and Class B common stock for new
shares of common stock.
3. Reduction of interest expense as a result of application of a portion of
the proceeds from the Initial Public Offering as described in note 1.
4. Provision for estimated income taxes using a 40% effective tax rate.
5. In accordance with the bylaws of the Company, the patronage portion of
income before income taxes is determined annually and distributed to
shareholders of the Company as patronage rebates. Since patronage rebates
are determined only at year end, the amount of interim net income has been
reflected as a separate item in the accompanying unaudited pro forma
condensed consolidated balance sheet. As a result of the Merger and Initial
Public Offering, 100% of 1996 patronage rebates will be paid in cash in
fiscal 1997.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Currently, the Company operates as a cooperative wholesaler owned by its
retailer members. As such, the Company distributes its net income each year to
its retailers as patronage refunds based upon each retailer's relative level
of purchases. The Company does not pay income tax on income distributed to its
retailers. Effective with the consummation of the Merger, the Company will
cease paying patronage refunds and commence paying income tax on its earnings.
The grocery wholesale industry is characterized by high sales volumes and
fixed costs and relatively low operating margins. Wholesalers seek to purchase
products at the lowest cost possible and to reduce operating expenses whenever
possible. Successful wholesalers are able to increase their customer base
through competitive pricing, thus increasing sales and leveraging fixed
operating costs.
Substantially all of the Company's revenues come from the sale of food and
non-food products to retailers. Retailer support services, including store
development and marketing and other support services, are designed to increase
retailer sales (and, consequently, Company sales) and, therefore, are
generally provided on a cost recovery basis. Loans and other direct retailer
financing transactions are also designed to increase sales volumes and,
therefore, are structured to provide a reasonable return to the Company while
providing a cost to the retailer below prevailing market rates. Inflation does
not have a significant impact on the Company's revenue or net income.
Sales of perishable items accounted for over 42% of revenues and 49% of net
warehouse sales in fiscal 1995. Perishables generally have a higher margin
than other food or non-food items. In 1995, the Company began a significant
emphasis on the distribution of health and beauty and general merchandise
products through its new Valu Merchandisers subsidiary, providing additional
product variety and revenue diversification.
Expansion activities have had a financial impact from period to period. The
addition of Valu Merchandisers in the beginning of 1995 and the Company's
Oklahoma City distribution center in April 1995 resulted in additional
operating expense. Subsequent to April 1995, revenues increased from the
Oklahoma expansion as additional retailers were added to the Company's
customer base. As of June 15, 1996, 160 stores were being supplied from the
Oklahoma distribution center.
The Company operates on a 52/53 week fiscal year ending the last Saturday of
December. The first and second quarter of each fiscal year consist of twelve
weeks, the third quarter consists of sixteen weeks, and the fourth quarter
consists of twelve weeks, with the exception of 53-week years, when the fourth
quarter has 13 weeks.
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Company's Consolidated
Financial Statements and the Notes thereto included elsewhere in this Proxy
Statement/Prospectus. The following table sets forth the major components of
the Company's historical consolidated statements of earnings as a percent of
revenues:
<TABLE>
<CAPTION>
TWENTY-FOUR WEEKS
FISCAL YEAR ENDED ENDED
-------------------------------------- -----------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, JUNE 17, JUNE 15,
1993 1994 1995 1995 1996
------------ ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Net sales............... 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of goods sold...... 94.10 94.00 93.74 93.85 93.30
------ ------ ------ ------ ------
Gross margin........... 5.90 6.00 6.26 6.15 6.70
General and
administrative
expenses............... 3.49 3.64 4.01 3.64 3.90
------ ------ ------ ------ ------
Operating income....... 2.41 2.36 2.25 2.51 2.80
Interest expense........ 0.34 0.27 0.33 0.32 0.41
Other income............ 0.19 0.21 0.17 0.19 0.24
Income tax expense
(benefit).............. 0.07 0.08 (0.01) 0.03 0.08
------ ------ ------ ------ ------
Net income............. 2.19% 2.22% 2.10% 2.35% 2.55%
====== ====== ====== ====== ======
</TABLE>
32
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TWENTY-FOUR WEEKS ENDED JUNE 15, 1996, COMPARED TO TWENTY-FOUR WEEKS ENDED
JUNE 17, 1995
Net sales for the twenty-four week period ended June 15, 1996 were $1.4
billion, an increase of $185.7 million or 15.3% compared to the twenty-four
week period ended June 17, 1995. Of the $185.7 million increase in net sales,
$134.9 million was additional volume generated from the April 1995 Oklahoma
City expansion. Other sales increases resulted from a Company-supplied
retailer acquiring ten stores in July of 1995 that were previously owned by a
large self-distributing retailer. Indicative of the sales increase is the
growth in AWG sales to the Company's licensed concept stores in the Kansas
City market. See "BUSINESS--Concept Stores." Increases (decreases) in AWG
sales to concept stores on a same store basis for the 1996 period compared to
the 1995 period were: Apple Market stores, 5.49%; Sun Fresh stores, 9.89%;
Thriftway stores, 4.11%; Price Chopper stores, 5.68% and Country Mart stores,
(0.28)%. In computing such sales, stores open at least 12 months are compared
from period to period. Also, sales increases resulted from the addition of new
stores and increased retail floor space to the Company's customer base. Retail
development added 298,000 square feet of retail space during the 1996 period
and the Company added 42 retail stores to its customer base.
Gross margin was 6.70% of net sales or $93.7 million for the 1996 period
compared to 6.15% or $74.7 million for the prior period. The increase in gross
margin was attributable primarily to the change in product mix towards higher
margin perishable products as shown by the following comparison of the 1996
period to the 1995 period product sales data as a percent of warehouse sales:
meat sales, 20.12% versus 19.80%; produce sales, 8.23% versus 7.67%; dairy
sales, 7.20% versus 6.66%; frozen foods sales, 6.32% versus 5.88%; deli sales,
2.19% versus 2.08%; and bakery sales, 1.49% versus 1.36%. Other improvements
in gross margin were attributable to improved inventory management and
procurement practices.
General and administrative expenses were $54.6 million or 3.90% of sales for
the 1996 period compared to $44.2 million or 3.64% of sales for the same
period in 1995. General and administrative expenses increased $7.3 million and
$2.2 million for the Oklahoma City distribution center and Valu Merchandisers,
respectively, for the 1996 period. Oklahoma City began operations in April
1995 and Valu Merchandisers did not have operations during the comparable 1995
period. Both the Oklahoma City distribution center and Valu Merchandisers were
fully operational during the 1996 period.
Interest expense was $5.8 million for the 1996 period compared to $3.9
million for the same period in 1995. The increase for the 1996 period was due
to higher average borrowings under a revolving credit facility and imputed
interest related to the Oklahoma City expansion.
Interest income was unchanged for the 1996 period compared to the 1995
period.
1995 COMPARED TO 1994
Fiscal 1995 results of operations reflect the effects of two significant
initiatives that were completed by the Company during the year. In April 1995,
the Company expanded into Oklahoma City and immediately added 102 stores to
its retailer base. In June 1995, the final phases of construction were
completed on the Valu Merchandisers distribution facility at Fort Scott,
Kansas and Valu Merchandisers began distributing product on a limited basis,
adding customers as rapidly as possible.
Net sales for fiscal 1995 were $2.84 billion, an increase of $352 million or
14.15% compared to sales of $2.48 billion for fiscal 1994, which was a 53 week
year, with $36 million attributable to the extra week. The addition of
retailers in Oklahoma City accounted for $212.6 million of the increase in
1995. Sales increases during the 1995 fiscal year also resulted from the
addition of new stores and increased retail floor space to the Company's
retailer base. The Company began supplying an additional 39 stores from the
Oklahoma City distribution center that were previously supplied by other
wholesalers and a Company-supplied retailer acquired ten stores in July 1995
that were previously owned by a large self-distributing retailer. Retail
development added 758,000 square feet of retail space due to retail expansion
and new store openings during 1995.
Gross margin was 6.26%, or $177.7 million for fiscal 1995 compared to 6.00%,
or $149.2 million, during fiscal 1994. Margin improvement in 1995 was
attributable to the continued emphasis on improving perishables
33
<PAGE>
presentations and merchandising throughout its retail customer base. Other
improvements in gross margin were attributable to improved inventory
management and procurement practices.
General and administrative expenses were $113.8 million, or 4.01% of sales,
for fiscal 1995 compared to $90.5 million, or 3.64%, in fiscal 1994 as costs
associated with the opening of the Oklahoma City and Valu Merchandisers
distribution centers increased operating expenses.
Interest expense was $9.3 million in fiscal 1995 compared to $6.8 million in
fiscal 1994. The increase in interest expense related to borrowings under a
new revolving credit facility in April 1995 to facilitate the opening of
Oklahoma City and Valu Merchandisers facilities, including purchase of
inventories. Additionally, certain contractual relationships related to the
Oklahoma City expansion resulted in imputed interest expense recognition.
Interest income was $4.8 million in fiscal 1995 compared to $4.1 million in
fiscal 1994.
1994 COMPARED TO 1993
Net sales for fiscal 1994 were $2.48 billion, an increase of $65.4 million
or 2.70% compared to fiscal 1993 sales of $2.42 billion. 1994 was a 53 week
year with $36 million of net sales attributable to the extra week. In March
1994, the Company acquired and simultaneously sold 38 stores supplied by the
Company in connection with the bankruptcy of Food Barn Stores, Inc. ("Food
Barn"), the owner of the stores. Many of these stores required substantial
remodeling and several of them were closed for an extended period of time for
major remodeling, resulting in lost sales during the 1994 period.
Gross margin was 6.00%, or $149.2 million, for fiscal 1994 compared to
5.90%, or $142.7 million, for fiscal 1993.
General and administrative expenses were $90.5 million or 3.64% of sales in
fiscal 1994 compared to $84.4 million or 3.49% of sales in fiscal 1993. There
was an increase in expenses and fees with respect to a truck fleet lease that
had been subleased by the Company from Food Barn and subsequently terminated.
Early developmental costs associated with the construction of the Valu
Merchandisers warehouse in Fort Scott began in 1994, and additional personnel
cost was incurred as the Company began hiring Valu Merchandisers executive
staff.
Interest expense was $6.8 million in 1994 compared to $8.4 million in 1993.
Effective in January 1994, the interest rate paid by the Company to retailers
for outstanding Patronage Certificates was reduced from 8% to 6%, resulting in
a savings of approximately $2 million annually.
Interest income was $4.1 million in fiscal 1994 compared to $3.4 million in
fiscal 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash flows provided by
operating activities and borrowings under the revolving credit agreement. The
Company generated cash from operating activities of $70.9 million, $78.2
million and $75.3 million for the 1993, 1994 and 1995 fiscal years,
respectively. The Company generated cash from operating activities of $31.9
million and $27.6 million for the twenty-four week periods ended June 17, 1995
and June 15, 1996, respectively. The decrease in cash provided by operating
activities in 1996 was attributable to a reduction in payables, offset in part
by higher net income and lower inventory levels.
The Company used net cash in investing activities of $27.9 million, $43.0
million and $59.5 million during the 1993, 1994 and 1995 fiscal years,
respectively. The Company used cash of $25.9 million in fiscal 1994 for the
acquisition of certain Food Barn assets, and $57.0 million in fiscal 1995 for
the acquisition of certain Homeland assets. The increase in capital
expenditures in fiscal 1995 reflects the construction of the new Valu
Merchandisers warehouse facility. The Company used net cash in investing
activities of $28.5 million and $13.1 million during the twenty-four week
periods ended June 17, 1995 and June 15, 1996, respectively. The higher cash
used in 1995 principally reflects the acquisition of certain Homeland assets.
34
<PAGE>
The Company used net cash in financing activities of $43.5 million, $45.5
million and $14.6 million during the 1993, 1994 and 1995 fiscal years,
respectively. The decrease in cash used in financing activities in fiscal 1995
reflects the net proceeds of $31.6 million from borrowings under the revolving
credit agreement. The Company used net cash in financing activities of $1.3
million and $20.4 million during the twenty-four week periods ended June 17,
1995 and June 15, 1996. The increase in 1996 was attributable to lower
borrowings under the revolving credit agreement and higher patronage payments.
The Company's working capital and current ratio were $29.9 million and 1.15
to 1, respectively, at December 31, 1994 compared to $28.1 million and 1.11 to
1, respectively, at December 30, 1995. The decreases at December 30, 1995
principally reflect the reduction of short-term investments of $32.4 million
which, along with bank borrowings, were used to finance the Oklahoma City
expansion and capital expenditures. The Company's working capital and current
ratio were $68.3 million and 1.36 to 1, respectively, at June 15, 1996.
In 1995, the Company entered into a revolving credit agreement with a bank
which currently provides for borrowings up to $120 million. Borrowings
outstanding under this agreement were $31.6 million and $53.0 million at
December 30, 1995 and June 15, 1996, respectively. The agreement includes
financial covenants regarding working capital, current ratio, fixed charge
coverage and net worth. At June 15, 1996, $67 million was available under the
revolving credit agreement.
The Company estimates capital expenditures of approximately $46.4 million
for fiscal 1996 of which approximately $20 million relates to an expansion of
the Kansas City warehouse facility.
The Company believes that cash flows from operating activities along with
amounts available under the revolving credit agreement will be adequate to
meet its anticipated cash requirements.
BUSINESS
GENERAL
Based on 1995 industry sales, AWG is the sixth largest wholesale food
distributor in the United States. AWG buys, resells and delivers a wide
variety of groceries, frozen foods, meats, produce, dairy products, bakery,
deli, health and beauty products and general merchandise to over 820 retail
grocery stores throughout a ten state area. AWG offers its retailer customers
a dependable supply and prompt delivery of over 16,000 food and over 16,000
non-food items at competitive prices. Its four distribution centers, located
in Kansas City, Kansas, Springfield, Missouri, Oklahoma City, Oklahoma and
Fort Scott, Kansas, contain over 2,375,000 square feet of space, including
over 736,000 square feet of perishable space and over 400 dock doors. The
Company owns and operates a fleet of approximately 240 tractors and 540
trailers, which travel over 20 million miles a year.
AWG has operated as a retailer-owned cooperative grocery wholesaler
throughout most of its 70 year history and has had 40 consecutive years of
increased sales and has achieved 23 consecutive years of increased
profitability. Since 1992, 118 stores have been added to the Company's
retailer base from other wholesalers.
The Company believes that its success is driven by the success of its
retailers. Accordingly, AWG's ability to deliver low cost of goods and to
provide a comprehensive range of sophisticated support services assists
retailers in increasing sales and profits. These services include store
development and engineering services, financing assistance, merchandising and
advertising services, technological support and insurance services. AWG
provides its retailers the competitive advantages available to self-
distributing retailers, while giving its retailers the autonomy vital to local
merchandising and operating success. This approach combines the purchasing
power, operating efficiency and broad service range available through a large
scale distribution operation with the flexibility and entrepreneurship
provided by a local operator.
The United States wholesale grocery industry is highly competitive and
undergoing consolidation. According to a 1993 study released by the National-
American Wholesale Grocers' Association, the industry experienced an annual
growth rate of 5.6% from 1980 through 1991; and an estimated 56% of total
grocery sales
35
<PAGE>
($410 billion) was supplied by wholesalers, while the remaining 44% was
supplied by self-distributing retailers and alternative format retailers.
Management believes that as a result of the Company's acquisition experience,
its improved financial strength following the Merger and the Initial Public
Offering and its ability as a public company to issue stock in connection with
acquisitions, AWG will be well positioned to take advantage of industry
consolidation by pursuing strategic acquisitions.
BUSINESS STRATEGY
The Company believes that its success depends upon the success of its
retailers. The Company's business strategy is to increase sales and
profitability by employing its purchasing power, distribution expertise and
retail knowledge (i) to control costs, (ii) to maintain highly efficient
distribution centers, (iii) to enhance the competitiveness of its retailers,
and (iv) to assist its retailers in identifying, developing and implementing
opportunities for growth. Key components of this strategy include the
following:
Maintain Close Relationships with Progressive Retailers. AWG strives to
develop and to maintain a close relationship with innovative and aggressive
retailers. Management believes that the Company's focus on its retailers'
success has resulted in a high rate of customer retention and improved
retailer penetration of their markets and enhanced AWG's ability to recruit
new retailers.
Provide Lowest Cost of Goods. The Company leverages the purchasing power of
its retailers' 820 retail stores to obtain what management believes is the
lowest price available on substantially all AWG supplied items. In addition,
distribution costs are minimized through the efficiencies provided by the
Company's large, strategically located distribution centers and the
concentration of AWG's retailers in their respective markets. The Company's
buying power also allows it to provide its retailers significant cost savings
on store equipment, decor and other items. All of the Company's retailer
services and price discount programs are available to every retailer on the
same terms, regardless of the number or size of stores the retailer operates.
Emphasize Store Development. AWG assists retailers in every aspect of store
development, including opening new stores and remodeling or renovating
existing stores. The Company's goal is to establish a progressive retailer in
the optimal location with an effective store concept in order to maximize the
retailer's opportunity for success. To accomplish this, the Company assists in
site selection and acquisition, store design and construction, and market
specific positioning. The Company has developed customized concept stores,
each with a different size, decor and product emphasis, in order to better
serve specific markets. In addition, the Company provides store financing and
real estate leasing to its retailers to encourage store development.
Provide Retailer Support Services. AWG works closely with each retailer to
provide a wide range of support services, including market analysis, product
positioning, advertising, and training for retail employees. In addition, the
Company assists its retailers by providing insurance, financial planning and
management succession services, and other services ancillary to the operation
of the retailer's business. All services are typically provided on a cost
recovery basis.
Sole Focus on Distribution Services. The Company focuses solely on buying,
selling and delivering food and non-food items to retailers. The Company does
not operate retail stores and believes that its single focus allows it to
concentrate on continuing to improve the efficiency and effectiveness of its
distribution services as well as avoiding conflicts with retailers.
GROWTH STRATEGY
AWG's plan for continued growth focuses on increasing sales by existing
retailers, developing new stores for existing retailers, attracting additional
retailers, and pursuing strategic acquisitions. The key components of the
Company's growth strategy include:
Increasing Sales by Existing Retailers. AWG seeks to provide an expanding
list of products to its retailers, such as its recent successful effort to
penetrate health and beauty and general merchandise product sales through its
Valu Merchandisers subsidiary. The Company's strong private label programs,
including Best Choice, Best
36
<PAGE>
Choice Value Club and Always Save, assist AWG retailers in competing
effectively in terms of price and quality against all classes of retail trade.
In addition, the Company provides a wide variety of services designed to help
its retailers increase their sales, including marketing and advertising,
product category management, shelf management and other services.
Developing Additional Stores for Existing Retailers. A key element in the
Company's growth has been the ability of its retailers to open new stores or
to remodel existing stores to expand their markets and market share. The
Company provides a complete array of services to growing retailers, including
market research, real estate acquisition assistance and store design and
decor. The Company has established the Price Chopper, Country Mart, Price
Mart, Apple Market and Sun Fresh customized concept stores which are licensed
to retailers seeking to develop new stores. Each concept store format consists
of stores with customized size, decor and product emphasis designed to meet
the specific requirements of the selected location. In addition, AWG has
actively made store financing and real estate leases available to its
retailers for expansion and remodeling expenses. At June 15, 1996, AWG had
retailer loans outstanding of $44.1 million and had over 115 real estate
leasing transactions in existence with retailers.
Attracting Additional Progressive Retailers. The Company focuses on
attracting additional retailers by offering competitive product pricing and a
full array of retailer support services, all of which are targeted at
increasing retailer sales and profitability. Through these efforts, the
Company has successfully attracted retailers from other wholesalers whose
pricing policies and retailer support services are not as effective in helping
the independent retailer be successful.
Pursuing Strategic Acquisitions. Consolidation trends in the food
distribution industry present opportunities for strategic acquisitions by AWG.
The Company has in the past acquired retail stores, which it promptly resold
to its retailers, and distribution facilities, which it retained and operated,
both to serve new stores and as a hub from which to penetrate new geographic
markets. AWG frequently evaluates acquisition opportunities and will continue
to pursue strategic acquisitions with facilities and capacity to accommodate
growth and to complement AWG's existing operations and geographic service
areas. Stores that were acquired and resold to retailers in recent years
accounted for annualized revenues of $213.6 million in 1995.
In April 1995, AWG purchased a 526,000 square foot distribution center in
Oklahoma City from Homeland Stores, Inc. ("Homeland"), then a self-
distributing grocery retailer. Contemporaneously with this purchase, AWG
arranged for the purchase by certain of its existing retailers of 29 of
Homeland's 102 retail grocery stores located throughout Oklahoma, southern
Kansas and northern Texas. In connection with this transaction, AWG and
Homeland entered into a supply agreement establishing AWG as the primary
supplier of grocery products to the remaining Homeland stores and granting AWG
the right to purchase any of those stores in the event they cease to be
operated by Homeland as retail grocery stores. Since its purchase of the
Homeland distribution center, AWG has added 38 new stores to its Oklahoma
division, which now supplies 166 total stores.
In March 1994, AWG purchased out of bankruptcy certain assets of Food Barn,
including 38 retail grocery stores and an office building. The office building
and most of the grocery stores were located in the Kansas City, Missouri
metropolitan area. The remaining stores were in the Wichita, Kansas area and
rural Kansas and Missouri. All of the grocery stores were sold to AWG
retailers pursuant to an auction process established by AWG management.
Because all of the purchased stores had previously been supplied by AWG, the
transaction allowed AWG to continue to supply the stores and maintain sales
volume.
STORE DEVELOPMENT SERVICES
AWG offers a complete array of store development services designed to
position its retailers at the forefront of the constantly changing food
retailing industry, including market analysis, site acquisition, store
engineering and construction, store decor and store remodeling. AWG believes
these services improve the ability of retailers to compete with all classes of
retail trade. Retailers choose which services to obtain from AWG and,
generally, are charged a fee that enables AWG to recover the cost of providing
the service.
37
<PAGE>
Real Estate Services and Store Development. The Company has extensive
experience in real estate development in all types of markets, having
developed store networks in major metropolitan markets as well as single
stores in small rural communities. Once an appropriate location is selected,
the Company's experienced real estate personnel provide complete property
development services to its retailers, and are available to assist retailers
in negotiating to acquire or lease the property. Where deemed appropriate, the
Company will lease a site and sublease it to the retailer.
Working with size or site constraints, marketing information and retailer
preferences, the Company then designs store layout and decor plans that are
both trendsetting and functional. These plans contain the latest marketing
concepts, departments, and labor or consumer timesaving ideas.
The Company coordinates the various trade professionals involved on behalf
of the retailer, assisting the architect/engineer in designing the store, the
contractor in building the store, and the various trade fixture suppliers in
equipping and decorating the store. Through volume purchasing and bid
specifications, the Company endeavors to insure quality equipment packages at
the lowest possible cost. Finally, the Company's design services insure that
the store decor package reinforces the store's marketing philosophy. Once the
decor package is designed, the Company may also fabricate and install the
decor items.
Market Research Services. The Company provides a complete range of market
and consumer research to its retailers. The Company's counselors assist
retailers with a detailed analysis of store operations, pricing, advertising,
delivery schedules, inventory control and merchandising plans to help each
retailer enhance its competitive position. Research services include:
Sales Projection. In analyzing new or expanded store opportunities, the
Company projects trade area potential, analyzes competition, and projects
sales based on a recommended store size and market format. Demographic
studies, traffic pattern surveys, and local consumer purchasing habits are
assessed.
Consumer Research. In an effort to delineate the strengths and weaknesses
of major competitors in the marketplace, the Company conducts consumer
telephone surveys. This research can be followed by focus group research to
further assess consumer impressions.
Customer Origin Survey. For existing stores, the Company can determine the
trade area of the store, the potential of the trade area and the
performance level of the store within the trade area.
Analysis of Underperforming Stores. The Company provides an analysis of
underperforming stores to determine their strengths and weaknesses and
formulates marketing and operational recommendations targeted to improve
performance.
Retailer Credit Terms. AWG supplies products to its retailers under several
types of credit arrangements. Payment schedules range from one to 14 days.
Generally, the more collateral, guarantees or other evidence of financial
strength or ability to pay which a retailer is able to provide, the longer the
payment period for which that retailer qualifies. AWG's management
periodically reviews and establishes the economic parameters that control the
specific level of credit AWG is willing to extend to its retailers. These
parameters include both general economic performance requirements and
financial ratios as well as considerations relating to the historical
performance of specific retailers.
Retailer Financing. AWG also makes loans or otherwise facilitates the
financing needed for expansions or other enhancements of its retailers'
grocery businesses. Interest rates for these loans have generally been one
percent over the prime rate. The criteria for the extension of such financing
include the same considerations used with respect to the extension of credit
for the purchase of goods. In addition, management evaluates the purpose or
program for which the loan is proposed. AWG also actively seeks to assist
retailers in obtaining financing from third-party lenders based on available
collateral and overall financial strength. At June 15, 1996, the Company had
an aggregate of $44.1 million of loans outstanding to its retailers.
The Company will continue to assist retailers in their financing needs after
the Merger and Initial Public Offering. The Company plans to use a portion of
the proceeds of the Initial Public Offering to continue to fund direct
retailer loans and real estate lease transactions. In addition, the Company
plans to facilitate the ability of
38
<PAGE>
retailers to borrow funds by pledging their shares of AWG Group Common Stock
to a third-party bank as collateral for loans used to improve the retailers'
businesses. In connection with the early payment of Patronage Certificates,
which, in many cases, collateralize credit extensions by AWG, the Company will
evaluate whether individual retailers continue to satisfy its credit
requirements and will require new collateral when necessary to maintain those
standards.
In-store Marketing. As a tool to build retail customer loyalty, increase per
customer retail sales and build retailer market share, AWG offers its
retailers a customized point-of-sale coupon and customer incentive system
known as the Catalina Marketing Network. This in-store system allows the
retailer to offer manufacturers' coupons, store coupons and other incentives
to each customer based on that customer's purchases which can only be redeemed
at the specific store. AWG retailers using the Catalina system have
experienced an average monthly redemption rate of over 10%. Presently, the
Catalina system is installed in over 270 of the stores supplied by the Company
and in 1996 the system has generated over 3 million coupons representing
aggregate customer purchase discounts of over $2.5 million.
CONCEPT STORES
The Company has developed four concept store formats designed for use in
different markets. AWG provides specific planning, designing, advertising and
other support services for its concept stores and the retailer is charged a
minimal fee for these services pursuant to a license agreement.
Price Chopper and Price Mart stores range from 50,000 to 80,000 square feet,
are value-priced stores with extensive variety in all departments and place a
significant emphasis on high-quality perishables. They feature a wide range of
health and beauty and general merchandise products, with pharmacies in many
stores. Both of these concept stores are known as value priced super stores.
Price Chopper and Price Mart stores are designed primarily for higher volume
trade areas.
Country Mart stores range from 25,000 to 45,000 square feet and are value-
priced stores with high-quality perishables, including deli, bakery, floral,
expanded health and beauty care and optional pharmacy. These stores are
designated to compete in county seat-type towns and mid-size trade areas, i.e.
serving populations of 5,000 to 25,000.
Apple Market stores range from 15,000 to 25,000 square feet and emphasize
high-quality perishables, a large selection of AWG brands and a high degree of
customer service in neighborhood locations in both rural and metropolitan
areas.
Sun Fresh stores range from 28,000 to 50,000 square feet. The stores have a
large selection of all types of high-quality perishables, including meat,
produce, seafood, deli and bakery. These are primarily upscale stores serving
a demographic of medium to upper income level customers and tailored to meet
the needs of each trade area they service.
VALU MERCHANDISERS
The Company's Valu Merchandisers subsidiary provides retailers a cost
effective general merchandise and health and beauty care program. The single
distribution center provides a centralized distribution point for all three
AWG grocery divisions, providing selection, stocking and redistribution of
approximately 16,000 different products. Valu Merchandisers performs all of
the category management, promotional efforts, and shelf management programs
for the 600 retailers using its services. Availability and variety of seasonal
promotions, focused advertising and the Company's Best Choice private label
program allow the retailer to compete aggressively in this product segment.
Valu Merchandisers also operates the Company's pharmacy program, providing
field consulting to retailers with in-store pharmacies, including direction
for pharmacy placement and operational issues. Due to the
39
<PAGE>
combined volume of its retailers' pharmacy purchases, the Company is able to
negotiate significant price discounts from the Company's suppliers of pharmacy
products.
Valu Merchandisers provides a complete range of retail marketing support and
is responsible for developing new business as well as supporting existing
retail stores with merchandising assistance and expertise. Valu Merchandisers
maintains an independent sales department consisting of a full-time customer
service representative, a full-time retail pricing specialist and a twenty-
person field staff dedicated to improving health and beauty and general
merchandise product sales. Similar to the Company's grocery retail support
functions, Valu Merchandisers provides guidelines in areas such as competitive
pricing, space allocation, gross profit objectives and seasonal merchandising
assistance.
PRIVATE LABEL PROGRAMS
AWG's successful private label programs provide retailers with a competitive
advantage in their markets. The Company attempts to ensure consistent quality
in its private label products through various means, including the use of an
in-house quality assurance lab and crop and processing inspections through
field visits. All AWG private label products provide to the consumer a 100%
satisfaction guarantee. To promote private labels, the Company provides
various merchandising events throughout the year, including targeted
advertising, point of purchase materials and theme materials. The Company's
brands are strategically positioned to assist retailers to meet consumer
demand in the marketplace, and accounted for AWG sales of over $300 million in
1995, an increase of 14% over 1994. Case sales in 1995 were 28 million, an
increase of 10% over 1994. AWG's private label programs consist of the
following:
Best Choice provides Grade A Fancy quality products in approximately 1,000
items. This program is designed to provide national brand quality to the
consumer with a 15% to 20% savings.
Always Save is a value label with strong price appeal and consistent
quality in approximately 500 items. This program is designed to provide 20%
to 40% savings to the consumer versus national brands. The Company has from
time to time entered into licensing agreements with other noncompeting
retailers and wholesalers for the rights to distribute Always Save
products.
Valu Merchandisers' Best Choice consists of 410 national brand equivalent
items that represent the best selling products in major categories and is
designed to provide a savings to consumers of 20% to 40% versus national
brand items.
Best Choice Value Club consists of approximately 80 items designed to allow
the retailer to compete with wholesale club packaged merchandise or "bulk
pack". This program is designed to provide a consistent, high-quality
product in sizes and packaging that allow retailers to effectively compete
with wholesale clubs or other classes of trade.
RETAILER SUPPORT SERVICES
AWG provides a variety of services to its retailers to enhance retailer
operations, profitability and competitiveness. These are generally provided to
the retailers on a cost-recovery basis. However, because they are instrumental
in enhancing retailer sales and profits, these services have an important, if
indirect, impact on AWG sales.
Operations and Merchandising. Support is available to assist retailers in
improving store or department performance. Various retailer groups are
assigned a marketing team that includes a sales manager, an advertising
coordinator, and an AWG retail system specialist in specific product areas
such as produce, meat, bakery, deli, and AWG brands. The goals of the
marketing team are to increase retailer sales and productivity and improve
market share.
Advertising. Advertising support is available to all retailers. For concept
store retailers, this support is provided through a dedicated marketing group.
The advertising coordinator for each marketing group develops an advertising
plan based on the group strategy. AWG's in-house advertising department then
produces the print ad on a computerized system and the final product is
contracted out for printing.
40
<PAGE>
Print and Sign Services. AWG offers retailers many of the printed materials
needed to support their operations and merchandising plans. These include
store layouts, consumer bulletins, internal store operations forms and
reports, training manuals, consumer and employee newsletters, deli and bakery
menus, bag stuffers and banners. A complete line of employee uniforms is also
offered. By aggregating retailer orders for these items, AWG is able to pass
on significant cost savings to the retailers.
Point of Sale. Point of sale price file maintenance allows retailers to
manage their own pricing, point of sale maintenance and log maintenance. Point
of sale system, scale system, and hardware and software field support is also
provided.
Shelf Management. AWG provides retailers with state of the art computerized
shelf management programs for grocery, dairy, frozen, meat and processed meat
sections. Using these programs, retailers have the flexibility of revising
their shelf sets at the individual store level. Through the use of shelf
management, retailers are able to maximize sales and profit, reduce inventory
and improve return on investment.
Retail Training. Training is offered for store owners, managers and
department managers throughout the year. Training consists of one-day seminars
and multi-day in-store schools designed to help participants develop their
skills in marketing, merchandising, operations and management. The Company's
training programs address topics such as financial controls and budgeting,
perishables operation and marketing, and personnel management.
Price Modeling. Price modeling is used to develop the appropriate pricing
strategy for a specific market. An AWG pricing specialist assists retailers
using price modeling software to develop strategies based on impact items,
competitive price checks and AWG brand strategy.
Financial Planning. AWG conducts seminars for its retailers in capital
budgeting, cash management and overall financial planning. The Company also
advises retailers of the benefits of and encourages individual estate planning
and ownership succession evaluation by professional advisers.
Insurance Services. The Company operates two insurance subsidiaries to
provide a broad array of insurance coverage services to retailers. These
insurance services include property, casualty, workers' compensation, life,
health, dental, vision and disability insurance. The annualized premium volume
of these services was over $28 million in 1995, resulting in earnings before
taxes of $1.6 million. Additionally, group accident and health, dental and
vision insurance is provided to nearly 4,000 AWG and retailer employees. The
Company's insurance operations are managed by experienced industry
professionals who operate their services as separate businesses. AWG's
insurance subsidiaries are licensed in 31 states, provide their own
underwriting and establish reinsurance relationships to limit the Company's
risks to levels within accepted industry standards, which vary by line of
business.
CORPORATE SALES DEVELOPMENT
AWG has a focused effort on attracting new retailers from other wholesalers
within AWG's geographic service area and on identifying growth opportunities
for the Company and its retailers in adjacent areas. The Company believes
retailers leave other wholesalers primarily to take advantage of AWG's
competitive prices and retail support services. As part of the effort to
attract new retailers, AWG has developed a sophisticated weighted formula that
compares identical items to a projected sales mix and allows the retailer to
understand the cost advantages of being supplied by AWG compared to their
current source of supply.
41
<PAGE>
As a result of this corporate sales development program, AWG has been
successful in attracting retailers from other wholesalers, as shown by the
following table:
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996(1) TOTAL
---- ----- ----- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
New AWG retailers................. 8 3 6 32 23 72
New stores........................ 18(2) 7 11 40(3) 42 118
First year annualized sales (in
millions)........................ $9.3 $11.7 $25.7 $130.3 $119.4 $296.4
</TABLE>
- --------
(1) Through June 15, 1996.
(2) Excludes 59 Food Barn stores with first year annualized sales of $212.4
million that the Company began supplying in 1992 and that were previously
self-distributing.
(3) Excludes 95 Homeland stores with first year annualized sales of $384.2
million that were added through the Oklahoma City expansion and that were
previously self-distributing.
In addition, the Company focuses on attracting self-supplied retail chains.
During the first twelve months after its acquisition of the former Homeland
distribution center, AWG experienced significant growth in the Oklahoma and
Texas markets. AWG currently supplies 66 Homeland-owned stores and 29 former
Homeland stores that were purchased by AWG retailers and 38 additional stores
attracted from competitors. These 133 stores, plus 33 stores previously
supplied by the Springfield distribution center, gave the Oklahoma division an
annualized sales volume in the first year of operations of $551 million.
PRICING POLICY
The Company's goal is to provide the overall lowest competitive price
possible to every retailer regardless of their size or geographic location.
AWG maintains cost comparisons with competitive wholesalers. These comparisons
show AWG's prices are consistently below those of its competitors and AWG
management anticipates they will remain so after elimination of the year-end
rebate.
PROCUREMENT
AWG supplies a comprehensive selection of national brand and private label
grocery products, dairy products, frozen foods, fresh produce items, fresh and
processed meat items, delicatessen and bakery products from its three modern,
highly-efficient grocery distribution centers. The Company also supplies a
comprehensive selection of health and beauty and general merchandise products
through its dedicated Valu Merchandisers distribution center. AWG continually
enhances its product offerings to meet changing consumer demands.
AWG believes that its size enables it to purchase substantially all of its
products at the lowest possible available manufacturers' price. AWG monitors
manufacturers' offerings to its retailers and to its wholesale and retail
competitors and then attempts to use its buying power to secure similar or
better terms. Order size and frequency is determined based on historical sales
data and ordering information from retailers. When possible, AWG buys long-
term supplies of inventory items offered at a discount by manufacturers. In
particular, AWG purchases sufficient quantities of certain staple items when
offered at a discount by manufacturers to meet anticipated demand until the
next scheduled manufacturer's sale.
Category Management. In July 1996, AWG formally implemented a category
management program. The AWG category management program involves the
centralization of all grocery product negotiation, including product cost,
terms and promotional programs and integrates the wholesaler, the retailer and
the supplier to manage product categories as strategic business units to
produce enhanced sales. AWG has established at its corporate headquarters in
Kansas City category managers who are responsible for leveraging the buying
power of all three grocery divisions. An AWG category manager is responsible
for all aspects of the category including product mix, promotion and
merchandising and the strategic direction of each business unit.
Product replenishment is conducted at the divisional level due to the
perishable nature of the product and the regional nature of product selection.
This enhanced procurement system of divisional purchasing and centralized
negotiation and strategic planning affords many benefits including improved
inventory turnover, increased service level to retail stores, enhanced sales
planning, and improved logistics.
42
<PAGE>
MIDAS. AWG uses a sophisticated computerized purchasing system known as
MIDAS. This buying system allows for accurate calculation of the amount and
timing of purchases, maximizing purchasing efficiency near the end of supplier
promotional allowance periods. The MIDAS system operates to minimize inventory
levels and maximize promotional fund income.
Efficient Consumer Response Initiatives. AWG has instituted several
efficient consumer response initiatives. These initiatives include electronic
purchase order and invoicing interchange with many of its suppliers,
continuous product replenishment that are designed to increase inventory
turnover through decreased lead time ordering, and computer-to-computer
product purchasing. These initiatives are intended to improve the Company's
working relationship with its suppliers and manage inventory positions.
Concentrated Purchase Allowance. The concentrated purchase allowance
program, or CPA, rewards AWG retailers for concentrating purchases through the
Company's distribution centers. CPA is paid quarterly and can provide
retailers a savings from 0.10% to 0.75%. CPA provides an incentive for
retailers to purchase as much of their needs as possible through AWG,
contributing to greater wholesale volume.
Reclamation. By processing and billing suppliers for unsaleable goods, AWG
recovers over $14 million in credits for retailers annually. Credits given to
stores for unsaleable product are issued after receipt of the product at the
AWG reclamation center. After all appropriate operating costs are applied,
retailers may receive a refund of up to 95% of list price. This additional
service affords retailers a means to recover the cost of unsaleable and
damaged products, offsetting shrinkage costs at the store level.
DISTRIBUTION CENTERS
The Company's distribution operations are focused on reducing operating
expenses in order to provide its retailers with competitive cost of goods. By
operating large, regional distribution centers and its own truck fleet, the
Company achieves significant economies of scale. These economies, combined
with its distribution operating systems and procedures, provide AWG with a
significant competitive advantage by reducing retailer cost of goods and
maintaining consistently high service levels.
AWG provides retailers significant advantages through its high level of
service. The following table sets forth the Company's service level at its
three grocery distribution centers. Service level is calculated by dividing
the number of cases shipped on a specific order by the total cases ordered by
a retailer on that same order.
<TABLE>
<CAPTION>
1996
DISTRIBUTION CENTER 1994 1995 (THROUGH JUNE 15)
------------------- ----- ----- ------------------
<S> <C> <C> <C>
Kansas City................................ 97.6% 97.5% 97.5%
Springfield................................ 97.3% 97.4% 97.9%
Oklahoma City.............................. N/A 97.9% 98.0%
</TABLE>
The Company operates four distribution centers strategically located
throughout its geographical service areas. The three grocery centers, located
in Kansas City, south central Missouri, and Oklahoma City have an aggregate of
2,167,000 square feet, of which 736,000 is perishable space. The fourth
center, a 208,000 square foot facility located in southeastern Kansas, is
devoted exclusively to the Company's health and beauty and general merchandise
subsidiary, Valu Merchandisers. The Company employs sophisticated management
and operating systems at its distribution centers focused on reducing
operating costs and increasing productivity. These include:
Productivity Monitoring System. AWG's Productivity Monitoring System
develops and measures task or goal times to develop an accurate measure of the
time required to perform a given cycle of work. AWG has significantly improved
its case selection productivity through the implementation of its Productivity
Monitoring System.
Order Processing and Receiving. Customer orders are transmitted daily to the
Company's order entry system at scheduled transmission times and fleet loading
and routing are scheduled each day by state-of-the-art computer systems
designed to reduce costs and improve efficiencies. Due to the speed by which
the Company
43
<PAGE>
can process orders, a retail customer is able to receive and stock a delivery
before creating its next order. Many retailers can receive same day order
delivery. Through the Company's supplemental order system, an order can have
additional items added until the truck leaves the AWG loading dock.
Slot-It. Slot-It is a warehouse space utilization software package that
optimizes the location of merchandise by selecting the appropriate rack type,
size, location, and family group for each item. Correct product location
within the warehouse increases order selection productivity, reduces employee
injury, enhances warehouse space utilization and reduces product damage.
Organizing the distribution center in product family groupings that correspond
to retailer store layout reduces sorting time for store personnel.
Personal Order Verification. Personal Order Verification, or POV, is a radio
frequency-based order selection system using bar code scanning verification of
individual items. POV provides a high degree of order filling accuracy while
maintaining a high level of order selection productivity. By using radio
communication, order selection can be monitored instantaneously and any
impediment to productivity can be recognized and responded to quickly. The
laser scanner, key pad and radio device weighs less than ten ounces, and
allows the employee to receive selection instructions instantaneously,
eliminating the congestion and delay problems associated with a central order
distribution point. AWG's experience with its POV selection system indicates
order selection accuracy at a rate substantially better than the industry
average.
The use of POV results in several cost savings. POV increases order
accuracy, reducing returns and out of date product. POV allows scanned data to
be electronically transferred to billing files, reducing the need for data
entry staff and increasing invoice accuracy and inventory record reliability.
Productivity also increases because the selection process is more efficient,
and the "time audit trail" created by POV motivates employee performance
improvement. The Company believes that POV has the potential to reduce order
cycle time by 25% because electronic transfer of selection data avoids the
much slower process of printing selection labels.
TRANSPORTATION
AWG owns and operates a fleet of approximately 240 tractors and 540 trailers
from its Kansas City and Springfield distribution centers. The Company's fleet
travels over 20 million miles a year in support of AWG's wholesale operations.
The average age of the tractor fleet is approximately three years, while the
average age of the trailer fleet is approximately five years. As described
below, the Company uses advanced technology to improve efficiency and to
reduce costs by automating fleet operations, processing customer orders and
optimizing truck loads and routes. Both distribution centers in Kansas City
and Springfield include fleet maintenance, fueling, and wash-rack facilities.
The Company utilizes a contract carrier for deliveries from its Oklahoma City
and Fort Scott distribution centers.
AWG provides retailers significant advantages through its high level of on-
time delivery. The following table sets forth the Company's on-time delivery
levels at its three grocery distribution centers. On-time delivery is
calculated by dividing the number of loads departing the distribution centers
within 30 minutes of the scheduled departure time by the total number of loads
departing the distribution center.
<TABLE>
<CAPTION>
1996
DISTRIBUTION CENTER 1994 1995 (THROUGH JUNE 15)
------------------- ----- ----- -----------------
<S> <C> <C> <C>
Kansas City................................. 97.1% 97.0% 97.0%
Springfield................................. 97.9% 96.4% 98.3%
Oklahoma City............................... N/A 97.9% 98.0%
</TABLE>
The Company negotiates the highest possible freight allowance from suppliers
in exchange for arranging to transport products from suppliers to AWG's
distribution centers and, in some cases, directly to retailers in Company
owned or third-party fleets. The size of AWG's owned fleet and its extensive
use of contract carriers allows the Company to operate a significant backhaul
business. In addition, the Company uses a variety of operating techniques and
systems to enhance its transportation operations.
Backhaul. Backhauling allows AWG to obtain freight allowances from suppliers
by using AWG's fleet to transport product from the supplier to AWG
distribution centers. Approximately 40% of AWG out-bound loads return with a
backhaul load, resulting in freight allowances in 1995 of approximately $8.9
million.
44
<PAGE>
Third Party Hauling. AWG uses negotiated rates with contract transportation
companies on approximately one-third of all in-bound loads for delivery to its
distribution centers, creating efficient delivery and low cost shipping within
performance standards established by AWG. Third party in-bound operations
resulted in cost savings of over $4.5 million in 1995.
RoadShow(TM) International Routing Software. The Company focuses on load
planning and work sequencing, electronically drawing customer order data from
the order billing files, verifying delivery types and dates, and consolidating
orders into truckloads using RoadShow(TM) International, a PC-based routing
software system designed to optimize truck space and distance traveled to plan
the most cost effective route. RoadShow(TM) International creates driveable
routes in the most efficient combination of cost, efficiency and utilization
of equipment to ensure delivery within a specified customer delivery window.
Cadec(TM) Onboard Information System. Cadec(TM) onboard computers are
tractor mounted information systems that collect a variety of data from direct
connection to the truck and from driver input, producing an assortment of
management reports on matters such as stops, driver hours of service,
Department of Transportation logs, problem deliveries, pallet and tote
management, engine performance, idle time, and fuel consumption. Cadec(TM)
interfaces with RoadShow(TM) International to produce a planned-versus-actual
analysis of each delivery. Although Cadec(TM) implementation has been spread
across several operating periods to accommodate equipment installation and
driver training, initial results indicate significant savings have been
achieved from reduced equipment idling time and increased operator
productivity.
Direct Retail Routing. Direct Retail Routing, or DRR, is a distribution
process that matches in-bound goods in transit to customer orders and delivers
goods directly to the retailer, bypassing distribution center handling.
Delivery to retailers is accomplished either by redirecting the in-bound truck
to the retailer's store, or by cross-docking the in-bound goods directly onto
a trailer containing the rest of the retailer's order. Significant savings are
possible through DRR because merchandise by-passes the traditionally labor
intensive warehouse functions of receiving, racking, selection and shipping.
Additionally, inventory carrying cost is eliminated because merchandise is
invoiced to the retailer and paid for prior to the supplier invoice becoming
due. Although the program is in the early stages of development, 21 million
pounds of product were moved using DRR in 1995. An estimated 30 million pounds
will be moved to retailers using DRR functions in 1996.
Store Order Load Option. The Store Order Load Option program offers
retailers the opportunity to realize product cost savings by coordinating
direct delivery of full truckload purchases. The retailer can realize a 4.0%
cost savings using this system compared to normal warehouse delivery.
MANAGEMENT OPERATING SYSTEMS
The Company's computing environment consists of a highly integrated blend of
wide and local area networked computers linked to the corporate data center.
Billing, accounts receivable, inventory and other critical data processing are
supported on mainframe and midrange platforms, as well as numerous client
server stations.
Communication. The Company has installed an extensive communications network
linking all of its locations. The majority of internal operating information
is delivered in report form and may either be prepared as hard copy or as an
on-line view with a report distribution system. Selected data is made
available for direct access to authorized staff members through networked
computer workstations for their subsequent retrieval and further use.
Centralized Accounting. With the recent addition of two divisions, Oklahoma
City and Valu Merchandisers, AWG is moving from a decentralized to a
centralized accounting structure. AWG believes this change will result in
lower operating costs as well as more consistency and standardization in all
accounting related activities. A centralized structure allows AWG to implement
new cost savings systems and methods more efficiently and to improve controls
and consistency in processes dealing with retail customers and vendors.
Electronic Data Interchange. Electronic Data Interchange consists of the
exchange of business documents between companies using a standard format.
Electronic Data Interchange purchase orders are sent to over 120 of the
Company's largest vendors, representing over 70% of AWG's business. The
Company is in the process of
45
<PAGE>
implementing electronic receipt of invoices, advanced shipping notices, price
changes and promotional notices. The Company anticipates having the major
portion of its communication with the vendor community on line electronically
by the end of 1996.
PROMPT. AWG is implementing a Payment Reconciliation of Matched Purchase
Order Transactions system, known as PROMPT, that will integrate accounts
payable with purchasing and receiving, providing additional information to
buyers, merchandisers, traffic managers, and accountants for invoice matching
and reconciliation. PROMPT is designed to improve accuracy and reduce clerical
costs. PROMPT accomplishes these improvements in less time than current manual
procedures and is expected to provide cost savings.
COMPETITION
The grocery industry is characterized by intense competition on both the
retail and wholesale levels. AWG competes with a number of other cooperative
and non-cooperative food distribution businesses for its retailers' business.
Some of these competitors are larger than AWG and some have integrated
wholesale and retail operations. AWG's principal wholesale competitors include
Fleming Companies Inc., SuperValu, Inc. and several smaller regional
distributors. The retailers supplied by the Company compete independently with
each other, with other independent store operators, and with large retailer
stores, super centers and wholesale club operators.
The Company believes that its business strategy provides it with a
significant competitive advantage. By leveraging the purchasing power of its
large retail base it can obtain products in all categories at the lowest price
available from its vendors. In addition, the Company's value-added, retailer-
focused support services help its retailers to compete successfully in every
market serviced by the Company. The Company believes that it achieves a
significant competitive advantage by combining the purchasing and operating
efficiencies from its centralized supply and support services with the local
market flexibility and entrepreneurship of its independent retailers.
AWG believes that it can continue to compete successfully on the wholesale
level while supporting the competitive efforts of its retailers by continuing
to provide to individual retailers the lowest competitive cost of goods and
the broad spectrum of support services typical of large retailers. In
addition, AWG will continue to explore opportunities for its retailers to
acquire additional stores as they become available within and adjacent to
AWG's principal service area.
FACILITIES
AWG's three principal facilities, which distribute all food and non-food
products provided by AWG, are located in Kansas City, Kansas; Springfield,
Missouri and Oklahoma City, Oklahoma. The Company also has a facility in Fort
Scott, Kansas which distributes health and beauty supplies.
The Kansas City, Kansas distribution center, together with AWG's corporate
offices, each of which are owned by AWG, are located on approximately 62 acres
and include approximately 605,000 square feet of warehouse space and 83,000
square feet of office space. The Kansas City, Kansas distribution center is
undergoing an expansion that will increase the warehouse space by
approximately 287,000 square feet.
The Springfield, Missouri distribution center is owned by AWG and is located
on approximately 54 acres and includes approximately 751,000 square feet of
warehouse and 43,000 square feet of office space.
The Oklahoma City, Oklahoma distribution center is partially owned and
leased. It is located on approximately 44 acres and includes approximately
526,000 square feet of warehouse and 36,000 square feet of office space.
The Fort Scott, Kansas distribution center is owned by AWG and is located on
approximately 36 acres and includes approximately 208,000 square feet of
warehouse and 10,000 square feet of office space.
46
<PAGE>
The Company has additional office space in Kansas City, Missouri. This
property is owned, sits on approximately 2 acres and constitutes 38,456 square
feet of office space. This office space is used primarily for information
services and to assist the Valu Merchandisers subsidiary.
EMPLOYEE RELATIONS
Management believes that relations with AWG's employees are good. As of June
15, 1996, AWG had 2,198 non-salaried employees, of whom 1,926 served in its
four distribution centers, and 272 served in administrative operations. AWG
also had approximately 604 salaried employees. AWG is a party to three
collective bargaining agreements. The current three-year collective bargaining
agreement with the International Brotherhood of Teamsters for the Kansas City
distribution center expires in October 1997, while the collective bargaining
agreement with the Teamsters at the Springfield and Oklahoma City distribution
centers expire in April 1997 and April 2001, respectively. The Company has not
experienced a work stoppage in over 18 years and believes that it will be able
to continue to negotiate collective bargaining agreements that will allow it
to maintain a competitive labor cost structure.
MATERIAL CUSTOMER
Homeland represented approximately 10% of sales of AWG in the 24 weeks ended
June 15, 1996. No other customer accounts for 10% or more of AWG sales.
LEGAL PROCEEDINGS
AWG and its subsidiaries are parties to certain legal proceedings incident
to their businesses. In the opinion of management, none of such matters,
either individually or in the aggregate, is material to AWG's financial
condition or results of operations.
REGULATION
AWG is subject to federal, state and local laws and regulations governing
the purchase, handling, sale and transportation of its products, and is
subject to the jurisdiction of the federal Food and Drug Administration
("FDA"), Interstate Commerce Commission ("ICC") and the Occupational Safety
and Health Administration ("OSHA"). Management believes that AWG is in
material compliance with all FDA, ICC, OSHA and other federal, state and local
laws and regulations governing its business.
47
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL OF AWG GROUP
The directors, executive officers and certain key personnel of AWG Group are
as set forth below. Subsequent to the Merger and Initial Public Offering, four
additional, independent directors will be added to the AWG Group Board.
<TABLE>
<CAPTION>
YEARS
WITH
NAME AGE AWG POSITION WITH AWG GROUP
- ---- --- ----- -----------------------
<S> <C> <C> <C>
Directors and Executive
Officers
J. Fred Ball............ 62 23 Director
Jim Queen............... 62 35 Director
Don Woods, Jr........... 51 12 Director
Mike DeFabis............ 64 10 President, Chief Executive Officer
and Director
Doug Carolan............ 54 13 Executive Vice President, Chief
Operating Officer and Director
Tom Williams............ 54 11 Executive Vice President of Division
Operations
Gary Phillips........... 49 22 Executive Vice President of Finance
and Administration, Chief Financial
Officer
Joe Campbell............ 58 21 Vice President, Secretary and
Treasurer
Certain Key Personnel
Jerry Barber............ 50 1 Senior Vice President, Kansas City
Division Manager
Jerry Garland........... 45 5 Senior Vice President, Oklahoma City
Division Manager
Maurice Henry........... 47 10 Senior Vice President, Springfield
Division Manager
Dennis Kinser........... 51 23 Vice President Procurement
Scott Wilmoski.......... 43 13 Vice President Real Estate
Bill Morrison........... 43 5 President Supermarket Insurance
Agency
Dick Swain.............. 63 3 President Valu Merchandisers Company
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
Mr. Ball has served as Chairman of the Board of Directors of AWG since 1977.
He is the President of Four B Corp., an AWG retailer which owns and operates
20 supermarkets in the Kansas City area.
Mr. Queen has served as a director of AWG since 1992. He was employed by the
Company from 1961 to 1974. He is the President of Buy Rite, Inc., an AWG
retailer which owns and operates three supermarkets in the Kansas City area.
He is the managing member of two limited liability companies that are AWG
retailers, each of which owns and operates one additional store.
Mr. Woods has served as a director of AWG since 1984. He is the President of
Woods Super Markets, Inc., an AWG retailer which owns and operates seven
supermarkets in western Missouri.
Mr. DeFabis has served as President and Chief Executive Officer of the
Company since March of 1992 and as Chief Operating Officer from March 1990 to
March 1992.
Mr. Carolan has served as Executive Vice President and Chief Operating
Officer since September 1995 and as Executive Vice President from September
1986 to September 1995.
48
<PAGE>
Mr. Williams has served as Executive Vice President of Division Operations
since September 1995 and as Senior Vice President and Manager of the Kansas
City Division from April 1984 to September 1995.
Mr. Phillips has served as Executive Vice President of Finance and
Administration since January 1996, Chief Financial Officer since August 1996
and as Senior Vice President and Manager of the Springfield division from
September 1983 to January 1996.
Mr. Campbell has served as Treasurer since 1975 and as Vice President since
1981. He was elected as Secretary by the Board of Directors in 1992.
CERTAIN KEY PERSONNEL
Mr. Barber has served as Senior Vice President and Manager of the Kansas
City division since 1995. Prior to joining AWG, Mr. Barber was the President
and Chief Executive Officer of Eagle Food Centers from 1990 to 1994 and
Executive Vice President of Sales and Marketing at Nash-Finch Company from
1985 to 1990.
Mr. Garland has served as Senior Vice President and Manager of the Oklahoma
City division since 1995 and as Vice President of Marketing and Procurement
for the Springfield division from 1991 to 1995. Prior to joining AWG, Mr.
Garland was Vice President of Merchandising of Harvest Foods from 1990 to 1991
and Director of Merchandising for Dallas KMA--Kroger Co. from 1986 to 1990.
Mr. Henry has served as Senior Vice President and Manager of the Springfield
division since January, 1996, Vice President of Merchandising of the Kansas
City division from June, 1995 to December 1996 and Executive Director of
Member Services for the Kansas City division from 1985 to 1995.
Mr. Kinser has served as Vice President of Procurement since 1991 and has
held various positions in the purchasing department of AWG since 1973.
Mr. Wilmoski has served as Vice President of Real Estate and Store
Engineering since 1989 and has held various real estate and store engineering
positions with AWG since 1983.
Mr. Morrison has served as President and Chief Executive Officer of
Supermarket Insurance Agency and Benchmark Insurance Company since May 1996,
and as Vice President and Chief Operating Officer of Benchmark Insurance
Company, since 1991. Prior to joining AWG, Mr. Morrison was a self-employed
insurance consultant from January 1990 to April 1991 and Senior Vice President
and Chief Financial Officer of Kensu Holdings, Inc., a holding company of
property and casualty insurance related entities, from 1985 through 1989.
Mr. Swain has served as the President of Valu Merchandisers since 1994 and
as Vice President of General Merchandise from 1993 to 1994. Prior to joining
AWG, Mr. Swain was the Division President of Fleming GMD, the general
merchandise division of Fleming Companies, Inc. from 1985 to 1993.
49
<PAGE>
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the compensation for the
1995 fiscal year of the five highest-paid executive officers of AWG who will
be executive officers of AWG Group. The Company did not provide any
compensation in the form of restricted stock awards, options, stock
appreciation rights or long-term incentive plan payouts.
<TABLE>
<CAPTION>
ALL OTHER
SALARY BONUS COMPENSATION
NAME AND PRINCIPAL POSITION ($) ($) ($)(1)
- --------------------------- ------- ------ ------------
<S> <C> <C> <C>
Mike DeFabis, President and Chief Executive
Officer............................................ 483,000 19,000 4,544
Doug Carolan, Executive Vice President and Chief
Operating Officer.................................. 340,600 13,100 2,031
Tom Williams, Executive Vice President of Division
Operations......................................... 216,130 9,150 4,411
Gary Phillips, Executive Vice President of Finance
and Administration................................. 201,695 7,870 1,946
Joe Campbell, Vice President, Secretary and
Treasurer.......................................... 153,920 6,000 4,136
</TABLE>
- --------
(1) Amounts include a $1,500 Company contribution to the AWG Restated 401(k)
Plan and the remainder for personal use of Company automobiles.
PENSION PLANS
The Company maintains a Restated Retirement Plan and a supplemental Pension
Restoration Plan (together, the "Retirement Plan"). The following table shows
the estimated annual benefits payable to a covered participant at normal
retirement age (age 65) under the Retirement Plan for various levels of
compensation and years of service. Benefit figures shown are amounts payable
on a straight-line annuity assuming retirement by the participant at the
normal retirement age of 65 without a joint survivorship provision and are not
subject to any offsets for Social Security but are offset by Social Security
covered compensation.
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------
AVERAGE
SALARY BASE 5 10 15 20 25 30 35
- ----------- ------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
125,000.................. 13,121 26,242 39,363 52,484 65,605 78,726 91,847
150,000.................. 15,909 31,817 47,726 63,634 79,543 95,451 111,360
175,000.................. 18,696 37,392 56,088 74,784 93,480 112,176 130,872
200,000.................. 21,484 42,967 64,451 85,934 107,418 128,901 150,385
225,000.................. 24,271 48,542 72,813 97,084 121,355 145,626 169,897
250,000.................. 27,059 54,117 81,176 108,234 135,293 162,351 189,410
275,000.................. 29,846 59,692 89,538 119,384 149,230 179,076 208,922
300,000.................. 32,634 65,267 97,901 130,534 163,168 195,801 228,435
325,000.................. 35,421 70,842 106,263 141,684 177,105 212,526 247,947
350,000.................. 38,209 76,417 114,626 152,834 191,043 229,251 267,460
375,000.................. 40,996 81,992 122,988 163,984 204,980 245,976 286,972
400,000.................. 43,784 87,567 131,351 175,134 218,918 262,701 306,485
425,000.................. 46,571 93,142 139,713 186,284 232,855 279,426 325,997
450,000.................. 49,359 98,717 148,076 197,434 246,793 296,151 345,510
475,000.................. 52,146 104,292 156,438 208,584 260,730 312,876 365,022
500,000.................. 54,934 109,867 164,801 219,734 274,668 329,601 384,535
</TABLE>
The compensation taken into account for purposes of determining the
aggregate pension benefit under the Retirement Plan is the employee's salary
as set forth in the Summary Compensation Table. As of December 31, 1995, the
years of service for the individuals named in the summary compensation table
were as follows: Mr. DeFabis--8 years, Mr. Carolan--12 years, Mr. Williams--11
years, Mr. Phillips--20 years, and Mr. Campbell--20 years.
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<PAGE>
EQUITY INCENTIVE PLAN
As a result of a comprehensive review of AWG's executive compensation
programs, the AWG Group Board adopted a compensation plan that allows the use
of equity-related compensation (the "Equity Incentive Plan"). Management
believes that the Equity Incentive Plan will become an important part of AWG
Group's management compensation program by helping to attract and retain
motivated, highly competent employees. By providing stock options and other
equity-related compensation, management believes that the participants will
have a strong incentive to create shareholder value. A copy of the Equity
Incentive Plan has been filed with the SEC as an exhibit to the Registration
Statement of which this Proxy Statement/Prospectus is a part. See "ADDITIONAL
INFORMATION."
The Incentive Plan allows the granting of stock options, stock appreciation
rights, restricted stock awards, performance unit awards and performance share
awards (collectively, "Awards") to eligible participants. The number of shares
authorized to be issued pursuant to Awards granted under the Equity Incentive
Plan shall be equal to 10% of the shares of AWG Group Common Stock outstanding
immediately after the Initial Public Offering, of which no more than 100,000
shares may be issued in the form of restricted stock. If an Award expires or
is canceled without having been fully exercised or vested, the unvested or
canceled shares generally will be available thereafter for grants of Awards.
The number of shares available for grant under the Incentive Plan, as well as
outstanding Awards and the numerical limits for individual grants, will be
adjusted as appropriate to reflect any stock splits, stock dividends,
recapitalizations, reorganizations or other changes to the capital structure
of AWG Group.
The Equity Incentive Plan will be administered by the Board of Directors or
a committee designated by the Board of Directors. Subject to the terms of the
Equity Incentive Plan, the Board has the sole discretion to determine the
employees and consultants who will be granted Awards, the size and types of
such Awards, and the terms and conditions of such Awards. The exercise price
of options must be at least equal to the fair market value of the common stock
as of the date of grant. Employees and consultants of AWG Group and its
affiliates (i.e., any corporation or any entity controlling, controlled by or
under common control with AWG Group) are eligible to be selected to receive
Awards.
Under the Equity Incentive Plan, the Board of Directors of AWG Group has
approved options for 77 executives totaling 1,115,000 shares, contingent upon
the consummation of the Merger. These options will have an exercise price
equal to the price per share that shares of AWG Group Common Stock are sold to
the public in the Initial Public Offering and will vest in equal installments
on each of the first three anniversaries of the grant date. Under these
grants, the individuals named in the summary compensation table will receive
the following options: Mr. DeFabis--100,000 shares; Mr. Carolan--75,000
shares; Mr. Williams--50,000 shares; Mr. Phillips--50,000 shares; and Mr.
Campbell--25,000 shares. The actual number of employees and consultants who
will receive Awards under the Equity Incentive Plan cannot be determined
because selection for participation in the Equity Incentive Plan is in the
sole discretion of the Board.
DIRECTOR COMPENSATION
The AWG Group Board of Directors has not yet adopted a director compensation
program. Such a program is anticipated to be adopted prior to the Initial
Public Offering.
CERTAIN TRANSACTIONS
The Company makes loans or otherwise facilitates the financing needs for
expansions or other enhancements of its retailers' supermarkets. As of June
15, 1996, the Company had an aggregate of $44.1 million of loans outstanding
to its retailers, including loans aggregating approximately $3.9 million to
Buy Rite, Inc. Queen-Morris Ventures, L.L.C. and Queen Enterprises, L.L.C.,
bearing interest at a rate of 9.25%. Mr. Queen, who is a director of AWG
Group, is a director, officer and shareholder of Buy Rite, Inc. and a member
of the two limited liability companies.
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<PAGE>
Certain directors of AWG Group are affiliated with Shareholders that
purchase all or a portion of their grocery and non-grocery needs and related
services from AWG. All such purchases are made at prices and on terms,
including volume discounts and rebates, identical to those offered to all
other Shareholders. During the first twenty-eight weeks of 1996, entities
related to the following persons purchased products in the following amounts
from AWG:
<TABLE>
<CAPTION>
NAME OF
SHAREHOLDER
(AFFILIATED
DIRECTOR) PURCHASES FROM AWG
----------- ------------------
(IN MILLIONS)
<S> <C>
Four B Corp. (J. Fred Ball)........................... $112.1
Woods Super Market, Inc. (Don Woods, Jr.)............. 16.6
Buy Rite, Inc. (Jim Queen)............................ 6.6
Queen-Morris Ventures L.L.C. (Jim Queen).............. 4.0
Queen Enterprises, L.L.C. (Jim Queen)................. 4.7
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
No executive officer of AWG owns any shares of AWG Common Stock. No director
of AWG beneficially owns more than 1% of any class of AWG Common Stock. The
directors of AWG as a group beneficially own 4% and 6% of the outstanding
shares of AWG Class A and Class B Common Stock, respectively. The number of
shares of AWG Class A and Class B common stock beneficially owned by members
of the AWG Board, and by all directors of AWG as a group is set forth below,
together with the shares of AWG Group to be owned after the Merger:
<TABLE>
<CAPTION>
SHARES OF AWG
SHARES OF AWG SHARES OF AWG GROUP COMMON
CLASS A CLASS B STOCK TO BE OWNED
NAME COMMON STOCK COMMON STOCK AFTER THE MERGER
- ---- ------------- ------------- -----------------
<S> <C> <C> <C>
David Baker(1)................... 15 75
J. Fred Ball(2).................. 15 75
Dante J. Cosentino(3)............ 60 120
James A. Demme(4)................ 15 --
Floyd G. Garrett(5).............. 15 75
Charles Graas.................... -- --
Gerald L. Harp(6)................ 15 75
Lester E. Horner(7).............. 15 75
Bob Hufford(8)................... 15 75
Kent Laughman(9)................. 15 75
Chuck Murfin(10)................. 15 75
James R. Queen(11)............... 45 75
David A. Trottier(12)............ 15 75
Donald C. Woods, Jr.(13)......... 15 75
--- --- ---
All directors as a group (14
persons)........................ 270 945
</TABLE>
- --------
(1) Each of these shares is owned by Baker Enterprises, Inc. Mr. Baker is a
director, officer and shareholder of Baker Enterprises, Inc.
(2) Each of these shares is owned by Four B Corp. Mr. Ball is a director,
officer and shareholder of Four B Corp.
(3) Class A shares include 15 shares owned by Cosentino Group, Inc., of which
Mr. Cosentino is the Chairman and a shareholder; 15 shares owned by
Cosentino Group II, Inc., of which Mr. Cosentino is the Chairman and a
shareholder; 15 shares owned by Cosco of Kansas, Inc., of which Mr.
Cosentino is the President and a shareholder; and 15 shares owned by Mid
Am Food Enterprises, Inc., of which Mr. Cosentino is a director, officer
and shareholder. Class B shares include 45 shares owned by Cosentino
Group, Inc., of
52
<PAGE>
which Mr. Cosentino is the President and a shareholder and 75 shares owned
by Mid Am Food Enterprises, Inc., of which Mr. Cosentino is a director,
officer and shareholder.
(4) Each of these shares is owned by Homeland Stores, Inc. Mr. Demme is the
President of Homeland Stores, Inc.
(5) Each of these shares is owned by Garrett & Giesy Enterprises, Inc., of
which Mr. Garrett is a director, officer and shareholder.
(6) Each of these shares is owned by Harp's Food Stores, Inc. Mr. Harp is a
director, officer and shareholder of Harp's Food Stores, Inc.
(7) Each of these shares is owned by Horner Foods, Inc. Mr. Horner is a
director, officer and shareholder of Horner Foods, Inc.
(8) Each of these shares is owned by Town & Country Grocers of Fredericktown
Missouri, Inc. ("Town & Country"). Mr. Hufford is a director, officer and
shareholder of Town & Country.
(9) Each of these shares is owned by Falley's, Inc. Mr. Laughman is the
President of Falley's, Inc.
(10) Each of these shares is owned by Ozark Supermarket, Inc. Mr. Murfin is a
director, officer and shareholder of Ozark Supermarket, Inc.
(11) Class A shares include 15 shares owned by Queen Enterprises, L.L.C., of
which Mr. Queen is a member; 15 shares owned by Buy Rite, Inc. of which
Mr. Queen is a director, officer and shareholder; and 15 shares owned by
Queen-Morris Ventures, L.L.C., of which Buy Rite, Inc. is a member. Class
B shares include 75 shares owned by Buy Rite, Inc. of which Mr. Queen is
a director, officer and shareholder.
(12) Each of these shares is owned by Smitty's Supermarkets, Inc. Mr. Trottier
is a director, officer and shareholder of Smitty's Supermarkets, Inc.
(13) Each of these shares is owned by Woods Super Markets, Inc. Mr. Woods is a
director, officer and shareholder of Woods Super Markets, Inc.
DESCRIPTION OF AWG GROUP CAPITAL STOCK
The following statements contain, in summary form, certain information
relating to AWG Group capital stock. They do not purport to be complete or to
reflect or give effect to statutory law and are intended to outline the
information presented in general terms only. Such statements are subject to
the detailed provisions of the AWG Group Articles of Incorporation and Bylaws
which are attached hereto as Annexes B and D.
COMMON STOCK
The Articles of Incorporation of AWG Group authorize the issuance of 500
million shares of common stock, par value $.01 per share. The holders of AWG
Group Common Stock are entitled to receive dividends when and as declared by
the Board of Directors out of funds legally available therefor. Upon
dissolution of AWG Group, the holders of AWG Group Common Stock are entitled
to share pro rata in AWG Group's net assets after payment or provision for
payment of all debts and liabilities of AWG Group, and after provision for any
class of preferred stock or other senior security which may be issued by AWG
Group.
The holders of AWG Group Common Stock are entitled to one vote per share on
all matters submitted to a vote of the shareholders and may not cumulate their
votes for the election of directors. Thus, the holders of a majority of the
shares of AWG Group Common Stock have the power to elect all the directors.
Subject to the voting rights of the holders of preferred stock, if any, the
exclusive voting power for all purposes is vested in the holders of the AWG
Group Common Stock. Each share of AWG Group Common Stock is entitled to
participate on a pro rata basis in dividends and other distributions to
holders of AWG Group Common Stock. There are no redemption, sinking fund,
conversion or preemptive rights with respect to shares of AWG Group Common
Stock. All shares of AWG Group Common Stock are, and the shares to be issued
in the Merger and in the Initial Public Offering will be, fully paid and
nonassessable.
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<PAGE>
PREFERRED STOCK
AWG Group has the authority, exercisable by its Board of Directors and
without shareholder approval, to issue, in one or more series, up to 50
million shares of preferred stock, par value $.10 per share, from time to time
with such preferences, limitations and relative rights as may be determined by
the Board of Directors for such purposes and for such consideration as it may
deem advisable. Accordingly, the Board of Directors, without shareholder
approval, may authorize the issuance of one or more series of preferred stock
with terms (including terms with respect to redemption, sinking fund,
dividend, liquidation, preemptive, conversion and voting rights and
preferences) that could adversely affect the voting power and other rights of
holders of AWG Group Common Stock.
The creation and issuance of any series of preferred stock and the relative
rights, designations and preferences of such series, if and when established,
will depend upon, among other things, the future capital needs of AWG Group,
then existing market conditions and other factors that, in the judgment of the
Board of Directors, might warrant the issuance of preferred stock. Preferred
stock may have the effect of discouraging an attempt, through acquisition of a
substantial number of shares of AWG Group Common Stock, to acquire control of
AWG Group with a view to effecting a merger, sale or exchange of assets or a
similar transaction. The anti-takeover effects of the preferred stock may deny
shareholders the receipt of a premium on their AWG Group Common Stock and may
also have a depressive effect on the market price of AWG Group Common Stock.
As of the date of this Proxy Statement/Prospectus, except with respect to the
shareholder rights plan discussed below, AWG Group has no arrangements,
undertakings or plans with respect to the issuance of preferred stock.
SHAREHOLDER RIGHTS PLAN
The Company has adopted a Shareholder Rights Plan, dated , 1996
(the "Rights Plan"), pursuant to which holders of Common Stock outstanding on
, 1996 or issued thereafter have been granted one preferred share
purchase right (a "Right") attributable to each share of AWG Group Common
Stock. The following description of the Rights is not intended to be complete
and is qualified in its entirety by reference to the Rights Agreement, dated
as of , 1996 (the "Rights Agreement"), between the Company
and . Certain of the capitalized terms used in
the following description have the meanings set forth in the Rights Agreement.
Each Right, when it becomes exercisable as described below, will entitle the
registered holder to purchase one one-thousandth ( 1/1000th) of a share of
Series A Participating Cumulative Preferred Stock of the Company, $0.10 par
value (the "Preferred Shares"), at an exercise price of $ , subject to
certain adjustments and other specified conditions. Initially, the Rights will
be evidenced by the certificates for AWG Group Common Stock, registered in the
names of the holders thereof and will be transferred with and only with the
AWG Group Common Stock.
The Rights become exercisable upon the occurrence of a Distribution Date,
which is defined in the Rights Plan as the earlier of (i) such time as the
Company learns that a person or group (including any affiliate or associate of
such person or group) has acquired, or has obtained the right to acquire,
beneficial ownership of more than 15% of the outstanding shares of AWG Group
Common Stock, other than pursuant to a Qualifying Offer (as defined below)
(such person or group being an "Acquiring Person"), and (ii) such date, if
any, as may be designated by the Board of Directors of the Company following
the commencement of, or first public disclosure of an intent to commence, a
tender or exchange offer for outstanding AWG Group Common Stock which could
result in such person or group becoming the beneficial owner of more than 15%
of the outstanding AWG Group Common Stock, other than pursuant to a Qualifying
Offer. Upon a person becoming an Acquiring Person, the Rights Plan provides,
among other things, that each holder of a Right (except for the Acquiring
Person) will thereafter have the right to receive, upon exercise, Common Stock
having a value equal to two (2) times the exercise price of the Right.
In the event that the Company is acquired in a merger or other business
combination by an Acquiring Person or an affiliate thereof that is a publicly
traded corporation or 50% or more of the Company's assets or assets
54
<PAGE>
representing 50% or more of the Company's revenues or cash flow are
transferred to an Acquiring Person or an affiliate thereof that is a publicly
traded corporation, each Right will entitle its holder (other than the
Acquiring Person) to purchase common shares of the acquiring corporation
having a market value equal to two (2) times the exercise price of the Right.
If the acquiring entity in such a transaction is not a publicly traded
corporation, each Right will entitle its holder (other than the Acquiring
Person) to purchase (i) common shares of the surviving or acquiring
corporation having a book value equal to two (2) times the exercise price of
the Right; or (ii) if such entity has an affiliate which has publicly traded
common shares, that number of common shares of such affiliate which at the
time of the transaction would have a market value of twice the exercise price
of the Right.
The Rights Plan will not apply to any Qualifying Offer. A Qualifying Offer
generally means an all-cash tender offer for all outstanding shares of Common
Stock and with respect to which the offeror: (i) provides documentation to the
Company that the offer is fully financed, (ii) provides a fairness opinion of
a nationally recognized investment banking firm, (iii) agrees to hold the
offer open for specified periods, not reduce the offering price, change the
consideration or reduce the number of shares being sought, (iv) owns, after
consummation of the offer, shares representing a majority of the outstanding
Common Stock, and (v) agrees to certain terms and conditions if the offeror
does not own a majority of the Common Stock at completion of the offer.
At any time prior to the earlier of such time as an Acquiring Person becomes
such and , 200 , the Board of Directors of AWG Group may redeem the
Rights in whole, but not in part, at a price of $0.01 per Right, subject to
adjustment as provided in the Rights Agreement. The Rights Plan may be amended
from time to time by the Board of Directors of AWG Group without approval of
AWG Group shareholders.
After there is an Acquiring Person, the Board of Directors of AWG Group may
elect to exchange each Right (other than Rights that have become null and void
and nontransferable as described above) for consideration per Right consisting
of one-half of the securities that would be issuable at such time upon the
exercise of one Right pursuant to the terms of the Rights Agreement or cash
equal to the exercise price of the Right.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on substantially all the Rights being acquired.
The Rights will not interfere with any merger or other business combination
pursuant to a Qualifying Offer or with a third party approved by the Board of
Directors of the Company since the Board of Directors may, at its option, at
any time prior to any person becoming an Acquired Person, redeem all but not
less than all of the then outstanding Rights as described above.
LIMITATIONS ON CHANGE OF CONTROL
Certain provisions of the AWG Group Articles of Incorporation could make
more difficult the acquisition of AWG Group by means of a tender offer, a
proxy contest or otherwise and the removal of incumbent officers and
directors. These provisions are expected to discourage certain types of
coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of AWG Group to first negotiate with the
AWG Group Board of Directors. Management believes that the benefits of
increased protection of AWG Group's ability to negotiate with the proponent of
an unfriendly or unsolicited proposal to acquire or restructure AWG Group
outweigh the disadvantages of discouraging such proposals because, among other
things, negotiation of such proposals could result in an improvement of their
terms.
AWG Group's Articles of Incorporation provide that the Board of Directors
will be divided into three classes with staggered three-year terms. The number
of directors shall not be less than five nor more than eleven, with the
classes to be as nearly equal in number as possible. As a result, only one
class of directors will be elected at each annual meeting of shareholders of
AWG Group, with the other classes continuing for the remainder of their
respective three-year terms. The classification of the Board of Directors
makes it more difficult for AWG Group's existing shareholders to replace
quickly the majority of the Board of Directors as well as for
55
<PAGE>
another party to obtain control of AWG Group by replacing the majority of the
Board of Directors. Because the Board of Directors has the power to retain and
discharge officers of AWG Group, these provisions also make it more difficult
for existing shareholders or another party to effect quickly a change in
management.
AWG Group's Articles of Incorporation provide that special meetings of
shareholders can be called only by a majority of the Board of Directors. The
AWG Group Bylaws set forth an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors and with regard to other proposals to be
brought before an annual meeting of shareholders of AWG Group. Shareholders
will not be permitted to fill vacancies on the Board of Directors caused by
resignation or newly created directorships.
The AWG Group Articles of Incorporation contain provisions requiring the
affirmative vote of the holders of at least two-thirds of the voting stock of
the Company to amend the foregoing provisions of the AWG Group Articles of
Incorporation. The AWG Group Bylaws also require a two-thirds vote to amend
certain provisions thereof.
TRANSFER RESTRICTIONS
Subject to applicable federal and state securities laws and regulations,
shares of AWG Group Common Stock sold in the Initial Public Offering will be
freely transferable. Shares of AWG Group Common Stock acquired pursuant to the
Merger may not be transferred, directly or indirectly, for a period of two
years except that such shares may be (i) pledged in connection with a bona-
fide loan transaction which has been approved by AWG Group prior to the
pledge, which consent is expected to be given if the loan relates to retail
store development, (ii) transferred as part of the sale of substantially all
of the assets or stock of the grocery business (if a corporation), in which
the Shareholder is engaged, or (iii) transferred by way of a gift to a trust
for the benefit of family members or to the estate of a deceased stockholder.
In each case, with the exception of persons who acquire shares pursuant to the
foreclosure of a security interest or in connection with estate taxes that may
be owed as a result of the transferor's death, the transferee will remain
subject to the remaining term of the two year transfer restriction.
COMPARISON OF SHAREHOLDER RIGHTS
GENERAL
AWG is incorporated in the State of Missouri, and AWG Group is incorporated
in the State of Kansas. AWG Shareholders, whose rights are currently governed
by Missouri law (including the MGBCL), the AWG Articles of Incorporation and
the AWG Bylaws, will, upon consummation of the Merger, become shareholders of
AWG Group. After such time, their rights will then be governed by Kansas law,
including the KGCC, the AWG Group Articles of Incorporation and the AWG Group
Bylaws.
Material differences that may affect the rights and interests of
shareholders of AWG and the AWG Group are set forth below. This summary is not
intended to be an exhaustive or detailed description of the provisions
discussed. It is qualified in its entirety by reference to the KGCC, MGBCL,
the AWG Articles of Incorporation, the AWG Bylaws, the AWG Group Articles of
Incorporation and the AWG Group Bylaws. All references herein to the AWG Group
Articles of Incorporation and the AWG Group Bylaws refer to such charter and
bylaws as will be in effect at the Effective Time. The AWG Group Articles of
Incorporation and the AWG Group Bylaws are attached to this Proxy
Statement/Prospectus as Annexes B and D, respectively.
NUMBER OF DIRECTORS
Under the AWG Articles of Incorporation, the AWG Board consists of at least
fifteen directors. Under the AWG Group Articles of Incorporation and the AWG
Group Bylaws, the AWG Group Board consists of at least five, but no more than
eleven directors, the exact number to be fixed by the AWG Group Bylaws.
Currently, the AWG Group Board consists of five directors.
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<PAGE>
The AWG Bylaws provide that directors are elected to a three-year term. The
AWG Group Articles of Incorporation and AWG Group Bylaws provide for a
staggered Board of Directors consisting of nine directors (which number is
subject to adjustment) comprised of three classes as nearly equal in size as
practicable. Each class holds office until the third annual meeting for
election of directors following the election of such class.
VACANCIES ON THE BOARD OF DIRECTORS
Under the AWG Bylaws, vacancies on the AWG Board may be filled by the
designee of a majority of the directors then in office, even if less than a
quorum. A director so designated will hold office for a term coinciding with
the term of the director whose vacancy was filled. Vacancies on the AWG Group
Board are filled in the same manner as AWG except the required board vote is
two-thirds of the remaining directors.
REMOVAL OF DIRECTORS
The AWG Articles of Incorporation and the AWG Bylaws are silent as to the
removal of any director, but, under the MGBCL, directors may be removed, with
or without cause, at a meeting of the Shareholders by a vote of the holders of
a majority of the shares then entitled to vote. In addition, if less than the
entire AWG Board is to be removed, no one of the directors may be removed if
the votes cast against removal would be sufficient to elect the director if
then cumulatively voted at an election of the entire AWG Board. The AWG Group
Articles of Incorporation provide that directors of AWG Group may be removed,
but only for "cause" by (i) a two-thirds majority of the shares then entitled
to vote for the election of directors, or (ii) by an affirmative vote of a
majority of the entire AWG Group Board. The term "cause" means (i) conviction
of a felony, (ii) declaration by order of a court that the director is of
unsound mind, or (iii) gross abuse of trust which is proven by clear and
convincing evidence to have been committed in bad faith.
VOTING
The AWG Articles of Incorporation and AWG Bylaws do not provide for
cumulative voting in connection with the election of directors and provide
that each outstanding share entitled to vote under the AWG Articles of
Incorporation is entitled to one vote on each matter submitted to a
Shareholder vote. Under the MGBCL Shareholders have the right to cumulate
their votes for the election of directors in the absence of a provision in the
AWG Articles of Incorporation or AWG Bylaws to the contrary. The AWG Group
Articles of Incorporation state that shareholders do not have cumulative
voting rights in connection with the election of directors and also provide
that each outstanding share entitled to vote is entitled to one vote on each
matter submitted to a shareholder vote.
The AWG Bylaws state that unless required otherwise by law, issues brought
before a meeting of Shareholders will be decided by a vote of the holders of a
majority of the shares represented and entitled to vote. The AWG Group Bylaws
(except with respect to the election of directors who are elected by a
plurality vote) contain a similar provision.
SPECIAL MEETINGS
The AWG Bylaws state that, in general, special Shareholder meetings may only
be called by the President of AWG, by the President upon resolution of the AWG
Board, or at the written request of not less than 20% of the Shareholders. The
AWG Group Articles of Incorporation state that, except as otherwise required
by law, special meetings of AWG Group shareholders may be called by only a
majority of the AWG Group Board.
INDEMNIFICATION; LIMITATION OF LIABILITY
The MGBCL and the KGCC permit indemnification of officers, directors and
others on substantially similar terms. A corporation may indemnify any person
made or threatened to be made a party to any legal proceeding, including any
suit by or in the name of the corporation, by reason of the fact that he is or
was a director, officer,
57
<PAGE>
employee or agent of the corporation, or is or was serving at the request of
the corporation in any capacity with respect to another enterprise, against
expenses and other amounts reasonably incurred by him in connection with such
legal proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the corporation, and,
with respect to any criminal proceeding, had no reasonable cause to believe
his conduct was unlawful. The foregoing notwithstanding, no indemnification
may be made in respect of any claim brought by or in the name of the
corporation as to which such person is adjudged to be liable to the
corporation unless and only to the extent that a proper court determines that
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses that the court deems
proper. These indemnification rights are not exclusive of any other rights to
which the person seeking indemnification is entitled and do not limit a
corporation's right to provide further indemnification.
The AWG Bylaws provide for indemnification of any person made or threatened
to be made a party to a legal proceeding by reason of the fact that the person
is or was a director, officer or general manager of AWG against all expense,
liability or loss (including attorneys' fees and judgments) actually and
reasonably incurred by such person; provided no such person shall be
indemnified as to matters for which they have been adjudged to have been
negligent. The indemnification applies to settlements only if the AWG Board
approves the settlement and makes its own determination that such person was
not negligent.
The AWG Group Articles of Incorporation contain a provision that eliminates
the personal liability of AWG Group's directors and officers to AWG Group or
its shareholders for monetary damages for breach of fiduciary duty to the
fullest extent permitted by the KGCC. Provisions in the AWG Group Articles and
AWG Group Bylaws entitle officers, directors and employees to be indemnified
by AWG Group against costs and expenses, attorneys' fees, judgments, fines and
amounts paid in settlement that are actually and reasonably incurred in
connection with any such action, suit or proceeding, including actions brought
by or in the right of AWG Group, to which such persons are made or threatened
to be made a party, by reason of their being a director or officer of AWG
Group, to the fullest extent permitted by Kansas law. AWG Group may also be
required to advance costs incurred by directors, officers and employees in
such situations.
SHAREHOLDER INSPECTION
Under the KGCC, any shareholder may inspect the corporation's stock ledger,
shareholder list and other books and records for any proper purpose. A "proper
purpose" is defined as a purpose reasonably related to such person's interest
as a shareholder. The KGCC specifically provides that a shareholder may
appoint an agent for the purpose of examining the stock ledger, list of
shareholders or other books and records of the corporation. A shareholder may
apply to the Kansas district court to compel inspection in the event the
shareholder's request to examine the books and records is refused. In general,
the corporation has the burden of proving an improper purpose where that
shareholder requests to examine only the shareholder ledger or the shareholder
list, and in all other circumstances, the shareholder has the burden of
proving a proper purpose. The right of shareholders to inspect under the KGCC
is generally similar to that of shareholders under the MGBCL. Neither the
MGBCL nor Missouri case law, however, provides specific guidance as to whether
a shareholder may appoint an agent for the purpose of examining books and
records or the extent to which a shareholder must have a "proper purpose."
Accordingly, in comparison with the KGCC, in a given situation, a Missouri
shareholder may be provided with less guidance as to the scope of its ability
to inspect the books and records of the corporation.
AMENDMENT OF ARTICLES OF INCORPORATIONS
The AWG Articles of Incorporation are silent as to the amendment of its
provisions. Under the MGBCL the AWG Articles of Incorporation may be amended
upon a resolution of the AWG Board proposing the amendment and its submission
to the Shareholders for their approval by the majority of the shares of AWG
common stock entitled to vote.
The AWG Group Articles of Incorporation provide that provisions of the AWG
Group Articles of Incorporation dealing with the number, election, and removal
of directors, director powers, and certain business
58
<PAGE>
combinations may not be repealed or amended without the affirmative vote of
holders of at least two-thirds of the outstanding shares of voting stock. The
AWG Group shareholders may otherwise amend, alter, change or repeal any
provision of the AWG Group Articles of Incorporation as the KGCC, which is
identical to the MGBCL in this respect, provides.
AMENDMENT OF BYLAWS
The AWG Bylaws provide that the Shareholders may make, alter, amend or
repeal the AWG Bylaws by a majority vote of the AWG shares. The AWG Group
Articles of Incorporation authorize the AWG Group Board to make, alter and
repeal bylaws, subject to the rights of shareholders at any regular or special
meeting to alter or repeal bylaws made by the AWG Group Board by a two-thirds
vote of the outstanding shares. Provisions relating to restrictions on
transfer of Common Stock may not be amended by the Shareholders.
NOTICE OF SHAREHOLDER PROPOSALS; NOMINATIONS OF DIRECTORS
The AWG Bylaws do not contain special requirements for providing advance
notice of the introduction by shareholders of business to be transacted at
Shareholder meetings.
The AWG Group Bylaws provide that any shareholder who intends to bring a
matter before a meeting of shareholders must deliver written notice of such
shareholder's intent to the Secretary of AWG Group. Such notice must be
received by the Secretary not later than the later of following dates: (1)
with respect to an annual meeting of shareholders, 130 days in advance of such
meeting; and (2) with respect to any other meeting of shareholders, the close
of business on the tenth day following the date of public disclosure of the
date of such meeting.
Such written notice must set forth (i) the name and address of the
shareholder, (ii) the class and number of shares of capital stock of AWG Group
which are beneficially owned by the shareholder, (iii) any material interest
of the shareholder in the proposed business described in the notice, and (iv)
if such business is a nomination for director, each nomination sought to be
made, together with the reasons for each nomination, a description of the
qualifications and business or professional experience of each proposed
nominee and a statement signed by each nominee indicating his or her
willingness to serve if elected, and disclosing the information about him or
her that is required by the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the rules and regulations promulgated thereunder, to be
disclosed in the proxy materials for the meeting involved as if he or she were
a nominee of the corporation for election as one of its directors.
SHAREHOLDERS' VOTE FOR MERGERS
In the area of mergers and/or other corporate reorganizations, the KGCC
differs from the MGBCL in a number of respects. A corporation incorporated
under the KGCC must obtain the affirmative vote (except as indicated below and
unless its articles of incorporation provide otherwise) of the holders of a
majority of the outstanding shares of the corporation entitled to vote thereon
to approve a merger with another corporation, the sale of substantially all of
the corporation's assets or the voluntary dissolution of the corporation. In
the same situations, the MGBCL requires the approval of persons holding at
least two-thirds of the outstanding shares entitled to vote thereon.
The KGCC does not require a shareholder vote of the surviving corporation in
a merger if (i) the merger agreement does not amend the existing certificate
of incorporation, (ii) each outstanding share of the surviving corporation
before the merger is unchanged, and (iii) the number of shares to be issued in
the merger does not exceed 20% of the shares outstanding immediately prior to
such issuance. The MGBCL has no such exception.
Neither the MGBCL nor the KGCC requires a vote of a corporation's
shareholders if such corporation is merged with and into a parent corporation
that owns 90% or more of such corporation's stock.
59
<PAGE>
APPRAISAL RIGHTS
Both the KGCC and the MGBCL provide appraisal rights to shareholders
entitled to vote in merger transactions (except as indicated below). The MGBCL
also provides such rights in a sale of assets, unless pursuant to a voluntary
dissolution of the corporation, whereas the KGCC does not. The KGCC does not
recognize dissenters' rights of appraisal in a merger or consolidation if the
dissenting shares of the corporation are listed on a national securities
exchange, designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or
held of record by more than 2,000 shareholders, or if the corporation is the
surviving corporation and no vote of its shareholders is required, subject to
certain exceptions.
ANTI-TAKEOVER STATUTES
The MGBCL and KGCC contain certain provisions which may be deemed to have an
anti-takeover effect.
The MGBCL also contains a "Control Share Acquisition Statute" which provides
that an "Acquiring Person" who, after any acquisition of shares of a publicly
traded corporation, has the voting power, when added to all shares of the same
corporation previously owned or controlled by the Acquiring Person, to
exercise or direct the exercise of (i) 20% but less than 33 1/3%, (ii) 33 1/3%
or more but less than a majority, or (iii) a majority of the voting power of
outstanding stock of such corporation, must obtain shareholder approval for
the purchase of the "Control Shares." If approval is not given, the Acquiring
Person's shares lose the right to vote. The statute prohibits an Acquiring
Person from voting its shares unless certain disclosure requirements are met
and the retention or restoration of voting rights is approved by both (i) a
majority of the outstanding voting stock, and (ii) a majority of the
outstanding voting stock after exclusion of Interested Shares. "Interested
Shares" are defined as shares owned by the Acquiring Person, by directors who
are also employees, and by officers of the corporation. Shareholders are given
dissenters' rights with respect to the vote on Control Share Acquisitions and
may demand payment of the fair value of their shares.
A number of acquisitions of shares are deemed not to constitute Control
Share Acquisitions, including good faith gifts, transfers pursuant to wills,
purchases pursuant to an issuance by the corporation, mergers involving the
corporation which satisfy the other requirements of the MGBCL, transactions
with a person who owned a majority of the voting power of the corporation
within the prior year, or purchases from a person who has previously satisfied
the provisions of the Control Share Acquisition Statute so long as the
transaction does not result in the purchasing party having voting power after
the purchase in a percentage range (such ranges are as set forth in the
immediately preceding paragraph) beyond the range for which the selling party
previously satisfied the provisions of the statute. Additionally, a
corporation may exempt itself from application of the statute by inserting a
provision in its articles of incorporation or bylaws expressly electing not to
be covered by the statute. The AWG Articles of Incorporation and the AWG
Bylaws do not "opt out" of the Control Share Acquisition Statute.
The KGCC contains a control share acquisition statute similar to that
contained in the MGBCL; however, the AWG Group Articles of Incorporation "opt
out" of its provisions.
MARKET FOR COMMON STOCK
There has been no public market for AWG Common Stock. As of ,
1996, there were outstanding shares of AWG Class A Common Stock
which were held by shareholders of record and shares of AWG
Class B Common Stock which were held by shares of record.
The AWG Bylaws require AWG to distribute all of its net earnings to its
shareholders in the form of patronage rebates. Therefore, AWG has not paid
cash dividends on the AWG Common Stock. Following the Merger and Initial
Public Offering, it is expected that the Company will pay a cash dividend at
the initial annual rate of $.20 per share.
60
<PAGE>
The AWG Bylaws prohibit the transfer of shares of AWG Common Stock unless
the holder first offers them to AWG at book value. The Company is required to
accept such offer. The AWG Board annually determines the book value of AWG
Common Stock based upon the financial condition of the Company at the prior
fiscal year end. All issuances and purchases of AWG Common Stock are conducted
at the last book value as established by the AWG Board. The book value of the
AWG Common Stock, as established by the AWG Board at its March meeting, was
$1,055, $1,165 and $1,165 in 1994, 1995 and 1996, respectively.
SHARES ELIGIBLE FOR FUTURE SALE
Shares of AWG Group Common Stock issued to Shareholders in the Merger will
be subject to restrictions on transfer for a period of two years. These shares
may not be sold or otherwise transferred except (i) as collateral in
connection with certain store development financing transactions if approved
by the Company, (ii) in conjunction with the sale of substantially all the
assets or stock (if a corporation) of a Shareholder, or (iii) by way of a bona
fide gift, to a family trust or pursuant to the death of a Shareholder. In
each case, with the exception of persons who acquire shares pursuant to the
foreclosure of a security interest or, in certain circumstances, pursuant to
the transferor's death, the transferee will remain subject to the remaining
term of the two year transfer restriction. After such two-year period, such
shares will be freely tradable, subject to the provisions of Rule 144
discussed below.
The shares sold in the Initial Public Offering will be freely tradeable by
persons other than "affiliates" of AWG Group, as that term is defined in the
Securities Act. Beginning 90 days after consummation of the Initial Public
Offering, affiliates who own shares of Common Stock that were acquired from
AWG Group in the Initial Public Offering or in the open market after the
Initial Public Offering, pursuant to Rule 144, may sell within any three month
period that number of shares which does not exceed the greater of 1% of the
then outstanding shares of Common Stock or the average weekly trading volume
of the Common Stock during the four calendar weeks preceding such sale. Sales
pursuant to Rule 144 are subject to certain requirements relating to the
manner of sale, notice and availability of current public information about
AWG Group. If at least three years have elapsed from the date the shares of
AWG Group Common Stock were acquired from AWG Group, or an affiliate of AWG
Group, and the proposed seller has not been an affiliate of AWG Group at any
time during the three months immediately preceding the sale, such person is
entitled to sell such shares pursuant to Rule 144(k) without regard to the
limitations described above. "Affiliates" are generally deemed to be directors
and executive officers of a company and any shareholder who exercises control
over a company.
LEGAL MATTERS
The validity of the AWG Group Common Stock offered hereby will be passed
upon by Blackwell Sanders Matheny Weary & Lombardi L.C., Kansas City,
Missouri.
EXPERTS
The Consolidated Financial Statements and Schedule of Associated Wholesale
Grocers, Inc. and Subsidiaries as of December 31, 1994 and December 30, 1995,
and for each of the years in the three-year period ended December 30, 1995 are
included herein and elsewhere in the registration statement in reliance upon
the reports of KPMG Peat Marwick LLP independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
61
<PAGE>
REPORTS TO SECURITIES HOLDERS
AWG Group intends to furnish to its shareholders annual reports containing
audited consolidated financial statements for each fiscal year.
By Order of the Board of Directors,
Joseph L. Campbell, II, Vice
President, Treasurer and Secretary
62
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Condensed Consolidated Balance Sheets at December 30, 1995 and June 15,
1996 (Unaudited)......................................................... F-2
Condensed Consolidated Statements of Earnings for the Twenty-four weeks
ended June 17, 1995 and June 15, 1996 (Unaudited)........................ F-3
Condensed Consolidated Statements of Cash Flows for the Twenty-four weeks
ended June 17, 1995 and June 15, 1996 (Unaudited)........................ F-4
Notes to Unaudited Condensed Consolidated Financial Statements............ F-5
Independent Auditors' Report.............................................. F-6
Consolidated Balance Sheets at December 31, 1994 and December 30, 1995.... F-7
Consolidated Statements of Earnings for the Fiscal years ended December
25, 1993, December 31, 1994 and December 30, 1995........................ F-8
Consolidated Statements of Shareholders' Equity for the Fiscal years ended
December 25, 1993, December 31, 1994 and December 30, 1995............... F-9
Consolidated Statements of Cash Flows for the Fiscal years ended December
25, 1993, December 31, 1994 and December 30, 1995........................ F-10
Notes to Consolidated Financial Statements................................ F-11
</TABLE>
F-1
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1995 AND JUNE 15, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 30, JUNE 15,
ASSETS 1995 1996
------ ------------ --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................... $ 18,056 $ 12,133
Receivables, net............................................ 82,045 88,961
Inventories................................................. 144,754 131,900
Other current assets........................................ 33,327 26,395
-------- --------
Total current assets...................................... 278,182 259,389
-------- --------
Notes receivable from shareholders, maturing after one year... 30,236 37,851
Property and equipment, net................................... 89,655 94,144
Intangibles, net of accumulated amortization of $4,203 in 1995
and $7,029 in 1996........................................... 55,768 52,942
Other assets.................................................. 10,041 12,000
-------- --------
Total assets.............................................. $463,882 $456,326
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable............................................ $160,033 $141,414
Patronage payable:
Cash portion of current year patronage.................... 35,257 --
Patronage certificates payable within one year............ 12,472 10,433
Accrued expenses and other current liabilities.............. 42,346 39,210
-------- --------
Total current liabilities............................... 250,108 191,057
-------- --------
Long-term obligations maturing after one year................. 52,531 72,045
Members' certificates:
Patronage certificates...................................... 112,389 109,239
Deposits.................................................... 12,643 12,041
Deferred income and other liabilities......................... 7,334 8,608
-------- --------
Total liabilities....................................... 435,005 392,990
Interim net income (note 1)................................... -- 35,589
Shareholders' equity:
Common stock, $100 par value:
Class A, voting; 12,000 shares authorized; 5,370 and
5,400 shares issued and outstanding in 1995 and 1996... 537 540
Class B, nonvoting; 150,000 shares authorized; 15,975
and 14,945 shares issued and outstanding in 1995 and
1996................................................... 1,598 1,494
Additional paid-in capital................................ 1,602 1,932
Retained earnings......................................... 25,140 23,781
-------- --------
Total shareholders' equity............................ 28,877 27,747
-------- --------
Commitments and contingent liabilities (note 2)
Total liabilities and shareholders' equity............ $463,882 $456,326
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
F-2
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
TWENTY-FOUR WEEKS ENDED JUNE 17, 1995 AND JUNE 15, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
TWENTY-FOUR
WEEKS ENDED
----------------------
JUNE 17, JUNE 15,
1995 1996
---------- ----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Net sales............................................... $1,213,508 $1,399,223
Cost of goods sold...................................... 1,138,839 1,305,522
---------- ----------
Gross profit........................................ 74,669 93,701
General and administrative expenses..................... 44,155 54,565
---------- ----------
Operating income.................................... 30,514 39,136
Other income (expenses):
Interest income....................................... 2,301 2,329
Interest expense...................................... (3,859) (5,794)
Other, net............................................ 4 1,028
---------- ----------
(1,554) (2,437)
---------- ----------
Income before income taxes.............................. 28,960 36,699
Income taxes............................................ 429 1,110
---------- ----------
Net income.......................................... $ 28,531 $ 35,589
========== ==========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
F-3
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
TWENTY-FOUR WEEKS ENDED JUNE 17, 1995 AND JUNE 15, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
TWENTY-FOUR
WEEKS ENDED
-------------------
JUNE 17, JUNE 15,
1995 1996
--------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 28,531 $ 35,589
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 4,915 7,524
Deferred income taxes................................. (2) 235
Changes in assets and liabilities, net of effects of
assets and liabilities acquired:
Accounts receivable................................. (15,610) (6,916)
Inventories......................................... (2,054) 12,854
Prepaid expenses.................................... 1,454 362
Accounts payable and other liabilities.............. 14,659 (22,042)
--------- --------
Net cash provided by operating activities......... 31,893 27,606
Cash flows from investing activities:
Additions to investments................................ (14,714) (6,535)
Proceeds from maturity of investments................... 42,807 3,555
Loans to shareholders................................... (519) (6,349)
Repayment of loans by shareholders...................... 2,796 5,961
Capital expenditures, net............................... (4,867) (9,622)
Acquisition of assets................................... (56,955) --
Other assets, net....................................... 2,964 (98)
--------- --------
Net cash used in investing activities............. (28,488) (13,088)
Cash flows from financing activities:
Year-end patronage distributions........................ (31,487) (35,257)
Redemption of prior year's patronage certificates....... (1,348) (5,190)
Issuance of common stock................................ 325 441
Redemption of common stock.............................. (1,215) (1,571)
Borrowings under revolving credit agreement............. 26,000 21,400
Payment of other long-term obligations.................. (185) (1,602)
Increase in deferred income and other long-term
liabilities............................................ 6,561 1,940
Increase (decrease) in member deposits, net............. 10 (602)
--------- --------
Net cash used in financing activities............. (1,339) (20,441)
--------- --------
Net increase (decrease) in cash and cash equivalents...... 2,066 (5,923)
Cash and cash equivalents at beginning of period.......... 16,878 18,056
--------- --------
Cash and cash equivalents at end of period................ $ 18,944 $ 12,133
========= ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
F-4
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of
normal recurring accruals) considered necessary to present fairly the
financial position of Associated Wholesale Grocers, Inc. and Subsidiaries (the
Company) for the interim periods presented. Operating results for the twenty-
four week period ended June 15, 1996 are not necessarily indicative of the
results that may be expected for the fiscal year ended December 28, 1996.
Cost for approximately 70% of inventory at June 15, 1996 is determined using
the last-in, first-out (LIFO) method. An actual valuation of inventory under
the LIFO method can be made only at the end of each year based on inventory
levels and costs at that time. Interim LIFO calculations must necessarily be
based on management's estimate of expected year-end inventory levels and
costs. Because estimates of future inventory levels and costs are subject to
many factors beyond management's control, interim results are subject to the
final year-end LIFO inventory valuation.
In accordance with the bylaws of the Company, the patronage portion of
income before income taxes is determined annually and distributed to
shareholders of the Company as patronage rebates. Since patronage rebates are
determined only at year-end and are deductible for income tax purposes, no
provision has been made for income taxes on income from cooperative
operations. Accordingly, the amount of interim net income has been reflected
as a separate item in the accompanying unaudited condensed consolidated
balance sheet.
(2) CONTINGENCY
On March 14, 1996, Homeland Stores, Inc. (Homeland) filed a motion to
include the Company as a third party defendant in a pension withdrawal
liability dispute. In connection with the acquisition of certain Homeland
assets in April 1995, the Company agreed to reimburse Homeland in an amount up
to approximately $3.4 million for any pension withdrawal liability incurred
with respect to "Covered Operations." "Covered Operations" were defined as
distribution center operations related to the assets being purchased by AWG
for which Homeland was currently making pension contributions. The withdrawal
liability dispute does not involve Covered Operations. As a result, the
Company believes that the claim is without merit and will vigorously defend
its position. This lawsuit has been stayed as a result of Homeland's
bankruptcy and will be resolved as part of the ordinary process of claims
resolution in the bankruptcy case. Accordingly, no provision has been made in
the accompanying condensed consolidated financial statements.
F-5
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Associated Wholesale Grocers, Inc.:
We have audited the accompanying consolidated balance sheets of Associated
Wholesale Grocers, Inc. and subsidiaries (the Company) as of December 31, 1994
and December 30, 1995, and the related consolidated statements of earnings,
shareholders' equity and cash flows for each of the fiscal years in the three-
year period ended December 30, 1995. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 Associated
Wholesale Grocers, Inc. and subsidiaries as of December 31, 1994 and December
30, 1995 and the results of their operations and cash flows for each of the
fiscal years in the three-year period ended December 30, 1995 in conformity
with generally accepted accounting principles.
Kansas City, Missouri
March 1, 1996
KPMG Peat Marwick LLP
F-6
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
ASSETS 1994 1995
------ -------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................... $ 16,878 $ 18,056
Short-term investments.......................................... 34,728 2,305
Receivables, net of allowance for doubtful accounts of $432 in
1994 and $807 in 1995:
Trade......................................................... 45,991 61,536
Other......................................................... 18,999 20,509
Inventories..................................................... 94,525 144,754
Other current assets............................................ 11,684 31,022
-------- --------
Total current assets........................................ 222,805 278,182
-------- --------
Notes receivable from shareholders, maturing after one year....... 18,668 30,236
Property and equipment, net (note 4).............................. 79,248 89,655
Intangibles, net of accumulated amortization of $424 in 1994 and
$4,203 in 1995
(note 2)......................................................... 13,318 55,768
Other assets...................................................... 5,139 10,041
-------- --------
Total assets................................................ $339,178 $463,882
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Long-term obligations maturing within one year (note 5)......... $ 455 $ 4,473
Accounts payable................................................ 117,192 160,033
Patronage payable:
Cash portion of current year patronage........................ 31,487 35,257
Patronage certificates payable within one year (note 3)....... 12,050 12,472
Accrued expenses--members....................................... 13,972 14,138
Accrued expenses and other current liabilities.................. 17,769 23,735
-------- --------
Total current liabilities................................... 192,925 250,108
-------- --------
Long-term obligations maturing after one year (note 5)............ 738 52,531
Members' certificates (note 3):
Patronage certificates.......................................... 102,033 112,389
Deposits........................................................ 12,415 12,643
Deferred income taxes (note 6).................................... 2,048 1,727
Deferred income and other liabilities............................. 393 5,607
-------- --------
Total liabilities........................................... 310,552 435,005
Shareholders' equity:
Common stock, $100 par value:
Class A, voting, 12,000 shares authorized; 5,070 and 5,370
shares issued and outstanding in 1994 and 1995............... 507 537
Class B, nonvoting; 150,000 shares authorized; 16,725 and
15,975 shares issued and outstanding in 1994 and 1995........ 1,673 1,598
Additional paid-in capital...................................... 1,099 1,602
Retained earnings............................................... 25,347 25,140
-------- --------
Total shareholders' equity.................................. 28,626 28,877
-------- --------
Commitments and contingent liabilities (notes 7 and 8)............
Total liabilities and shareholders' equity.................. $339,178 $463,882
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FISCAL YEARS ENDED DECEMBER 25, 1993, DECEMBER 31, 1994 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................... $2,419,157 $2,484,559 $2,836,216
Cost of goods sold.......................... 2,276,512 2,335,371 2,658,478
---------- ---------- ----------
Gross profit............................ 142,645 149,188 177,738
General and administrative expenses......... 84,384 90,514 113,782
---------- ---------- ----------
Operating income........................ 58,261 58,674 63,956
Other income (expenses):
Interest income (note 2).................. 3,366 4,063 4,809
Interest expense (note 3)................. (8,417) (6,787) (9,330)
Other, net................................ 1,347 1,217 (66)
---------- ---------- ----------
(3,704) (1,507) (4,587)
---------- ---------- ----------
Income before income taxes.................. 54,557 57,167 59,369
Income taxes (note 6)....................... 1,668 1,885 (203)
---------- ---------- ----------
Net income............................ $ 52,889 $ 55,282 $ 59,572
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FISCAL YEARS ENDED DECEMBER 25, 1993, DECEMBER 31, 1994 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------- PAID-IN RETAINED
CLASS A CLASS B CAPITAL EARNINGS TOTAL
------- ------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at December 26, 1992.... $531 $1,973 $ 655 $22,870 $26,029
Issuance of common stock........ 15 2 134 -- 151
Redemption of common stock...... (30) (126) (18) (1,042) (1,216)
Net income...................... -- -- -- 52,889 52,889
Distribution of year-end
patronage...................... -- -- -- (50,035) (50,035)
---- ------ ------ -------- --------
Balance at December 25, 1993.... 516 1,849 771 24,682 27,818
Issuance of common stock........ 42 4 402 -- 448
Redemption of common stock...... (51) (180) (74) (1,954) (2,259)
Net income...................... -- -- -- 55,282 55,282
Distribution of year-end
patronage...................... -- -- -- (52,663) (52,663)
---- ------ ------ -------- --------
Balance at December 31, 1994.... 507 1,673 1,099 25,347 28,626
Issuance of common stock........ 60 -- 613 -- 673
Redemption of common stock...... (30) (75) (110) (918) (1,133)
Net income...................... -- -- -- 59,572 59,572
Distribution of year-end
patronage...................... -- -- -- (58,861) (58,861)
---- ------ ------ -------- --------
Balance at December 30, 1995.... $537 $1,598 $1,602 $ 25,140 $ 28,877
==== ====== ====== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED DECEMBER 25, 1993, DECEMBER 31, 1994 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
1993 1994 1995
-------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................... $ 52,889 $ 55,282 $ 59,572
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 9,084 9,333 13,959
Deferred income taxes....................... 321 214 (1,225)
Changes in assets and liabilities, net of
effects of assets and liabilities acquired
(note 2):
Accounts receivable....................... (5,724) 6,784 (17,055)
Inventories............................... 5,991 (3,893) (31,829)
Prepaid expenses.......................... 413 2,020 (277)
Accounts payable and other liabilities.... 7,897 8,740 50,809
Other..................................... 24 (244) 1,324
-------- --------- --------
Net cash provided by operating
activities............................. 70,895 78,236 75,278
Cash flows from investing activities:
Additions to investments...................... (75,074) (107,746) (19,058)
Proceeds from maturity of investments......... 56,421 103,898 46,600
Loans to shareholders......................... (12,469) (1,975) (14,555)
Repayment of loans by shareholders............ 9,275 8,650 9,364
Capital expenditures, net..................... (5,486) (15,063) (18,727)
Acquisition of assets (note 2)................ -- (25,928) (56,955)
Other assets, net............................. (579) (4,791) (6,125)
-------- --------- --------
Net cash used in investing activities... (27,912) (42,955) (59,456)
Cash flows from financing activities:
Year-end patronage distributions.............. (28,196) (29,905) (31,487)
Redemption of prior year's patronage
certificates................................. (13,513) (13,032) (12,725)
Issuance of common stock...................... 151 448 673
Redemption of common stock.................... (1,216) (2,259) (1,133)
Borrowings under revolving credit agreement... -- -- 31,600
Payment of other long-term obligations........ (417) (742) (2,571)
Increase in deferred income and other long-
term liabilities............................. 5 137 771
Increase (decrease) in member deposits, net... (287) (138) 228
-------- --------- --------
Net cash used in financing activities... (43,473) (45,491) (14,644)
-------- --------- --------
Net increase (decrease) in cash and cash
equivalents.................................... (490) (10,210) 1,178
Cash and cash equivalents at beginning of year.. 27,578 27,088 16,878
-------- --------- --------
Cash and cash equivalents at end of year........ $ 27,088 $ 16,878 $ 18,056
======== ========= ========
Supplemental Schedule of cash paid for interest
and income taxes:
Cash paid for interest (net of capitalized
interest).................................... $ 8,216 $ 8,075 $ 8,587
======== ========= ========
Cash paid for income taxes.................... $ 1,600 $ 1,580 $ 1,136
======== ========= ========
Supplemental schedule of noncash investing and
financing activities:
Notes receivable from sale of supermarket
properties (note 2).......................... $ -- $ 10,900 $ 14,460
======== ========= ========
Supply agreement payable...................... -- -- 26,782
======== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Associated
Wholesale Grocers, Inc. (AWG) and its subsidiaries (the Company). AWG operates
on a cooperative basis (see Patronage). AWG's principal line of business is
wholesaling grocery merchandise to its member shareholders (members)
throughout the Midwestern United States. The subsidiaries are organized as
corporations and primarily provide ancillary services and non-food merchandise
to AWG and its members. All significant intercompany balances and transactions
have been eliminated in consolidation.
Fiscal Year
The Company's fiscal year ends on the last Saturday in December. Fiscal 1993
and 1995 included 52 weeks, while fiscal 1994 included 53 weeks of operations.
Business and Credit Concentrations
The majority of the Company's members are located in Kansas, Missouri,
Oklahoma and Arkansas. As a cooperative, substantially all of the Company's
sales are to its members. No single member accounted for more than 10% of the
Company's sales in 1993, 1994 or 1995. The Company also provides financing to
its members for acquisition/expansion of supermarket properties. The Company
establishes an allowance for doubtful accounts based on the creditworthiness
of its members.
Sales
Sales are recognized at the time the product is shipped.
Cash Equivalents
The Company considers all investments with an original maturity of three
months or less to be cash equivalents.
Investments
Short-term investments consist primarily of commercial paper, certificates
of deposit and government agency securities which mature within one year and
for which cost approximates fair value.
Effective December 26, 1993, the Company adopted Statement of Financial
Accounting Standards No. 115 (Statement 115), "Accounting for Certain
Investments in Debt and Equity Securities." The cumulative effect of adopting
Statement 115 was immaterial. Under Statement 115, the Company classifies its
investment securities as available-for-sale.
Inventories
Inventories are valued at the lower of cost or market. Cost for 91% of 1994
inventories and 73% of 1995 inventories is determined by using the last-in,
first-out (LIFO) method. Cost for the remaining inventories is determined
using the first-in, first-out (FIFO) method. Had all inventories been valued
on the FIFO method, they would have been increased by $30,855 at December 31,
1994 and $32,578 at December 30, 1995.
F-11
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment are stated at cost. Expenditures for improvements
which significantly increase property lives are capitalized. Interest costs
incurred during the construction of facilities are included in the cost of
such properties. Depreciation and amortization are calculated on the straight-
line method over the assets estimated useful lives which range from 31 to 50
years for buildings; 5 to 10 years for equipment; and 3 to 5 years for
vehicles. Leasehold improvements are amortized over the terms of the
respective leases.
Intangible Assets
Intangible assets consist principally of amounts relating to the acquisition
of wholesale volume and are being amortized on a straight-line basis over the
estimated periods benefited (7 to 25 years) (see note 2).
The Company assesses the recoverability of intangible assets by determining
whether the amortization of such intangible assets over their remaining life
can be recovered through undiscounted future operating cash flows of the
operation.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121 (Statement 121), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". Statement
121 establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangible assets and goodwill related to those assets to
be held and used, and for long-lived assets and certain identifiable
intangible assets to be disposed of. Statement 121 is effective for the
Company in 1996. Management expects that the adoption of Statement 121 will
not have a significant impact on the Company's consolidated financial
statements.
Patronage
Income from cooperative operations, less a nominal amount authorized by the
Board of Directors to be retained, is returned to the members in the form of
year-end patronage. At each year-end, a percentage of net income to be
distributed (60% for 1993, 1994, and 1995) is paid in cash with the remainder
paid in the form of patronage certificates (see note 3). Such amounts are
apportioned to the members based on each member's qualifying warehouse
purchases.
Income Taxes
AWG and its subsidiaries file a consolidated federal income tax return.
Patronage distributions from cooperative operations are deductible for income
tax purposes. The Company accounts for income taxes using the asset and
liability method under Statement of Financial Accounting Standards No. 109.
Deferred income taxes are provided for differences in financial reporting and
tax reporting bases of existing assets and liabilities.
Earnings per Share
Since income from cooperative operations is apportioned annually to members
and distributed in the form of patronage based on qualifying warehouse
purchases, earnings per share information has not been presented.
Use of Estimates
Management of the Company has made certain estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
F-12
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) CERTAIN TRANSACTIONS WITH MEMBERS
A) Acquisition of Wholesale Volume
In April 1995, the Company acquired, among other things, inventory,
fixtures, a distribution center and 29 supermarket properties from Homeland
Stores, Inc. (Homeland) for cash of $73,287. The Company concurrently sold the
supermarket properties acquired from Homeland to existing members for cash of
$16,332 and notes receivable of $14,460. In addition, the Company also entered
into an agreement with Homeland whereby the Company supplies the supermarkets
retained by Homeland and Homeland became a member of AWG. The supply agreement
requires the Company to make quarterly payments over the life of the
agreement, seven years. The Company recorded the present value of the payments
due under the supply agreement ($26,782) as an intangible asset and a long
term obligation (see note 5). The supply agreement is being amortized on a
straight-line basis over its term. At December 30, 1995, the unamortized
amount of the supply agreement totaled $24,133.
In March 1994, the Company acquired 38 supermarket properties and an office
building from Food Barn Stores, Inc. (Food Barn) for cash of $41,025. The
Company concurrently sold the supermarket properties acquired from Food Barn
to existing members for cash of $15,097 and notes receivable of $10,900.
The Company also recorded other intangible assets in 1995 and 1994 for the
aforementioned Homeland and Food Barn transactions of $19,447 and $13,742,
respectively. The intangible assets, which represent the acquisition of
wholesale volumes, are being amortized on a straight-line basis over twenty-
five years. At December 31, 1994 and December 30, 1995, the unamortized amount
of these intangible assets was $13,318 and $31,635, respectively.
B) Notes Receivable from Members
The Company extends long-term credit to members primarily for the purchase
or construction of new stores, store expansions or improvements and opening
inventory purchases. Loans to members are generally collateralized by the
member's inventory, property and equipment and patronage certificates.
Interest rates are generally one percent over the prime rate (9.75% at
December 31, 1995) and terms of the notes are up to 10 years. For the fiscal
years 1993, 1994 and 1995, the Company recorded interest income of $2,560,
$3,439 and $4,306, respectively, on such loans to members.
(3) PATRONAGE CERTIFICATES, DEPOSITS AND EQUITIES
Patronage certificates are issued annually to members as a part of the year-
end distribution of net income from cooperative operations. Pertinent
provisions of the certificates are as follows: (a) The certificates are not
transferable; (b) AWG has the right to offset but the certificate holder does
not; (c) the Board of Directors of AWG has the authority to set the interest
rate on these certificates, subject to the maintenance of an interest rate of
at least 4% but not in excess of 8%; and (d) the certificates are subordinate
to the claims of all creditors of AWG. Certificates earned interest at 8% per
annum in 1993 and 6% per annum in 1994 and 1995. All certificates issued prior
to 1986 mature ten years from the date of the certificate. All outstanding
patronage certificates issued for 1988, 1989 and 1990 mature eight years from
the date of the certificate. All certificates issued after January 1992 mature
seven years from the date of the certificate. At December 30, 1995, patronage
certificates maturing over the next five years and thereafter are as follows:
1996--$12,472; 1997--$13,646; 1998--$15,583; 1999--$18,778; 2000--$20,010; and
thereafter--$44,372.
Member deposits represent funds held by the Company on behalf of members.
These funds accrue interest at rates ranging from 3.00% to 4.00% in 1993 and
1994 and 4.00% to 5.25% in 1995.
Interest expense incurred on patronage certificates and member deposits in
1993, 1994 and 1995 was $8,305, $6,787, and $7,383, respectively.
F-13
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The by-laws of AWG contain restrictions concerning the transfer of common
stock and provide that member's common stock in AWG serves as collateral to
secure indebtedness to AWG. The by-laws also provide that dividends may not be
paid on common stock and each member holding Class A Common Stock is entitled
to one vote in shareholder matters.
(4) PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Land.................................................. $ 2,676 $ 3,588
Buildings............................................. 52,623 59,904
Equipment............................................. 71,635 79,967
Supermarket Properties Leased to Members.............. 11,343 4,787
Construction in progress.............................. 93 4,269
-------- --------
138,370 152,515
Less accumulated depreciation......................... (59,122) (62,860)
-------- --------
Property and equipment, net........................... $ 79,248 $ 89,655
======== ========
</TABLE>
During 1993, 1994, and 1995 the Company capitalized construction period
interest of $50, $139, and $950, respectively.
(5) LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
1994 1995
------ -------
<S> <C> <C>
Revolving credit agreement, unsecured..................... $ -- $31,600
Supply agreement.......................................... -- 24,666
8.5% mortgage notes, secured by land and buildings........ 1,193 738
------ -------
1,193 57,004
Less current maturities................................... 455 4,473
------ -------
$ 738 $52,531
====== =======
</TABLE>
In 1995, the Company entered into a revolving credit agreement with a bank
for approximately $122,000 of which $90,146 was available at December 30,
1995. The revolving credit agreement provides for interest at the Federal
Funds Rate plus 1.5% adjusted daily (7.03% at December 30, 1995) and expires
in May 1998. The Company pays commitment fees of 1/8 of 1% annually on the
unused portion of the credit agreement. The Company must maintain certain
financial covenants, including maintaining (i) a current ratio greater than
1.09 to 1; (ii) a ratio of income to fixed charges of at least 10 to 1; and
(iii) indebtedness to tangible net worth of not more than 2.75 to 1. The
Company must also maintain consolidated tangible net worth, as defined, of at
least $110,000 and working capital of at least $25,000. At December 30, 1995,
the Company was in compliance with these covenants.
As described in note 2, the Company entered into a supply agreement with
Homeland to supply supermarkets operated by Homeland. The supply agreement
requires the Company to make quarterly payments, which are directly related to
the volume of purchases by Homeland from the Company, through 2002. The
Company recorded the net present value of the supply agreement payments, using
a discount rate of 7.15%, as a long-term obligation.
Principal payments over the next five years and thereafter on long-term
obligations maturing after December 30, 1995 are as follows: 1996--$4,473;
1997--$3,691; 1998--$35,144; 1999--$3,806; 2000--$4,087; and thereafter--
$5,803.
F-14
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(6) INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ -------
<S> <C> <C> <C>
Federal:
Current.......................................... $1,145 $1,421 $ 868
Deferred......................................... 273 182 (1,041)
------ ------ -------
1,418 1,603 (173)
------ ------ -------
State:
Current.......................................... 202 250 154
Deferred......................................... 48 32 (184)
------ ------ -------
250 282 (30)
------ ------ -------
$1,668 $1,885 $ (203)
====== ====== =======
</TABLE>
Actual income tax expense (benefit) attributable to income before income
taxes differs from the "expected" income tax expense using the statutory
federal corporate tax rate of 34% as follows:
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Computed "expected" tax expense............ $ 18,549 $ 19,437 $ 20,185
Increase (reduction) in income tax expense
attributable to:
Patronage refunds........................ (17,012) (17,905) (20,013)
State income taxes, net of federal income
tax benefit............................. 165 186 (20)
Tax credits.............................. -- -- (632)
Other.................................... (34) 167 277
-------- -------- --------
$ 1,668 $ 1,885 $ (203)
======== ======== ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Pension liability..................................... $ 1,368 $ 1,080
Compensated absences.................................. 803 913
Inventory............................................. 562 1,207
Other................................................. 646 927
------- -------
Total gross deferred assets......................... 3,379 4,127
Deferred tax liabilities:
Depreciation and amortization......................... (3,739) (3,298)
Other................................................. (674) (638)
------- -------
Total gross deferred liability...................... (4,413) (3,936)
------- -------
Net deferred tax asset(liability)................... $(1,034) $ 191
======= =======
</TABLE>
A valuation allowance for deferred tax assets was not necessary at December
31, 1994 or December 30, 1995.
F-15
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7) EMPLOYEE BENEFIT PLANS
The Company has a qualified defined benefit pension plan covering
substantially all of its non-union employees. The benefits are based on years
of service and the participant's final average earnings as defined by the
plan. The Company's funding policy is to make annual contributions for current
service cost, interest and amortization of past service cost, to the extent
such contributions are allowed as deductions for federal income tax purposes.
The plan assets primarily consist of U. S. Government obligations, corporate
bonds and common stocks.
The plan's funded status and amounts recognized in the Company's
consolidated financial statements are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Projected benefit obligation:
Vested benefits...................................... $12,217 $15,359
Nonvested benefits................................... 732 2,030
------- -------
Accumulated benefit obligation..................... 12,949 17,389
Effect of future compensation levels................. 8,084 9,934
------- -------
Projected benefit obligation....................... 21,033 27,323
Fair value of plan assets............................ 16,592 22,111
------- -------
Fair value of plan assets less than projected
benefit obligation................................ (4,441) (5,212)
Unrecognized net assets being amortized over 19
years................................................ (2,164) (1,947)
Unrecognized net loss................................ 873 2,643
Unrecognized prior service cost...................... 1,561 1,431
------- -------
Accrued pension cost............................... $(4,171) $(3,085)
======= =======
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Pension expense is comprised of the
following:
Service cost............................... $ 1,804 $ 2,324 $ 2,021
Interest cost on projected benefit
obligation................................. 1,367 1,401 1,570
Actual return on plan assets............... (1,591) (60) (3,341)
Net amortization and deferral items........ 176 (1,492) 1,655
------- ------- -------
Net pension expense...................... $ 1,756 $ 2,173 $ 1,905
======= ======= =======
Assumed rates used for projected benefit
obligations:
Weighted average discount rate............. 6.00% 7.75% 7.00%
Rate of increase in future compensation.... 5.00% 5.25% 5.25%
Expected long-term rate of return on plan
assets..................................... 9.50% 9.50% 9.50%
</TABLE>
The Company's union employees participate in a multi-employer defined
benefit pension plan. Pension expense for such plan was $7,086, $5,567 and
$6,043 in 1993, 1994 and 1995, respectively.
The Company also has a defined contribution 401(k) plan covering
substantially all salaried and hourly employees not covered by a collective
bargaining agreement. Total expense for the plan amounted to $2,160, $2,146
and $2,110 in 1993, 1994 and 1995, respectively.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," effective January 1, 1995, which covers health care and other
welfare benefits provided to retirees. The adoption of this statement did not
have a significant effect on the consolidated financial statements.
F-16
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(8) COMMITMENTS AND CONTINGENT LIABILITIES
The Company is obligated as lessee under noncancellable long-term
supermarket properties and warehouse operating leases. These leases have
unexpired terms ranging from 1 to 35 years. It is expected in the ordinary
course of business that these leases will be renewed or replaced. The Company
has subleased the supermarket properties to members for substantially the same
lease terms and rental amounts.
Minimum rentals to be paid and minimum sublease rentals to be received on
noncancellable operating leases with remaining terms greater than one year are
as follows:
<TABLE>
<CAPTION>
MINIMUM MINIMUM
LEASE RENTALS SUBLEASE RENTALS NET
FISCAL YEAR TO BE PAID TO BE RECEIVED RENTALS
----------- ------------- ---------------- -------
<S> <C> <C> <C>
1996.............................. $13,910 $13,666 $ 244
1997.............................. 13,430 13,333 97
1998.............................. 13,199 13,169 30
1999.............................. 12,417 12,823 (406)
2000.............................. 11,790 12,386 (596)
</TABLE>
Rental expense under noncancellable operating leases with terms greater than
one year are as follows: 1993--$9,105; 1994--$9,302 and 1995--$11,513. Rental
expense is reduced for sublease rental income of: 1993-- $9,658; 1994--$9,766
and 1995--$11,233.
The Company is involved in various claims and litigation arising in the
normal course of business. In the opinion of management, the ultimate
resolution of these actions will not have a material adverse effect on the
Company's consolidated financial statements.
(9) FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has financial instruments which are comprised of cash and cash
equivalents, commercial paper, municipal bonds, treasury bills, certificates
of deposit, notes receivable, a mortgage note payable, a revolving line of
credit, other long-term obligations, patronage certificates and member
deposits. The carrying amounts reported in the consolidated balance sheets for
the above financial instruments approximate their fair values.
(10) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial information for the fiscal quarters indicated
is presented below. For fiscal year 1994, the first and second quarter each
consist of twelve weeks, the third quarter consists of sixteen weeks and the
fourth quarter consists of thirteen weeks. For fiscal year 1995, the first,
second, and fourth quarters each consist of twelve weeks and the third quarter
consists of sixteen weeks.
Fiscal year ended December 31, 1994:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................. $524,705 $572,622 $747,038 $640,194
Gross profit.......................... 31,231 33,590 48,613 35,754
Net income............................ 11,739 13,339 20,761 9,443
</TABLE>
Fiscal year ended December 30, 1995:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................. $562,286 $651,222 $908,635 $714,073
Gross profit.......................... 34,799 39,870 59,762 43,307
Net income............................ 14,583 13,948 20,250 10,791
</TABLE>
F-17
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
ASSOCIATED WHOLESALE GROCERS, INC.
AND
ASSOCIATED WHOLESALE GROCERS GROUP, INC.
AND
AWG MERGER CORP.
DATED AS OF , 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I--THE MERGER....................................................... 1
Section 1.1 Effects of the Merger......................................... 2
Section 1.2 Effective Time of the Merger.................................. 2
ARTICLE II--TREATMENT OF SHARES............................................. 3
Section 2.1 Effect on Capital Stock of AWG, AWG Group and AWG Merger...... 3
Section 2.2 AWG Dissenting Shares......................................... 4
Section 2.3 Issuance of New Certificates.................................. 4
ARTICLE III--THE CLOSING.................................................... 5
Section 3.1 Closing....................................................... 5
ARTICLE IV--CONDITIONS...................................................... 5
Section 4.1 Conditions to Each Party's Obligation to Effect the Merger.... 5
ARTICLE V--TERMINATION, AMENDMENT AND WAIVER................................ 6
Section 5.1 Termination................................................... 6
Section 5.2 Effect of Termination......................................... 6
Section 5.3 Amendment..................................................... 6
Section 5.4 Waiver........................................................ 6
ARTICLE VI--GENERAL PROVISIONS.............................................. 6
Section 6.1 Miscellaneous................................................. 6
Section 6.2 Interpretation................................................ 6
Section 6.3 Counterparts; Effect.......................................... 6
Section 6.4 Parties' Interest............................................. 6
</TABLE>
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This Agreement and Plan of Merger (this "Agreement"), is dated as of
, 1996, by and among Associated Wholesale Grocers, Inc., a Missouri
corporation ("AWG"), Associated Wholesale Grocers Group, Inc., a Kansas
corporation ("AWG Group"), and AWG Merger Corp., a Missouri corporation (the
"AWG Merger Corp.").
RECITALS
A. The board of directors of AWG has determined that it is in the best
interests of the company to obtain access to the capital markets through an
initial public offering;
B. Prior to such initial public offering, the board of directors of AWG has
determined that it is in the best interests of the company for AWG to be
reorganized into a holding company structure;
C. In contemplation of such reorganization, AWG Group was formed as a wholly
owned subsidiary of AWG and AWG Merger Corp. was formed as a wholly owned
subsidiary of AWG Group;
D. The respective boards of directors of AWG, AWG Group and AWG Merger Corp.
have approved this Agreement and the merger of AWG Merger Corp. with and into
AWG (the "Merger");
E. For accounting purposes, the Merger is intended to be recorded as a
pooling-of-interests; and
F. For United States federal income tax purposes, the Merger is intended to
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement is
intended to be and is adopted as a plan of reorganization within the meaning
of Section 368 of the Code.
AGREEMENT
In consideration of the premises and the covenants and agreements contained
herein, the parties to this Agreement, intending to be legally bound hereby,
agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Effects of the Merger. At the Effective Time (as defined in
Section 1.2), (a) the separate existence of AWG Merger Corp. shall cease and
AWG Merger Corp. shall be merged with and into AWG, (b) the separate corporate
existence of AWG, with all of its rights, privileges, immunities, powers and
franchises, shall continue unaffected by the Merger, (c) the articles of
incorporation of AWG shall remain unchanged by the Merger and shall be the
articles of incorporation of AWG after the Effective Time until duly amended,
(d) the bylaws of AWG shall remain unchanged by the Merger and shall be the
bylaws of AWG after the Effective Time until duly amended, (e) the name of AWG
shall remain unchanged by the Merger, and (f) the Merger shall have all the
effects provided by applicable law.
Section 1.2 Effective Time of the Merger. Subject to the provisions of this
Agreement, on the Closing Date (as defined in Section 3.1), articles of merger
shall be executed and filed by AWG, AWG Group and AWG Merger Corp. with the
Secretary of State of the State of Missouri pursuant to The General and
Business Corporation Law of Missouri (the "MGCL"). The Merger shall become
effective at such time as the Secretary of State of the State of Missouri has
issued a certificate of merger (the "Effective Time").
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ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect on Capital Stock of AWG, AWG Group and AWG Merger Corp.
As of the Effective Time, by virtue of the Merger and without any action on
the part of any holder of any capital stock of AWG, AWG Group or AWG Merger
Corp.:
(a) Capital Stock of AWG. Subject to Section 2.1(b) and Section 2.2, each
issued and outstanding share of Class A common stock, par value $100 per
share, of AWG and Class B common stock, par value $100 per share, of AWG
(collectively, "AWG Common Stock"), in each case not owned (i) directly by
AWG or through a wholly owned subsidiary or (ii) by the holders of record
who are Dissenting Holders (as defined in Section 2.2), shall be converted
into the right to receive fully paid and nonassessable shares of common
stock, par value $0.01 per share, of AWG Group ("AWG Group Common Stock")
as follows:
(i) shares of AWG Common Stock shall be converted into an aggregate
of 25,000,000 shares of AWG Group Common Stock as follows:
a) shares of AWG Common Stock held by holders of record of AWG
Common Stock who have not become Dissenting Holders ("Nondissenting
Shareholders") shall be converted, on a pro rata basis, into the
right to receive an aggregate of 1,389,570 shares of AWG Group
Common Stock; and
b) shares of AWG Common Stock held by Nondissenting Shareholders
shall be converted into the right to receive an aggregate of
23,610,430 shares of AWG Group Common Stock based on each
Nondissenting Shareholder's relative proportion of qualifying
purchases from AWG for the fiscal years 1989 through 1995 and for
the year to date period ending on September 7, 1996. The total
dollar amount of qualifying purchases by each Nondissenting
Shareholder during each of the measured periods ("Annual Purchase
Amount") will be determined from AWG historical retailer purchase
records. Qualifying purchases are defined as purchases for products
billed or sold through AWG distribution facilities which are carried
in AWG's warehouses, subject to certain exclusions in accordance
with AWG's past practices for determining year-end patronage
rebates. The Annual Purchase Amount for each period (the "Individual
Year Conversion") will then be multiplied by a percentage, as
follows: 1996 purchases--25%; 1995 purchases--25%; 1994 purchases--
14%; 1993 purchases--11%; 1992 purchases--9%; 1991 purchases--7%;
1990 purchases--5%; 1989 purchases--4%. The sum of each
Nondissenting Shareholder's Individual Year Conversion will equal
its "Total Purchase Conversion." The 23,610,430 shares will be
distributed based upon the ratio of each Nondissenting Shareholder's
Total Purchase Conversion to the Total Purchase Conversions of all
Nondissenting Shareholders.
All such shares of AWG Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and
each holder of a Certificate (as defined in Section 2.3(b)), formerly
representing any such shares shall cease to have any rights with respect to
such shares, except the right to receive shares of AWG Group Common Stock
to be issued in consideration therefor upon the surrender of such
Certificate in accordance with Section 2.3.
(b) Cancellation of Treasury Stock and Certain AWG Common Stock. Any
shares of AWG Common Stock that are owned by AWG as treasury stock or by
any wholly-owned subsidiary of AWG shall be canceled and retired and shall
cease to exist and no stock of AWG Group or other consideration shall be
issued or delivered in exchange therefor. All such shares of AWG shall no
longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a Certificate formerly
representing any such shares shall cease to have any rights with respect
thereto.
(c) Capital Stock of AWG Group. Each issued and outstanding share of AWG
Group Common Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist and no stock or other
consideration shall be issued or delivered in exchange therefor, and each
holder of a certificate formerly representing any such shares shall cease
to have any rights with respect thereto.
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(d) Capital Stock of AWG Merger Corp. Each issued and outstanding share
of common stock, par value $0.01 per share, of AWG Merger Corp. shall be
converted into and become one fully paid and nonassessable share of Class A
Common Stock, par value $100 per share, of AWG.
Section 2.2 AWG Dissenting Shares. Any issued and outstanding shares of AWG
Common Stock held by a person (as defined below) who objects to the Merger and
complies with all provisions of the MGCL concerning the right of such person
to dissent from the Merger and demands appraisal of such shares ("Dissenting
Holder") shall not be converted as described in Section 2.1(a) but shall, from
and after the Effective Time, represent only the right to receive such
consideration as may be determined to be due to such Dissenting Holder
pursuant to the MGCL; provided, however, that shares of AWG Common Stock
outstanding immediately prior to the Effective Time and held by a Dissenting
Holder who shall, after the Effective Time, withdraw the demand for appraisal
or lose the right of appraisal of such shares, in either case pursuant to the
MGCL, shall be deemed to be converted, as of the Effective Time, into the
right to receive shares of AWG Group Common Stock in accordance with Section
2.1(a), without interest. As used in this Agreement, the term "person" shall
mean any natural person, corporation, general or limited partnership, limited
liability company, joint venture, trust, association or entity of any kind.
Section 2.3 Issuance of New Certificates.
(a) Deposit with Exchange Agent. As soon as practicable after the
Effective Time, AWG Group shall deposit, in trust for the benefit of
holders of the Certificates, with a bank or trust company (the "Exchange
Agent"), certificates representing shares of AWG Group Common Stock
required to effect the issuances referred to in Section 2.1.
(b) Issuance Procedures. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates (the "Certificate") which immediately prior to the Effective
Time represented outstanding shares of AWG Common Stock (the "Canceled
Shares") that, pursuant to Section 2.1, were canceled and became instead
the right to receive shares of AWG Group Common Stock (the "AWG Group
Shares") (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall
pass, only upon actual delivery of a sworn statement acknowledging that the
Certificates are in possession of AWG to the Exchange Agent), and (ii)
instructions for use in receiving shares. Upon receipt by the Exchange
Agent of the statement referenced above (or such other agent or agents as
may be appointed), together with a duly executed letter of transmittal and
such other documents as the Exchange Agent shall require, the holder of
such Certificate shall be entitled to receive a certificate or certificates
representing that number of whole AWG Group Shares which such holder has
the right to receive pursuant to the provisions of this Article II. In the
event of a transfer of ownership of Canceled Shares which is not registered
in the transfer records of AWG, a certificate representing the proper
number of AWG Group Shares may be issued to a transferee if the Certificate
representing such Canceled Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
and by evidence satisfactory to the Exchange Agent that any applicable
stock transfer taxes have been paid. Until surrendered as contemplated by
this Section 2.3, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender
the Certificate representing AWG Group Shares.
(c) Distributions with Respect to Unsurrendered Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to AWG Group Shares with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to AWG
Group Shares represented thereby, until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect of
unclaimed property, escheat and other applicable laws, following surrender
of any such Certificate, there shall be paid to the record holder of the
certificates representing whole AWG Group Shares issued in consideration
therefor, without interest, (i) at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective
Time theretofore paid with respect to such whole AWG Group Shares and (ii)
at the appropriate payment date, the amount of dividends or other
distributions
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with a record date after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole AWG
Group Shares.
(d) No Fractional Securities. The number of AWG Group Shares issued to an
individual in the Merger shall be rounded down to the nearest whole share.
No certificates or scrip representing fractional shares of AWG Group Common
Stock shall be issued upon the surrender for exchange of Certificates and
such fractional shares shall not entitle the owner thereof to vote or to
any other rights of a holder of AWG Group Common Stock.
(e) Termination of Exchange Agent. Any Certificates representing AWG
Group Shares deposited with the Exchange Agent pursuant to Section 2.3(a)
and not exchanged within one year after the Effective Time pursuant to this
Section 2.3 shall be returned by the Exchange Agent to the transfer agent
of AWG Group, which shall thereafter act as Exchange Agent. All funds held
by the Exchange Agent for payment to the holders of unsurrendered
Certificates and unclaimed at the end of one year from the Effective Time
shall be returned to the transfer agent of AWG Group; after which time any
holder of unsurrendered Certificates shall look as a general creditor only
to AWG Group for payment of such funds to which such holder may be due,
subject to applicable law. AWG Group shall not be liable to any person for
such shares or funds delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing of the Merger (the "Closing") shall take
place at the time, date and place as the parties shall mutually agree
following the date on which the last of the conditions set forth in Article IV
hereof is fulfilled or waived (the "Closing Date").
ARTICLE IV
CONDITIONS
Section 4.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions,
except, to the extent permitted by applicable law, that such conditions may be
waived in writing by the parties hereto:
(a) Shareholder Approvals. The approval of the shareholders of AWG and
AWG Merger Corp. shall have been obtained.
(b) No Injunction. No temporary restraining order or preliminary or
permanent injunction or other order by any federal or state court
preventing consummation of the Merger shall have been issued and be
continuing in effect, and the Merger and the other transactions
contemplated hereby shall not have been prohibited under any applicable
federal or state law or regulation.
(c) Registration Statement. A Registration Statement on Form S-1 of AWG
Group shall have become effective in accordance with the provisions of the
Securities Act of 1933, as amended, and no stop order suspending such
effectiveness shall have been issued and remain in effect.
(d) Underwriting Commitment. AWG Group shall have entered into an
agreement whereby one or more nationally recognized investment banks agree
to purchase, on a firm commitment basis, shares of AWG Group Common Stock
for sale in an underwritten public offering at a time, in an amount, at a
price and with such other terms as the board of directors of AWG Group
shall determine in its sole discretion.
(e) Required Consents. Any governmental or third-party consents shall
have been obtained if the failure to obtain any such consents would have a
material adverse effect on the business, assets, financial condition,
results of operations or prospects of any party hereto.
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<PAGE>
ARTICLE V
TERMINATION, AMENDMENT AND WAIVER
Section 5.1 Termination. This Agreement may be terminated by any party
hereto by written notice to the other parties at any time prior to the Closing
Date, whether before or after approval by the shareholders of the respective
parties.
Section 5.2 Effect of Termination. In the event of termination of this
Agreement there shall be no liability on the part of AWG, AWG Group or AWG
Merger Corp., or their respective officers or directors under this Agreement
to any other party to this Agreement.
Section 5.3 Amendment. This Agreement may be amended by the boards of
directors of the parties hereto, at any time before or after approval hereof
by the shareholders of AWG and prior to the Effective Time, but after such
approval, no such amendment shall (a) alter or change the amount or kind of
shares, rights or any of the proceedings of the treatment of shares under
Article II, or (b) alter or change any of the terms and conditions of this
Agreement if any of the alterations or changes, alone or in the aggregate,
would materially adversely affect the rights of holders of AWG Common Stock.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 5.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, and (b) waive compliance with any
of the agreements or conditions contained herein, to the extent permitted by
applicable law. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE VI
GENERAL PROVISIONS
Section 6.1 Miscellaneous. This Agreement (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof, (b) shall not be assigned by operation of law or
otherwise, and (c) shall be governed by and construed in accordance with the
laws of the State of Missouri applicable to contracts executed in and to be
fully performed in such State, without giving effect to its conflicts of law
rules or principles.
Section 6.2 Interpretation. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 6.3 Counterparts; Effect. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 6.4 Parties' Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
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<PAGE>
In Witness Whereof, AWG, AWG Group and AWG Merger Corp. have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.
Associated Wholesale Grocers, Inc.
Attest: _____________________________
By: _________________________________
Secretary
Name: _______________________________
Title: ______________________________
Associated Wholesale Grocers Group,
Inc.
Attest: _____________________________
By: _________________________________
Secretary
Name: _______________________________
Title: ______________________________
AWG Merger Corp.
Attest: _____________________________
By: _________________________________
Secretary
Name: _______________________________
Title: ______________________________
A-7
<PAGE>
ANNEX B
ARTICLES OF INCORPORATION
OF
ASSOCIATED WHOLESALE GROCERS GROUP, INC.
ARTICLE ONE
The name of the corporation is Associated Wholesale Grocers Group, Inc. (the
"Corporation").
ARTICLE TWO
The address of the Corporation's registered office in the State of Kansas is
515 S. Kansas, Topeka, Shawnee County, Kansas 66603. The name of its
registered agent at such address is The Corporation Company, Inc.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the Kansas General Corporation Code.
ARTICLE FOUR
1. Authorized Shares. The Corporation has authority to issue five hundred
fifty million (550,000,000) shares of capital stock, consisting of five
hundred million (500,000,000) shares of Common Stock, par value $.01 per share
(the "Common Stock"), and fifty million (50,000,000) shares of Preferred
Stock, par value $.10 per share (the "Preferred Stock").
All of the authorized shares of the Corporation may be issued, from time to
time, without action by the stockholders, for such consideration as may be
fixed, from time to time, by the Board of Directors, or by any duly authorized
committee thereof, and shares so issued, the full consideration for which has
been paid or delivered, will be deemed fully paid and non-assessable stock.
The holders of such shares shall not be liable for any further payment
thereon.
2. Common Stock
a. Voting Rights. The holders of Common Stock shall be entitled to one
vote per share on all matters to be voted on by the stockholders of the
Corporation and shall not be entitled to cumulate their votes.
b. Dividends. To the extent permitted under the Kansas General
Corporation Code and subject to the provisions of the Preferred Stock, as
and when dividends are declared by the Board of Directors or paid thereon,
whether in cash, property or securities of the Corporation, the holders of
Common Stock shall be entitled to participate in such dividends ratably on
a per share basis.
c. Liquidation. Subject to the provisions of the Preferred Stock, the
holders of Common Stock shall be entitled to participate ratably on a per
share basis in all distributions to the holders of Common Stock in any
liquidation, dissolution or winding up of the Corporation.
d. Registration of Transfer. The Corporation shall keep at its principal
office (or such other place as the Corporation reasonably designates) a
register for the registration of shares of Common Stock whether in
certificate or book-entry form. Upon the surrender of any certificate
representing shares of any class of Common Stock at such place, the
Corporation shall, at the request of the registered holder of such
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certificate, execute and deliver a new certificate or certificates in
exchange therefor representing in the aggregate the number of shares of
such class represented by the surrendered certificate, and the Corporation
forthwith shall cancel such surrendered certificate. Each such new
certificate will be registered in such name and will represent such number
of shares of such class as is substantially identical in form to the
surrendered certificate. The issuance of new certificates shall be made
without charge to the holders of the surrendered certificates for any
issuance tax in respect thereof or other cost incurred by the Corporation
in connection with such issuance. Upon receipt of a transfer instruction by
the owner of any shares of Common Stock registered in book-entry form, the
Corporation shall record the transfer of such shares in the register and
shall deliver to the owner of such shares a written statement describing
the number of shares transferred and the date the transfer was registered.
e. Replacement. Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any
certificate evidencing one or more shares of any class of Common Stock, and
in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (provided that if the
holder is a financial institution or other institutional investor its own
agreement will be satisfactory), or in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense)
execute and deliver in lieu of such certificate a new certificate of like
kind representing the number of shares of such class represented by such
lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
f. Notices. All notices referred to herein shall be in writing, shall be
delivered personally or by first class mail, postage prepaid, and shall be
deemed to have been given when so delivered or mailed to the Corporation at
its principal executive offices and to any stockholder at such holder's
address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder).
g. Restrictions on Transfer. Certain shares of Common Stock, as
designated by the Board of Directors, shall have the restrictions on
transfer set forth in the by-laws of the Corporation. Shares not so
designated shall be free of such restrictions.
3. Preferred Stock
a. Shares of Preferred Stock may be issued in one or more series at such
time or times and for such consideration as the Board of Directors may
determine. Each such series shall be given a distinguishing designation.
All shares of any one series shall have preferences, limitations and
relative rights identical with those of other shares of the same series
and, except to the extent otherwise provided in the description of such
series, with those of other shares of Preferred Stock.
b. The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
i. The distinguishing designation and number of shares constituting
that series, which number may (except where otherwise provided by the
Board of Directors in creating such series) be increased or decreased
from time to time by action of the Board of Directors;
ii. The dividend rate, if any, on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends on
shares of that series over shares of any other series or over the
Common Stock;
iii. The voting rights, if any, which shares of that series shall
have, and the terms of such voting rights;
iv. Whether the shares of that series shall be convertible into or
exchangeable for cash, shares of stock of any other class or any other
series, indebtedness, or other property or rights, including securities
of another corporation, and, if so, the terms and conditions of such
exchange or conversion, including the rate or rates of conversion, and
whether such rate shall be a designated amount or an
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amount determined in accordance with a designated formula or by
reference to extrinsic data or events, the date or dates upon or after
which they shall be convertible or exchangeable, the duration for which
they shall be convertible or exchangeable, the event or events upon or
after which they shall be convertible or exchangeable, and whether they
shall be convertible or exchangeable at the option of the Corporation,
the shareholder or another person, and the method (if any) of adjusting
the rate of conversion or exchange in the event of a stock split, stock
dividend, combination of shares or similar event;
v. Whether or not the shares of that series shall be redeemable and,
if so, the terms and conditions of such redemption, including the date
or dates upon or after which the shares of that series shall be
redeemable, whether they shall be redeemable at the option of the
Corporation, the shareholder or another person, the amount per share
payable in the event of redemption (which amount may vary under
different conditions and at different redemption dates), whether such
amount shall be a designated amount or an amount determined in
accordance with a designated formula or by reference to extrinsic data
or events, and whether such amount shall be paid in cash, indebtedness,
securities or other property or rights, including securities of any
other corporation;
vi. Whether that series shall have a retirement or sinking fund for
the purchase or redemption of shares of that series, and, if so, the
terms and amount payable into such fund;
vii. The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of
shares of that series over shares of any other series or over the
Common Stock;
viii. Whether the issuance of any additional shares of such series,
or of any shares of any other series, shall be subject to restrictions
as to issuance, or as to the powers, preferences or rights of any such
other series; and
ix. Any other preferences, powers, privileges, and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the shares of
that series, as the Board of Directors may deem advisable and as shall
not be inconsistent with these Articles of Incorporation or the Kansas
General Corporation Code.
ARTICLE FIVE
The Corporation is to have perpetual existence.
ARTICLE SIX
The authority to make, amend, alter or repeal the by-laws of the Corporation
is hereby expressly and solely granted to and vested in the Board of Directors
of the Corporation, subject always to the power of the stockholders to make,
amend, alter or repeal the by-laws of the Corporation by the affirmative vote
of the holders of 66 2/3% of the shares of the then outstanding voting stock
of the Corporation, voting together as a single class; provided, however, that
the stockholders may not amend or repeal, or adopt any provisions inconsistent
with, ARTICLE IX of the by-laws.
ARTICLE SEVEN
Meetings of stockholders may be held within or without the State of Kansas,
as the by-laws of the Corporation may provide. The books of the Corporation
may be kept outside the State of Kansas at such place or places as may be
designated from time to time by the Board of Directors or in the by-laws of
the Corporation. Election of directors need not be by written ballot unless
the by-laws of the Corporation so provide.
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Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
Except as otherwise required by law and subject to the right of holders of
any Preferred Stock, special meetings of the stockholders may only be called
by the Board of Directors pursuant to a resolution duly adopted by a majority
of the entire Board of Directors. Special meetings of the stockholders may not
be called by any other person or persons.
ARTICLE EIGHT
The Corporation shall indemnify to the fullest extent permitted by law (as
now or hereafter in effect), any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that he or she is or was a director, officer or employee of the
Corporation, or is or was a director, officer or employee of the Corporation
serving at the request of the Corporation as a director, officer, trustee,
employee or agent of, or in any other capacity with respect to another
corporation, partnership, limited liability company, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding. No amendment to or appeal of this ARTICLE EIGHT shall apply to or
have any effect on any right to indemnification provided hereunder with
respect to any acts or omissions occurring prior to such amendment or repeal.
ARTICLE NINE
To the fullest extent permitted by the Kansas General Corporation Code as
the same exists or may hereafter be amended, a director of this Corporation
shall not be liable to the corporation or its stockholders for monetary
damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE NINE shall not adversely affect any right or
protection of a director of the corporation existing at the time of such
repeal or modification.
ARTICLE TEN
The Corporation expressly elects not to be governed by (S)(S) 17-12,100 et.
seq. of the Kansas General Corporation Code.
ARTICLE ELEVEN
1. Number of Directors. The number of directors constituting the entire
Board of Directors shall be not less than five nor more than eleven. Subject
to the rights of the holders of any Preferred Stock then outstanding, the
specific number of directors within such minimum and maximum shall be
authorized from time to time by resolution duly adopted by a two-thirds vote
of the entire Board of Directors. As used in these Articles of Incorporation,
the term "entire Board of Directors" means the total number of directors that
has, at the time of any determination, been specifically authorized by the
Board of Directors pursuant to this Section 1, assuming no vacancies exist
with respect to such number of specifically authorized directors.
2. Classified Board. The Board of Directors shall be classified such that
there will be three classes of directors, with respect to the time that the
directors severally hold office, as nearly equal in number as possible. The
initial directors of the first class shall hold office for one year or until
the first annual election of directors
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following their election. The initial directors of the second class shall hold
office for two years or until the second annual election of directors
following their election. The initial directors of the third class shall hold
office for three years or until the third annual election of directors
following their election. Each director shall hold office until his or her
successor shall be elected and qualifies, except in the event of the earlier
death, resignation or removal of such director.
At each annual stockholders' meeting following such initial classification
and election, the number of directors equal to the number of the class whose
term expires at the time of such meeting shall be elected by the stockholders
for a full three-year term, as the case may be, to succeed those whose terms
expire.
If the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain, if possible, the equality of
the number of directors in each class, but in no case will a decrease in the
number of directors shorten the term of any incumbent director. If such
equality is not possible, the increase or decrease shall be apportioned among
the classes in such a way that the difference in the number of directors in
any two classes shall not exceed one.
3. Vacancies. Subject to the rights of the holders of any Preferred Stock
then outstanding, any vacancies in the Board of Directors for any reasons,
including by reason of any increase in the number of directors, shall, if
occurring prior to the expiration of the term of office of the class in which
such vacancy occurs, be filled only by the Board of Directors, acting by the
affirmative vote of two-thirds of the remaining directors.
4. Removal of Directors. Subject to the rights of the holders of any
Preferred Stock then outstanding, (i) any director, or the entire Board of
Directors, may be removed from office at any time, but only for Cause (as
defined below), by the affirmative vote of the holders of record of
outstanding shares representing at least 66 2/3% of the voting power of all
the shares of capital stock of the Corporation then entitled to vote generally
in the election of directors, voting together as a single class, and (ii) to
the extent permitted by law, any director may be removed from office at any
time, but only for Cause, by the affirmative vote of a majority of the entire
Board of Directors. As used in these Articles of Incorporation, the term
"Cause" means (i) conviction of the director of a felony; (ii) declaration by
order of a court that the director is of unsound mind; or (iii) gross abuse of
trust which is proven by clear and convincing evidence to have been committed
in bad faith.
ARTICLE TWELVE
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation in the manner now or
hereafter prescribed herein and by the laws of the State of Kansas, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
Notwithstanding the above provision or any other provisions of the Articles
of Incorporation or the by-laws of the Corporation, the affirmative vote of
the holders of at least 66 2/3% of the voting power of the shares of the then
outstanding voting stock of the Corporation, voting together as a single
class, shall be required to amend or repeal, or adopt any provisions
inconsistent with, ARTICLES FOUR, SIX, SEVEN, EIGHT, NINE, TEN, ELEVEN, or
this ARTICLE TWELVE of these Articles of Incorporation.
Notwithstanding any other provisions of the Articles of Incorporation or the
by-laws of the Corporation, the stockholders may not amend or repeal, or adopt
provisions inconsistent with, Article FOUR, Section 2(g) of these Articles of
Incorporation.
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ARTICLE THIRTEEN
The name and mailing address of the incorporator is as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Shari L. Wright Blackwell Sanders Matheny Weary & Lombardi L.C.
2300 Main Street, Suite 1100
P.O. Box 419777
Kansas City, MO 64141-6777
</TABLE>
In Testimony Whereof, I have subscribed my name this day of ,
1996.
-------------------------------------
Shari L. Wright
State of Missouri ss:
County of Jackson
}
Subscribed and sworn to before me, this day of , 1996.
-------------------------------------
Notary Public
My Commission Expires:
- -------------------------------
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<PAGE>
ANNEX C
SECTION 351.455 OF THE MISSOURI GENERAL
AND BUSINESS CORPORATION LAW
351.455 SHAREHOLDER WHO OBJECTS TO MERGER MAY DEMAND VALUE OF SHARES,
WHEN.--1. If a shareholder of a corporation which is a party to a merger or
consolidation shall file with such corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to such plan of merger or consolidation, and shall
not vote in favor thereof, and such shareholder, within twenty days after the
merger or consolidation is effected, shall make written demand on the
surviving or new corporation for payment of the fair value of his shares as of
the day prior to the date on which the vote was taken approving the merger or
consolidation, the surviving or new corporation shall pay to such shareholder,
upon surrender of his certificate or certificates representing said shares,
the fair value thereof. Such demand shall state the number and class of the
shares owned by such dissenting shareholder. Any shareholder failing to make
demand within the twenty day period shall be conclusively presumed to have
consented to the merger or consolidated and shall be bound by the terms
thereof.
2. If within thirty days after the date on which such merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment therefor
shall be made within ninety days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing said shares. Upon payment of the agreed value the
dissenting shareholder shall cease to have any interest in such shares or in
the corporation.
3. If within such period of thirty days the shareholder and the surviving or
new corporation do not so agree, then the dissenting shareholder may, within
sixty days after the expiration of the thirty day period, file a petition in
any court of competent jurisdiction within the county in which the registered
office of the surviving or new corporation is situated, asking for a finding
and determination of the fair value of such shares, and shall be entitled to
judgment against the surviving or new corporation for the amount of such fair
value as of the day prior to the date on which such vote was taken approving
such merger or consolidation, together with interest thereon to the date of
such judgment. The judgment shall be payable only upon and simultaneously with
the surrender to the surviving or new corporation of the certificate or
certificates representing said shares. Upon the payment of the judgment, the
dissenting shareholder shall cease to have any interest in such shares, or in
the surviving or new corporation. Such shares may be held and disposed of by
the surviving or new corporation as it may see fit. Unless the dissenting
shareholder shall file such petition within the time herein limited, such
shareholder and all persons claiming under him shall be conclusively presumed
to have approved and ratified the merger or consolidation, and shall be bound
by the terms thereof.
4. The right of a dissenting shareholder to be paid the fair value of his
shares as herein provided shall cease if and when the corporation shall
abandon the merger or consolidation.
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ANNEX D
BY-LAWS
OF
ASSOCIATED WHOLESALE GROCERS GROUP, INC.
A KANSAS CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Kansas shall be located at 515 South Kansas, Topeka, Kansas
66603. The name of the corporation's registered agent at such address shall be
The Corporation Company, Inc. The registered office and/or registered agent of
the corporation may be changed from time to time by action of the Board of
Directors.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the state of Kansas, as the Board of
Directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the stockholders
shall be held each year within 150 days after the close of the immediately
preceding fiscal year of the corporation for the purpose of electing directors
and conducting such other proper business as may come before the meeting. The
date, time and place of the annual meeting shall be determined by the Board of
Directors of the corporation.
Section 2. Special Meetings. Except as otherwise required by law and subject
to the right of holders of any Preferred Stock, special meetings of the
stockholders may only be called by the Board of Directors pursuant to a
resolution duly adopted by a full majority of the entire Board of Directors.
Special meetings of stockholders may not be called by any other person or
persons.
Section 3. Place of Meetings. The Board of Directors may designate any
place, either within or without the state of Kansas, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
Section 4. Notice. Whenever stockholders are required or permitted to take
action at a meeting, written or printed notice stating the place, date, time,
and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting
not less than 10 nor more than 60 days before the date of the meeting. All
such notices shall be delivered, either personally or by mail, by or at the
direction of the Board of Directors, the President or the Secretary, and if
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, postage prepaid, addressed to the stockholder at his, her
or its address as the same appears on the records of the corporation.
Attendance of a person at a meeting shall constitute a waiver of notice of
such meeting, except when the person attends for the express purpose of
objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
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Section 5. Stockholders List. The officer having charge of the stock ledger
of the corporation shall prepare, at least 10 days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the articles of incorporation. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy
at the meeting, and entitled to vote at the meeting, may adjourn the meeting
to another time or place. When a quorum is once present to commence a meeting
of stockholders, it is not broken by the subsequent withdrawal of any
stockholders or their proxies.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time
or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken;
provided however, that if the adjournment is for more than 30 days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. At the adjourned meeting, the corporation may
transact any business which might have been transacted at the original
meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote of
the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by express provisions of
an applicable law or of the articles of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the Kansas General
Corporation Code or by the articles of incorporation, and subject to Section 3
of Article VI hereof, every stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
capital stock having voting power held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or
her by proxy, but no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and
only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A proxy may be made irrevocable regardless of whether
the interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to
vote, except that when such proxy is coupled with an interest and the fact of
the interest appears on the face of the proxy, the agent named in the proxy
shall have all voting and other rights referred to in the proxy,
notwithstanding the presence of the person executing the proxy. At each
meeting of the stockholders, and before any voting commences, all proxies
filed at or before the meeting shall be submitted to and examined by the
Secretary or a person designated by the Secretary, and no shares may be
represented or voted under a proxy that has been found by the Secretary or a
person designated by the Secretary in his or her sole discretion, to be
invalid or irregular.
Section 11. Proposed Business. Except as may otherwise be required by
applicable law or regulation or be expressly authorized by the Board of
Directors, a stockholder may make a nomination or nominations for director of
the corporation at an annual meeting of stockholders or at a special meeting
of stockholders called for the
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purpose of electing Directors or may bring up any other matter for
consideration and action by the stockholders at a meeting of stockholders only
if the provisions of the following subsections 11(a), 11(b), 11(c) and 11(d)
shall have been satisfied. If such provisions shall not have been satisfied,
any nomination sought to be made or other business sought to be presented by a
stockholder for consideration and action by the stockholders at the meeting
shall be deemed not properly brought before the meeting, is and shall be ruled
by the Chairman of the meeting to be out of order, and shall not be presented
or acted upon at the meeting.
a. The stockholder must be a stockholder of record on the record date for
such meeting, be entitled to vote thereat and must continue to be a
stockholder of record at the time of such meeting.
b. The stockholder must, not less than 130 days before the day of the
meeting or within ten days after the corporation has mailed to stockholders
a notice of an annual meeting of stockholders, whichever is the later,
deliver or cause to be delivered a written notice to the Secretary of the
corporation. The notice shall specify (i) the name and address of the
stockholder as they appear on the books of the corporation, (ii) the class
and number of shares of the corporation which are beneficially owned by the
stockholder; (iii) any material interest of the stockholder in the proposed
business described in the notice; (iv) if such business is a nomination for
director, each nomination sought to be made, together with the reasons for
each nomination, a description of the qualifications and business or
professional experience of each proposed nominee and a statement signed by
each nominee indicating his or her willingness to serve if elected, and
disclosing the information about him or her that is required by the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules
and regulations promulgated thereunder, to be disclosed in the proxy
materials for the meeting involved as if he or she were a nominee of the
corporation for election as one of its directors; (v) if such business is
other than a nomination for director, the nature of the business, the
reasons why it is sought to be raised and submitted for a vote of the
stockholders and if and why it is deemed by the stockholder to be
beneficial to the corporation, and (vi) if so requested by the corporation,
all other information that would be required to be filed with the
Securities and Exchange Commission if, with respect to the business
proposed to be brought before the meeting, the person proposing such
business was a participant in a solicitation subject to Section 14 of the
1934 Act.
c. Notwithstanding satisfaction of the provisions of subsection 11(a) and
11(b), the proposed business described in the notice may be deemed not to
be properly brought before the meeting if, pursuant to state law or to any
rule or regulation of the Securities and Exchange Commission, it was
offered as a stockholder proposal and was omitted, or had it been so
offered, it could have been omitted, from the notice of, and proxy material
for, the meeting (or any supplement thereto) authorized by the Board of
Directors.
d. In the event such notice is timely given pursuant to subsection 11(b)
and the business described therein is not disqualified pursuant to
subsection 11(c), such business (i) may nevertheless not be presented or
acted upon at a special meeting of stockholders unless in all other
respects it is properly before such meeting; and (ii) may not be presented
except by the stockholder who shall have given the notice required by
subsection 11(a) or a representative of such stockholder who is qualified
under the law of the State of Kansas to present the proposal on the
stockholder's behalf at the meeting.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the corporation shall
be managed by or under the direction of the Board of Directors.
Section 2. Number, Election and Term of Office. The number of directors
which shall constitute the Board of Directors shall be nine. Thereafter, the
number of directors shall be established from time to time as provided in the
articles of incorporation. Except as otherwise provided in the articles of
incorporation or in Section 4 of this Article III, the directors shall be
elected at the annual meeting of the stockholders by a plurality of the votes
of the shares present in person or represented by proxy at the meeting and
entitled to vote in the election of directors.
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Section 3. Removal and Resignation. Any director or the entire Board of
Directors may be removed at such time and in such manner as provided in the
articles of incorporation. Any director may resign at any time upon written
notice to the corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled only by
the Board of Directors and in the manner provided in the articles of
incorporation. Each director so chosen shall hold office until a successor is
duly elected and qualified or until his or her earlier death, resignation or
removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected Board
of Directors shall be held without other notice than this by-law immediately
after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the Board of Directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution
of the Board. Subject to Section 11 of this Article III, special meetings of
the Board of Directors may be called by or at the request of the Chairman of
the Board of Directors, President or any two Directors on at least 24 hours
notice to each director, either personally, by telephone, by mail or by
telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
number of directors then in office shall constitute a quorum for the
transaction of business. Except as otherwise provided by the articles of
incorporation, the vote of a majority of directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present.
Section 8. Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation, which to the
extent provided in such resolution or these by-laws shall have and may
exercise the powers of the Board of Directors in the management and affairs of
the corporation except as otherwise limited by law. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same
to the Board of Directors when required.
Section 9. Committee Rules. Each committee of the Board of Directors may fix
its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the Board of
Directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the
committee shall be necessary to constitute a quorum. In the event that a
member and that member's alternate, if alternates are designated by the Board
of Directors as provided in Section 8 of this Article III, of such committee
is or are absent or disqualified, the member or members thereof present at any
meeting and not disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in place of any such absent or
disqualified member.
Section 10. Communications Equipment. Members of the Board of Directors or
any committee thereof may participate in and act at any meeting of such Board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
Board of Directors or any committee thereof who is present at a meeting shall
be conclusively presumed to have waived notice of such
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meeting except when such member attends for the express purpose of objecting
at the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened. Such member shall be conclusively
presumed to have assented to any action taken unless his or her dissent shall
be entered in the minutes of the meeting or unless his or her written dissent
to such action shall be filed with the person acting as the Secretary of the
meeting before the adjournment thereof or shall be forwarded by registered
mail to the Secretary of the corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to any member who voted in
favor of such action. Nothing contained in this section shall be construed to
prevent a member of the Board of Directors or any committee thereof from
waiving notice of any meeting in any method in addition to waiver by
attendance at such meeting.
Section 12. Action by Written Consent. Unless otherwise restricted by the
articles of incorporation, any action required or permitted to be taken at any
meeting of the Board of Directors, or of any committee thereof, may be taken
without a meeting if all members of the Board or committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be elected by the
Board of Directors and shall consist of a Chairman of the Board of Directors,
President, one or more Vice-Presidents, a Secretary, a Treasurer, and such
other officers and assistant officers as may be deemed necessary or desirable
by the Board of Directors. Any number of offices may be held by the same
person except that neither the Chairman of the Board nor the President shall
also hold the office of Secretary. In its discretion, the Board of Directors
may choose not to fill any office for any period as it may deem advisable,
except that the offices of President and Secretary shall be filled as
expeditiously as possible.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the Board of Directors at its first meeting held
after each annual meeting of stockholders or as soon as such election may be
conveniently held thereafter. Vacancies may be filled or new offices created
and filled at any meeting of the Board of Directors. Each officer shall hold
office until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the Board of Directors
may be removed by the Board of Directors whenever in its judgment the best
interests of the corporation would be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term by the Board of
Directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by the
Board of Directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. Chairman of the Board. The Chairman of the Board of Directors
shall preside at all meetings of the Board of Directors and shall preside at
all stockholder meetings. The Chairman of the Board shall also perform any
other duties which the Board of Directors may assign from time to time.
Section 7. The President. The President shall be the chief executive officer
of the corporation; subject to the powers of the Board of Directors, shall
have general charge of the business, affairs and property of the corporation,
and control over its officers, agents and employees; and shall see that all
orders and resolutions of the Board of Directors are carried into effect. The
President shall execute bonds, mortgages and other contracts
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requiring a seal, under the seal of the corporation, except as provided in
Section 8 of this Article IV, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors or the
President to some other officer or agent of the corporation. The President
shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or as may be provided in these by-laws.
Section 8. Vice-Presidents. The Vice-President, or if there shall be more
than one, the Vice-Presidents in the order determined by the Board of
Directors, shall, in the absence or disability of the President, act with all
of the powers and be subject to all the restrictions of the President. The
Vice-Presidents shall also perform such other duties and have such other
powers as the Board of Directors, the President or these by-laws may, from
time to time, prescribe.
Section 9. The Secretary and Assistant Secretaries. The Secretary shall
attend all meetings of the Board of Directors, all meetings of the committees
thereof (unless a committee shall appoint one of its members to serve as
secretary for the committee) and all meetings of the stockholders and record
all the proceedings of the meetings in a book or books to be kept for that
purpose. Under the President's supervision, the Secretary shall give, or cause
to be given, all notices required to be given by these by-laws or by law;
shall have such powers and perform such duties as the Board of Directors, the
President or these by-laws may, from time to time, prescribe; and shall have
custody of the corporate seal of the corporation. The Secretary, or an
Assistant Secretary, shall have authority to affix the corporate seal to any
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his or her signature. The
Assistant Secretary, or if there by more than one, the Assistant Secretaries
in the order determined by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as
the Board of Directors, the President, or Secretary may, from time to time,
prescribe.
Section 10. The Treasurer and Assistant Treasurer. The Treasurer shall have
the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name
and to the credit of the corporation as may be ordered by the Board of
Directors; shall cause the funds of the corporation to be disbursed when such
disbursements have been duly authorized, taking proper vouchers for such
disbursements; and shall render to the President and the Board of Directors,
at its regular meeting or when the Board of Directors so requires, an account
of the corporation; shall have such powers and perform such duties as the
Board of Directors, the President or these by-laws may, from time to time,
prescribe. If required by the Board of Directors, the Treasurer shall give the
corporation a bond in such sums and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of the office of Treasurer and for the restoration to the corporation,
in case of death, resignation, retirement, or removal from office, of all
books, papers, vouchers, money, and other property of whatever kind in the
possession or under the control of the Treasurer belonging to the corporation.
The Assistant Treasurer, or if there shall be more than one, the Assistant
Treasurers in the order determined by the Board of Directors, shall in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer. The Assistant Treasurers shall perform such other
duties and have such other powers as the Board of Directors, the President or
Treasurer may, from time to time, prescribe.
Section 11. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such
duties as may from time to time be prescribed by resolution of the Board of
Directors.
Section 12. Absence or Disability of Officers. In the case of the absence or
disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the Board of Directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any
other person whom it may select.
D-6
<PAGE>
ARTICLE V
INDEMNIFICATION
Section 1. Indemnification and Advancement of Expenses. The directors,
officers and employees of this corporation shall be indemnified to the maximum
extent permitted by law. The corporation shall pay all expenses incurred by a
director, officer or employee of this corporation in defending a civil or
criminal action, suit or proceeding in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director, officer or employee to repay such amount if it is ultimately
determined that the director, officer or employee is not entitled to be
indemnified by the corporation as authorized by the Kansas General Corporation
Code. The foregoing right of indemnification and advancement of expenses shall
in no way be exclusive of any other rights of indemnification and advancement
of expenses to which any such director, officer or employee may be entitled by
law, agreement, vote of stockholders or of disinterested directors or
otherwise.
Section 2. Continuation of Rights. All rights of indemnification and
advancement of expenses under Article V of these Bylaws and under the Kansas
General Corporation Code shall continue as to a person who has ceased to be an
officer, director or employee and shall inure to the benefit of the heirs,
executors and administrators of such director, officer or employee.
Section 3. Indemnification Insurance. The corporation may maintain
insurance, at its expense, to protect itself and any director, officer,
employee or agent of the corporation or another corporation, partnership,
joint venture, trust or other enterprise against any such expense, liability
or loss, whether or not the corporation would have the power to indemnify such
person against such expense, liability or loss under the Kansas General
Corporation Code.
Section 4. Determination of Rights. Any indemnification under this section,
unless ordered by a court, shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the
director, officer or employee has met the applicable standard of conduct
required by the Kansas General Corporation Code. Such determination shall be
made (1) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding, or (2)
if such quorum is not obtainable, or even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by the
President or a Vice-President and the Secretary or an Assistant Secretary of
the corporation, certifying the number of shares owned by such holder in the
corporation. If such a certificate is countersigned (i) by a transfer agent or
an assistant transfer agent other than the corporation or its employee or (ii)
by a registrar, other than the corporation or its employee, the signature of
any such President, Vice-President, Secretary or Assistant Secretary may be
facsimiles. In case any officer or officers who has or have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation
whether because of death, resignation or otherwise before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile
signature or signatures have been used thereon had not ceased to be such
officer or officers of the corporation. All certificates for shares shall be
consecutively numbered or otherwise identified. The name of the person to whom
the shares represented thereby are issued, with the number of shares and date
of issue, shall be entered on the books of the corporation. Shares of stock of
the corporation shall only be transferred on the books of the corporation by
the holder of record thereof or by such holder's attorney duly authorized in
D-7
<PAGE>
writing, upon surrender to the corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization, and
other matters as the corporation may reasonably require, and accompanied by
all necessary stock transfer stamps. In that event, it shall be the duty of
the corporation to issue a new certificate or certificates, and record the
transaction on its books. The Board of Directors may appoint a bank or trust
company organized under the laws of the United States or any state thereof to
act as its transfer agent or registrar, or both in connection with the
transfer of any class or series of securities of the corporation.
Section 2. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of the fact by the
person claiming the certificate of stock to be lost, stolen, or destroyed.
When authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be
made against the corporation on account of the loss, theft or destruction of
any such certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that the
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors,
and which record date shall not be more than 60 nor less than 10 days before
the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of the stockholders shall be the close of business on
the next day preceding the day on which notice is given, or if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 4. Fixing a Record Date for Other Purposes. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purposes of any other lawful action, the Board
of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted, and which
record date shall be not more than 60 days prior to such action. If no record
date is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
Section 5. Registered Stockholders. Prior to the surrender of the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers to an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice
thereof.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation,
subject to the provisions of the articles of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of the articles of incorporation.
Before payment of any dividend, there may be set aside out of any
D-8
<PAGE>
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or any other
purpose, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts or other orders for
the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be
signed by such officer or officers, agent or agents of the corporation, and in
such manner, as shall be determined by the resolution of the Board of
Directors or a duly authorized committee thereof.
Section 3. Contracts. The Board of Directors may authorize any officer or
officers, or any agent or agents, of the corporation to enter into any
contract or to execute and deliver any instrument in the name of and on behalf
of the corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of
the directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such a manner as the
Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in this section contained shall be
deemed to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
Section 6. Corporate Seal. The Board of Directors shall provide a corporate
seal which shall be in the form of a circle and shall have inscribed thereon
the name of the corporation and the words "Corporate Seal, Kansas." The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 7. Voting Securities Owned by Corporation. Voting securities in any
other corporation held by the corporation shall be voted by the President,
unless the Board of Directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for
business and at the principal executive office of the Corporation to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in the State of Kansas or at its principal place of
business.
Section 9. Section Headings. Section headings in these by-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these by-laws is or becomes inconsistent with any provision of the articles of
incorporation, the Kansas General Corporation Code or any other applicable
law, the provision of these by-laws shall not be given any effect to the
extent of such inconsistency but shall otherwise be given full force and
effect.
D-9
<PAGE>
ARTICLE VIII
AMENDMENTS
Subject to the provisions of the articles of incorporation, these by-laws
may be amended, altered, or repealed and new by-laws adopted at any meeting of
the Board of Directors by a majority vote. The fact that the power to adopt,
amend, alter, or repeal the by-laws has been conferred upon the Board of
Directors shall not divest the stockholders of the same powers to the extent
permitted under the articles of incorporation.
ARTICLE IX
RESTRICTIONS ON TRANSFER
The Board of Directors may designate, in its discretion, shares of the
common stock of the Corporation which shall be subject to the following
restrictions on transfer set forth below. If such designation has not been
made, shares of common stock will not be subject to any restrictions on
transfer.
Shares of common stock which have been so designated may not be transferred,
sold, pledged, hypothecated or assigned, directly or indirectly, for a period
of two years from the date of acquisition of such shares by the stockholder
from the Corporation except in the following circumstances:
(i) A pledge of such shares in a bona fide loan transaction which has
been approved by the Corporation prior to the pledge which approval may be
withheld by the Corporation in its sole discretion. If the pledgee
forecloses on the shares in connection with the default of the loan, the
restriction would be removed as to pledgee;
(ii) In connection with the transfer or sale of substantially all of the
assets or stock of the grocery business, if a corporation, in which the
stockholder is engaged, provided that the transferee of such assets or
stock shall remain subject to the above restriction on transfer; or
(iii) In connection with the transfer by gift to a trust for the benefit
of family members of the stockholder, or in connection with the transfer to
the estate of a deceased stockholder, provided that the two-year transfer
restriction shall remain except to the extent certified by a personal
representative of the deceased stockholder as necessary to meet state or
federal taxes due as a result of the inclusion of the restricted shares in
the taxable estate of the deceased.
The officers of the Company are authorized to place appropriate restrictive
transfer legends on the certificates representing the shares of common stock
which are the subject of the above-referenced restrictions.
D-10
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the KGCC, a corporation may indemnify any person made or threatened to
be made a party to any legal proceeding, including any suit by or in the name
of the corporation, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation in such a capacity with respect to another
enterprise, against expenses and other amounts reasonably incurred by him in
connection with such legal proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interest of
the corporation, and, with respect to any criminal proceeding, had no
reasonable cause to believe his conduct was unlawful. The foregoing
notwithstanding, no indemnification may be made in respect of any claim
brought by or in the name of the corporation as to which such person is
adjudged to be liable to the corporation unless and only to the extent that a
proper court determines that in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
that the court deems proper. To the extent a person has been successful in the
defense of any of the foregoing proceedings or as to any particular issue
therein, such person shall be indemnified by the corporation against expenses
reasonably incurred by such person in connection therewith. These
indemnification rights are not exclusive of any other rights to which the
person seeking indemnification is entitled and do not limit a corporation's
right to provide further indemnification.
The AWG Group Articles of Incorporation contain a provision that eliminates
the personal liability of AWG Group's directors to AWG Group or its
shareholders for monetary damages for breach of fiduciary duty to the fullest
extent permitted by the KGCC. Provisions in the AWG Group Articles of
Incorporation and Bylaws entitle existing or former directors, officers and
employees of AWG Group or persons serving in any capacity with respect to any
other enterprise at the request of AWG Group to be indemnified by AWG Group
against costs and expenses, attorneys' fees, judgments, fines and amounts paid
in settlement that are actually and reasonably incurred in connection with any
action, suit or proceeding, whether civil, criminal, investigative or
administrative by reason of the fact that such person served in any of the
foregoing capacities. AWG Group may also be required to advance costs incurred
by directors, officers and employees in such situations.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) The exhibits to this Registration Statement are listed in the Exhibit
Index hereto and are incorporated herein by reference.
(b) The financial statement schedule of Associated Wholesale Grocers, Inc.
and subsidiaries for each of the years in the three-year period ended December
30, 1995.
II-1
<PAGE>
SCHEDULE II
ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 25, 1993, DECEMBER 31, 1994 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND DEDUCTIONS AT END
DESCRIPTION OF YEAR EXPENSES AND OTHER OF YEAR
- ----------- ---------- ---------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Year ended:
December 25, 1993................. $487 -- 30 $457
==== === === ====
December 31, 1994................. $457 -- 25 $432
==== === === ====
December 30, 1995................. $432 375 -- $807
==== === === ====
</TABLE>
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the Calculation of
Registration Fee table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for the purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(6) That every prospectus: (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(7) Insofar as indemnification, for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions referred
to in Item 20 of this registration statement, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(8) To respond to requests for information that is incorporated by
reference into the Joint Proxy Statement/Prospectus pursuant to Item 4,
10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENTS THERETO TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
KANSAS CITY, AND STATE OF KANSAS ON THE 20TH DAY OF AUGUST, 1996.
Associated Wholesale Grocers Group,
Inc.
/s/ Mike DeFabis
By: _________________________________
Mike DeFabis,
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Mike DeFabis President, Chief Executive August 20, 1996
____________________________________ Officer and Director
Mike DeFabis (Principal Executive
Officer)
/s/ Gary Phillips Executive Vice President of August 20, 1996
____________________________________ Finance and Administration
Gary Phillips and Chief Financial
Officer (Principal
Financial and Accounting
Officer)
/s/ Doug Carolan Director August 20, 1996
____________________________________
Doug Carolan
/s/ J. Fred Ball Director August 20, 1996
____________________________________
J. Fred Ball
/s/ James Queen Director August 20, 1996
____________________________________
James Queen
/s/ Donald Woods, Jr. Director August 20, 1996
____________________________________
Donald Woods, Jr.
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S> <C>
2 Agreement and Plan of Merger, dated as of , 1996
by and among Associated Wholesale Grocers, Inc., Associated
Wholesale Grocers Group, Inc. and AWG Merger Corp. (Included
as Annex A to the Proxy Statement/Prospectus contained in this
Registration Statement)
3.1 Articles of Incorporation of Associated Wholesale Grocers
Group, Inc. (Included as Annex B to the Proxy
Statement/Prospectus contained in this Registration Statement)
3.2 By-laws of Associated Wholesale Grocers Group, Inc. (Included
as Annex D to the Proxy Statement/ Prospectus contained in
this Registration Statement)
*4.1 Shareholder Rights Plan
*4.2 Certificate of Designation
5 Opinion of Blackwell Sanders Matheny Weary & Lombardi L.C.
8.1 Opinion of Blackwell Sanders Matheny Weary & Lombardi L.C.
8.2 Opinion of KPMG Peat Marwick LLP
10.1 Associated Wholesale Grocers Group, Inc. 1996 Equity Incentive
Plan.
10.2 Supply Agreement between Associated Wholesale Grocers, Inc.
and Homeland Stores, Inc. dated April 21, 1995.
10.3 Agreement between Associated Wholesale Grocers, Inc. and Gen-
eral Drivers, Chauffeurs and Helpers Local Union Number 886
dated April 23, 1995.
10.4 Agreement between Associated Wholesale Grocers, Inc. and De-
partment Store, Package, Grocery, Paper House, Liquor and Meat
Drivers, Helpers and Warehousemen Local Union Number 955 dated
January 12, 1994.
10.5 Agreement between Associated Wholesale Grocers, Inc. and Team-
ster Local Union Number 245 dated April 30, 1995.
10.6 Unsecured Credit Agreement among Associated Wholesale Grocers,
Inc. and its subsidiaries and UMB Bank, N.A., Harris Trust and
Savings Bank, NBD Bank and UMB Bank, N.A. as agent dated April
17, 1995.
10.7 Associated Wholesale Grocers, Inc. Nonqualified Deferred Com-
pensation Plan
10.8 Associated Wholesale Grocers, Inc. Pension Restoration Plan
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Blackwell Sanders Matheny Weary & Lombardi L.C.
(Included in Exhibits 5 and 8.1).
24 Powers of Attorney
99.1 Form of Proxy to be used in connection with the Special Meet-
ing of Shareholders of Associated Wholesale Grocers, Inc.--
Class A Common Stock
99.2 Form of Proxy to be used in connection with the Special Meet-
ing of Shareholders of Associated Wholesale Grocers, Inc.--
Class B Common Stock
99.3 Form of Informational Statement
99.4 Consent of Lazard Freres & Co. LLC
99.5 Consent of Smith Barney Inc.
99.6 Consent of George K. Baum & Company
</TABLE>
- --------
*To be filed by Amendment
II-5
<PAGE>
EXHIBIT 5
_____________, 1996
Associated Wholesale Grocers Group, Inc.
5000 Kansas Avenue
Kansas City, Kansas 66106
Ladies and Gentlemen:
We have acted as special counsel to Associated Wholesale Grocers Group,
Inc., a Kansas corporation (the "Company"), in connection with the transactions
contemplated by the Agreement and Plan of Merger, dated as of _____________,
1996 (the "Merger Agreement"), by and among Associated Wholesale Grocers, Inc.,
a Missouri corporation ("AWG"), AWG Merger Corp., a Missouri corporation
("Merger Corp."), and the Company.
This opinion is being furnished in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the
"Securities Act").
Pursuant to the Merger Agreement, AWG and Merger Corp. will be merged with
and into the Company, with the Company being the surviving corporation (the
"Merger"). In the Merger, the outstanding shares of Class A and Class B common
stock, $100 par value, of AWG (AWG Common Stock"), other than any shares owned
by AWG, Merger Corp., the Company or any of their wholly-owned subsidiaries
(which shares will be canceled), will be canceled and converted into 25,000,000
fully paid and nonassessable shares of common stock, $0.01 par value, of the
Company (the "Company Common Stock"). The number of shares of the Company Common
Stock issued to any individual will be rounded down to the nearest whole share.
In connection with the transactions contemplated by the Merger Agreement,
the Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (File No. ______) (the
"Registration Statement") relating to the registration under the Securities Act
of the shares of the Company Common Stock to be issued in the Merger.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Registration Statement, (ii) the Articles of Incorporation and By-laws
of the Company, as in effect on the date hereof, (iii) the Merger Agreement and
(iv) certain resolutions of the Board of Directors of the Company relating to
the Merger. We have also examined originals or copies, certified or otherwise
identified to our
<PAGE>
satisfaction, of such documents as we have deemed necessary or appropriate as a
basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the completeness and authenticity of
all documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified or photostatic copies and the
completeness and authenticity of the originals of such latter documents. In
making our examination of documents executed by parties other than the Company,
we have assumed that such parties had the power, corporate or other, to enter
into and perform all obligations thereunder and have also assumed the due
authorization by all requisite action, corporate or other, and execution and
delivery by such parties of such documents on such parties. As to any facts
material to the opinion expressed herein which were not independently
established or verified, we have relied upon oral or written statements and
representations of officers and other representations of the Company and others.
Members of our firm are admitted to the Bar in the State of Kansas, and we
do not express any opinion as to the laws of any other jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that the
shares of the Company Common Stock, when issued upon the consummation of the
Merger in accordance with the terms of the Merger Agreement and as set forth in
the Registration Statement, will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement and to the reference to our firm under the
heading "LEGAL MATTERS" in the related Proxy Statement/Prospectus which
forms a part of the Registration Statement. In giving such consent we do not
thereby admit or imply that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Commission thereunder.
Very truly yours,
<PAGE>
Exhibit 8.1
DRAFT
BBSMOLIAR
081996
[BLACKWELL SANDERS MATHENY WEARY & LOMBARDI L.C. LETTERHEAD]
, 1996
Associated Wholesale Grocers, Inc.
5000 Kansas Avenue
Kansas City, Kansas 66103
Attention: Francis Pellegrino Puhl, Esq.
Ladies and Gentlemen:
You have asked for our opinion about certain federal income tax
consequences of the transactions (the "Transactions") described below, which are
more fully described in the Proxy Statement/Prospectus of Associated Wholesale
Grocers Group, Inc. ("AWG Group") dated as of _____________, 1996 (the
"Prospectus") filed as part of the Registration Statement on Form S-4 filed by
AWG Group on ___________, 1996 (the "Registration Statement"). All capitalized
terms used herein, unless otherwise specified, have the meanings assigned to
them in the Prospectus.
In rendering our opinion, we have examined and relied on the accuracy and
completeness of the facts, information, covenants and representations contained
in the Prospectus, the Agreement and Plan of Merger between AWG Group and
Associated Wholesale Grocers, Inc. ("AWG") dated as of _____________, 1996 (the
"Merger Agreement") and originals, or copies, certified or otherwise identified
to our satisfaction, of such other documents as we have deemed necessary or
appropriate as the basis for our opinion. We have also made certain assumptions,
which are described below. Our opinion is conditioned on, among other things,
the accuracy of such facts, information, covenants, representations and
assumptions as of the time the Merger Agreement is consummated.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of such documents. We have also assumed that the Merger Agreement
will be consummated in accordance with its terms and as described in the
Prospectus.
In rendering our opinion we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
promulgated under
<PAGE>
the Code, pertinent judicial authorities, interpretive rulings of the Internal
Revenue Service and such other authorities as we have considered relevant. It
should be noted that statutes, regulations, judicial decisions and
administrative interpretations are subject to change at any time and, in some
circumstances, with retroactive effect. A material change in the authorities
upon which our opinion is based could affect our conclusions.
The Transactions
----------------
The following summarizes the Transactions and related facts.
AWG is a corporation organized under Missouri law and operating as a
wholesale grocery distributor for the benefit of its shareholders. Its
outstanding stock consists of Class A voting common stock ("Class A") and Class
B nonvoting common stock ("Class B"). Class A is owned by retail grocers who
purchase inventory from AWG and is divided equally among the shareholders.
Class B is owned only by Class A holders, but not all Class A holders own Class
B. No holder of Class A or Class B is a dealer in AWG stock. AWG's bylaws
require the redemption of both Class A and Class B for book value from retailers
who tender their shares. All shareholders are entitled to distributions from
AWG based solely on the volume of their purchases from AWG, and AWG reduces its
taxable income for Federal income tax purposes by the amounts of these
distributions pursuant to section 1382(b) of the Code.
In August of 1996, AWG formed AWG Group as a wholly owned subsidiary under
Kansas law and AWG Group formed AWG Merger Corp. as a wholly owned subsidiary
under Missouri law. Before the transactions contemplated by the Merger
Agreement AWG Group and AWG Merger Corp. had only nominal assets and
liabilities. Under the Merger Agreement AWG Merger Corp. will merge with AWG
(the "Merger"); AWG will survive; AWG Group will become the sole shareholder of
AWG; shares of AWG Group held by AWG and shares of AWG Merger Corp. held by AWG
Group will be canceled, and each share of Class A and Class B will be converted
into a certain number of shares of the single class of AWG Group Common Stock.
The terms of the Merger Agreement do not call for the issuance of fractional
shares of AWG Group Common Stock or cash in lieu thereof. Shareholders of AWG
will also receive additional AWG Group Common Stock based on the historical
volume of their qualifying purchases from AWG. At the same time AWG Group will
offer shares of its common stock in an underwritten firm commitment public
offering in which the underwriters will purchase AWG Group Common Stock for
their own account but will have only transitory ownership. After the Merger
Agreement is consummated, AWG will terminate any obligations to make
distributions to shareholders based on patronage or to redeem stock.
Assumptions
-----------
We have made the following assumptions:
1. No stock or securities will be issued for services rendered to or
for the benefit of AWG Group or AWG in connection with the Merger. AWG
Group does
-2-
<PAGE>
plan to issue stock options to employees pursuant to incentive plans on and
after the date of the Merger.
2. No stock or securities will be issued for indebtedness of AWG
Group in the Transactions.
3. The Transactions will not involve any transfers of receivables or
payables.
4. No patents, patent applications, copyrights, franchises,
trademarks, trade names, or technical "know-how" is being transferred in
exchange for stock in the Transactions.
5. All of the stock being transferred to AWG Group is common stock.
6. The shareholders of AWG will not retain any rights in the stock of
AWG that they transfer to AWG Group except their rights as shareholders in
AWG Group itself.
7. The only solicitation by a promoter, broker, or investment house
that affected the Transactions is the work of Lazard Freres & Co. LLC,
Smith Barney, Inc., and George K. Baum & Company and the members of their
syndicate in organizing the public offering of the AWG Group Common Stock.
8. The shareholders of AWG will receive solely AWG Group Common Stock
in exchange for their stock and other rights in AWG. The shareholders of
AWG have no plan to dispose of as much as 50% of the shares of AWG Group
Common Stock that they receive in the Transactions and changes in the share
holdings of AWG during the past five years have not involved as much as 50%
of the outstanding shares.
9. AWG Group will not assume any debt or take any AWG Common Stock
subject to debt in the Transactions. There is no indebtedness between the
shareholders of AWG and AWG Group and the transaction will not create any
indebtedness in favor of the shareholders of AWG.
10. All of the transactions, including the Merger and the public
offering, will occur under a plan agreed upon before the Transactions in
which the rights of the parties are defined. The Merger and the public
offering will occur on approximately the same date. No stock will be
placed in escrow or be issued later under a contingent stock arrangement.
11. AWG Group has no plan or intention to redeem or otherwise
reacquire any stock to be issued in the Transactions. Taking into account
any issuance of additional shares of AWG Group Common Stock, any issuance
of stock for services, the exercise of any stock rights, warrants, or
subscriptions, the public offering of AWG Group
-3-
<PAGE>
Common Stock, and the sale, exchange, transfer by gift, or other
disposition of any stock of AWG Group to be received in the Merger or the
public offering, the transferors to AWG Group will own stock possessing
more then 80% of the total combined voting power of all classes of voting
stock of AWG Group immediately after the transfers; there will be no
nonvoting stock of AWG Group.
12. Each former AWG Shareholder will receive stock of AWG Group that
represents a fair and reasonable allocation of the shares of AWG Group
among former AWG shareholders; all other transferors will receive stock of
AWG Group with a fair market value approximately equal to the cash they
will pay for those shares.
13. AWG Group will remain in existence and retain the use of the
stock of AWG in its role as a holding company. AWG Group has no plan or
intention to dispose of the stock of AWG.
14. All of the parties to the Transactions will pay their own
expenses.
15. After the Transactions AWG Group will not be a regulated
investment company or a real estate investment trust, and less than 80% of
its assets will consist of readily marketable securities or interests in
regulated investment companies or real estate investment trusts.
16. None of the transferors is under the jurisdiction of a court in
an insolvency proceeding except for Homeland Stores, Inc., which is being
reorganized under Chapter XI of the Bankruptcy Code and will exchange 15
shares of Class A representing less than 1% of the total outstanding Class
A for shares of AWG Group Common Stock representing less than 10% of the
shares to be issued in the Merger.
17. AWG Group will not elect to be taxed as a "small business
corporation."
18. No substantial part of AWG's activities will consist of the
performance of personal services, although AWG will offer operational
advice and similar services to retailers.
Opinion
-------
In our opinion the consummation of the Merger Agreement and the public
offering of the shares of AWG Group Common Stock will constitute parts of a tax-
free exchange described in section 351(a) of the Code. Consequently:
(1) Under section 351(a) of the Code shareholders of AWG will not
recognize gain or loss on the receipt of AWG Group Common Stock upon
consummation of the Merger Agreement.
-4-
<PAGE>
(2) AWG will not recognize gain or loss as a result of the
consummation of the Merger Agreement.
(3) Under section 358 of the Code, the basis of AWG Group Common
Stock in the hands of former shareholders of AWG will equal the basis
of Class A and Class B exchanged for that AWG Group Common Stock.
(4) Under section 1223(1) of the Code the holding period of AWG
Group Common Stock received by shareholders of AWG upon consummation
of the Merger Agreement will include the holding period of the Class A
and Class B exchanged for that AWG Group Common Stock.
(5) The consummation of the Merger Agreement will not affect the
basis or holding period of the assets of AWG.
Except as set forth above, we express no opinion to any party as to the
consequences of the consummation of the Merger Agreement or the other
transactions described in this letter. We consent to the filing of this opinion
as an Exhibit to the Registration Statement and to references to this opinion
and to Blackwell Sanders Matheny Weary & Lombardi L.C. in the Prospectus. In
giving this consent, we do not admit or imply that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.
Except as stated in this paragraph, this opinion is not to be used, circulated,
quoted or otherwise referred to for any purpose without our express consent.
Very truly yours,
-5-
<PAGE>
Exhibit 8.2
August 20, 1996
PRIVATE & CONFIDENTIAL
Frances P. Puhl, Esq.
Vice President and General Counsel
Associated Wholesale Grocers, Inc.
P.O. Box 2932
Kansas City, KS 66110-2932
Dear Ms. Puhl:
You have requested the opinion of KPMG Peat Marwick LLP as to the federal income
tax consequences to the members of Associated Wholesale Grocers, Inc. (AWG) of
the proposed transaction whereby AWG will convert from a corporation operating
as a cooperative to a regular corporation for U.S. income tax purposes. In
conjunction with the conversion of AWG into a regular corporation, the members
of AWG will exchange their membership interests and AWG Class A and Class B
shares for shares of stock in a newly-created holding company, Associated
Wholesale Grocers Group, Inc. (Group). Our opinion is based solely upon the
assumptions contained herein as well as the documents that we have reviewed. We
assume for purposes of this opinion that the transactions detailed in the
documents we have reviewed are consummated in accordance with the terms of those
documents./1/
Scope of Opinion
We assume that the facts and assumptions as set forth in the "FACTS", "PROPOSED
TRANSACTION" and "ASSUMPTIONS" sections of this letter provide an accurate and
- -------------------------
/1/ We have obtained this information from a draft Form S-4 filing for Group
dated July 1, 1996, a memorandum from Joe Campbell of AWG dated March 28, 1996,
two memoranda from James M. Ash of Blackwell Sanders dated May 17, 1996, and a
memorandum from Burton B. Smoliar of Blackwell Sanders dated June 13, 1996.
<PAGE>
Page 2
Ms Frances P. Puhl, Esq.
Associated Wholesale Grocers, Inc.
August 20, 1996
complete description of the facts of the proposed transaction, and we have made
no independent inquiry as to verify any of them. Any variance or omission in
the facts and circumstances or assumptions may adversely affect our views stated
herein.
Please note that our opinion is limited in scope as to the federal income tax
consequences to the nondissenting AWG members of the transfer of their
membership interests and Class A and Class B shares to Group for shares of Group
stock. We express no opinion herein as to the federal income tax consequences to
any other party to the proposed transaction or with respect to any other issues
which may arise concerning the proposed transaction. Further, we express no
opinion as to the federal tax consequences of the receipt of options under the
Recent Shareholder Option Program to any of the parties involved in the
transaction.
FACTS
The relevant facts, as we understand them, are as follows:
AWG
. AWG is a domestic corporation incorporated as a Missouri corporation circa
1926. AWG has, since the early 1950's operated on a cooperative basis for
federal income tax purposes under section 1381(a)(2)./2/ As such, the
majority of AWG'S sales have been made to AWG members (which primarily
operate as retail grocery stores) who have purchased products pursuant to
patronage rights and receive annual patronage rebates with respect to their
purchases.
. AWG is the common parent corporation of a group of corporations that files
a consolidated federal income tax return. Each subsidiary of AWG operates
on a non-cooperative basis.
- -----------------------------
/2/ All section references, unless otherwise noted, are to the Internal Revenue
Code of 1986 (the "Code"), as amended, and the regulations promulgated
thereunder.
<PAGE>
Page 3
Ms Frances P. Puhl, Esq.
Associated Wholesale Grocers, Inc.
August 20, 1996
. AWG has two classes of common stock outstanding. Class A is a voting common
stock. Class B is a non-voting common stock. Each member of AWG is required to
purchase and own 15 shares of the Class A common stock irrespective of the
volume of their purchases from AWG, while no members are required to purchase
or own any of the Class B common stock. (The Class B common stock was issued
circa 1987 to the then-existing members of AWG. Very few members since that
time have purchased any Class B shares.) In excess of 300 independent members
each hold at least 15 shares of AWG Class A stock. A number of groups own more
than one group of 15 shares of Class A shares. This situation arises in a
limited number of cases where the members own their retail grocery stores, and
have AWG membership, in more than one legal entity.
. The by-laws of AWG provide that any member desiring to dispose of its AWG
shares must first offer such shares to AWG. AWG must agree to buy back the
shares at a formulae price. Additionally, the by-laws and articles of
incorporation AWG are silent with respect to addressing the amounts a member
would receive in the event of a liquidation of AWG.
. AWG pays its annual patronage distribution in the form of cash and written
notices of allocation (referred to herein as"patronage rebate certificates").
The patronage rebate certificates are in the form of interest-bearing notes,
with a fixed maturity of seven years. AWG pays interest annually on the notes
and redeems the certificates as they mature. The notes are treated as debt for
federal income tax purposes, and the interest expense is deducted by AWG. (For
purposes of this opinion letter, we are assuming that the "patronage rebate
certificates" constitute valid debt for federal income tax purposes.)
. AWG annually retains some income and pays income tax thereon. In addition, the
annual after-tax earnings of the non-cooperative subsidiaries are retained to
increase the book value of the consolidate group. Members retiring annually
from AWG receive the formula price determined for the year that they cease to
be a member of AWG.
Associated Wholesale Grocers Group, Inc. (Group)
<PAGE>
Page 4
Ms Frances P. Puhl, Esq.
Associated Wholesale Grocers, Inc.
August 20, 1996
. Group is a wholly-owned domestic subsidiary of AWG which was formed in
August, 1996, under Kansas law in order to effect the proposed transaction.
Before the proposed transaction, Group will have only nominal assets and
liabilities and no income. After the proposed transaction, Group will be a
holding company for AWG.
AWG Merger Corp.
. AWG Merger Corp. (Mergeco) was formed in August, 1996, under Missouri law
as a wholly-owned stock corporation of Group in order to effect the
proposed transaction. Before the proposed transaction, Mergeco will have
only nominal assets and liabilities and no income. Mergeco will be merged
into AWG as part of the transaction.
Proposed Transaction
The steps of the proposed transaction are as follows:
1. As a result of the merger of Mergeco into AWG, with AWG as the surviving
entity, the nondissenting AWG members will transfer their Class A and Class
B shares, as well as all their other rights in AWG to Group in exchange for
newly-issued Group common shares. Certain recent members of AWG will also
receive Group stock options, as further discussed below. Dissenting AWG
members will receive cash equal to the fair market value of their AWG
shares.
Thus after the merger of Mergeco into AWG, Group will own 100 percent of
AWG which will continue to own its subsidiaries. As a result of the
acquisition by Group of AWG, AWG will cease to be a cooperative and become
a regular corporation. Such conversion of AWG from a cooperative will not
involve, either directly or constructively, the transfer of the assets of
AWG, after its acquisition by Group, to another corporation.
2. Group will issue additional shares to the public in an initial public
offering (IPO). The shares offered to the public could exceed 30 percent of
the total outstanding Group shares. The IPO will be a "firm commitment"
underwriting whereby the underwriter will contractually bind itself to
purchase a specified number of Group
<PAGE>
Page 5
Ms Frances P. Puhl, Esq.
Associated Wholesale Grocers, Inc.
August 20, 1996
shares. It is expected that most of the AWG shares purchased by the
underwriter will be resold.
Following the proposed transaction, Group will take the following steps:
1. Group will transfer a portion of the IPO proceeds to AWG to effect the early
redemption of certain outstanding patronage rebate certificates and to
repay all member deposit certificates. Members having patronage rebate
certificates having an aggregate face value of less than $1 million will
have such certificates redeemed early by AWG for cash at face value. Members
having patronage rebate certificates that have an aggregate face value of $1
million or more will not have such certificates redeemed early and will be
paid as such certificates mature. Any patronage rebate certificates which
are redeemed will be redeemed by AWG, rather than acquired by Group.
No additional debt will be created in the proposed transaction and no debt
will be distributed to the transferors.
2. AWG will pay cash to the pre-transaction AWG members for the patronage
rebates relating to the short cooperative year created as a result of the
proposed transaction. A portion of the net proceeds of the initial public
offering may be used by AWG to redeem a portion of the outstanding AWG
patronage certificates.
3. Group will institute two separate stock option plans for recent members and
new customers, as follows:
The Recent Shareholder Option Program will apply to members who acquired
their initial AWG shares after a specified "program beginning" date (after
January 1, 1996). The goal of this plan is to give these new AWG members
incentive to maintain a buying relationship with AWG following the proposed
transaction, as such members would receive few Group shares under the
conversion formula (described below) due to their short history of purchases
from AWG. These options will be granted concurrently with the IPO and will
be exercisable at the IPO price per share during only a 90-day period
beginning three years after the grant date. A respective recent member's
options will lapse if throughout the three-year period
<PAGE>
Page 6
Ms Frances P. Puhl, Esq.
Associated Wholesale Grocers, Inc.
August 20, 1996
such recent member does not maintain a specified level of purchasing
activity from AWG.
The New Customer Incentive Program will be aimed at replacing the incentive
of patronage rebates that AWG has heretofore as a cooperative been able to
offer new retailers. Approximately five percent of Group's outstanding
shares immediately following the IPO will be reserved for issuance under
this option program. Group will have complete discretion as to which new
customers are granted options and, if so, how many options will be granted.
These options will be granted at the market price of the Group stock at the
grant date and will be exercisable for only a 90-day period at the end of
three years from the grant date. A respective new customer's options will
lapse if throughout the three-year period such new customer does not
maintain an anticipated level of purchasing activity from AWG. The Group
shares to be issued under these options will be freely-transferable.
The following additional facts are relevant to the proposed transaction:
. The amount of Group shares to be received by each nondissenting member will
be determined under a conversion formula. Such conversion formula will
essentially provide that a portion of the total value of Group shares to be
distributed will be allocated among the nondissenting AWG members based
upon the book value of their current stock ownership in AWG. Given that the
book value of all shares of AWG common stock was approximately $27,700,000
as of June 15, 1996 and that the AWG board of directors, based on a
valuation analysis prepared by AWG's investment banker, has estimated the
current fair market value of AWG to be approximately $500,000,000, the
allotment of Group shares based on book value will approximate six percent
of the Group shares outstanding. The approximate 94 percent of Group shares
remaining will be allocated among the nondissenting AWG members based upon
their relative volume of qualifying purchases from AWG during the prior
seven fiscal years plus the current year through and including September 7,
1996. (Note that these percentages assume that there are no dissenting AWG
members.)
<PAGE>
Page 7
Ms Frances P. Puhl, Esq.
Associated Wholesale Grocers, Inc.
August 20, 1996
. Shares of Group issued to the nondissenting AWG members will be
nontransferable for a period of two years, except in limited circumstances.
. Shares of Group bought by the public will be freely-transferable.
. We understand that AWG's management has the option to terminate the
proposed transaction subsequent to shareholder approval of such, should AWG
be unable to secure a satisfactory firm commitment underwriting contract
for the IPO.
ASSUMPTIONS
In addition to the facts set forth above, the following assumptions have been
made in connection with the proposed transaction:
1. The fair market value of the Group stock to be received by the transferors
(the members of AWG and the public investors) will, in each instance, be
approximately equal to the fair market value of the property transferred to
Group.
2. The total amount of shares of Group issued for services rendered or to be
rendered to or for the benefit of Group in connection with the proposed
transaction will not exceed twenty percent of the total Group shares
outstanding after the transaction.
3. No stock will be issued for indebtedness of either Group or AWG.
4. The transferors will not retain any rights in the property transferred to
Group.
5. Group will not assume any liabilities of any of the transferors nor will
any of the property transferred to Group be subject to any liabilities.
6. None of the property transferred to Group in the proposed transaction was
received in the liquidation of another corporation.
7. There is no indebtedness between the transferors and Group, and there will
be no indebtedness created in favor of any of the transferors as a result
of the proposed transaction.
<PAGE>
Page 8
Ms Frances P. Puhl, Esq.
Associated Wholesale Grocers, Inc.
August 20, 1996
8. The transfers and exchanges will occur under a plan agreed upon before the
transaction in which the rights of the parties are defined.
9. All exchanges will occur on approximately the same date.
10. There is no present plan or intention on the part of Group, or any entity
related to Group to redeem or otherwise reacquire any stock to be issued in
the proposed transaction.
11. The transferors of property to Group will be in control of Group within the
meaning of section 368(c) (eighty percent of all the shares of Group
entitled to vote as well as eighty percent of each separate class of Group
nonvoting shares), taking into account any sales or other dispositions of
Group shares that are pursuant to a binding commitment entered into by any
of the transferors prior to or contemporaneous with the transfer to Group,
shares of Group stock issued for services rendered or to be rendered to
Group/AWG, and any shares of Group stock issued to a member of AWG that is
under the jurisdiction of a court in a title 11 or similar case (within the
meaning of section 368(a)(3)(A)), to the extent that the Group shares
received are used to satisfy the indebtedness of the debtor.
12. Group will remain in existence and retain the property transferred to it as
a holding company.
13. AWG will remain in existence as a wholly-owned subsidiary of Group and will
continue its trade or business.
14. The active AWG subsidiaries will remain in existence as subsidiaries of AWG
and will continue their trades or businesses.
15. The structure of the transaction does not contemplate the disposal by Group
of the transferred property other than in the normal course of business
operations.
16. Each of the parties to the transaction will pay its own expenses, if any,
to be incurred in connection with the proposed transaction.
<PAGE>
Page 9
Ms Frances P. Puhl, Esq.
Associated Wholesale Grocers, Inc.
August 20, 1996
17. Group will not be an investment company within the meaning of section
351(e)(1) and Reg. Sec. 1.351-1(c)(1)(ii) as its assets will constitute the
shares of AWG.
18. Other than one situation, none of the transferors are, as of the date of the
transaction, under the jurisdiction of a court in a Title 11 or similar case
(within the meaning of section 368(a)(3)(A)), and the stock received in the
exchange will not be used to satisfy the indebtedness of such debtor.
19. There exists no plan or intention on the part of the transferors to
liquidate or merge Group or to dispose of any of the Group stock received by
them in the transaction.
20. Neither the transferors nor any person acquiring shares of Group pursuant
to an offering of such shares will retain any rights in the property
transferred to Group other than through ownership of Group shares.
21. The IPO of Group shares will be effected by a firm commitment underwriting
whereby the underwriters will have "transitory" ownership of the Group
shares, as defined in Reg. Sec. 1.351-1(a)(3)(i).
22. None of the optionees under either the Recent Member Option Adjustment
Program or the New Customer Incentive Program are or will be subject to a
binding commitment to exercise any options.
OPINIONS
Based on the facts and representations set forth above, it is the opinion of
KPMG Peat Marwick, LLP that:
1. No gain or loss should be recognized by any of the AWG members upon the
transfer of their AWG Class A shares, AWG Class B shares and their
membership rights to Group to the extent that they receive shares of Group
stock. Section 351.
2. The basis of the Group stock to be receive by each member of AWG that
receives shares of Group in the transaction will be the same as the basis of
the property transferred by each transferor to Group immediately prior to
the exchange, increased
<PAGE>
Page 10
Ms Frances P. Puhl, Esq.
Associated Wholesale Grocers, Inc.
August 20, 1996
by the gain recognized (if any) to any of the transferors upon the exchange,
and reduced by the value of property, other than the shares of Group,
received by them from Group in the exchange. Section 358(a)(1).
3. The holding period of the Group stock to be received by a transferor will
include the period during which the transferor held the property which will
be transferred to Group, provided the property transferred by the transferor
is held as a capital asset on the date of the exchange. Section 1223(1).
4. The merger of Mergeco with and into AWG will be disregarded for federal
income tax purposes. Rev. Rul. 73-427, 1973-2 C.B. 301.
Our conclusions are based on the completeness and accuracy of the above-stated
facts and assumptions. If any of the foregoing is not entirely complete or
accurate, it is imperative that we be informed immediately, as the inaccuracy or
incompleteness could have a material effect on our conclusions. We are relying
upon the relevant provisions of the Internal Revenue Code of 1986, as amended,
the regulations thereunder, and the judicial and administrative interpretations
thereof, which are subject to change or modification by subsequent legislative,
regulatory, administrative, or judicial decisions. Any such changes also could
have an effect on the validity of our conclusions. Unless you specifically
request otherwise, we will not update our advice for subsequent changes or
modifications to the law and regulations or to the judicial and administrative
interpretations thereof.
We consent to the filing of this opinion as an Exhibit to the Registration
Statement and to reference to this opinion and to KPMG Peat Marwick LLP under
the heading "Federal Income Tax Consequences of the Merger" in the Proxy
Statement/Prospectus. In giving this consent, we do not admit or imply that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
Very truly yours,
KPMG Peat Marwick LLP
<PAGE>
Page 11
Ms Frances P. Puhl, Esq.
Associated Wholesale Grocers, Inc.
August 20, 1996
SCW:mhf
cc:
Mr. G.P. "Rusty" Jandl - KPMG
Mr. Mike Koeppen - KPMG
Mr. Burton Smoliar - Blackwell Sanders
<PAGE>
EXHIBIT 10.1
ASSOCIATED WHOLESALE GROCERS GROUP, INC.
1996 EQUITY COMPENSATION PLAN
SECTION 1
PURPOSE AND DURATION
1. Effective Date. This Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units and
Performance Shares. This Plan shall become effective upon approval by the Board
of Directors of the Company.
1.2 Purpose of this Plan. This Plan is intended to attract, motivate, and
retain employees of the Company and its Affiliates and consultants who provide
significant services to the Company and its Affiliates. This Plan also is
designed to further the growth and financial success of the Company and its
Affiliates by aligning the interests of the Participants, through the ownership
of Shares and through other equity based incentives, with the interests of the
Company's shareholders.
SECTION 2
DEFINITIONS
The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:
2.1 "1933 Act" means the Securities Act of 1933, as amended. Reference to
a specific section of the 1933 Act or regulation thereunder shall include such
section or regulation, any valid regulation promulgated under such section, and
any comparable provision of any future legislation or regulation amending,
supplementing, or superseding such section or regulation.
2.2 "1934 Act" means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the 1934 Act or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing, or superseding such section or regulation.
2.3 "Affiliate" means any corporation or any other entity, including
partnerships and joint ventures, which, directly or indirectly, controls, is
controlled by, or is under common control with, the Company, whether now or
hereafter existing.
2.4 "Affiliated SAR" means a SAR which is granted in connection with, and
is related to, an Option, and which automatically will be deemed to be exercised
at the same time that such related Option is exercised.
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2.5 "Award" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock,
Performance Units or Performance Shares.
2.6 "Award Agreement" means the written agreement setting forth the terms
and provisions applicable to each Award granted under this Plan.
2.7 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.8 "Change in Control" shall have the meaning assigned to such term in
Section 12.2.
2.9 "Code" means the Internal Revenue Code of 1986, as amended. Reference
to a specific section of the Code or regulation thereunder shall include such
section or regulation, any valid regulation promulgated under such section, and
any comparable provision of any future legislation or regulation amending,
supplementing, or superseding such section or regulation.
2.10 "Committee" means the committee which may be appointed by the Board
pursuant to Section 3.1 to administer this Plan.
2.11 "Company" means Associated Wholesale Grocers Group, Inc., a Kansas
corporation, and any successor thereto. With respect to the definitions of the
Performance Goals, the Committee in its sole discretion may determine that
"Company" means Associated Wholesale Grocers Group, Inc. and its Subsidiaries.
2.12 "Consultant" means any consultant, independent contractor or other
person who provides significant services to the Company or to an Affiliate, and
who is compensated for such services, but who is neither an Employee nor a
Director.
2.13 "Director" means any individual who is a member of the Board of
Directors of the Company.
2.14 "Disability" means a permanent and total disability within the
meaning of Section 22(e)(3) of the Code, provided that in the case of Awards
other than Incentive Stock Options, the Committee in its sole discretion may
determine whether a permanent and total disability exists in accordance with
uniform and nondiscriminatory standards adopted by the Committee from time to
time.
2.15 "Earnings Per Share" means as to any Fiscal Year, the Company's Net
Income or a specified business unit's Pro Forma Net Income, divided by a
weighted average number of Shares outstanding calculated on a fully diluted
basis.
2.16 "Employee" means any employee of the Company or of an Affiliate,
whether now or hereafter employed.
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2.17 "Exercise Price" means the price at which a Share may be purchased by
a Participant pursuant to the exercise of an Option.
2.18 "Fair Market Value" means, in descending order of determination, (i)
the last quoted per share selling price at which Shares were traded, as reported
in The Wall Street Journal; provided that the most recent trade date is less
than sixty (60) days prior to the date of determining Fair Market Value
hereunder, or (ii) the value determined in good faith by the Committee in
accordance with uniform and nondiscriminatory standards. Notwithstanding the
preceding, for federal, state and local income tax reporting purposes, fair
market value shall be determined by the Committee or its delegate in accordance
with uniform and nondiscriminatory standards adopted by it from time to time.
2.19 "Fiscal Year" means the fiscal year of the Company.
2.20 "Freestanding SAR" means a SAR that is granted independently of any
Option.
2.21 "Grant Date" means, with respect to an Award, the date on which the
Award was granted.
2.22 "Incentive Stock Option" means an Option to purchase Shares which is
designated as an Incentive Stock Option, and is intended to meet the
requirements of Section 422 of the Code.
2.23 "Individual MBOs" means as to a Participant, the objective and
measurable goals set by a "management by objectives" process, and approved by
the Committee in its sole discretion.
2.24 "Net Income" means as to any Fiscal Year, the income after taxes of
the Company for that Fiscal Year determined in accordance with generally
accepted accounting principles; provided, however, that prior to the Fiscal
Year, the Committee shall determine whether any significant items shall be
included or excluded from the calculation of Net Income with respect to one or
more Participants.
2.25 "Nonqualified Stock Option" means an Option to purchase Shares which
is not an Incentive Stock Option.
2.26 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option granted pursuant to this Plan.
2.27 "Participant" means an Employee or Consultant to whom an outstanding
Award has been granted.
2.28 "Performance Goals" means the goals determined by the Committee in
its sole discretion to be applicable to a Participant with respect to an Award.
As determined by the
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Committee, the Performance Goals applicable to an Award may provide for a
targeted level or levels of achievement using one or more of the following
measures: (a) Earnings Per Share, (b) Individual MBOs, (c) Net Income, (d) Pro
Forma Net Income, (e) Return on Designated Assets, (f) Return on Revenues, and
(g) Satisfaction MBOs. The Performance Goals may differ from Participant to
Participant and from Award to Award.
2.29 "Performance Period" shall have the meaning assigned to such term in
Section 8.3.
2.30 "Performance Share" means an Award granted to a Participant pursuant
to Section 8.
2.31 "Performance Unit" means an Award granted to a Participant pursuant
to Section 8.
2.32 "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock are subject to restrictions. As provided in Section
7, such restrictions may be based on the passage of time, the achievement of
target levels of performance or the occurrence of other events as determined by
the Committee in its sole discretion.
2.33 "Plan" means the Associated Wholesale Grocers Group, Inc. 1996 Equity
Compensation Plan, as set forth in this instrument and as hereafter amended from
time to time.
2.34 "Pro Forma Net Income" means as to any specified business unit for
any Fiscal Year, the portion of the Company's Net Income allocable to such
business unit; provided, however, that prior to such Fiscal Year, the Committee
shall determine the basis on which such allocation shall be made.
2.35 "Restricted Stock" means an Award granted to a Participant pursuant
to Section 7.
2.36 "Retirement" means, in the case of an Employee, a Termination of
Service by reason of the Employee's retirement at or after age sixty-five (65)
or pursuant to any early retirement program instituted by the Company.
2.37 "Return on Designated Assets" means as to any Fiscal Year, (a) the
Pro Forma Net Income of a specified business unit, divided by the average of
that business unit's designated assets measured as of the beginning and end of
such Fiscal Year, or (b) the Net Income of the Company, divided by the average
of the Company's designated assets measured as of the beginning and end of such
Fiscal Year.
2.38 "Return on Revenues" means as to any Fiscal Year, the percentage
equal to the Company's Net Income or a specified business unit's Pro Forma Net
Income, divided by the Company's or that business unit's Annual Revenue.
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2.39 "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, and any
future regulation amending, supplementing, or superseding such regulation.
2.40 "Satisfaction MBOs" means as to any Participant, the objective and
measurable individual goals set by a "management by objectives" process and
approved by the Committee, which goals relate to the satisfaction of external or
internal requirements.
2.41 "Section 16 Person" means a person who, with respect to the Shares,
is subject to Section 16 of the 1934 Act.
2.42 "Shares" means the shares of common stock of the Company.
2.43 "Stock Appreciation Right" or "SAR" means an Award, granted either
alone or in connection with a related Option, that is designated as a SAR
pursuant to Section 6.
2.44 "Subsidiary" means a "subsidiary corporation" as defined in Section
424(f) of the Code, whether now or hereafter existing.
2.45 "Tandem SAR" means a SAR which is granted in connection with, or
related to, an Option, and which requires forfeiture of the right to purchase an
equal number of Shares under the related Option upon the exercise of such SAR;
or alternatively, which requires the cancellation of an equal amount of SAR upon
the purchase of the Shares subject to the Option.
2.46 "Termination of Service" or "Terminates" means (a) in the case of an
Employee, a cessation of the employee-employer relationship between an Employee
and the Company or an Affiliate for any reason, including, but not limited to, a
cessation by resignation, discharge, death, Disability, Retirement or the
disaffiliation of an Affiliate, but excluding any such cessation where there is
a simultaneous reemployment by the Company or by an Affiliate, and (b) in the
case of a Consultant, a cessation of the service relationship between a
Consultant and the Company or an Affiliate for any reason, including, but not
limited to, a cessation by resignation, discharge, death, Disability or the
disaffiliation of an Affiliate, but excluding any such cessation where there is
a simultaneous reengagement of the Consultant by the Company or by an Affiliate.
SECTION 3
ADMINISTRATION
3.1 The Committee. This Plan may be administered by the Board of
Directors or by a Committee appointed by the Board of Directors which shall act
with all powers of the Board under this Plan. If a Committee administers the
Plan, the Committee shall consist of not less than two (2) Directors. The
members of the Committee shall be appointed from time to time by, and shall
serve at the pleasure of, the Board of Directors. The Committee shall be
comprised solely of Directors who both are (a) "nonemployee directors" under
Rule 16b-3, and (b) "outside directors" under Section 162(m) of the Code.
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3.2 Authority of the Committee. It shall be the duty of the Board of
Directors to administer this Plan in accordance with the provisions hereof. The
Board of Directors shall have all powers and discretion necessary or appropriate
to administer this Plan and to control its operation, including, but not limited
to, the power to (a) determine which Employees and Consultants shall be granted
Awards, (b) prescribe the terms and conditions of the Awards, (c) interpret the
terms and provision of this Plan and of the Awards, (d) adopt rules for the
administration, interpretation and application of this Plan, and (e) interpret,
amend, or revoke any such rules.
3.3 Delegation by the Committee. The Board of Directors, in its sole
discretion and on such terms and conditions as it may provide, may delegate all
or any part of its authority and powers under this Plan to one or more directors
or officers of the Company; provided, however, that the Board of Directors may
not delegate its authority and powers (a) with respect to Section 16 Persons, or
(b) in any way which would jeopardize this Plan's qualification under Section
162(m) of the Code or Rule 16b-3.
3.4 Decisions Binding. All determinations and decisions made by the
Board of Directors, the Committee and any delegate of the Committee appointed
pursuant to Section 3.3 shall be final, conclusive, and binding on all persons,
and shall be given the maximum deference permitted by law.
SECTION 4
SHARES SUBJECT TO THIS PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3,
the total number of Shares available for grant under this Plan shall not exceed
ten percent of the shares outstanding after the Company's initial public
offering. Shares granted under this Plan may be either authorized but unissued
Shares or treasury Shares, or any combination thereof.
4.2 Lapsed Awards. If an Award is settled in cash, or is cancelled,
terminates, expires or lapses for any reason (with the exception of the
termination of a Tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the corresponding Tandem SAR),
any Shares subject to such Award thereafter shall be available to be the subject
of a subsequent Award.
4.3 Adjustments in Awards and Authorized Shares. In the event of any
merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, stock split, Share combination, or other change in
the corporate structure of the Company affecting the Shares, the Board shall
adjust the number and class of Shares which may be delivered under this Plan,
the number, class, and price of Shares subject to outstanding Awards, and the
numerical limits of Sections 4.1, 5.1, 6.1.1, 7.1 and 8.1, in such manner as the
Board in its sole discretion shall determine to be advisable or appropriate to
prevent the dilution or diminution of such
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Awards. Notwithstanding the preceding, the number of Shares subject to any
Award always shall be a whole number.
SECTION 5
STOCK OPTIONS
5.1 Grant of Options. Subject to the terms and provisions of this Plan,
Options may be granted to Employees and Consultants at any time and from time to
time as determined by the Board in its sole discretion. The Board in its sole
discretion shall determine the number of Shares subject to each Option;
provided, however, that during any Fiscal Year, no Participant shall be granted
Options covering more than 250,000 Shares. The Board may grant Incentive Stock
Options, Nonqualified Stock Options, or any combination thereof.
5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement
that shall specify the Exercise Price, the expiration date of the Option, the
number of Shares to which the Option pertains, any conditions to exercise of the
Option and such other terms and conditions as the Board in its sole discretion
shall determine. The Award Agreement also shall specify whether the Option is
intended to be an Incentive Stock Option or a Nonqualified Stock Option.
5.3 Exercise Price. Subject to the provisions of this Section 5.3, the
Exercise Price per Share for each Option shall be determined by the Board in its
sole discretion.
5.3.1 Nonqualified Stock Options. In the case of a Nonqualified
Stock Option, the Exercise Price per Share shall be not less than one
hundred percent (100%) of the Fair Market Value of a Share on the Grant
Date.
5.3.2 Incentive Stock Options. In the case of an Incentive Stock
Option, the Exercise Price per Share shall be not less than one hundred
percent (100%) of the Fair Market Value of a Share on the Grant Date;
provided, however, that if on the Grant Date, the Employee (together with
persons whose stock ownership is attributed to the Employee pursuant to
Section 424(d) of the Code) owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any
of its Subsidiaries, the Exercise Price per Share shall be not less than
one hundred ten percent (110%) of the Fair Market Value of a Share on the
Grant Date.
5.3.3 Substitute Options. Notwithstanding the provisions of Sections
5.3.1 and 5.3.2, in the event that the Company or an Affiliate consummates
a transaction described in Section 424(a) of the Code (e.g., the
acquisition of property or stock from an unrelated corporation), persons
who become Employees or Consultants on account of such transaction may be
granted Options in substitution for options granted by such former employer
or recipient of services. If such substitute Options are granted, the
Board, in its sole discretion and consistent with Section 424(a) of the
Code, may determine that such
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substitute Options shall have an Exercise Price per Share less than one
hundred (100%) of the Fair Market Value of the Shares on the Grant Date.
5.4 Expiration of Options.
5.4.1 Expiration Dates. Each Option shall terminate no later than
the earlier of the first to occur of the following events:
(a) The date for termination of the Option set forth in the
Award Agreement; or
(b) The expiration of ten (10) years from the Grant Date
(except as provided in Section 5.8.2 regarding Incentive Stock
Options); or
(c) The expiration of 90 days from the date of the Optionee's
Termination of Service for a reason other than the Optionee's death,
Disability or Retirement (except as provided in Section 5.8.2
regarding Incentive Stock Options).
5.4.2 Board Discretion. Subject to the limits of Section 5.4.1, the
Board in its sole discretion (a) shall provide in each Award Agreement
when each Option expires and becomes unexercisable and (b) may, after an
Option is granted, extend the maximum term of the Option (subject to
Section 5.8.4 regarding Incentive Stock Options), provided however, in the
case of Incentive Stock Options, that the maximum term of the Option may
not be extended if the Fair Market Value per Share is greater than the
Exercise Price per Share.
5.5 Exercisability of Options. Options granted under this Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Board shall determine in its sole discretion. After an Option is granted,
the Board in its sole discretion may accelerate the exercisability of the
Option. However, in no event may any Option granted to a Section 16 Person be
exercisable until at least six (6) months following the Grant Date or such
shorter period as may be permissible while maintaining compliance with Rule 16b-
3.
5.6 Payment. Options shall be exercised by the Participant's delivery of
a written notice of exercise to the Secretary of the Company or its designee,
setting forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares. Upon the exercise of any
Option, the Exercise Price shall be payable to the Company in full in cash or by
certified or cashiers check. The Board in its sole discretion also may permit
exercise (a) by tendering previously acquired Shares having an aggregate Fair
Market Value at the time of exercise equal to the total Exercise Price, (b) by
delivery of an executed promissory note representing indebtedness of the
Participant to the Company, (c) by any other means which the Board in its sole
discretion determines (i) to provide legal consideration for the Shares, and
(ii) to be consistent with the purposes of this Plan, or (d) any combination of
the methods of
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payment set forth in this Section. As soon as practicable after receipt of a
written notification of exercise and full payment for the Shares purchased, the
Company shall deliver to the Participant or to the Participant's designated
broker, Share certificates (which may be in book entry form) representing such
Shares.
5.7 Share Transferability. The Board may impose transfer restrictions on
any Shares acquired pursuant to the exercise of an Option as it may deem
advisable or appropriate in its sole discretion, including, but not limited to,
restrictions related to applicable Federal securities laws, the requirements of
any national securities exchange or system upon which Shares are then listed or
traded, and any blue sky or state securities laws.
5.8 Certain Additional Provisions for Incentive Stock Options.
5.8.1 Eligible Participants. Incentive Stock Options may be granted
only to persons who are employees of the Company or a Subsidiary on the
Grant Date.
5.8.2 Exercisability. The aggregate Fair Market Value of the Shares
(as determined on the applicable Grant Date) with respect to which
Incentive Stock Options are exercisable for the first time by any Employee
during any calendar year (under all plans of the Company and its
Subsidiaries) shall not exceed $100,000.
5.8.3 Termination of Service. No Incentive Stock Option may be
exercised more than three (3) months after the Participant's Termination of
Service for any reason other than Disability or death, unless (a) the
Participant dies during such three-month period, and (b) the Award
Agreement or the Board permits later exercise. No Incentive Stock Option
may be exercised more than one (1) year after the Participant's termination
of employment on account of Disability, unless (a) the Participant dies
during such one-year period, and (b) the Award Agreement or the Board
permits later exercise.
5.8.4 Expiration. No Incentive Stock Option may be exercised after the
expiration of ten (10) years from the Grant Date; provided, however, that
if the Option is granted to an Employee who, together with persons whose
stock ownership is attributed to the Employee pursuant to Section 424(d) of
the Code, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any of its Subsidiaries,
the Option may not be exercised after the expiration of five (5) years from
the Grant Date.
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SECTION 6
STOCK APPRECIATION RIGHTS
6.1 Grant of SARs. Subject to the terms and conditions of this Plan, a
SAR may be granted to Employees and Consultants at any time and from time to
time as shall be determined by the Board in its sole discretion. The Board may
grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination
thereof.
6.1.1 Number of Shares. The Board shall have complete discretion to
determine the number of SARs granted to any Participant, provided that
during any Fiscal Year, no Participant shall be granted SARs covering more
than 250,000 Shares.
6.1.2 Exercise Price and Other Terms. The Board, subject to the
provisions of this Plan, shall have complete discretion to determine the
terms and conditions of SARs granted under this Plan; provided, however,
that the exercise price per Share of a Freestanding SAR shall be not less
than one hundred percent (100%) of the Fair Market Value of a Share on the
Grant Date. The exercise price per Share of Tandem or Affiliated SARs
shall equal the Exercise Price per Share of the related Option. In no
event shall a SAR granted to a Section 16 Person become exercisable until
at least six (6) months after the Grant Date or such shorter period as may
be permissible while maintaining compliance with Rule 16b-3.
6.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable. With respect to a Tandem SAR granted in connection with an
Incentive Stock Option: (a) the Tandem SAR shall expire no later than the
expiration of the underlying Incentive Stock Option; (b) the value of the payout
with respect to the Tandem SAR shall be for no more than one hundred percent
(100%) of the difference between the Exercise Price per Share of the underlying
Incentive Stock Option and the Fair Market Value per Share of the Shares subject
to the underlying Incentive Stock Option at the time the Tandem SAR is
exercised; and (c) the Tandem SAR shall be exercisable only when the Fair Market
Value per Share of the Shares subject to the Incentive Stock Option exceeds the
Exercise Price per Share of the Incentive Stock Option.
6.3 Exercise of Affiliated SARs. An Affiliated SAR shall be deemed to be
exercised upon the exercise of the related Option. The deemed exercise of an
Affiliated SAR shall not necessitate a reduction in the number of Shares subject
to the related Option.
6.4 Exercise of Freestanding SARs. Freestanding SARs shall be exercisable
on such terms and conditions as the Board in its sole discretion shall
determine; provided, however, that no SAR granted to a Section 16 Person shall
be exercisable until at least six (6) months after the
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Grant Date or such shorter period as may be permissible while maintaining
compliance with Rule 16b-3.
6.5 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the exercise price per share, the term of the SAR, the
conditions of exercise, and such other terms and conditions as the Board in its
sole discretion shall determine.
6.6 Expiration of SARs. A SAR granted under this Plan shall expire on the
date set forth in the Award Agreement, which date shall be determined by the
Board in its sole discretion. Notwithstanding the foregoing, the terms and
provisions of Section 5.4 also shall apply to SARs.
6.7 Payment of SAR Amount. Upon exercise of a SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying (i) the positive difference between the Fair Market Value of a Share
on the date of exercise over the exercise price per Share by (ii) the number of
Shares with respect to which the SAR is exercised. At the sole discretion of
the Board, the payment upon SAR exercise may be in cash, in Shares of equivalent
value, or in any combination thereof.
SECTION 7
RESTRICTED STOCK
7.1 Grant of Restricted Stock. Subject to the terms and provisions of this
Plan, the Board, at any time and from time to time, may grant Shares of
Restricted Stock to Employees and Consultants in such amounts as the Board in
its sole discretion shall determine. The Board in its sole discretion shall
determine the number of Shares to be granted to each Participant; provided,
however, that during any Fiscal Year, no Participant shall receive more than
100,000 Shares of Restricted Stock and the aggregate number of shares of
Restricted Stock that may be issued under the Plan is limited to 1,000,000
Shares.
7.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be
evidenced by an Award Agreement that shall specify the Period of Restriction,
the number of Shares granted, and such other terms and conditions as the Board
in its sole discretion shall determine. Unless the Board in its sole discretion
determines otherwise, Shares of Restricted Stock shall be held by the Company as
escrow agent until the end of the applicable Period of Restriction.
7.3 Transferability. Except as provided in this Section 7, Shares of
Restricted Stock may not be sold, transferred, gifted, bequeathed, pledged,
assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily,
until the end of the applicable Period of Restriction; provided, however, that
in no event may the restrictions on Restricted Stock granted to a Section 16
Person lapse prior to six (6) months following the Grant Date or such shorter
period as may be permissible while maintaining compliance with Rule 16b-3.
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7.4 Other Restrictions. The Board in its sole discretion may impose such
other restrictions on Shares of Restricted Stock as it may deem advisable or
appropriate in accordance with this Section 7.4.
7.4.1 General Restrictions. The Board may set restrictions based
upon (a) the achievement of specific performance objectives (Company-wide,
divisional or individual), (b) applicable Federal or state securities laws,
(c) continued employment or service to the Company, or (d) any other basis
determined by the Board in its sole discretion.
7.4.2 Section 162(m) Performance Restrictions. For purposes of
qualifying grants of Restricted Stock as "performance-based compensation"
under Section 162(m) of the Code, the Board in its sole discretion may
either condition Awards on the achievement of Performance Goals or set
restrictions based upon the achievement of Performance Goals. The
Performance Goals shall be set by the Board on or before the latest date
permissible to enable the Restricted Stock to qualify as "performance-based
compensation" under Section 162(m) of the Code. In granting Restricted
Stock that is intended to qualify under Section 162(m) of the Code, the
Board shall follow any procedures determined by it in its sole discretion
from time to time to be necessary, advisable, or appropriate to ensure
qualification of the Restricted Stock under Section 162(m) of the Code
(e.g., in determining the Performance Goals).
7.4.3 Legend on Certificates. The Board in its sole discretion may
legend the certificates representing Restricted Stock to give appropriate
notice of such restrictions. For example, the Board may determine that some
or all certificates representing Shares of Restricted Stock shall bear the
following legend:
"THE SALE OR OTHER TRANSFER OF THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY, OR BY OPERATION OF LAW,
IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER IMPOSED PURSUANT TO THE
ASSOCIATED WHOLESALE GROCERS GROUP, INC. 1996 EQUITY COMPENSATION PLAN
AND IN A RESTRICTED STOCK AGREEMENT. A COPY OF THE PLAN AND SUCH
RESTRICTED STOCK AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF
ASSOCIATED WHOLESALE GROCERS GROUP, INC."
7.5 Removal of Restrictions. Except as otherwise provided in this Section
7, Shares of Restricted Stock covered by each Restricted Stock grant made under
this Plan shall be released from escrow as soon as practicable after the end of
the applicable Period of Restriction. The Board in its sole discretion may
accelerate the time at which any restrictions shall lapse and remove any
restrictions; provided, however, that the Period of Restriction on Shares
granted to a Section 16 Person may not lapse until at least six (6) months after
the Grant Date or such shorter period as may be permissible while maintaining
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the applicable Period of Restriction, the Participant shall be entitled to have
any legend or legends under Section 7.4.3 removed from his or her Share
certificate, and the Shares shall be freely transferable by the Participant.
7.6 Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares, unless the applicable Award Agreement provides
otherwise.
7.7 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the applicable Award Agreement. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid. With respect to Restricted Stock
granted to a Section 16 Person, any dividend or distribution that constitutes a
"derivative security" or an "equity security" under Section 16 of the 1934 Act
shall be subject to a Period of Restriction equal to the longer of (a) the
remaining Period of Restriction on the Shares of Restricted Stock with respect
to which the dividend or distribution is paid, or (b) six (6) months or such
shorter period as allowed by Rule 16b-3.
7.8 Return of Restricted Stock to Company. On the date set forth in the
applicable Award Agreement, the Restricted Stock for which the applicable
restrictions have not either lapsed or been satisfied shall revert to the
Company and thereafter shall be available for grant under this Plan.
SECTION 8
PERFORMANCE UNITS AND PERFORMANCE SHARES
8.1 Grant of Performance Units/Shares. Performance Units and Performance
Shares may be granted to Employees and Consultants at any time and from time to
time, as shall be determined by the Board in its sole discretion. The Board
shall have complete discretion in determining the number of Performance Units
and Performance Shares granted to each Participant; provided, however, that
during any Fiscal Year, (a) no Participant shall receive Performance Units
having an initial value greater than $250,000, and (b) no Participant shall
receive more than 100,000 Performance Shares.
8.2 Value of Performance Units/Shares. Each Performance Unit shall have
an initial value that is established by the Board on or before the Grant Date.
Each Performance Share shall have an initial value equal to the Fair Market
Value of a Share on the Grant Date.
8.3 Performance Objectives and Other Terms. The Board shall set
performance objectives in its sole discretion which, depending on the extent to
which they are met, will determine the number or value of Performance Units or
Performance Shares, or both, that will be paid out to
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the Participants. The time period during which the performance objectives must
be met shall be called the "Performance Period." Performance Periods of Awards
granted to Section 16 Persons shall, in all cases, exceed six (6) months in
length or such shorter period as may be permissible while maintaining compliance
with Rule 16b-3. Each Award of Performance Units or Performance Shares shall be
evidenced by an Award Agreement that shall specify the Performance Period, and
such other terms and conditions as the Committee in its sole discretion shall
determine.
8.3.1 General Performance Objectives. The Board may set performance
objectives based upon (a) the achievement of Company-wide, divisional or
individual goals, (b) applicable Federal or state securities laws, or (c)
any other basis determined by the Committee in its discretion.
8.3.2 Section 162(m) Performance Objectives. For purposes of
qualifying grants of Performance Units or Performance Shares as
"performance-based compensation" under Section 162(m) of the Code, the
Board in its sole discretion may determine that the performance objectives
applicable to Performance Units or Performance Shares, as the case may be,
shall be based on the achievement of Performance Goals. The Performance
Goals shall be set by the Board on or before the latest date permissible to
enable the Performance Units or Performance Shares, as the case may be, to
qualify as "performance-based compensation" under Section 162(m) of the
Code. In granting Performance Units or Performance Shares which are
intended to qualify under Section 162(m) of the Code, the Board shall
follow any procedures determined by it from time to time to be necessary or
appropriate in its sole discretion to ensure qualification of the
Performance Units or Performance Shares, as the case may be, under Section
162(m) of the Code (e.g., in determining the Performance Goals).
8.4 Earning of Performance Units/Shares. After the applicable Performance
Period has ended, the holder of Performance Units or Performance Shares shall be
entitled to receive a payout of the number of Performance Units or Performance
Shares, as the case may be, earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance objectives have been achieved. After the grant of a Performance Unit
or Performance Share, the Board in its sole discretion may reduce or waive any
performance objectives for such Performance Unit or Performance Share; provided,
however, that Performance Periods of Awards granted to Section 16 Persons shall
not be less than six (6) months or such shorter period as may be permissible
while maintaining compliance with Rule 16b-3.
8.5 Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units or Performance Shares shall be made as soon as
practicable after the end of the applicable Performance Period. The Board in its
sole discretion may pay earned Performance Units or Performance Shares in the
form of cash, in Shares (which have an aggregate Fair Market
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Value equal to the value of the earned Performance Units or Performance Shares,
as the case may be, at the end of the applicable Performance Period), or in any
combination thereof.
8.6 Cancellation of Performance Units/Shares. On the earlier of the date
set forth in the Award Agreement or the Participant's Termination of Service
(other than by death, Disability or, with respect to an Employee, Retirement),
all unearned or unvested Performance Units or Performance Shares shall be
forfeited to the Company, and thereafter shall be available for grant under this
Plan. In the event of a Participant's death, Disability or, with respect to an
Employee, Retirement, prior to the end of a Performance Period, the Board shall
reduce his or her Performance Units or Performance Shares proportionately based
on the date of such Termination of Service.
SECTION 9
MISCELLANEOUS
9.1 Deferrals. The Board in its sole discretion may permit a Participant
to defer receipt of the payment of cash or the delivery of Shares that would
otherwise be due to such Participant under an Award. Any such deferral election
shall be made at least one year prior to the due date, and shall be subject to
such rules and procedures as shall be determined by the Committee in its sole
discretion.
9.2 No Effect on Employment or Service. Nothing in this Plan shall
interfere with or limit in any way the right of the Company to terminate any
Participant's employment or service at any time, with or without cause. For
purposes of this Plan, transfer of employment of a Participant between the
Company and any of its Affiliates (or between Affiliates) shall not be deemed a
Termination of Service. Employment with the Company and its Affiliates is on an
at-will basis only, unless otherwise provided by an applicable employment
agreement between the Participant and the Company or its Affiliate, as the case
may be.
9.3 Participation. No Employee or Consultant shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to
receive a future Award.
9.4 Indemnification. Each person who is or shall have been a member of
the Board or the Committee shall be indemnified and held harmless by the Company
against and from (a) any loss, cost, liability or expense (including attorneys'
fees) that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit or proceeding to which
he or she may be a party or in which he or she may be involved by reason of any
action taken or failure to act under this Plan or any Award Agreement, and (b)
from any and all amounts paid by him or her in settlement thereof, with the
Company's prior written approval, or paid by him or her in satisfaction of any
judgment in any such claim, action, suit, or proceeding against him or her;
provided, however, that he or she shall give the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes to handle
and defend it on his or her own behalf. The foregoing right of indemnification
shall not be exclusive of any other
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rights of indemnification to which such persons may be entitled under the
Company's incorporation documents or Bylaws, by contract, as a matter of law or
otherwise, or under any power that the Company may have to indemnify them or
hold them harmless.
9.5 Successors. All obligations of the Company under this Plan, with
respect to Awards granted hereunder, shall be binding on any successor of the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation or otherwise, of all or substantially
all of the business or assets of the Company.
9.6 Beneficiary Designations. If permitted by the Board, a Participant
under this Plan may name a beneficiary or beneficiaries to whom any vested but
unpaid Award shall be paid in the event of the Participant's death. Each such
designation shall revoke all prior designations by the Participant, and shall be
effective only if given in a form and manner acceptable to the Board. In the
absence of any such designation, any vested benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate and, subject to
the terms of this Plan and of the applicable Award Agreement, any unexercised
vested Award may be exercised by the administrator or executor of the
Participant's estate.
9.7 No Rights as Shareholder. Except to the limited extent provided in
Sections 7.6 and 7.7, no Participant nor any beneficiary thereof shall have any
of the rights or privileges of a shareholder of the Company with respect to any
Shares issuable pursuant to an Award or the exercise thereof, unless and until
certificates representing such Shares shall have been issued, recorded on the
records of the Company or its transfer agents or registrars, and delivered to
the Participant or his or her beneficiary.
SECTION 10
AMENDMENT, TERMINATION, AND DURATION
10.1 Amendment, Suspension, or Termination. The Board in its sole
discretion may amend or terminate this Plan, or any part thereof, at any time
and for any reason. The amendment, suspension or termination of this Plan shall
not, without the consent of the Participant, alter or impair any rights or
obligations under any Award previously granted to such Participant. No Award
may be granted during any period of suspension or after termination of this
Plan.
10.2 Duration of this Plan. This Plan shall become effective on the date
specified herein, and subject to Section 10.1, shall remain in effect
thereafter; provided, however, that without further shareholder approval, no
Incentive Stock Option may be granted under this Plan after the tenth
anniversary of the effective date of this Plan.
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SECTION 11
TAX WITHHOLDING
11.1 Withholding Requirements. Prior to the delivery of any Shares or
cash pursuant to an Award or the exercise thereof, the Company shall have the
power and the right to deduct or withhold, or require a Participant to remit to
the Company, an amount sufficient to satisfy Federal, state, and local taxes,
including the Participant's Social Security tax obligation, required to be
withheld with respect to such Award or the exercise thereof.
11.2 Withholding Arrangements. The Board, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part, by
(a) electing to have the Company withhold otherwise deliverable Shares, or (b)
delivering to the Company Shares then owned by the Participant having a Fair
Market Value equal to the amount required to be withheld. The amount of the
withholding requirement shall be deemed to include any amount that the Board
agrees may be withheld at the time any such election is made, not to exceed the
amount determined by using the maximum federal, state, or local marginal income
tax rates applicable to the Participant with respect to the Award on the date
that the amount of tax to be withheld is to be determined. The Fair Market
Value of the Shares to be withheld or delivered shall be determined as of the
date that the taxes are required to be withheld.
SECTION 12
CHANGE IN CONTROL
12.1 Change in Control. In the event of a Change in Control of the
Company, all Awards granted under this Plan that are then outstanding and not
then exercisable, or are then subject to restrictions, shall, unless otherwise
provided for in the Agreements applicable thereto, become immediately
exercisable, and all restrictions shall be removed, as of the first date that
the Change in Control shall be deemed to have occurred, and shall remain as such
for the remaining life of the Award as provided herein and within the provisions
of the related Agreements; provided however, that the Board of Directors of the
Company may limit the applicability of this Section with respect to that portion
of any Award to which Section 280G of the Code is applicable.
12.2 Definition. For purposes of Section 12.1 above, a Change in Control
of the Company shall be deemed to have occurred if the conditions set forth in
any one or more of the following shall have been satisfied, unless such
condition shall have received prior approval of a majority vote of the
Continuing Directors, as defined below, indicating that Section 12.1 shall not
apply thereto:
(a) any "person" (as such term is used in Section 13(d) of the
Exchange Act, but excluding the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, or any
corporation owned,
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directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the
Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing thirty percent (30%) or more of the combined voting
power of the Company's then outstanding securities;
(b) during any period of two consecutive years (not including
any period prior to the Effective Date of this Plan), individuals
("Existing Directors") who at the beginning of such period constitute
the Board of Directors, and any new director (an "Approved Director")
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in
paragraph (a), (b) or (c) of this Section 12.2) whose election by the
Board of Directors or nomination for election by the Company's
shareholders was approved by a vote of a least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
previously was so approved (Existing Directors together with Approved
Directors constituting "Continuing Directors"), cease for any reason to
constitute at least a majority of the Board of Directors; or
(c) the shareholders of the Company approve a merger or
consolidation of the Company with any other person, other than (i) a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities for the surviving entity) more than fifty percent
(50%) of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger in which no "person" (as
defined in Section 12.2(a)) acquires more than thirty percent (30%) of
the combined voting power of the Company's then outstanding securities;
or
(d) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets or any transaction
having a similar effect.
SECTION 13
LEGAL CONSTRUCTION
13.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
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<PAGE>
13.2 Severability. In the event any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of this Plan, and this Plan shall be construed and enforced
as if the illegal or invalid provision had not been included.
13.3 Requirements of Law. The grant of Awards and the issuance of Shares
under this Plan shall be subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required from time to time.
13.4 Securities Law Compliance. With respect to Section 16 Persons, Awards
under this Plan are intended to comply with all applicable conditions of Rule
16b-3. To the extent any provision of this Plan, Award Agreement or action by
the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable or appropriate by the Committee in
its sole discretion.
13.5 Governing Law. This Plan and all Award Agreements shall be construed
in accordance with and governed by the laws of the State of Kansas, excluding
its conflict of laws provisions.
13.6 Captions. Captions are provided herein for convenience of reference
only, and shall not serve as a basis for interpretation or construction of this
Plan.
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EXHIBIT 10.2
SUPPLY AGREEMENT
----------------
THIS SUPPLY AGREEMENT ("Agreement") is made as of the 21st day of April,
1995, by and between ASSOCIATED WHOLESALE GROCERS, INC., a Missouri corporation
("AWG") and HOMELAND STORES, INC., a Delaware corporation ("HOMELAND").
RECITALS:
--------
The following recitals are a material part of this Agreement and are being
relied upon by AWG and Homeland in connection with the transaction contemplated
hereby:
A. AWG and Homeland have consummated that certain Asset Purchase
Agreement ("APA") contemporaneously herewith. The execution of this
Agreement was a condition precedent for both parties to the closing of
the APA. Except as otherwise indicated or defined herein, all
capitalized, defined terms shall have the same meanings as set forth
in the APA which definitions are incorporated herein by reference. For
convenient reference, a copy of the APA (without exhibits attached) is
attached hereto as EXHIBIT "A".
B. AWG is a wholesaler of grocery and supermarket products operating in a
cooperative manner. In entering into this Agreement, AWG is seeking to
enhance the interests of its retail members by (i) increasing its
volume of wholesale sales, and (ii) providing for the maintenance of
such increase.
C. Homeland owns and/or operates the Supplied Stores listed on EXHIBIT
"B" at the locations legally described on SCHEDULE "1" of EXHIBIT
"B", all of which are attached hereto and incorporated herein by
reference. Until the Supplied Stores are closed or sold, Homeland
intends to continue to own and/or operate such stores as retail
grocery stores. Subject to AWG's Volume Protection Rights, Homeland
has the right in its sole discretion to decide whether or not to sell
or close Supplied Stores.
D. Based on its independent decision, Homeland has informed AWG that,
upon the sale of its Warehouse and Warehouse inventory to AWG under
the APA, Homeland is terminating its internal wholesale distribution
operations and network with which it has previously serviced the
Supplied Stores and the Excluded Stores. Homeland acknowledges that
AWG is assuming no risk or liability with respect to this decision by
Homeland. The provisions of this recital are not intended to diminish,
in any way, AWG's specific assumption of liabilities as set forth in
the APA or its obligations hereunder.
<PAGE>
E. Homeland desires to arrange for a reliable supply of quality food and
grocery products and merchandise for distribution through Homeland's
retail stores.
F. To provide Homeland a reliable source of supply, AWG is willing to
sell certain food and grocery products and merchandise to Homeland
during the term of this Agreement and subject to the terms and
conditions of this Agreement.
G. Homeland has advised AWG that Homeland desires to become one of AWG's
retail members and obtain from AWG products available from time to
time from AWG's warehouse in accordance with the terms hereof.
H. AWG is willing to supply its full line of available products and
services to Homeland for the Supplied Stores and Excluded Stores based
on the terms, conditions and financial assurances contained herein.
I. In addition to providing for a current supplier of its wholesale
needs, Homeland wishes to establish a potential market for the sale of
certain of its assets, including the Supplied Stores. Inasmuch as
Homeland's desire to establish such market directly coincides with
AWG's desire to preserve the volume of sales which will be achieved by
supplying the Supplied Stores hereunder and to give practical effect
to the Volume Protection Rights, AWG is willing to facilitate the
potential acquisition of certain Homeland assets and/or Supplied
Stores by one or more of AWG's retail members all within the terms and
conditions set forth herein.
J. The parties understand and acknowledge that in addition to the
consideration set forth specifically herein, each party will be
required to make a substantial and continuing commitment of its
resources in reliance upon the other's respective commitment to
provide and/or purchase products and services in the future, and that
neither party or their respective owners, retail members and or
affiliates will realize the full benefit of their anticipated bargain
hereunder unless each party materially fulfills its obligations
hereunder in accordance with the terms hereof.
K. Because the value of this transaction to AWG lies in AWG's ongoing
ability to sell its products to all of the Supplied Stores on a long
term basis, AWG is unwilling to enter into this Agreement unless it
obtains the Volume Protection Rights pertaining to (i) the purchase by
AWG of the Supplied Stores as set forth in paragraph 7 below, (ii) the
noncompetition agreement as set forth in paragraph 8 below and (iii)
the use restriction agreement set forth in paragraph 8 below. Homeland
agrees that all such rights are an integral and nonseverable part of
this Agreement.
L. Homeland represents to AWG that Homeland has used its best efforts to
obtain offers better than the transaction set forth in the APA, but
Homeland has been unable to obtain any better offers. Homeland has no
knowledge of any facts which
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would indicate that the consideration being paid to Homeland in
connection with the transactions contemplated hereby are less than the
fair market value associated therewith.
M. Homeland has requested and AWG has agreed to commence simultaneous
supply of all Supplied Stores and Excluded Stores. Homeland and AWG
acknowledge that there are inherent difficulties in doing so. The
parties will use their best efforts to minimize any such difficulties.
N. AWG agrees to commit its resources, personnel, facilities and
equipment to perform its obligations hereunder.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
TERMS OF AGREEMENT:
------------------
1. TERM. The term of this Agreement shall be for a period of seven (7) years
commencing on April 23, 1995 ("COMMENCEMENT DATE") and ending on April 22,
2002. This Agreement shall be administered on the basis of a Contract Year.
The term "CONTRACT YEAR" as used herein shall mean a period of twelve (12)
consecutive, full calendar months. The first Contract Year shall begin on
the Commencement Date and end on the last day of the twelfth consecutive
full calendar month thereafter. Each succeeding Contract Year shall
commence on the day following the last day of the immediately preceding
Contract Year.
2. SUPPLY. Subject to the terms and conditions of this Agreement and except
as otherwise provided herein, the following obligations of the parties
shall begin on the Commencement Date and shall continue for the full term
hereof:
a. Products to be Supplied by AWG. AWG agrees to sell, supply and
deliver to Homeland's Supplied Stores and Excluded Stores products
available from time to time from AWG's warehouse, (hereinafter "AVAILABLE
PRODUCTS"). Subject to agreement by AWG as to reasonable minimum volume and
slotting requirements for each category, AWG agrees to carry in its
warehouse and include in Available Products any products requested by
Homeland.
b. Products to be Purchased by Homeland. To the extent available
within the category of Available Products and subject to the exceptions set
forth herein, Homeland shall utilize AWG as Homeland's primary supplier (as
such term is commonly used in the grocery industry) for Homeland's Supplied
Stores and Excluded Stores and shall make purchases in a manner consistent
with such relationship. To the extent inconsistent with the foregoing
sentence, Homeland shall be allowed to make purchases pursuant to the
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provisions of the Existing Contracts until the expiration of the current
terms of the respective Existing Contracts. The merchandise purchased by
Homeland from AWG shall be referred to herein as the "PURCHASED GOODS".
c. Cost of Goods. AWG will supply Available Products to Homeland
and Homeland shall pay for Purchased Goods at the lowest prices and best
terms as are available to AWG's other retail members from time to time.
Homeland shall have available to it all cost saving mechanisms available to
other AWG retail members, including AWG's Concentrated Purchase Allowance
Program ("CPA"). A schedule setting forth the terms of AWG's current CPA
program is attached as EXHIBIT "C". Homeland acknowledges that AWG's prices
of goods, terms and CPA (i) are affected by and/or are a direct function of
the volume of purchases by Homeland and (ii) are amended periodically by
AWG.
d. Certain Assurances to Homeland. Where applicable and as
appropriate for Homeland's level of purchases from AWG, AWG agrees that:
(i) AWG will pass-through promotional and advertising allowances and
rebates from manufacturers and vendors to Homeland on the same basis as any
other AWG member, (ii) Homeland will receive seasonal, special promotions
and advertising programs on the best terms available to other AWG members
and (iii) AWG shall supply and offer to Homeland all advantages,
opportunities and services that AWG offers to other retail members. AWG
further agrees that: (i) Homeland will be given credit for unsalable
products and pricing adjustments on the best terms available to other AWG
members or retailers, (ii) the quality of the Purchased Goods will be
consistent with other wholesalers within Homeland's market area, which
shall include the area in which the Supplied Stores are located, (iii) the
activities of AWG will meet all applicable legal and regulatory
requirements, (iv) AWG will provide to Homeland a service level
commensurate with all other members, (v) AWG will make timely deliveries
(vi) AWG will provide quality Purchased Goods within acceptable fresh code
dating and in a clean and healthy manner and (vii) AWG shall provide to
Homeland from time to time during the term of this Agreement, in the same
manner as provided to AWG's other retail members, information regarding the
availability of all promotional and advertising allowances and rebates.
e. Conditions Precedent. In addition to the conditions set forth in
paragraph 13, AWG's obligation to supply Available Products is expressly
contingent upon delivery by Homeland of all of the documents, consideration
and security set forth in paragraphs 4, 5(a) and 5(b).
3. TERMS OF PAYMENT.
a. By Homeland to AWG. Subject to the provisions of paragraph 6,
Homeland shall pay for the Purchased Goods in accordance with the following
credit procedures: (i) weekly credit will be extended to Homeland for
purchases from AWG in an amount not to exceed the Letter of Credit (and/or
other collateral posted in accordance
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with the provisions of paragraph 5 below), (ii) invoices will be posted to a
weekly statement which will be prepared by AWG and delivered to Homeland by
Friday of each week or, if Friday is not a business day, Thursday of each week
and (iii) Homeland shall pay for its purchases by bank wire transfer of funds to
AWG which must be received (A) in the event Homeland satisfies the Friday Wire
Credit Requirements (as defined below), by 11:00 a.m. central time on the
following Friday (the "FRIDAY WIRE CREDIT ARRANGEMENT") or (B) in the event
Homeland satisfies the Monday Wire Credit Requirements (as defined below), by
11:00 a.m. central time on the following Monday (the "MONDAY WIRE CREDIT
ARRANGEMENT"). If the payment date is a holiday, the payment shall be due on
the next preceding business day. As of the Commencement Date, the Monday Wire
Credit Arrangement shall be in effect. Thereafter, at Homeland's option, and
upon written notice to AWG, Homeland may pay for purchases hereunder in
accordance with the Monday Wire Credit Arrangement or the Friday Wire Credit
Arrangement provided that Homeland satisfies (i) in the case of the Monday Wire
Credit Arrangement, the Monday Wire Credit Requirement and (ii) in the case of
the Friday Wire Credit Arrangement, the Friday Wire Credit Requirement.
b. By AWG to Homeland. Subject to the terms and conditions hereof, AWG
will pay to Homeland an amount calculated as follows at the end of each AWG
fiscal quarter ("QUARTERLY PAYMENTS") during the term hereof:
Quarterly Payment = Target Payment X Operative Fraction.
(i) For purposes of the foregoing calculation, the Target Payment
amounts shall be as set forth on the quarterly payment schedule ("QPS"),
attached hereto as EXHIBIT "D" and the Operative Fraction shall be a
function of the Purchase Percentage as set forth below. The Purchase
Percentage shall be determined from a fraction, the numerator of which is
the total amount of Warehouse Purchases (as defined below) through AWG's
warehouse by Homeland during the fiscal quarter in question (or such
shorter periods as may exist such as the short period commencing on the
Commencement Date and ending on the last day of the fiscal quarter during
which this Agreement goes into effect) and the denominator of which is
$72,500,000 [$290,000,000 / 4] (it being understood that such $72,500,000
figure is based on four (4) equal fiscal quarters and that such figure
shall be adjusted upwards or downwards based on the actual length of fiscal
quarters). The Operative Fraction to be utilized in conjunction with the
indicated level of Purchase Percentage is reflected in the following table:
If the Purchase The Operative
Percentage is: Fraction shall be:
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100- 90.01% 100%
90 - 80.01% 90%
80 - 70.01% 80%
70 - 60-01% 70%
60 - 50.01% 60%
50 - 40.01% 50%
40 - 30.01% 40%
30% or below 0%
Quarterly Payments shall be made to Homeland within three (3) weeks after
the end of each fiscal quarter.
(ii) For purposes of the foregoing, "WAREHOUSE PURCHASES" by Homeland
will include purchases that are billed or sold through AWG warehouses in
connection with products which are carried in AWG's warehouses based on
prices paid by Homeland as contemplated under paragraph 2(c) hereof. For
purposes herein, the word "carried" includes products upon which AWG is
able to realize a gross margin in contrast to products which may be handled
on its docks for a handling fee on a cost recovery basis. Included in the
definition of Warehouse Products are: SOLOS and continuities, as such terms
are commonly used in the grocery industry. Notwithstanding the foregoing,
qualifying purchases for purposes of Calculating year-end patronage and CPA
shall be calculated pursuant to AWG's policies then in effect during the
term of this Agreement and nothing contained herein shall be construed to
change AWG's policies in connection therewith.
(iii) For reference purposes, the QPS sets forth the dollar amounts of
the Quarterly Payments associated with the foregoing Purchase Percentage
and related Operative Fractions; provided, however, the Quarterly Payments
made for the first three quarters of any fiscal year during the term of the
Supply Agreement shall be subject to a year-end adjustment such that the
Purchase Percentage and the Operative Fraction shall be calculated on the
basis of Homeland's cumulative purchases at AWG's fiscal year-end.
(iv) In the event that Homeland sells any of the Supplied Stores
directly to AWG or through AWG as required under paragraph 7 to one or more
current or future AWG members, the purchases by such AWG member shall be
credited to Homeland's benefit for purposes of the Operative Fraction and
Purchase Percentage; provided, however, that the amount of such credit
shall be equal to the purchases from AWG (and Homeland if such sale occurs
prior to one year from the date hereof) by each such sold store for the
four AWG fiscal quarters immediately preceding such sale during which the
sold store was a Homeland store. Homeland shall not be entitled to such
credit if Homeland (i) sells to any third party which is not an AWG member,
(ii) sells directly to an AWG member
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rather than going through AWG as required under paragraph 7, or (iii)
closes a store.
(v) None of the consideration to be paid to Homeland pursuant to this
subparagraph 3(b) shall be deemed under any circumstances to be earned
until calculated at the end of each fiscal quarter. Until Quarterly
Payments are earned and paid to Homeland, Homeland shall not transfer,
assign, pledge, hypothecate or otherwise encumber such payments without the
prior written consent of AWG; provided, however, that Homeland shall be
permitted to grant junior liens on such collateral subject to such
acknowledgments of AWG's rights by such junior lienholders (including a
subordination by such junior lienholder) and such other matters as may be
reasonably required by AWG.
4. MEMBERSHIP. AWG agrees to allow Homeland to become, and Homeland agrees to
become a retail member of AWG. As a retail member of AWG, Homeland shall
have the same rights and obligations as any other retail member of AWG.
Specifically, as a condition precedent to AWG's obligations hereunder,
Homeland agrees to do the following on or before the Commencement Date:
a. To execute all documentation required of retail members ("MEMBER
SIGN-UP DOCUMENTS"). The Member Sign-Up Documents are attached hereto and
incorporated herein as EXHIBIT "E".
b. To acquire 15 shares of AWG Class A stock for actual book value
of such stock on the Closing Date.
c. Comply with AWG's credit requirements and provide the required
security set forth herein.
5. CREDIT REQUIREMENTS AND SECURITY FOR PERFORMANCE.
a. Letter of Credit. Contemporaneously with the execution of this
Agreement and subject to the Monday Wire Credit Requirement, Homeland shall
deliver to AWG an irrevocable and unconditional (except as to drawing
procedures and conditions) standby letter of credit ("LETTER OF CREDIT") in
the face amount of Ten Million Dollars ($10,000,000). The term of the
Letter of Credit shall be for periods of not less than one year, and such
periods shall run concurrently with Contract Years. The Letter of Credit
shall be security for Homeland's obligations in connection with Homeland's
open account arrangement with AWG. The Letter of Credit may be drawn upon
to cure any payment default by Homeland in connection with such open
account. The Letter of Credit shall be issued by a bank which is acceptable
to AWG in its sole discretion, and shall contain such terms and conditions
as are acceptable to AWG in its sole discretion. For purposes hereof, a
Letter of Credit in substantially the form of EXHIBIT "F" attached hereto
issued
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by an approved bank shall be acceptable to AWG. AWG acknowledges and agrees
that the Union Bank of Switzerland (New York Branch) shall be an acceptable
issuing bank.
(i) If Homeland is not in default under this Agreement, upon the
written consent of AWG (which consent will not be unreasonably withheld or
delayed), the Letter of Credit (A) may be reduced dollar-for-dollar in an
amount equal to the face value of Homeland's issued and outstanding AWG
patronage refund certificates ("PATRONAGE REFUND CERTIFICATES") and (B) may
be reduced to reflect Homeland's then current average weekly volume of
purchases; provided, however, the combined face amount of the Patronage
Refund Certificates and the Letter of Credit shall never be allowed to be
less than either the Monday Wire Credit Requirement if a Monday Wire Credit
Arrangement is in effect or the Friday Wire Credit Requirement if a Friday
Wire Credit Arrangement is in effect. Homeland shall give AWG 30 days prior
written notice of its request to reduce the Letter of Credit along with (i)
the amount of the proposed reduction, and (ii) evidence that it has met the
above criteria for such a reduction. AWG shall respond to Homeland's
written notice within fifteen (15) days and shall either (i) agree to the
amount of the reduction requested by Homeland, or (ii) set forth the amount
of the reduction, if any, to which AWG reasonably believes Homeland is
entitled. Promptly following such determination, AWG shall cooperate with
Homeland as appropriate to effect such reduction, including, without
limitation, delivering appropriate instructions to the bank issuing the
Letter of Credit and informing such bank of the reduction. In no event
shall the Letter of Credit be reduced until said calculations are
reconciled. Homeland's requests for reductions of the Letter of Credit
shall be made no more than twice in any Contract Year. AWG shall provide
such notice of its consent to a reduction of the Letter of Credit to the
issuing bank as Homeland may reasonably request.
(ii) For purposes of this Agreement (A) "MONDAY WIRE CREDIT
REQUIREMENT" shall mean collateral (of a type acceptable to AWG) in an
amount equal to the product of the average weekly purchases of Homeland
from AWG for the prior twelve months times one and six tenths (1.6), (B)
"FRIDAY WIRE CREDIT REQUIREMENT" shall mean collateral (of a type
acceptable to AWG) in an amount equal to the product of the average weekly
purchases of Homeland from AWG for the prior twelve months times two (2)
and (C) "MINIMUM CREDIT REQUIREMENTS" shall mean, collectively, the Monday
Wire Credit Requirement and the Friday Wire Credit Requirement; it being
understood that the Letter of Credit and AWG Equity shall be collateral of
a type satisfactory to AWG. In the event that there are less than twelve
(12) months of Homeland purchases from AWG, for purposes of calculating the
foregoing credit requirements, Homeland's average weekly purchases shall be
calculated by the parties based on information available to them at the
time such calculation is made.
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b. Pledge of AWG Equity. Homeland hereby grants AWG a security
interest in and pledges to AWG all AWG equity ("AWG EQUITY") owned by
Homeland. For purposes hereof, AWG Equity shall be defined as all equity,
deposits, credits, sums and indebtedness of any kind or description,
whatsoever, at any time owed by AWG to Homeland or at any time standing in
the name of or to the credit of Homeland on the books and/or records of
AWG, including without limitation, Capital Stock of AWG, Members Deposit
Certificates, Patronage Refund Certificates, Members Savings, Direct
Patronage or Year-End Patronage, Concentrated Purchase Allowance, Quarterly
Payments and any other sums due from AWG to Homeland hereunder (excluding
any amounts due, if any, to Homeland by AWG pursuant to Section 5.1 of the
APA or the agreements to be entered into pursuant thereto). The security
under this subparagraph will be security for the performance of all of
Homeland's obligations to AWG. Security shall be held in accordance with
AWG's policies which are applicable to all retail members. No third party
shall be given any security interest in any AWG Equity without the prior
written consent of AWG; provided, however, Homeland shall be permitted to
grant junior liens on the AWG Equity subject to such acknowledgments by
such junior lienholders of AWG's rights (including a subordination by such
junior lienholder) and such other matters as may be reasonably required by
AWG.
c. Drake and K-CCS. As a condition precedent to Homeland entering into
the APA, AWG was required to (i) assume ("Assumption") that certain Product
Transportation Agreement dated March 1 8, 1992 by and between Homeland and
Drake Refrigerated Lines, Inc. ("DRAKE CONTRACT") and (ii) enter into an
undertaking ("K-CCS UNDERTAKING") whereby AWG agreed to reimburse Homeland
in connection with certain obligations under that certain Agreement for
Systems Operations Services dated effective as of October 1, 1991, as
amended on September 10, 1993, by and between Homeland and K-C Computer
Services, Inc. ("K-CCS CONTRACT"). In the event that Homeland materially
breaches its obligations under any of the provisions of paragraphs 7 or 8
below within the first two Contract Years, whether by act, omission or
operation of law ("TRIGGER EVENT"), all of AWG's obligations in connection
with (i) the K-CCS Undertaking shall immediately terminate and become null
and void and (ii) the Assumption shall revert to Homeland as its primary
obligation, and Homeland shall be liable to and hereby indemnities AWG for
any cost or expense it may incur in connection with such Assumption from
and after the date of such default. Notwithstanding anything else contained
in this paragraph 5(c), Homeland's liability under the Drake Contract shall
in no event be greater than Homeland's liability under the Drake Contract
on the Closing Date and AWG shall be responsible to Drake for any such
excess liability. The occurrence of a Trigger Event will not change the
obligations of the parties with respect to any other Existing Contracts or
other obligations described in Article V of the APA and AWG's obligations
in connection with the other Existing Contracts or other obligations
described in Article V of the APA will continue notwithstanding such
breach. In addition, breaches of the Supply Agreement other than a Trigger
Event will not change the obligations of the parties with respect to any
Existing Contracts or other obligations described in Article V of the APA
and AWG's obligations in connection with the other
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Existing Contracts or other obligations will continue notwithstanding such
other breaches. If following a Trigger Event terminating AWG's obligations
with respect to the Drake Contract and K-CCS Contract under the Assumption
and/or K-CCS Undertaking, AWG brings suit against Homeland for damages
resulting from such breach, AWG will not seek and will not be entitled to
receive damages in respect of any liabilities under the Existing Contracts
for which AWG's responsibility has terminated. In addition, upon the
execution hereof, Homeland shall cooperate in obtaining the agreement of
Drake that it will (i) recognize Homeland as Drake's obligor to the extent
of Homeland's liability as of the Closing Date and (ii) release AWG from
such liability under the Drake Contract in the event Drake receives a sworn
affidavit executed by the President of AWG stating that a Trigger Event has
occurred.
6. LIMITATION ON OBLIGATION TO EXTEND CREDIT. Homeland acknowledges and agrees
that under no circumstances shall AWG be required to accept orders or
deliver Purchased Goods to Homeland (i) until the Letter of Credit is
delivered, (ii) at any time that the Letter of Credit is not in full force
and effect for a period which extends thirty (30) days beyond the end of
the credit cycle in question, or (iii) if the addition of such orders or
deliveries would cause the amount owed by Homeland to AWG for Purchased
Goods and/or other items charged by Homeland to Homeland's open account
with AWG to exceed the amount of Letter of Credit plus any Patronage Refund
Certificates (or other AWG Equity) held as collateral for the open account.
7. AWG'S PURCHASE RIGHTS UPON HOMELAND'S SALE OF STORES.
a. Supplied Stores. Subject to AWG's Volume Protection Rights
described in this paragraph 7 and in paragraph 8, Homeland reserves the
right, in its sole discretion, to close or sell any or all of the Supplied
Stores during the term of this Agreement. AWG shall have the following
purchase rights ("PURCHASE RIGHTS") in connection with the Supplied Stores.
In the event that Homeland wishes to sell (or otherwise transfer) any of
the Supplied Stores, whether individually or in groups, it shall first make
a written offer to sell (or otherwise transfer) such Supplied Store or
group of Supplied Stores to AWG (an offer made directly to an AWG member
shall not satisfy this requirement). The offer shall contain the price and
general terms upon which the Supplied Store and any associated rights,
equipment, inventory or related assets are being offered for sale (or
otherwise being offered for transfer). As used in this paragraph 7, "terms"
shall be required to include the proposed closing schedule (if one has been
set). AWG shall have the right to accept or reject such offer by way of
written notice delivered within forty-five (45) days after receipt of the
offer and a definitive agreement regarding the subject matter of such offer
entered into within such 45-day period. To the extent AWG has accepted such
offer and the parties are engaged in good faith negotiations regarding the
definitive agreement, such 45-day period shall be extended for one
additional thirty (30) day period to allow for the conclusion of such
negotiations and the drafting of the definitive agreement ("ACCEPTANCE
PROCESS"). If AWG elects to reject such offer or fails to make a timely
acceptance or timely enter into a definitive agreement regarding the
subject matter of such offer,
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Homeland shall be free to sell (or otherwise transfer) the Supplied
Store(s) which is or are the subject of the offer to any third party at a
price which is no less than ninety percent (90%) of the offer to AWG and on
terms no more favorable in the aggregate to such third party than those set
forth in the original offer to AWG. If Homeland is unable to consummate
such a sale (or other transfer), but receives a bona fide third party
counteroffer from a person who is not an AWG retail member and is at a
price less than ninety percent (90%) of the original offer price and/or
less favorable material terms, and Homeland is willing to sell in
accordance with the price and material terms set forth in such
counteroffer, Homeland shall provide AWG with a copy of such counteroffer.
AWG shall have fifteen (15) days from the receipt of such counteroffer to
either purchase the Supplied Store(s) in accordance with the material terms
of the counteroffer or reject same. If AWG rejects same or fails to make a
timely acceptance, including the signing of a definitive agreement in
accordance with the Acceptance Process, Homeland shall be free to sell the
Supplied Store(s) to the third-party offeror in accordance with the
material terms and conditions of the counteroffer. Homeland acknowledges
that AWG has exercised the Purchase Rights, the assets subject to the
Purchase Rights shall be freely assignable by AWG in whole or in part to
one or more of AWG's retail members.
Until notified in writing by AWG of an assignment to an AWG member, Homeland
shall not deal directly with any AWG member.
(i) Sales to "affiliates" of Homeland shall not be subject to
the foregoing Purchase Rights; provided, however, (A) affiliates shall
include only entities which are wholly owned by Homeland or Homeland
Holding Corporation; (B) the affiliate must agree in writing prior to
such sale to use AWG as the affiliate's wholesale supplier in
accordance with the terms of the Supply Agreement between the parties
and such other terms relating to the financial ability of such
affiliate as may be reasonably required by AWG (such other terms shall
be consistent with AWG policy regarding the financial ability of AWG
retail members which are similarly situated to such affiliate), (C)
the affiliate must agree in writing that any subsequent sale by such
affiliate is subject to the Volume Protection Rights, (D) such sale to
an affiliate shall not be an event of default under any of Homeland's
then outstanding loans, indebtedness or other material contracts, and
(E) such transfer shall not result in the insolvency of either
Homeland or the affiliate.
b. Closure of Substantially All of the Supplied Stores; Sale of Stock.
(i) Closure of Substantially All of the Supplied Stores. In the
event that Homeland wishes to close substantially all (90% or more) of
the Supplied Stores and such closure is not done in contemplation of a
sale of such Supplied Stores, the closure of such Supplied Stores
shall be deemed to be an offer hereunder to sell all (but not less
than all) such Supplied Stores to AWG in consideration of AWG (A)
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assuming or otherwise undertaking any of Homeland's outstanding and/or
ongoing lease obligations and property tax obligations in connection with
such Supplied Stores plus (B) an amount equal to the fair market value of
such Supplied Stores, including, without limitation, the fair market value
of all Equipment, Inventory and interests in real property associated with
such Supplied Stores. Such fair market value shall be determined by a
nationally recognized appraisal firm selected by Homeland and reasonably
satisfactory to AWG. The cost of such appraisal shall be paid for by
Homeland; provided, however, that in the event the sale contemplated by
such offer is consummated, the cost of such appraisal shall be split by the
parties. Homeland shall give AWG written notice of Homeland's decision to
close substantially all of the Supplied Stores at least forty-five (45)
days prior to the implementation of such closure. AWG shall accept such
offer (and enter into a definitive agreement) or reject such offer within
such fortyfive (45) day period. If AWG accepts, a definitive agreement will
be entered into in accordance with the Acceptance Process. So long as
Homeland complies with the foregoing, such closure shall not create an
Event of Default.
(ii) Sale of Stock. In the event that one or more of the
stockholders of Homeland or Homeland Holding Corporation wish to sell
shares of stock of Homeland or Homeland Holding Corporation (as the case
may be) in a manner which would otherwise be in contravention of the
provisions of paragraph 1 3.a(vii) hereof, if such stockholders) conduct
the sale of their stock in the manner set forth in paragraphs 7(a), 7(c),
7(d), 7(e) and 7(f) such that AWG has an opportunity to buy all such stock
in accordance with such sections, such sale shall not create an Event of
Default for purposes of paragraph 13.a(vii) hereof. Any such sale of stock
shall be deemed to be a sale of a "Supplied Store" for definitional
purposes of this paragraph 7.
c. Failure to Close the Sale of any Store. If, at any time, Homeland fails
to consummate an allowed sale to a third party within the time frame set forth
in the offer to AWG (such time frame for such third party sale will be measured
from the date that AWG rejects or fails to timely accept the offer with respect
to such allowed sale pursuant to clause (a) of paragraph 7 hereof, whichever is
earlier), the provisions of this paragraph 7 shall once again be applicable,
provided, however, that in the event the offer to AWG does not include a time
frame within which to consummate the allowed sale, the offer to such third party
must be accepted and 'a definitive agreement entered into between Homeland and
such third party within nine (9) months from the date on which AWG rejects or
fails to timely accept the offer with respect to such allowed sale pursuant to
clause (a) of paragraph 7, whichever is earlier.
d. Confirmation of Sales. Homeland shall provide AWG with confirmation of
any sales (or other transfers) under this paragraph in which AWG is not a party.
AWG shall have the right to inspect Homeland's books and records relating to
such sale and receive copies of any pertinent closing documents in connection
with any such sale. If
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such inspection would breach applicable confidentiality agreements between
Homeland and such party, the Chief Financial Officer of Homeland or its
President shall certify to AWG that the sales (or other transfers) in question
were in compliance with the provisions of this paragraph 7 of this Agreement.
Notwithstanding the foregoing, Homeland shall reveal its disclosure obligations
under this paragraph to all potential transferees and shall attempt to negotiate
a confidentiality agreement with such party which would permit or not prohibit
the disclosure contemplated hereby.
e. No Assumption. Unless excluded by the terms of the offer, the
provisions of paragraph 17 shall be applicable to any purchase by AWG of a
Supplied Store.
f. Public Notice. Homeland shall execute such documents in recordable
form as AWG may reasonably request from time to time in order to give public
notice of its Purchase Rights under this paragraph 7. The form of such notice
shall be as set forth on Exhibit "G" - SCHEDULE "1" attached hereto and
incorporated herein. Each recorded notice document shall be terminable in
connection with each Supplied Store on the earlier of (i) the expiration of the
term of this Agreement, (ii) compliance by Homeland with AWG's Purchase Rights
as set forth in this paragraph 7 with respect to such Supplied Store, (iii) the
date upon which any holder of a lien placed of record before the date hereof has
foreclosed on the Property or has taken title to Homeland's interest in the
described property whether by foreclosure or a deed in lieu of foreclosure with
a recital that it is a deed in lieu of foreclosure, (iv) the date immediately
preceding the expiration of any cure period in respect of a continuing event of
default under a lease to which Homeland is a party, which default directly
relates to Homeland's filing of such recorded notice, provided that (A) Homeland
shall deliver prompt notice of such event of default to AWG, (B) AWG shall be
permitted to contact the landlord under such lease for the purpose of obtaining
a rescission or termination of such event of default and (C) AWG shall indemnify
Homeland for any of its costs, liabilities and/or damages relating to or arising
in connection with the foregoing, or (v) the expiration or earlier termination
of Homeland's leasehold estate, if any. AWG agrees to allow each document to be
released upon the recordation of a sworn affidavit by the President of Homeland,
or in the case of clause (iii) above, a lienholder stating that (i) the Purchase
Rights have been complied with as set forth in paragraph 7 as to the particular
Supplied Store covered by the document which is to be released or (ii) one of
the events specified in clauses (i), (iii), (iv) or (v) of the preceding
sentence has occurred with respect to the particular Supplied Store covered by
the document to be released.
g. Excluded Stores. During the term hereof, Homeland shall not sell the
Excluded Stores to any third party for retail grocery use; provided, however, at
Homeland's option, upon written notice to AWG, Homeland may designate one or
more Excluded Stores to be Supplied Stores and, upon such designation, such
Excluded Stores shall thereafter be treated as Supplied Stores for all purposes
of this Agreement, including, without limitation, for purposes of the Volume
Protection Rights and paragraph 3(b)(iv) herein.
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h. No Adequate Remedy. Subject to the limitations set forth in
paragraph 5(c), if either party shall breach any of the foregoing
agreements in this paragraph 7 by way of its actions, omissions or
operation of law, either party agrees that the other will have no adequate
remedy at law and that immediate injunctive relief will be appropriate.
Subject to the limitations set forth in paragraph 5(c), in the event that a
court of competent jurisdiction refuses to grant a party injunctive relief,
such party shall be free to pursue any and all remedies, including remedies
at law, which may be available to such party.
8. NON-COMPETITION AND USE RESTRICTION AGREEMENT. Pursuant to paragraph 5.3
of the APA, the parties agree as follows:
a. Homeland will not during the term of this Agreement compete
directly 6-r indirectly with AWG as a wholesaler of grocery products,
including Available Products, in or to any counties in Oklahoma, Arkansas,
Texas, Kansas or Missouri in which Supplied Stores are located. A sale of
any of the Supplied Stores to a competitor of AWG in a manner which is not
consistent with the provisions of paragraph 7 shall be a violation of the
noncompetition agreement.
b. Homeland agrees that, to the extent of Homeland's interest
therein (including leasehold interests), the real estate comprising the
Supplied Stores and the improvements thereon shall be dedicated to the
exclusive use of a retail grocery facility (including all activities which
from time to time are commonly associated with the operation of a grocery
facility) which is owned by a retail member of AWG. The foregoing use
restriction agreement shall be reflected by way of an appropriate document
(in the form of EXHIBIT "G" - SCHEDULE "2", attached hereto and
incorporated herein) executed by Homeland and recorded in the official
records of each county in which a Supplied Store is located. Each recorded
notice document shall be terminable in connection with each Supplied Store
on the earlier of (i) the expiration of the term of this Agreement, (ii)
compliance by Homeland with AWG's Purchase Rights as set forth in this
paragraph 7 with respect to such Supplied Store, (iii) the date upon which
any holder of a lien placed of record before the date hereof takes title to
Homeland's interest in the described property whether by foreclosure or a
deed in lieu of foreclosure with a recital that it is a deed in lieu of
foreclosure, (iv) the date immediately preceding the expiration of any cure
period in respect of a continuing event of default under a lease to which
Homeland is a party, which default directly relates to Homeland's filing of
such recorded notice, provided that (A) Homeland shall deliver prompt
notice of such event of default to AWG, (B) AWG shall be permitted to
contact the landlord under such lease for the purpose of obtaining a
rescission or termination of such event of default and (C) AWG shall
indemnify Homeland for any of its costs, liabilities and/or damages
relating to or arising in connection with the foregoing, or (v) the
expiration or earlier termination of Homeland's leasehold estate, if any.
AWG agrees to allow each document to be released upon the recordation of a
sworn affidavit by the President of Homeland stating that (i) the Purchase
Rights have been complied with as set forth in paragraph 7 as to the
particular
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Supplied Store covered by the document which is to be released or (ii) one
of the events specified in clauses (i), (iii), (iv) or (v) of the preceding
sentence has occurred with respect to the particular Supplied Store covered
by the document to be released.
c. If Homeland or AWG shall breach the foregoing agreements in this
paragraph 8 by way of its actions, omissions or operation of law, each
agrees that the other will have no adequate remedy at law and that
immediate injunctive relief will be appropriate. In the event that a court
of competent jurisdiction refuses to grant a party injunctive relief, such
party shall be free to pursue any and all remedies, including remedies at
law, which may be available to such party.
9. REPRESENTATIONS AND WARRANTIES OF HOMELAND. In addition to any
representations and warranties contained elsewhere in this Agreement,
Homeland hereby makes the following representations and warranties to and
for the benefit of AWG, its successors and permitted assigns, in connection
with Homeland and/or the Supplied Stores, each of which warranties and
representations (i) is material and being relied upon by AWG and (ii) is
true in all respects as of the date hereof (or such other date as may be
indicated).
a. Organization of Homeland. Homeland is duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has full corporate power and authority to own, lease and operate its
business. Homeland is duly licensed and qualified to do business as a
foreign corporation and is in good standing in the States of Oklahoma,
Texas and Kansas.
b. Authorization. Homeland has all necessary corporate power and
authority and has taken all corporate action necessary to enter into this
Agreement, to consummate the transactions contemplated hereby and to
perform its obligations hereunder including approval of its Board of
Directors. This Agreement has been duly executed and delivered by Homeland
and is a valid and binding obligation of Homeland, enforceable against
Homeland in accordance with its terms.
c. Litigation, Proceedings and Applicable Law. Except as set forth
on EXHIBIT "H" hereto, there are no material actions, suits or proceedings
pending or, to the best knowledge OF Homeland, threatened against, at law
or in equity or before or by any governmental authority or instrumentality
or before any arbitrator of any kind which would have a material adverse
effect on Homeland's ability-to perform its obligations hereunder and, to
the best knowledge of Homeland, there is no valid basis for any such
action, suit, proceeding or investigation. Except as set forth on EXHIBIT
"H", to the best of Homeland's knowledge, Homeland is not in default with
respect to any judgment, order, writ, injunction or decree of any court or
governmental agency, and there are no unsatisfied judgments against
Homeland or its business or activities, in each case, which would
materially adversely affect Homeland's ability to perform hereunder. To the
best of Homeland's knowledge, there is not a reasonable likelihood of an
adverse determination
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of any pending proceeding which would, individually or in the aggregate, have a
material adverse effect on Homeland's ability to perform its obligations
hereunder.
d. No Violations and Compliance with Laws. Except as set forth on
EXHIBIT "I", there are no existing Violations with respect to the Supplied
Stores, and Homeland is not aware of any threatened Violations or notices with
respect to any Violations, which would have a material adverse effect on the
performance by either party of its obligations hereunder. Except as set forth
on EXHIBIT "I", Homeland has received no written notification alleging any
existing material violation of any applicable statutes, rules, regulations,
ordinances, codes, orders, licenses, permits or authorizations, as such now
apply to the Supplied Stores, including without limitation, any applicable
business, building, zoning, antipollution, occupational safety, health or other
law, ordinance or regulation, which would have a material adverse effect on the
performance by either party of its obligations hereunder.
e. No Conflict or Violation. Except as otherwise set forth herein or in
the exhibits hereto, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will result in (i) a
violation of or a conflict with any provision of the Certificate of
Incorporation or Bylaws of Homeland or Homeland Holding Corporation, (ii) a
material breach of, or a material default under, any material term or provision
of any material contract, agreement, lease, commitment, license, franchise,
permit, authorization or concession to which Homeland is a party or an event
which, with notice, lapse of time, or both, would result in any such breach or
default, or (iii) a material violation by Homeland of any material statute,
rule, regulation, ordinance, code, order, judgment, writ, injunction, decree or
award, or an event which in the case of (i), (ii) or (iii) above, with notice,
lapse of time, or both, would result in any such violation, which breach,
default or Violation would have a material adverse effect on either party's
ability to perform it obligations, hereunder.
f. Consents and Approvals. The list attached hereto as EXHIBIT "K", is a
true, correct and complete list of all individuals and/or entities from whom
consent is required to consummate or perform all or any part of the transactions
contemplated under this Agreement or the APA. No other consents and/or
approvals are required.
g. Financial Statements. Homeland has heretofore delivered to AWG
complete, true and accurate copies of the most recent financial statements of
Homeland and fully audited financial statements for the year ending December 31,
1 994. Except as otherwise set forth therein, Homeland's financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, and fairly present the financial condition and the results
of operations of Homeland at the dates and for the periods covered thereby.
h. Environmental Matters. Except as set forth on EXHIBIT "J", to the
best of Homeland's knowledge, there are no Adverse Environmental Conditions,
located in, on
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or under or existing in connection with any of the Supplied Stores which
materially adversely affects either party's ability to perform its
obligations hereunder. A list of all remediation plans existing in
connection with Adverse Environmental Conditions is attached as SCHEDULE
"1" of EXHIBIT "J". Copies of all such remediation plans shall be attached
as SCHEDULE "2" of EXHIBIT "J".
i. Financial Restructuring. Homeland represents that its current
plans and intentions in connection with any financial restructuring or sale
of assets do not include any type of bankruptcy proceeding. During the term
hereof, Homeland will keep AWG fully advised in connection with any
financial restructuring which would adversely affect Homeland's ability to
comply with the terms hereof and shall deliver any evidence of any such
financial restructuring to AWG. In addition, any sale of the Supplied
Stores will be conducted in a manner which is consistent with AWG's Volume
Protection Rights hereunder.
j. Supplied Stores. EXHIBIT "B" is a complete, true and correct
schedule of the Supplied Stores.
10. REPRESENTATIONS AND WARRANTIES OF AWG. In addition to any representations
and warranties contained elsewhere in this Agreement, AWG hereby makes the
following representations and warranties to and for the benefit of
Homeland, its successors and assigns, in connection with AWG and/or the
Supplied Stores, each of which warranties and representations (i) is
material and being relied upon by Homeland and (ii) is true in all respects
as of the date hereof (or such other date as may be indicated).
a. Organization of AWG. AWG is duly organized, validly existing and
in good standing under the laws of the State of Missouri and is qualified
to do business in the States of Kansas, Texas and Oklahoma.
b. Authorization. AWG has all necessary corporate power and
authority and has taken all corporate action necessary to enter into this
Agreement, to consummate the transactions contemplated hereby and to
perform its obligations hereunder, including approval of its Board of
Directors. This Agreement has been duly executed and delivered by AWG and
is a valid and binding obligation of AWG, enforceable against AWG in
accordance with its terms.
c. No Conflict or Violation. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will result in (i) a material violation of or a conflict with any provision
of the Articles of Incorporation or Bylaws of AWG, (ii) a material breach
of, or a default under, any term or provision of any contract, agreement,
lease, commitment, license, franchise, permit, authorization or concession
to which AWG is a party or an event which with notice, lapse of time, or
both, would result in any such breach or default, or (iii) a material
violation by AWG of any statute, rule, regulation, ordinance, code, order,
judgment, writ, injunction, decree, or
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award, or an event which in the case of (i), (ii) or (iii) above, with
notice, lapse of time, or both, would result in any such violation, which
breach, default or violation would have a materially adverse effect on
either party's ability to perform its obligations hereunder.
d. Compliance with Law. To the best of AWG's knowledge, AWG has
received no written notification alleging any existing material violation
of any applicable statutes, rules, regulations, ordinances, codes, orders,
licenses, permits or authorizations which would have a materially adverse
impact on either party's ability to perform its obligations hereunder.
e. Litigation, Proceedings and Applicable Law. Except as set forth
on EXHIBIT "L" hereto, there are no material actions, suits or proceedings
pending or, to the best knowledge of AWG, threatened against, or materially
adversely affecting AWG's ability to perform its obligations hereunder, at
law or in equity or before or by any governmental authority or
instrumentality or before any arbitrator of any kind and, to the best
knowledge of AWG, there is no valid basis for any such action, suit,
proceeding or investigation. Except as set forth on EXHIBIT "L", to the
best of AWG's knowledge, AWG is not in default with respect to any
judgment, order, writ, injunction or decree of any court or governmental
agency, and there are no unsatisfied judgments against AWG or its business
or activities, in each case, which would have a material adverse effect on
AWG's ability to perform hereunder. To the best of AWG's knowledge, there
is not a reasonable likelihood of an adverse determination of any pending
proceeding which would, individually or in the aggregate, have a material
adverse effect on AWG's ability to perform its obligations hereunder.
11. COVENANTS OF HOMELAND AND AWG. Homeland and AWG each covenant with the
other as follows:
a. Consents and Best Efforts. As soon as practicable, AWG and
Homeland, as applicable, will commence and diligently pursue all reasonable
action required hereunder (i) to obtain all required documents, consents,
approvals and agreements, (ii) to give all notices and make all filings
with, any third parties as may be necessary to authorize, approve or permit
full and complete compliance with the terms of the Agreement, (iii) to
identify and/or obtain all collateral required hereunder and (iv) to cause
all documentation contemplated hereunder to be executed and delivered.
b. Providing Copies of Documents. Homeland covenants to provide
copies to AWG of all of Homeland's SEC filings and reports within ten (10)
days after filing with or other delivery to the SEC. AWG covenants to make
available to Homeland all information and reports which are available to
other members at a cost, if any, equal to that charged to other members
(Any such charge shall be based on a cost recovery for AWG.)
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c. Evidence of Insurance. During the term hereof, AWG shall provide
Homeland with current evidence of all product liability and comprehensive
insurance carried by AWG in connection with its wholesale operation under
this Agreement.
d. Material Changes to Representations and Warranties. During the
term hereof, each party hereby covenants that it will provide the other
with written notice of any change to their respective representations and
warranties contained herein which materially adversely affects either
party's ability to perform its obligations hereunder.
e. Necessary Resources. After the Closing of the transactions
contemplated under the APA, AWG will have the necessary resources,
equipment and personnel to sell, supply and deliver the Purchased Goods to
the Supplied Stores and to otherwise fulfill its obligations hereunder.
12. CONDITIONS TO PARTIES' OBLIGATIONS. The Closing of the APA shall be a
condition precedent to Homeland's and AWG's obligations hereunder.
13. EVENTS OF DEFAULT. The following shall be events of default ("EVENTS OF
DEFAULT"):
a. Homeland Defaults. The following shall be Events of Default by
Homeland hereunder:
(i) Failure to Maintain Letter of Credit. Homeland's failure to
maintain the Letter of Credit as required herein or to renew such
Letter of Credit within thirty (30) days prior to its expiration.
(ii) Transfer of Security. Homeland's transfer or other failure
to preserve any security pledged to AWG pursuant to the terms of this
Agreement, except to the extent provided for in paragraphs 3b.(v) and
5b.
(iii) Non-Payment/Failure to Perform. Homeland's failure to
make any payment when due or failure to perform any of the other
agreements, terms, covenants, provisions or conditions contained
herein in any material respect; it being understood that the events of
defaults specified in this paragraph 15.a(iii) are in addition to, but
are not in limitation of, the other events of defaults specified in
this paragraph 13.a.
(iv) Breach of Other Agreements. Breach, in any material
respect, BY Homeland of the Member Sign-Up Documents; provided,
however, there will be no cross-default between the Supply Agreement
and the APA.
(v) Bankruptcy Matters. If Homeland:
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(1) files a Petition under the Federal Bankruptcy Code or any
similar law, state or federal, whether now or hereafter existing
(hereinafter referred to as a "BANKRUPTCY PROCEEDING"); or
(2) files any Answer admitting insolvency or inability to pay its
debts; or
(3) is the subject of any Petition of involuntary bankruptcy
which is not dismissed within thirty (30) days after filing; or
(4) becomes the subject of an order for relief against it in any
bankruptcy proceeding; or
(5) has a custodian or trustee or receiver appointed for it or
has any court take jurisdiction of its property, or the major part
thereof, in any involuntary proceeding for the purpose of
reorganization, arrangement, dissolution or liquidation; or
(6) makes an assignment for the benefit of creditors;
(7) is generally not paying its debts as they become due; or
(8) consents to an appointment of a custodian, receiver or
trustee of all its property, or the major part thereof.
(vi) Volume Protection Rights. Any breach by Homeland of its
obligations and/or agreements contained in paragraphs 7 and/or 8 hereof.
(vii) Subject to paragraph 7(b)(ii), the transfer by one or more
stockholders of Homeland or Homeland Holding Corporation of greater than
fifty percent (50%) of the outstanding stock of Homeland or Homeland
Holding Corporation, as the case may be, during the term hereof, to an
entity primarily engaged (including through a subsidiary or otherwise) in
the retail or wholesale grocery business.
b. AWG Defaults. The following shall be Events of Default by AWG:
(i) Non-Payment/Failure to Perform. AWG's failure to make any
payment when due or failure to perform any of the other agreements, terms,
covenants, provisions or conditions contained herein in any material
respect; it being understood that the events of defaults specified in this
paragraph 1 3.b(i) are in addition to, but are not in limitation of, the
other events of defaults specified in this paragraph 1 3.b.
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(ii) Breach of Other Agreements. There will be no cross-
defaults between the Supply Agreement and the APA.
(iii)Bankruptcy Matters. If AWG:
(1) files a Petition under the Federal Bankruptcy Code or
any similar law, state or federal, whether now or hereafter
existing (hereinafter referred to as a "BANKRUPTCY PROCEEDING");
or
(2) files any Answer admitting insolvency or inability to
pay its debts; or
(3) is the subject of any Petition of involuntary
bankruptcy which is not dismissed within thirty (30) days after
filing; or
(4) becomes the subject of an order for relief against it
in any bankruptcy proceeding; or
(5) has a custodian or trustee or receiver appointed for
it or has any court take jurisdiction of its property, or the
major part thereof, in any involuntary proceeding for the purpose
of reorganization, arrangement, dissolution or liquidation; or
(6) makes an assignment for the benefit of creditors;
(7) is generally not paying its debts as they become due;
or
(8) consents to an appointment of a custodian, receiver or
trustee of all its property, or the major part thereof.
(iv) Sale of AWG. The sale of ninety percent (90%) or more of
the stock or assets of AWG.
(v) Dissolution of AWG. The dissolution of AWG.
14. REMEDIES. With the exception of Homeland's obligations with respect to the
Letter of Credit, its obligations under its open account arrangement with
AWG and its obligations in paragraphs 7 and 8 hereof, each of which must be
performed exactly when required without any notice or cure period, if any
other Event of Default shall remain uncured for five (5) business days
(thirty (30) days in the case of an Event of Default by Homeland in respect
of its failure to deliver the documents required to be delivered pursuant
to paragraphs 11 (b) and 16) after written notice thereof has been given to
the defaulting party, the non-
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defaulting party may declare this Agreement to be in default. At any time
that Homeland materially breaches its obligations in connection with the
Letter of Credit, its open account arrangement with AWG or any of AWG's
Volume Protection Rights, AWG may immediately declare this Agreement to be
in default. In such event, the non-defaulting party may exercise all
remedies available to it at law or in equity including, but not limited to,
the rights set forth herein. At any time that Homeland is in default
hereunder, AWG shall be under no obligation to accept orders for or ship
Purchased Goods. No remedies conferred upon or reserved by a party are
intended to be exclusive of any other available remedy or remedies herein.
Notwithstanding the foregoing or anything else contained herein or in the
APA and notwithstanding any default by Homeland of its obligations
hereunder or thereunder, except as set forth in paragraph 5(c) hereof in
connection with the K-CCS Contract and the Drake Contract, and except as
specifically provided in the Undertakings, the Assignment and Assumption
Agreements, the ERISA Agreement and the other agreements to be entered into
pursuant to Section 5.1 of the APA, AWG shall not have the right otherwise
to rescind, terminate, modify or otherwise avoid its obligations with
respect to the Existing Contracts under Section 5.1 of the Asset Purchase
Agreement, or as specifically provided in the Undertakings, the Assignment
and Assumption Agreements, the ERISA Agreement and the other agreements to
be entered into pursuant to Section 5.1.
15. FORCE MAJEURE. In the event either party hereto shall be delayed or
hindered in or prevented from the performance of any act required under
this Agreement by reason of strikes, lockouts, labor troubles, inability to
procure materials, failure of power, restrictive governmental laws or
regulations (this does not include proceedings under any bankruptcy law),
riots, insurrection, war or other reason of a like nature not the fault of
the party delayed in performing work or doing acts required under the terms
of this Agreement, then, upon written notice of such force majeure event
from the affected party to the other party, performance of such act shall
be excused for the period of the delay, and the period for the performance
of any such act shall be extended for a period equivalent to the period of
such delay. The affected party shall resume performance as soon as
practicable thereafter. The mere inability to pay monetary amounts
hereunder (no matter how caused) shall not be considered a force majeure
event hereunder.
a. For purposes hereof, (i) if AWG does not or cannot supply
Homeland due to force majeure-type events or (ii) the levels for out of
stock products exceed 10% in the aggregate subsequent to five (5) days
notice by Homeland, and Homeland seeks alternative suppliers until such
condition is cured by AWG, such purchases from alternative suppliers, shall
be treated as Warehouse Purchases for purposes of computing the Operative
Fraction and Purchase Percentage in paragraph 3 above ("CREDIT") and such
purchases shall not be deemed to breach paragraph 2(b) hereof; provided,
however, if the event described in clause 1 5.a(ii) results from Homeland's
failure to meet Homeland's applicable Minimum Credit Requirements, Homeland
shall not be entitled to the Credit and to the extent the aforementioned
purchases from alternative suppliers violate the primary supplier
provisions of paragraph 2(b) of this Agreement, such purchases shall
constitute a breach of this Agreement.
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16. FINANCIAL STATEMENTS.
a. Proforma Statements. Homeland shall supply to AWG a proforma
opening balance sheet and profit and loss statement showing projections of
Homeland's operations during Homeland's fiscal years 1995 and 1996.
b. Yearly. Homeland shall supply AWG with all audited, consolidated
financial statements of Homeland Holding Corporation (which includes
Homeland Stores, Inc.) within one hundred twenty (120) days after the end
of each fiscal year of Homeland and unaudited consolidated quarterly
financial statements of Homeland Holding Corporation (which include
Homeland Stores, Inc.) within forty-five (45) days after the end of each of
the first three (3) fiscal quarters of Homeland.
c. General Notice. Each party shall give the other prompt notice of
any change in such party's financial condition which would have a
materially adverse effect on such party's ability to perform its
obligations hereunder.
17. NO ASSUMPTION OF LIABILITIES.
a. By entering into this Agreement or performing any act or
agreement hereunder, AWG does not assume or undertake any obligations or
liabilities of Homeland, except as specifically provided in paragraph 5(c)
of this Agreement and Article V of the APA and the agreements to be entered
into pursuant thereto, including, without limitation, the following:
(i) Claims by Homeland employees, former employees or others
under any private or collective contract, agreement or the like or any
state, Federal, local or other laws, statutes, executive order,
regulations, ordinances codes or the like including, but not limited
to, claims in connection with employee wages, vacation pay, severance
pay, holiday pay, sick leave pay, other union claims, detrimental
reliance claims, implied contract claims, WARN notice claims, worker's
compensation claims, ERISA claims, COBRA claims, Civil Rights Laws
claims, claims under the Fair Labor Standards Act or Labor Management
Relations Act, employment discrimination claims of all types, claims
regarding health and welfare benefits or premiums, claims regarding
union collective bargaining agreements and/or supplemental agreements,
sexual harassment claims, disability claims, Family and Medical Leave
Act claims, except as provided otherwise in Section 5.1 (h) of the
APA, pension fund liability (whether for current or unfunded accrued
liabilities), claims or other problems arising under OSHA, claims in
connection with environmental problems, claims arising out of
Homeland's agreements with Safeway Stores, Inc. or its affiliates or
any other obligations of Homeland of any kind or character;
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(ii) Demands, causes of action, obligations or liabilities
(including damages, costs and reasonable attorneys fees) from any
claim of any third party including, but not limited to, those
types of claims set forth above in paragraph 17 (a) (i).
b. Relationship. The relationship of AWG and Homeland under this
Agreement is that of wholesale supplier and retail customer. This Agreement
shall not be construed to create any other relationship between AWG and
Homeland. There is no agency relationship between Homeland and AWG; AWG is
not a successor or assign or alter ego to Homeland. Homeland and AWG are
not involved in a joint venture or partnership; AWG is not required to
continue operations at any of Homeland's former facilities; and AWG, in its
sole discretion, shall determine the extent, method and manner of how any
of Homeland's former facilities purchased or leased by AWG, if any, will be
operated. Homeland shall remove on or before Closing all of Homeland's
employees, supervisors, managers, subcontractors and agents from all
facilities which are part of the Purchased Assets. If, in its sole
discretion, AWG hires former employees, managers or supervisors of
Homeland, these individuals shall be employed as new employees of AWG. AWG
repudiates all of Homeland's union collective bargaining agreements, will
not consider the seniority of Homeland's former employees in deciding
whether to employ them, and all individuals considered for employment by
AWG will be hired on the basis of qualifications, as determined by AWG. AWG
shall not be bound by any arbitration decision issued under any of the
Homeland's union collective bargaining agreements and has no obligation to
arbitrate any dispute under any such bargaining agreements. AWG does not
assume and is not responsible for any liability Homeland may have to
retired persons or former employees. Homeland represents that it is
stopping its distribution operations and ceasing all the business connected
with the distribution operations. Homeland further represents to AWG that
it has, or will before the Closing, satisfy all of its liabilities and/or
obligations accruing prior to the Closing Date under union collective
bargaining agreements, including obligations required by the National Labor
Relations Act, and that it has, or will before the Closing, satisfy its
liabilities and/or obligations accruing prior to the Closing Date to all
other persons who are affected by Closing of Homeland's distribution center
operations; provided, however, if such obligations are of a nature such
that they cannot be satisfied prior to the Closing Date, Homeland shall
diligently cause the satisfaction of such obligations as soon as
practicable after the Closing Date. After the Closing Date, Homeland shall
be responsible for Homeland's obligations to its employees.
c. By entering into this Agreement or performing any act or
agreement hereunder, Homeland does not assume or undertake any obligations
or liabilities of AWG, except as specifically provided herein in paragraph
5(c) of this Agreement and Article V of the APA and the agreements to be
entered into pursuant thereto, including, without limitation, the
following:
(i) Claims by AWG employees, former employees or others under
any private or collective contract, agreement or the like or any
state, Federal, local or
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other laws, statutes, executive order, regulations, ordinances, codes or
the like including, but not limited to, claims in connection with
employee wages, vacation pay, severance pay, holiday pay, sick leave
pay, other union claims, detrimental reliance claims, implied contract
claims, WARN notice claims, worker's compensation claims, ERISA claims,
COBRA claims, Civil Rights Laws claims, claims under the Fair Labor
Standards Act or Labor Management Relations Act, employment
discrimination claims of all types, claims regarding health and welfare
benefits or premiums, claims regarding union collective bargaining
agreements and/or supplemental agreements, sexual harassment claims,
disability claims, Family and Medical Leave Act claims, pension fund
liability (whether for current or unfunded accrued liabilities), claims
or other problems arising under OSHA, claims in connection with
environmental problems, or any other obligations of AWG of any kind or
character;
(ii) Demands, causes of action, obligations or liabilities
(including damages, costs and reasonable attorneys fees) from any claim
of any third party including, but not limited to, those types of claims
set forth above in paragraph 17(c)(i); and
(iii) AWG shall be responsible for AWG's obligations to its
employees.
18. GOVERNING LAW, VENUE. The laws of the State of Kansas shall govern the
interpretation, validity, performance and enforcement of this Agreement.
Any dispute or cause of action under this Agreement shall be resolved in a
court of competent jurisdiction in Johnson County, Kansas.
19. COUNTERPARTS. This Agreement may be executed in one or more identical
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
20. HEADINGS; CONSTRUCTION. The headings which have been used throughout this
Agreement have been inserted for convenience of reference only and do not
constitute matters to be construed in interpreting this Agreement. Words of
any gender used in this Agreement shall be held and construed to include
any other gender and words in the singular numbers shall be held to include
the plural, and vice versa, unless the context requires otherwise. The
words "herein," "hereof," "hereunder" and other similar compounds of the
word "here" when used in this Agreement shall refer to the entire Agreement
and not any particular provision or section. If the last day of any time
period stated herein shall fall on a Saturday, Sunday or legal holiday,
then the duration of such time period shall be shortened so that it shall
end on the next preceding day which is not a Saturday, Sunday or legal
holiday.
21. BINDING AGREEMENT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and to the respective
permitted successors. Except as
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provided herein, neither this Agreement nor the rights or obligations
hereunder may be assigned or delegated by either party without the prior
written consent of the other party.
22. INVALIDITY. In the event any one or more of the provisions contained in
this Agreement, or any other instrument referred to herein, shall for any
reason be held invalid, illegal or unenforceable in any respect, then, to
the maximum extent permitted by law, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or
any such instrument, and this Agreement shall be construed as if the
invalid, illegal or unenforceable provision had never been present.
However, none of the provisions hereof are severable for any purpose
(including attempts to avoid portions hereof in a bankruptcy proceeding)
other than to avoid invalidity, illegality or unenforceability.
23. AMENDMENTS. This Agreement, together with all exhibits attached hereto,
contains the entire agreement of the parties hereto with respect to the
subject matter hereof, and no representations, inducements, promises or
agreements, oral or otherwise, between the parties not embodied herein
shall be of any force or effect unless contained in a written amendment.
Any amendment to this Agreement shall not be binding upon either of the
parties hereto unless such amendment is in writing and executed by the
authorized representatives of all the parties hereto.
24. NOTICES. All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been
duly given when presented personally or upon being deposited in a regularly
maintained receptacle for United States postal service, postage prepaid,
registered or certified, return receipt requested, or sent by a national
overnight courier service, and addressed as set forth below or such other
addresses as AWG or Homeland may from time to time designate by written
notice to the others as required herein:
If to Homeland, addressed to:
Homeland Stores, Inc.
400 N.E. 36th Street
Oklahoma City, Oklahoma 73105
Attention: James A. Demme
With copies to:
Crowe & Dunievy
1800 Mid-America Tower
20 North Broadway
Oklahoma City, Oklahoma 73102
Attention: Kenni B. Merritt, Esq.
Clayton Dubilier & Rice, Inc.
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126 East 56th Street
New York, New York 10022
Attention: Alberto Cribiore
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Steven R. Gross, Esq.
If to AWG, addressed to:
Associated Wholesale Grocers, Inc.
P.O. Box 2932
5000 Kansas Avenue
Kansas City, Kansas 66110-2932
Attention: General Counsel
With a copy to:
Rose, Brouillette & Shapiro, P.C.
4900 Main, Eleventh Floor
Kansas City, Missouri 64112
Attention: C. Christian Kirley, Esq.
or such other place and with such other copies as either party may designate as
to itself by written notice to the others.
25. WAIVER. No waiver by either party of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute
a continuing waiver unless otherwise expressly provided.
26. CONFIDENTIAL INFORMATION.
a. The parties acknowledge that the transaction described herein is
of a confidential nature and neither the transaction or any information
obtained as a result of this Agreement or the underlying transaction shall
be disclosed to anyone except to Representatives or as required by law.
Until such time as the parties make a mutually agreeable public
announcement regarding the transactions, neither Homeland nor AWG shall
make any public disclosure of the specific terms of this Agreement without
the prior written consent of the other party hereto, except as required by
law.
b. In connection with the negotiation of this Agreement, the
preparation for the consummation of the transactions contemplated hereby,
and the performance of obligations hereunder, each party acknowledges that
it has had and will have access to confidential
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information relating to the other party. Each party shall treat such
information as confidential, preserve the confidentiality thereof and not
(except (i) as required by applicable law, (ii) with respect to Homeland's
lenders and their authorized representatives and (iii) as permitted herein)
use, duplicate or disclose such information in connection with the
transactions and activities contemplated hereby, except to representatives
who also agree to treat such information as confidential.
c. In the event of the termination of this Agreement for any reason
whatsoever, each party shall return to the other all documents, work papers
and other material (including all copies thereof) obtained in connection
with the transactions contemplated hereby, will use all reasonable efforts,
including instructing its employees and others who have had access to such
information, unless such information is now, or is hereafter disclosed,
through no act or omission of such party, in any manner making it available
to the general public, and agrees not to use any such information disclosed
or learned.
27. INDEMNIFICATION. In addition to any specific indemnifications contained
herein (and not in derogation thereof) the following indemnifications shall
be applicable:
a. By Homeland. Homeland shall indemnify, save and hold harmless
AWG, its affiliates and subsidiaries, and its and their respective
Representatives, from and against any and all costs, losses (including,
without limitation, diminution in value), liabilities, damages, lawsuits,
deficiencies, claims and expenses (whether or not arising out of third-
party claims) including, without limitation, interest, penalties,
reasonable attorneys' fees and all amounts paid in investigation, defense
or settlement for any of the foregoing (herein, the "DAMAGES"), incurred in
connection with or arising out of or resulting from (i) any breach of any
covenant or warranty or the inaccuracy of any representation made by
Homeland in or pursuant to this Agreement, or (ii) any liability,
obligation or commitment of any nature (absolute, accrued, contingent or
otherwise) of Homeland which is due to or arises in connection with
Homeland's acts or omissions prior to or after the Closing Date and not
specifically assumed BY AWG pursuant to this Agreement or the APA. Homeland
shall not be liable for any matter which is due to or arises in connection
with AWG's acts or omissions. Notwithstanding the foregoing or anything
else contained herein or in the APA and notwithstanding any default by
Homeland of its obligations hereunder or thereunder, except as set forth in
paragraph 5(c) hereof in connection with the K-CCS Contract and the Drake
Contract, and except as specifically provided in the Undertakings, the
Assignment and Assumption Agreements, the ERISA Agreement and the other
agreements to be entered into pursuant to Section 5.1 of the APA, AWG shall
not have the right to otherwise rescind, terminate, modify or avoid its
obligations with respect to the Existing Contracts under Section 5.1 of the
Asset Purchase Agreement, or as specifically provided in the Undertakings,
the Assignment and Assumption Agreements, the ERISA Agreement and the other
agreements to be entered into pursuant to Section 5.1.
b. By AWG. AWG shall indemnify and save and hold harmless Homeland,
its affiliates and subsidiaries, and its and their respective
Representatives from and against any
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and all Damages incurred in connection with or arising out of or resulting
from (i) any breach of any covenant or warranty, or the inaccuracy of any
representation made by AWG in or pursuant to this Agreement or (ii) any
liability, obligation or commitment of any nature (absolute, accrued,
contingent or otherwise) of AWG which is due to or arises in connection
with AWG's acts or omissions prior to or after the Closing Date, including
any other claim, liability, or obligation which is specifically assumed by
AWG pursuant to this Agreement or the APA. Except as provided herein or in
the APA, AWG shall not be liable for any matter which is due to or arises
in connection with Homeland's acts or omissions.
c. Defense of Claims. If any lawsuit or enforcement action is filed
against any party entitled to the benefit of indemnity under this
Agreement, written notice thereof shall be given to the indemnifying party
as promptly as practicable (and in any event within fifteen (15) days
after the service of the citation or summons); provided, that the failure
of any indemnified party to give timely notice shall not affect rights to
indemnification hereunder except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if
the indemnifying party shall acknowledge in writing to the indemnified
party that the indemnifying party shall be obligated under the terms of its
indemnity hereunder in connection with such lawsuit or action, then the
indemnifying party shall be entitled, if it so elects, to take control of
the defense and investigation of such lawsuit or action and to employ and
engage attorneys of its own choice to handle and defend the same, at the
indemnifying party's cost, risk and expense; and such indemnified party
shall cooperate in all reasonable respects with the indemnifying party and
such attorneys in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom; provided, however, that the
indemnified party may, at its own cost, participate in the investigation,
trial and defense of such lawsuit or action and any appeal arising
therefrom. In the event the indemnifying party elects not to assume the
defense or investigation of a lawsuit or an action, the indemnifying party
shall not be obligated to pay the fees and expenses of more than one
counsel or one firm of counsel for all parties indemnified by the
indemnifying party in respect of such lawsuit or action, unless in the
reasonable judgment of the indemnifying party a conflict of interest may
exist between such indemnified party and any other of such indemnified
parties in respect of such lawsuit or action. Notwithstanding the
foregoing, no party may settle any matter in a manner which would have an
adverse effect on the other party without the affected party's prior
written consent.
d. Brokers and Finders. Pursuant to the provisions of this
paragraph, AWG and Homeland shall indemnify, hold harmless and defend each
other from the payment of any and all broker's and finder's expenses,
commissions, fees or other forms of compensation which may be due or
payable from or by the indemnifying party, or may have been earned by any
third party acting on behalf of the indemnifying party in connection with
the negotiation and execution hereof and the consummation of the
transactions contemplated hereby.
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No individual representative of any party shall be personally liable for
any Damages under the provisions contained in this paragraph. Nothing
herein shall relieve either party of any obligation to make any payment
expressly required to be made by such party pursuant to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year last above written.
ASSOCIATED WHOLESALE GROCERS, INC.
By: /s/ Mike DeFabis
--------------------------------------
Mike DeFabis, President
HOMELAND STORES, INC.
By: /s/ James A. Demme
--------------------------------------
James A. Demme, President
31
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EXHIBIT 10.3
AGREEMENT
THIS AGREEMENT, executed and effective as of this 23rd day of April, 1995,
by and between Associated Wholesale Grocers, Oklahoma City Division, hereinafter
referred to as "Company," and General Drivers, Chauffeurs and Helpers Local
Union No. 886, affiliated with the International Brotherhood of Teamsters,
hereinafter referred to as "Union." The parties mutually agree as follows:
1. GENERAL PURPOSE OF AGREEMENT
----------------------------
The purpose of this Agreement is to promote and maintain mutually
satisfactory industrial and economical relationships between the Company and the
Union. It is recognized by this Agreement to be the duty of the Company, the
Union, and the employees to cooperate fully for the advancement of these
conditions, including industrial peace, looking towards a profitable operation.
2. RECOGNITION
-----------
a. The Company recognizes the Union as the sole and exclusive
representative for the employees covered herein for the purpose of collective
bargaining with respect to rates of pay, wages, hours of employment, and other
conditions of employment. The term employee as used in this Agreement includes
warehouse employees employed at the Company's Oklahoma City, Oklahoma
warehouses, including warehousemen and warehouse maintenance employees,
excluding office-clerical employees, guards, professional employees, and
supervisors as defined in the National Labor Relations Act.
b. The Company agrees not to enter into any agreement or contract with its
employees, individually or collectively, which in any way conflicts with the
terms and provisions of this Agreement.
c. The Company will not discriminate in any way against employees in the
above-described bargaining because of Union affiliation, not in violation of
this Agreement.
3. UNION SHOP
----------
a. All of the Company's present employees within the above-described
bargaining unit shall remain members of the Union in good standing as a
condition of employment. All newly hired employees in the above-described
bargaining unit shall become members of the Union within 31 days after the date
of their employment, and shall remain members of the Union in good standing as a
condition of employment.
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b. In the event that the foregoing paragraph becomes illegal, by reason of
Oklahoma law prohibiting the union shop, then the parties will substitute an
agency shop provision for the union shop provision if such substitution can
lawfully be made. Such agency shop provision, if legal, would require all
employees in the above-described bargaining unit to pay the Union an amount
equal to union dues, initiation fees, and assessments after 30 days of
employment.
c. Nothing contained in this Article shall be construed to require the
Company to violate any applicable law.
4. CHECK-OFF
---------
The Company agrees to check-off Union membership monthly dues, initiation
fees, and assessments or agency shop fees for all Union employees covered by
this Agreement, provided that the Union delivers to the Company a written
authorization to make such deductions, signed by the employee irrevocable for
one year or the expiration date of this Agreement, whichever shall occur sooner.
The Union shall certify to the Company, in writing each month, a list of its
members together with an itemized statement of dues, assessments, initiation
fees or agency shop fees to be deducted from each for such month. The Company
shall deduct the amount so certified in respect to each such member or agency
fee payor from the first paycheck of such member following the receipt of such
certification or statement and within seven (7) days following such deduction
remit to the Union in one lump sum.
5. MANAGEMENT
----------
The management of the warehouse and the direction of the working forces,
including the planning, direction and control of warehouse operations, the
scheduling of work and the assignment of employees to such work, the transfer of
employees and the right to relieve employees from duty because of lack of work
or other legitimate reasons, the determination of manpower requirements, the
location or relocation of warehouses, the work to be assigned to each warehouse,
and the cessation of operations are vested solely and exclusively in the
Company. This listing of sole and exclusive management prerogatives shall not be
interpreted as excluding other prerogatives not listed which are not abridged by
a specific provision of this Agreement. Supervisors shall not perform work
except in cases of an emergency or to train employees.
6. HOURS OF WORK AND OVERTIME
--------------------------
a. Hours of work shall be determined by the Company. Regular employees
shall be bid for forty (40) hours' work each week to shifts that shall consist
of five days of eight (8) hours each or for days of ten (10) hours each.
b. Time and one-half (1 1/2) the regular hourly rate shall be paid for all
hours worked after eight (8) hours per day for regular employees scheduled to
work 8-hour shifts and after ten
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(10) hours per day for regular employees scheduled to work 10-hour shifts. Time
and one-half (1 1/2) the regular hourly rate shall be paid regular employees for
all work performed on a day off. Casual and Summer Help shall receive one and
one-half (1 1/2) times the regular hourly rate only after forty (40) hours of
actual work in the work week.
c. All employees, including Casuals and Summer Help, reporting for
scheduled work shall receive four (4) hours' work or pay at their regular hourly
rate of pay unless they have been previously notified not to report for work or
unless the lack of available work is due to acts of God, power failure, fire,
computer malfunction, bombing or threat of bombing.
d. Except in cases of emergency and change of regular shift, no employee,
after completing his shift, may return to work earlier than eight (8) hours
after the end of his last work shift.
e. When Summer Help is hired they must sign a letter stating they are a
student, and a beginning and ending date of employment will be listed and the
employee will be terminated at that date and does not acquire seniority.
f. For pay purposes, the work week shall start on Sunday.
g. All hours worked by regular employees scheduled to eight (8) hour shifts
(not including Casuals or Summer Help) in a holiday week in excess of thirty-two
(32) hours shall be paid for at time and one-half (1 1/2) the regular hourly
rate. For regular employees (not including Casuals and Summer Help) scheduled to
ten (10) hour shifts in a holiday week, time and one-half (1 1/2) shall be paid
for work in excess of thirty (30) hours in the week.
h. Employees scheduled for ten (10) hour shifts shall have two (2)
consecutive days off, unless otherwise agreed between the Company and Union.
7. SENIORITY
---------
a. New employees hired into regular jobs shall be regarded as probationary
employees until they have completed forty-five (45) calendar days of full-time
employment from date of last hire with the Company. During this probationary
period, the Company may, at its option, terminate the employment of any
probationary employee and there shall be no responsibility on the part of the
Company for re-employment of such employee. Upon successful completion of the
probationary period, an employee shall become a regular employee, shall qualify
for fringe benefits, shall be placed on the seniority list, and the employee's
seniority shall date from his latest hiring by the Company.
b. The term "seniority" shall mean length of continuous service with the
Company. There shall be two seniority lists:
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Warehouse
Maintenance
c. An employee's continuous service shall be deemed to be broken and all
seniority lost if (a) he is discharged for just cause, (b) he voluntarily quits,
(c) he is absent for three (3) consecutive days without notifying the Company,
except when an emergency prevents such notice, (d) he obtains employment during
or fails to report for work at the expiration of an approved leave, (e) he gives
a willful false statement in obtaining employment with the Company, or (f) he
has performed no work for the Company for a period of twelve (12) months, except
in cases of on-the-job injury the period shall be extended to twenty-four (24)
months.
d. In laying off and recalling employees, selection of vacation weeks, and
filling regular job vacancies seniority shall prevail in the applicable
seniority group. Employees must be qualified to perform the work. The Company
shall be reasonable in judging qualifications and any complaint that it has
failed to be reasonable shall be subject to the grievance and arbitration
procedure.
e. When deemed appropriate by the Company, not less than once per calendar
year, all jobs, based on seniority group, will be posted for seven (7) days for
observation. After the observation period, the Company will post, based on
seniority group, the date and time on which the jobs will be available for
bidding. Employees who are not present to make a bid may exercise their bid in
writing prior to the bidding date and leave their choices with the steward to be
used in bidding for the employee. If the absent employee choices are not
available, the steward will bid for the employee.
f. A necessary number of employees shall be bid Utility Warehouseman to
fill open temporary and extra jobs as they occur on a daily and/or weekly basis.
Known vacancies of one week or more that the Company elects to fill will be
offered by seniority to Utility Warehousemen by the week preceding the vacancy.
All other Utility Warehousemen will bid shifts and days off on a weekly basis.
On a daily basis, Utility Warehousemen not bid to a classification for the week
will bid by seniority to any open job the Company elects to fill and shall
remain on the bid job until it is discontinued. As it becomes necessary to fill
other open jobs on a shift, the Company will offer the open jobs by seniority to
employees from the classification and area where it deems them available for
transfer.
g. An employee's job will be discontinued in accordance with his seniority
during his shift and the employee will then perform whatever available work is
assigned to him. When more than one employee's job is discontinued at the same
time, those employees will be allowed to exercise shift seniority to claim work
that is open and available.
h. A seniority list will be posted in January and July of each year at the
time clocks, with a copy to the Union. Any grievance with respect to the
seniority standing of an employee
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must be filed within thirty (30) calendar days after posting of the seniority
list or the grievance shall be waived.
i. Each employee shall keep the Company informed of his current address and
telephone number in writing to the appropriate Company designee; and if an
employee cannot be reached by routine telephone communication, he shall not be
entitled to call-ins.
j. Day-off overtime will be offered by seniority to qualified employees by
shift, classification and the area where the majority of work is to be
performed. Forced day-off overtime will be assigned in inverse seniority order
of the above. If more employees are needed in the classification, shift and
area, the day-off overtime will be offered by group seniority to those qualified
employees on the shift the work will be performed.
k. Except as provided in Article 7, paragraph 13, shift overtime, of more
than 30 minutes, will be offered by seniority to qualified employees on the
shift in the area and classification in which the work is required. Forced shift
overtime will be assigned in inverse seniority order of above.
l. Except as provided in Article 7, paragraph 13, if additional employees
are needed for overtime under paragraphs 10 and 11 above, the work will be
assigned (or forced) to qualified employees by group seniority plant-wide.
m. Employees will not be transferred between the main and any satellite
warehouse unless there are four (4) hours of work to be performed.
n. The Company shall notify the Union within seventy-two (72) hours of when
it hires, lays off or recalls employees.
8. MEAL AND REST PERIODS
---------------------
a. The Company will grant each employee a one-half (1/2) hour meal period,
without pay between the third hour and the sixth hour of work on the shift.
b. Employees assigned to eight (8) hour shifts shall receive two (2) paid
fifteen (15) minute breaks. Employees assigned to ten (10) hour shifts shall
receive three (3) paid fifteen (15) minute breaks.
c. Employees who are scheduled to work more than one (1) hour of overtime
after completing their regular shift shall receive a fifteen (15) minute break
and shall receive additional fifteen (15) minute breaks after each additional
two (2) hours of work.
d. An employee who is called in earlier than his regular starting time
shall receive a fifteen (15) minute paid break after each two (2) hours of work
before his regular shift begins.
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9. CASUALS
-------
a. Notwithstanding any provision in this Agreement to the contrary, the
Company may hire, subject to need, Casual employees. The number of Casual
employees shall not exceed fifteen percent (15%) of the total number of
employees on the seniority list.
b. Casual (and Summer Help) employees will not be part of the regular
seniority list.
c. Casual (and Summer Help) employees will not be entitled to any fringe
benefits such as, but not limited to, vacations, holidays, funeral leave, jury
pay, health and welfare, and pension.
d. Casual (and Summer Help) employees may be worked on either a call-in or
a scheduled basis.
e. The Company shall have the right to utilize five (5) additional Casual
employees during each of three (3) designated days each week to meet heavy work
loads. These five (5) additional Casual employees shall be supplemental to and
in addition to the Casual employee use limits set forth above. This Article 9,
paragraph 5 shall not apply to the maintenance department.
f. Casual employees who are promoted to regular status shall be required to
serve a probationary period.
g. Casual (and Summer Help) will be assigned to the order selector
classification so long as there is work to be performed in that classification
and sufficient regular employees are available to perform all other work.
h. The Company shall provide the Union with a list on a weekly basis of
Casuals (showing day and hours worked) who have performed work during the week.
i. Shift overtime shall be offered to regular employees before it is
assigned to Casual and Summer Help.
10. DISCHARGE
---------
a. Subject to the grievance procedure, the right to discharge, discipline
and suspend for just cause and to maintain the discipline of employees is the
prerogative of the Company, provided that in the exercise of these rights the
Company will not violate any of the terms of this Agreement. The Company shall
be deemed to have just cause to discharge or to discipline any employee for
dishonesty, the illegal use of a controlled substance on Company time or on
Company property, recklessness resulting in an accident while on duty,
insubordination, or violating the Company's substance abuse policy.
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b. The Union will be given notice of all warning letters, suspensions and
discharges, in writing by certified mail, which shall state the reason for the
suspension or discharge. The notice shall be given within ten (10) calendar days
of the alleged incident, or the incident will not provide a basis for
disciplinary action unless, because of extenuating circumstances, the Company
did not have knowledge of the facts giving rise to the incident. The notice
shall be deemed given if delivered to the employee, or mailed by certified mail,
return receipt requested, within ten (10) calendar days of the alleged incident,
or within ten (10) calendar days of the Company's obtaining knowledge of the
alleged incident.
c. The affected employee may request an investigation should he feel that
he has been improperly suspended or discharged. Such request for investigation
must be made in writing and a copy thereof furnished the Company not later than
ten (10) calendar days after receipt of written notice of the employee's
suspension or discharge. The Company and the Union in the event they cannot come
to an agreement on the matter will settle the dispute as provided for herein,
including reference to arbitration.
d. Disciplinary action against an employee shall remain in effect for not
more than thirty (30) months.
11. PENSIONS
--------
a. For each of the Company's regular employees covered by this Agreement,
the Company shall contribute to the Central States Southeast, and Southwest Area
Pension Fund in the amount of Eighty-five Dollars ($85.00) per week. The
obligation to pay for and make the required weekly contribution for the pension
program hereby established for regular employees of the Company shall rest
solely with the Company, except as hereinafter provided. Casual, Summer Help,
and probationary employees shall not be covered by this pension program
established under this Agreement.
b. The Company shall pay and make weekly contribution for the pension
program hereby established for each week worked (or paid vacation or jury duty)
by a regular employee, even though such employee may work for the Company only
part-time during such week. If such employee is absent from work during any week
because of illness or noncompensable injury and notifies the Company of such
absence, the Company shall continue to pay and make the required weekly
contributions, so long as the employee is on the Company's regular seniority
list, but for a period of not more than four (4) weeks. If such employee is
absent from work during any week due to compensable injury, the Company shall
continue to pay and make such weekly payments, so long as the employee is on the
Company's regular seniority list, but for a period of not more than six (6)
months.
c. If an employee is absent from work during any week, the Company shall
not be required to pay or make any weekly contributions for such employee,
except as provided in
7
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paragraph 2 above. However, if any such regular employee so desires, he may
continue his pension program contributions so long as he is on the Company's
regular seniority list by making prior arrangements with the Company, who shall
collect from such employee sufficient moneys for the Company to make the weekly
contributions due the pension and on account of such employee during any such
absence.
d. By the execution of this Agreement, the Company agrees to enter into
appropriate trust agreements necessary for the administration of such pension
fund and to designate the Company's trustees under such Agreement, hereby
waiving all notices hereof and ratifying all actions already taken or to be
taken by such trustees in the scope of their authority.
e. Failure of the Company to pay or make any contribution for the pension
program as hereinabove provided shall relieve the Union of its no-strike
obligation with respect to the Company, unless there is a bona fide dispute as
to the amount owed, in which case the matter shall be resolved under the
provisions of Article 24 hereof.
12. INSURANCE
---------
a. The Company shall make medical, vision, dental, life and short-term
disability insurance available to regular employees (not including Casual and
Summer Help). The Company shall have the right to change insurance carriers so
long as substantially equal benefits are offered.
b. All insurance premiums shall be paid by the Company.
c. If an employee is absent because of illness or off-the-job injury and
notifies the Company of such absence, the Company shall continue to pay premiums
as provided above for a period of four (4) weeks. If an employee is injured on
the job, the Company shall continue to pay premiums as provided above until such
employee returns to work; however, the Company shall not be required to make
such premium payments for a period of more than twenty-six (26) weeks. In
accordance with applicable law, if an employee is granted a leave of absence and
desires to retain insurance coverage, the employee shall pay to the Company,
prior to the leave of absence being effective, sufficient monies to pay the
required premiums during the period of absence. No contributions shall be made
for any employee on layoff, except as otherwise required by law or Article 21,
paragraph 3 hereof.
5. The Union shall have access to the cost of all insurance coverage.
13. JURY DUTY
---------
Each regular employee serving on jury duty shall, upon presentation of a
statement signed by an officer of the court involved signifying the time he so
served on the jury, receive his regular classified rate of pay for the time he
is required to be absent from regular scheduled days for such service but not to
exceed ten (10) working days in any one contract year. If the employee is
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discharged from the jury before his work shift ends, he must report immediately
to the Company for work if time permits him to work at least three (3) hours. If
the employee desires and the Company approves, the jury duty benefit may be
administered on an hourly instead of a daily basis.
14. FUNERAL LEAVE
-------------
Should a death occur in the immediate family, upon request a regular
employee who attends the funeral shall be granted three (3) consecutive days
consisting of the day of the funeral and either the two (2) days preceding, the
day preceding and the day following or the two (2) days following the day of the
funeral. The employee shall be compensated for the regular scheduled days he
would have worked within the applicable period had such death not occurred at
eight (8) times his regular straight-time hourly rate; at ten (10) times the
regular straight-time rate of pay if working ten (10) hour shifts. Immediate
family shall mean spouse, mother, father, mother-in-law, father-in-law,
stepmother, stepfather, brother-in-law, sister-in-law, child, brother, sister,
stepchild, stepbrother, stepsister, grandparents, grandchildren, spouse's
grandparents and any other relatives residing with the employee.
15. STEWARD
-------
a. The Company recognizes the right of the Union to designate job stewards
and alternates from the Company's seniority list. The authority of job stewards
and alternates so designated by the Union shall be limited to and shall not
exceed the following duties and activities:
i. The investigation and presentation of grievances to the Company or the
designated Company representatives in accordance with the provisions of the
Collective Bargaining Agreement.
ii. The collection of dues when authorized by appropriate Local Union
action.
iii. The transmission of such messages and information which shall
originate with and authorized by the Local Union, or its officers, provided
such message and information:
(1) Have been reduced to writing; or
(2) If not reduced to writing, are of a routine nature and do not
involve work stoppages, slowdowns, refusal to handle goods, or any other
interference with the Company's business.
b. Job stewards and alternates have no authority to take strike action, or
any other action interrupting the Company's business, except as specifically
authorized by official action of the Union. The Union agrees to do all in its
power to remedy unauthorized action.
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c. The Company recognizes these limitations upon the authority of job
stewards and their alternates and shall not hold the Union liable for
unauthorized acts. The Company in so recognizing such limitations shall have the
authority to impose discipline, including discharge, in the event the job
steward or his designated alternate has taken unauthorized strike action, slow
down or work stoppage in violation of this Agreement.
16. BULLETIN BOARDS
---------------
The Company will provide suitable space for Union bulletin boards in the
warehouse and break room. Postings by the Union on such bulletin boards will be
confined to items involving official Union business. A Union official and/or
steward will police the board from time to time.
17. COMPANY RULES
-------------
The Company may establish reasonable rules of conduct not inconsistent with
the provisions of this Agreement. The question of whether or not a work rule
violates the Agreement shall be subject to grievance and arbitration. The
Company shall furnish the Union ten (10) days in advance of the enforcement a
copy of any written Company rule. It is understood that all of the Company's
rules are not in writing and written rules are not all inclusive.
18. UNION ACCESS
------------
The Union business representative shall have access to the warehouse during
working hours for official Union business, after notifying the Distribution
Manager in charge or his designee, provided there shall be no interference with
production or the work of the employees. The Union shall notify the Company in
writing of the names of its authorized representatives.
19. NEW CLASSIFICATIONS
-------------------
If, during the term of this Agreement, new job classifications are created,
the Company shall notify the Union and shall determine the rate of pay for the
new job classification and if the Union fails to protest the rate within thirty
(30) calendar days of the establishment of the rate, the rate shall become the
permanent rate for the new job classification. Any Union protest of such rate
shall be subject to the grievance and arbitration procedure as set forth herein.
The permanent rate so established shall be retroactive to the date on which
employees were first assigned to work in the new job classification.
20. DAMAGE
------
Employees shall not be required to pay for loss or damage to Company
property or products unless such loss or damage was due to a proven willful act
on the part of the employee.
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21. WAGES AND CLASSIFICATIONS
-------------------------
a. For employees hired before May 1, 1995, who were employed by Homeland
Stores, Inc. on April 22, 1995, during the term of this Agreement, the following
wage rates shall apply:
<TABLE>
<CAPTION>
April 23, April 21, April 20, April 19, April 18, April 23,
1995 1996 1997 1998 1999 2000
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Warehousemen 13.80 14.10 14.45 14.85 15.25 15.65
Maintenance 14.84 15.14 15.49 15.89 16.29 16.69
Refrigeration
Maintenance 15.34 15.64 15.99 16.39 16.79 17.19
Casual 8.97 9.17 9.40 9.65 9.91 10.17
Summer Help 8.97 9.17 9.40 9.65 9.91 10.17
</TABLE>
All other employees, excluding Casual and Summer Help, shall, for the first year
of continuous employment, be paid seventy percent (70%) of the regularly hourly
rate; for the second year of continuous employment seventy-five period (75%) of
the regularly hourly rate; for the third year of continuous employment eighty
percent (80%) of the regularly hourly rate; for the fourth year of continuous
employment ninety percent (90%) of the regularly hourly rate. For the fifth year
of continuous employment and thereafter, employees shall be paid one hundred
percent (100%) of the regular hourly rate.
For work in the freezer, employees shall receive a premium of twenty-five
cents (25c) per hour.
b. Employees shall be paid on a regular established payday which will be
the same day each week. No change in payday will occur except where necessary in
a holiday week. If the payday is to be permanently changed, notice of such
chance will be posted fourteen (14) days in advance of change.
c. Regular employees who are reduced to part-time shall be offered
available work in preference to Casuals. Such employees who work more than
twenty-four (24) hours per week shall receive their normal benefits and wage
rate.
d. Employees shall receive a premium of twenty cents (20c) per hour for
all hours worked between 6:00 p.m. and 6:00 a.m.
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22. VACATIONS
---------
a. Employees shall be entitled to annual vacations with pay upon the
following terms and conditions: After one year of continuous employment, one
week of vacation; after three years of continuous employment, two weeks of
vacation; after eight years of continuous employment, three weeks of vacation;
after fifteen years of continuous employment, four weeks of vacation.
b. In order to qualify for full vacation benefits, employees must work
twelve hundred (1,200) actual hours of work during the twelve (12) month period
immediately preceding January 1 of such calendar year. Hours paid for shall be
considered actual hours of work. Employees who fail to qualify for full vacation
benefits shall receive pro rata vacation benefits based on a formula of dividing
actual hours worked by 2,080 hours, except in cases where the employee is
discharged for dishonesty or illegal use of a controlled substance. On or after
January 1, 1996, employees will be eligible to take paid vacations which have
been earned.
c. Vacations shall be scheduled based on Company-wide seniority. Not more
than ten percent (10%) of the work force may be on vacation in any week, except
in a pre-holiday week, not more than five percent (5%) of the work force may be
on vacation. The Company agrees that if the calculation of the percentage of
employees to be on vacation is not a whole number of employees, then the Company
agrees to round off to the next highest number the employees allowed to be on
vacation. The calculation for determining the number of employees to be on
vacation shall be the effective number of employees on the payroll of the first
week of each new calendar year.
d. When a holiday falls within an employee's vacation, the employee shall
be granted an extra day's pay or an additional day of vacation, such day to be
selected by mutual agreement with the Company.
e. The term "continuous employment" shall be defined as the period
beginning with the employee's last date of hire by the Company except, for
vacation purposes only, employees who are employed by the Company prior to May
1, 1995, shall be given credit for their years of "Company Seniority" with
Homeland Stores, Inc., not to exceed eight (8) years, prior to their employment
date with the Company and shall be eligible for full paid vacation in 1996
provided they work six hundred (600) hours since date of hire. Employees who
have a break in continuous employment with the Company shall not be given any
credit for "Company Seniority" with Homeland Stores, Inc.
f. Employees who have not had an opportunity to exercise their seniority
with regard to prime time vacations (June, July and August and/or holiday weeks)
and those who choose to float one (1) week of vacation will be allowed to bid by
seniority should a week become available after the close of the vacation period.
If an employee is offered a bid under this provision and refuses, he forfeits
his right to further bidding. An employee who bids will only be allowed one week
of prime time vacation under this provision.
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g. Employees shall receive their vacation pay at the time of leaving on
vacation. No employee shall be required to work overtime on the day his vacation
is scheduled to begin. Employees will not be available for work until their next
scheduled shift after vacation.
23. HOLIDAYS
--------
a. Christmas Day, Thanksgiving Day, New Year's Day, Memorial Day, July 4,
Labor Day and birthday shall be recognized as holidays under this Agreement.
Employees shall receive three (3) floating holidays to be paid as follows: One
(1) floating holiday shall be added on April 23 of each contract year for the
years 1996, 1997, and 1999.
b. Any employee, except Casual and Summer Help, who works on his holiday
shift shall receive one and one-half (1 1/2) times his regular rate of pay plus
holiday pay.
c. The Company shall determine the shifts on which a holiday will be
observed and shall notify the Union in January of each year the shifts on which
each holiday will be observed for that year, including New Year's Day the
following year.
d. In order to qualify for holiday pay, an employee must (a) perform some
work for the Company or receive pay from the Company during the holiday week,
(b) work his scheduled day before and after the holiday, and (c) be on the
active payroll of the Company.
e. Any employee scheduled to work on a holiday but who fails to work as
scheduled, except where off work because of illness or injury supported by a
medical doctor's statement showing inability to work, shall not be entitled to
holiday pay.
f. Employees regularly assigned to an eight (8) hour shift shall receive
eight (8) hours' pay for a holiday not worked. Employees regularly assigned to
a ten (10) hour shift shall receive ten (10) hours' pay for a holiday not worked
that falls on one of their regularly scheduled workdays; otherwise, they will
receive eight (8) hours' pay for a holiday not worked.
g. Employees shall not be required to work overtime on the shift prior to
their scheduled birthday holiday or scheduled floating holidays. Employees will
not be available until their next scheduled shift.
24. GRIEVANCE AND ARBITRATION
-------------------------
a. Any complaint or disagreement by the Union or employees covered by this
Agreement which concerns the interpretation or application of the terms and
provisions of this Agreement shall be considered a grievance. If grievances
shall arise regarding the interpretation or application of any of the terms of
this Agreement, they shall be handled as hereinafter provided:
13
<PAGE>
Step 1: Any employee with a grievance will first discuss the grievance with
his immediate supervisor within five (5) working days of the event giving
rise to the grievance or when it should have reasonably become known to
him. If no agreement is reached within twenty-four (24) hours then the
grievance shall be reduced to writing and submitted to the same employee's
supervisor within three (3) working days. The written grievance shall be
signed by the aggrieved employee or Union and must specify the section or
sections of the Agreement alleged to have been violated. For the purpose of
this Article, working days shall be defined as Monday through Friday.
Step 2: If the grievance is not resolved in Step 1, it shall, within five
(5) working days after presentation to the employee's supervisor, be
presented by the steward and/or Union official to the Manager of the
Company or his designee. The Manager shall answer the grievance in writing
within five (5) working days.
Step 3: If the grievance is not resolved in Step 2, the matter shall, on
the request of the Union, made within ten (10) working days after the
conclusion of Step 2, be submitted to an arbitrator for a decision.
b. The arbitrator shall be selected by agreement of the parties. In the
event of inability to agree, the Union and the Company shall request the Federal
Mediation and Conciliation Service to submit a list of seven (7) arbitrators.
Beginning with the party requesting arbitration, the parties shall strike
alternately from said list until one name remains. The name remaining on the
list shall be chosen to be the official arbitrator. The expense of the
arbitrator shall be borne equally by the Union and the Company.
c. The arbitrator shall have no power to add to or subtract from or modify
any of the terms of this Agreement. The decision of the arbitrator shall be
final and binding on both parties to this Agreement.
d. Multiple unrelated grievances shall not be subject to arbitration at
the same time.
e. The failure of an employee or the Union to follow the time limits set
forth above shall mean that the grievance has been waived. Failure of the
Company to act within time limits specified above shall automatically advance
the grievance to the next succeeding step. The time limits set forth in this
article may be extended by mutual agreement in writing between the Company and
Union.
f. Payments in settlement of grievance will be included in the paycheck no
later than the pay period following the pay period in which the grievance is
settled.
25. NON-DISCRIMINATION
------------------
14
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a. The Company, Union and employees shall comply with applicable law with
regard to discrimination against any employee on the basis of age, race, sex,
sexual harassment, creed, color, national origin, religion, disability, equal
pay, and veteran's status.
b. Whenever the masculine gender is used it shall also refer to the
feminine gender.
26. FEDERAL AND STATE LAW
---------------------
If any article or section of this Agreement or any riders thereto should be
held invalid by operation of law or by any tribunal of competent jurisdiction or
if compliance with or enforcement of any article or section should be restrained
by such tribunal pending a final determination as to its validity, the remainder
of this Agreement and of any rider thereto shall not be affected thereby. In the
event that any article or section is held invalid or enforcement of or
compliance with which has been restrained as above set forth, the parties
affected thereby shall enter into immediate collective bargaining negotiations,
upon request of the Union or the Company for the purpose of arriving at a
mutually satisfactory replacement for such article or section.
27. CLOTHING AND TOOLS
------------------
a. If uniforms are required, they shall be furnished free of cost and
shall be kept clean by the Company. Maintenance employees shall furnish their
own hand tools and shall be paid One Hundred Twenty-five Dollars ($125.00) cash
each six (6) months as a tool allowance.
b. All employees holding bid jobs in the freezer shall be furnished head
gear, gloves, insulated boots and coveralls. Part-time freezer employees will be
furnished head gear, gloves, overshoes and coveralls.
c. All perishable loaders shall be furnished gloves which shall remain the
property of the Company.
28. NO STRIKE - NO LOCKOUT
----------------------
a. During the term of this Agreement, there shall be no picketing, work
stoppages, slowdowns, or concerted refusal to work by employees or the Union,
except as otherwise provided in paragraph 5.
b. The Company shall not cause or engage in any lockout of its employees
during the term of this Agreement.
c. Any employee who violates the provisions of this Article may be
discharged by the Company, subject to the grievance and arbitration procedure.
15
<PAGE>
d. Neither the Union nor any of its officers or representatives shall be
held liable for any damages resulting from unauthorized or "wildcat" strikes not
called, directed, or ratified by them.
e. It will not be a violation of this Agreement for employees to refuse to
cross another union's or a different local of Teamsters' lawful picket line
involving a primary dispute, provided that the Union gives the Company twenty-
four (24) hours' notice. The term "another union" means any local union other
than Teamsters Local 886.
29. LEAVE OF ABSENCE
----------------
a. Leaves of absence will be granted to enable employees to attend Union
conventions, or officiate at Local 886 Union elections, provided that (1) one
week's written notice is given to the Company, (2) such absence does not disrupt
Company operations, and (3) the duration of the leave will be limited to the
duration of the convention or election plus necessary travel time.
b. Leaves of absence up to 90 days will be granted to enable employees to
accept employment with the Union, provided that not more than one employee will
be on such leave of absence at one time. The Company may, if the employee and
the Union request, extend the leave an additional 90 days.
c. The Company, Union and employees shall comply with the provisions of
the Americans With Disabilities Act and Family and Medical Leave Act.
d. Any employee desiring a leave of absence from employment for any reason
other than those specified in paragraphs 1, 2 and 3 hereof, must secure written
permission from the Company. A copy of the letter of permission shall be
furnished to the Union within five (5) workdays from the date the leave of
absence commences. An employee shall not accept employment elsewhere when on
leave of absence unless written consent of the Company is obtained and a copy
thereof furnished to the Union.
e. Inability of an employee to work because of injury or illness not
arising out of or in connection with his job shall not result in loss of
seniority if the employee performs work within a period of twelve (12) months as
provided in Article 7, or within such further extension as the Company may elect
to grant.
30. PHYSICAL EXAMINATIONS
---------------------
a. Physical, mental or other examinations required by the Company shall be
promptly complied with by all employees, provided, however, the Company shall
pay for all such examinations. Employees required to take examinations during
their regular scheduled working hours shall be paid for such lost time. The
Company reserves the right to select its own medical doctor, but the employee
may, if he believes an injustice has been done to him, be re-examined
16
<PAGE>
by another medical doctor at the employee's expense. If the two medical doctors
do not agree, then the two medical doctors shall select a third medical doctor
whose decision shall be final and binding. The Company and employee shall share
the cost of the third doctor.
b. If an employee fails to pass a physical examination given by the
Company, the Company shall furnish a copy of the report to the employee and the
Union by certified mail.
c. Any employee who is off work due to illness or an off-the-job injury
for more than five (5) workdays will be required to notify the Company in
advance of his return to work and present the Company with a medical doctor's
release so that a return-to-work physical may be scheduled with the Company's
medical doctor if the Company deems it necessary. The employee must notify the
Company so that his return-to-work physical can be scheduled on Monday through
Friday between the hours of 8:00 a.m. and 4:30 p.m. If such employee is to
report to work on a Saturday or Sunday, he must notify the Company on the
preceding Friday so that the physical may be scheduled prior to the weekend.
31. SCOPE OF AGREEMENT
------------------
a. This Agreement contains all of the covenants, stipulations and
provisions agreed upon by the parties hereto and no representative of either
party has authority to make and neither of the parties shall be bound by, any
statement, representation or agreement reached prior to the signing of this
Agreement or made during these negotiations not set forth herein.
b. No subject or matter referred to or covered by this Agreement or which
is not specifically referred to or covered herein or is omitted hereby shall,
except by mutual agreement, be the subject of collective bargaining during the
term of this Agreement even though such subject or matters may or may not have
been within the knowledge or contemplation of either or both of the parties at
the time of negotiation or the signing of this Agreement.
32. MILITARY LEAVE
--------------
Employees of the Company who leave employment to enter service in the Armed
Forces of the United States shall be entitled to all rights and privileges
guaranteed by applicable federal and state laws.
33. SAFETY AND ACCIDENTS
--------------------
a. Any employee involved in any accident shall immediately report said
accident and any physical injury sustained. The employee, before starting his
next shift, shall make out an accident report in writing on forms furnished by
the Company and shall turn in all available names and addresses of witnesses to
the accident.
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b. Employees shall promptly report to the Company in writing all known
defects in equipment.
c. All material-handling equipment in the warehouse will be kept in safe
operating condition and all structures will be kept in safe condition.
34. TERM OF AGREEMENT
-----------------
This Agreement sets forth the full and complete understandings of the
parties hereto and cancels and supersedes any and all agreements heretofore
entered into by and between the parties and cancels and supersedes all Company
past practices. This Agreement shall become effective April 23, 1995, and shall
remain in effect until April 23, 2001, and thereafter from year to year unless
either party gives sixty (60) days' written notice to the other prior to April
23, 2001, or any subsequent anniversary date, that it wishes to amend, modify or
change this Agreement.
EXECUTED this 5th day of April, 1995.
GENERAL DRIVERS, CHAUFFEURS ASSOCIATED WHOLESALE GROCERS,
AND HELPERS LOCAL UNION NO. 886, INC., OKLAHOMA CITY DIVISION
affiliated with the INTERNATIONAL
BROTHERHOOD OF TEAMSTERS
By: /s/ Richard W. Nelson By: /s/ Tom Williams
---------------------------- -----------------------------------
Tom Williams, Senior Vice President
Date: April 17, 1995 Date: April 5, 1995
-------------------------- ---------------------------------
By: /s/ Neal Snow
----------------------------
Date: April 17, 1995
--------------------------
18
<PAGE>
EXHIBIT 10.4
AGREEMENT
---------
THIS AGREEMENT made and entered into by and between ASSOCIATED WHOLESALE
GROCERS, INC., hereinafter called "Company", and DEPARTMENT STORE, PACKAGE,
GROCERY, PAPER HOUSE, LIQUOR AND MEAT DRIVERS, HELPERS AND WAREHOUSEMEN. LOCAL
UNION, NO. 955, an affiliate of the INTERNATIONAL BROTHERHOOD OF TEAMSTERS,
CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA, hereinafter called the "Union".
ARTICLE I - Recognition
-----------------------
Section 1. The Company recognizes the Union as the sole and exclusive
collective bargaining agency for all employees who are working for the Company
at its warehouse located in the Greater Kansas City Area in the job
classifications listed in Article IX hereof, but excluding, office, shipping
room office, clerical, supervisory employees as defined in The Labor-Management
Relations Act of 1947, as amended, and all other employees.
Section 2. The Company agrees not to enter into any agreement or contract
with its employees, individually or collectively, which in any way conflicts
with the terms and provisions of this Agreement.
Section 3. The Employer and the Union agree that they will comply with
applicable law concerning discrimination relating to age, race, creed, color,
national origin, sex, sexual harassment, religion, disability, and veteran
status. Any reference in this Agreement which implies a gender shall also mean
the opposite gender.
ARTICLE II - Management
-----------------------
The management of the plant and the direction of the working force,
including the right to hire, suspend or discharge for proper cause and to
relieve employees from duty for any legitimate reasons and to make rules and
regulations for the conduct of the Company's business, are vested exclusively in
the Company, provided such action by the Company does not conflict with the
provisions of this Agreement.
ARTICLE III - Union Security
----------------------------
Section 1. Except as limited by Section 3 of this article, the Company
agrees to require as a condition of continued employment that all present
employees subject to the provisions of this Agreement must become members of the
Union not later than the thirty-first (31st) day following the beginning of such
employment or thirty-one (31) days following the
<PAGE>
effective date of this Agreement, whichever is the later, and all new or
additional employees who become subject to the provisions of this Agreement must
become members of the Union not later than the thirty-first (31st) day following
the beginning of such employment, and all such employees must remain members of
the Union in good standing thereafter by the payment of initiation fees and dues
so long as they remain on the Company's payroll.
Section 2. If any present or future employee shall apply for Union
membership and shall be refused such membership by the Union, his continuance
thereafter in the employ of the Company shall not be cause for discharge under
this Agreement, nor subject the Company to any claim by the Union of a breach of
this Agreement by the Company and the same in the case of any other Union member
deprived by the Union of his membership for any cause other than the nonpayment
of Union membership dues uniformly required as a condition of acquiring or
retaining membership.
Section 3. The foregoing two sections of this Article III shall not be
applicable with respect to operations of the Company at locations in the State
of Kansas until such time as the present Right-to-Work Kansas constitutional
amendment ceases to be effective through repeal, federal legislation or
otherwise.
Section 4. Each fourteen (14) days the Company shall furnish the Union, on
an appropriate form supplied by the Union, a list of all employees laid-off,
discharged, hired or rehired during the preceding fourteen (14) days.
ARTICLE IV - Checkoff
---------------------
Section 1. The Company agrees to deduct from the wages of those employees
who so authorize it by written assignment initiation fees and regular monthly
Union membership dues. The form of assignment shall be in such form as is
approved by the Company and the Union.
Section 2. Assignments, once executed under this Agreement, shall be
irrevocable for a period of one year from the date of their execution or until
the termination date of this Agreement, whichever first occurs.
Section 3. The Union shall submit to the Company properly executed
assignments for those employees from whose pay deductions shall be made.
Section 4. The Company shall furnish the Union each month with a list of
the employees from whose pay deductions have been made and at the same time
shall remit to the Secretary-Treasurer of the Union a check payable to the Local
Union for the amount so deducted.
2
<PAGE>
Section 5. The Union accepts full responsibility for the authenticity of
each and every authorization and assignment submitted to the Company and shall
indemnify and save the Company harmless from any claims, suits, judgments,
attachments and from any other form of liability as a result of making any
deductions in accordance with the foregoing authorizations and assignments. The
Union agrees to refund promptly to the Company any such dues found to have been
erroneously or improperly deducted.
Section 6. Any employee promoted or transferred to a position outside the
bargaining unit shall revoke any checkoff authorization or assignment
theretofore made by him.
ARTICLE V - Seniority
---------------------
Section 1. The Company agrees that in laying off and recalling employees,
group seniority shall prevail if employee qualifications are relatively equal.
By group, similar employees covered by this Agreement, will be given forty (40)
hours work per week when work is available according to seniority. The Company
may at its discretion pay in lieu of work up to forty (40) hours per week. The
Company and Union representative or steward shall exercise fairness in judging
the qualifications of employees and any complaint that it has failed to do so
may be taken through the grievance procedure set forth in Article X hereof.
Section 2. Group seniority is to be considered separately in the following
four groups:
(a) drivers and loaders
(b) garage maintenance employees
(c) warehouse maintenance employees
(d) warehousemen, including Cash and Carry, and all other employees
except those in groups (a), (b) and (c).
Section 3. The provisions of this section apply to employees in the various
seniority groups set forth in Section 2 above with the exception of group (a).
The Company agrees that in granting promotions and filling open jobs, any job
vacancy shall be posted for bid for seven (7) consecutive calendar days prior to
the filling of such job, and the senior employee in the group bidding the job
will be assigned to it, provided the Company deems the employee capable of
filling the job. The Company shall exercise fairness in judging the capabilities
of employees and any complaint that it has failed to do so may be taken through
the grievance procedure set forth in Article X hereof. The person so assigned to
the job vacancy shall be allowed ten (10) calendar days to qualify for the job.
An employee who fails to qualify for a job to which he was assigned under this
procedure shall be assigned to the lowest-rated job on his shift in his group.
Thereafter, he shall be eligible to bid on job vacancies which occur
3
<PAGE>
other than in the classification from which he was disqualified. Provided,
however, that an employee who fails to qualify for a job during the initial ten
(10) day qualification period shall be given one (1) additional ten (10) day
period to qualify for such job. Such additional qualification period shall be
afforded the employee no sooner than one (1) year after the employee failed to
qualify for the job initially. The Company, in its discretion, may waive the one
(1) year requirement and allow the employee to re-qualify sooner if it so
desires.
Section 4. A necessary number of men shall be Bid Utility Warehousemen to
fill open temporary and extra jobs according to seniority to higher paid
positions on their work shifts. Utility Warehousemen will fill all open and
extra jobs at the beginning of the shift. Once utility warehousemen have filled
a job, they will remain on that job unless they are discontinued. No other
freezer jobs will be bid after the beginning of the shift unless an employee
leaves work or bids out. Utility Warehousemen will exercise seniority on
Wednesday to bid for the next week of work. Utility Warehousemen not used in the
above jobs will be assigned other available work by seniority.
When all Utility Warehousemen have been utilized, any open or extra jobs
will be bid by those employees in the orderfiller classification first and then
any employees on duty.
The employee temporarily bid shall remain on the job until the employee
returns who is regularly bid to the job or until the job is discontinued or
until the end of the work week, whichever occurs first; however, in the event of
a discontinued extra job which is reopened during that same work week, the
original successful bidder will be reassigned to that job. Not applicable if
employee has bid another extra job, then the employee shall return to his last
extra bid job.
Section 5. The provisions of this section are applicable to employees in
the various seniority groups defined in Section 2 above with the exception of
group (a). All jobs in groups (b), (c) and (d) will be posted and bid at
intervals of four (4) months, or sooner if deemed advisable by the Company. The
day shift job bid will be limited to ten (10) multiple job bid jobs at any time.
Bidding will be by seniority and each employee shall bid on the day and during
the time designated by the Company. Any employee failing, to bid during the
designated time shall forfeit his right to bid until he notifies the Company
that he is ready to bid. At that time, he can bid on the jobs then unbid.
Successful bidders will be assigned to posted jobs based upon group seniority,
provided the Company deems the bidder capable of filling the job. The Company
shall exercise fairness in judging the capabilities of employees and any
complaint that it has failed to do so may be taken through the grievance
procedure set forth in Article X hereof.
Section 6. The provisions of this section shall be applicable only to those
employees in group seniority (a) described in Section 2 above. The Company
agrees that in granting promotions and filling open jobs, any permanent job
vacancy shall be posted for bid seven (7) consecutive calendar days prior to the
filling of such job, and the senior employee in the group
4
<PAGE>
bidding the job will be assigned to it, providing the Company deems the employee
capable of filling the job. The Company shall exercise fairness in judging the
capabilities of employees and any complaint that it has failed to do so may be
taken through the grievance procedure set forth in Article X hereof. The Company
may allow the successful bidder to the permanent job vacancy period not to
exceed fifteen (15) working days to qualify for the job. An employee who fails
to qualify for a job to which he was assigned under this procedure shall be
assigned to the lowest rated job in his Group until such time as all jobs are
rebid, except that he shall be eligible to bid on job vacancies which occur
other than on the job from which he was disqualified.
(a) All jobs will be posted and bid at intervals of four (4) months or
sooner if deemed advisable by the Company. The bidding procedure will commence
at least twenty-one (21) calendar days prior to the time the bid is placed in
operation. Bid periods shall commence on the second Sunday in January, May and
September of each year during the terms of this Agreement.
(b) Bidding will be by seniority and each employee shall bid on the day and
during the time designated by the Company. Any employee failing to bid during
the designated time shall forfeit his right to bid until he notifies the
Company that he is ready to bid. At that time, he can bid on the jobs then
unbid.
(c) All drivers shall have eight (8) hours off before returning to work.
Back hauls will be included in the bids only when they are on a weekly basis.
It is understood that all runs are subject to backhauls and/or lay overs.
(d) At least three (3) days before the bidding procedure begins, the
Company shall make available to all drivers and loaders 1) a run sheet showing
the run numbers, the farthest point on the runs, estimated times of department,
estimated total hours, and the anticipated number of stops on the runs and 2) a
schedule of the dates and times designated for bidding.
(e) Drivers will bid on a full week's work of runs ("assembled runs") that
have been combined by the Company for a minimum of forty (40) hours and a
maximum of forty-four (44) hours. When, in the Company's opinion, it is no
longer practical to combine daily runs to make forty (40) hours of work for a
week, the Company may fill in the remaining assembled runs with city driver or
loader work at the rate of pay applicable for such work. At the time he bids on
the assembled runs, a driver may exchange any of the daily runs assigned to the
assembled run he selects with a daily run on any of the remaining assembled
runs not then bid so long as such exchange does not cause either assembled run
to be in violation of the provisions of this Section 6. When assigning daily
runs to the assembled runs, the Company shall group all out-of-town runs
together and all city runs together so long as it is practical to do so. When
it is no longer practical to do so, the Company may put out-of-town runs
5
<PAGE>
and city runs on the same assembled run to make a full week of work. If a daily
run includes both city and out-of-town work, then the out-of-town rate of pay
shall apply for the full day.
(f) A necessary number of drivers shall be bid to perform other
available jobs in group (a) and shall be paid the hourly rate of pay as an out-
of-town driver.
(1) These drivers will be utilized to fill absence of drivers and
loaders. The bidding of these drivers to fill these vacancies will be
on a full work week basis, as the job was bid by the absent employee.
(2) The drivers filling these vacancies may exercise seniority on
Wednesday to bid for the next week of work.
(3) These drivers will bid for extra runs or other available work
that may develop during the work week to fill out a normal week's work
of forty (40) hours. Other extra runs or other available work will be
filled from the seniority list of employees in group (a) who are
available.
(4) These drivers will be used as city drivers or loaders in
order to fill out a normal work week of forty (40) hours. All hours
worked in excess of eight (8) hours in a work day will be at the rate
of time and one-half when such drivers are working as city drivers or
loaders. If these drivers have no run, they will be used as loaders
and the starting time will be the regular shift starting time.
(5) When a bid driver's run or back haul is eliminated, he shall
revert to the status of this section "f" in accordance with his
seniority. In the event there is a permanent loss of run, he will be
given the opportunity to bid another run to fill out his forty (40)
hour guarantee. If he refuses and chooses to remain open for that day,
he will forfeit his forty (40) hour guarantee.
(g) An out-of-town driver having a birthday on a bid workday will be
entitled to receive a normal work week of forty (40) hours during that work week
if such driver chooses to take his birthday off. However, such driver may work
on such day and receive an additional eight (8) hours straight-time pay for that
day. Such birthday time paid for but not worked shall not be considered as time
worked for the purposes of overtime computation. In any event, no out-of-town
driver, because of having observed the holiday, shall receive less than forty
(40) hours pay for that week.
(h) An out-of-town driver will be given the opportunity to work on the
dock, or other available work in group (a) to fill out his bid daily time after
returning from an out-of-town run.
6
<PAGE>
(i) Employees who work on one of their scheduled days off will be
paid at the rate of time and one-half for time worked on such day.
(j) When the bidding procedure provided for in this Section 6 has
been completed, all bids will be locked in and will be subject to rebidding
as provided in Paragraph (a) of this section.
(k) A regular bid driver who has completed his forty (40) hour
guarantee prior to his last scheduled work day, and who has his last run
eliminated, shall be scheduled to work as open utility for that day.
Section 7. The Company will give preference to qualified employees who
wish to move to a new group. Any employee who expresses a desire to move to a
new group, and is qualified to perform the work in the new group, and performs
the work in the new group successfully for thirty (30) working days will forfeit
seniority (but not Company benefits) in the prior group and the employee's
seniority in the new group shall be as of the date of transfer.
(a) It is understood that any employee who fails to qualify for the
job to which he was assigned shall be assigned to the lowest rate job in
the group from which he heretofore came for the remaining term of the bid,
although he shall be eligible to bid on any job vacancy which occurs in his
group during the term of any bid.
(b) In the event of a lay off in any group, those laid off who are
qualified will be given preference for openings in any other group; in this
event recall to the original group will be in original group seniority
sequence.
(c) In the event the Union does not agree that Company has been fair
in judging qualifications, the issue will be subject to the grievance
procedure in Article X.
(d) In the event the Company should sell and lease back its truck
fleet, those garage maintenance employees laid off as a result of such
action will be allowed to transfer to seniority group (a) if qualified, and
their seniority in such group (a) shall date from their latest dates of
hire with the Company.
Section 8. New employees shall be regarded as probationary employees until
they have actually worked thirty (30) days for the Company. By mutual agreement
with a business representative of the Union, this period may be extended for an
additional thirty (30) working days. During this probationary period the Company
may, at its option, lay off or dismiss such probationary employees. There shall
be no responsibility on the part of the Company for the re-employment of
probationary employees if they are laid off or dismissed during this period.
After an employee has actually completed his probationary period he shall cease
to be
7
<PAGE>
considered a probationary employee, shall thereafter be known as a regular
employee and shall be placed on the group seniority list and shall rank for
group seniority from the date of his latest hiring by the Company. If two or
more employees are hired on any given day, their group seniority ranking shall
be determined by lot.
Section 9. An employee's seniority and an employee's continuous service
shall be broken if (a) he is discharged for proper cause, (b) he voluntarily
quits, (c) if he fails to report for work after a layoff within seven (7) days
after being notified to return by certified letter mailed to his last known
address, (d) he has been absent from work for more than six (6) months because
of a layoff, (e) he has been absent from work for two (2) consecutive workdays
without notice to the Company, unless it is impossible for the employee to give
such notice, or (f) he fails to report for work the first scheduled workday
following the expiration of an authorized leave of absence.
Section 10. Reasonable overtime shall be assigned according to seniority
within the group, as defined in Section 2 of this article, except that when
shift overtime is involved group seniority shall be on the shift basis and shall
apply only to employees on duty. However, in the warehouse group, all extra or
open jobs will be bid from the grocery orderfiller classification first and then
any employees on duty.
Section 11. Each Employee shall keep the Company informed of his current
address and telephone number in writing to the appropriate Company designee; and
if an employee cannot be reached by routine telephone communication, he shall
not be entitled to emergency call ins. In accordance with information furnished
by employees, every six (6) months the Company shall send to the Union the
current address and telephone number of each employee covered by this Agreement.
Section 12. Notwithstanding any provision in this Agreement to the
contrary, the Company may hire, subject to need casual employees. Casual
employees may be used on a one for one basis to replace any employees absent,
this includes, but is not limited to vacations, jury duty, holidays, sick,
funeral, etc. Provided, however, the Company may utilize an additional ten (10)
casual employees in addition to replacements for absent employees during the
week prior to and the week of the following holidays: New Years, Memorial Day,
Fourth of July, Labor Day, Thanksgiving, and Christmas.
(a) Casual employees will not be a part of the regular seniority
list.
(b) Casual employees will not be entitled to fringe benefits such as,
but not limited to vacations, holidays, sick pay, funeral leave, jury pay,
health and welfare, and pension.
(c) Casual employees called to work shall be guaranteed four (4)
hours pay.
8
<PAGE>
(d) No casual employee shall work shift overtime unless regular
employees on that shift have been first offered the opportunity to work
such overtime.
(e) Casual employees may be worked on either a call in or a scheduled
basis.
(f) The Company agrees casuals will not be used to replace day shift
warehousemen unless the Company schedules order selection on the day shift
in which case, casuals may be used in the order filler classification on
the day shift.
(g) The Company agrees not to use casuals in a group while employees
in that group are on lay off. It is agreed once the company has attempted
to contact a laid off employee to return to work, either by phone or letter
the waiting period will not be in effect before the company can use
casuals.
(h) Known vacancies on the day shift that are at least one (1) week
in duration will be filled first by the day shift utility classification.
Any remaining vacancies on any shift may be filled by seniority from the
second and/or third shift utility classification.
(i) Daily absence on the day shift will be filled by the present
method.
(j) Casual employees will not be utilized in driving jobs until all
qualified regular employees in the driving group have been first offered
the work.
(k) The Company shall have the right to utilize ten (10) additional
casuals during each of three (3) designated days each week to meet heavy
workloads. The ten (10) additional casuals shall be supplemental to and in
excess of the one to one replacements.
(l) If a utility man replaces a driver/loader who is absent for any
reason, a casual employee may be used for replacement on a one for one
basis so long as that casual is used on other than the day shift.
(Example: a day shift driver/loader is replaced by a utility man, the
utility man may be replaced on 2nd or 3rd shift.)
(m) In addition, casual employees may be used to replace regular
driver/loaders who are absent for any reason on a one for one basis, except
casual employees will not be used as day shift loaders so long as regular
employees in the driver/loader's group are available.
9
<PAGE>
(n) At the start of each bid period, the Company will designate those
days the ten (10) additional casuals may be used in the driver/loader
group.
(o) Casual employees who have worked in excess of 90 working days and
are being promoted to regular status shall not be required to serve a
probationary period.
(p) Casuals will not be used in seniority group "b".
Section 13. Loaders may not do warehouse work so long as any employee who
has a regular bid position which includes the runner function is not performing
the runner function.
ARTICLE VI-Hours, Overtime and Premium Pay
------------------------------------------
Section 1. This article is intended to define a normal work week of
forty (40) hours; however, additional time may be worked to permit the operation
or protection of the Company's operations when that time is paid for in
accordance with the provisions of this Agreement.
Section 2. This Section 2 is applicable only to GROCERY DEPARTMENT
WAREHOUSEMEN, REGULAR BID CITY DRIVERS, REGULAR BID LOADERS and WAREHOUSE
MAINTENANCE EMPLOYEES. The regular work week shall be forty (40) hours per week,
excluding lunch periods. The regular work week will be divided into five (5)
consecutive eight (8) hour days (Sunday through Thursday, Monday through Friday,
or Tuesday through Saturday) excluding lunch periods, or four (4) consecutive or
non-consecutive ten (10) hour days (scheduled days off during the work week for
employees working a four (4) ten (10) hour day work week shall be as follows:
three (3) days with at least two (2) consecutive days off) excluding lunch
periods. The Company shall designate which, if any, jobs will be worked the (5)
day schedule and which if any, jobs will be worked the four (4) day schedule.
The lunch period shall not exceed thirty minutes. Those employees working a
regularly scheduled eight (8) hour day shall be paid at the rate of one and one-
half (1 1/2) times the regular hourly rate for all work in excess of eight (8)
hours for that day. Those employees working a regularly scheduled ten (10) hour
day shall be paid at the rate of one and one-half (1 1/2) times the regular
hourly rate for all work in excess of ten (10) hours for that day. All work
performed on a regularly scheduled day off shall be paid for at one and one-half
(1 1/2) times the regular hourly rate for the first ten (10) hours and double
(2) the regular hourly rate for work performed in excess of ten (10) hours. All
work performed on a paid holiday will be paid for at double (2) the regular
hourly rate of pay. Irrespective of the foregoing provisions relating to premium
time, all work performed on the seventh (7th) consecutive day of work shall be
paid for at double (2) the regular hourly rate for the first eight (8) hours of
such work and two and one-half (2 1/2) times the regular hourly rate after eight
(8) hours. For those employees, except city drivers, covered by this section
working
10
<PAGE>
five (5) eight (8) hour days, the regular day shift starting time shall not be
earlier than 5:00 a.m. and shall not be later than 8:00 a.m., and the regular
second shift starting time shall not be earlier than 1:00 p.m. and shall not be
later than 4:30 p.m. For those employees except city drivers and loaders,
covered by this section working four (4) ten (10) hour days, the regular day
shift starting time shall not be earlier than 4:00 a.m. and shall not be later
than 7:00 a.m. and the regular second shift starting time shall not be earlier
than 1:00 p.m. and shall not be later than 5:00 p.m. For loaders working four
(4) ten (10) hour days, the regular day shift starting time shall not be earlier
than 4:00 a.m. or later than 7:00 a.m. and the regular second shift starting
time shall not be earlier than 2:00 p.m. or later than 5:00 p.m. This does not
preclude the Company from bidding a necessary number of jobs to cover the time
between shifts. The regular day shift starting time for city drivers shall not
be earlier than 5:00 a.m. and shall not be later than 8:00 a.m. The regular
second shift starting time for city drivers shall not be earlier than 1:30 p.m.
and shall not be later than 4:30 p.m. An employee, if called to work earlier
than his regular starting time, shall be paid at the rate of one and one-half
(1 1/2) times his regular hourly rate for all time worked prior to said starting
time. It is understood that any such employee must work his regular schedule in
addition to the extra time worked prior to his regular reporting time. When
practical, the Company shall give at least one (1) hour notice of overtime to
Third Shift Warehousemen and Loaders.
Section 3. This Section 3 is applicable only to PERISHABLE DEPARTMENT
WAREHOUSEMEN, REGULAR BID CITY DRIVERS and REGULAR BID LOADERS. The regular work
week shall be forty (40) hours per week, excluding lunch periods. The regular
work week will be divided into five (5) consecutive eight (8) hour days,
excluding lunch periods, or four (4) consecutive or non-consecutive ten (10)
hour days (scheduled days off during the work week for employees working a four
(4) ten (10) hour day work week shall be as follows: three (3) days with at
least two (2) consecutive days off) excluding lunch periods. The Company shall
designate which, if any, jobs will be worked the five (5) day schedule and
which, if any, jobs will be worked the four (4) day schedule. The lunch period
shall not exceed thirty (30) minutes. Those employees working a regularly
scheduled eight (8) hour day shall be paid at the rate of one and one-half
(1 1/2) times the regular hourly rate for all work in excess of eight (8) hours
for that day. Those employees working a regularly scheduled ten (10) hour day
shall be paid at the rate of one and one-half (1 1/2) times the regular hourly
rate for all work in excess of ten (10) hours for that day. All work performed
on a holiday will be paid for at two (2) times the regular hourly rate of pay.
(Perishable Department includes fruits, vegetables, and all produce, frozen
foods, bread, eggs, milk, cheese, meat, and may include other items of a
perishable nature which require controlled humidity and temperatures.) Employees
assigned to handling perishables for the entire work week or assigned to a mixed
work week of perishables and grocery items, not to exceed a maximum of twenty-
five percent (25%) of the employees covered by this Agreement, shall be exempt
from the Monday through Friday work week provision as well as the starting time
provisions contained in Section 2 of this Article. When practical, the Company
shall give at least one (1) hour notice of overtime to Third Shift Warehousemen
and Loaders.
11
<PAGE>
Section 4. This Section 4 is applicable only to OUT-OF-TOWN DRIVERS. For
out-of-town drivers, forty (40) hours work shall be the basic work week before
overtime. All work performed in excess of forty (40) hours work in any one week
shall be paid at the rate of one and one-half (1 1/2) times the employee's
regular classified hourly rate. Illness pay to be considered as time worked for
the purpose of overtime computation for out-of-town drivers for the week.
Section 5. GARAGE MAINTENANCE EMPLOYEES shall have a basic work week of
five (5) consecutive eight (8) hour days (Sunday through Thursday, Monday
through Friday or Tuesday through Saturday) excluding lunch periods. The lunch
period shall not exceed thirty minutes. First shift starting time shall not be
earlier than 5:00 a.m. nor later than 7:00 a.m., second shift starting time
shall be not earlier than 2:00 p.m. nor later than 4:00 p.m., the third shift
starting time shall be not earlier than 9:00 p.m. nor later than 11:00 p.m. All
work performed on a regularly scheduled day off shall be paid at the rate of
time and one-half (1 1/2) the regular hourly rate of pay for the first ten (10)
hours and double (2) the regular hourly rate for work performed in excess of ten
(10) hours. Irrespective of the foregoing provision relating to premium time,
all work performed on the seventh (7th) consecutive day of work shall be paid
for at the rate of double (2) the regular hourly rate of pay for the first eight
(8) hours of such work and two and one-half (2 1/2) times the regular hourly
rate after eight (8) hours. An employee, if called to work earlier than his
regular starting time, shall be paid at the rate of one and one-half (1 1/2)
times his regular hourly rate for all time worked prior to said starting time.
It is understood that any such employee must work his regular schedule in
addition to the extra time worked prior to his regular reporting time. Garage
maintenance employees shall receive a meal allowance in the amount as set forth
in Article IX, Section 3, when on out-of-town service calls of four (4) hours or
more. The first meal allowance is payable four (4) hours after the employee's
last scheduled meal time and, if applicable, subsequent meal allowances are
payable each four (4) hours thereafter during the duration of the service call.
No meals shall be taken on Company time.
Section 6. This Section Six is applicable only to Cash and Carry employees
and takes priority over any contrary provisions. The regular work week shall be
forty (40) hours per week, excluding lunch periods. The regular work week shall
be divided into five (5) eight (8) hour days or four (4) ten (10) hours days,
excluding lunch periods. The Company shall designate which jobs, if any, will be
worked on the five (5) day schedule and which jobs, if any, will be worked on
the four (4) day schedule. The lunch period shall not exceed thirty minutes. One
and one-half (1 1/2) times the regular rate of pay shall be paid for all work in
excess of eight (8) hours for employees working eight (8) hour shifts and for
ten (10) hours for employees working ten (10) hours shifts. All work performed
on a regularly scheduled day off in that work week shall be paid for at one and
one-half (1 1/2) times the regular hourly rate. All work performed on a holiday
will be paid for at double (2) the regular hourly rate. Any employee starting
work between three p.m. and three a.m. shall receive a shift differential of
twelve and one-half cents (12.5) per hour. Employees shall have vacations and
personal
12
<PAGE>
holidays based on seniority within the Cash and Carry group, and unless
otherwise agreed to by management, only one employee shall be scheduled off work
at any one time. Employees shall be allowed to bid into and out of Cash and
Carry on the first regular warehouse bid of each year.
Section 7. For those employees except out-of-town drivers working the four
(4) ten (10) hour day work schedule, the benefits for holiday pay, jury duty and
funeral leave shall be paid as a ten (10) hour benefit instead of an eight (8)
hour benefit as may be provided for elsewhere in this Agreement.
Section 8. Extra employees reporting after being called for work shall be
guaranteed four (4) hours work or pay therefor, regular employees shall be
guaranteed eight (8) hours work or pay therefor, except when called in for
overtime work, the guarantee shall only be four (4) hours work or pay therefor.
This Section 8 shall not be applicable when work is not available because of
fire, flood, breakdown of equipment or other causes beyond the control of the
Company.
Section 9. Overtime and/or premium pay will not be pyramided. When work
performed falls within two or more overtime and/or premium pay classifications,
only the highest single overtime or premium rate shall be paid for such work.
Section 10. Senior employees will not be permitted to work overtime to the
extreme when less senior employees are laid off or have not worked forty (40)
hours.
Section 11. Except in cases of emergency and change of regular shift, no
employee, after completing his workday, may return to work earlier than eight
(8) hours after the end of his last work shift; provided, however, this section
shall not be construed to limit the Company's right to schedule overtime.
Section 12. When summer help is hired for vacation relief and he signs a
letter stating he is summer help, a beginning and ending day of employment will
be listed and the employee will be terminated at that date and does not acquire
seniority.
Section 13. This section is applicable only to Dry Grocery and Perishable
Warehousemen, Loaders, Warehouse Maintenance, and Garage employees: For an eight
(8) hour work shift, employees shall receive two (2) paid ten (10) minute breaks
during their regular hours. All employees on a ten (10) hour work shift shall
receive three (3) paid ten (10) minute breaks during their regular hours. When
the Company schedules employees to work more than one (1) hour of overtime, they
will receive a paid ten (10) minute break before starting overtime, and will
thereafter receive a paid ten (10) minute break every two (2) hours until the
work is completed.
13
<PAGE>
Section 14. This section is applicable only to regular Bid Freezer
employees: For an eight (8) hour work shift employees shall receive three (3)
paid ten (10) minute breaks during their regular hours. All employees on a ten
(10) hour work shift shall receive four (4) paid ten (10) minute breaks during
their regular hours. When the Company schedules employees to work more than one
(1) hour of overtime, they will receive a paid ten (10) minute break before
starting overtime, and will thereafter receive a paid ten (10) minute break
every one and one-half (1 1/2) hours until the work is complete.
ARTICLE VII - Holidays
----------------------
Section 1. Except in cases of emergency, regular employees covered by this
Agreement shall not be required to work on the following holidays.
New Year's Day Thanksgiving Day
Memorial Day Christmas Day
Fourth of July Employee's Birthday
Labor Day Anniversary Date of Employment
(To be treated as a birthday).
Section 2. With the exception of out-of-town drivers, each regular employee
on the payroll during the holiday week shall be paid eight (8) or ten (10) hours
straight-time pay for each of the above-named holidays, or day observed as such,
provided the employee, unless otherwise arranged between the Company and the
employee, works the workday preceding and the workday following the holiday. If
an emergency requires work on any of the said holidays, the regular employees
working shall receive the holiday pay referred to above plus double (2) their
regular rate of pay for the hours actually worked on the holiday. All work in
excess of thirty-two (32) or thirty (30) hours in any one week in which the
holiday occurs, excluding work performed on the holiday, shall be paid at the
rate of one and one-half (1 1/2) times the regular hourly rate.
Section 3. During work weeks in which a paid holiday occurs, all out-of-
town drivers will pull their bid runs even though the day or days may change
because of the holiday. In the event an out-of-town driver has two (2) bid runs
that are rescheduled on the same day, the employee may choose which run he
prefers as long as the hours are basically equal. All out-of-town drivers shall
be guaranteed thirty-two (32) hours of work during the holiday week and any work
performed in excess of thirty-two (32) hours in a holiday week shall be paid at
the rate of one and one-half (1 1/2) times the regular rate of pay. Out-of-town
drivers may, during a holiday week, perform other work in their group to make up
any hours they may be short of thirty-two (32) hours. The make-up work may be
assigned by the Company to the driver when work is available. In the event an
out-of-town driver is called in on a bid day off during a holiday week to be
either a grocery city driver or a loader, he shall report for work at the
regularly scheduled time of that job. If any out-of-town driver is called in on
his bid day
14
<PAGE>
off for extra or open jobs in their group during a holiday week, they shall be
called by seniority among those available. The above provisions pertaining to
out-of-town drivers during a holiday week shall supersede all the provisions of
Article V as they pertain to out-of-town drivers.
If it is necessary for the Company to schedule work other than out-of-town
runs on a paid holiday, for which holiday premium pay is to be paid, employees
in the applicable seniority group will bid for such work and the senior
employee who is capable of performing the work and who still has available time
off before his next bid work will be awarded the holiday work.
Section 4. The occurrence of an employee's birthday in any work week shall
not make that work week a holiday week for the purposes of this article.
However, should an employee have a birthday during a work week in which another
paid holiday occurs, such employee's birthday will be celebrated on a day
mutually agreed to between the employee and his supervisor. If the birthday of
an employee falls on a bid day off, such employee may elect to work his full
work week and be paid eight (8) or ten (10) hours straight-time pay for the
birthday holiday in lieu of time off. If the birthday of an employee falls on a
normal bid workday, the employee may elect to work on such day and receive eight
(8) or ten (10) hours straight-time pay in lieu of time off, in addition to
compensation for time worked on such day. Any employee who has a birthday on a
bid workday and who elects to work on such day must notify his supervisor of
intent to work at least one (1) day prior to his birthday. Birthday time paid
for, where the employee elects to work on such day, or where the birthday falls
on a bid day off, shall not be considered as time worked for purposes of
overtime computations.
Section 5. An employee shall not be required to observe his birthday and
anniversary holidays on the date they actually fall. Instead, the employee may
designate the date of observance of such holidays so long as the date designated
is acceptable to the Company. However, the date designated must be within the
calendar year that the holiday actually falls.
Section 6. An employee scheduled for vacation during a week in which a
holiday falls may elect to receive vacation pay for that week and holiday pay
for the holiday and, if he does so elect, he shall not be entitled to an
additional day off. However, such employee may elect to receive vacation pay,
for that week and designate the date he will observe the holiday in accordance
with the provisions of Section 5, above. If the employee elects to designate the
date he will observe the holiday, then such holiday shall be treated as a
birthday holiday.
Section 7. Except for out-of-town drivers, in the event that a holiday
other than a birthday or anniversary falls on an employee's bid day off, such
holiday shall be rescheduled to a bid day on.
ARTICLE VIII - Vacations
------------------------
15
<PAGE>
Section 1. Employees under this Agreement shall receive vacation pay as
follows:
Continuous employment by the Company of one (l) year or more - one (1)
week vacation with regular pay.
Continuous employment by the Company of three (3) years or more - two
(2) weeks vacation with regular pay.
Continuous employment by the Company of eight (8) years or more -
three (3) weeks vacation with regular pay.
Continuous employment by the Company of fifteen (15) years or more -
four (4) weeks vacation with regular pay.
Continuous employment by the Company of twenty (20) years or more -
five (5) weeks vacation with regular pay.
Section 2. The vacation period shall be continuous throughout the year and
vacations are due the employee after the anniversary date of employment, unless
a different time is agreed upon between the Company and the employee. Vacations
shall be scheduled by the Company, giving consideration to seniority rights when
practicable. Employees shall receive their vacation pay at the time of leaving
on vacation. No employee shall be required to work overtime on the day his
vacation is scheduled to begin.
The Company agrees that it will allow a minimum of ten percent (10%) of
the employees in any group to be on vacation at any one time. The Company
agrees that if the calculation of ten percent (10%) is not a whole number of
employees, then the Company agrees to round off to the next highest number the
employees allowed to be on vacation.
The calculation for determining the number of employees to be on vacation
shall be the effective number of employees on the payroll in each group on the
first week of each new calendar year.
Section 3. Upon termination, an employee with at least one (1) year of
continuous employment with the Company shall receive pro rata pay for earned
vacation.
Section 4. Employees who have not had an opportunity to exercise their
seniority with regard to prime time vacations (June, July, and August) will be
allowed to bid by seniority should a week become available after the close of
the vacation period. If an employee is offered a bid under this provision and
refuses, he forfeits his right to further bidding. An
16
<PAGE>
Employee who bids will only be allowed one week of prime time vacation under
this provision.
The Company will, commencing on the second Sunday of June and ending the third
Sunday of August, allow an additional two (2) percent of the employees
classified as warehousemen and loader/drivers to be on vacation during that
period.
ARTICLE IX - Wages
------------------
Section 1. During the term of this Agreement the following scale of wages shall
prevail:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Effective: 10/16/93 10/16/94 10/15/95 10/13/96
Drivers (Out-of-Town) $14.48 $14.98 $15.48 $15.93
Drivers (City) $14.34 $14.84 $15.34 $15.79
Loaders $14.30 $14.80 $15.30 $15.75
Checkers $14.25 $14.75 $15.25 $15.70
Fork Truck Operators,
Cleanup, Sanitation
& Pallet Repair $14.25 $14.75 $15.25 $15.70
Order Fillers &
Warehousemen (Grocery
& Produce), Cigarette
& Repack, Cigarette
Cutter, Back-In-Stock
& Salvage $14.22 $14.72 $15.22 $15.67
Freezermen $14.45 $14.95 $15.45 $15.90
Warehouse Maintenance $14.50 $15.00 $15.50 $15.95
Garage Maintenance $14.50 $15.00 $15.50 $15.95
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Cash & Carry (Receiver,
Cigarette Machine
Operator, Cooler Order
Filler, Cooler Fork,
Meat Fork, Meat Order
Filler) $ 14.30 $ 14.80 $ 15.30 $ 15.75
Utility Warehousemen $ 14.45 $ 14.95 $ 15.45 $ 15.90
Casual Workers $ 8.75 $ 8.75 $ 8.75 $ 8.75
</TABLE>
Employees Hired After January 5, 1986
Regular employees hired after January 5, 1986 and who have not completed
three years of work, will be entitled to additional pay equal to the difference
between the rate for the job being performed and the grocery orderfiller rate
applicable to employees with more than three years of service.
<TABLE>
<CAPTION>
Employees Employees Employees Employees
Effective First Year Second Year Third Year Fourth Year
Date Rate of Pay Rate of Pay Rate of Pay Rate of Pay
<S> <C> <C> <C> <C>
10/16/93 $10.35 $11.10 $11.85 Current Rate *
10/16/94 $10.85 $11.60 $12.35 Current Rate *
10/15/95 $11.35 $12.10 $12.85 Current Rate *
10/13/96 $11.80 $12.55 $13.30 Current Rate *
</TABLE>
("*" Denotes current rate of above employees)
Section 2. The first shift regardless of the number of hours worked shall
receive no shift differential. The second shift regardless of the number of
hours worked shall receive a shift differential of ten cents (10 cents) per hour
over the regular rate of pay. The third shift, defined as that shift where an
employee's major portion of his regular work time occurs after 12:00 midnight,
regardless of the hours worked, shall receive a shift differential of twelve and
one-half cents (12 1/2 cents) per hour over the regular rate of pay. This
section does not apply to out-of-town drivers.
Section 3. Out-of-town drivers shall receive a meal allowance of:
<TABLE>
<CAPTION>
<S> <C>
October 16, 1993 - $5.25
October 16, 1994 - $5.50
October 15, 1995 - $5.75
October 13, 1996 - $6.00
</TABLE>
18
<PAGE>
The first meal allowance is payable after eight (8) hours on the clock and an
additional meal allowance each four (4) hours additional time on the clock that
day. Out-of-town drivers shall be paid for his lodging plus two additional
meal allowances when on layover. The meals on layover shall not be taken on
time paid for by the Company. Drivers shall take meal breaks at reasonable
times after starting work and thereafter during their work schedule. Drivers
on layover shall have the option to have eight (8) or ten (10) hours off before
returning to work unless the Company determines work is not available. The
regular hourly rate of pay per hour shall start within ten (10) hours on
layovers.
Out-of-town drivers shall be paid a premium of ten cents (10 cents) per
hour when pulling doubles.
Section 4. No employee shall suffer a reduction in his hourly rate of pay
due to the adoption of this Agreement.
ARTICLE X Handling of Complaints and Arbitration
------------------------------------------------
Section 1. All employees shall at all times make an effort to perform
their duties in such manner as to promote efficient operation of their
departments, and the Company as a whole, but if grievances shall arise regarding
the interpretation or application of any of the terms of this Agreement, they
shall be handled as hereinafter provided.
Section 2. The Company and Union recognize that complaints or grievances
of a minor nature usually need not be processed immediately, and consequently
should not be processed at times which will interfere with work to be performed.
It is further recognized, however, that some complaints or grievances are of
sufficient importance to warrant prompt processing, and with respect to same, an
employee or Union Steward will be excused from work for a reasonable time to
discuss such a grievance, after first obtaining their supervisor's approval and
outlining to the supervisor the nature of their grievance. Union representatives
shall have the right to discuss grievances with Union Stewards on Company
premises at times that will not interfere with the work of the steward or any
other employee; however, upon prior approval of the Company supervisory employee
in charge, the Union Steward may be excused from work for such discussion. Any
employee called in to the office by a supervisor for the purpose of receiving a
reprimand shall be so notified and upon notification, the employee shall have
the right to ask for a steward to be present.
Section 3. Any employee having a grievance, within five (5) days after the
grievance becomes known to him, or reasonably should have been known to him,
whichever date is earlier, shall first discuss it thoroughly with his supervisor
and make an honest effort to settle same, provided such settlement shall not be
inconsistent with the terms of this Agreement. A Union Steward shall take part
in the discussion with the supervisor or handle it with the supervisor alone if
the aggrieved employee so requests. If the employee is not satisfied with
19
<PAGE>
the result of the discussion with the supervisor, the employee may request that
the shift superintendent become involved.
Section 4. If the employee and the supervisor cannot agree on a
satisfactory settlement, the employee shall report same to the Union Steward in
writing.
Section 5. The Union shall make a detailed investigation and decide
whether the grievance should be carried further with the Company. If it is to be
handled further, then the appropriate Company Director (Warehousing or
Transportation) or his designee shall be notified of the grievance by the Union
in writing no later thirty (30) days after the grievance became known to the
employee, or reasonably should have been known to him, whichever date is
earlier, and the matter shall be discussed with him and every effort made to
settle same. Within thirty (30) days of such discussion with the appropriate
Company Director, the Company shall answer the grievance in writing.
Section 6. If the discussion between the Director or his designee and the
Union does not result in a satisfactory settlement, the matter may be submitted
to the Labor-Management Council by written notice of submission. If the matter
is to proceed further, such written notice of submission must be given to the
Council no later than thirty (30) days after the date of the Company's written
answer to such grievance required by Section 5, above. The said Council shall
have four (4) members. Two (2) Labor members of such Council shall be designated
by the Teamsters Joint Council No. 56, Kansas City, Missouri, and two (2)
Management members shall be designated by the Company. The Labor members
appointed to the Council shall be subject to approval by the Union but shall not
be an agent, officer or member of any Local having a Collective Bargaining
Agreement with the Company or an agent or officer or employee of any of the
Company's competitors. The management members appointed may be employees of the
Kansas City Division of the Company, and/or can be employees of the corporate
staff of the Company or of any other division the Company operates. Such Council
shall have the power and authority to settle the grievances, and such settlement
shall be final and binding on the parties. Meetings of the Council will be held
from time to time, but no less frequently than quarterly at such place as the
Council may elect. The council shall notify the Company and the Union in writing
of its failure to reach agreement with respect to any grievance.
Section 7. If the Labor-Management Council fails to reach agreement with
respect to resolution of a grievance, either party may notify the other of its
intention to submit the grievance to arbitration so long as written notice of
intent to arbitration is given to the other party within ninety (90) days of the
date of the Labor-Management Council's written notice to the parties of its
failure to reach agreement as required by Section 6 above. If the grievance is
to be submitted to arbitration, the parties shall jointly request the United
States Mediation and Conciliation Service to furnish the names of seven (7)
arbitrators, from which one is to be selected. The parties shall determine who
will strike the first name from the list of arbitrators by flip of a coin, then
the other party shall strike a name and so on until but one is left on the
20
<PAGE>
panel and this person shall be the Arbitrator. Both parties agree
to act promptly before the Arbitrator in order to obtain an early decision.
The Arbitrator shall have the right to construe this Agreement but not to
change any of its provisions. The decision of the Arbitrator shall be final
and binding upon both parties. The expenses of this Arbitrator shall be borne
equally by the Company and the Union.
Section 8. Disciplinary action against an employee shall remain in effect
for not more than five years, except disciplinary action which resulted in
discharge but which was reversed in whole or in part by the Labor-Management
Council or by an arbitrator shall remain in effect.
Section 9. Failure to comply with any of the time limitations imposed
under Sections three through seven, above, shall constitute waiver of the
grievance.
Section 10. During the term of this Agreement, the Union agrees that it
will not cause or permit its members to cause nor will any member of the Union
take part in any strike or activity which interferes with production of the
Company. Neither the Union nor any of its officers or representatives shall be
held liable for any damages resulting from unauthorized or "wildcat" strikes not
called, directed or ratified by them unless they fail to use their best efforts
to bring about a cessation to any such unauthorized or "wildcat" strike. The
Company may discharge any member of the Union who violates any provision of this
section. The Company agrees that it will not lock out any of its employees
during the time this Agreement is in force.
Section 11. It will not be a violation of this Agreement for employees to
refuse to cross a picket line approved by Teamsters Joint Council No. 56, Kansas
City, Missouri, involving a primary dispute, provided that the Union will give
the Company seventy-two (72) hours to remove and distribute perishable items
which include produce, meat items, eggs, bread, milk, and any other items that
would normally spoil within a seventy-two (72) hour period. It is understood and
agreed that the Company's regular employees would perform the above work to
remove and distribute these items for a period up to seventy-two (72) hours.
ARTICLE XI-Health and Welfare
-----------------------------
Section 1. During the term of this Agreement, the Company shall pay the
premium required to maintain employees in the Central States, Southeast, and
Southwest Area Health and Welfare Fund, Teamsters C-6 Health and Welfare Plan,
but such premium amount, effective October 16, 1993, shall not exceed $128.70
per week; effective October 16, 1994, shall not exceed $141.20 per week;
effective October 15, 1995, shall not exceed $153.70 per week and effective
October 13, 1996, shall not exceed $166.40 per week. This coverage will extend
to employees covered by the Agreement and their dependents who, under the terms
of the policy in effect, qualify for health and welfare coverage.
21
<PAGE>
Section 2. If an employee is absent because of illness or off-the-job
injury and notifies the Company of such absence, the Company shall continue to
pay premiums as provided above for a period of four (4) weeks. If an employee is
injured on-the-job the company shall continue to pay premiums as provided above
until such employee returns to work; however, the Company shall not be required
to make such premium payments for a period of more than twenty-six (26) weeks.
In accordance with applicable law, if an employee is granted a leave of absence
and desires to retain Health and Welfare coverage, the employee shall pay to the
Company, prior to the leave of absence being effective, sufficient monies to pay
the required premiums during the period of absence. No contributions shall be
made for any employee on layoff.
Section 3. The Health and Welfare Plan provided for in this article may be
changed to a different plan by mutual agreement of the Company and the Union.
The Union representatives shall have access to the cost of the Health and
Welfare coverage.
ARTICLE XII-Illness Pay
-----------------------
Section 1. Regular employees who have been in the continuous employment of
the Company for more than one (1) year who absent themselves from work due to
disability from sickness shall be granted sick leave with pay for an aggregate
of not to exceed forty-eight (48) hours. Any part not used to be accumulative
from year to year but not to exceed three hundred sixty (360) hours. Any regular
employee with at least 10 years of service with the Company shall be paid one-
half ( 1/2) of their accumulated sick leave upon death or retirement. A day's
sick leave shall be eight (8) hours pay. For regular employees hired by the
Company after October 15, 1976, there shall be no sick pay for the first year of
employment and twenty-four (24) hours sick pay during the second year of
employment, and thereafter this group of employees shall receive the normal
forty-eight (48) hours sick pay per year accumulative to three hundred sixty
(360) hours. For employees hired after October 15, 1979, there shall be no sick
pay for the first year of employment, twenty-four (24) hours sick pay during the
second year of employment, and the normal forty-eight (48) hours sick pay during
the third year of employment and each year of employment thereafter,
accumulative to three hundred sixty (360) hours. These employees hired after
October 15, 1979, not to be subject to Article XII, Section 4 of this Agreement.
Section 2. The employee shall provide the Company with a certificate from
a licensed physician as proof of sickness except for a one-day absence as a
result of sickness. In the case of a one-day absence for sickness, the employee,
in order to be entitled to illness pay, shall call his supervisor prior to the
start of his normal work shift and explain to his supervisor the reason and
necessity for the absence.
22
<PAGE>
Section 3. Any examination required by the Company shall be paid for by
the Company.
Section 4. It is understood that this article, Illness Pay, shall be paid
on a yearly-contract basis.
Section 5. An employee absent on account of bona fide illness, not to
exceed ninety (90) days unless a longer period is agreed upon, shall receive his
former position last held upon his return to work, provided he is able to
perform those duties; provided, however, that the employee gives notice to the
Company of such illness within three (3) days (or sooner if possible) after the
beginning of such illness.
Section 6. Absences covered by sick pay up to a maximum of six (6) days
per year will not be considered by the Company for disciplinary purposes.
ARTICLE XIII - Jury Duty
------------------------
Each regular employee serving on jury duty shall, upon presentation of a
statement signed by an officer of the court involved signifying the time he so
served on the jury, receive his regular classified rate of pay for the time he
is required to be absent from his job for such service but not to exceed ten
(10) working days in any one contract year. If the employee is discharged from
the jury before the workday ends, he must report immediately to the Company for
work if time permits him to work at least three (3) hours. If the employee
desires and the Company approves, the jury duty benefit may be administered on
an hourly instead of a daily basis.
ARTICLE XIV - Funeral Leave
---------------------------
Should a death occur in the immediate family, upon request a regular
employee who attends the funeral shall be granted three (3) consecutive days
consisting of the day of the funeral and either the two (2) days preceding, the
day preceding and the day following, or the two (2) days following the day of
the funeral. The employee shall be compensated for the scheduled days he would
have worked within the applicable period had such death not occurred at eight
(8) times his regular straight-time hourly rate. Employees may be granted
additional unpaid funeral leave based on reasonable employee need and approved
by the Company. Immediate family shall mean spouse, mother, father, mother-in-
law, father-in-law, stepmother, stepfather, brother-in-law, sister-in-law,
child, brother, sister, stepchild, stepbrother, stepsister, grandparents,
grandchildren, spouse's grandparents and any other relatives residing with the
employee.
23
<PAGE>
ARTICLE XV - Safety
-------------------
Section 1. The Company shall not require employees to take out on the
streets or highways any vehicle which is not in a safe operating condition, or
any vehicle that is not equipped with safety appliances prescribed by law. All
vehicles shall be equipped with heaters and defrosters.
Section 2. All material-handling equipment in the warehouse will be kept
in safe operating condition and all structures will be kept in safe condition.
ARTICLE XVI - Clothing and Tools
--------------------------------
Section 1. If uniforms are required, they shall be furnished free of cost
and shall be kept clean by the Company.
Section 2. All employees holding bid jobs in the freezer shall be
furnished head gear, gloves, insulated boots and coveralls. Part-time freezer
employees will be furnished head gear, gloves, overshoes and coveralls. All
employees when working regular or part-time in a cooler with temperature range
of 35 degrees to 45 degrees shall be furnished a jacket. These garments shall be
mutually satisfactory to employee and Company, and shall be the property of the
Company and shall be used on the premises only.
Section 3. All perishable loaders shall be furnished gloves which shall
remain the property of the Company.
Section 4. All garage maintenance employees will be required to furnish
their own hand tools. These employees will be paid $125.00 each six (6) months
as a tool allowance.
Section 5. A clothing allowance of $12.00 per month will be paid employees
assigned to salvage and clean-up jobs pursuant to bid.
ARTICLE XVII - Other Agreements
-------------------------------
Section 1. Except as provided below, the Company agrees that no work or
services presently performed or hereafter assigned to the collective bargaining
unit will be subcontracted or transferred for the purpose of circumventing the
terms and provisions of this Agreement to any outside company. However, the
Company may subcontract or transfer excess snow removal, lawn, tree and shrub
care for any purpose so long as such subcontracting or transfer shall not result
in the layoff of any bargaining unit employees employed by the Company on
October 16, 1982.
24
<PAGE>
ARTICLE XVIII - Pensions
------------------------
Section 1. Effective January 1, 1994, for each of the Company's regular
employees covered by this Agreement, the Company shall contribute to the Central
States Southeast, and Southwest Areas Pension Fund according to the following
schedule:
January 1, 1994 - $85.00
January 1, 1995 - $85.00
January 1, 1996 - $85.00
January 1, 1997 - $91.00
The obligation to pay for and make the required weekly contribution for the
pension program hereby established for regular employees of the Company shall
rest solely with the Company, except as hereinafter provided. Casual,
probationary and temporary employees shall not be covered by this pension
program established under this Agreement.
Section 2. The Company shall pay and make weekly contribution for the
pension program hereby established for each week worked by a regular employee,
even though such employee may work for the Company only part-time during such
week. If such employee is absent from work during any week because of illness or
noncompensable injury and notifies the Company of such absence, the Company
shall continue to pay and make the required weekly contributions, so long as the
employee is on the Company's regular seniority list, but for a period of not
more than four (4) weeks. If such employee is absent from work during any week
due to compensable injury, the Company shall continue to pay and make such
weekly payments, so long as the employee is on the Company's regular seniority
list, but for a period of not more than six (6) months.
Section 3. If an employee is absent from work during any week due to
layoff or leave of absence granted by the Company, the Company shall not be
required to pay or make any weekly contributions for such employee. However, if
any such regular employee so desires, he may continue his pension program
contributions so long as he is on the Company's regular seniority list by making
prior arrangements with the Company, who shall collect from such employee
sufficient moneys for the Company to make the weekly contributions due the
pension and on account of such employee during any such absence.
Section 4. By the execution of this Agreement, the Company agrees to enter
into appropriate trust agreements necessary for the administration of such
pension fund and to designate the Company's trustees under such Agreement,
hereby waiving all notices hereof and ratifying all actions already taken or to
be taken by such trustees in the scope of their authority.
Section 5. Failure of the Company to pay or make any contribution for the
pension program as hereinabove provided shall relieve the Union of its no-strike
obligation with
25
<PAGE>
respect to the Company, unless there is a bona fide dispute as to the amount
owed, in which case the matter shall be resolved under the provisions of Article
X hereof.
ARTICLE XIX - Savings Clause
----------------------------
The parties hereto believe that each and every provision of this Agreement
is lawful. However, if any provision of this Agreement is or should become in
contravention of the laws or regulations of the United States or the state in
which the plant covered by this Agreement is located, such provision shall be
superseded by the appropriate provisions of such laws or regulations so long as
such laws or regulations remain in force and effect, but all other provisions
of this Agreement shall continue in full force and effect.
ARTICLE XX - Miscellaneous
--------------------------
Section 1. That any future retail grocery store serviced by the Company
located north of Highway 54 and west of Jefferson City, Missouri, and east of
Jefferson City, Missouri, north of Highway 50, except those located in the
greater St. Louis, Missouri, standard metropolitan statistical area, will be
assigned to Kansas City employees.
Section 2. That if the Company takes on any new business, other than a
national chain or regional chain, the Company agrees to warehouse the necessary
grocery commodities and make all deliveries with the Company's regular
employees.
Section 3. That the Company will make no changes in its present method of
servicing its present members except that the Company may service any new
national chain or regional chain F.O.B. the Company dock. Any other new members,
except national chains or regional chains, shall be served in the Company's
normal fashion.
Section 4. Notwithstanding any provisions of this Agreement to the
contrary, including Sections 2 and 3 of Article XX. The Company shall be
permitted to service its present and future members and stores of members using
any manner or method of service which its competitors (Fleming, Safeway and
Milgram under contract with Teamsters Local 955) are permitted to utilize; and
it is hereby agreed and understood that the Company, using its regular
employees, may make deliveries to the Company's member stores directly from
vendors and/or manufacturers when in the judgment of the Company such deliveries
are necessary.
ARTICLE XXI - Term of Agreement
-------------------------------
This Agreement sets forth the full and complete understanding of the
parties hereto and cancels and supersedes any and all agreements heretofore
entered into by and between the
26
<PAGE>
parties. This Agreement shall become effective at 12:01 a.m. on October 16, 1993
and shall remain in effect until 12:00 midnight on October 18, 1997, and
thereafter from year to year unless either party gives at least sixty (60) days
written notice to the other prior to October 18, 1997, or any subsequent
anniversary date, that the party wishes to modify or change this Agreement.
DEPARTMENT STORE, PACKAGE ASSOCIATED WHOLESALE GROCERS,
GROCERY, PAPER HOUSE, LIQUOR INC.
AND MEAT DRIVERS, HELPERS
AND WAREHOUSEMEN, LOCAL
UNION NO. 955
By: /s/ Dale McGhee By: /s/ Tom Williams
----------------------------- ------------------------------
Dale McGhee, President Tom Williams, Sr., Vice President
Date:
---------------- Date: 1/12/94
--------------
By: /s/ Bobby Davidson
-----------------------------
Bobby Davidson, Secretary
Date: 1/12/94
----------------
27
<PAGE>
Exhibit 10.5
AGREEMENT
Between
ASSOCIATED WHOLESALE GROCERS, INC.
and
TEAMSTERS LOCAL UNION NO. 245,
AN AFFILIATE OF THE INTERNATIONAL BROTHERHOOD OF
TEAMSTERS
- --------------------------------------------------------------------------------
THIS AGREEMENT made and entered into as of the 30th day of April, 1995, by
and between ASSOCIATED WHOLESALE GROCERS, INC., of Springfield, Missouri,
hereinafter called "Company," and the Teamsters Local Union No. 245, an
affiliate of the International Brotherhood of Teamsters, hereinafter called
"Union."
ARTICLE I
---------
RECOGNITION
-----------
The Company recognizes the Union as the sole bargaining agency for the
employees covered herein as to wages, hours and working conditions. The term
"employee" as used in this Agreement includes all warehouse employees employed
at the Company's Springfield, Missouri, warehouse; including truck drivers,
garage and warehouse maintenance employees, production clerks, and inventory
control (WRAPS) clerks but excluding office employees, salesmen, factory
employees, janitorial employees, night watchmen and supervisors as defined in
the National Labor Relations Act.
ARTICLE II
----------
NO CONFLICTING AGREEMENTS
-------------------------
The Company agrees not to enter into any agreement with its employees
covered hereby, individually or collectively, which in any way conflicts with
the terms of this Agreement.
ARTICLE III
-----------
UNION SECURITY
--------------
The Company agrees to require as a condition of continued employment that
all present employees subject to the provisions of this Agreement must become
members of the Union not
<PAGE>
later than the thirty-first (31st) day following the beginning of such
employment or thirty-one (31) days following the effective date of this
Agreement, whichever is the later, and all new or additional employees who
become subject to the provisions of this Agreement must become members of the
Union not later than the thirty-first (31st) day following the beginning of such
employment, and all such employees must remain members of the Union in good
standing thereafter by the payment of initiation fees and dues so long as they
remain on the Company's payroll.
ARTICLE IV
----------
CHECK-OFF
---------
The Employer agrees to deduct from the pay of all Employees covered by this
Agreement dues and any other lawful assessments of the Local Union having
jurisdiction over such employees and agrees to remit to said Local Union all
such deductions by the 10th of the month for which the deduction is made. Upon
such deductions being authorized in writing, and to the extent so authorized, by
the employees, the deduction shall be made from wages owing on the last payroll
period in any calendar month of the term of this Agreement. Authorizations
shall be made on the form required and no deductions shall be made which are
prohibited by law.
The Company agrees to deduct from the paychecks of all employees covered by
this Agreement for voluntary contributions to DRIVE or other such organization
established by or participated in by Teamsters Local 245. DRIVE, or such other
similar organization, shall notify the Company of the amount designated by the
individual employee that is to be deducted on a weekly basis. The Company shall
transmit to DRIVE, or other similar organization's headquarters, on a monthly
basis, in one (1) check, the total amount deducted, along with each employee's
name, social security number, and the amount deducted from each employee's
paycheck.
ARTICLE V
---------
HOURS OF WORK FOR EMPLOYEES OTHER THAN TRUCK DRIVERS
----------------------------------------------------
Hours of work for employees other than truck drivers shall be as follows:
Section 1: The regular work week shall consist of four or five days.
Eighty-five percent (85%) of all employees shall be scheduled to work four (4)
or five (5) consecutive days. For purposes of this provision, all employees
working a four (4) ten-hour (10-hour) day schedule with Saturday and Sunday
scheduled off or a four (4) ten-hour (10-hour) night schedule with Friday and
Saturday scheduled off shall be considered to be on four (4) consecutive work
day schedules.
EMPLOYEES WHO WORK A FIVE DAY WORK WEEK:
2
<PAGE>
(A) Employees working five (5) days shall be paid at a rate of one and
one-half (1 1/2) times the regular hourly rate for all hours in excess of
eight (8) hours per day.
(B) Employees working five (5) days shall be paid at a rate of one and
one-half (1 1/2) times the regular hourly rate for all hours worked in
excess of forty (40) in any one payroll week.
(C) In weeks in which a holiday falls, all work by employees working a
five (5) day work week in excess of thirty-two (32) hours (excluding work
performed on the holiday) shall be paid at the rate of one and one-half (1
1/2) times the regular rate of pay.
(D) All work performed on the employees' regular days off shall be
paid for at the rate of one and one-half (1 1/2) times the regular hourly
rate.
EMPLOYEES WHO WORK A FOUR (4) TEN-HOUR (10-HOUR) DAY WORK WEEK
(A) Employees working four (4) days shall be paid at a rate of one and
one-half (1 1/2) times the regular hourly rate for all hours in excess of
ten (10) hours per day.
(B) Employees working four (4) days shall be paid at a rate of one and
one-half (1 1/2) times the regular hourly rate for all hours worked in
excess of forty (40) in one payroll week.
(C) In weeks in which a holiday falls, all work by employees working a
four (4) day work week in excess of thirty (30) hours (excluding work
performed on the holiday) shall be paid at the rate of one and one-half (1
1/2) times the regular hourly rate.
(D) All work performed on the employees' regular days off shall be
paid for at the rate of one and one-half (1 1/2) times the regular hourly
rate.
(E) Employees working a four (4) ten-hour (10-hour) day work week
shall have, at a minimum, at least two (2) consecutive days off.
WEEKEND WORK
(A) Fifty percent (50%) of the employees on the Warehouse Department
seniority list shall not be required to work regularly scheduled shifts (in
their normal work week which include hours of work) between 2:00 a.m.
Saturday and 3:30 p.m. Sunday.
(B) Not more than fifteen percent (15%) of the employees on the
Warehouse Department seniority list shall be required to work two (2)
regularly scheduled shifts (in their normal work week which include hours
of work) between 2:00 a.m. Saturday and 3:30 p.m. Sunday.
3
<PAGE>
(C) Maintenance employees in the Garage and Maintenance employees in the
Warehouse who were employed by the Company as of April 1, 1978 and who, as
of April 1, 1978, were not working a schedule that included hours of work
between twelve (12) midnight Saturday and twelve (12), midnight Sunday
shall not be required to work hours scheduled between twelve (12) midnight
Saturday and twelve (12) midnight Sunday.
GUARANTEE
Ninety percent (90%) of all regular employees shall be guaranteed forty
(40) hours work each regular work week without layoff (except weeks in which a
holiday falls) unless due to slack business or causes beyond the Company's
control, in which event layoffs shall be made in accordance with the seniority
provisions set forth in Article VIII hereof.
In weeks in which a holiday falls, the guaranteed work for all employees
entitled thereto shall be reduced by eight (8) hours if working five (5) eight
(8) hour shifts, or ten (10) hours if working, four (4) ten-hour (10 hour)
shifts.
LAYOFFS
-------
When an employee is laid off due to slack business, he may be recalled for
a day's work with no weekly guarantee, and if an employee elects to take time
off, such time shall be deducted from his weekly guarantee. In the event of
layoffs after a work week has begun, only those regular employees without a
guaranteed work week shall be laid off during that particular week and at the
end of that particular week any number of employees formerly guaranteed forty
(40) hours work may be laid off and the number of employees working the
following week shall form the basis for determining the ninety percent (90%) of
employees who are to be guaranteed forty (40) hours of work during that
particular week and the same procedure shall apply to any weeks thereafter.
If, by department, overtime worked in the Warehouse Department, Warehouse
Maintenance Department, or Garage Maintenance Department exceeds twenty percent
(20%) during the immediately preceding four (4) week period (twenty-five percent
(25%) in any four (4) week period during which a holiday falls) then the Company
will, as soon as is practicable, recall sufficient laid off employees in such
department(s) to reduce such percentage to the above stated maximum. It is
understood by the Union that management shall use its best judgement in
complying with this provision. For the Garage Maintenance Department, only,
weeks shall not be included in the percentage calculation in which a large
amount of the overtime worked resulted from unfavorable weather conditions.
Section 2: There shall be a regularly scheduled starting time for all
regular employees; however, such starting times may vary for different employees
or groups of employees. Fifteen percent (15%) of all regular employees may have
two different starting times during the work week.
4
<PAGE>
If the change of hours is more than one hour earlier or one hour later than
the starting time applicable at the time of the signing of this contract, then
the job or jobs involved will be rebid. In the event the Company decides to
alter or change the scheduled times of its regular employees, it shall give
notice thereof not less than one (1) work week prior to such change unless the
employees affected thereby agree to such change on shorter notice.
The earliest scheduled starting time for the day shift shall not be prior
to 5:00 a.m. and the latest scheduled starting time for the day shift shall be
not later than 9:00 a.m. No more than ten percent (10%) of the second and third
shift may start their work week as much as one (1) hour earlier or later than
the bulk of the shift.
The Company reserves the right to schedule different start times for major
segments of the same shift; i.e., perishable versus dry. Regular employees
called to work before their regularly scheduled starting time shall be paid at
the rate of one and one-half (1 1/2) times their regular hourly rate for all
work performed prior to their regularly scheduled starting time.
Section 3: All regular employees called to work on any work day shall be
guaranteed six (6) hours work or six (6) hours pay; provided, however, that
regular employees called in for overtime work shall be guaranteed only four (4)
hours work, or four (4) hours pay.
Section 4: The Company agrees that, except as may be necessary to perform
additional work required because of power failure, breakdown of equipment, work
stoppages, concerted work slowdowns, emergencies or other reasons beyond the
Company's control, the Company will not require regular warehouse employees,
garage maintenance employees or warehouse maintenance employees to work more
than four (4) hours overtime per day beyond the hours regularly scheduled for
any day during their regularly scheduled five (5) day work week. No employee
working on a four (4) ten-hour (10-hour) day schedule will be required to work
more than two (2) hours overtime on a scheduled day beyond their normally
scheduled regular hours. For post shift overtime employees will be allowed to
volunteer for up to two (2) or four (4) hours of work at the Company's
discretion.
In the event a Warehouse Employee works more than ten (10) hours on a
shift, the Company agrees not to impose discipline under its productivity
standard for substandard productivity during hours in excess of ten (10) unless
the employee's productivity during those excess hours falls below eighty-five
percent (85%) of standard performance.
Section 5: All employees shall be allowed eight (8) hours off duty
before their next scheduled shift, or being required to return for any extra
overtime shift, after being released from work. A reasonable limit on
continuous hours of work shall be established. Employees covered by this
Article V shall be allowed a ten (10) minute break with pay at approximately the
mid-point of each half of a regular shift. However, employees working the four
(4) day, ten (10) hour schedule shall be allowed three (3), ten (10) minute
breaks during their shift. Employees
5
<PAGE>
working beyond a normal work day shall be given one (1) additional rest break
prior to starting such time and an additional break each two (2) hours
thereafter.
Section 6: For those employees working the four (4), ten (10) hour day
work schedule, the benefits for holiday pay, jury duty, and funeral leave shall
be paid as a ten (10) hour benefit instead of an eight (8) hour benefit as may
be provided for elsewhere in this agreement.
Section 7:
----------
Casual Employees--For warehouse casual employees hired on or before
April 29, 1995. The employer may hire, subject to need, persons who will be
known as "Casual Employees" or "Casuals." Such casuals may be used as follows:
1. Casual employees shall be utilized in the Warehouse Department only.
(This section governing use of casuals shall not apply to the existing
practice concerning the use of extra drivers, which shall continue in
effect.)
2. All casual employees will be subject to the provisions of Articles III
and IV effective upon the completion of 45 days of actual work or 60
calendar days, whichever occurs first. Casuals shall be probationary
during that 45 or 60 day period, and may be laid-off or discharged
with or without cause; provided, however, that the company may not
discharge or discipline for the purpose of evading this Agreement, or
discriminating against union members.
3. A separate seniority roster shall be established for casuals, with the
employees being ranked according to the first day of actual work for
the company.
4. The most senior casual employee shall be offered regular employee
status when the company hires additional regular employees. If the
most senior casual declines the offer of regular employment,
additional offers shall be made in seniority order to casuals until
the position is filled.
5. Daily work assignments shall be made to available casual employees (on
a straight-time basis) by seniority.
6. If, prior to the completion of a shift, fewer than all casuals
assigned to that shift are needed to complete the remaining work,
casuals shall be released from work in reverse order of casual
seniority.
7. Casual employees shall not be permitted to work on day shift (first
shift).
6
<PAGE>
8. Casuals shall be assigned only to dry grocery order selection
unless all regular warehouse employees on the shift have been offered
and declined a warehouse work assignment other than dry grocery order
selection, in which case a casual may be assigned to that work.
9. A casual employee notified to report for work who reports at the
assigned time shall be guaranteed four (4) hours straight-time work or
pay.
10. Casuals shall be paid one and one-half times their regular rate of pay
for all hours worked in excess of forty (40) in any workweek and for
all hours in excess of eight (8) in any workday. (Daily overtime shall
commence after ten (10) hours of work if a four (4) ten-hour (10-hour)
day scheduling procedure is established.)
11. The limitations on required overtime contained in Article V, Section 4
of this agreement shall apply to casual employees.
12. When converted to regular employee status, a casual employee who has
reported for and worked twenty-three (23) days of active work as a
casual shall be immediately entitled to all benefits provided for
regular employees under this agreement and shall not be required to
serve any further probationary period as a regular employee. A casual
converted to regular status prior to the completion of twenty-three
(23) days of work shall be probationary until the completion of that
period at which time all regular employee benefits shall apply.
13. Disciplinary action with respect to casual employees under the
currently effective warehouse productivity standards shall be based on
an initial enforcement level of seventy-five percent (75%) during the
first forty (40) hours of work in order selection by a casual, and
shall increase by five percent (5%) for each forty (40) hour increment
of work performed until a ninety-five percent (95%) performance level
is required. A casual employee shall be subject to disciplinary action
for low productivity using the same criteria as applied to regular
employees after the ninety five percent (95%) level has been attained.
14. In any work-week in which casual employees are assigned, the forty
(40) hour guarantee contained in Article V, Section 1, shall be
applicable to one hundred percent (100%) of all regular warehouse
employees, subject to the exceptions to such guarantee.
15. The company shall maintain a pool of personal protective clothing and
equipment of the same type provided to regular employees. When a
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casual employee is assigned to duties normally requiring protective
clothing or equipment, the casual employee shall be assigned
appropriate clothing or equipment from that pool.
16. Casual employees shall not be eligible to work daily overtime until
all regular employees on duty on a shift have been offered the
opportunity to work.
17. Available casual employees will be required to work overtime on daily
overtime, normal days off, or holidays before regular employees are
required to work.
18. The company shall not use any casuals while regular employees in the
warehouse department are on lay-off, except that casuals may be
utilized subject to the other restrictions of this agreement while
regular warehouse employees are being recalled to work but have not
yet reported.
19. Before assigning casuals, the company shall first offer available work
to laid-off employees from other departments who have notified the
company of their availability for assignment to work which would
otherwise be assigned to casuals. While assigned as casuals, such
employees shall be paid at the hourly rate applicable to casual
employees but shall not be entitled to any fringe benefits except the
company shall make the health and welfare and pension contributions to
provide coverage for such employees during weeks they are assigned to
work in accordance with this provision. Laid-off employees shall not
lose any regular recall rights as a result of working as casuals.
20. Upon request, the union shall be furnished with a weekly listing of
all regular warehouse employee absentees, and all casual employees
working during the week, including the days and hours of such casual
work.
21. Casual employees assigned to work on contractual holidays shall not be
paid holiday pay, but shall be paid one and one-half (1 1/2) times the
regular casual rate for holiday work performed, except that work
performed on the casual employee's birthday and employment anniversary
date shall not be considered holiday work subject to this provision.
22. Casuals may be used to replace absent regular warehouse employees (1
for 1) who are absent for any reason other than vacation including but
not limited to illness, injury, jury duty, funeral leave, union leave,
personal holiday, holiday falling during vacation, and personal leave
of absence. While the work of casual employees will be primarily on
second shift,
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absences on all shifts among warehouse employees shall be counted in
order to determine the number of replacement casuals which may be
utilized on any given workday. For purposes of this provision, third
shift shall be considered a part of the next following workday.
23. For twelve (12) weeks each calendar year, as determined by the
employer, the employer shall have the right to use supplemental
casuals in addition to replacement casuals, but the number of
supplemental casuals utilized in any such week shall not exceed the
equivalent of fifteen (15) employees per day plus any daily overtime
work by casuals in accordance with this agreement.
24. In weeks other than those designated under paragraph 23 above, the
employer shall have the right to use supplemental casuals not to
exceed the equivalent of fifteen (15) employees working three (3) days
plus any daily overtime work by casuals in accordance with this
agreement.
25. Before supplemental casuals are assigned to work under paragraphs 23
and 24 above on Sunday or Friday, regular warehouse employees not
scheduled for work on those days shall be given the opportunity to
work voluntary overtime on second or third shift, not to exceed the
company's staffing requirements on that shift.
26. Casuals shall not be entitled to any contractual benefits (such as
holidays, jury duty pay, funeral leave, pension, vacations, reporting
pay, shift differential, etc.) except as specifically provided under
this section.
27. If supplemental casual hours (not including replacement casual hours)
exceed two hundred (200) for a period of four (4) consecutive weeks
(but not counting the twelve (12) weeks designated by the employer
under paragraph 23 above) the company shall increase the regular
warehouse employee workforce by hiring a number of new regular
employees sufficient to reduce the average use of supplemental casual
hours below the two hundred (200) hours.
28. The parties intend that casual employees shall be used to fill
vacancies which occur due to the absence of regular employees and to
provide additional assistance during peak days of normal workweeks and
the designated peak workweeks, and that the use of casual employees to
erode the regular employee workforce or to evade the terms of this
agreement shall not be permitted.
29. If a major change in circumstances occurs following the execution of
this agreement which causes this section to operate in a manner
creating
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significant inequity for either of the parties, the parties shall
conduct immediate negotiations for modification of this section to
correct the unforeseen inequity. If the parties are unable to agree as
to the correction of the unforeseen inequity, the matter may be
referred to the grievance and arbitration procedure established under
Article XX, but the jurisdiction of an arbitrator shall be limited to
selecting between final negotiating positions of the parties prior to
submission of the matter to arbitration. The parties shall adopt that
position which the arbitrator determines to be the more reasonable in
light of all the circumstances and most nearly in accordance with the
primary intent of this section as expressed in Paragraph 28 above.
30. Regular employees, when casual employees work in a workweek, shall be
entitled to at least six (6) hours off duty before their next
regularly scheduled shift or before being required to return for any
extra overtime shift after being released from work.
Section 8: For casual warehouse employees hired after April 29, 1995.
Notwithstanding any provision in this agreement to the contrary, the Company may
hire, subject to need casual warehouse employees. Casual employees may be used
on a "one for one" basis to replace any employees absent, this includes, but is
not limited to vacations, jury duty, holidays, sick, funeral, etc. Provided,
however, the Company may utilize an additional ten (10) casual employees in
addition to replacements for absent employees during the week prior to and the
week of the following holidays; New Years, Memorial Day, Fourth of July, Labor
Day, Thanksgiving, and Christmas.
(a) Casual employees will not be a part of the regular seniority list.
(b) Casual employees will not be entitled to fringe benefits such as, but
not limited to vacations, holidays, funeral leave, jury pay, health
and welfare, and pension.
(c) Casual employees called to work shall be guaranteed four (4) hours
pay.
(d) No casual employee shall work shift overtime unless regular employees
on that shift have been first offered the opportunity to work such
overtime.
(e) Casual employees may be worked on either a call in or a scheduled
basis.
(f) Casuals will not be utilized on the day shift. However, employees
absent from day shift shall be counted to determine the number of "one
for one" replacement casuals which may be used on other shifts.
(g) In addition to "one for one" replacement casuals, during each of two
(2) designated days each week after giving all regular employees the
opportunity
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to volunteer to perform additional work required by the Company, ten
(10) supplemental casuals day be utilized; after giving regular
employees the opportunity to volunteer to work, on Friday night and
Saturday night of each week the Company shall be entitled to utilize
an unlimited number of casuals.
(h) Casual employees who have worked in excess of ninety (90) working days
and are being promoted to regular status shall not be required to
serve a probationary period.
(i) The hourly rate for casual employees shall be sixty-five (65) percent
of the regular warehouseman rate and casuals shall be paid overtime
after forty (40) hours of work per week.
ARTICLE VI
----------
HOURS OF WORK FOR TRUCK DRIVERS
-------------------------------
Hours of work for truck drivers shall be as follows:
Section 1: All work by truck drivers in excess of forty (40) hours in
any one (1) week shall be paid for at the rate of one and one-half (1 1/2) times
the employee's straight time classified hourly rate. All work performed by
Drivers on their scheduled days off shall be paid for at the rate of one and
one-half (1 1/2) times the regular hourly rate. For these purposes, a pay week
shall be deemed to commence at 12:01 a.m. on Sunday of each week. D.O.T. Rules
and Regulations with regard to hours and rest period between work shifts shall
be adhered to. Ninety percent (90%) of all Drivers will be granted two (2)
consecutive days off each week; for this purpose Saturday and Sunday and any
other combination of two (2) consecutive days shall be considered as two (2)
consecutive days off. After thirty (30) days of employment, employees in the
bottom ten percent (10%) of the Driver classification shall be allowed one (1)
scheduled day off to be chosen by seniority within that group after the days are
initially selected by the Company. This scheduled day off will not be provided
during holiday weeks; however, a Driver in the bottom ten percent (10%) of the
Driver classification shall receive another day off in addition to the holiday
in a holiday work week, said additional day off shall be selected by the
Company. During weeks in which a holiday occurs, ninety percent (90%) of all
Drivers, on an individual basis, shall be granted two (2) consecutive days off
in addition to the holiday. The ninety percent (90%) of Drivers who are
entitled to two (2) consecutive days off shall be permitted to bid for their
days off on a seniority basis; provided, however, that one hundred percent
(100%) of said ninety percent (90%) shall be bid for days off on a midnight-to-
midnight basis. Ninety percent (90%) of all Drivers shall be guaranteed forty
(40) hours per week and employees in the bottom ten percent (10%) who have been
employed ninety (90) days shall be guaranteed twenty-five (25) hours per week
except that these guarantees shall not apply during weeks in which a holiday
occurs, or in case of slack business or causes beyond the Company's control in
which event layoffs shall be made in accordance with the seniority provisions of
Article VIII hereof. In weeks in which extra Drivers are called in for work, on
a one-to-one basis, for
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<PAGE>
each extra Driver so employed one (1) additional Driver shall be added to the
ninety-percent (90%) of regular Drivers that are entitled to the aforesaid
guaranteed work week. These Drivers will not, however, be granted two (2)
consecutive days off as the result of this provision. In weeks in which a
holiday falls, the guaranteed work week for all Drivers entitled thereto shall
be reduced by eight (8) hours. In weeks in which a holiday falls, all work by
Truck Drivers in excess of thirty-two (32) hours (excluding work performed on
the holiday) shall be paid at the rate of one and one-half (1 1/2) times the
regular rate of pay. If a Driver voluntarily elects to take time off, eight (8)
hours shall be deducted from the weekly guarantee. No extra Drivers shall be
employed at a time when other Drivers are laid off. A Driver called to work
shall be guaranteed six (6) hours time or six (6) hours pay, with the exception,
however, that employees called in for overtime work shall be guaranteed only
four (4) hours work or four (4) hours pay. If over-time worked by Truck Drivers
exceeds twenty-seven and one-half percent (27 1/2%) during the immediately
preceding four (4) week period (thirty-two and one-half percent (32 1/2%) in any
four (4) week period during which a holiday falls) then the Company will, as
soon as practicable, recall sufficient laid off employees to reduce such
percentage to the above stated maximum. It is understood by the Union that
management shall use its best judgement in complying with this provision.
Section 2: Truck Drivers on long distance drives shall be allowed and
paid their actual expenses for lodging, subject to the following conditions and
maximums. Drivers shall not be required to exceed six (6) hours between meals;
providing, however, that no more than three (3) meals shall be allowed in any
one (1) twenty-four (24) hour period. Drivers starting from the plant on or
after 6:00 a.m. of any day will not be allowed expenses for breakfast on that
calendar day or for more than two (2) meals for the balance of the twenty-four
(24) hour period. The meal allowance shall be $6.25 per meal. If an overnight
layover is necessary, drivers shall be reimbursed for the reasonable cost of a
room therefore, upon presentation of a paid bill; provided, however, the Company
shall have the right to designate, in advance, where the lodging shall be
obtained. In the event a layover shall exceed ten (10) hours, an employee shall
begin receiving his regular hourly rate of pay which shall continue for eight
(8) hours and thereafter, shall be off ten (10) hours and on eight (8) hours
until the layover is completed. Drivers will be allowed ten (10) hours off duty
between trips or legs of overnight trips. In the event a layover should be ten
(10) or more hours to pickup a backhaul, the layover period shall include no
more than two (2) meal periods. Receipts shall be obtained by all drivers
showing actual cost of all expense items incurred (excluding meals) and shall be
turned in to the Company with the expense accounts. All driving within a radius
of fifteen (15) miles from the Company's premises in Springfield, Missouri,
shall be considered local driving, and driving beyond such radius shall be
considered long-distance driving.
The Company shall allow one three (3) minute call for any Driver whose run
changes to an overnight run provided said Driver is made aware of such change
after his departure from the home terminal. Any additional time in excess of
three (3) minutes shall be the responsibility of the Driver.
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Section 3: Drivers designated as "HOSTLER" (that is, those drivers whose
primary duties are handling of trucks and trailers at the Company's warehouse,
and occasional local deliveries) shall receive overtime pay at the rate of one
and one-half (1 1/2) times the regular hourly rate for all hours in excess of
eight (8) hours in any one (1) work day.
The Hostler positions shall be available to bid every six months on the
following basis: One (1) day, one (1) evening, and one (1) night Hostler
position shall be bid providing there remains one (1) day, one (1) evening, and
one (1) night Hostler position not available for bid.
Section 4: The Company shall reimburse all employees who are required to
obtain D.O.T. physical examinations and for obtaining chauffeurs licenses. The
Company may designate where D.O.T. physicals are to be taken; such physical
examinations shall be taken in Springfield, Missouri.
Section 5: Regular drivers shall be given at least one (1) hour's
notice, before departure time, when being dispatched. Regular drivers shall be
given at least one (1) hour's notice, before their scheduled start time, in the
event their scheduled work is cancelled. Drivers shall notify the Company at
least one (1) hour before start time, if they are unable to perform their
scheduled work.
Section 6: Run Bidding - Ninety percent (90%) of the ninety percent
(90%) of road Drivers entitled to two (2) consecutive days off (exclusive of
probationary employees and Hostlers) shall be entitled to bid by seniority their
first three (3) runs immediately following their second consecutive day off.
However, drivers bidding an overnight run shall be allowed to bid two (2) runs,
only: If the first run bid is an overnight run, then the bidding driver shall be
allowed to bid only one (1) additional run. If the second run bid is an
overnight run, then such run shall be the last run the driver shall bid. In no
event shall a driver be allowed to bid two (2) overnight runs.
However, notwithstanding any of the above, the top percent (50%) of the
aforementioned ninety percent (90%) of Drivers entitled to bid their runs shall
be entitled to bid by seniority their first three (3), four (4) or five (5) runs
immediately following their second consecutive day off. An overnight run shall
count as two (2) runs for bidding purposes. In no event shall a Driver be
allowed to bid three (3) overnight runs.
GENERAL PROCEDURES
------------------
(a) Bids shall be posted for at least one (1) week prior to the time
bidding commences. Thereafter, the bidding procedure will commence at
least thirty (30) days prior to the time the bid is placed in
operation. The completed bid shall be posted at least one (1) week
prior to the time the bid is placed in operation. This bidding shall
be handled through the dispatch office.
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<PAGE>
(b) The duration of each bid period shall be six (6) months and shall be
divided as follows:
The beginning of the week of July 15 to the end of the week of
January 8. The beginning of the week of January 15 to the end of
the week of July 8.
(c) All holiday weeks are to be nonbid work weeks. However, the Company
will attempt to schedule employees on their normal bids in such weeks
whenever the runs and the Driver are both available and it doesn't
hinder the dispatch operation or adversely affect the Driver's
seniority.
(d) Drivers entitled to bid two (2) consecutive days off shall bid days
off at the same time as the runs are being bid.
(e) All regular runs and backhauls available before the posting period
shall be posted for bid.
(f) The top fifty percent (50%) of the drivers entitled to bid shall
structure their bids so that the total hours for the runs bid by each
driver shall not be less than forty (40) hours nor greater than forty-
six (46) hours. The other fifty percent (50%) of the drivers entitled
to bid shall structure their bids so that total hours for the runs bid
by each driver shall not be less than twenty-nine (29) hours nor
greater than thirty-seven (37) hours. The Company, at its discretion,
shall determine what the expected hours will be for each run available
for bid.
(g) Any driver entitled to bid and failing to bid when notified to do so
shall forfeit his right to bid. If a driver is entitled to bid and he
fails to do so, such failure does not create a right to bid for a
driver who is not otherwise entitled to bid.
(h) New or additional runs added during a bid period shall be dispatched
from the "extra board" until the next bid period. (For the purposes of
this Agreement, "extra board" means the pool of drivers available for
assignment by the Company at its sole discretion.)
SPECIAL PROCEDURES
------------------
(a) If a bid run is cancelled, the driver assigned to such run shall go to
the "extra board" and will be given a run of comparable hours, if
available. The company will dispatch the driver so that said driver
will be available for his next bid run.
(b) If a bid run is split, the senior driver shall be assigned to the
portion of the run with the most expected hours. The other portion
shall be assigned to the "extra board."
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(c) If two (2) or more bid runs combine, the driver assigned to the run
normally handling the first stop on the combined run shall be assigned
to the combined run. The other driver(s) shall go to the "extra
board."
(d) If a bid run is advanced or delayed over two (2) hours from the
original bid starting time, the driver for that run shall go to the
"extra board" and the run itself shall be dispatched from the "extra
board." The affected driver shall be given a run of comparable hours,
if available.
(e) A backhaul can be added or cancelled on a bid run at any time and the
driver assigned to the bid run involved shall remain assigned to such
bid run.
(f) If a driver assigned to a bid run is delayed due to a breakdown, bad
weather, road conditions, or any other reason and as a result, is not
available for said driver's next bid run, said driver shall go to the
"extra board" and said bid run shall be dispatched from the "extra
board."
(g) If, for any reason other than a reason covered by Special Procedure
(f), above, a driver is unavailable to take his bid run at its
scheduled starting time, then, at the Company's discretion, such
driver may be assigned to the "extra board" and such run may be
dispatched from the "extra board." The affected driver shall be given
a run of comparable hours, if available.
(h) "Bumping" is not authorized.
(i) If a bid run is permanently cancelled, such affected Driver shall be
allowed to bid any runs that were left unbid at the end of the bidding
process provided said new bid remains within the original bid hour
limitations or the Driver can work from the extra board for that
particular run for the remainder of the bid period.
(j) If a bid run that is bid as a "turn" becomes an "overnighter," such
bid Driver shall be given the choice of the overnight run or a turn of
comparable hours from the extra board if available. Drivers not
wanting to go overnight on these bids must sign a form to indicate
their choice, and this form must be submitted to the Dispatcher when
the Driver initially bids his runs.
Section 7: Upon completion of a driver's work day that allows such driver
to reach or surpass the guaranteed work week, all additional days of work shall
be offered first by total seniority and then required by inverse seniority to
drivers not on their bid days off and then by inverse seniority to drivers on
their bid days off. It is understood that such driver has to have available
D.O.T. hours to work before volunteering or being required for such work.
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Section 8: Light Duty for Truck Drivers. Truck drivers who have been off
work due to medical disability, and who are physically able to return to work on
a light duty basis, shall be allowed to return to work on a light duty basis
under the following guidelines:
1. The limited duty request has to be medically documented by a licensed
physician.
2. In cases where the medical disability is the result of an on-the-job
injury, such release for light duty must come from a Company-
authorized physician.
3. In cases where the medical disability is not the result of an on-the-
job injury, any light duty release from the employee's personal
physician shall, at the Company's discretion, be reviewed by a
Company-authorized physician. Should the Company-authorized physician
diagnose such employee as fit for full duty, the employee shall return
to his/her regular job duties on an unrestricted basis. If the
employee's doctor and the Company's authorized doctor disagree as to
the employee's fitness for regular duty, the two doctors shall
designate a mutually agreeable third physician whose determination
as to the employee's fitness shall be final and binding. The expense
of the third physician's examination and diagnosis shall be borne by
the Company.
4. The duration of such limited duty shall not exceed thirty (30)
calendar days.
5. Limited duty shall be defined in accordance with the physical
restrictions which the physicians involved place upon the employee
released for light duty.
6. Limited or light duty runs shall only come from the "extra board." The
Company may assign runs appropriate to the physical restrictions of
the limited duty employee without regard to seniority.
ARTICLE VII
-----------
NO PYRAMIDING OF OVERTIME
-------------------------
There shall be no pyramiding of overtime pay.
16
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ARTICLE VIII
------------
SENIORITY
---------
Section 1: Seniority by department shall prevail. Seniority by length of
service shall govern in laying off and recalling employees. Seniority also shall
prevail in transfers providing the employee is qualified to perform the work. An
agreed upon seniority List shall be established and such list shall be available
to the Union at all times.
Section 2: An employee's seniority shall be considered broken only if an
emplovee voluntarily quits, or if he has been laid off continuously for a period
of more than one (1) year, or if he is called back to work after a layoff and
does not report for work within a reasonable time under the then existing
circumstances, but in no case more than seven (7) days from date of
notification.
Section 3: Seniority shall be by department, Truck Drivers constituting one
department, employees in the Warehouse a second department with Inventory Clerk
employees comprising one (1) sub-department in the Warehouse Department,
Maintenance employees in the Garage a third department, and Maintenance
employees in the Warehouse a fourth department.
Seniority in the sub-department of Inventory Clerks will be separate for
vacation scheduling purposes. In addition, new employees bumping or bidding into
the Inventory Clerks' sub-department or present employees who leave and,
subsequently, bump or bid back must retain the Inventory Clerk bid for a period
of one (1) year.
In the event an employee bids to another department and satisfactorily
completes a thirty (30) calendar day trial period in the new department, then
his seniority with the Company shall be transferred to the new department.
Any employee who bids to maintenance shall go to the bottom of the
seniority list and work his way up as a new employee and will have a thirty (30)
calendar day probationary period. If successful, he shall retain total seniority
for the purpose of earned vacation.
All Garage Maintenance jobs and Warehouse Maintenance jobs will be posted
for bid once each year.
Section 4: Except as noted below, there shall be no transfers from one
department to another unless there is a job open. Where a job is open in a
department, employees in such department shall be given first opportunity to
fill the job by bidding and the employees from the other departments desiring to
transfer, if any, shall be given the next opportunity to fill the job by
bidding. Management shall have the right to pass upon employees' qualifications
to make any transfers from one department to another, provided there shall be no
discrimination practiced in determining same, subject to the grievance and
arbitration procedure. When a new job is open or a vacancy occurs, the job will
be posted for bid for three (3) working days and the job shall
17
<PAGE>
be awarded two (2) days after the expiration of the three (3) day posting
period, provided, however, that it is understood and agreed that (1) the bid may
be posted with a specified later effective date, (2) the posted job may be
cancelled at any time before it is awarded, and (3) that in the event the job
bid involves any change of job starting time, then the bid job will not become
effective until the later of (a) the effective date posted, and (b) the first
day of the new bid job following the expiration of the current work week of the
successful bidder. Notwithstanding any other provision of this paragraph which
may appear to be to the contrary, no employee shall be permitted to bid on open
jobs under the provisions of this paragraph more than three (3) times in any
contract year, unless such job involves a higher rate of pay or a change of
shift. A change of shift shall be defined as (1) a shift in the majority of an
employee's hours from one of three time periods to another (those periods being
6:00 a.m. to 2:00 p.m.; 2:00 P.M. to 10:00 p.m.; and 10:00 p.m. to 6:00 a.m.) or
(2) a change in bid days off. No employee will be permitted to withdraw a bid
after the award of the bid is posted and he must then accept the job.
Section 5: Truck drivers who become physically disqualified to perform
their duties as truck drivers under D.O.T. regulations or any other governmental
order may, at their option, transfer to the warehouse with full seniority,
provided however that they satisfactorily complete a thirty (30) calendar day
probationary period. Truck drivers will be eligible to bid immediately upon any
open job in the warehouse.
In the event of a layoff in the garage maintenance or warehouse maintenance
department, employees in one of the above departments may displace employees who
are less senior in the other. Such employees will be probationary for a thirty
(30) calendar day period and, if discharged, will maintain layoff status in
their prior department. Any employee on layoff status will be eligible to bid on
openings in other departments before hiring from the outside. Such a bid must be
received during the normal posting period and it is the sole responsibility of
the laid off employee to become aware of posted positions. Such employee shall
be placed at the bottom of the seniority list in the department in which so
employed and will be a probationary employee for a thirty (30) calendar day
period. If discharged during the probationary period, such employee will
maintain layoff status in his prior department.
Section 6: Each month the Company shall fumish the Union with a list of all
employees laid off, discharged, hired or recalled during the period month.
Section 7: When an employee's regularly assigned job is not required, then
the employee will be allowed to choose by seniority any job declared by the
Company to be open and available. The opportunity to choose by seniority shall
occur only once per shift per employee whose regularly assigned job is not
required.
Section 8: The Company agrees to give five (5) calendar days' notification
to all its employees in the event of layoff; however, it is clearly understood
that such notification is not required for employees who are not covered by the
ninety percent (90%) guaranteed work week
18
<PAGE>
provisions, and that such notice is not applicable in cases of discharge or
causes beyond the Company's control.
ARTICLE IX
----------
MANAGEMENT
----------
The management of the plant and the direction of the working force
including the right to discipline employees and hire, suspend or discharge for
proper cause and to relieve employees from duty for any legitimate reason and to
make rules and regulations for the conduct of the Company's business is vested
exclusively in the Company, provided such action by the Company does not
conflict with the provisions of this Agreement.
ARTICLE X
---------
SAFETY
------
The Employer shall not require employees to use any unsafe equipment or to
take out on the streets or highways any vehicle which is not in safe operating
condition or any vehicle that IS not equipped with safety appliances prescribed
by law. All vehicles shall be equipped with air conditioning, heated mirrors,
heaters, defrosters, power steering, and air seats. All employees shall promptly
report in writing any defect or deficiency in any such equipment or vehicle. All
air conditioners shall be kept in good operating condition.
ARTICLE XI
----------
UNIFORMS
--------
Section 1: For regular employees assigned to the freezer the Company shall
provide freezer suits and boots similar to those being currently used. Employees
assigned as meat room fork-lift operators shall be provided freezer suits; meat
room selectors, perishable fork lift operators and perishable freight haulers
shall be provided freezer suits to the extent of existing practice. The suits
and boots will be replaced by the Company each twelve (12) months; provided,
however, that replacement may be made at any time the Company, in the exercise
of its discretion, determines that a freezer suit or boots are worn out and need
replacement. Freezer suits and boots which are so provided to employees by the
Company shall become the property of the employees after twelve (12) months of
continuous use. The freezer employees shall maintain and be responsible for
their suits and boots and shall keep themselves properly attired to do freezer
work. The Company shall continue to replace gloves for freezer employees as
needed. Warehouse maintenance employees shall, individually, be provided freezer
suits for their use and these suits shall be maintained in the maintenance area.
For employees working in the dairy cooler, poultry cooler, meat cooler, produce
area and perishable dock, the Company shall furnish coveralls, similar to those
being currently used, to the employees and it shall be the responsibility of the
employees to maintain them, and these coveralls shall belong to the employees at
the end of the twelve (12) months of use. The Company will furnish jersey gloves
for employees in the dairy cooler, meat cooler, poultry cooler, produce area and
perishable dock
19
<PAGE>
as needed. Employees who are furnished suits and coveralls under the
provisions of this section shall be provided lockers for storage of same; and
replacement of suits under this section shall be subject to the grievance and
arbitration provisions of Article XX of this contract.
Section 2: The Company shall furnish coveralls or uniforms for shop
employees, fuel men and hostlers and shall launder them. Hostlers shall be
furnished adequate rain gear and insulated coveralls. Garage/Maintenance
employees shall each be furnished one (1) freezer suit for the duration of this
contract. At the end of the contract, such freezer suits will become the
property of the employee to whom they have been issued. These suits shall be
maintained in the Garage/Maintenance area. These suits will be replaced by the
Company, when in the exercise of its discretion, determines that a pair of
insulated coveralls or freezer suits are worn out and need replacement. Fuel men
shall be assigned freezer suits, rain gear, and boots with liners for their use.
These garments shall be the property of the Company and shall be used on the
premises only. The Company may require any one or group of employees to wear
uniforms designated by it. The Company shall furnish one (1) pair of leather
work gloves to each driver every four (4) months.
ARTICLE XII
-----------
PROBATIONARY AND REGULAR EMPLOYEES
----------------------------------
New employees shall be on probation during the first thirty (30) calendar
days after employment and during such probationary period may be laid off or
discharged with or without cause. Employees retained in service beyond such
thirty (30) days (at the request of management and agreed by the appropriate
union steward, the probationary period can be extended an additional thirty (30)
calendar days) shall be and become regular employees and subject to the
Seniority Clause and all the rights of this Agreement; provided, however, that
the Company may not discharge or discipline for the purpose of evading this
Agreement, or discriminating against Union members.
ARTICLE XIII
------------
VACATIONS
---------
Section 1: Employees under this Agreement shall receive vacation pay as
follows: one or more years of employment--two (2) weeks; eight (8) or more years
employment--three (3) weeks; fifteen (15) or more years employment--four (4)
weeks, and twenty (20) or more years employment--five (5) weeks. Vacation pay
shall be computed by multiplying forty-two (42) hours by the prevailing straight
time hourly rate at the time employees receive their vacation.
Section 2: During the first year of employment an employee must work sixty
percent (60%) of the year in order to obtain his vacation and must have been
employed for the full year. During the second and subsequent years, employees
need not comply with the sixty percent (60%) rule above but must not have been
on lay off or absent due to sickness or on-the-job injury, in
20
<PAGE>
excess of one year to be eligible for the vacation. On-the-job injuries shall
count as days worked for first-year employees. No more than one vacation will
be taken in any calendar year.
Section 3: All earned vacations must be taken by employees and no employee
shall be entitled to vacation pay in lieu of vacation, except time for unused
daily vacation referred to in Section 6 below (unused personal holidays and
unused holidays falling within vacations shall be treated in the same manner as
unused daily vacation).
Section 4: The Company's vacation period shall be from January 1 through
December 31 of each calendar year. The Company will post its departmental
vacation schedule no earlier than November 1 of each year and employees shall
select their vacation period by departmental seniority, consistent with the
efficient operation of the Company's business. Ten (10) percent of warehouse
employees may be on vacation each week during the period commencing Memorial Day
week and ending the second full week in August. Five (5) percent of warehouse
employees may be on vacation in all other weeks.
Section 5: Employees shall qualify for a vacation as follows: First-year
employees shall not qualify until they have completed an anniversary year;
thereafter employees shall qualify for subsequent vacations on a calendar year
basis. Employees who have been discharged for dishonesty or insubordination
shall not be entitled to vacation pay. Employees who quit after qualifying for a
vacation but before taking same shall be entitled to vacation pay for the
vacation time earned but not taken provided that such employee shall have worked
sixty percent (60%) or more of his last anniversary year but not otherwise. In
the event an employee transfers to a different department, such transferred
employee's vacation period, if scheduled, shall be rescheduled in accordance
with the vacation schedule applicable to the department into which such employee
is transferring and the period of such employee's scheduled vacation shall not
conflict with any vacation periods of other employees within such department
scheduled prior to the effective date of transfer of such transferee.
Section 6: Employees will be allowed to take one (1) week of vacation one
(1) day at a time provided the employee schedules such day of vacation twenty-
four (24) hours in advance. Such daily vacation scheduling shall be by seniority
at the time of vacation scheduling and thereafter on a first come first serve
basis. The maximum number of employees who may schedule vacation days and
floating holidays referred to in Article XIV, Section 6 shall be limited to nine
(9) warehouse employees, six (6) transportation employees, one (1) maintenance
employee and one (1) garage employee on the same work day.
Section 7: Vacation shall start the day immediately following the
employee's last regularly scheduled work day and shall end at the starting time
of his next regularly scheduled work day.
21
<PAGE>
ARTICLE XIV
-----------
HOLIDAYS
--------
Section 1: Regular employees shall be paid eight (8) hours or ten (10)
hours pay at the straight time hourly rate for the following eight (8) holidays:
New Year's Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day,
Christmas Day, the employee's birthday, and the employee's anniversary date of
employment. Employees shall receive holiday pay even when not worked and
regardless of the day of the week on which it falls, provided they comply with
the qualifications set forth hereinafter.
Section 2: In order to qualify for eight (8) hours or ten (10) hours of
straight time pay for a holiday not worked, a regular employee must work his
regularly scheduled work day which immediately precedes and his regularly
scheduled work day which immediately follows the holiday, except in cases of
proven illness, or unless an absence is mutually agreed to. If a truck driver's
birthday or employment anniversary date occurs on a regularly scheduled day off
or on a holiday, then such employee may, with the supervisor's permission,
either take as such employee's birthday or employment anniversary date the first
work day prior to such birthday, employment anniversary date, or holiday or the
first scheduled work day after the birthday, employment anniversary date or
holiday. When a holiday falls on one of the regularly scheduled days off of
Hostlers and other employees other than truck drivers, such holiday shall be
observed either the last regularly scheduled work day prior to such holiday or
the next regularly scheduled work day following such holiday depending on which
is the closest to such holiday; and it is understood that the provisions of this
sentence are not to be construed to apply to Truck Drivers.
Section 3: In the event a holiday(s) falls within an employee's vacation
period he shall be granted an additional day(s) vacation with pay and may
reschedule the holiday in accordance with Section 6 hereof.
Section 4: Employees who are serving their (30) day probationary period are
not entitled to holiday pay for holidays falling within the probationary period.
Section 5: If an emergency requires work on any of the said holidays, the
regular employees working on such holiday shall receive the holiday pay referred
to above plus one and one-half (1 1/2) times their regular rate of pay for the
hours worked on the holiday.
Section 6: Employees may schedule their birthday and anniversary date of
employment holidays and holidays that fall within an employee's vacation period
as floating holidays provided the employee schedules such days of vacation
twenty-four (24) hours in advance. Such holiday scheduling shall be first by
seniority at the time of vacation scheduling and thereafter on a first come
first serve basis. The maximum number of employees who may schedule holidays and
vacation days scheduled under this provision and under Article XIII, Section 6
shall be limited to nine (9) warehouse employees, six (6) transportation
employees, one (1) maintenance employee, and one (1) garage employee on the same
work day.
22
<PAGE>
ARTICLE XV
-----------
WAGES
-----
Section 1: The following shall be the classifications and the rates of pay
for the respective periods set forth:
<TABLE>
<CAPTION>
EFFECTIVE EFFECTIVE EFFECTIVE
4/30/95 4/28/96 10/27/96
- ------------------------------------ -------- --------- ----------
<S> <C> <C> <C>
Truck Drivers $14.41 $14.61 $14.81
Freezermen $14.46 $14.66 $14.86
Receiving Clerk $14.46 $14.66 $14.86
Warehousemen $14.10 $14.30 $14.50
Production Clerk $14.10 $14.30 $14.50
Maintenance I $14.80 $15.00 $15.20
Maintenance II $14.20 $14.40 $14.60
Maintenance III $14.10 $14.30 $14.50
Casual, hired on or before 4/29/95 $10.15 $10.15 $10.15
Casual, hired after 4/29/95 $ 9.17 $ 9.30 $ 9.43
Wraps Clerks $12.08 $12.95 $13.15
</TABLE>
Section 2: The various jobs available in the warehouse for employees
consist of loaders, unloaders, orderfillers, receiving clerks, forklift
operators, freezermen, cooler, produce, salvage, checkers, cleanup, repack,
cigarette machine, will call, vacation relief, dual function jobs, perishables,
and other possible bid jobs. The above jobs will continue to be posted as
necessary and a description, if necessary, shall be posted with the job. The
Company shall not be restricted to the above listed job openings nor necessarily
continue the above jobs, and it is understood that the above jobs can be
eliminated, combined, or added to for the better operation of the warehouse at
the Company's option (this shall not be construed to permit the Company to
continue or create "where needed" or "utility" jobs). Any employee whose job is
permanently abolished shall be allowed to move to any job in his department
based on his seniority within his department. If a job is worked fifty percent
(50%) of the time or more for a period of thirty (30) days, it shall be posted
for bid.
Section 3: Beginners, in all classifications other than casuals, shall
receive one dollar ($1.00) per hour less than the above rates the first thirty
(30) days after date of employment, seventy-five (75) cents per hour less than
the above rates the next thirty-one (31) through ninety (90) days of employment,
fifty (50) cents per hour less than the above rates the ninety-first (91st)
through one hundred-eightieth (180th) days of employment, and the regular rate
for the particular classifications as set out above after 180th day of
employment.
Casuals promoted to regular status and who have completed more than three
(3) months will begin at seventy-five (75) cents below the current regular rate.
If a casual has completed
23
<PAGE>
less than three (3) months of employment said casual will begin at $1.00 below
the regular rate and progress as a beginner.
Section 4: The above wages are the minimum rates to be paid. Nothing herein
is to prevent the Company from paying any one or more employees above the
minimum rates provided for herein, for special merit, incentive, efficiency or
ability.
Section 5: Employees shall perform any work supervision may direct. When an
employee is temporarily assigned to a job with a lesser rate of pay, he shall be
paid his regular rate of pay. If no work is available in an employee's regular
classification, he may voluntarily elect to take a lower rated job and
classification rather than accept a layoff. If an employee is assigned to a job
classification for which a higher pay is applicable, the employee shall be
entitled to receive the higher rate of pay for all time actually worked on the
higher pay classified job.
Section 6: A premium of twenty (20) cents per hour shall be paid for work
performed on a regular shift between the hours of 6:00 p.m. and 6:00 a.m.
This premium pay for night work does not apply to truck drivers or to
day workers working on overtime rates, but does apply to Hostlers. It is
understood and agreed that if the major portion of the hours of a regular shift
fall within the premium hours, then the premium will be paid for all hours
worked on that shift, but if the major portion of the hours of any shift fall
between 6:00 a.m. and 6:00 p.m., then no premium shall be paid for any hours on
such shift.
Section 7: Maintenance I employees are required to furnish their own hand
tools and will receive a $250.00 allowance each six (6) months therefor.
Maintenance II employees are required to furnish their own hand tools and will
receive $150.00 allowance each six (6) months therefor.
The Company shall provide all special tools, equipment and supplies,
exclusive of hand tools, that the Company shall determine are necessary for the
performance of work by Maintenance I employees or Maintenance II employees.
Section 8: Any warehouse, maintenance or hostler employee injured on the
job who requires medical attention will be paid for the remainder of such
employee's regular shift (not to exceed eight (8) hours) and truck drivers will
be paid for all scheduled hours not worked that trip, if the doctor says the
employee cannot return to work that day or trip. The employee shall also be paid
lost hours (not to exceed eight (8)) due to his first return trip to the doctor
related to an on-the-job injury. The employee shall upon returning to work bring
the doctor's statement stating that the employee was not able to return to work
on the day or trip of injury.
24
<PAGE>
Section 9: Maintenance employees shall be paid "cold pay" of 36 cents per
hour for all time spent working within the freezer providing the freezer is
operational during the time of such work.
Section 10: If the Company establishes a new classification with a primary
function not previously performed by bargaining unit employees, the Company
shall initially establish a rate applicable to that classification which shall
not be below the minimum current existing rate for a regular employee in the
department involved.
Within thirty (30) days following the commencement of work in that
classification, the Union may file a grievance concerning the rate assigned to
the classification. If an adjustment in the rate is agreed on during the
processing of that grievance, any change in rate shall be retroactive and shall
apply to all work performed prior to the change in rate.
If the parties are unable to agree on appropriate rate, that issue may
be appealed to arbitration as provided in Article XX. However, the jurisdiction
of an arbitrator in determining the rate appropriate shall be limited to
selection between the final positions of the parties at the conclusion of the
processing of the grievance. The arbitrator shall determine, in consideration
of the bargaining unit wage structure, which final position is most appropriate
and shall direct that the classification be compensated at that level. The
arbitration award shall apply retroactive to all work performed following the
establishment of the classification.
ARTICLE XVI
-----------
REDUCTION OF PAY
----------------
No employee shall suffer a reduction of pay due to the adoption of this
Agreement.
ARTICLE XVII
------------
FEDERAL OR STATE LAW
--------------------
Should any Federal or State law be enacted affecting the hours or wages
covered by this Agreement and requiring chance therein, then this Agreement
shall be open for the purpose of adjusting the part or parts affected thereby.
ARTICLE XVIII
-------------
FUNERAL LEAVE
-------------
In the event of a death in the immediate family of a regular employee,
and if said employee actually attends the funeral of such relative, he shall be
paid for time off from work for said purpose as follows: He shall be paid
twenty-four (24) hours' pay at his regular rate of pay for his spouse, child,
grandchild, father, mother, brother, sister, father-in-law, and mother-in-law,
step-parents and spouse's step-parents. He shall be paid eight (8) hours' pay
at his regular rate of pay
25
<PAGE>
for his brother-in-law, sister-in-law, grandparents of employee, and
grandparents of employee's spouse. It is understood and agreed that the "in-law"
relationship identified in the preceding sentence described shall relate to the
family of the employee's spouse married to the employee at the time of the
subject death. For good cause employees will be granted a reasonable amount of
additional time off without pay.
ARTICLE XIX
-----------
PENSIONS
--------
Section 1: For each regular employee covered by this Agreement, the Company
shall contribute to the Central States Southeast and Southwest Areas Pension
Fund $85.00 per week. Effective the week beginning April 28, 1996, the
contribution shall be $91.00 per week throughout and including April 26, 1997.
The obligation to pay for and make the required weekly contribution for the
Pension Program hereby established for regular employees of the Company shall
rest solely with the Company, except as hereinafter provided. Extra,
probationary and temporary employees shall not be covered by the pension program
established under this Agreement.
Section 2: The Company shall make weekly contributions for the pension
program hereby established for each week worked by regular employees, even
though an employee may work only part-time for the Company during a given week.
If an emplovee is absent from work during any week because of illness or
noncompensable injury and notifies the Company of his absence, the Company shall
continue to make the required weekly contributions for a period of not more than
four (4) weeks, so long as the employee is on the Company's regular seniority
list. If an employee is absent from work during any week due to compensable
injury, the Company shall continue to make such weekly payments for a period of
not more than six (6) months, so long as the employee is on the Company's
regular seniority list.
Section 3: If a regular employee is absent from work during any week due to
layoff or leave of absence granted by the Company, the Company shall not be
required to make any weekly contribution for such employee. However, if any
regular employee so desires, he may continue his pension program contributions
so long as he is on the Company's regular seniority list by making prior
arrangements with the Company. The Company shall collect from the employee a sum
sufficient to enable the Company to make the weekly contributions due the
pension fund.
Section 4: The Company also agrees to enter into appropriate trust
agreements necessary for the administration of such pension fund and to
designate the Company's trustees under such Agreement, hereby waiving all
notices thereof and ratifying all actions already taken or to be taken by such
trustees within the scope of their authority.
Section 5: Failure of the Company to make any contribution for the pension
program as hereinabove provided shall relieve the Union of the no-strike
obligation set forth in this
26
<PAGE>
Agreement, unless there is a bona fide dispute as to the amount owed, in which
case the matter shall be resolved under the provisions of Article XX hereof.
ARTICLE XX
----------
GRIEVANCE PROCEDURE AND ARBITRATION PROCEDURE.
----------------------------------------------
Should differences arise between the Company and the Union, or any
employees of the Company, as to the meaning or application of the provisions of
this Agreement, such differences shall be settled in the following manner:
Section 1: The aggrieved employee or employees shall first take the matter
up orally with the Department Supervisor and Shop Steward. If a satisfactory
settlement is not reached with the Company within one (1) working day, the
employee shall submit the grievance in writing, to the Company within seven (7)
days.
Section 2: If a satisfactory adjustment is not agreed upon, the matter
shall be referred by the Steward, or in the absence of a Steward, then by the
Business Agent of the Union, to the Division Manager of the Companv or some
other executive of the Company with authority to act, who shall review the
alleged grievance or grievances and offer a decision within seven (7) working
days after receipt thereof.
Section 3: If no agreement has been reached pursuant to the procedure
specified in Sections 1 and 2, either the Union or the Company shall have the
right to request arbitration of the dispute, and when such is done, the Company
and the Union agree to submit the Grievance to an arbitrator as herein provided.
Except when mutually agreed by the parties, requests for arbitration must be
made within forty-five (45) days of the written denial of the initial grievance.
Failure to abide by this time limitation will render the grievance null and
void.
Section 4: Upon either party requesting arbitration, then the parties
hereto shall meet and endeavor in good faith to agree upon an arbitrator, this
meeting to be held within not more than ten (10) days after a request for
arbitration has been made. If the Company and the Union fail to agree upon an
arbitrator within ten (10) days after the request for arbitration, then either
party may request the United States Mediation and Conciliation Service to
furnish the names of seven (7) arbitrators, from which one is to be selected.
The party requesting arbitration shall first strike one (1) name from the panel,
then the other party shall strike a name and so on until but one (1) is left on
the panel and this person shall be the Arbitrator. Both parties agree to act
promptly before the Arbitrator in order to obtain an early decision. The
Arbitrator shall have the right to construe this Agreement but not to change any
of its provisions. The decision of the Arbitrator shall be final and binding
upon both parties. The expenses of the Arbitrator shall be borne equally by the
Company and the Union.
27
<PAGE>
ARTICLE XXI
-----------
STEWARDS
--------
The Company recognizes the right of the Union to designate job stewards and
alternates from the Company's seniority list. The authority of job stewards and
alternates so designated by the Union shall be limited to and shall not exceed
the following duties and activities:
(1) The investigation and presentation of grievances to the Company or the
designated Company representatives in accordance with the provisions
of the Collective Bargaining Agreement.
(2) The collection of dues when authorized by appropriate Local Union
action.
(3) The transmission of such messages and information which shall
originate with and are authorized by the Local Union, or its officers,
provided such messages and information:
(a) Have been reduced to writing, or
(b) If not reduced to writing, are of a routine nature and do not
involve work stoppages, slow downs, refusal to handle goods, or
any other interference with the Employer's business.
Job stewards and alternates have no authority to take strike action, or any
other action interrupting the Company's business, except as specifically
authorized by official action of the Union. The Union agrees that in the event
any such action is so authorized by the Union, to notify the Company thereof in
writing; prior to any such action in writing, it shall be presumed that it is
unauthorized action in breach of this contract and the Employer may take any
disciplinary action it may see fit; the Union agrees in such event to, at the
same time, do all in its power to remedy the breach and unauthorized action.
The Company recognizes these limitations upon the authority of job stewards
and their alternates and shall not hold the Union liable for unauthorized acts.
Any employee who may have a grievance may report to the employee's
immediate supervisor and explain said grievance; if not resolved by immediate
supervisor, employee may ask to see the appropriate Steward and the supervisor
will either grant immediate permission to see the Steward, depending upon the
nature of the grievance, or will grant permission for the employee to see the
Steward as soon as possible but not more than two hours from the time of the
request. The employee and Steward shall have a private conversation period of
not more than five (5) minutes and thereafter Company supervisory personnel will
be present during the remainder of the employee's meetings with the Steward, if
such meeting is on Company time.
28
<PAGE>
ARTICLE XXII
------------
ACCIDENT AND HEALTH INSURANCE
-----------------------------
Section 1: The Company shall contribute to a fund, which is to be
administered through Trust Agreement of the Central States, Southeast and
Southwest Areas Health and Welfare Fund, the sum of $140.70 per week. Effective
the week beginning April 28, 1996, the contribution shall be $151.70 per week
throughout and including April 26, 1997. These contributions shall be made for
each employee covered by this Agreement who has been on the payroll thirty (30)
days or more. By the execution of this Agreement, the Company authorizes the
Central States, Southeast and Southwest Areas Employer's Association to enter
into an appropriate Trust Agreement necessary for the Administration of such
Fund, and to designate the Company Trustees under such Agreement, hereby Waiving
all notice thereof and ratifying all actions already taken or to be taken by
such trustees within the scope of their authority.
Section 2: If an employee is absent because of illness or off-the-job
injury and notifies the Company of such absence, the Company shall continue to
make the required contributions for a period of four (4) weeks. If any employee
is injured on the job, the Company shall continue to make the required
contributions until such employee returns to work; however, such contributions
shall not be paid for a period of more than six (6) months. If an employee is
granted a leave of absence, the Company shall collect from said employee, prior
to the leave of absence being effective, sufficient monies to pay the required
contributions into the Health and Welfare Fund during the period of absence.
Section 3: Contributions to the Health and Welfare Fund must be made for
each week on each employee on the general seniority list, including weeks where
no work is performed under the provisions of this Agreement, and although
contributions may be made for those weeks into some other Health and Welfare
Fund. This Section 3 does not apply in cases of layoff.
ARTICLE XXIII
-------------
STRIKES AND PICKETING
---------------------
Section 1: During the term of this Agreement, the Union agrees that it
will not cause or permit its members to cause nor will any member of the Union
take part in any strike or activity which interferes with production of the
Company. Neither the Union nor any of its officers or representatives shall be
held liable for any damages resulting, from unauthorized or "wildcat" strikes
not called, directed or ratified by them unless they fail to use their best
efforts to bring about a cessation to any such unauthorized or "wildcat" strike.
The Company may discharge any member of the Union who violates any provision of
this Section. The Company agrees that it will not lock out any of its employees
during the term of this Agreement.
Section 2: It shall not be a violation of this Agreement nor grounds for
discipline, discharge or replacement of employees for persons covered hereunder
to refuse to cross a primary
29
<PAGE>
picket line and perform work in any instance where a picket line has been
authorized by Local 245 and sanctioned and ratified by Joint Council 56, Kansas
City, Mssouri.
ARTICLE XXIV
------------
RULES AND REGULATIONS
---------------------
The Union agrees to uphold, and the employees shall abide by, the rules and
regulations of the Company in regard to punctual and steady attendance, proper
and sufficient notification in case of necessary absence, conduct on the job,
and all other reasonable rules and regulations established by the Company, each
party acknowledging notice and knowledge of present established rules and
regulations.
ARTICLE XXV
-----------
JURY DUTY
---------
Each regular employee serving on jury duty shall, upon presentation of a
statement signed by an officer of the court involved signifying the time he so
served on the jury, receive his regular classified rate of pay for the time he
is required to be absent from his job for such service (less what pay he
received for jury service) but not to exceed ten (10) working days in any one
(1) contract year. If the employee is discharged from the jury before the work-
day ends, he must report immediately to the Company for work if time permits him
to work at least three (3) hours.
ARTICLE XXVI
------------
MISCELLANEOUS
-------------
Section 1: The Company shall determine the qualifications of maintenance
employees who bid on jobs posted in the maintenance department. An employee
selected to fill the posted job who does not meet the necessary requirements
during a fifteen (15) working day trial period, will be returned during or at
the end of such period to the employee's previous job. The Company may not
discriminate in determining qualifications and any complaint of discrimination
is expressly subject to the grievance and arbitration procedure set forth in
Article XX above. When a new job is open or a vacancy occurs, the job will be
posted for bid for three (3) working days, excluding Saturday and Sunday. The
provisions of this paragraph are applicable to maintenance employees only.
ARTICLE XXVII
-------------
MAINTENANCE TRAINING PROGRAM
----------------------------
The Company agrees that those employees on the roster as of the signing of
this agreement in the Warehouse Maintenance and Garage Maintenance departments,
including laid off employees
30
<PAGE>
should have an opportunity to bid on open or additional Maintenance I positions
and receive training to help qualify for such positions. The following terms
and conditions apply to the training program:
(1) The employee desiring to enter the program must be able to demonstrate
reasonable skill levels and must show reasonable progress throughout the
training program, if accepted.
(2) The training program shall be six (6) months in duration.
(3) During the period of training, the employee shall be paid at his former
rate of pay.
(4) Training sessions made available at the AWG facility with attendance
required will be paid for at the employee's regular straight time hourly
rate whether on or off the employee's normal shift.
(5) Any outside classes, seminars, home study courses, etc., required by the
Company will be paid one-half (1/2) by the Company and one-half (1/2) by
the employee. Requirement of these types of classes is vested solely with
the Company.
ARTICLE XXVIII
--------------
LEAVE OF ABSENCE
----------------
The employer shall not unreasonably deny unpaid leaves of absence, for not
less than one (1) week nor more than ninety (90) days, for compelling personal
reasons. Compelling personal reasons shall include family illness or death,
performance of civic duties, and other individual and family matters about which
the requesting employee shall provide a reasonably specific identification to
the employer. Any employee using a leave of absence as a subterfuge shall
forfeit his seniority rights and job. The Union will be notified in writing of
all leaves of absence. Such leaves may be extended for additional periods of
time by mutual agreement of the Company and the Union. No leave of absence shall
be granted to any employee for the purpose of trying another job, with the
exception of a job for the local Union.
ARTICLE XXIX
------------
TERM
----
This Agreement shall be effective as of 12:01 a.m., April 30, 1995, and
shall remain in effect through April 26, 1997, and thereafter from year to year
unless either party gives sixty (60) days' written notice to the other prior to
April 26, 1997, or any subsequent anniversary date that it wishes to amend,
modify or change this Agreement.
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
this, the 31st day of May 1995.
ASSOCIATED WHOLESALE GROCERS, TEAMSTERS LOCAL UNION NO. 245,
INC., of Springfield, Missouri an affiliate of the International
Brotherhood of Teamsters
By /s/ Gary L. Phillips By /s/ Jim Kabell
---------------------------- ---------------------------------
Gary L. Phillips Jim Kabell
Sr. Vice President/Div. Manager Secretary/Treasurer
32
<PAGE>
AGREEMENT
Between
ASSOCIATED WHOLESALE GROCERS, INC.
and
TEAMSTERS LOCAL UNION NO. 245,
AN AFFILIATE OF THE INTERNATIONAL BROTHERHOOD OF
TEAMSTERS
NUMERIC INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I RECOGNITION....................................... 1
ARTICLE II NO CONFLICTING AGREEMENTS......................... 1
ARTICLE III UNION SECURITY.................................... 1
ARTICLE IV CHECK-OFF......................................... 2
ARTICLE V HOURS OF WORK FOR EMPLOYEES OTHER
THAN TRUCK DRIVERS................................ 2
ARTICLE VI HOURS OF WORK FOR TRUCK DRIVERS...................11
ARTICLE VII NO PYRAMIDING OF OVERTIME.........................16
ARTICLE VIII SENIORITY.........................................17
ARTICLE IX MANAGEMENT........................................19
ARTICLE X SAFETY............................................19
ARTICLE XI UNIFORMS..........................................19
ARTICLE XII PROBATIONARY AND REGULAR EMPLOYEES................20
ARTICLE XIII VACATIONS.........................................20
ARTICLE XIV HOLIDAYS..........................................22
ARTICLE XV WAGES.............................................23
ARTICLE XVI REDUCTION OF PAY..................................25
ARTICLE XVII FEDERAL OR STATE LAW..............................25
ARTICLE XVIII FUNERAL LEAVE.....................................25
ARTICLE XIX PENSIONS..........................................26
ARTICLE XX GRIEVANCE PROCEDURE AND ARBITRATION
PROCEDURE.........................................27
ARTICLE XXI STEWARDS..........................................28
ARTICLE XXII ACCIDENT AND HEALTH INSURANCE.....................29
ARTICLE XXIII STRIKES AND PICKETING.............................29
ARTICLE XXIV RULES AND REGULATIONS.............................30
ARTICLE XXV JURY DUTY.........................................30
ARTICLE XXVI MISCELLANEOUS.....................................30
ARTICLE XXVII MAINTENANCE TRAINING PROGRAM......................30
ARTICLE XXVIII LEAVE OF ABSENCE..................................31
ARTICLE XXIX TERM..............................................31
</TABLE>
33
<PAGE>
AGREEMENT
Between
ASSOCIATED WHOLESALE GROCERS, INC.
and
TEAMSTERS LOCAL UNION NO. 245,
AN AFFILIATE OF THE INTERNATIONAL BROTHERHOOD OF
TEAMSTERS
ALPHABETIC INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE XXII ACCIDENT AND HEALTH INSURANCE.....................29
ARTICLE IV CHECK-OFF......................................... 2
ARTICLE XVII FEDERAL OR STATE LAW..............................25
ARTICLE XVIII FUNERAL LEAVE.....................................25
ARTICLE XX GRIEVANCE PROCEDURE AND ARBITRATION
PROCEDURE.........................................27
ARTICLE XIV HOLIDAYS..........................................22
ARTICLE V HOURS OF WORK FOR EMPLOYEES OTHER
THAN TRUCK DRIVERS................................ 2
ARTICLE VI HOURS OF WORK FOR TRUCK DRIVERS...................11
ARTICLE XXVIII LEAVE OF ABSENCE..................................31
ARTICLE XXV JURY DUTY.........................................30
ARTICLE XXVII MAINTENANCE TRAINING PROGRAM......................30
ARTICLE IX MANAGEMENT........................................19
ARTICLE XXVI MISCELLANEOUS.....................................30
ARTICLE II NO CONFLICTING AGREEMENTS......................... 1
ARTICLE VII NO PYRAMIDING OF OVERTIME.........................16
ARTICLE XIX PENSIONS..........................................26
ARTICLE XII PROBATIONARY AND REGULAR EMPLOYEES................20
ARTICLE I RECOGNITION....................................... 1
ARTICLE XVI REDUCTION OF PAY..................................25
ARTICLE XXIV RULES AND REGULATIONS.............................30
ARTICLE X SAFETY............................................19
ARTICLE VIII SENIORITY.........................................17
ARTICLE XXI STEWARDS..........................................28
ARTICLE XXIII STRIKES AND PICKETING.............................29
ARTICLE XXIX TERM..............................................31
ARTICLE XI UNIFORMS..........................................19
ARTICLE III UNION SECURITY.................................... 1
ARTICLE XIII VACATIONS.........................................20
ARTICLE XV WAGES.............................................23
</TABLE>
34
<PAGE>
EXHIBIT 10.6
UNSECURED CREDIT AGREEMENT
---------------------------
THIS AGREEMENT, dated as of the 17th day of April, 1995, is made by and
between ASSOCIATED WHOLESALE GROCERS, INC., a Missouri corporation ("AWG"),
GROCERS DAIRY COMPANY, INC., a Missouri corporation ("Dairy"), GROCER'S
PURCHASING GROUP, INC., a Kansas corporation ("Purchasing"), MEMBERS SERVICES
ASSOCIATION, INC., a Kansas corporation ("Members") SUPER MARKET DEVELOPERS,
INC., a Missouri corporation ("Developers"), SUPERMARKET INSURANCE AGENCY, INC.,
a Kansas corporation ("Agency") SUPER MARKET INVESTMENT COMPANY, INC., a
Missouri corporation ("Investment"), SUPERMARKET MANAGEMENT, INC., a Missouri
corporation ("Management"), and VALU MERCHANDISERS COMPANY, a Kansas corporation
("VALU") (AWG, Benchmark, Dairy, Purchasing, Members, Developers, Agency,
Investment, Management and Valu being sometimes collectively referred to herein
as the "Borrowers" or individually as a "Borrower"), UMB BANK, N.A., Kansas
City, Missouri, a national banking association ("UMB"), HARRIS TRUST AND SAVINGS
BANK, Chicago, Illinois, an Illinois banking corporation ("Harris"), NBD BANK,
Detroit, Michigan, a Michigan banking corporation ("NBD") (UMB, Harris and NBD
being sometimes collectively referred to herein as the "Banks" or individually
as a "Bank"), and UMB Bank, N.A., Kansas City, Missouri, a national banking
association, as Agent for the Banks herein (in such capacity, the "Agent").
WHEREAS, the Borrowers have requested a total credit facility of up to
$140,000,000 in revolving loans; and
WHEREAS, the Banks are willing to extend such credit facility to the
Borrowers on the terms and conditions hereinafter set forth.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, the parties mutually agree as follows:
1. DEFINITIONS.
-----------
1.1 ACCOUNTING TERMS. All accounting and financial terms used herein
are used with the meanings such terms are given in accordance with generally
accepted accounting principles, except as may be otherwise specifically provided
in this Agreement.
1.2 DEFINED TERMS.
-------------
"Adjusted LIBOR" means a rate per annum determined by the Agent
--------------
on behalf of the Banks in accordance with the following formula:
Adjusted LIBOR = LIBOR
-----------------------
100%-Reserve percentage
"Advance" means a disbursement of proceeds of the Revolving
Credit.
"Agent" means UMB Bank, N.A., Kansas City, Missouri, in its
capacity as Agent for the Banks hereunder, and any successor Agent appointed
pursuant to this Agreement.
"Agreement" means this Unsecured Credit Agreement, as amended
from time to time.
"Application for Advance" or Application" means the written
application of the Borrowers for an Advance, which Application shall be in the
form of Exhibit A attached hereto.
"Authorized Officer" means any of Mike DeFabis, President of AWG,
Douglas Carolan, Executive Vice President of AWG, and Joseph L. Campbell, Vice
President, Secretary and Treasurer of AWG, or such other officer or employee of
any of the Borrowers whose authority to perform acts to be performed only by an
Authorized Officer under this Agreement is
2
<PAGE>
evidenced to the Banks by a certified copy of an appropriate resolution of the
Board of Directors of the respective Borrower.
"Bank" and "Banks" have the meaning ascribed thereto in the
---- -----
preamble.
"Borrower" and "Borrowers" have the meaning ascribed thereto in
-------- ---------
the preamble.
"Business Day" means any day other than a Saturday or Sunday on which
any Bank is not authorized or required to close and, when used with respect to
LIBOR Loans, a day on which any Bank is also dealing in United States Dollar
deposits in London, England and/or Nassau, Bahamas.
"Commitment" means a Bank's Revolving Credit Commitment.
----------
"Consolidated Tangible Net Worth" means all assets of the Borrowers
and all of their Subsidiaries less goodwill and any other intangible assets and
less all of their liabilities except AWG's member's deposits and patronage
certificates with maturities in excess of one year, deposit certificates and
member's savings (all of which are subordinate to payment of all indebtedness
incurred hereunder) and less AWG's minority interest in a subsidiary. For
purposes of calculating Consolidated Tangible Net Worth the value of the Supply
Agreement with Homeland Stores, Inc. will not be considered as part of goodwill.
"Current Assets" means the sum representing all assets of the
Borrowers and all of their Subsidiaries which, in accordance with generally
accepted accounting principles consistently applied, are required to be
classified as current assets on the Borrowers' consolidated balance sheet.
3
<PAGE>
"Current Liabilities" means the sum representing all liabilities of
the Borrowers and all of their Subsidiaries which, in accordance with generally
accepted accounting principles consistently applied, are required to be
classified as current liabilities on the Borrowers' consolidated balance sheet.
"Default" means any event specified in Section 10 which is not
initially an Event of Default but which would, if uncured, become an Event of
Default with the giving of notice or the passage of time or both.
"Event of Default" has the meaning set forth in Section 10.
----------------
"Federal Funds Rate" means, for any day, an interest rate per annum
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10 a.m. (Kansas
City, Missouri time) on such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by the Agent in its
sole discretion.
"Fixed Charges" for any period means all rent expense for all leases,
except intercompany leases and except leases covering real property which is
subleased to a third party by any of the Borrowers other than capitalized leases
having an original term in excess of one year, and all interest and all
amortization of principal and interest on all indebtedness of any of the
Borrowers and their Subsidiaries.
4
<PAGE>
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, any agency, body, commission,
court or department thereof, whether federal, state, local or foreign.
"Harris" shall have the meaning ascribed in the preamble.
------
"Indebtedness" means all liabilities, obligations and indebtedness of
any and every kind or nature whatsoever, whether heretofore, or hereafter owing,
arising, due or payable by the Borrowers or any of their Subsidiaries to any
person or other entity and however evidenced, created, incurred, acquired or
owing except obligations which are subordinated in right of payment to
Obligations payable to the Banks and which are evidenced by patronage and
deposit certificates issued by AWG.
"LIBOR" means, for each LIBOR Interest Period, (a) the LIBOR Index
Rate for such LIBOR Interest Period, if such rate is available, and (b) if the
LIBOR Index Rate cannot be determined, the arithmetic average of the rates of
interest per annum (rounded upward, if necessary to the nearest 1/100th of l%)
at which deposits in U.S. Dollars in immediately available funds are offered to
any Bank at 11:00 A.M. (London, England time) two (2) Business Days before the
beginning of such LIBOR Interest Period by three (3) or more major banks in the
interbank Eurodollar market selected by any Bank for a period equal to such
LIBOR Interest Period and in an amount equal or comparable to the applicable
LIBOR Loan scheduled to be outstanding from the Bank during such LIBOR Interest
Period.
5
<PAGE>
"LIBOR Index Rate" means, for any LIBOR Interest Period, the rate per
annum (rounded upwards, if necessary, to the next higher one hundred-thousandth
of a percentage point) for deposits in U.S. Dollars for a period equal to such
LIBOR Interest Period, which appears on the Telerate Page 3750 as of 11:00 a.m.
(London, England time) on the day two (2) Business Days before the commencement
of such LIBOR Interest Period.
"LIBOR Interest Period" means, with respect to (a) any LIBOR Loan, the
period commencing on, as the case may be, the creation, continuation or
conversion date with respect to such LIBOR Loan and ending one (1) month
thereafter as provided herein; provided that all of the foregoing provisions
relating to LIBOR Interest Periods are subject to the following:
(i) if any LIBOR Interest Period would otherwise end on a day which is
not a Business Day, that LIBOR Interest Period shall be extended to the next
succeeding Business Day, unless in the case of a LIBOR Interest Period for a
LIBOR Loan the result of such extension would be to carry such LIBOR Interest
Period into another calendar month in which event such LIBOR Interest Period
shall end on the immediately preceding Business Day;
(ii) no LIBOR Interest Period may extend beyond the final
maturity date of the Note;
(iii) the interest rate to be applicable to each LIBOR Loan for each
LIBOR Interest Period shall apply from and including the first day of such LIBOR
Interest Period to but excluding the last day thereof; and
(iv) no LIBOR Interest Period may be selected if after giving effect
thereto the Borrowers will be unable to make a principal payment scheduled to be
6
<PAGE>
made during such LIBOR Interest Period without paying part of a LIBOR Loan
on a date other than the last day of the LIBOR Interest Period applicable
thereto.
For purposes of determining a LIBOR Interest Period, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month, provided, however, if a LIBOR
Interest Period begins on the last day of a month or if there is no numerically
corresponding day in the month in which a LIBOR Interest Period is to end, then
such LIBOR Interest Period shall end on the last Business Day of such month.
"LIBOR Loan" means, except as otherwise specifically provided herein,
each amount borrowed under the Revolving Credit upon which interest is payable
at the Optional Rate.
"Loan Documents" means this Agreement, the Notes and any other
documents or instruments now or hereafter executed and delivered by or on behalf
of the Borrowers to the Banks or to the Agent to further evidence or govern the
Obligations.
"Loans" means loans pursuant to the Revolving Credit.
"NBD" shall have the meaning ascribed in the preamble.
"Notes" means the Revolving Credit Notes.
"Net Income" shall mean all income of the Borrowers and all of their
Subsidiaries before deduction of income taxes, minority interests in
Subsidiaries and fiscal year end patronage distributions.
"Obligations" means (i) all obligations of the Borrowers to the Banks
of every type and description, direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, on account of the Loans,
including, without limitation, any Advances made pursuant to any discretionary
extension of the Commitments by the Banks beyond the Revolving
7
<PAGE>
Credit Maturity Date or pursuant to any other amendment of the Loan Documents,
and whether or not contemplated by the Borrowers or the Banks as of the date of
this Agreement; and (ii) all other obligations arising under the Loan Documents
including, without limitation, all costs of collection and enforcement of any
and all of the Loan Documents, including reasonable attorneys' fees and expenses
(to, the extent Permitted by applicable law).
"Optional Rate" has the meaning ascribed in Section 3.1.
-------------
"Person" means and includes an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization and a Governmental Authority.
"Pro Rata Share" means, for any Bank, when used with reference to any
aggregate or total amount, an amount equal to the product of (i) such aggregate
or total amount, times (ii) a fraction the numerator of which shall be such
Bank's Commitment and the denominator of which shall be the aggregate of all
Commitments.
"Reserve Percentage" means, for the purpose of computing Adjusted
LIBOR, the maximum rate of all reserve requirements (including, without
limitation, any marginal, emergency, supplemental or other special reserves)
imposed by the Board of Governors of the Federal Reserve System (or any
successor) under Regulation D on Eurocurrency liabilities (as such term is
defined in Regulation D) for the applicable LIBOR Interest Period as of the
first day of such LIBOR Interest Period, but subject to any amendments to such
reserve requirement by such Board or its successor, and taking into account any
transitional adjustments thereto becoming effective during such LIBOR Interest
Period. For purposes of this definition, LIBOR Loans shall be deemed to be
Eurocurrency liabilities as defined in Regulation D without benefit of or credit
for prorations,
8
<PAGE>
exemptions or offsets under Regulation D. The Reserve Percentage as of the date
of the first advance under this Agreement shall be zero.
"Revolving Credit Commitments" means the individual revolving credit
commitments of each of the Banks for which they are not jointly and severally
obligated in the respective amounts of (i) Forty-Seven Million Dollars
($47,000,000) in the case of UMB, (ii) Forty-Six Million Five Hundred Thousand
Dollars ($46,500,000) in the case of Harris, and (iii) Forty-Six Million Five
Hundred Thousand Dollars ($46,500,000) in the case of NBD; or as otherwise
reduced pursuant to the terms hereof.
"Revolving Credit Maturity Date" means May 1, 1998, or as otherwise
extended, if extended.
"Revolving Credit Notes" has the meaning ascribed in Section 2 and
shall be deemed to include any extensions or renewals thereof.
"Subsidiary" shall mean any corporation of which any of the Borrowers
now or at any time hereafter owns or controls, on an aggregate basis, at least
fifty percent (50%) of the outstanding capital stock of such corporation or of
which any of the Borrowers controls a majority of the board of directors,
specifically including but not limited to all those corporations listed on
Exhibit B attached hereto which are subsidiaries of AWG. For purposes hereof,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of management and policies, whether through the ownership
of voting securities, by contract or otherwise.
"Telerate Page 3750" means the display designated as "Page 3750" on
the Telerate Service (or such other page as may replace Page 3750 on that
service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose
9
<PAGE>
of displaying British Bankers' Association Interest Settlement Rates for U.S.
Dollar deposits). Each determination of LIBOR made by the Agent on behalf of the
Banks shall be conclusive and binding absent manifest error.
"UMB" shall have the meaning ascribed in the preamble.
"Working Capital" shall mean all of the Borrowers' and all of their
Subsidiaries' Current Assets minus all of the Borrowers' and all of their
Subsidiaries' Current Liabilities.
1.3 SINGULAR AND PLURAL. The foregoing definitions shall be equally
applicable to both the singular and plural forms of the defined terms.
2. REVOLVING CREDIT/PAYMENTS.
2.1 THE REVOLVING CREDIT. Subject to all terms and conditions hereof,
each Bank agrees to lend to the Borrowers during the period of time beginning on
the date hereof and ending on May 1, 1998, such amount or amounts as the
Borrowers may from time to time request to borrow up to and including, but not
exceeding at any time, each Bank's Commitment for an outstanding aggregate
principal amount owing to all Banks of up to, but not exceeding at any time,
$140,000,000.00 (the "Revolving Credit"). The Borrowers may, except with respect
to LIBOR Loans which may be paid only on the last day of the applicable LIBOR
Interest Period, prepay all or any part of the Indebtedness outstanding
hereunder at any time, without notice and without penalty. Any prepayment of the
full amount of such Indebtedness shall include accrued interest thereon. Upon
any payment prior to May 1, 1998, of the Indebtedness under this Agreement, the
Banks agree to loan the Borrowers from time to time during the period beginning
upon the execution of this Agreement and ending on the Revolving Credit Maturity
Date, an aggregate
10
<PAGE>
principal amount not to exceed the difference between (i) the then outstanding
aggregate principal amount of the Borrowers' aggregate indebtedness hereunder,
and (ii) $140,000,000.00; provided, however, that the Banks shall have no
obligation to make any such Loan if a Default or an Event of Default has
occurred and is then continuing.
At the time of execution hereof, any two Authorized Officers of each of the
Borrowers shall execute promissory notes in the form of Exhibits C-1, C-2 and C-
3 attached hereto and incorporated herein by reference (the "Revolving Credit
Notes"). The Revolving Credit Notes payable to each of the Banks shall be due
and payable in full on the Revolving Credit Maturity Date. As the Borrowers
desire to obtain Loans pursuant to the Revolving Credit hereunder, AWG, as agent
for the Borrowers and which is hereby designated as agent for the Borrowers for
such purpose and for all other purposes hereunder, shall give the Agent notice
of the Borrowers' intention to borrow pursuant to the Revolving Credit
Commitments for other than LIBOR Loans by not later than 10.00 A.M. (Kansas
City, Missouri time) on the proposed date of borrowing and for LIBOR Loans
notice shall be given pursuant to Section 3.3(iii) hereof. As soon as
practicable after receipt of a borrowing notice but in no event later than 11:00
A.M. on the date of notice (Kansas City, Missouri time), for other than LIBOR
Loans and by 3:00 p.m. (Kansas City, Missouri time) on the date of notice for
LIBOR Loans, the Agent shall give the Banks telephonic notice of the same. By
2:00 p.m. (Kansas City, Missouri time) on each borrowing date, each Bank
severally agrees to make its Pro Rata Share of the Advance of the Loan under the
Revolving Credit then being made to the Borrowers by making it available to the
Agent, either by wire transfer to Agent's main office in Kansas City, Missouri,
or by deposit to any correspondent account, if any, which Agent may maintain
with such Bank pursuant to instructions of AWG. The Agent will make the funds so
11
<PAGE>
received from the Banks immediately available to the Borrowers in the manner
provided below. Each Advance under the Revolving Credit will be conditioned upon
delivery (which delivery may be made by telex, telecopier or facsimile
transmission) to the Agent by AWG of an Application for Advance provided that
the Agent may, in its sole discretion, make a disbursement upon the verbal
request of AWG made telephonically by an Authorized Officer. The Agent and the
Banks may rely on any such verbal request which shall have been received by it
in good faith from a Person reasonably believed to be an Authorized Officer.
Each such verbal request shall be promptly confirmed by a duly executed
Application for Advance. Subject to the provisions of Sections 3.1 and 3.3, all
borrowings and reborrowings shall be in amounts of not less than Six Hundred
Thousand Dollars ($600,000). Repayments may be in any amount except (i)
mandatory prepayment of Loans under the Revolving Credit as required by Section
2.1 and (ii) repayment of LIBOR Loans which must be in the full amount of each
such loan. Upon compliance with all conditions of lending stated in this
Agreement applicable to the Revolving Credit, the Agent shall disburse the
amount of the requested Advance to AWG by depositing the same in AWG's account
number 9800000124 at UMB, and the Borrowers hereby authorize the disbursement of
Advances of Loans under the Revolving Credit in such manner. All Advances by the
Banks and payments by the Borrowers shall be recorded by the Banks on their
books and records, current copies of which shall be supplied by the Banks to the
Agent at all times upon request therefore, and the principal amount outstanding
from time to time, plus interest payable thereon, shall be determined by
reference to the books and records of the Agent. Such books and records shall be
rebuttably presumed to be correct as to such matters. In the event of any
conflict between the terms of the Revolving Credit Notes executed hereunder and
the terms of this Agreement, the terms of the Revolving Credit Notes
12
<PAGE>
shall control. All indebtedness of the Borrowers under the Revolving Credit
shall be reduced by the Borrowers to zero on the Revolving Credit Maturity Date.
2.2 PAYMENTS, MANDATORY PREPAYMENT OF REVOLVING CREDIT. All payments
of principal and interest on Loans pursuant to the Revolving Credit shall be
made by AWG on behalf of the Borrowers to the Agent at its main office in Kansas
City, Missouri, by 10:00 A.M. (Kansas City, Missouri time) on the date when due,
and shall be applied by the Agent pro rata between the Banks in accordance with
the outstanding principal balance of the Revolving Credit Notes held by them.
Each payment delivered to the Agent for the account of any Bank shall be
delivered by the Agent for the account of such Bank no later than 12:00 Noon
(Kansas City, Missouri time) on the same day.
In the event that the maximum principal amount of indebtedness which is
outstanding under this Agreement is at any time greater than the maximum amount
which is then authorized to be outstanding hereunder, the Borrowers will
immediately, upon written notice from the Agent, pay to the Agent on behalf of
the Banks the difference between the outstanding principal amount and the
principal amount then authorized to be outstanding hereunder plus all accrued
interest thereon.
2.3 REDUCTION OF COMMITMENTS. Notwithstanding anything stated in
this Agreement to the contrary, the Borrowers may on any one occasion on or
after June 1, 1996, and on only one occasion elect, by giving 10 prior Business
Days notice to the Banks, to reduce the aggregate Commitment of the Banks by a
sum of $25,000,000 or more. Once elected by the Borrowers, the Commitments of
each of the Banks shall thereafter permanently be reduced by each Bank's Pro
Rata Share of the aggregate amount by which the Borrowers elected to reduce the
13
<PAGE>
Commitments and the amount of the Borrowers' obligations under Section 3.5 to
pay a commitment fee shall thereafter be calculated on the basis of the reduced
Commitments.
3. INTEREST/REPAYMENT/FEES.
-----------------------
3.1 INTEREST RATE. The principal amount of all borrowings under the
Revolving Credit Notes shall bear interest at a rate equal to 150 basis points
over the Federal Funds Rate, adjusted daily, except that at the option of AWG on
behalf of the Borrowers on each advance of Three Million Dollars ($3,000,000.00)
or more, exercised as provided in Section 3.3, interest may accrue at a rate
equal to 100 basis points over Adjusted LIBOR (the "Optional Rate") during LIBOR
Interest Periods. At the expiration of each applicable LIBOR Interest Period,
unless AWG exercises the Optional Rate as provided in Section 3.3, interest on
any such advance for which the Optional Rate was elected shall again accrue at a
rate equal to 150 basis points over the Federal Funds Rate, adjusted daily.
3.2 CALCULATION OF INTEREST. Interest shall be computed on the basis
of days elapsed and assuming a 360-day year.
3.3 OPTIONAL RATE PROVISIONS. The Optional Rate may be elected only
in accordance with the following procedures and subject to the following
conditions:
(i) The Optional Rate may not be elected at any time a Default or an Event
of Default shall have occurred and is continuing.
(ii) The Optional Rate may not be elected for any advance of less than
Three Million Dollars ($3,000,000).
(iii) AWG, as agent for the Borrowers, shall notify the Agent of its
election of the Optional Rate prior to 12:00 P.M. (Kansas City, Missouri
14
<PAGE>
time) not less than two (2) Business Days prior to the commencement of a LIBOR
Interest Period.
(iv) An election of the Optional Rate may be communicated to the Agent only
by an Authorized Officer of AWG as agent for the Borrowers. Such election may be
communicated by telephone or by telex, facsimile machine or other form of
written electronic communication, or by a writing delivered to the agent. AWG
shall confirm in writing any election communicated by telephone and such written
confirmation shall be signed by an Authorized Officer of AWG as Agent for the
Borrowers. The Agent shall be entitled to rely on any oral communication of the
election of the Optional Rate which is received by a designated employee of the
Agent from anyone reasonably believed in good faith by such employee to be an
Authorized Officer of AWG.
(v) Notwithstanding any other provision of this Agreement, in the event
that by reason of circumstances affecting the interbank European market,
adequate and reasonable means do not exist for ascertaining the LIBOR for any
LIBOR Interest Period, the Agent shall forthwith give notice of such
determination, confirmed in writing, to AWG. If such notice is given, then all
borrowings under the Revolving Credit Notes shall bear interest at a rate equal
to 150 basis points over the Federal Funds Rate, adjusted daily.
15
<PAGE>
(vi) If any law or any governmental regulation, guideline or order or
interpretation or application thereof by any Governmental Authority charged with
the interpretation or administration thereof or compliance with any request or
directive of any central bank or other Governmental Authority whether or not
having the force of law (i) imposes, modifies or deems applicable any reserve,
special deposit or similar requirement against assets held by, credit extended
by, deposits with or for the account of, or other acquisition of funds by, the
Banks with respect to the Optional Rate under this Agreement, or (ii) imposes
upon the Banks any other materially adverse condition or expense with respect to
the Optional Rate under this Agreement; and the result of the foregoing is to
increase the cost to, reduce the income receivable by, or impose any expense
upon the Banks with respect to the outstanding balance of the borrowings under
the Revolving Credit Notes bearing interest at the Optional Rate or the making,
maintenance or funding of any part thereof which the Banks deem to be material,
the Agent, on behalf of the Banks shall from time to time notify the Borrowers
(which notification shall be made within three (3) Business Days after discovery
by the Banks of the causing circumstances) of the amount determined in good
faith (using any commonly accepted methods employed in good faith) by the Banks
(which determination shall be conclusive) to be necessary to compensate the
Banks in connection with the Optional Rate for such increase in cost, reduction
in income or additional expense. Such amount shall be due
16
<PAGE>
and payable by the Borrowers to the Banks thirty (30) days after such notice is
given.
Notwithstanding any provision of this Agreement to the contrary, each Bank
shall be entitled to fund and to maintain its funding of all or any part of its
Note in any manner it sees fit, it being understood, however, that to the extent
any Bank is matching funds in any manner (whether or not in the LIBOR eurodollar
market) that for the purposes of this Agreement all determinations hereunder
shall be made as if such Bank had actually funded and maintained each Loan
bearing interest at the Optional Rate during each LIBOR Interest Period
applicable thereto through the purchase of deposits in the relevant interbank
market in the amount of its share of such Loan bearing interest at the Optional
Rate having a maturity corresponding to such LIBOR Interest Period, and bearing
an interest rate equal to the Optional Rate for such LIBOR Interest Period.
If at the time of any authorized voluntary or mandatory prepayment of any
portion of the principal of any Loan, interest accrues at both an Optional Rate
and at a Federal Funds Rate on portions of a Loan or Loans, under the Revolving
Credit, then any prepayment of principal will be applied first to the portion of
any such Loan or Loans on which interest accrues at the Federal Funds Rate and
next to the portion or portions at which interest accrues at an Optional Rate.
The Agent will notify the Borrowers and obtain their approval prior to any
application of any prepayment which would result in any prepayment premium.
(vii) Also, notwithstanding any provision of this Agreement to the
contrary, (a) no Optional Rate may be selected for any Loan if the interest
period applicable thereto would extend beyond the Revolving Credit Maturity Date
including any extensions thereof, in the case of Loans pursuant to the
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Revolving Credit and (b) all Optional Rates shall remain fixed throughout
the relevant LIBOR Interest Period.
(viii) Notwithstanding any other provisions of this Agreement or any
Note to the contrary, if at any time after the date hereof with respect to
LIBOR Loans, any Bank shall determine in good faith that any change in
applicable law or regulation or in the interpretation thereof makes it
unlawful for such Bank to make or continue to maintain any LIBOR Loan or to
give effect to its obligations as contemplated hereby, such Bank shall
promptly give notice thereof to AWG on behalf of the Borrowers to such
effect, and such Bank's obligation to make, relend, continue or convert any
such affected LIBOR Loans under this Agreement shall terminate until it is
no longer unlawful for such Bank to make or maintain such affected Loan. In
any such event, the outstanding principal amount of any such affected LIBOR
Loan together with all interest accrued thereon shall, upon notice from the
Bank holding the affected LIBOR Loan, be paid immediately, by the Borrowers
being deemed to have automatically elected to borrow the principal amount
of such affected LIBOR Loan together with all interest accrued thereon at
other than the Optional Rate, as of the date of any such notice subject to
all of the terms and conditions of this Agreement.
3.4 PAYMENT OF INTEREST. All accrued interest under the Revolving Credit
Notes except interest payable on LIBOR Loans shall be payable monthly on the
first Banking Day of each
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calendar month. Interest payable on LIBOR Loans shall be payable on the last day
of the applicable LIBOR Interest Period.
3.5 REVOLVING CREDIT COMMITMENT AND FACILITY FEES. AWG on behalf of
the Borrowers shall pay to the Agent, for the ratable account of the Banks,
commencing June 15, 1995, and continuing on the fifteenth (15th) day of each
September, December, March and June thereafter, so long as the Revolving Credit
Commitments are outstanding, a commitment fee equal to one-eighth of one percent
(.125%) of the average daily unused portion of the Revolving Credit Commitments
during the immediately preceding three (3) month period ending September 1,
December 1, March 1 or June 1 (the "Facility Fee Periods"); provided, however,
the first such commitment fee shall be payable for the period commencing on the
date of this Agreement and ending June 1, 1995. For purposes of the immediately
preceding sentence the unused portion of the Revolving Credit Commitments shall
be reduced as of each date, if any, lump sum payments, but not including
payments from installment sales, are made by AWG to the Banks pursuant to
Section 7.1 hereof of cash proceeds of sales of assets purchased from Homeland
Stores, Inc. to the extent of any such payments. Effective as of the relevant
payment date, the obligation to pay the commitment fee shall be an absolute,
joint and several Obligation of the Borrowers, not subject to cancellation or
reduction for any reason, including, without limitation, termination, in whole
or in part, of the Revolving Credit Commitments, and, once paid, the commitment
fee shall be non-refundable; provided, however, to the extent the Revolving
Credit Commitments are so reduced or terminated, then the fee payable by the
Borrowers for the next succeeding Facility Fee Periods shall be accordingly
reduced. The Agent is hereby authorized by the Borrowers to automatically debit
any of the Borrowers' accounts with the Agent for the payment of any commitment
fee due
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and payable hereunder. The Agent shall give notice of any such debit to AWG on
behalf of the Borrowers when any such debit is made. The Revolving Credit
commitment fee shall be allocated between the Banks according to their Pro Rata
Shares and will be remitted to Harris and NBD by the Agent promptly upon
receipt.
Upon the execution of this Agreement, the Borrowers shall pay a one time
nonrefundable facility fee to the Banks in the aggregate amount of $175,000,
such facility fee to be allocated between the Banks according to their Pro Rata
Shares and will be remitted to Harris and NBD by the Agent promptly upon
receipt.
3.6 BUSINESS DAY. If any installment of principal or interest on any
Loan becomes due and payable on a day other than a Business Day, the maturity of
the installment of principal or interest shall be extended to the next
succeeding Business Day, and interest shall be payable during such extension of
maturity.
4. CONDITIONS TO MAKING LOANS. The Banks' obligation to make any Loan or
Advance pursuant to this Agreement shall be subject to compliance by the
Borrowers with all of their obligations hereunder and to the following specific
conditions being met by the Borrowers at the time of the making of each Advance
hereunder:
4.1 NO ADVERSE CHANGE IN BUSINESS. The Borrowers shall not have
experienced any material adverse change in the conduct of their respective
business, operations, financial condition or otherwise since the date of this
Agreement.
4.2 REPRESENTATIONS. The covenants, representations and warranties
made in Sections 6, 7 and 8 shall be true and correct as of the date of each
Advance made hereunder, and an Authorized Officer of AWG as Agent for the
Borrowers shall certify in writing to the same;
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provided, however, (i) the representations and warranties made with respect to
financial statements shall be deemed to refer to the most recent financial
statements furnished to the Banks pursuant to Section 6.1 hereof, and (ii) the
covenant set forth in Section 7.8 concerning environmental matters and the
representation set forth in Section 8.3 concerning litigation shall be deemed to
refer to the representations with respect thereto set forth in the most recent
Certificate certifying compliance with all covenants of this Agreement furnished
to the Banks pursuant to Section 6.1 hereof.
4.3 REQUIRED CONSENTS AND APPROVALS. All approvals required from the
Board of Directors of each of the Borrowers for the execution of this Agreement,
the borrowings contemplated hereunder and the execution of all documents to be
executed hereunder have been obtained and shall be in full force and effect.
4.4 NO DEFAULTS.
-----------
(i) The Borrowers shall be in compliance with all of the
terms and conditions hereof, and no Event of Default shall have
occurred and be continuing; and
(ii) After giving effect to the requested Advance and to
each Advance that has been made and is then unpaid, the aggregate
principal amount of all Advances shall not exceed the sum of the
Banks' Revolving Credit Commitments then in effect.
4.5 APPLICATION CONSTITUTES REPRESENTATION. Each application by the
Borrowers for any Advance shall be and constitute a representation that the
representations set forth in Sections 4.1 through 4.4 hereof are true and
correct.
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5. SPECIAL FIRST ADVANCE CONDITION. As a condition to the Banks making the
first Advance to the Borrowers under the Revolving Credit, there shall have been
no material adverse changes in the financial condition of the Borrowers since
the close of their fiscal years ended December 31, 1994.
6. AFFIRMATIVE COVENANTS. The Borrowers covenant, and agree from the date
hereof and until payment in full of all indebtedness incurred pursuant to this
Agreement, that the Borrowers shall comply with each of the following
provisions:
6.1 FINANCIAL AND BUSINESS INFORMATION. AWG will furnish to the Banks
as soon as reasonably available after the end of its fiscal year, but in no
event later than 90 days following the end of its fiscal year, its audited
consolidated financial statements including, at a minimum, a balance sheet, a
statement of profit and loss and retained earnings, and a statement of cash
flows for such fiscal year, all of which shall have been prepared by independent
certified public accountants and which shall be in conformity with generally
accepted accounting principles consistently applied. AWG will furnish to the
Banks for each of its first three fiscal quarters as soon as reasonably
available, but in no event later than 45 days after the end of each such fiscal
quarter, its financial statements and the individual financial statements for
each of its subsidiaries for the immediately preceding fiscal quarter, all such
financial statements to be certified by the Chief Financial Officer of AWG or
the Corporate Controller of AWG in their capacities as representatives of AWG.
Such quarterly financial statements shall include a balance sheet and statement
of profit and loss. In the event that as of the end of any of the first three
fiscal quarters, the total assets of all of AWG's Subsidiaries exceeds 15.5% of
the aggregate of the total assets of such subsidiaries and of AWG, AWG further
agrees to furnish to Agent on behalf of the Banks
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within 45 days after the end of any such fiscal quarter a certificate of the
Chief Financial Officer of AWG or the Corporate Controller of AWG certifying in
their capacities as representatives of AWG that AWG and all of its Subsidiaries
have been and are in compliance with all of the covenants of this Agreement on a
consolidated basis. AWG further agrees, in any event, to furnish to the Banks
within 45 days after the end of each of its first three quarters for itself and
within 90 days after the end of its fiscal year for itself and each of its
Subsidiaries a certificate of the Chief Financial Officer of AWG or the
Corporate Controller of AWG certifying in their capacities as representatives of
AWG that AWG, or AWG and all of its Subsidiaries, as the case may be, have been
and are in compliance with all of the covenants of this Agreement. AWG further
agrees, and will cause its Subsidiaries, to at all times keep accurate and
complete records of AWG's and its Subsidiaries' financial condition and of its
and their assets, and it agrees that it will furnish to the Banks, at the Banks'
expense, from time to time such other and further information regarding its and
its Subsidiaries' financial condition as the Banks may request, including upon
such request by the Banks, an opportunity or opportunities for employees or
representatives of the Banks to inspect, audit, check, examine and copy books
and records of AWG and its Subsidiaries.
6.2 CORPORATE EXISTENCE AND MAINTENANCE OF PROPERTY. AWG will, and
will cause its Subsidiaries to, do or cause to be done all things necessary or
appropriate to preserve and keep in full force and effect and in good standing
its and their corporate existence, its and their authority to continue to do
business and conduct its and their operations and its and their rights and
franchises now or hereafter possessed. AWG will, and will cause its Subsidiaries
to, preserve and maintain its and their property and assets used or useful in
the conduct of its and their business and cause the same to be kept in good
repair, working order and condition.
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6.3 TAXES, CHARGES AND CLAIMS. AWG will, and will cause its
Subsidiaries to, pay and discharge all taxes, assessments, governmental
charges or levies invoked upon it or them or its or their income or profits
or its or their property or assets and all indebtedness payable by it or
them before the same shall be deemed in default, as well as all lawful
claims for labor, materials and supplies which, if unpaid, might become a
lien or charge upon such property or assets or any part thereof, provided,
however, that AWG and its Subsidiaries shall not be required to pay and
discharge any such tax, assessment, charge, levy, claim or indebtedness so
long as the validity thereof shall be contested in good faith by an
appropriate proceeding, and AWG or any of its Subsidiaries, as the case may
be, shall have set aside on its books adequate reserves to cover the
contested item.
6.4 LOCATION OF RECORDS. The location of AWG's books and records
shall be at 5000 Kansas Avenue, Kansas City, Kansas 66106, and the books
and records of each of AWG's Subsidiaries shall be located at their
respective address listed on Exhibit B attached hereto. None of such
locations shall be changed by AWG or any of its Subsidiaries without giving
written notice of the address of the new location to the Agent on behalf of
the Banks at least 30 days prior to such a change.
6.5 CURRENT RATIO. At all times during the Revolving Credit
hereunder and until all Indebtedness of the Borrowers hereunder is paid in
full the Borrowers will maintain a ratio of Current Assets to Current
Liabilities of not less than 1.09 to 1 computed on a four quarter trailing
average, calculation of such trailing average to begin with AWG's fiscal
quarter beginning June 30, 1995, as the first quarter of such trailing
average.
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6.6 INDEBTEDNESS RATIO. At all times during the Revolving Credit
hereunder and until all indebtedness of the Borrowers hereunder is paid in
full the Borrowers will maintain a ratio of Indebtedness to Tangible Net
Worth of not more than 2.75 to 1 through June 30, 1996 and at all times
thereafter such ratio shall not exceed 2.5 to 1.
6.7 CONSOLIDATED TANGIBLE NET WORTH. At all times during the
Revolving Credit hereunder and until all indebtedness of the Borrowers
hereunder is paid in full, the Borrowers will maintain, as of the date
hereof and through December 30, 1996 a Consolidated Tangible Net Worth
equal to or greater than $110,000,000, as of December 31, 1996 and through
December 30, 1997 a Consolidated Tangible Net Worth equal to or greater
than $117,500,000, and as of December 31, 1997 and at all times thereafter
a Consolidated Tangible Net Worth equal to or greater than $125,000,000.
6.8 FIXED CHARGES. At all times during the Revolving Credit
hereunder and until all indebtedness of the Borrowers hereunder is paid in
full, the Borrowers will maintain a ratio of (i) Net Income before Fixed
Charges and income taxes to (ii) Fixed Charges as of the end of each fiscal
quarter of the Borrowers of not less than 10 to 1.
6.9 WORKING CAPITAL. At all times during the Revolving Credit
hereunder and until all indebtedness of the Borrowers hereunder is paid in
full, the Borrowers will maintain as of the last day of each fiscal quarter
of the Borrowers Working Capital in an amount at least equal to
$25,000,000.
6.10 BANKING RELATIONSHIP. The Borrowers will maintain their primary
depository banking relationships with UMB at all times during the term of
the Revolving Credit and until all indebtedness of the Borrowers hereunder
is paid in full.
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7. NEGATIVE COVENANTS. The Borrowers covenant and agree from the date
hereof until payment in full of all indebtedness incurred pursuant to this
Agreement, that the Borrowers shall comply with each of the following
provisions:
7.1 LIMITATION ON SALES OF ASSETS. AWG shall not, and will not allow
its Subsidiaries to, except in the ordinary course of business, during any
fiscal year, sell or otherwise dispose of assets which represent in the
aggregate more than 10% of Consolidated Tangible Net Worth; provided,
however, the limitations of this Section 7.1 shall not apply to sales of
any assets purchased from Homeland Stores, Inc. pursuant to an agreement
dated as of February 6, 1995, so long as all lump sum cash proceeds, but
not including payments from installment sales, of any such sales are paid
to the Agent on behalf of the Banks in reduction of the outstanding
principal amount of the Revolving Credit if any amount is outstanding. Upon
payment to the Banks of any such cash proceeds each of the Bank's Revolving
Credit Commitments shall be reduced by the amount of each Bank's Pro Rata
Share of such proceeds. If no Revolving Credit is outstanding at the time
of receipt of any such cash proceeds by AWG any such proceeds may be
retained by AWG, but the amount of each Bank's Revolving Credit Commitment
will nonetheless be reduced by the amount of each Bank's Pro Rata Share of
such proceeds as if all of such proceeds had been paid to the Banks in
payment of outstanding Loans under the Revolving Credit. For purposes of
this Section disposing of vehicles and/or trailers, whether by sale or by
expiration of leases shall be deemed to be in the ordinary course of
business so long as such vehicles and/or trailers are replaced, whether by
purchase or lease, and the sale or lease of supermarket buildings
constructed or acquired by any of the Borrowers for the purpose of sale or
lease shall be deemed to be within the ordinary course of the Borrowers'
business.
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7.2 LIMITATION ON LIENS. AWG shall not, and will not allow its
Subsidiaries to, permit any of its or their properties or assets to become
subject to liens except (i) those securing indebtedness outstanding as of
the date hereof and which were previously disclosed to the Banks in
writing, (ii) liens which are not material given in connection with
customary permitted exceptions, (iii) liens given to secure obligations of
not more than the aggregate amount of $100,000 incurred by all Borrowers in
any fiscal year, such amount to be noncumulative and (iv) uncontested
mechanics liens in an aggregate amount of less than One Million Dollars
($1,000,000).
7.3 PERMITTED INVESTMENTS AND LOANS. AWG shall not, and will not
allow its Subsidiaries to, have or make investments or loans other than:
(i) investments in direct obligations of the United States of America or
any agencies thereof; (ii) investments in certificates of deposit maturing
within one year from the date acquired and which are issued by a bank or
trust company organized under the laws of the United States and having
capital, surplus and undivided profits aggregating at least $250,000,000.00
or, if in smaller banks or trust companies, investments and certificates of
deposit of $100,000.00 or less; (iii) investments in commercial paper given
the highest rating by a nationally recognized credit rating agency and
maturing not more than 270 days from the date acquired; (iv) investments in
publicly traded municipal bonds with a rating of A or better based upon the
underlying credit of the issuer not to exceed in the aggregate, Seven
Million Five Hundred Thousand Dollars ($7,500,000.00); (v) loans to members
in an aggregate outstanding principal amount not to exceed Seventy-Five
Million Dollars ($75,000,000.00) at any time; (vi) intercompany loans, and
(vii) other investments not to exceed in the aggregate, 5% of Consolidated
Tangible Net Worth.
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7.4 RESTRICTED PAYMENTS. AWG shall not make any patronage dividend
payments in cash to its members during any fiscal year during the term of
this Agreement in excess of sixty percent (60%) of its net profit for each
such fiscal year. AWG may, however, declare patronage dividends for any
such fiscal year in an amount up to the total net profit for such fiscal
year so long as at least forty percent (40%) of such patronage dividends so
declared are paid by the issuance of patronage certificates maturing in not
less than seven (7) years and payment of such patronage certificates is
subordinated to payment of all indebtedness of the Borrowers to the Bank
incurred pursuant hereto.
7.5 MERGERS OR CONSOLIDATIONS. The Borrowers shall not merge or
otherwise consolidate with any corporation or other entity unless (i) one
of the Borrowers shall be the surviving or continuing corporation, and (ii)
at the time of such consolidation or merger and after giving effect
thereto, no Default or Event of Default exists under this Agreement or the
Revolving Credit Notes.
7.6 ADDITIONAL LOANS AND OBLIGATIONS. The Borrowers will not incur,
create or permit to exist without the prior written consent of the Agent on
behalf of the Banks any loans or other obligations payable by any of them
or any of their Subsidiaries except: (i) Loans made pursuant to the terms
and conditions of this Agreement, (ii) indebtedness to trade creditors in
the ordinary course of the Borrowers' respective businesses, (iii)
currently existing indebtedness as set forth on Exhibit D attached hereto,
(iv) obligations under leases for equipment and vehicles to be used in the
respective Borrower's normal course of business, (v) currently existing
leases of stores and future leases of stores except leases of stores
purchased from Homeland Stores, Inc. or any of its affiliates, provided,
however, the aggregate annual base rental payments for all leases of stores
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outstanding at any time shall not exceed $27,000,000, plus 30% of any
increase in Consolidated Tangible Net Worth from fiscal year 1995 to fiscal
year 1996 and 30% of any such increase from fiscal year 1996 to fiscal year
1997; provided, however, in no event shall the amount of such aggregate
annual base rental payment ever exceed the amount of $31,000,000, and (vi)
obligations under the Supply Agreement with Homeland Stores, Inc.
7.7 GUARANTEES. The Borrowers will not, without the prior written
consent of the Agent on behalf of the Banks, guarantee the obligations of
or otherwise be or become responsible for the obligations of any other
person or entity to the extent the aggregate outstanding amount of all such
guarantees or responsibilities at any time exceeds $10,000,000.
7.8 ENVIRONMENTAL MATTERS. The Borrowers shall not in the future use
or permit any other person or entity over which they have control to use
any property hereafter owned or occupied by any of them for the purpose of
refining, producing, storing, handling, transferring, processing or
transporting any hazardous substances, pollutants or contaminants, except
in compliance with all laws of any applicable Governmental Authority. The
Borrowers shall comply with all laws, statutes, rules or regulations of any
Governmental Authority in connection with any hazardous substances,
pollutants or contaminants or any type of facility.
Notwithstanding the foregoing, the Borrowers shall have the right to
contest any notice received by any of them alleging failure to comply with
any of the foregoing provided the same is being contested in good faith by
appropriate proceedings and if, and so long as, the applicable Borrower
shall, in accordance with generally accepted accounting principles, have
set aside on its books adequate reserves with respect thereto; and
provided, further, that the applicable Borrower
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will immediately comply therewith upon the entry of any order by a court of
competent jurisdiction not stayed by an appeal or the imposition of any lien by
reason thereof.
In connection with the foregoing, the Borrowers represent that any property
previously or now occupied or owned by any of the Borrowers has never been used
by them, or to the best of their information or belief, by previous owners,
lessees, operators and/or any others except as set forth on Exhibit E attached
hereto (i) to refine, produce, store, handle, transfer, process or transport
hazardous substances as defined in the Comprehensive Environmental Response
Compensation and Liability Act (42 U.S.C.A. Section 9601(14)) or any pollutant
or contaminant as defined in the Superfund Amendments and Reauthorization Act of
1986, public law 99-499, Section 1.01(033, or (ii) as a "Facility" as defined in
said Comprehensive Environmental Response Compensation and Liability Act,
Section 9601(9)(B), or as a resource recovery facility, resource recovery
system, demolition landfill, sanitary landfill, solid waste disposal area, solid
waste management system, solid waste processing facility or an abandoned or
uncontrolled hazardous waste site, except in full compliance with all laws of
any applicable Government Authority.
7.9 JUDGMENTS. The Borrowers will not permit to exist at anytime
outstanding judgments, payment of which is not fully covered by insurance, which
in the aggregate total $5,000,000 or more.
8. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks to
extend credit to the Borrowers hereunder, the Borrowers hereby represent and
warrant to the Banks as of the date hereof and at all times hereafter while any
indebtedness is outstanding under this Agreement that:
8.1 CORPORATE EXISTENCE AND AUTHORITY. The Borrowers are duly
incorporated and existing in good standing under the laws of their respective
state of incorporation and are qualified
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to do business as a foreign corporation in every jurisdiction where the
ownership of their property or the nature of their business requires
qualification. They are duly authorized to execute and deliver this Agreement,
to borrow monies hereunder and to execute and deliver Notes evidencing
borrowings under this Agreement. The execution and delivery of this Agreement
and of all Notes evidencing borrowings under this Agreement does not conflict
with any provision of law, any order of any court or Government Authority) the
Charter or Bylaws of any of the Borrowers or any agreement binding upon any of
them.
8.2 PERFORMANCE OF OTHER AGREEMENTS. None of the Borrowers is a
party to any indenture, agreement, lease or other instrument, nor are any of
them subject to any charter or other corporate restriction which materially
affects the operation of their respective business in any adverse manner not
disclosed to the Banks, and to their knowledge are not IN default in the
performance, observance or fulfillment of any material covenant or obligation
contained in any indenture, agreement, lease or other instrument to which any of
them are a party.
8.3 LITIGATION. Except as set forth on Exhibit F attached hereto,
the Borrowers have no knowledge of any action, suit or proceeding, liability
under which they are not fully covered by insurance (i) in any court or
tribunal, whether at law or in equity, or (ii) by or before any Government
Authority, whether such action, suit or proceeding be pending or threatened
against any of the Borrowers or affecting any of them, or any of their assets or
property, which, if adversely determined, would have a material adverse effect
on the condition of AWG on a consolidated basis , financial or otherwise.
8.4 TAX RETURNS. The Borrowers have filed all tax returns which are
required to be filed and have paid, or made adequate provision for the payment
of, all taxes which have or may
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become due pursuant to said returns or to assessments received by the Borrowers.
The Borrowers know of no material additional assessments for which adequate
reserves determined in accordance with generally accepted accounting principles
have not been established. The Borrowers have made adequate provision for the
payment of all current taxes.
8.5 FINANCIAL AND OTHER INFORMATION. All balance sheets and
statements of income and financial condition of the Borrowers furnished by the
Borrowers to the Banks are materially correct and complete.
8.6 CONDUCT OF BUSINESS. The Borrowers will engage and continue to
engage primarily in the business of wholesale food distribution and businesses
related thereto; provided, however, nothing contained herein shall prohibit the
Borrowers from engaging in such other related businesses as may be duly approved
by the Boards of Directors of the Borrowers and promptly reported to the Banks,
so long as engaging in such related businesses would not materially change the
general, overall type of business previously being conducted by the Borrowers.
The Borrowers will keep all of their respective properties in such repair,
working order and condition and will from time to time make such repairs,
renewals, replacements, additions and improvements thereto as management of the
Borrowers exercising good faith judgment as to what is in the best interests of
the Borrowers deem necessary and appropriate, and will comply at all times with
the provisions of all leases, and other agreements to which the Borrowers are a
party and which are, or the lapse of which are or would be material to the
financial condition, operations or prospects of the Borrowers, so as to prevent
any loss or forfeiture thereof or thereunder unless compliance therewith is
being currently contested in good faith by appropriate proceedings, and the
applicable Borrower shall have in accordance with generally accepted accounting
principles set aside on its books
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adequate reserves with respect thereto. The Borrowers will do all things
appropriate and necessary to preserve, renew and keep in full force and effect
and in good standing each of the Borrowers' corporate existence and all
authority necessary to continue the Borrowers' respective businesses and
operations, will preserve and keep in full force and effect all franchises,
permits, licenses, trademarks, trademark rights, trade names, trade name rights,
copyrights, trade secrets and all other authorizations and rights necessary to
the proper conduct of the Borrowers' respective businesses and operations. The
Borrowers will comply in all material respects with all applicable statutes,
rules and regulations of the United States, of the States thereof, and of
counties, municipalities and other subdivisions and of any other jurisdictions
or Governmental Authority applicable to the Borrowers.
8.7 INSURANCE. The Borrowers will keep their respective assets which
are of an insurable nature insured by financially sound and reputable insurance
companies against loss or damage by fire, explosion or other hazards insured
against by extended or all-risk coverage in amounts which are at all times to be
not less than 80% of the insurable value of the property insured, but in no
event less than the aggregate principal amount of all indebtedness of the
Borrowers to the Bank hereunder. The Borrowers shall also maintain, with
financially sound and reputable insurance companies, insurance against liability
for hazards and risks and liability to persons and property to the extent and in
the manner customary for companies in similar businesses similarly situated.
All policies of insurance maintained by the Borrowers may contain reasonable
deductibles in amounts generally acceptable for companies similarly situated in
the respective Borrower's industry and the Borrowers may self insure as to those
risks for which self insuring is reasonably acceptable for companies similarly
situated in the respective Borrower's industry.
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8.8 ERISA. To the best knowledge and belief of the Borrowers, no
prohibited transaction, accumulated funding deficiency or reportable event has
occurred with respect to any plan to which any of them are a party and which is
covered by Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). The present value of all benefits vested under all such
plans, if any, maintained by any of the Borrowers did not, as of the last annual
evaluation date, exceed the value of the assets of all such plans allocable to
such vested benefits. The Borrowers are not subject to any delinquent liability
under ERISA with respect to any multi-employer plan, if any, or any other plan
subject to ERISA.
9. OPINION OF COUNSEL. Prior to the making of any Loans under the terms
and conditions of this Agreement, the Borrowers agree to furnish to the Banks an
Opinion of Counsel to the Borrowers in the form of Exhibit G attached hereto and
incorporated herein by reference.
10. EVENTS OF DEFAULT. "Event of Default" shall mean any one or more of
the following:
10.1 Failure of the Borrowers to cure, within 5 business days after
receipt of written notice of the same, any default in the payment of principal
or of interest or any other amount payable under this Agreement on any
Indebtedness of the Borrowers incurred pursuant to the terms and conditions of
this Agreement when and as the same shall become due and payable, whether at the
maturity date stated on any Note evidencing such Indebtedness or at a date fixed
for prepayment or by acceleration or otherwise.
10.2 Material breach by any of the Borrowers of any covenant,
obligation or requirement contained herein or in any document required to be
executed pursuant hereto or failure of any of the Borrowers, within 30 days
after receipt of written notice specifying the same, to
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perform any covenant, obligation or requirement contained in this Agreement or
in the other Loan Documents.
10.3 Any representation or warranty made by any of the Borrowers
hereunder being untrue in any material respect now or hereafter; or any
schedule, statement, report, notice, information or writing furnished by any of
the Borrowers to the Agent being untrue in any material respect as of the date
the facts set forth therein are stated or certified.
10.4 Failure of any of the Borrowers within 10 days after receipt of
notice of same to cure any default by the Borrowers with respect to any of the
terms, covenants, conditions or obligations of any evidence of Indebtedness to
the Banks other than indebtedness incurred hereunder.
10.5 Failure of any of the Borrowers to cure, within 5 business days
after receipt of written notice of the same, any default in the payment of
principal or of interest on any Indebtedness of the Borrowers payable to any
person or entity other than the Banks in the amount of $1,000,000 or more when
and as the same shall become due and payable, whether at the maturity date
stated on any such Note evidencing such Indebtedness or at a date fixed for
prepayment or by acceleration or otherwise.
10.6 Material breach by any of the Borrowers of any covenant,
obligation or requirement contained in any document executed by the Borrowers in
favor of any person or party other than the Banks evidencing Indebtedness in the
amount of $1,000,000 or more.
10.7 Any of the Borrowers shall admit in writing their inability to
pay their debts as they mature; or any of the Borrowers shall make a general
assignment for the benefit of creditors or any of the Borrowers, consents to,
applies for or acquiesces in the appointment of a trustee or
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receiver for any of them or for substantially all of the property of any of
them; or any of the Borrowers shall suffer proceedings under any law relating to
bankruptcy, insolvency or reorganization or the release of debtors to be
instituted by or against it, and if contested, not dismissed or stayed within 60
days; any of the Borrowers shall suffer any writ of attachment or execution or
any similar process to be issued or levied against any material portion of its
property which is not released, stayed, bonded or vacated within 60 days after
its issue or levy.
11. ACCELERATION. In the event of the occurrence of any one or more
Events of Default which are defined in paragraph 10 of this Agreement, and if
such Event of Default is not cured within the allowed grace period and shall be
continuing, the Banks may declare the entire principal amount of all Notes
executed hereunder, together with accrued interest thereon, to be immediately
due and payable, and terminate the Commitments of the Banks hereunder, all
without further notice of any kind to the Borrowers. Upon the occurrence of an
Event of Default, the Banks may proceed to enforce payment of all Indebtedness
of the Borrowers to the Banks under this Agreement and may exercise any and all
rights and remedies possessed by the Banks.
12. THE AGENT.
---------
12.1 APPOINTMENT. UMB is hereby appointed Agent hereunder and under
the Revolving Credit Notes and the other Loan Documents, and each of the Banks
irrevocably authorizes the Agent to act as the Agent for such Bank. The Agent
agrees to act as such upon the express conditions contained in this Section 12.
The duties of the Agent shall be administrative in nature, and the Agent shall
not have a fiduciary relationship with respect to any Bank by reason of this
Agreement.
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12.2 POWERS. The Agent shall have and may exercise such powers
hereunder and under the Revolving Credit Notes and the other Loan Documents as
are specifically delegated to the Agent by the terms hereof and thereby,
together with such powers as are reasonably incidental thereto. The Agent shall
have no implied duties to the Banks, or any obligation to the Banks to take any
action hereunder or thereunder except any action specifically provided by this
Agreement, the Revolving Credit Notes or the other Loan Documents to be taken by
the Agent.
12.3 GENERAL IMMUNITY. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Banks or any Bank for any
action taken or omitted to be taken by it or them hereunder or under the
Revolving Credit Notes or the other Loan Documents or in connection herewith or
therewith, except for its or their own gross negligence or willful misconduct.
12.4 NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. The Agent shall not
be responsible to the Banks for any recitals, reports, statements, warranties or
representations herein or in the Revolving Credit Notes or the other Loan
Documents or any Loans hereunder or be bound to ascertain or inquire as to the
performance or observance of any of the terms of this Agreement, the Revolving
Credit Notes or the other Loan Documents.
12.5 RIGHT TO INDEMNITY. The Agent shall be fully justified in
failing or refusing to take any action hereunder, the Revolving Credit Notes or
under the other Loan Documents unless it shall first be indemnified to its
satisfaction by the Banks pro rata against any and all liability and expense
which may be incurred by it or by reason of taking or continuing to take any
such action.
12.6 ACTION ON INSTRUCTIONS OF BANKS. The Agent shall, in all cases,
act or refrain from acting hereunder or in connection with the Revolving Credit
Notes or the other Loan
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Documents in accordance with written instructions signed by the Banks. Any
action taken or failure to act pursuant to such instructions shall be binding on
all of the Banks and on all holders of the Notes and the Agent shall be fully
protected in connection with all such action taken or refraining from action in
connection therewith.
12.7 EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may execute any of
its duties as Agent hereunder by or through employees, agents, and attorneys-in-
fact and shall not be answerable to the Banks, except as to money or security
received by it or its authorized Agents, for the default or misconduct of any
such Agents or attorney-in-fact selected by it with reasonable care. The Agent
shall be entitled to advice of counsel concerning all matters pertaining to the
agency hereby created and its duties hereunder.
12.8 RELIANCE ON DOCUMENTS. The Agent shall be entitled to rely upon
any Note, notice, consent, certificate, affidavit, letter, telegram, statement,
paper or document believed by it to be genuine and correct and believed to have
been signed or sent by the proper person and, with respect to legal matters,
upon the opinion of counsel selected by the Agent.
12.9 MAY TREAT PAYEE AS OWNER. The Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
a written notice of the assignment or transfer thereof shall have been filed
with the Agent. Any request, authority or consent of any person, who at the
time of making such request or giving such authority or consent is the holder of
any Note, shall be conclusive and binding on any subsequent holder, transferee
or assignee of such Note or of any Note or Notes issued in exchange therefor.
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12.10 AGENT'S REIMBURSEMENT. Each Bank agrees to reimburse the Agent
its Pro Rata Share of any expense, not reimbursed by the Borrowers, incurred by
the Agent on behalf of the Banks in connection with the administration and
enforcement of the Revolving Credit.
12.11 RIGHTS AS A LENDER. With respect to its obligations to make
Loans hereunder, Loans made by it and the Notes issued to it, the Agent shall
have the same rights and powers hereunder as any Bank and may exercise the same
as though it were not the Agent, and the term "Bank" or "Banks" shall, unless
the context otherwise indicates, include the Agent in its individual capacity.
The Agent may accept deposits from, lend money to, and generally engage in any
kind of banking or trust business with the Borrowers and their subsidiaries as
if it were not the Agent.
12.12 BANK CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on the financial statements referred to in Section 8.5, and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it
will, independently and without reliance upon the Agent or any other Bank and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement, the Revolving Credit Notes or the other Loan Documents.
The Agent makes no representation or warranty of any kind with respect to the
validity, enforceability, legality or sufficiency of any Loan Document or any of
the other documents referred to or contemplated herein or therein.
12.13 SUCCESSOR AGENT. The Agent may voluntarily resign at any time
by giving written notice to the Banks and the Borrowers and may be removed at
any time without cause by
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unanimous vote of the Banks and with cause by a majority of the Banks. Upon any
such voluntary resignation or removal with cause, Harris and NBD shall jointly
have the right to appoint, on behalf of the Borrowers and the Banks, a successor
Agent, subject to the approval of the Borrowers and upon any removal without
cause a majority of the Banks shall have the right to appoint, on behalf of the
Borrowers and the Banks, a successor agent, subject to the approval of the
Borrowers. UMB shall remain as Agent until such time as a successor Agent is
approved by the necessary parties and accepts such appointment. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Section
12 shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent hereunder.
12.14 DISTRIBUTION OF INFORMATION. The Borrowers authorize the
Agent, and the Agent shall discuss with and furnish to the Banks all financial
statements, audit reports, notices and other information pertaining to the
Borrowers and their subsidiaries whether such information was provided by the
Borrowers or prepared or obtained by the Agent. Neither the Agent nor any of
its employees, officers, directors or agents makes any representation or
warranty, regarding any audit reports or other analyses of the Borrowers' or
their Subsidiaries' condition which the Agent may distribute, whether such
information was provided by the Borrowers or prepared or obtained by the Agent,
nor shall the Agent nor any of its employees, officers, directors or agents be
liable to any person receiving a copy of such reports of analyses for any
inaccuracy or omission contained in or relating thereto.
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12.15 APPLICATION OF PROCEEDS. Notwithstanding any contrary
provision of any other Loan Document, after the occurrence of an Event of
Default and acceleration of the Obligations, collections on the Loans under the
Revolving Credit, shall be applied by the Agent to payment of such Loans in the
following order unless a court of competent jurisdiction shall otherwise direct:
(a) FIRST, to payment of all costs and expenses of the Agent and
the Banks incurred in connection with the preservation, collection and
Enforcement of the Loans under the Revolving Credit;
(b) SECOND, to the payment of that portion of the Loans under the
Revolving Credit constituting accrued and unpaid interest and fees, pro rata
between the Banks In accordance with their Pro Rata Shares;
(c) THIRD, to payment of the principal amount of the Loans under
the Revolving Credit, pro rata between the Banks in accordance with their Pro
Rata Shares;
(d) FOURTH, to payment of any other obligations not referred to
above to the Agent or the Banks as may be properly payable; and
(e) FIFTH, the balance, if any, after all of the Obligations of the
Borrowers to the Banks have been satisfied, shall be deposited by the Agent into
AWG's general operating account with UMB.
12.16 ISSUES REQUIRING DECISIONS BY BANKS. All issues which require
a decision by the Banks hereunder must be approved by all of the Banks;
provided, however, if all of the Banks cannot agree on any issue requiring their
agreement within ten (10) days after the Agent has given written notice to the
Banks of the issue requiring a decision, then, if the Banks then holding
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a majority in amount of outstanding principal of the Loans under the Revolving
Credit agree on the issue in question the Agent shall decide the issue for all
of the Banks on the basis of the decision of the majority and proceed thereafter
accordingly, including without limitation the right to sign amendments,
modifications, waivers and consents, and shall have no liability in connection
therewith to the Banks except in the event of the Agent's gross negligence or
willful misconduct. Notwithstanding the foregoing, all of the Banks must approve
any decision with respect to (i) the amount or due dates of the Loans under the
Revolving Credit provided for in Section 2 hereof, (ii) the rate of interest and
fees to be paid by the Borrowers hereunder, (iii) the financial covenants set
forth in Section 6 hereof, and (iv) the negative pledge contained in Section 7
hereof. The Commitment of any Bank may also not be increased without its
consent.
12.17 ADMINISTRATION OF LOANS; AGENT AS SERVICER.
(i) Notwithstanding anything to the contrary set forth in
this Section 12, in this Agreement or in any other Loan
Documents, and provided that no Event of Default shall be in
existence (beyond any applicable notice and cure period), the
Borrowers shall, except as otherwise specifically provided
herein, deal only with the Agent, and the Borrowers shall not
be required to deal with the individual Banks at any time with
respect to the administration of their rights, duties and
obligations under this Agreement, the Notes, and any other Loan
Documents. Accordingly, whether or not the Banks sell or assign
all or any part of their rights and obligations hereunder to
any other bank or lender or grant one or more participation
interests in any of the obligations of the Borrowers hereunder
to any other lender, the
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Borrowers shall not be required to deliver notices or requests
to, or otherwise deal with, any person or entity other than the
Agent or any successor Agent (as provided in this Section 12)
respecting the Loan Documents and the Loans evidenced thereby,
except upon the existence and continuance of an Event of Default
(and expiration of applicable notice and cure periods); provided,
however, notwithstanding anything stated herein to the contrary
each Bank shall have the right to meet with representatives of
AWG at AWG from time to time during normal business hours at
reasonable intervals and upon reasonable notice for the purpose
of discussing the business and financial condition of the
Borrowers;
(ii) Each of the Banks and any successor or participant so
described agrees that it shall and hereby does designate the
Agent as servicer for the Loans evidenced by this Agreement, the
Notes, and the other Loan Documents, and the Agent shall be
authorized to act on behalf of each Bank in accordance with the
terms of this Agreement or any other agreement between the Banks
and their respective successors, assigns and participants, and
the Agent. Any notices, requests, approvals, consents, deliveries
or other forms of communication from the Borrowers to the Agent
shall be deemed adequate and sufficient as if given to all Banks
and their respective successors, assigns and participants if
given in writing and service is made as provided in Section 14.1
hereof.
13. RATABLE PAYMENTS.
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In case at any time any Bank, whether by setoff or otherwise, has payment
made to it upon its Note in a greater proportion than received by any other Bank
under its Note, or receives any other payment on the Obligations in greater
proportion than such Bank is entitled to receive, such Bank so receiving such
greater proportionate payment agrees to promptly purchase a portion of the
Obligations evidencing Loans under the Revolving Credit held by the other Banks
so that after such purchase each Bank will hold its ratable proportion of the
Loans under the Revolving Credit.
14. GENERAL.
14.1 NOTICES. All notices hereunder shall be deemed to be received 3
days after being deposited in the U.S. Mail addressed to any party hereto at the
following addresses or such other address as, from time to time, any party
identifies in a written notice to the others given pursuant to this Section at
least thirty (30) days prior to the effective date of such new address:
If to UMB:
UMB Bank, N.A.
1010 Grand
P.O. Box 419226
Kansas City, Missouri 64141-6226
Attention: Commercial Loan Department
With a copy to:
Norman E. Fretwell, Esq.
Watson & Marshall L.C.
1010 Grand, Suite 500
Kansas City, Missouri 64106-2271
If to Harris:
Harris Trust and Savings Bank
111 West Monroe Street
P.O. Box 755
Chicago, Illinois 60690
Attention: Agribusiness Division
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If to NBD:
NBD Bank
611 Woodward Avenue
Detroit, Michigan 48226
Attention: National Banking Division
If to the Borrowers:
Associated Wholesale Grocers, Inc.
5000 Kansas Avenue
P.O. Box 2932
Kansas City, Kansas 66110-2932
Attention: Corporate Treasurer
With a copy to:
Associated Wholesale Grocers, Inc.
5000 Kansas Avenue
P.O. Box 2932
Kansas City, Kansas 66110-2932
Attention: General Counsel
14.2 NO WAIVERS. No failure or delay by the Banks in exercising any
right, power or privilege hereunder shall operate as a waiver thereof; nor shall
any single or partial modification or waiver of any provision of this Agreement
or of any Note executed hereunder or a single or partial exercise of any such
right, power or privilege preclude any other or further exercise of such or of
any other right, power or privilege.
14.3 OFFSETS. The Borrowers specifically agree that upon the
occurrence of an Event of Default, and if such Event of Default is continuing,
the Banks shall be entitled to exercise any right of setoff or banker's lien at
any time, irrespective of the stated maturity of all Notes executed hereunder
evidencing the indebtedness of the Borrowers to the Banks, and irrespective of
the fact that the Banks have not given such notice except as specifically
required hereunder.
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14.4 MISSOURI LAW. This Agreement and all Notes issued hereunder
shall be deemed to be contracts made under and shall be construed in accordance
with the laws of the state of Missouri.
14.5 SEVERABILITY. In the event any one or more of the provisions of
this Agreement or of any Note executed and delivered hereunder shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
14.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but when taken together
shall constitute but one agreement.
14.7 TITLES AND HEADINGS. All titles and headings which are used in
this Agreement are used solely for the convenience of the parties hereto and are
not part of the agreement of the parties.
14.8 ASSIGNMENT. This Agreement and all provisions hereof shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Borrowers may not
assign any rights hereunder without the prior written consent of the Banks; and
provided further that the Borrowers acknowledge and agree that the Banks may,
without notice, assign all or any part of their rights and obligations hereunder
to any other bank or lender, at their sole discretion, or may grant one or more
participation interests in any of the obligations of the Borrowers hereunder to
any other lender.
14.9 EXPENSES. The Borrowers agree to pay all out of pocket
expenses, including reasonable attorneys fees, incurred by the Bank in
connection with the preparation and amendment
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of this Agreement and the enforcement of the rights of the Banks in connection
with this Agreement and all Notes executed and delivered pursuant hereto and in
connection with any amendment, extension or renewal thereof, or waivers
thereunder; provided, however, attorneys fees payable by the Borrowers in
connection with the preparation of this Agreement shall not exceed $20,000 for
the attorneys for UMB and shall not exceed $5,000 each for the attorneys of
Harris and of NBD.
14.10 WAIVER OF JURY TRIAL. IN THE EVENT OF ANY DISPUTE BETWEEN THE
BORROWERS AND THE BANKS RELATED IN ANY WAY TO THIS AGREEMENT WHICH BECOMES THE
SUBJECT OF ANY JUDICIAL PROCEEDING IN ANY COURT OF LAW, THE BORROWERS AND THE
BANKS HEREBY EACH WAIVE ANY RIGHT WHICH THEY MAY RESPECTIVELY HAVE TO A TRIAL BY
JURY.
14.11 CONTRIBUTION, ETC. Each of the Borrowers acknowledges that the
other Borrowers are part of a consolidated group of companies and that its
financial strength is interdependent upon the financial strength of the
consolidated group as a whole. Therefore, each Borrower acknowledges and agrees
that the Obligations under the Revolving Credit are supported by adequate
consideration, regardless of the amount of Advances or other benefits actually
received by such Borrower under the Revolving Credit. In the event any Borrower
makes any payment on a Loan under the Revolving Credit which exceeds the amount
of funds actually received, directly or indirectly, by such Borrower thereunder,
such Borrower shall be entitled to contribution and reimbursement from the other
Borrowers, pro rata, on the basis of funds actually received and shall be
entitled to recover such amounts by available legal means. After (but only
after) full payment of the Obligations and until such recovery is made, such
Borrower shall be deemed subrogated to the rights and interests of the Banks
hereunder. Such rights of contribution, reimbursement and
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subrogation shall be and remain at all times junior, subordinate, inferior and
subject to the rights and interests of the Banks and shall not affect or impair
in any way the joint, several, personal and unconditional obligation of each
Borrower to fully pay or perform each of the Obligations hereunder and under the
Revolving Credit Notes.
14.12 SEVERAL OBLIGATIONS. The respective obligations of the Banks
hereunder are several and not joint, and no Bank shall be the partner or agent
of the other (except to the extent to which the Agent is authorized to act as
such). The failure of any Bank to perform any of its obligations hereunder
shall not relieve any other Bank from any of its obligations hereunder. All
Obligations of the Borrowers are joint and several.
14.13 INDEMNIFICATION.
(a) Except as otherwise provided herein, the Borrowers jointly and
severally agree to indemnify the Agent and each Bank, and each successor
and assign (including any authorized purchaser of a participation in any of
the Obligations), its directors, officers, employees, attorneys and agents,
on demand and to the fullest extent permitted by law against any and all
liabilities, damages, judgments, suits and claims (and the reasonable costs
and legal fees related thereto) of any kind or nature whatsoever imposed
on, incurred by or asserted against the Agent or any of the Banks arising
under or in connection with the Loan Documents; provided, however, the
Borrowers will not be obligated to indemnify the Agent or any Bank
hereunder to the extent any claims or liabilities result from the Agent's
or such Bank's negligence or willful misconduct or with respect to any
claims between the Banks. The Obligations of the Borrowers under this
Section shall survive the termination of this Agreement.
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(b) In the event any Bank shall incur any loss, cost, expense or
premium (including, without limitation, any loss of profit and any loss,
cost, expense or premium incurred by reason of the liquidation or re-
employment of deposits or other funds acquired by such Bank to fund or
maintain any LIBOR Loan or the re-lending or reinvesting of such deposits
or amounts paid or prepaid to such Bank) as a result of:
(i) any payment or prepayment of a LIBOR Loan on a date other
than the last day of the then LIBOR Interest Period;
(ii) any failure by the Borrowers to borrow, continue or convert
any LIBOR Loan, on the date specified in the notice given pursuant to
Section 3.3 hereof; or
(iii) the occurrence of any Event of Default which is not cured
within any applicable grace period;
then, upon the demand of any such Bank, the Borrowers shall pay to
such Bank such amount as will reimburse such Bank for such loss, cost or
expense. If any Bank makes a claim for compensation under this Section
14.13 (ii), it shall provide to AWG, as agent for the Borrowers, a
Certificate setting forth the amount of any such loss, cost or expense in
reasonable detail. The amount of any such claim set forth in any
Certificate shall be rebuttably presumed to be correct.
14.14 INCORPORATION BY REFERENCE. Each of the Revolving Credit Notes
and the other Loan Documents are hereby made subject to all of the terms,
covenants, conditions, obligations, stipulations and agreements contained in
this Agreement to the same extent and effect as if fully set forth therein, and
this Agreement is hereby made subject to all of the terms,
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covenants, conditions, obligations, stipulations and agreements contained in the
Revolving Credit Notes and the other Loan Documents to the same extent and
effect as if fully set forth herein. All Exhibits hereto are incorporated
herein by reference. All representations and warranties of the Borrowers
contained herein in Section 8 have been or will be relied upon by the Agent and
the Banks notwithstanding any investigation made by or on behalf of them.
14.15 INTEREST RATE LIMITATION. Notwithstanding any provisions of
this Agreement or any of the Revolving Credit Notes or the Loan Documents, in no
event shall the amount of interest paid or agreed to be paid by the Borrowers
exceed an amount computed at the highest rate of interest permissible under
applicable law. If, from any circumstances whatsoever, fulfillment of any
provision of this Agreement or the Revolving Credit Notes or any Loan Document
at the time performance of such provision shall be due, shall involve exceeding
the interest rate limitation validly prescribed by law which a court of
competent jurisdiction may deem applicable hereto, then, ipso facto, the
obligations to be fulfilled shall be reduced to an amount computed at the
highest rate of interest permissible under applicable law, and if for any reason
whatsoever the Banks shall ever receive as interest an amount which would be
deemed unlawful under such applicable law, such interest shall be automatically
applied to the payment of principal of the amounts outstanding hereunder
(whether or not then due and payable) and not to the payment of interest, or
shall be refunded to the Borrowers if such principal and all other Obligations
of the Borrowers to the Banks have been paid in full.
15. PRIOR AGREEMENTS SUPERSEDED/COMPLETE AGREEMENT/STATUTORY STATEMENTS.
This Agreement and all documents referred to herein contain the entire agreement
of the parties hereto with respect to the subject matter hereof; provided,
however, this Agreement shall not supersede
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any agreements set forth in any promissory notes outstanding as of the date
hereof which are executed by any of the Borrowers and are not paid in full by
use of the proceeds of any borrowing hereunder. The agreement between AWG and
UMB dated March 25, 1994 shall terminate and be of no further force and effect
as of the time of the first Advance made to the Borrowers hereunder at which
time all obligations of AWG thereunder shall be paid in full.
MO. REV. STAT. SECTION 432.045. ORAL AGREEMENTS OR COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT THE
BORROWERS AND THE BANKS FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS
THE BORROWERS AND THE BANKS REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS
WRITING WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN
THE BORROWERS AND THE BANKS, EXCEPT AS THE BORROWERS AND THE BANKS MAY LATER
AGREE IN WRITING TO MODIFY IT.
THIS SECTION IS MADE PART OF THIS AGREEMENT IN COMPLIANCE WITH KANSAS
STATUTES ANNOTATED 16-118. THIS AGREEMENT AND ALL NOTES AND OTHER DOCUMENTS TO
BE EXECUTED HEREUNDER OR IN CONNECTION HEREWITH CONSTITUTE THE FULL, COMPLETE
AND FINAL EXPRESSION OF THE CREDIT AGREEMENT OF THE PARTIES HERETO AND
SUPERSEDES ALL PRIOR AGREEMENTS BETWEEN THE PARTIES HERETO CONCERNING THE
SUBJECT MATTER HEREOF WHETHER WRITTEN OR ORAL. THE PROVISIONS OF THIS AGREEMENT
MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL AGREEMENT OR OF A
CONTEMPORANEOUS ORAL AGREEMENT BETWEEN THE PARTIES HERETO.
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- --------------------------------------------------------------------------------
ASSOCIATED WHOLESALER GROCERS, UMB BANK, N.A.
INC., Individually and as agent for
each of the Borrowers
By /s/
-------------------------------
By /s/ Mike DeFabis HARRIS TRUST AND SAVINGS BANK
----------------------------------
By /s/
-------------------------------
NBD BANK
By /s/
-------------------------------
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THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO BE EXECUTED
BY THEIR DULY AUTHORIZED OFFICERS AS OF THE DAY AND YEAR FIRST WRITTEN ABOVE.
ASSOCIATED WHOLESALE GROCER'S DAIRY COMPANY, INC.
GROCERS, INC.
By: /s/ Mike DeFabis By /s/ Mike DeFabis
---------------------------------- ----------------------------------
Mike DeFabis, President Mike DeFabis, President
BENCHMARK INSURANCE COMPANY SUPER MARKET DEVELOPERS, INC.
By /s/ Lanny C. Riedel By /s/ Mike DeFabis
---------------------------------- ----------------------------------
Lanny C. Riedel, President Mike DeFabis, President
GROCER'S PURCHASING GROUP, INC. SUPER MARKET INVESTMENT
COMPANY, INC.
By /s/ Lanny C. Riedel By /s/ Mike DeFabis
---------------------------------- ----------------------------------
Lanny C. Riedel, President Mike DeFabis, President
MEMBERS SERVICE ASSOCIATION, VALU MERCHANDISERS COMPANY
INC.
By /s/ Kevin J. Brown By /s/ Richard B. Swain
---------------------------------- ----------------------------------
Kevin J. Brown, President Richard B. Swain, President
SUPERMARKET INSURANCE AGENCY SUPERMARKET MANAGEMENT, INC.
INC.
By /s/ Larry C. Riedel By /s/ Mike DeFabis
---------------------------------- ----------------------------------
Larry C. Riedel, President Mike DeFabis, President
UMB BANK, N.A.
By /s/
----------------------------------
Title Executive Vice President
-------------------------------
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<PAGE>
Signature page to Unsecured Credit Agreement between Associated Wholesale
Grocers, Inc. and the undersigned dated as of April 17, 1995.
HARRIS TRUST AND SAVINGS BANK
By /s/
----------------------------------
Title: Vice President
54
<PAGE>
Signature page to Unsecured Credit Agreement between Associated Wholesale
Grocers, Inc., et al. and the undersigned dated as of April 17, 1995.
NBD BANK
By /s/ Thomas Serossan
----------------------------------
Title: Vice President
55
<PAGE>
UNSECURED CREDIT AGREEMENT
among
ASSOCIATED WHOLESALE GROCERS, INC.
BENCHMARK INSURANCE COMPANY
GROCERS DAIRY COMPANY, INC.
GROCER'S PURCHASING GROUP, INC.
MEMBERS SERVICES ASSOCIATION, INC.
SUPER MARKET DEVELOPERS, INC.
SUPERMARKET INSURANCE AGENCY, INC.
SUPER MARKET INVESTMENT COMPANY, INC.
SUPERMARKET MANAGEMENT, INC.
VALU MERCHANDISERS COMPANY
and
UMB BANK, N.A.,
HARRIS TRUST AND SAVINGS BANK,
NBD BANK
and
UMB BANK, N.A.
as Agent
Dated April 17, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
UNSECURED CREDIT AGREEMENT............................................ 1
1. Definitions................................................. 2
1.1 Accounting Terms....................................... 2
1.2 Defined Terms.......................................... 2
1.3 Singular and Plural....................................10
2. Revolving Credit/Payments...................................10
2.1 The Revolving Credit...................................10
2.2 Payments, Mandatory Prepayment of Revolving Credit.....13
2.3 Reduction of Commitments...............................13
3. Interest/Repayment/Fees.....................................14
3.1 Interest Rate..........................................14
3.2 Calculation of Interest................................14
3.3 Optional Rate Provisions...............................14
3.4 Payment of Interest....................................18
3.5 Revolving Credit Commitment and Facility Fees..........19
3.6 Business Day...........................................20
4. Conditions to Making Loans..................................20
4.1 No Adverse Change in Business..........................20
4.2 Representations........................................20
4.3 Required Consents and Approvals........................21
4.4 No Defaults............................................21
4.5 Application Constitutes Representation.................21
5. Special First Advance Condition.............................21
6. Affirmative Covenants.......................................22
6.1 Financial and Business Information.....................22
6.2 Corporate Existence and Maintenance of Property........23
6.3 Taxes, Charges and Claims..............................24
6.4 Location of Records....................................24
6.5 Current Ratio..........................................24
6.6 Indebtedness Ratio.....................................25
6.7 Consolidated Tangible Net Worth........................25
6.8 Fixed Charges..........................................25
6.9 Working Capital........................................25
i
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6.10 Banking Relationship................................25
7. Negative Covenants........................................26
7.1 Limitation on Sales of Assets........................26
7.2 Limitation on Liens..................................27
7.3 Permitted Investments and Loans......................27
7.4 Restricted Payments..................................28
7.5 Mergers or Consolidations............................28
7.6 Additional Loans and Obligations.....................28
7.7 Guarantees...........................................29
7.8 Environmental Matters................................29
7.9 Judgments............................................30
8. Representations and Warranties............................30
8.1 Corporate Existence and Authority....................31
8.2 Performance of Other Agreements......................31
8.3 Litigation...........................................31
8.4 Tax Returns..........................................32
8.5 Financial and Other Information......................32
8.6 Conduct of Business..................................32
8.7 Insurance............................................33
8.8 ERISA................................................34
9. Opinion of Counsel........................................34
10. Events of Default.........................................34
11. Acceleration..............................................36
12. The Agent.................................................36
12.1 Appointment.........................................36
12.2 Powers..............................................37
12.3 General Immunity....................................37
12.4 No Responsibility for Loans, Recitals, Etc..........37
12.5 Right to Indemnity..................................37
12.6 Action on Instructions of Banks.....................38
12.7 Employment of Agents and Counsel....................38
12.8 Reliance on Documents...............................38
12.9 May Treat Payee as Owner............................38
12.10 Agent's Reimbursement..............................39
12.11 Rights as a Lender.................................39
12.12 Bank Credit Decision...............................39
12.13 Successor Agent....................................40
12.14 Distribution of Information........................40
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12.15 Application of Proceeds............................41
12.16 Issues Requiring Decisions by Banks................42
12.17 Administration of Loans; Agent as Servicer.........42
13. Ratable Payments..........................................44
14. General...................................................44
14.1 Notices.............................................44
14.2 No Waivers..........................................45
14.3 Offsets.............................................45
14.4 Missouri Law........................................46
14.5 Severability........................................46
14.6 Counterparts........................................46
14.7 Titles and Headings.................................46
14.8 Assignment..........................................46
14.9 Expenses............................................47
14.10 Waiver of Jury Trial...............................47
14.11 Contribution, Etc..................................47
14.12 Several Obligations................................48
14.13 Indemnification....................................48
14.14 Incorporation by Reference.........................50
14.15 Interest Rate Limitation...........................50
15. Prior Agreements Superseded/Complete Agreement/Statutory
Statements................................................51
iii
<PAGE>
EXHIBIT 10.7
ASSOCIATED WHOLESALE GROCERS, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
(RESTATED JANUARY 1, 1996)
<PAGE>
ASSOCIATED WHOLESALE GROCERS, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Section Page
- ------- ------- ----
<C> <S> <C>
I Purpose and Effective Date......................... 1
1.01 Title.............................................. 1
1.02 Purpose............................................ 1
1.03 Effective Date..................................... 1
II Definitions and Construction of the Plan Document.. 1
2.01 Beneficiary........................................ 1
2.02 Board.............................................. 1
2.03 Bookkeeping Account................................ 1
2.04 Change in Control.................................. 1
2.05 Committee.......................................... 2
2.06 Company............................................ 2
2.07 Deferral Agreement................................. 2
2.08 Deferred Salary.................................... 2
2.09 Election Date...................................... 2
2.10 Executive.......................................... 2
2.11 Participant........................................ 2
2.12 Plan............................................... 2
2.13 Plan Administrator................................. 2
2.14 Plan Year.......................................... 2
2.15 Prior Plan......................................... 2
2.16 Termination of Service............................. 3
2.17 Trust.............................................. 3
2.18 Valuation Date..................................... 3
2.19 Gender and Number.................................. 3
2.20 Titles............................................. 3
III Eligibility and Participation...................... 3
3.01 Eligibility........................................ 3
3.02 Participation...................................... 3
IV Deferral of Compensation........................... 3
4.01 Deferred Salary.................................... 3
4.02 Deferral Agreement................................. 3
4.03 No Deferral Without Agreement...................... 4
4.04 Duration of Deferral Agreement..................... 4
V Deferred Account and Crediting..................... 4
5.01 Bookkeeping Account................................ 4
5.02 Earnings........................................... 4
</TABLE>
<PAGE>
<TABLE>
TABLE OF CONTENTS
(continued)
<C> <S> <C>
VI Distribution....................................... 5
6.01 Amount of Benefits................................. 5
6.02 Time and Method of Payment......................... 5
6.03 Form of Payment.................................... 6
VII Hardship Distributions............................. 6
7.01 Hardship........................................... 6
VIII Beneficiary........................................ 6
8.01 Beneficiary Designation............................ 6
8.02 Proper Beneficiary................................. 7
8.03 Minor or Incompetent Beneficiary................... 7
IX Administration of the Plan......................... 7
9.01 Majority Vote...................................... 7
9.02 Finality of Determination.......................... 7
9.03 Certificates and Reports........................... 7
9.04 Indemnification and Exculpation.................... 8
9.05 Tax Analysis....................................... 8
9.06 Expenses........................................... 8
X Claims Procedure................................... 8
10.01 Written Claim...................................... 8
10.02 Denied Claim....................................... 8
10.03 Review Procedure................................... 8
10.04 Committee Review................................... 9
XI Nature of Company's Obligation..................... 9
11.01 Company's Obligation............................... 9
11.02 Creditor Status.................................... 9
XII Miscellaneous...................................... 9
12.01 Written Notice..................................... 9
12.02 Change of Address.................................. 9
12.03 Merger, Consolidation or Acquisition............... 9
12.04 Amendment and Termination.......................... 10
12.05 Employment......................................... 10
12.06 Nontransferability................................. 10
12.07 Legal Fees......................................... 10
12.08 Tax Withholding.................................... 10
12.09 Acceleration of Payment............................ 10
12.10 Applicable Law..................................... 11
12.11 Remedies........................................... 11
12.12 Beneficial Interest................................ 11
</TABLE>
<PAGE>
ARTICLE I
PURPOSE AND EFFECTIVE DATE
--------------------------
1.01 TITLE This Plan shall be known as the Associated Wholesale Grocers, Inc.
Nonqualified Deferred Compensation Plan (hereinafter referred to as the "Plan").
1.02 PURPOSE The purpose of the Plan is to permit eligible members of management
and highly compensated employees to defer current compensation.
1.03 EFFECTIVE DATE The initial Effective Date of the Plan shall be November 15,
1993, and the Effective Date of the Plan as restated shall be January 1, 1996
ARTICLE II
DEFINITIONS AND CONSTRUCTION OF THE PLAN DOCUMENT
--------------------------------------------------
2.01 BENEFICIARY "Beneficiary" shall mean the person or persons or the estate of
a Participant entitled to receive any benefits under this Plan.
2.02 BOARD "Board" shall mean the Board of Directors of Associated Wholesale
Grocers, Inc.
2.03 BOOKKEEPING ACCOUNT A "Bookkeeping Account" will be established as a
bookkeeping record for each Participant who elects to defer compensation under
this Plan and may, at the discretion of the Committee, include one (1) or more
subaccounts to reflect amounts credited to a Participant under the various terms
of this Plan.
2.04 CHANGE IN CONTROL "Change in Control" means the occurrence of any of the
following events: (i) the Company shall merge or consolidate with any other
corporation(s) (other than a reorganization in which there is no material change
in the beneficial ownership of the capital stock of the Company); (ii) the
Company shall liquidate or dissolve or shall sell, transfer or otherwise dispose
of substantially all of its assets (in one transaction or a series of related
transactions); (iii) any other corporation, person, entity or group thereof
(other than affiliates of or persons relating to, or trusts created by,
shareholders of the Company) shall directly or indirectly acquire control of 20%
or more of the outstanding shares of common stock of the Company; (iv) as a
result of a public offering, the Company becomes subject to the reporting
requirements of Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934;
(v) the Company shall convert from its current form of corporation to another
form of business entity, including without limitation, another form of
corporation, a limited liability company or a partnership; (vi) the Company
shall amend its articles of incorporation or by-laws with respect to the terms
and conditions of ownership of any class or series of capital stock of the
Company, to permit a person, partnership, corporation or other entity to become
a shareholder of the Company, if such person or entity has a primary business
function other than the retail purveying of food for human consumption; or
<PAGE>
(vii) the Company shall issue a new class or series of capital stock to permit a
person, partnership, corporation or other entity to become a shareholder of the
Company, if such person or entity has a primary business function other than the
retail purveying of food for human consumption.
2.05 COMMITTEE "Committee" means the Finance Committee of the Company or such
other Committee designated by the Company which will manage and administer the
Plan.
2.06 COMPANY Company shall mean Associated Wholesale Grocers, Inc., a Missouri
corporation.
2.07 DEFERRAL AGREEMENT "Deferral Agreement" means the written form which is
submitted to the Plan Administrator before the relevant Election Date which
indicates whether the Executive wishes to defer a portion of his compensation
and indicates the portion of salary to be deferred. No Deferral Agreement shall
be effective until acknowledged, in writing, by the Company.
2.08 DEFERRED SALARY "Deferred Salary" means the portion of a Participant's
salary, including any bonus, for any calendar year, or part thereof, that has
been deferred pursuant to the Plan.
2.09 ELECTION DATE The "Election Date" is the date established by this Plan as
the date before which an Executive must submit a valid Deferral Agreement to the
Plan Administrator. The applicable Election Dates are as follows: (a) fifteen
(15) days after adoption of the Plan for employees who are eligible to
participate at the time the Plan is adopted; (b) thirty (30) days after A newly
eligible employee is notified of his right to participate in the Plan; or (c) if
(a) or (b) do not apply, December 31 of any calendar year or such earlier date
as determined by the Plan Administrator.
2.10 EXECUTIVE "Executive" shall mean any member of management or any highly
compensated employee who has been recommended for participation in the Plan by
the President of the Company and approved by the Committee, pursuant to Section
3.01.
2.11 PARTICIPANT "Participant" means an Executive who has deferred a portion of
salary pursuant to the terms of this Plan and whose benefits hereunder have not
yet been paid.
2.12 PLAN "Plan" means the Associated Wholesale Grocers, Inc. Nonqualified
Deferred Compensation Plan as described in this instrument and as amended from
time to time.
2.13 PLAN ADMINISTRATOR The "Plan Administrator" means the Company or such
person or persons designated by the Company from time to time.
2.14 PLAN YEAR The "Plan Year" is the same as the calendar year; provided,
however, that the first Plan Year shall be from date of adoption of this Plan by
the Company to December 31, 1993.
2.15 PRIOR PLAN "Prior Plan" means the Associated Wholesale Grocers, Inc.
Nonqualified Deferred Compensation Plan as in effect on December 31, 1995.
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<PAGE>
2.16 TERMINATION OF SERVICE "Termination of Service" or similar expression means
the termination of the Participant's employment as a regular employee of the
Company and any division, subsidiary and affiliate thereof.
2.17 TRUST The "Trust" shall mean the Associated Wholesale Grocers, Inc.
Nonqualified Deferred Compensation Plan Trust.
2.18 VALUATION DATE For purposes of determining the value of any Participant's
Measuring Investment as defined in Section 5.02 hereof, the "Valuation Date"
shall mean each business day of the Plan Year or such other date or dates as
determined by the Plan Administrator; provided, however, that such Valuation
Date(s) in effect on the date of a Change in Control shall remain in effect
until termination of the Plan, unless the Plan is amended to provide for a
different definition of Valuation Date.
2.19 GENDER AND NUMBER Wherever the context so requires, masculine pronouns
include the feminine and singular words shall include the plural.
2.20 TITLES Titles of the Articles of this Plan are included for ease of
reference only and are not to be used for the purpose of construing any portion
or provision of this Plan document.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.01 ELIGIBILITY Eligibility for participation in this Plan shall be determined
on an individual basis by recommendation from the President and approved by the
Committee, but no Executive shall be selected for participation in this Plan
unless he qualifies as a member of a select group of management or as a highly
compensated employee of the Company.
3.02 PARTICIPATION An Executive, after having been selected and approved for
participation in the Plan, shall, as a condition to participation, complete and
return to the Plan Administrator a duly executed Deferral Agreement.
ARTICLE IV
DEFERRAL OF COMPENSATION
------------------------
4.01 DEFERRED SALARY Each Participant in the Plan may have a percentage or
dollar amount of his salary deferred in accordance with the terms and conditions
of this Plan.
4.02 DEFERRAL AGREEMENT An eligible Executive electing to participate in the
Plan must submit his written Deferral Agreement to the Plan Administrator on or
before the applicable Election Date. Valid Deferral Agreements filed by the
applicable Election Date as provided in Section 2.09(a) or Section 2.09(b)
hereof shall cause salary to be deferred in the Plan Year for
-3-
<PAGE>
which such Deferral Agreement is made. Deferral Agreements entered into under
the conditions of Section 2.09(c) shall cause salary to be deferred beginning
January 1 of the next calendar year. Notwithstanding the above, the Company, in
its sole and absolute discretion may place a maximum limit on the amount of
Deferred Salary for a Plan Year; provided, however, that once a Deferral
Agreement has been signed and approved by the Company, the Deferred Salary
amount may not be reduced, except as provided in Article VII or as provided in
Section 12.09.
4.03 NO DEFERRAL WITHOUT AGREEMENT A Participant who has not submitted a valid
Deferral Agreement to the Plan Administrator before the relevant Election Date
may not defer any salary under this Plan for the applicable Plan Year.
4.04 DURATION OF DEFERRAL AGREEMENT Deferral Agreements remain in effect for the
Plan Year for which they apply. A Participant must file a new Deferral Agreement
for any subsequent Plan Year. The terms of any Deferral Agreement may, but need
not be, similar to the terms of any prior Deferral Agreement.
ARTICLE V
DEFERRAL ACCOUNT AND CREDITING
------------------------------
5.01 BOOKKEEPING ACCOUNT The Deferred Salary pursuant to a written Deferral
Agreement shall be credited to a separate Bookkeeping Account for each
Participant. Deferred Salary under subsequent written Deferral Agreements by a
Participant shall be added to his Bookkeeping Account.
5.02 EARNINGS On each Valuation Date on or after June 1, 1996, the amount
credited to each Participant's Bookkeeping Account shall be credited with an
amount equal to the deemed net earnings or losses which would have been realized
by the Corporation if the Corporation were to have invested the amounts credited
to the Bookkeeping Account in the Participant's Measuring Investment. Such net
earnings and losses shall be determined pursuant to the method or methods deemed
appropriate by the Plan Administrator in its discretion, which methods may be
different for different Measuring Investments, may vary from time to time, need
not be the same for determining net earnings versus losses, and may be based on
the cash receipts or the accrual method with any modifications deemed
appropriate by the Plan Administrator in its discretion; provided, however, that
the method of determining net earnings and losses in effect at the time of a
Change in Control shall remain in effect until termination of the Plan unless
the Plan is amended pursuant to Section 12.04 of the Plan.
The Measuring Investments shall be the investments listed on Appendix A attached
hereto and incorporated herein by reference, and which may be changed from time-
to-time by amendment to the Plan. The Participant's Measuring Investment shall
be the hypothetical investment or investments selected from time-to-time, with
the approval of the Plan Administrator, by each Participant from among the
Measuring Investments as described herein. The selection of a Participant's
Measuring Investment must be in writing in a form acceptable to the Plan
Administrator and must be delivered to the Plan Administrator. For purposes of
calculating the
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<PAGE>
Participant's deemed net earnings and losses, any amount shall be deemed to be
invested in a Measuring Investment as of the date determined appropriate by the
Plan Administrator.
With respect to periods prior to June 1, 1996, the amount credited to a
Participant's Bookkeeping Account shall be determined in accordance with the
provisions of the Prior Plan. Further, in the event that a Plan Participant does
not request that his Bookkeeping Account be credited with earnings or losses
according to one or more Measuring Investments, the amount credited to the
Participant's Bookkeeping Account shall be credited with an amount equal to the
interest rate then paid under Scout Money Market Fund, Federal Portfolio or
under such other investment as the Plan Administrator may direct.
ARTICLE VI
DISTRIBUTION
------------
6.01 AMOUNT OF BENEFITS The Company's liability to any Participant hereunder
shall be an amount equal to the Participant's Deferred Salary plus or minus the
deemed earnings or losses based on the Participant's Measuring Investment, less
payments to the Participant pursuant to this Plan, and such amount shall be
credited to each Participant's Bookkeeping Account. The amount of any payment
shall be based upon the amount credited to a Participant's Bookkeeping Account
as of the Valuation Date coincident with or immediately preceding the date of
payment.
6.02 TIME AND METHOD OF PAYMENT
(a) Deferred Salary on or after January 1, 1996. Payment of benefits
attributable to Deferred Salary that was deferred with respect to each
Plan Year commencing on or after January 1, 1996 shall be made in
accordance with the time and method of payment elected in the Deferral
Agreement for each such year. In all cases, the deferral and election
shall be made before the applicable Election Date.
(b) Deferred Salary before January 1, 1996. Payment of benefits
attributable to Deferred Salary that was deferred with respect to each
Plan Year prior to January 1, 1996 or with respect to Plan Years in
which a Participant does not choose a distribution option for such
Plan Year's deferrals, shall be made in annual cash installments in
the five (5) successive calendar years beginning with the calendar
year next following the date of the Participant's Termination of
Service. Each installment shall be made as of the first working day of
the applicable year. The amount of each installment shall be equal to
the amount credited to the Participant's Bookkeeping Account divided
by the number of remaining installments (including the installment
being determined).
(c) Participant's Death. Notwithstanding (a) or (b) above, in the event of
the participant's death prior to the complete payment of an amount
equal to the sum credited to the Participant's Bookkeeping Account,
payment of any remaining
-5-
<PAGE>
amount shall be made to the Participant's Beneficiary as soon as
administratively practicable after the Participant's death.
6.03 FORM OF PAYMENT All payments hereunder shall be made in cash or
immediately available funds.
ARTICLE VII
HARDSHIP DISTRIBUTIONS
----------------------
7.01 HARDSHIP At the request of a Participant before or after the
Participant's retirement or Termination of Service, the Company may, in its
sole discretion, accelerate and cause all or part of the value of a
Participant's benefits due under this Plan to be paid. Accelerated payments at
the request of the Participant or the Participant's Beneficiaries may be
allowed only in the event of a Financial Hardship as defined herein. Such
payment shall cause the Participant's Bookkeeping Account to be reduced in a
manner determined by the Company. An accelerated distribution must be limited
to only that amount necessary to relieve the Financial Hardship, plus the
amount needed to pay federal, state or local income taxes reasonably
anticipated to result from the payment. In the event the Company determines
the existence of a Financial Hardship and decides in its sole and absolute
discretion to accelerate payments hereunder, it may in its sole and absolute
discretion, reduce or suspend future salary deferrals under the Deferral
Agreement in effect during such Plan Year.
"Financial Hardship" shall mean an immediate and heavy financial need of the
Participant which cannot be satisfied from other reasonably available resources
on account of:
. Medical expenses incurred by the Participant, his spouse or his
dependents, or expenses necessary to obtain medical care;
. The payment of tuition and fees, including room and board, for the
next twelve (12) months of post-secondary education for the
Participant, his spouse or his dependents;
. The purchase of a principal residence of the Participant (not
including mortgage payments); or
. The need to prevent eviction of the Participant from his principal
residence or foreclosure on the mortgage of such principal residence.
ARTICLE VIII
BENEFICIARY
-----------
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<PAGE>
8.01 BENEFICIARY DESIGNATION A Participant shall designate his Beneficiary to
receive benefits under the Plan by completing the appropriate form provided by
the Plan Administrator. If more than one (1) Beneficiary is named, the shares
and/or percentage of each Beneficiary shall be indicated. A Participant shall
have the right to change the Beneficiary by submitting to the Plan
Administrator a Change of Beneficiary Form. However, no change of Beneficiary
shall be effective until acknowledged, in writing, by the Plan Administrator.
8.02 PROPER BENEFICIARY If the Company has any doubt as to the proper
Beneficiary to receive payments hereunder, the Company shall have the right to
withhold such payments until the matter is finally adjudicated. However, any
payment made by the Company, in good faith and in accordance with this Plan,
shall fully discharge the Company and the Plan Administrator from all further
obligations with respect to that payment.
8.03 MINOR OR INCOMPETENT BENEFICIARY In making any payments to or for the
benefit of any minor or an incompetent Beneficiary, the Plan Administrator, in
its sole and absolute discretion, may (a) make a distribution to a legal or
natural guardian or other relative of a minor or court appointed committee of
such incompetent; or (b) make a payment to any adult with whom the minor or
incompetent temporarily or resides. The receipt by a guardian, committee,
relative or other person shall be a complete discharge to the Company and the
Plan Administrator. Neither the Plan Administrator nor the Company shall have
any responsibility to see to the proper application of any payments so made.
ARTICLE IX
ADMINISTRATION OF THE PLAN
--------------------------
9.01 MAJORITY VOTE All resolutions or other actions taken by the Committee
shall be by vote of a majority of those present at a meeting at which a
majority of the members are present, or in writing by all the members, at the
time in office, if they act without a meeting.
9.02 FINALITY OF DETERMINATION Subject to the Plan, the Committee or Plan
Administrator shall, from time to time, establish rules, forms and procedures
for the administration of the Plan. Except as herein otherwise expressly
provided, the Committee and Plan Administrator shall have full and absolute
discretion to (i) construe and interpret the Plan, (ii) decide all questions
arising with respect to the Plan, including but not limited to, eligibility to
participate in the Plan, and (iii) determine the amount, manner and time of
payment of any benefits to any Participant or Beneficiary. The respective
decisions, actions and records of the Committee and Plan Administrator shall be
conclusive and binding upon the Company and all persons having or claiming to
have any right or interest in or under the Plan.
9.03 CERTIFICATES AND REPORTS The members of the Committee, the Plan
Administrator and the officers and directors of the Company shall be entitled
to rely on all certificates, opinions, and reports made by any duly appointed
accountants and consultants, and on all opinions given by any duly appointed
legal counsel, which legal counsel may be counsel for the Company.
-7-
<PAGE>
9.04 INDEMNIFICATION AND EXCULPATION The Company shall indemnify and hold
harmless the Plan Administrator and each member of the Committee and any person
acting on behalf of or pursuant to appointment by the Plan Administrator
(hereinafter referred to as "designee") in connection with the administration of
the Plan against any and all expenses and liabilities arising out of his
membership on the Committee or administration of the Plan or any action or
failure to act by the Committee, Plan Administrator, any member of the Committee
or any designee, except if such action or failure to act constitutes gross
negligence or willful misconduct. Expenses against which a member of the
Committee or any designee shall be indemnified hereunder shall include, without
limitation, the amount of any settlement or judgment, costs, counsel fees, and
related charges reasonably incurred in connection with a claim asserted, or a
proceeding brought or settlement thereof. The foregoing rights of
indemnification shall be in addition to any other rights to which any such
member of the Committee or designee may be entitled as a matter of law.
9.05 TAX ANALYSIS The Plan Administrator shall compute the tax consequences of
each year's proposed Deferral Agreements prior to the beginning of the year and
shall report its findings to the President.
9.06 EXPENSES The expenses of administering the Plan shall be borne by the
Company, except for expenses or fees that are directly deducted from the return
of a Participant's Measuring Investment.
ARTICLE X
CLAIMS PROCEDURE
----------------
10.01 WRITTEN CLAIM Benefits shall be paid in accordance with the provisions
of this Plan. The Participant, or a designated Beneficiary or any other person
claiming through the Participant, shall make a written request for benefits
under this Plan. This written claim shall be mailed or delivered to the Plan
Administrator. Such claim shall be reviewed by the Plan Administrator or his
delegate.
10.02 DENIED CLAIM If the claim is denied, in full or in part, the Plan
Administrator shall provide a written notice within ninety (90) days setting
forth the specific reasons for denial and any additional material or information
necessary to perfect the claim and an explanation of why such material or
information is necessary and appropriate information and explanation of the
steps to be taken if a review of the denial is desired.
10.03 REVIEW PROCEDURE If the claim is denied and a review is desired, the
Participant (or Beneficiary) shall notify the Plan Administrator, in writing,
within sixty (60) days (a claim shall be deemed denied if the Plan Administrator
does not take any action within the aforesaid ninety (90) day period) after
receipt of the written notice of denial. In requesting a review, the Participant
or his Beneficiary may request a review of the Plan document or other pertinent
documents with regard to the Plan, may submit any written issues and comments,
may request an
-8-
<PAGE>
extension of time for such written submission of issues and comments and may
request that a hearing be held, but the decision to hold a hearing shall be
within the sole discretion of the Committee.
10.04 COMMITTEE REVIEW The decision on the review of the denied claim shall be
rendered by the Committee within sixty (60) days after the receipt of the
request for review (if no hearing is held) or within sixty (60) days after the
hearing if one is held. The decision shall be written and shall state the
specific reasons for the decision including reference to the specific provisions
of this Plan on which the decision is based.
ARTICLE XI
NATURE OF COMPANY'S OBLIGATION
------------------------------
11.01 COMPANY'S OBLIGATION The Company's payment obligations in connection
with Deferred Salary under this Plan shall be an unfunded and unsecured promise
to pay the benefit due under each Deferral Agreement in accordance with the
Plan. The Company shall not be obligated under any circumstances to set aside
assets to discharge its financial obligations under this Plan; provided,
however, that the Company may establish a trust and contribute assets to the
trust for the purpose of satisfying its obligations under the Plan. The
Company's payment obligations hereunder shall be discharged and satisfied to the
extent proper payments are made from such trust to a Participant or Beneficiary.
11.02 CREDITOR STATUS Any assets which the Company may acquire or set aside to
help cover its financial liabilities under the Plan are and shall remain general
assets of the Company subject to the claims of the creditors of the Company.
Neither the Company hereunder nor this Plan gives the Participant or any
Beneficiary any ownership interest in any asset of the Company. All rights of
ownership in any such assets are, and remain, in the Company.
ARTICLE XII
MISCELLANEOUS
-------------
12.01 WRITTEN NOTICE Any notice which shall or may be given under this Plan
or a Deferral Agreement shall be in writing and shall be mailed by United States
mail, postage prepaid. If notice is to be given to the Company, such notice
shall be addressed to the Company at 5000 Kansas Avenue, P. 0. Box 2932, Kansas
City, Kansas 66110-2932 or, if notice is to a Participant, addressed to the
address shown on such Participant's Deferral Agreement.
12.02 CHANGE OF ADDRESS Any party may, from time to time, change the address
to which notices shall be mailed by giving written notice of such new address.
-9-
<PAGE>
12.03 MERGER, CONSOLIDATION OR ACQUISITION The Plan shall be binding upon the
Company, its assigns, and any successor company which shall succeed to
substantially all of its assets and business through merger, acquisition or
consolidation, and upon an Executive, his Beneficiary, assigns, heirs, executors
and administrators.
12.04 AMENDMENT AND TERMINATION Except as provided herein, the Company
retains the sole and unilateral right to terminate, amend, modify or supplement
this Plan, in whole or in part, at any time. This right includes the right to
make retroactive amendments. However, in no event shall the Company have the
right to amend the Plan (other than a prospective amendment of the Measuring
Investments set forth in Appendix A) in a manner that (i) reduces the amount
credited to any Participant's Bookkeeping Account, (ii) reduces or discontinues
earnings credits pursuant to Section 5.02 hereof or (iii) adversely affects any
rights of any Participant or, if deceased, such Participant's Beneficiary, with
respect to Deferred Salary, including, but not limited to, the right to select a
Measuring Investment, pursuant to Section 5.02 and the right to payment of
benefits pursuant to Sections 6.01 and 6.02 hereof. Notwithstanding the above,
upon and following the occurrence of a Change in Control, no action to amend or
terminate the Plan shall be effective without the express written consent of
two-thirds (2/3's) or more of the Participants and the Beneficiaries of deceased
Participants.
12.05 EMPLOYMENT This Plan does not provide a contract of employment between
the Company and the Participant, and, except as provided in any other
contractual arrangement, if any, between a Participant and the Company, the
Company resumes the right to terminate the Participant's employment, for any
reason, at any time, notwithstanding the existence of this Plan.
12.06 NONTRANSFERABILITY Except insofar as prohibited by applicable law, no
sale, transfer, alienation, assignment, pledge, collateralization or attachment
of any benefits under this Plan shall be valid or recognized by the Company or
the Trustee of the Trust. Neither the Participant, his spouse, or designated
Beneficiary, shall have any right to hypothecate, mortgage, commute, modify or
otherwise encumber in advance of any receipt of the benefits payable hereunder,
nor shall any of said benefits be subject to seizure for the payment of any
debts, judgments, alimony maintenance, owed by the Participant or his
Beneficiary, or be transferable by operation of law in the event of bankruptcy,
insolvency or otherwise.
12.07 LEGAL FEES All reasonable legal fees incurred by any Participant (or
former Participant) to successfully enforce his valid rights under this Plan
shall be paid by the Company in addition to sums due under this Plan.
12.08 TAX WITHHOLDING The Company may withhold from a payment any federal,
state or local taxes required by law to be withheld with respect to such
payment.
12.09 ACCELERATION OF PAYMENT The Committee has the right to accelerate the
payment of any benefits under this Plan at any time without the consent of the
Participant, his estate, his Beneficiary or any other person claiming through
the Participant. In the event payment is accelerated under this Section 12.09,
the Committee may also cease the continued Deferred Salary under any Deferral
Agreement for the remainder of the Plan Year.
-10-
<PAGE>
12.10 APPLICABLE LAW This Plan shall be governed by the laws of the state of
Missouri.
12.11 REMEDIES All parties shall have the right to pursue any and all
remedies available under law or equity.
12.12 BENEFICIAL INTEREST This Plan is established solely for the benefit of
the Company, its successors and assigns, and the Participants as defined herein.
No person other than the Company and each Participant or, if applicable, the
Participant's Beneficiary may claim any rights or benefits under this Plan nor
may seek to enforce any of the provisions of this Plan.
-11-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officer on this 1st day of January, l996, effective as set forth
herein.
ASSOCIATED WHOLESALE GROCERS, INC.
By: /s/ Mike DeFabis
-------------------------------------------------
Mike DeFabis, President
ATTEST:
By: /s/ Douglas M. Carolan
------------------------------------------------
Douglas M. Carolan, Assistant Secretary
[SEAL]
-12-
<PAGE>
EXHIBIT 10.8
ASSOCIATED WHOLESALE GROCERS, INC.
PENSION RESTORATION PLAN
ASSOCIATED WHOLESALE GROCERS, INC., a Missouri corporation, with principal
office located in Kansas City, Missouri (hereinafter the "Company") hereby
establishes the Associated Wholesale Grocers, Inc. Pension Restoration Plan for
selected employees of the Company as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1 - Code The term "Code" shall mean the Internal Revenue Code of
1986, as amended, or as it may be amended from time to time.
Section 1.2 - Effective Date The effective date of the Plan shall be October 1,
1989.
Section 1.3 - Plan The term "Plan" shall mean the Associated Wholesale Grocers,
Inc. Pension Restoration Plan as set forth herein or in any amendment hereto.
Section 1.4 - Retirement Plan The term "Retirement Plan" shall mean any
retirement plan of the Company which qualifies under Section 401 of the Code as
a defined benefit pension plan.
ARTICLE II
PURPOSE
-------
Section 2.1 - Purpose The purpose of the Plan is to provide to a select group
of management and highly compensated employees retirement benefits in excess of
the limitations on benefits imposed by Section 415 of the Code and the
limitation on retirement benefits resulting from the limitation on compensation
that may be taken into account by Retirement Plans of the Company under Section
401(a)(17) of the Code. The Plan shall be an "Excess Benefit Plan" as defined
in Section 3(36) of the Employment Retirement Income Security Act of 1974, as
amended, to the extent it provides retirement benefits in excess of the
limitations imposed by Section 415 of the Code.
<PAGE>
ARTICLE III
ELIGIBILITY
-----------
Section 3.1 - Eligibility Management and highly compensated employees of the
Company and their beneficiaries who are eligible to receive benefits from the
Associated Wholesale Grocers, Inc. Restated Retirement Plan.
ARTICLE IV
BENEFITS
--------
Section 4.1 - Amount of Benefits The benefits payable to an eligible employee
shall equal the benefit which would be payable to or on behalf of the employee
under each Retirement Plan of the Company which qualifies under Section 401 of
the Code as a defined benefit pension plan, if the requirements of Section 415
and Section 401(a)(17) of the Code were inapplicable to such Retirement Plan;
reduced by the benefit actually payable to or on behalf of the employee under
such Retirement Plan. The amount of any compensation deferred by the employee
under any deferral plan or arrangement with the Company shall be included in the
calculation of earnings for purposes of determining benefits that would be
payable from the applicable Retirement Plan.
Section 4.2 - Form and Time of Benefit Payments Subject to the approval of the
Company, the benefits payable hereunder shall be payable hereunder shall be
payable in the same manner, under the same conditions and at the same time that
benefits from the Retirement Plan are payable, in accordance with the elections
made by the employee thereunder.
Section 4.3 - Benefits on Death If death benefits are payable under a
Retirement Plan with respect to an eligible employee, death benefits shall also
be payable hereunder to the beneficiaries designated under the Retirement Plan.
Such death benefits shall equal the death benefits that would be payable with
respect to the employee under the Retirement Plan if the requirements of Section
415 and Section 401(a)(17) of the Code were inapplicable; reduced by the death
benefits actually payable with respect to the employee under the Retirement
Plan.
Section 4.4 - Benefits Unfunded The benefits payable under the Plan shall be
paid solely from the general assets of the Company. The Plan shall not be
funded in any manner.
ARTICLE V
ADMINISTRATION
--------------
Section 5.1 - Committee A Committee of one (1) or more persons shall be
appointed by the Board of Directors of the Company. The Committee shall have
full power and authority to administer and interpret the Plan, subject to the
provisions of the Plan and as to such matters as are reserved under the Plan to
the Board of Directors. The Committee shall adopt such
2
<PAGE>
procedures as it deems necessary in administering the Plan. The Committee shall
designate a Committee member or an officer of the Company as Plan Administrator
who shall perform duties as assigned by the Committee.
ARTICLE VI
AMENDMENT AND TERMINATION
-------------------------
Section 6.1 - Amendment and Termination The Plan may be amended from time to
time or terminated by the Board of Directors of the Company, provided that any
amendment or termination shall not revoke or reduce the benefits which have
commenced as of the date of the amendment or termination.
Section 6.2 - Successors The Plan shall be binding upon the Company and upon
its successors or assigns.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.1 - Rights Not Assignable The rights, interests and benefits under
the Plan shall not be assigned, transferred, pledged, sold, conveyed or
encumbered in any way by the employee or his beneficiary.
Section 7.2 - Construction The Plan shall be governed by and interpreted in
accordance with the laws of the State of Missouri.
IN WITNESS WHEREOF, Associated Wholesale Grocers, Inc., has caused this Plan to
be executed this 10th day of October, 1989.
ASSOCIATED WHOLESALE GROCERS, INC.
BY /s/ James L. Baska
-------------------------------
ITS President
------------------------------
3
<PAGE>
EXHIBIT 23.1
CONSENT AND REPORT ON SCHEDULE
The Board of Directors
Associated Wholesale Grocers, Inc.:
The audits referred to in our report dated March 1, 1996, included the
related financial statement schedule for each of the years in the three-year
period ended December 30, 1995, included in the registration statement. This
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits. In our opinion, such 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 consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the proxy statement/prospectus.
Kansas City, Missouri
August 20, 1996
/s/ KPMG Peat Marwick LLP
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby appoint
Mike DeFabis and Doug Carolan, or either of them, attorney for the undersigned
and in the name of and on behalf of the undersigned to sign a Registration
Statement on Form S-4 of Associated Wholesale Grocers Group, Inc., together
with any and all amendments which might be required from time to time with
respect thereto, to be filed with the Securities and Exchange Commission under
the Securities Act of 1933, with respect to the registration with the
Securities and Exchange Commission of shares of common stock, $.01 par value,
of Associated Wholesale Grocers Group, Inc., in connection with an Agreement
and Plan of Merger by and among Associated Wholesale Grocers Group, Inc.,
Associated Wholesale Grocers, Inc. and AWG Merger Corp., with full power and
authority in either of said attorneys to do and perform in the name of and on
behalf of the undersigned every act whatsoever necessary or desirable to be
done in connection therewith as fully and to all intents and purposes as the
undersigned might or could do in person.
Executed this 20th day of August, 1996.
/s/ J. Fred Ball
_____________________________________
J. Fred Ball
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby appoint
Mike DeFabis and Doug Carolan, or either of them, attorney for the undersigned
and in the name of and on behalf of the undersigned to sign a Registration
Statement on Form S-4 of Associated Wholesale Grocers Group, Inc., together with
any and all amendments which might be required from time to time with respect
thereto, to be filed with the Securities and Exchange Commission under the
Securities Act of 1933, with respect to the registration with the Securities and
Exchange Commission of shares of common stock, $.01 par value, of Associated
Wholesale Grocers Group, Inc., in connection with an Agreement and Plan of
Merger by and among Associated Wholesale Grocers Group, Inc., Associated
Wholesale Grocers, Inc. and AWG Merger Corp., with full power and authority in
either of said attorneys to do and perform in the name of and on behalf of the
undersigned every act whatsoever necessary or desirable to be done in connection
therewith as fully and to all intents and purposes as the undersigned might or
could do in person.
Executed this 20th day of August, 1996.
/s/ Donald Woods, Jr.
-----------------------------
Donald Woods, Jr.
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby appoint
Mike DeFabis and Doug Carolan, or either of them, attorney for the undersigned
and in the name of and on behalf of the undersigned to sign a Registration
Statement on Form S-4 of Associated Wholesale Grocers Group, Inc., together with
any and all amendments which might be required from time to time with respect
thereto, to be filed with the Securities and Exchange Commission under the
Securities Act of 1933, with respect to the registration with the Securities and
Exchange Commission of shares of common stock, $.01 par value, of Associated
Wholesale Grocers Group, Inc., in connection with an Agreement and Plan of
Merger by and among Associated Wholesale Grocers Group, Inc., Associated
Wholesale Grocers, Inc. and AWG Merger Corp., with full power and authority in
either of said attorneys to do and perform in the name of and on behalf of the
undersigned every act whatsoever necessary or desirable to be done in connection
therewith as fully and to all intents and purposes as the undersigned might or
could do in person.
Executed this 20th day of August, 1996.
/s/ James Queen
----------------------------------
James Queen
<PAGE>
PROXY/VOTING INSTRUCTION CARD EXHIBIT 99.1
ASSOCIATED WHOLESALE GROCERS, INC.
CLASS A COMMON STOCK
This Proxy is solicited on behalf of the Board of Directors of Associated
Wholesale Grocers, Inc. (the "Company") for the Special Meeting on
, 1996. The undersigned hereby constitutes and appoints
, and and each of
them, true and lawful agents and proxies (the "Proxies") with full power of
substitution in each, to represent and to vote, as designated below, all of the
shares of CLASS A common stock of the Company held of record by the undersigned
on September 7, 1996, at the Special Meeting of Shareholders to be held at
, Kansas City, on ,
, 1996, at (Kansas City time) and at any
adjournment or postponement thereof, on all matters coming before said meeting.
This proxy when properly executed will be voted in the manner directed by
you. If no direction is made, this proxy will be voted FOR approval of the
Merger Agreement. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
You are encouraged to specify your choice by marking the appropriate box but
you need not mark any box if you wish to vote in accordance with the Board of
Directors' recommendations. However, the Proxies cannot vote your shares unless
you sign and return this card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
1. To approve the Merger Agreement with Associated Wholesale Grocers Group,
Inc. and AWG Merger Corp.
FOR [_]AGAINST [_]ABSTAIN [_]
------------------------------------
Printed Name
------------------------------------
SignatureDate
Title (if applicable) ______________
YOUR VOTE IS IMPORTANT! UNDER MISSOURI LAW, THE FAILURE TO VOTE WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST APPROVAL OF THE MERGER AGREEMENT.
Please follow these steps to ensure that your proxy is properly executed and
returned in time to be counted:
1. Mark your vote for the proposal in one of the three boxes on the other side
of this card.
2. If you are the record owner of shares of CLASS A common stock of the Company
print your name in the space provided. If you are completing this proxy card
on behalf of a corporation, partnership, limited liability company or other
entity that is the record owner of shares of CLASS A common stock of the
Company print the name of that entity in the space provided.
3. Sign in the space provided. Also enter the date. If you are signing on
behalf of a corporation, partnership, limited liability company or other
entity, indicate your position with that entity.
4. Mail the completed card with signature in the enclosed reply envelope to:
Associated Wholesale Grocers, Inc.
Attn: Joseph L. Campbell, II, Secretary
5000 Kansas Avenue
P.O. Box 2932
Kansas City, Kansas 66110-2932
If you have questions regarding completion of this proxy card, contact
at .
<PAGE>
PROXY/VOTING INSTRUCTION CARD EXHIBIT 99.2
ASSOCIATED WHOLESALE GROCERS, INC.
CLASS B COMMON STOCK
This Proxy is solicited on behalf of the Board of Directors of Associated
Wholesale Grocers, Inc. (the "Company") for the Special Meeting on
, 1996. The undersigned hereby constitutes and appoints
, and and each of
them, true and lawful agents and proxies (the "Proxies") with full power of
substitution in each, to represent and to vote, as designated below, all of the
shares of CLASS B common stock of the Company held of record by the undersigned
on September 7, 1996, at the Special Meeting of Shareholders to be held at
, Kansas City, on ,
, 1996, at (Kansas City time) and at any
adjournment or postponement thereof, on all matters coming before said meeting.
This proxy when properly executed will be voted in the manner directed by
you. If no direction is made, this proxy will be voted FOR approval of the
Merger Agreement.
You are encouraged to specify your choice by marking the appropriate box but
you need not mark any box if you wish to vote in accordance with the Board of
Directors' recommendations. However, the Proxies cannot vote your shares unless
you sign and return this card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
1. To approve the Merger Agreement with Associated Wholesale Grocers Group,
Inc. and AWG Merger Corp.
FOR [_]AGAINST [_]ABSTAIN [_]
------------------------------------
Printed Name
------------------------------------
Signature Date
TITLE (if applicable)_______________
YOUR VOTE IS IMPORTANT! UNDER MISSOURI LAW, THE FAILURE TO VOTE WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST APPROVAL OF THE MERGER AGREEMENT.
Please follow these steps to ensure that your proxy is properly executed and
returned in time to be counted:
1. Mark your vote for the proposal in one of the three boxes on the other
side of this card.
2. If you are the record owner of shares of CLASS B common stock of the
Company print your name in the space provided. If you are completing this
proxy card on behalf of a corporation, partnership, limited liability
company or other entity that is the record owner of shares of CLASS B
common stock of the Company print the name of that entity in the space
provided.
3. Sign in the space provided. Also enter the date. If you are signing on
behalf of a corporation, partnership, limited liability company or other
entity, indicate your position with that entity.
4. Mail the completed card with signature in the enclosed reply envelope to:
Associated Wholesale Grocers, Inc.
Attn: Joseph L. Campbell, II, Secretary
5000 Kansas Avenue
P.O. Box 2932
Kansas City, Kansas 66110-2932
If you have questions regarding completion of this proxy card, contact
at .
<PAGE>
Exhibit 99.3
Schedule A
Associated Wholesale Grocers, Inc.
Preliminary Analysis of Public Offering
August 23, 1996
Name: 0
Equity #: 0
Your estimated stock allocation has been calculated using the assumption of a
$500 million stock valuation and a $20 per share stock price. In addition, 1996
purchases through the seventh period are used to estimate your final 1996
qualifying purchases. The actual allocation will be based on 1996 qualifying
purchases through the ninth period ending September 7, 1996.
Using these assumptions, your stock allocation would be as follows:
<TABLE>
<CAPTION>
1. Shares to be issued based on existing Class A and B Common Stock:
<S> <C>
Total shares of A & B stock currently issued to your membership 0
------------------
Multiplied by the book value of shares as of the June 15, 1996 valuation date: $1,365.00
------------------
= Book value of shares to be exchanged for public stock: $0.00
------------------
Divided by assumed per share price of: $20.00
------------------
(Subject to change based on the final price at the time of I.P.O.)
= Total public shares to be issued based on existing stock: 0.00
==================
2. Shares to be issued based on qualifying purchases.
Your qualified purchases from 1989 through the 7th period of 1996 total: $0.00
------------------
Total weighted base of qualifying purchases: $14,076,166,998.31
------------------
Your calculated purchases as a percentage of the total weighted
base of qualifying purchases: 0.00000%
==================
Shares to be allocated based on qualifying purchases: 23,610.430
------------------
Times the ratio of calculated purchases as a percentage of the
total weighted base of qualifying purchases: 0.00000%
------------------
= Total shares to be issued based on qualifying purchases: 0.00
==================
Note: Refer to Proxy Statement Section "The Merger" subsection "Conversion Formula" in conjunction
with reviewing this material.
The final stock allocation will be issued in whole shares; stock cannot be issued in partial shares.
</TABLE>
<PAGE>
Associated Wholesale Grocers, Inc.
Preliminary Analysis of Conversion and Patronage Redemption
August 23, 1996
Name:
Equity #:
Your estimated allocations are based on the following assumptions:
. Stores identified in your equity group(s) is/are correct.
. Calculations of your past purchases are correct.
. Current valuation of AWG at time of the stock issue is $500 million.
. Allocation formula is set forth in the Proxy Statement.
<TABLE>
<CAPTION>
<S> <C>
1. Shares to be issued in Conversion (See Schedule A attached)
Total shares to be issued based on existing Class A and B Common Stock: 0.00
----
Total shares to be issued based on qualifying purchases: 0.00
----
(Your qualified purchases from 1989 through
the 7th period of 1996 total: $0.00)
Total shares to be issued in Conversion: 0.00
====
Note: The final stock allocation will be based on whole shares; partial shares cannot be issued)
2. Estimate of cash payments from AWG:
. 1988-1995 Patronage Certificates redeemed for cash: $0.00
-----
. Estimated 1996 Year End Distribution paid 100% in cash: 0.00
(Based on 11/13 of 1995 year end) -----
</TABLE>
By use or acceptance hereof, the user of this information hereby acknowledges
and agrees that the information generated by Associated Wholesale Grocers, Inc.
("AWG") contains, and is based upon information, assumptions and estimates, the
accuracy and completeness of which has not been verified by AWG. Facts and
assumptions used herein may change due to a variety of conditions or causes
which could cause significant variations in the information, and the possibility
for such changes increases with time. The user acknowledges and agrees that AWG,
its officers, directors, employees or agents (i) make no representations,
warranties or guarantees whatsoever, implied or expressed, as to the accuracy or
completeness of the information or conclusions derived by the user, or the
accuracy or completeness of the information generated by AWG; and (ii) do not
guarantee, represent or warrant any particular result. The user acknowledges
and agrees that user is not entitled to rely on the accuracy or completeness of
the information and AWG, its officers, directors, employees or agents shall in
no event be liable for any acts, claims, damages actual or otherwise, loss of
profits, goodwill or special consequential damages arising from or in any way
relating to user's use.
<PAGE>
Associated Wholesale Grocers, Inc.
Preliminary Analysis of Conversion and Patronage Redemption
August 23, 1996
Name:
Equity #:
<TABLE>
<CAPTION>
<S> <C>
Your estimated allocations are based on the following assumptions:
. Stores identified in your equity group(s) is/are correct.
. Calculations of your past purchases are correct.
. Current valuation of AWG at time of the stock issue is $500 million.
. Allocation formula is set forth in the Proxy Statement.
1. Shares to be issued in Conversion (See Schedule A attached)
Total shares to be issued based on existing Class A and B
Common Stock: 0.00
----
Total shares to be issued based on qualifying purchases: 0.00
----
(Your qualified purchases from 1989 through the 7th period
of 1996 total: $0.00)
Total shares to be issued in Conversion: 0.00
====
Note: The final stock allocation will be based on whole shares; partial
shares cannot be issued)
2. Estimate of cash payments from AWG:
. Patronage Certificate Redemption Schedule:
1996 $0.00
1997 $0.00
1998 $0.00
1999 $0.00
2000 $0.00
2001 $0.00
2002 $0.00
Total: $0.00
-----
. Estimated 1996 Year End Distribution paid 100% in cash: 0.00
(Based on 11/13 of 1995 year end) -----
</TABLE>
By use or acceptance hereof, the user of this information hereby acknowledges
and agrees that the information generated by Associated Wholesale Grocers, Inc.
("AWG") contains, and is based upon information, assumptions and estimates, the
accuracy and completeness of which has not been verified by AWG. Facts and
assumptions used herein may change due to a variety of conditions or causes
which could cause significant variations in the information, and the possibility
for such changes increases with time. The user acknowledges and agrees that AWG,
its officers, directors, employees or agents (i) make no representations,
warranties or guarantees whatsoever, implied or expressed, as to the accuracy or
completeness of the information or conclusions derived by the user, or the
accuracy or completeness of the information generated by AWG; and (ii) do not
guarantee, represent or warrant any particular result. The user acknowledges and
agrees that user is not entitled to rely on the accuracy or completeness of the
information and AWG, its officers, directors, employees or agents shall in no
event be liable for any acts, claims, damages actual or otherwise, loss of
profits, goodwill or special consequential damages arising from or in any way
relating to user's use.
<PAGE>
ANNEX D
SECTION 351.455 OF THE MISSOURI GENERAL
AND BUSINESS CORPORATION LAW
351.455 SHAREHOLDER WHO OBJECTS TO MERGER MAY DEMAND VALUE OF SHARES,
WHEN. -- 1. If a shareholder of a corporation which is a party to a merger or
consolidation shall file with such corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to such plan of merger or consolidation, and shall not
vote in favor thereof, and such shareholder, within twenty days after the merger
or consolidation is effected, shall make written demand on the surviving or new
corporation for payment of the fair value of his shares as of the day prior to
the date on which the vote was taken approving the merger or consolidation, the
surviving or new corporation shall pay to such shareholder, upon surrender of
his certificate or certificates representing said shares, the fair value
thereof. Such demand shall state the number and class of the shares owned by
such dissenting shareholder. Any shareholder failing to make demand within the
twenty day period shall be conclusively presumed to have consented to the merger
or consolidated and shall be bound by the terms thereof.
2. If within thirty days after the date on which such merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment therefor
shall be made within ninety days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing said shares. Upon payment of the agreed value the
dissenting shareholder shall cease to have any interest in such shares or in the
corporation.
3. If within such period of thirty days the shareholder and the surviving
or new corporation do not so agree, then the dissenting shareholder may, within
sixty days after the expiration of the thirty day period, file a petition in any
court of competent jurisdiction within the county in which the registered office
of the surviving or new corporation is situated, asking for a finding and
determination of the fair value of such shares, and shall be entitled to
judgment against the surviving or new corporation for the amount of such fair
value as of the day prior to the date on which such vote was taken approving
such merger or consolidation, together with interest thereon to the date of such
judgment. The judgment shall be payable only upon and simultaneously with the
surrender to the surviving or new corporation of the certificate or certificates
representing said shares. Upon the payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares, or in the surviving
or new corporation. Such shares may be held and disposed of by the surviving or
new corporation as it may see fit. Unless the dissenting shareholder shall file
such petition within the time herein limited, such shareholder and all persons
claiming under him shall be conclusively presumed to have approved and ratified
the merger or consolidation, and shall be bound by the terms thereof.
4. The right of a dissenting shareholder to be paid the fair value of his
shares as herein provided shall cease if and when the corporation shall abandon
the merger or consolidation.
<PAGE>
EXHIBIT 99.4
CONSENT OF LAZARD FRERES & CO. LLC
We hereby consent to all references to Lazard Freres & Co. LLC in the
section captioned "The Merger" as shown in the Proxy Statement/Prospectus
which forms a part of the Registration Statement on Form S-4 filed by Associated
Wholesale Grocers Group, Inc. on August 21, 1996. In giving such consent, we do
not admit that we come within the category of persons whose consent is required
under, and we do not admit and we disclaim that we are "experts" for purposes
of, the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
/s/ LAZARD FRERES & CO. LLC
New York, New York
August 21, 1996
<PAGE>
EXHIBIT 99.5
CONSENT OF SMITH BARNEY INC.
We hereby consent to all references to Smith Barney Inc. in the section
captioned "The Merger" as shown in the Proxy Statement/Prospectus which
forms a part of the Registration Statement on Form S-4 filed by Associated
Wholesale Grocers Group, Inc. on August 21, 1996. In giving such consent, we do
not admit that we come within the category of persons whose consent is required
under, and we do not admit and we disclaim that we are "experts" for purposes
of, the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
/s/ SMITH BARNEY INC.
New York, New York
August 21, 1996
<PAGE>
EXHIBIT 99.6
CONSENT OF GEORGE K. BAUM & COMPANY
We hereby consent to all references to George K. Baum & Company in the
section captioned "The Merger" as shown in the Proxy Statement/Prospectus
which forms a part of the Registration Statement on Form S-4 filed by Associated
Wholesale Grocers Group, Inc. on August 21, 1996. In giving such consent, we do
not admit that we come within the category of persons whose consent is required
under, and we do not admit and we disclaim that we are "experts" for purposes
of, the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
/s/ GEORGE K. BAUM & COMPANY
Kansas City, Missouri
August 21, 1996
