<PAGE>
<PAGE>
Registration No. 33-57272
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
Post-Effective Amendment No. 1
to
FORM S-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
______________
UNITED GROCERS, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-0301970
(State of incorporation) (I.R.S. Employer Identification
No.)
6433 S. E. Lake Road (Milwaukie, Oregon), Post Office Box 22187,
Portland, Oregon 97222
(503) 653-6330
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
ALAN C. JONES, President
United Grocers, Inc.
6433 S. E. Lake Road (Milwaukie, Oregon), Post Office Box 22187,
Portland, Oregon 97222
(503) 653-6330
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Miller, Nash, Wiener, Hager & Carlsen
111 S. W. Fifth Avenue
Portland, Oregon 97204-3699
Attention: Erich W. Merrill, Jr.
Approximate date of commencement of proposed sale to the public:
From time to time following the effective date of this registration
statement.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If the registrant elects to deliver its latest annual report to
security holders, or a complete and legible facsimile thereof, pursuant
to <PAGE>
<PAGE>
Item 11(a)(1) of this form, check the following box. [X]
The registrant hereby amends this registration statement on such
date or 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.
Pursuant to Rule 429, the prospectus for the Common Stock, $5 par
value, covered hereby is a combined prospectus that also relates to the
registration statement on Form S-2 of the registrant (No. 33-49450)
effective August 10, 1992, and the Series H Notes covered thereby.
<PAGE>
<PAGE>
UNITED GROCERS, INC.
Cross Reference Sheet Between
the Items of Part I of Form S-2 and the Prospectus
Location or Caption
Items in Form S-2 in Prospectus
1. Forepart of the Registration Statement Cover Page
and Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages Statement of Available
of Prospectus Information;
Incorporation
of Certain Documents by
Reference; Table of
Contents
3. Summary Information, Risk Factors Prospectus Summary
and Ratio of Earnings to Fixed Charges
4. Use of Proceeds Introduction
5. Determination of Offering Price Introduction
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution Introduction
9. Description of Securities to be Introduction;
Registered Description of
Membership
Stock; Description of
Notes
10. Interests of Named Experts and Counsel *
11. Information with Respect to Prospectus Summary;
the Registrant Introduction;
The Company;
Incorporation
of Certain
Documents by Reference
12. Incorporation of Certain Information Incorporation of
by Reference Certain Documents by
Reference
13. Disclosure of Commission Position on *
Indemnification for Securities
Act Liabilities
* Omitted either because the item is inapplicable or because the
answer is in the negative.<PAGE>
<PAGE>
UNITED GROCERS, INC.
(Portland, Oregon)
250,000 Shares
Common Stock, $5 Par Value
$19,600,000 Series H 5% Subordinated
Redeemable Capital Investment Notes
Maturing Approximately 10 Years from Date of Issue
Common stock ("Membership Stock") is sold solely to members of
United Grocers, Inc. ("United"), at adjusted book value determined for
each calendar year as of the end of United's preceding fiscal year. In
addition to shares sold to newly admitted members as a prerequisite for
membership, Membership Stock may be issued to existing members for cash
or in payment of patronage dividends. See "The Company."
Notes are issued in registered form in denominations of $100 or
multiples of $100 at 100% of principal amount, with interest payable
quarterly. Notes are issued in noncertificated form. Notes are
redeemable at United's option during the 7 years prior to maturity at a
price equal to principal plus accrued interest. United does not expect
any public market for Notes to develop. Although it is not legally
obligated to do so, United intends to prepay any Note, at any time, upon
request of the holder. See "Introduction."
The board of directors of United has decided to pay interest at
the rate of 5.5% per annum during the period December 16, 1993, to March
15, 1994, on all Notes outstanding at any time during that period. On
March 16, 1994, the interest rate on all Notes will revert to the stated
rate of 5% per annum unless the board of directors takes further action.
The decision to pay interest at 5.5% per annum is a voluntary action
taken by the board of directors in recognition of prevailing interest
rates. There can be no assurance that the interest rate on Notes after
March 15, 1994, will exceed 5% per annum. The only right evidenced by
the Notes is to receive timely payment of principal and interest at 5%
per annum.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds
Public discounts and to United
commissions
<S> <C> <C> <C>
Per Share $57.00 None $57.00
Per Note 100% None 100%
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE <PAGE>
<PAGE>
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This offering is not underwritten; all sales will be made by
United through its regular employees. United reserves the right to
withdraw, cancel or modify the offer without notice and to reject orders
in whole or in part.
The date of this prospectus is January __, 1994.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S>
<C>
Statement of Available Information 2
Incorporation of Certain Documents by Reference 2
Prospectus Summary 3
Introduction 6
The Company 8
Description of Membership Stock 11
Description of Notes 13
Legal Matters 16
Experts 16
Additional Information 16
</TABLE>
No person is authorized to give any information or to make any
representations other than those contained herein, and, if given or
made, such information or representations must not be relied upon as
having been authorized. Neither the delivery hereof nor any sale
hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of United since the date hereof.
This prospectus does not constitute an offer to sell or a solicitation
of any such offer in any state to any person to whom it is unlawful to
make such an offer in such state.
STATEMENT OF AVAILABLE INFORMATION
United is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files
reports and other information with the Securities and Exchange
Commission ("Commission"). Such reports and other information can be
inspected and copied at the public reference facilities maintained by
the Commission in Washington, D.C., at 450 Fifth Street, N.W.,
Washington, D.C., and at the Commission's regional offices at 7 World
Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies can be obtained at
prescribed rates by writing to the Securities and Exchange Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549.
United intends to provide its security holders annual reports
containing audited financial statements which have been examined and
reported on by independent certified public accountants.
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE
United incorporates herein by reference (i) its annual report on
Form 10-K for the fiscal year ended October 1, 1993, and (ii) the
material under the captions "Board of Directors" and "Management" and
the information on pages 2 through 20 of United's annual report to its
security holders for the year ended October 1, 1993.
This prospectus is accompanied by a copy of United's 1993 annual
report to security holders. United will provide, without charge, to
each person to whom a copy of this prospectus is delivered, upon the
written or oral request of any such person, a copy of the above
mentioned Form 10-K (other than certain exhibits). Requests should be
directed to John W. White, Vice President, United Grocers, Inc., Post
Office Box 22187, Portland, Oregon 97269-2187, telephone (503) 653-6330.
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following material summarizes certain matters described in
the prospectus. It is necessarily incomplete and is qualified in its
entirety by reference to the remainder of the prospectus.
United
The Company United Grocers, Inc., 6433 S. E. Lake
Road (Milwaukie, Oregon), Post Office
Box 22187, Portland, Oregon 97269-2187;
telephone (503) 653-6330.
Principal Business A wholesale grocery distributor which
operates as a cooperative. United sells
groceries and related products at
wholesale to approximately
363 independent retail grocery stores
operated by its members in Oregon,
western Washington and northern
California.
Use of Proceeds of Working capital and general corporate
Offering purposes.
See "Introduction--Use of Proceeds" and "The Company."
Membership Stock
Shares Offered to Retail grocers who have been accepted as
members of United on the basis of 200
shares per retail store. Membership
Stock will also be issued to members in
payment of patronage dividends and to
members who wish to acquire additional
shares for cash.
Price Adjusted book value computed as of the
end of each fiscal year (the Friday
nearest September 30) to be effective for
the following calendar year ($57.00 per
share, or $11,400 for 200 shares, during
1994).
Repurchase Under its present bylaws United is
obligated to repurchase shares held by
terminated members at the price at which
Membership Stock is then being offered
(book value as of the end of the fiscal
year preceding the year of termination,
adjusted for certain items). A portion
of the repurchase price may, under
certain circumstances, be paid in
installments on such terms as the board
of directors determines.
Voting Rights One vote for each shareholder of record.
Transfer Membership Stock is not transferable.
Dividends and Federal It is United's policy not to declare
Tax Consequences dividends other than patronage dividends
based upon members' purchases. The
total amount of patronage dividends
(including Membership Stock) is taxable
to individual members when distributed.
See "Introduction," "The Company" and "Description of Membership Stock."<PAGE>
<PAGE>
Notes
Notes Offered Series H Subordinated Redeemable Capital
Investment Notes.
Interest 5% per annum, payable quarterly. The board
of directors of United has decided to pay
interest at the rate of 5.5% per annum during
the period December 16, 1993, to March 15,
1994, on all Notes outstanding at any time
during that period. On March 16, 1994, the
interest rate on all Notes will revert to the
stated rate of 5% per annum unless the board
of directors takes further action. The
decision to pay interest at 5.5% per annum is
a voluntary action taken by the board of
directors in recognition of prevailing
interest rates. There can be no assurance
that the interest rate on Notes after
March 15, 1994, will exceed 5% per annum.
The only right evidenced by the Notes is to
receive timely payment of principal and
interest at 5% per annum.
Denominations $100 and multiples thereof.
Price 100% of the principal amount.
Certificates Notes will be noncertificated. The rights of
holders of Notes will be evidenced by the
Investment Note Register maintained by
United. United will provide holders of Notes
with quarterly statements of their Note
holdings.
Maturity of Principal On the interest payment date coinciding with,
or next following, the expiration of 10 years
from date of issue.
Prepayment In the event of death of a registered holder
or joint registered holder of a Note, United
will be legally obligated to prepay the Note
upon request of the person entitled to the
Note. Although United has no other
obligation to prepay Notes, its present
intention is to prepay any Note, at any time,
upon request of the holder. Although
United's present intention is to continue
this prepayment policy indefinitely, it may
discontinue such policy at any time. See
"Introduction--Notes Offered." The prepayment
price is the principal amount plus accrued
interest.
Type Unsecured, subordinated to Senior
Indebtedness. The amount of Senior
Indebtedness outstanding as of October 1,
1993, was approximately $75,281,000.
Redemption Redeemable at the option of United during the
7 years prior to maturity at a price equal to
principal plus accrued interest.
Transfer Notes are transferable but no market for
Notes exists or is expected to develop.
Indenture Trustee United States National Bank of Oregon.
See "Introduction" and "Description of Notes."
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
Fiscal years ended
Oct. 1 Oct. 2 Sept. 27 Sept. 28 Sept. 30
1993 1992 1991 1990 1989
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Income Statement<F1>:
Net sales and operating
revenues $876,985 $896,587 $882,878 $873,685 $796,768
Income before members'
patronage dividends and
income taxes 11,291 13,314 13,126 12,408 10,820
Patronage dividends 9,000 10,211 10,427 10,000 9,011
Net income<F2><F3> 1,714 2,723 1,712 1,394 1,262
Balance Sheet:
Working capital<F4> 41,819 53,326 61,032 49,912 45,082
Total assets 280,600 261,289 249,205 218,143 200,489
Liabilities
Current 132,067 113,759 112,256 101,179 97,044
Long-term 105,539 104,645 98,685 82,918 72,172
Members' equity 39,112 39,141 36,431 33,299 30,308
Adjusted book value
per share<F5> 57.00 53.94 48.99 46.24 43.81
Ratio of adjusted income
to fixed charges<F1><F6> 1.86 2.00 2.07 2.05 1.91
<FN>
<F1> In fiscal 1993, United changed its method of accounting for inventories to
the first-in, first-out method. Amounts for prior periods have been restated
to reflect the change. See Note 4 to the consolidated financial statements
appearing in the accompanying annual report to shareholders ("Consolidated
Financial Statements").
<F2> Earnings per share are not shown because earnings are distributed only in
the form of patronage dividends; under United's policy no earnings are
available for the purpose of paying dividends on the Membership Stock.
<F3> In fiscal 1992, United changed its method of accounting for income taxes,
resulting in a one-time increase in net income of $526,314. See Note 7 to the
Consolidated Financial Statements.
<F4> In fiscal 1992, United changed its method of accounting for investments,
resulting in an increase in current assets at October 2, 1992, of $26,684,291
and a corresponding decrease in non-current assets. Amounts for prior periods
have been restated to reflect the change. See Note 1.e. to the Consolidated
Financial Statements.
<F5> Adjusted book value per share, which is the offering price per share, is
computed by subtracting from total members' equity at fiscal year end, stock to
be issued from patronage and paid-in capital on such stock and undistributed
equity from investments accounted for on the equity method, net of the tax
effect, and dividing the resulting amount by shares outstanding at fiscal year
end.
<F6> Adjusted income used to compute the ratio of adjusted income to fixed
charges represents net income to which has been added income taxes, patronage
dividends and fixed charges. Fixed charges consist of interest on all
indebtedness and that portion of rentals considered to be the interest factor.
</FN>
For additional information, reference is made to the Consolidated
Financial Statements and other information incorporated herein by reference as
described under "Incorporation of Certain Documents by Reference."
/TABLE
<PAGE>
INTRODUCTION
General. United is offering to sell
250,000 shares of its Membership Stock and $19,600,000 in principal
amount of Notes. All sales will be made by United through its regular
employees, who will not receive any additional remuneration in
connection with the sales. No sales will be made through brokers and
there are no underwriters. Membership Stock is not transferable and
there is, therefore, no public market for it. United does not expect
that any public market for Notes will develop. United anticipates that
the securities offered hereby will not all be sold in the immediate
future and that the offerings will, therefore, be made on a continuous
basis over a period of time. There is no assurance that any portion of
the offerings will be sold.
Use of Proceeds. United expects to use the
proceeds from the sale of the securities offered hereby for working
capital and general corporate purposes. To the extent that proceeds are
insufficient to meet United's requirements for working capital at any
particular time, United intends to rely upon increased borrowing from
banks. Although United has not in the past experienced any substantial
difficulty in obtaining bank financing, there can be no assurance that
United will be able to obtain additional bank financing or that it will
be able to obtain such financing at interest rates which it considers
reasonable.
Membership Stock Offered. Membership Stock
is sold only upon approval by United's board of directors to retail
grocers who have applied for and been accepted for membership in United.
Retail grocers accepted for membership will thereby gain the right to
purchase groceries and related products from United on a cooperative
basis. See "The Company." Membership Stock is sold in units of
200 shares for each retail store accepted for membership. Shares will
be sold from time to time as United's board of directors admits
additional members and as existing members are accepted for membership
with respect to additional stores. Membership Stock will also be issued
to existing members in partial payment of patronage dividends (see "The
Company") and to members who wish to purchase additional shares for
cash.
Membership Stock is offered at its adjusted
book value, as determined by United's annual audited balance sheet as of
the end of each fiscal year, effective the following January 1.
Adjusted book value per share is computed by subtracting from total
members' equity at fiscal year end, stock to be issued from patronage
and paid-in capital on such stock and undistributed equity from
investments accounted for on the equity method, net of the tax effect,
and dividing the resulting amount by shares outstanding at
fiscal year end. At October 1, 1993, the only adjustment for
investments accounted for on the equity method was United's investment
in Western Family Holding Company. The adjusted book value at October
1, 1993, was $57.00 per share. Thus, the offering price for 200 shares
during calendar year 1994 is $11,400.
From time to time, United sells Membership
Stock to new members on an installment basis. If the board of directors
determines that an applicant's financial standing merits such treatment,
Membership Stock may be issued upon receipt of a cash down payment plus
a promissory note or other undertaking to pay the balance of the
purchase price. The amount of the down payment, interest rate and other
terms of installment sales may vary depending on the applicant's
financial standing.
United's bylaws provide that, upon
termination of membership, Membership Stock will be repurchased by
United at the price at which Membership Stock is then being offered
(adjusted book value). United's board of directors may elect to pay the
repurchase price in installments upon such terms as the board of
directors determines with respect to any shares held over and above the
number of shares a member was initially required to purchase upon
acceptance to membership. For additional information, see "Description
of Membership Stock." Although United has no other obligation to
repurchase Membership Stock, the board of directors has indicated that
it will consider requests for repurchase of Membership Stock from
members which are corporations upon a bona fide transfer of ownership of
the corporate member.
It is United's policy not to declare
dividends other than patronage dividends based on a member's purchases
from United. The total amount of patronage dividends (including
Membership Stock) is taxable to individual members when distributed.
See "The Company."
United's bylaws provide that the number of
shares of Membership Stock which a member is required to purchase shall
be established by the board of directors. The board of directors has
decided that, at present, members must purchase a unit of 200 shares for
each retail store for which they are admitted as members. This number
is subject to change from time to time. There will not be any refund on
or redemption of any shares already purchased as a result of any
decrease in the number of shares required for new stores. Existing
members will not be required to purchase additional shares as a result
of any future increase in the number of shares required per store.
United's bylaws and articles of incorporation
also provide that each holder of record of Membership Stock is entitled
to one vote regardless of the number of shares owned. Thus, a newly
admitted member purchasing 200 shares of Membership Stock will have the
same voting rights as an existing member directly holding a greater or
lesser number of shares. Certain members control family corporations or
other separate entities that own shares. Those members may control more
than one vote because each controlled entity is a separate holder of
record. See "Description of Membership Stock."
Under United's present policies, members
acquiring additional Membership Stock may have (i) the possibility,
under certain circumstances, of receiving a greater portion of future
patronage dividends in cash (see "The Company--Deposit") and (ii) the
possibility of realizing gain in the event of future appreciation in the
book value of Membership Stock (see "Description of Membership Stock").
Members considering acquiring additional shares of Membership Stock
should be aware that there can be no assurance that United's future
operations will result in the payment of patronage dividends or in any
appreciation in book value. In the event of losses in future years, the
book value of Membership Stock could decline. Also, as described more
fully under "The Company" and "Description of Membership Stock," the
proportion of patronage dividends to be paid in cash and the method of
payment for repurchased shares of Membership Stock are all subject to
the discretion of United's board of directors, and the right to
repurchase at book value upon termination of membership is subject to
change by a vote of United's members. Acquisition of additional shares
of Membership Stock will not give a member any additional voting rights.
Any increase in the total number of shares
outstanding will, of course, proportionately reduce the effect of future
changes in total members' equity upon book value per share. In other
words, future increases or decreases in members' equity resulting from
earnings or losses will have a lesser effect per share if the total
number of shares outstanding is increased.
Notes Offered. United is offering Notes only
in fully registered form without coupons in denominations of $100 or
multiples of $100 at 100% of principal amount. Notes bear interest at
5% per annum, payable quarterly, and mature on the interest payment date
coinciding with, or next following, the expiration of 10 years from the
date of issue. The board of directors of United has decided to pay
interest at the rate of 5.5% per annum during the period December 16,
1993, to March 15, 1994, on all Notes outstanding at any time during
that period. On March 16, 1994, the interest rate on all Notes will
revert to the stated rate of 5% per annum unless the board of directors
takes further action. The decision to pay interest at 5.5% per annum is
a voluntary action taken by the board of directors in recognition of
prevailing interest rates. The board expects to review the interest
rate paid on Notes from time to time in light of prevailing interest
rates and other factors. There can be no assurance that the interest
rate on Notes after March 15, 1994, will exceed 5% per annum. The only
right evidenced by the Notes offered hereby is to receive timely payment
of principal and interest at 5% per annum.
Notes are issued as noncertificated Notes.
The rights of Note holders are evidenced by the Investment Note
Register. Note holders are therefore dependent on the Investment Note
Registrar to maintain accurate records regarding their Note holdings.
United presently serves as Investment Note Registrar. Because there is
no certificate, Notes may not be readily saleable. However, no market
for Notes exists or is expected to develop.
Notes are unsecured and are subordinated in
right of payment to Senior Indebtedness (as defined, see "Description of
Notes--Subordination") in the event of any liquidation or dissolution.
The amount of Senior Indebtedness at October 1, 1993, was approximately
$75,281,000 (consisting of approximately $58,281,000 in unsubordinated
long-term debt and approximately $17,000,000 in current liabilities).
Notes may be redeemed at United's option during the 7 years prior to
maturity at a redemption price equal to their principal amount plus
accrued interest. For additional information, see "Description of
Notes."
Upon the death of a registered holder or
joint registered holder, United will be legally obligated to prepay the
Note upon request of the person entitled to the Note. United may
require evidence of
death before making prepayment. Although United has no other legal
obligation to prepay Notes, its present intention is to prepay any Note,
at any time, upon request of the holder. The prepayment price upon
death or under United's prepayment policy is the principal amount of the
Note plus accrued interest.
United's prepayment policy may provide
holders of Notes with liquidity which they might not otherwise have.
Although United's present intention is to continue its prepayment policy
indefinitely, it may discontinue such policy at any time. In the event
that United discontinues its prepayment policy, holders of Notes might,
because of the absence of an established market, be unable to sell their
Notes prior to maturity or might be unable to sell the Notes other than
at a price below their principal amount.
It is anticipated that most sales of Notes
will be made to members of United, friends and relatives of members, key
employees and other persons with existing relationships with United.
United allows members to purchase Notes on a regular basis by adding the
purchase price to any such member's weekly invoice for grocery
purchases.
THE COMPANY
General. United, a wholesale grocery distributor, is an Oregon
business corporation organized in 1915 which operates and is taxed as a
cooperative.
It supplies groceries and related products to independent retail
grocers located in Oregon, western Washington and northern California.
United's goal is both to supply grocery products to retailers at prices
which enable them to compete effectively in the retail market and to
furnish them other services, such as marketing assistance, engineering,
accounting, financing, and insurance, which are important to the
successful operation of a retail grocery business.
United also sells groceries and related products at wholesale
through 28 cash-and-carry depots, principally to nonmember grocers,
restaurants, and institutional buyers.
United's board of directors consists of nine members serving
staggered three-year terms, and they may not be elected to consecutive
terms. Directors, all grocers, must either be proprietors or partners
owning a membership in United or the holder of a substantial interest in
a corporation owning a membership in United. United's directors are
Arnold L. Atkins, Bert S. Babb, Kenneth M. Owen, Gilbert A. Foster,
H. Lawrence Montgomery, Marlin A. Smythe, Dennis Blasingame, Craig
Danielson, and James C. Vickers.
The management of the corporation is under the direction of a
President and Chief Executive Officer who is employed and guided by the
board of directors.
Additional information is set forth in the documents incorporated
herein by reference.
Membership. United has approximately 250 members operating a
total of approximately 363 retail grocery stores. All applicants for
membership, who must be retail grocers, are subject to approval by
United's board of directors on the basis of financial responsibility and
operational ability. On approval, applicants are required to purchase
shares of United's Membership Stock.
Upon termination of membership, a member's shares of Membership
Stock are redeemed. Sales and redemptions of Membership Stock are made
at adjusted book
value. Adjusted book value for this purpose is determined according to
United's most recent annual audited balance sheet, adjusted for certain
items, effective for the following calendar year. See "Description of
Membership Stock."
United's board of directors may elect to pay the repurchase price
in installments with respect to any shares held over and above the
number of shares a member was initially required to purchase upon
acceptance to membership. See "Description of Membership Stock."
The following table shows the adjusted book value per share of
Membership Stock for the past five years:
<TABLE>
<CAPTION>
Fiscal years ended
Oct 1 Oct 2 Sept 27 Sept 28
Sept 30
1993 1992 1991 1990
1989 <S> <C> <C> <C>
<C> <C>
Adjusted book value per share $57.00 $53.94 $48.99 $46.24
$43.81
</TABLE>
The issuance of the additional shares offered hereby may result
in substantial dilution of the rate of increase or decrease in adjusted
book value per share. See "Introduction."
Cost Savings. By pooling the buying power of its members, United
is able to purchase goods in large quantities at prices lower than the
prices generally available to independent retail grocers. The savings
from the bulk purchases are passed along to members in the form of
rebates, allowances and patronage dividends.
Sales to members are invoiced to their accounts at prices
contained in United's order guide. While the complex pricing systems
used in the wholesale grocery industry make item-by-item price
comparisons impracticable, United believes that its pricing structure,
including the various cost savings available to members, compares
favorably on an overall basis with the pricing structures of its
competitors. A cost equalization program results in the addition or
subtraction of a percentage of the member's weekly invoice cost based on
the member's average weekly purchases for the preceding four weeks,
excluding drop shipment purchases. The cost equalization percentages
are designed to reflect the economies of scale realized by United in
servicing larger accounts.
Rebates and allowances are paid to members periodically based
upon their purchases of particular items or their promotional and
advertising performance. Generally, such rebates and allowances stem
from United's margins and the merchandising or promotional programs of
United's suppliers. The amount of rebates and allowances paid to
members with respect to particular items may vary from the amount
realized by United from its suppliers.
United also pays its members annual patronage dividends based on
the overage, or excess of revenues over expenses, on sales to members
for the year. Each year United's board of directors determines the
portion of the overage which is to be distributed as patronage
dividends. For fiscal year 1993, the
board decided to distribute 79.7% of the overage that was available for
distribution. Decisions concerning the portion of overage to be
retained are based upon various factors, including United's future
capital needs and the amount of earnings available from operations not
qualifying for distribution as patronage dividends. The patronage
dividends are allocated among the members in proportion to the
contribution to United's gross profit (before rebates and allowances)
attributable to their purchases from United. The patronage dividends
are paid partly in cash and partly in Membership Stock. See "Deposit."
As a result of cost equalization, rebates, allowances and
patronage dividends, the total cost savings each member realizes will
vary depending on the member's volume of purchases and merchandising of
particular products.
Patronage Dividends and Tax Matters. The following discussion
summarizes the operation of certain aspects of the federal income tax
treatment of cooperatives. The tax treatment of cooperatives is subject
to change from time to time as the Internal Revenue Code of 1986, as
amended ("Code"), is amended and as new regulations and interpretations
are periodically adopted.
United operates and is taxed as a cooperative. Accordingly,
patronage dividends are not included in United's taxable income but are
instead taxed to the individual members receiving the patronage
dividends.
The Code requires that not less than 20% of each member's
patronage dividend be paid in cash. It is United's policy to at least
meet that minimum requirement and to pay the balance of patronage
dividends in Membership Stock. See "Deposit" for information regarding
the method used by United to determine the patronage dividends to be
paid in cash in excess of the Code's minimum requirement.
Members are required to agree to abide by all United's bylaw
provisions, including those applicable to federal income taxation of
patronage dividends. Accordingly, members must report as taxable income
the total amount of patronage dividends, including the adjusted book
value of Membership Stock, in the year such patronage dividends are
received, and such amounts are not taxable to United.
United is taxed on income which does not qualify for distribution
as patronage dividends and on the portion of overage which is not
distributed to members. United's subsidiaries generally retain all
profits (or losses) from their operations and are subject to all
applicable income taxes.
Deposit. Members are encouraged to accumulate holdings of
Membership Stock. Such holdings are referred to in the cooperative
grocery trade as "Deposits," although the Membership Stock is not
physically deposited with United. The amount of a member's Deposit is
defined to be the adjusted book value of his or her Membership Stock.
The Deposit does not include notes representing United's obligation to
pay the deferred balance of the price of Membership Stock repurchased
from members or Capital Investment Notes. The Deposit is used to:
a. Provide a guarantee fund for the member's purchases on open
account.
b. Ensure the funding of United's operations.
c. Serve as a basis for calculating cash patronage dividends.
The method of calculation is intended to encourage members to
maintain
Deposits of at least one and one half times their average weekly
purchases ("AWP") from United. AWP is the average of a member's
weekly purchases of all items from United during the fiscal year
for which patronage dividends are being calculated.
In recent years, the noncash portion of patronage dividends has
been paid in Membership Stock, and it is anticipated that future
payments will also be made in Membership Stock. The board's present
policy is to pay patronage dividends as follows:
1. If the Deposit is less than one and one half times AWP, the
member's patronage dividend is paid 20% in cash and 80% in
Membership Stock.
2. If the Deposit equals or exceeds one and one half times AWP
but is less than 4,000 shares, the member's patronage dividend is
paid 80% in cash and 20% in Membership Stock.
3. If the Deposit equals or exceeds one and one half times AWP
and is at least 4,000 shares, the member's patronage dividend is
paid 100% in cash.
4. In the case of multiple store operations, Deposit and AWP
requirements are applied on a per store basis.
5. If a member's Deposit exceeds 4,000 shares of Membership
Stock per store, excess shares may be submitted for redemption
over a five-year period. Twenty percent of the shares submitted
for each store will be redeemed each year at the current share
price for that year.
The board's Deposit policy is subject to change from time to
time. Although the board expects to retain the general principle of
paying increasing portions of patronage dividends in cash as a member's
Deposit increases, the board may, in the future, decide to consider
additional factors in the payment of patronage dividends. Therefore,
there can be no assurance that the purchase of Membership Stock by a
member will result in the member's receiving any particular portion of
future patronage dividends in cash.
DESCRIPTION OF MEMBERSHIP STOCK
United's authorized Membership Stock consists of 10,000,000
shares of Membership Stock, $5 par value. Membership Stock is sold only
to members of United. All members must be actively engaged in the
retail grocery business and must be approved by the board of directors,
primarily on grounds of financial responsibility and operational
ability, before being admitted to membership.
Each member must purchase the number of shares of Membership
Stock as determined by the board of directors for each retail store the
member operates. Each shareholder of record is entitled to one vote,
regardless of the number of shares owned. Certain members control
family corporations or other separate entities that own shares. Those
members may control more than one vote because each controlled entity is
a separate holder of record. Voting for directors is noncumulative.
Membership Stock is not transferable and is not negotiable.
Under United's bylaws all shares are sold at adjusted book value and,
upon a member's death, retirement, voluntary withdrawal, expulsion or
cessation of purchases from United, will be repurchased by United at
adjusted book value as determined
by United's annual audited balance sheet as of the end of each fiscal
year, effective the following January 1. Adjusted book value per share
is computed by subtracting from total members' equity, stock to be
issued from patronage and paid-in capital on such stock and
undistributed equity from investments accounted for on the equity
method, net of the tax effect, and dividing the resulting amount by
shares outstanding at fiscal year end (as restated for any stock splits,
stock dividends or similar changes). United's bylaws provide that the
repurchase price for any shares over and above the number of shares the
member was required to purchase as a condition of membership for a
retail store or stores may, in the discretion of United's board of
directors, be paid in 20 quarterly installments with interest at the
same rate being paid from time to time (presently 5.5%) on United's
Capital Investment Notes then being offered or in such other manner as
the board of directors may from time to time determine.
United's board has adopted a policy, subject to change without
notice, requiring United to repurchase on request the number of shares a
member owns in excess of 4,000. The excess shares are repurchased over
a five-year period at the current adjusted book value each year, payable
in cash.
United's obligation to repurchase the shares of members is
subject to the general limitations imposed by the Oregon Business
Corporation Act that United may not purchase shares if, after giving the
purchase effect, United would not be able to pay its debts as they
become due in the usual course of business or United's total assets
would be less than its total liabilities.
A member is subject to expulsion by the board of directors for
the following reasons: (l) disclosure to nonmembers of confidential
information relating to United's business, (2) abuse of office by
officers, (3) purchase of goods for the benefit of a nonmember,
(4) commission of a felony, (5) violation of the corporation's bylaws,
or (6) action to the detriment of the corporation. Since 1954, no
members have been expelled. Patronage dividends for the fiscal year in
which a membership is terminated are paid in cash following the end of
the fiscal year, based on the member's purchases from United during the
fiscal year. All bylaw provisions, including those relating to the
repurchase of Membership Stock at adjusted book value, are subject to
amendment by a vote of a two-thirds majority of the quorum of shares
voting on such amendment.
Shares of Membership Stock are issued from time to time upon
payment of less than the full purchase price. Upon payment of the full
purchase price, shares of Membership Stock are fully paid and
nonassessable. A member's interest in the adjusted book value of shares
of Membership Stock, is, however, subject to being set off against any
debts of the member to United or its subsidiaries.
The shares of Membership Stock are entitled to share pro rata in
any liquidating distributions and dividends other than patronage
dividends. It is not the policy of the board of directors to declare
any dividends other than patronage dividends. In the event of any
liquidation of United, the rights of holders of Membership Stock with
respect to any liquidating distributions and the rights of former
holders of Membership Stock with respect to any deferred payments due
them would be subordinated to all other claims against United's assets.
Shares of Membership Stock are not subject to any sinking fund
provisions and have no conversion rights.
DESCRIPTION OF NOTES
The Notes offered hereby are issued as the eighth series of
Capital Investment Notes under an indenture dated as of February 1,
1978, between United and United States National Bank of Oregon, as
trustee ("U. S. Bank"), as supplemented by supplemental indentures dated
as of August 15, 1979, November 11, 1981, December 15, 1984,
December 15, 1986, January 27, 1989, January 22, 1991, and July 6, 1992,
between United and U. S. Bank (which indenture, as so supplemented, is
herein referred to as the "Indenture"). First Trust National
Association ("Trustee") has assumed U. S. Bank's rights and obligations
as trustee under the Indenture. A copy of the Indenture is on file with
the Securities and Exchange Commission as an exhibit to the registration
statement of which this prospectus forms a part. The following
description summarizes certain provisions of the Indenture and is
subject to the detailed provisions of the Indenture, to which reference
is hereby made for a complete statement of such provisions. Whenever
particular Sections or terms defined in the Indenture are referred to
herein, such Sections or definitions are incorporated by reference.
References in parentheses are to Sections of the indenture dated as of
February 1, 1978, except that references marked with an asterisk (*) are
to Sections of the supplemental indenture dated as of July 6, 1992. See
"Additional Information."
General. Notes bear interest from the date of issue at the
stated annual rate indicated on the cover page of this prospectus.
United may, under the Indenture, issue Notes at other interest rates,
but no change in interest rates may affect the stated interest rate on
Notes then outstanding. Interest is paid on the 15th day of March,
June, September, and December for the quarters ending on those dates to
the persons in whose names the Notes are registered as of the last
business day of the calendar month preceding the payment date.
(Secs. 3.06 and 4.02*)
Notes mature on the interest payment date which is on, or next
following, the date ten years from the date of issue, are unsecured
obligations of United and are limited to $50,000,000 aggregate principal
amount, of which $19,600,000 is being offered pursuant to this
prospectus. Notes are issuable only in registered form, without
coupons, in denominations of $100 or any multiple of $100 approved by
United. Notes are issued as noncertificated Notes. (Secs. 1.15, 3.02,
2.01*, 4.01* and 4.02*)
Principal and interest on all Notes are payable at the principal
office of United in Clackamas County, Oregon, provided that, at the
option of United, interest and principal payments on Notes may be made
by check mailed to the address of the registered holders of the Notes.
United intends to pay interest and principal by check. (Secs. 3.01,
7.02 and 3.03*) United will exchange Notes for other Notes of the same
series and of a like principal amount and having the same terms and
conditions upon written request of the holder. No service charge will
be made to the holder for any exchange or transfer, except for any tax
or governmental charge incidental thereto. (Secs. 3.04 and 3.04*)
United is required to mail quarterly statements of Note holdings to
holders of Notes. (Sec. 4.03*)
United may from time to time without the consent of any holder of
an outstanding Note issue under the Indenture, by means of an indenture
supplemental thereto, additional Capital Investment Notes having
different terms and of a series other than the Notes. The amount of
additional Capital Investment Notes or other debt which may be issued by
United is not limited by the Indenture. (Sec. 4.01)
The Indenture does not contain any covenant or provision that
protects the holders of Notes against a reduction in the value of the
Notes resulting from a highly leveraged transaction, whether or not such
transaction involves a change in control of United. Similarly, no
holder of Senior Indebtedness of United at October 1, 1993, is protected
against a reduction in the value of Senior Indebtedness held by such
holder resulting from a highly leveraged transaction, except that
certain agreements relating to Senior Indebtedness require that United
maintain specified financial ratios.
Prepayment. Although United is not obligated to prepay Notes
except in the event of the death of a registered holder, United's
present intention is to prepay the principal amount of any Note,
together with accrued interest to the date of payment, at any time upon
the request of the holder.
In the event of the death of a registered holder or joint
registered holder of a Note, United is obligated, at the option of the
person legally entitled to become the holder of the Note, to prepay the
principal amount of the Note, together with accrued interest to the date
of payment. Any request for prepayment must be made to United in
writing. United may, as a condition precedent to the prepayment,
require the submission of evidence satisfactory to United of the death
of the registered holder or joint registered holder and such additional
documents or other material as it may consider necessary to establish
the person entitled to become the holder of the Note or such other facts
as it considers relevant to the fulfillment of its prepayment
obligation. (Sec. 5.01*)
Redemption. The Notes may be redeemed at the election of United
during the seven years prior to maturity at their principal amount, plus
accrued interest, upon not less than 30 days' notice by mail to the
registered holder. United, in its sole discretion, may designate for
redemption Notes maturing on specified dates or bearing specified
interest rates. If less than all the Notes with a specified maturity
date or interest rate are to be redeemed, the Trustee shall select the
particular Notes to be redeemed in whole or in part. (Secs. 5.02* and
5.03*) No interest on Notes selected for redemption will accrue after
the date fixed for redemption. (Sec. 5.04*)
Subordination. Payment of the principal of, and interest on, the
Notes is subordinated in the manner and to the extent set forth in the
Indenture in right of payment to the prior payment in full of all Senior
Indebtedness. (Sec. 6.01*) Senior Indebtedness is defined as
indebtedness of United, whether outstanding on the date of the Indenture
or thereafter incurred, (a) for money borrowed by United (other than
indebtedness evidenced by Capital Investment Notes and Registered
Redeemable Building Notes); (b) for money borrowed by others and
guaranteed by United; (c) constituting purchase money indebtedness
incurred for the purchase of tangible property and for the payment of
which United is directly or contingently liable; or (d) arising under
any document creating an absolute or contingent obligation of United to
purchase promissory notes and related documents from third parties;
unless by the terms of the instrument creating or evidencing the
indebtedness it is provided that such indebtedness is not superior in
right of payment to the Notes. (Secs. 1.01* and 6.01*) The Indenture
does not limit the amount of Senior Indebtedness which United may incur.
The Indenture provides that, in the event of and during the
continuation of any default on any Senior Indebtedness, no payment may
be made on the Notes or for the redemption or purchase of Notes.
(Sec. 6.03*) Upon any distribution of assets of United, upon any
liquidation, dissolution, winding up or
reorganization of United, whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of
creditors, or other proceeding, all principal of (and premium, if any)
and interest on all Senior Indebtedness must be paid in full before the
holders of the Notes are entitled to receive or retain any payment.
Subject to the payment in full of all Senior Indebtedness, the holders
of the Notes are subrogated to the rights of the holders of the Senior
Indebtedness to receive distributions of assets of United applicable to
Senior Indebtedness until the Notes are paid in full. (Sec. 6.02*) By
reason of such subordination, in the event of insolvency, creditors of
United who are holders of Senior Indebtedness may recover more, ratably,
than the holders of the Notes, and creditors of United who are not
holders of Senior Indebtedness or of the Notes may recover less,
ratably, than the holders of Senior Indebtedness, and may recover more,
ratably, than the holders of the Notes.
Modification of Indenture. Modifications and amendments of the
Indenture may be made by United and the Trustee with the consent of the
holders of 66 2/3% in principal amount of the Capital Investment Notes
of all series then outstanding, provided that no such modification or
amendment may, without the consent of the holder of each Note affected
thereby, (a) change the maturity date of the principal or the interest
payment dates; (b) reduce the principal amount of or the interest on any
Note; (c) change the currency of payment; (d) impair the right to
institute suit for the enforcement of any such payment on or after the
maturity date or the Redemption Date, as the case may be; or (e) reduce
the above-stated percentage of holders of Capital Investment Notes
necessary to modify or amend the Indenture. (Sec. 13.02)
Events of Default; Notice and Waiver. The following constitute
Events of Default: (a) default in the payment of any interest continued
for 30 days; (b) default in the payment of the principal of (or premium,
if any, on) any Capital Investment Note at its maturity; (c) default in
the performance of any other covenant or warranty of United, continued
for 60 days after written notice as provided in the Indenture;
(d) acceleration of any Senior Indebtedness of United as a result of a
default with respect thereto if such acceleration is not rescinded
within 30 days after written notice as provided in the Indenture; and
(e) certain events in bankruptcy, insolvency or reorganization.
(Sec. 9.01) If an Event of Default shall happen and be continuing, the
Trustee or the holders of not less than 25% in principal amount of
outstanding Capital Investment Notes may declare the principal of all
the Capital Investment Notes to be due and payable immediately.
(Sec. 9.02)
The Indenture provides that the Trustee will, within 90 days
after the occurrence of a default, give to the holders of Capital
Investment Notes notice of such default known to it, unless such default
shall have been cured or waived; but, except in the case of a default in
the payment of the principal of (or premium, if any) or interest on any
of the Capital Investment Notes, the Trustee shall be protected in
withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of such holders.
(Sec. 9.14)
The holders of a majority in principal amount of the outstanding
Capital Investment Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
such direction shall not be in conflict with any rule of law or the
Indenture. (Sec. 9.12) Before proceeding to exercise any right or power
under the Indenture at the direction of such holders, the Trustee is
entitled to receive from such holders reasonable security or indemnity
against the costs, expenses and liabilities which might
be incurred by it in compliance with any such direction. (Sec. 10.02)
The holders of not less than a majority in principal amount of
the outstanding Capital Investment Notes may, on behalf of the holders
of all the Capital Investment Notes, waive any past default except (a) a
default in the payment of principal of (or premium, if any) or interest
on any Capital Investment Note, and (b) a default in respect of a
covenant or provision of the Indenture which cannot be amended without
the consent of the holder of each Capital Investment Note affected.
(Sec. 9.13)
United is required to furnish to the Trustee annually a statement
as to the fulfillment by United of all its obligations under the
Indenture. (Sec. 7.06)
Other. The Notes have no sinking fund provisions. The Indenture
contains no restrictions on the dividends that may be paid by United and
imposes no obligations with respect to the maintenance of reserves,
levels of net worth, liabilities, working capital or the like.
Regarding the Trustee. United has no agreements or business
relationships with the Trustee other than those contained in or
contemplated by the Indenture. The Trustee is required to furnish
annual reports to holders of Notes as to certain matters relating to the
Notes, the Trustee's performance and the Trustee's eligibility to act as
Trustee. (Sec. 8.03)
LEGAL MATTERS
The validity of the Membership Stock and Notes offered hereby
have been passed upon for United by Miller, Nash, Wiener, Hager &
Carlsen, Portland, Oregon, who have acted as special counsel to United
in connection with this offer.
EXPERTS
The consolidated financial statements of United incorporated in
this prospectus by reference have been audited by DeLap, White & Raish,
independent certified public accountants, as indicated in their report
with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in auditing and accounting in giving
said report.
ADDITIONAL INFORMATION
This prospectus omits certain information contained in a
registration statement filed by United with the Securities and Exchange
Commission. For further information, reference is made to
the registration statement, including the financial schedules and
exhibits filed as a part thereof. See "Statement of Available
Information."
<PAGE>
<PAGE>
PART II
Information Not Required in Prospectus
<TABLE>
<CAPTION>
Item 14. Other Expenses of Issuance and Distribution.
<S> <C>
a. Registration fees $ 5,057.00
b. Printing, mailing and engraving costs 6,000.00*
c. Legal fees 25,000.00*
d. Accounting fees 20,000.00*
e. Blue sky fees 7,019.55
f. Other 6,923.45*
Total $70,000.00*
</TABLE>
* Expense is estimated.
Item 15. Indemnification of Directors and Officers
Section 60.367 of Oregon Revised Statutes (a part of the
Oregon Business Corporation Act) provides in substance that any director
held liable pursuant to that section for the unlawful payment of a
dividend or other distribution of assets of a corporation shall be
entitled to contribution from the shareholders who accepted the dividend
or distribution, knowing the same to have been made in violation of said
Act or the articles of incorporation. The section also provides that
any such director shall be entitled to contribution from the other
directors who voted for or assented to the dividend or distribution
without complying with the applicable standards of conduct prescribed by
said Act.
As authorized by said Act, Article V of the registrant's
restated articles of incorporation provides:
"ARTICLE V
"A. Indemnification; Actions and Suits Other than
by the Corporation. 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 (other
than an action by or in the right 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 as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or
by reason of any action taken or not taken in his
capacity as such director, officer, employee or agent may
be indemnified by the corporation against expenses
(including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding,
including any appeal relating thereto, if he acted<PAGE>
<PAGE>
in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person
(i) did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interest of the
corporation or (ii) with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was
unlawful.
"B. Indemnification; Actions and Suits by the
Corporation. Any person who was or is a party or is
threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the
corporation to procure a judgment in its favor 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 as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or
by reason of any action taken or not taken in his
capacity as such director, officer, employee or agent,
may be indemnified by the corporation against expenses
(including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or
settlement of such action or suit, including any appeal
relating thereto, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to
the best interests of the corporation and except that no
indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless and
only to the extent that the court in which such action or
suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which
such court shall deem proper.
"C. Indemnification as a Matter of Right. To the
extent that a person referred to in Sections A and B of
this Article has been successful on the merits or
otherwise in defense of any action, suit or proceeding
referred to in Sections A and B of this Article, or in
defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorney's
fees) actually and reasonably incurred by him in
connection therewith, as a matter of right.
"D. Indemnification Other Than as a Matter of
Right. Any indemnification under Sections A and B of
this Article of a person referred to therein (unless
ordered by a court) shall be made by the corporation only
as authorized in the specific case upon a determination
that indemnification is proper in the circumstances
because the applicable standard of conduct set forth in
Sections A and B of this Article, as the case may be, has
been met. Such determination shall be made (i) by the
Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such
action, suit or<PAGE>
<PAGE>
proceeding, (ii) if such a quorum is not obtainable, or, even if
obtainable, and a quorum of disinterested directors so directs by
independent legal counsel in a written opinion, or (iii) by the
shareholders.
"E. Payment of Expenses in Advance. Expenses
incurred in defending a civil or criminal action, suit or
proceeding, may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding,
as authorized in the manner provided in Section D of this
Article upon receipt of an undertaking by or on behalf of
the director, officer, employee or agent to repay such
amount unless it shall ultimately be determined that he
is entitled to be indemnified by the corporation as
authorized in this Article.
"F. Provision Not Exclusive. The indemnification
provided by this Article shall not be deemed exclusive of
any other rights to which those indemnified may be
entitled under any other provision of these Restated
Articles of Incorporation, or any bylaw, agreement, vote
of shareholders or disinterested directors or otherwise,
both as to action in his official capacity and as to
action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of
such a person.
"G. Insurance. The corporation may purchase and
maintain insurance on behalf of any person who is or was
a director, officer, employee or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against
him and incurred by him in any such capacity or arising
out of his status as such, whether or not the corporation
has the authority or obligation to indemnify him against
such liability under the provisions of this Article."
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("1933 Act") may be permitted to directors,
officers and controlling persons of the registrant pursuant to the
foregoing provisions, 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 1933 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 1933 Act and will be governed by the
final adjudication of such issue.
The registrant maintains a policy of insurance (incorporated
by reference in Exhibit 10-B hereto) which provides for coverage of
certain of the registrant's obligations under this provision. The
undertaking of the registrant in the preceding paragraph shall not apply
to insurance against liability arising under the 1933 Act.<PAGE>
<PAGE>
Item 16. Exhibits.
The exhibits are listed in the accompanying index to
exhibits.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(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 1933 Act;
(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;
(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 1933 Act, 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.
The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or
Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or cause
to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
See Item 15 regarding the Securities and Exchange
Commission's position on indemnification.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-2 and has duly
caused this amendment to this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Milwaukie, State of Oregon, on January 7, 1994.
UNITED GROCERS, INC.
(Registrant)
By:/s/ JOHN W. WHITE
John W. White, Vice President
Pursuant to the requirements of the Securities Act of 1933,
this amendment to this registration statement has been signed by the
following persons in the capacities indicated on January 7, 1994.
Name Title
Principal executive officer
* ALAN C. JONES President
Alan C. Jones Secretary and
Treasurer
Principal financial officer and
principal accounting officer
/s/ JOHN W. WHITE Vice President
and
John W. White Chief Financial
Officer
A majority of the Board of Directors
* ARNOLD L. ATKINS Director
Arnold L. Atkins
* BERT G. BABB Director
Berg G. Babb
* KENNETH M. OWENS Director
Kenneth M. Owens
* GILBERT A. FOSTER Director
Gilbert A. Foster
* H. LAWRENCE MONTGOMERY Director
H. Lawrence Montgomery
* MARLIN A. SMYTHE Director
Marlin A. Smythe
* By /s/ JOHN W. WHITE
John W. White
Attorney-in-fact
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
4-A. Form of certificate representing shares of the registrant's
common stock, $5 par value (incorporated by reference to Exhibit
4-A to the registrant's registration statement on Form S-2, No.
33-26631).
4-B. Copy of indenture dated as of February 1, 1978, between the
registrant and United States National Bank of Oregon, as trustee,
relating to the registrant's Capital Investment Notes
(incorporated by reference to Exhibit 4-I to the registrant's
registration statement on Form S-1, No. 2-60488).
4-C. Copy of supplemental indenture dated as of July 6, 1992, between
the registrant and United States National Bank of Oregon, as
trustee, relating to the registrant's Series H 5% Subordinated
Redeemable Capital Investment Notes (incorporated by reference to
Exhibit 4-C to the registrant's registration statement on Form
S-2, No. 33-49450).
4-D. Copy of the registrant's restated articles of incorporation, as
amended (incorporated by reference to Exhibit 4-E to the
registrant's registration statement on Form S-2, No. 33-26631).
4-E. Copy of the registrant's bylaws, as amended (incorporated by
reference to Exhibit 4-F to the registrant's registration
statement on Form S-2, No. 33-26631).
5. Opinion of Miller, Nash, Wiener, Hager & Carlsen (previously
filed as part of this registration statement).
10-A1. Copy of United Grocers, Inc. pension plan and trust agreement
dated as of October 1, 1985 (incorporated by reference to Exhibit
10-A to the registrant's registration statement on Form S-2, No.
33-11212).
10-A2. Copy of first amendment to United Grocers, Inc., pension plan and
trust agreement dated as of October 1, 1987 (incorporated by
reference to Exhibit 10-B to post-effective amendment No. 1 to
the registrant's registration statement on Form S-2, No.
33-11212).
10-A3. Copy of policy summary and related documents pertaining to a life
insurance policy for Alan C. Jones, President of the registrant,
purchased pursuant to the registrant's supplemental executive
retirement plan (incorporated by reference to Exhibit 10-E to the
registrant's Form 10-K for the fiscal year ended September 28,
1990).
10-A4. Copy of registrant's executive deferred compensation plan
(incorporated by reference to Exhibit 10-U to the registrant's
Form 10-K for the fiscal year ended September 27, 1991).
10-A5. Copy of executive compensation agreement dated March 1, 1991
(incorporated by reference to Exhibit 10-T to the registrant's
Form 10-K for the fiscal year ended September 27, 1991).
<PAGE>
<PAGE>
10-B. Copy of binder of insurance with respect to indemnification of
officers and directors, as described under Item 15 (incorporated
by reference to Exhibit 10-C to the registrant's Form 10-K for
the fiscal year ended October 1, 1993).
10-C1. Copy of note purchase agreement dated as of April 15, 1988, among
the registrant, Seattle-First National Bank, and United States
National Bank of Oregon (incorporated by reference to Exhibit
10-V to the registrant's Form 10-K for the fiscal year ended
September 30, 1988).
10-C2. Copy of amendment number one to 1988 note purchase agreement
among the registrant, Seattle-First National Bank, and United
States National Bank of Oregon (incorporated by reference to
Exhibit 10-C2 to the registrant's registration statement on Form
S-2, No. 33-26631).
10-C3. Copy of amendment number two to 1988 note purchase agreement,
dated March 31, 1989, among the registrant, Seattle-First
National Bank, and United States National Bank of Oregon
(incorporated by reference to Exhibit 10-R3 to the registrant's
Form 10-K for the fiscal year ended September 30, 1989).
10-C4. Copy of amendment number three to 1988 note purchase agreement,
dated as of April 16, 1990, among the registrant, Seattle-First
National Bank, and United States National Bank of Oregon
(incorporated by reference to Exhibit 10-Q4 to the registrant's
Form 10-K for the fiscal year ended September 28, 1990).
10-C5. Copy of amendment number four to 1988 note purchase agreement
dated as of September 27, 1991, among the registrant,
Seattle-First National Bank, and United States National Bank of
Oregon (incorporated by reference to Exhibit 10-Q5 to the
registrant's Form 10-K for the fiscal year ended September 27,
1991).
10-C6. Copy of note purchase agreement dated March 31, 1989, and
modification to note purchase agreement dated March 31, 1989,
among the registrant, Seattle-First National Bank, and United
States National Bank of Oregon (incorporated by reference to
Exhibit 10-R4 to the registrant's Form 10-K for the fiscal year
ended September 30, 1989).
10-C7. Copy of amendment to 1989 note purchase agreement, dated as of
April 16, 1990, among the registrant, Seattle-First National
Bank, and United States National Bank of Oregon (incorporated by
reference to Exhibit 10-Q6 to the registrant's Form 10-K for the
fiscal year ended September 28, 1990).
10-C8. Copy of amendment number two to 1989 note purchase agreement,
dated as of September 27, 1991, among the registrant,
Seattle-First National Bank, and United States National Bank of
Oregon (incorporated by reference to Exhibit 10-Q8 to the
registrant's Form 10-K for the fiscal year ended September 27,
1991).
10-C9. Copy of note purchase agreement dated as of April 16, 1990, among
the registrant, Seattle-First National Bank and United States
National Bank of Oregon (incorporated by reference to Exhibit
10-Q7<PAGE>
<PAGE>
to the registrant's Form 10-K for the fiscal year ended September
28, 1990).
10-C10 Copy of amendment number two to 1990 note purchase agreement,
dated as of September 27, 1991, among the registrant,
Seattle-First National Bank and United States National Bank of
Oregon (incorporated by reference to Exhibit 10-Q10 to the
registrant's Form 10-K for the fiscal year ended September 27,
1991).
10-C11. Copy of credit agreement of July 31, 1991, among the registrant,
United States National Bank of Oregon, Seattle-First National
Bank, and Security Pacific Bank Oregon (incorporated by reference
to Exhibit 4-H to the registrant's Form 10-K for the fiscal year
ended September 27, 1991).
10-C12. Copy of amendments 1, 2, and 3 to credit agreement of July 31,
1991, among the registrant, United States National Bank of
Oregon, Seattle-First National Bank, and Security Pacific Bank
Oregon, dated as of August 19, 1991, December 20, 1991, and March
13, 1992 (incorporated by reference to Exhibit 4-C2 to the
registrant's Form 10-K for the fiscal year ended October 2,
1992).
10-C13. Copy of amendment 4 to credit agreement of July 31, 1991, among
the registrant, United States National Bank of Oregon,
Seattle-First National Bank, and Bank of America Oregon
(successor organization to Security Pacific Bank Oregon), dated
as of April 20, 1993 (incorporated by reference to Exhibit 4-C3
to the registrant's Form 10-K for the fiscal year ended October
1, 1993).
10-C14. Copy of amendment 5 to credit agreement of July 31, 1991, and
amendment to notes, among the registrant, United States National
Bank of Oregon, Seattle-First National Bank, and Bank of America
Oregon (successor organization to Security Pacific Bank Oregon),
dated as of May 28, 1993 (incorporated by reference to Exhibit
4-C4 to the registrant's Form 10-K for the fiscal year ended
October 1, 1993).
10-C15. Copy of promissory notes to United States National Bank of
Oregon, Seattle-First National Bank, and Bank of America Oregon
(successor organization to Security Pacific Bank Oregon), dated
as of April 20, 1993 (incorporated by reference to Exhibit 4-C5
to the registrant's Form 10-K for the fiscal year ended October
1, 1993).
10-C16. Copy of note agreement dated as of September 20, 1991, and Senior
Notes dated September 24, 1991, among the registrant and various
purchasers (incorporated by reference to Exhibit 4-I to the
registrant's Form 10-K for the fiscal year ended September 27,
1991).
10-C17. Copy of 1991 note purchase agreement dated as of September 27,
1991, among the registrant, United States National Bank of
Oregon, and Seattle-First National Bank (incorporated by
reference to Exhibit 10-S to the registrant's Form 10-K for the
fiscal year ended September 27, 1991).
10-C18. Copy of Promissory Note, Assignment of Rents and Leases, Deed of
Trust, Financing Agreement and Security Agreement, and
Environmental Indemnity Agreement dated as of September 30, 1993,
<PAGE>
<PAGE>
between the registrant and United of Omaha Life Insurance
Company, relating to the registrant's construction of a new
office building (incorporated by reference to Exhibit 4-E to the
registrant's Form 10-K for the fiscal year ended October 1,
1993).
10-C19. Interest rate and currency exchange agreement dated as of April
22, 1993, between the registrant and Bank of America National
Trust and Savings Association.
10-D1. Typical forms executed in connection with loans to members,
including directors.
10-D1a. Installment note (Stevens-Ness form 217), with optional interest
rate riders (incorporated by reference to Exhibit 10-D1a to the
registrant's Form 10-K for the fiscal year ended October 2,
1992).
10-D1b. Promissory note (Stevens-Ness form 216), with optional interest
rate riders (incorporated by reference to Exhibit 10-D16 to the
registrant's Form 10-K for the fiscal year ended October 2,
1992).
10-D1c. Subsequent note (three forms) (incorporated by reference to
Exhibit 10-D1c to the registrant's Form 10-K for the fiscal year
ended October 2, 1992).
10-D1d. Loan agreement (two forms) (incorporated by reference to Exhibit
10-D1d to the registrant's Form 10-K for the fiscal year ended
October 2, 1992).
10-D1e. Loan agreement for subsequent notes (incorporated by reference to
Exhibit 10-D1e to the registrant's Form 10-K for the fiscal year
ended October 2, 1992).
10-D1f. Amendment to loan and security agreements, including optional
clauses (incorporated by reference to Exhibit 10-D1f to the
registrant's Form 10-K for the fiscal year ended October 2,
1992).
10-D1g. Security agreement (Stevens-Ness form 1201) (incorporated by
reference to Exhibit 10-D1g to the registrant's Form 10-K for the
fiscal year ended October 2, 1992).
10-D1h. Purchase money security agreement (Stevens-Ness form 1202)
(incorporated by reference to Exhibit 10-D1h to the registrant's
Form 10-K for the fiscal year ended October 2, 1992).
10-D1i. Security agreement for equipment (Stevens-Ness form 1203)
(incorporated by reference to Exhibit 10-D1i to the registrant's
Form 10-K for the fiscal year ended October 2, 1992).
10-D1j. Inventory loan and security agreement (Stevens-Ness form 1206)
(incorporated by reference to Exhibit 10-D1j to the registrant's
Form 10-K for the fiscal year ended October 2, 1992).
10-D1k. Security agreement (equipment and inventory) (incorporated by
reference to Exhibit 10-D1k to the registrant's Form 10-K for the
fiscal year ended October 2, 1992).
10-D1l. Security agreement for subsequent notes (incorporated by
reference to Exhibit 10-D1l to the registrant's Form 10-K for the
fiscal year<PAGE>
<PAGE>
ended October 2, 1992).
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the
registrant has filed the forms listed above in lieu of filing
each document executed in connection with loans to directors. A
schedule showing the principal amount and interest rate of each
director loan at November 26, 1993, appears in Item 13.C of the
registrant's Form 10-K for the fiscal year ended October 1, 1993.
The registrant agrees to furnish a copy of any omitted loan
document to the Securities and Exchange Commission upon request.
10-D2a. Typical form of residual stock redemption note executed in
connection with redemption of common stock from members,
including directors (incorporated by reference to Exhibit 10-D2
to the registrant's Form 10-K for the fiscal year ended October
2, 1992).
10-D2b. Schedule listing material details of residual stock redemption
notes payable to directors and nominees.
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the
registrant has filed the form and schedule listed above in lieu
of filing each document executed in transactions with directors.
The registrant agrees to furnish a copy of any omitted document
to the Securities and Exchange Commission upon request.
10-E1. Copy of sublease agreement for Salem store dated August 28, 1986,
between the registrant and Arnold L. Atkins, a director of the
registrant (incorporated by reference to Exhibit 10-F6 to the
registrant's Form 10-K for the fiscal year ended September 28,
1990).
10-E2. Copy of option and loan modification agreement dated November 30,
1992, between the registrant and Lindar Limited, an affiliate of
Arnold L. Atkins, a director of the registrant (incorporated by
reference to Exhibit 10-F2 to the registrant's Form 10-K for the
fiscal year ended October 1, 1993).
10-F1. Copy of sublease agreement for Sandy store dated March 8, 1990,
between the registrant and Sandy Thriftway, Inc., an affiliate of
Pamela Garcia, a nominee for director of the registrant
(incorporated by reference to Exhibit 10-H1 to the registrant's
Form 10-K for the fiscal year ended October 1, 1993).
10-F2. Copy of sublease agreement for Murrayhill store dated October 30,
1989, between the registrant and Murrayhill Thriftway, Inc., an
affiliate of Pamela Garcia, a nominee for director of the
registrant (incorporated by reference to Exhibit 10-H2 to the
registrant's Form 10-K for the fiscal year ended October 1,
1993).
10-G. Copy of sublease agreement for Crescent City store dated April
26, 1966, and related documents, between the registrant and
Kenneth Martin, a nominee for director of the registrant, for
store sublease that has expired but is being continued on a
month-to-month basis (incorporated by reference to Exhibit 10-M
to the registrant's Form 10-K for fiscal year ended October 1,
1993).
10-H. Copy of sublease agreement for Sisters store dated June 27, 1978,
between the registrant and Arthur L. Thenell, a director of the<PAGE>
<PAGE>
registrant (incorporated by reference to Exhibit 10-M1 to the
registrant's Form 10-K for the fiscal year ended September 30,
1989).
12. Statement of computation of ratio of adjusted income to fixed
charges (incorporated by reference to Exhibit 12 to the
registrant's Form 10-K for the fiscal year ended October 2,
1992).
13. Portions of annual report to security holders incorporated by
reference in the prospectus forming a part of this registration
statement.
23-A. Consent of Miller, Nash, Wiener, Hager & Carlsen (filed as part
of Exhibit 5).
23-B. Consent of DeLap, White & Raish.
24. Power of attorney (previously filed as part of this registration
statement).
28. Copy of schedule P of the annual statement for United Employers
Insurance Company, a subsidiary of the registrant, as filed with
the state insurance departments where the company operates, for
the year ended December 31, 1992 (incorporated by reference to
Exhibit 28 to the registrant's Form 10-K for the fiscal year
ended October 1, 1993).
<PAGE>
<PAGE>
<PAGE>
ISDA
International Swap Dealers Association, Inc.
INTEREST RATE
AND
CURRENCY EXCHANGE AGREEMENT
Dated as of April 22, 1993
UNITED GROCERS, INC. and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION
have entered and/or anticipate entering into one or more transactions (each
a "Swap Transaction"). The parties agree that each Swap Transaction will
be governed by the terms and conditions set forth in this document (which
includes the schedule (the "Schedule")) and in the documents (each a
"Confirmation") exchanged between the parties confirming such Swap
Transactions. Each Confirmation constitutes a supplement to and forms part
of this document and will be read and construed as one with this document.
so that this document and all the Confirmations constitute a single
agreement between the parties (collectively referred to as this
"Agreement"). The parties acknowledge that all Swap Transactions are
entered into in reliance on the fact that this document and all
Confirmations will form a single agreement between the parties, it being
understood that the parties would not otherwise enter into any Swap
Transactions.
Accordingly, the parties agree as follows:
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the
Schedule will have the meanings therein specified for the purpose of this
Agreement.
(b) Inconsistency. In the event of any inconsistency between the
provisions of any Confirmation and this document, such Confirmation will
prevail for the purpose of the relevant Swap Transaction.
2. Payments
(a) Obligations and Conditions.
<PAGE>
<PAGE>
(i) Each party will make each payment specified in each
Confirmation as being payable by it.
(ii) Payments under this Agreement will be made not later than
the due date fore value on that date in the place of the account
specified in the relevant Confirmation or otherwise pursuant to
this Agreement. in freely transferable funds and in the manner
customary for payments in the required currency.
(iii) Each obligation of each party to pay any amount due under
Section 2(a)(i) is subject to (1) the condition precedent that no
Event of Default or Potential Event of Default with respect to
the other party has occurred and is continuing and (2) each other
applicable condition precedent specified in this Agreement.
(b) Change of Account. Either party may change its account by giving
notice to the other party at least five days prior to the due date for
payment for which such change applies.
(c) Netting. If on any date amounts would otherwise be payable:
(i) in the same currency; and
(ii) in respect of the same Swap Transaction,
by each party to the other, then. on such date, each party's obligation to
make payment of any such amount will be automatically satisfied and
discharged and, if the aggregate amount that would otherwise have been
payable by one party exceeds the aggregate amount that would otherwise have
been payable by the other party, replaced by an obligation upon the party
by whom the larger aggregate amount would have been payable to pay to the
other party the excess of the larger aggregate amount over the smaller
aggregate amount.
If the parties specify "Net Payments - Corresponding Payment Dates" in a
Confirmation or otherwise in this Agreement, sub-paragraph (ii) above will
cease to apply to all Swap Transactions with effect from the date so
specified (so that a net amount will be determined in respect of all
amounts due on the same date in the same currency, regardless of whether
such amounts are payable in respect of the same Swap Transaction); provided
that, in such case, this Section 2(c) will apply separately to each Office
through which a party makes and receives payments as set forth in
Section 10.
<PAGE>
<PAGE>
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made
without any deduction or withholding for or on account of any Tax
unless such deduction or withholding is required by any
applicable law, as modified by the practice of any relevant
governmental revenue authority then in effect. If a party is so
required to deduct or withhold, then that party ("X") will:
(1) promptly notify the other party ("Y") of such
requirement;
(2) pay to the relevant authorities the full amount
required to be deducted or withheld (including the full
amount required to be deducted or withheld from any
additional amount paid by X to Y under this Section 2(d))
promptly upon the earlier of determining that such deduction
or withholding is required or, receiving notice that such
amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a
certified copy), or other documentation reasonably acceptable
to Y, evidencing such payment to such authorities; and
(4) if such Tax is an indemnifiable Tax, pay to Y, in
addition to the payment to which Y is otherwise entitled
under this Agreement, such additional amount as is necessary
to ensure that the net amount actually received by Y (free
and clear of Indemnifiable Taxes, whether assessed against X
or Y) will equal the full amount Y would have received had no
such deduction or withholding been required. However, X will
not be required to pay-any additional amount to Y to the
extent that it would not be required to be paid but for:
(A) the failure by Y to comply with or perform any
agreement contained in Section 4(a)(i) or 4(d); or
(B) the failure of a representation made by Y
pursuant to Section 3(f) to be accurate and true
unless such failure would not have occurred but for a
Change in Tax Law.
(ii) Liability. If:
(1) X is required by any applicable law, as modified by
the practice of any relevant governmental revenue authority,
to make any deduction or withholding in respect of which X
would not be required to pay an additional amount to Y under
Section 2(d)(i)(4):
<PAGE>
<PAGE>
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed
directly, against X.
then, except to the extent Y has satisfied or then satisfies
the liability resulting from such Tax, Y will promptly pay to
X the amount of such liability (including any related
liability for interest, but including any related liability
for penalties only if Y has failed to comply with or perform
any agreement contained in Section 4(a)(i) or (d)).
(e) Default Interest. A party that defaults in the payment of any
amount due will, to the extent permitted by law, be required to pay
interest (before as well as after judgment) on such amount to the other
party on demand in the same currency as the overdue amount. for the period
from (and including) the original due date for payment to (but excluding)
the date of actual payment, at the Default Rate. Such interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed.
3. Representations
Each party represents to the other party (which representations will be
deemed to be repeated by each party on each date on which a Swap
Transaction is entered into and, in the case of the representations in
Section 3(f), at all times until the termination of this Agreement) that:
(a) Basic Representations.
(i) Status. It is duly organized and validly existing under the
laws of the jurisdiction of its organization or incorporation
and, if relevant under such laws, in good standing;
(ii) Powers. It has the power to execute and deliver this
Agreement and any other documentation relating to this Agreement
that it is required by this Agreement to deliver and to perform
its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has
taken all necessary action to authorize such execution, delivery
and performance;
(iii) No Violation or Conflict. Such execution. delivery and
performance do not violate or conflict with any law applicable to
it, any provision of its constitutional documents, any order or
judgment of any court or other agency of government applicable to
it or any of its assets or any contractual restriction binding on
or affecting it or any of its assets;
<PAGE>
<PAGE>
(iv) Consents. All governmental and other consents that are
required to have been obtained by it with respect to this
Agreement or any Credit Support Document to which it is a party
have been obtained and are in full force and effect and all
conditions of any such consents have been complied with; and
(v) Obligations Binding. Its obligations under this Agreement
and any Credit Support Document to which it is a party constitute
its legal, valid and binding obligations, enforceable in
accordance with their respective terms (subject to applicable
bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding in
equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential
Event of Default or to its knowledge, Termination Event with respect to it
has occurred and is continuing and no such event or circumstance would
occur as a result of its entering into or performing its obligations under
this Agreement or any Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its
knowledge, threatened against it or any of its Affiliates any action, suit
or proceeding at law or in equity or before any court. tribunal,
governmental body, agency or official or any arbitrator that purports to
draw into question, or is likely to affect, the legality, validity or
enforceability against it of this Agreement or any Credit Support Document
to which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information
that is furnished in writing by or on behalf of it to the other party and
is identified for the purpose of this Section 3(d) in paragraph 2 of Part 3
of the Schedule is, as of the date of the information, true, accurate and
complete in every material respect.
(e) Payer Tax Representation. Each representation specified in
Part 2 of the Schedule as being made by it for the purpose of this
Section 3(c) is accurate ind true.
(f) Payee Tax Representations. Each representation specified in
Part 2 of the Schedule as being made by it for the purpose of this
Section 3(f) is accurate and true.
<PAGE>
<PAGE>
4. Agreements
Each party agrees with the other that, so long as it has or may have any
obligation under this Agreement or under any Credit Support Document to
which it is a party:
(a) Furnish Specified Information. It will deliver to the other
party:
(i) any forms, documents or certificates relating to
taxation specified in Pall 3 of the Schedule or any Confirmation,
and
(ii) any other documents specified in Part 3 of the Schedule or
any Confirmation.
by the date specified in Part 3 of the Schedule or such Confirmation or, if
none is specified, as soon as practicable.
(b) Maintain Authorizations. It will use all reasonable efforts to
maintain in full force and effect all consents of any governmental or other
authority that are required to be obtained by it with respect to this
Agreement or any Credit Support Document to which it is a party and will
use all reasonable efforts to obtain any that may become necessary in the
future.
(c) Comply with Laws. It will comply in all material respects with
all applicable laws and orders to which it may be subject if failure so to
comply would materially impair its ability to perform its obligations under
this Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a
representation made by it under Section 3(f) to be accurate and true
promptly upon learning of such failure.
(e) Payment of Stamp Tax. It will pay any Stamp Tax levied or
imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organized, managed
and controlled, or considered to have its seat, or in which a branch or
office through which it is acting for the purpose of this Agreement is
located ("Stamp Tax Jurisdiction") and will indemnify the other party
against any Stamp Tax levied or imposed upon the other party or in respect
of the other party's execution or performance of this Agreement by any such
Stamp Tax jurisdiction which is not also a Stamp Tax Jurisdiction with
respect to the other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a
party or, if applicable, any Specified Entity of such party, of<PAGE>
<PAGE>
any of the following events constitutes an event of default (an "Event of
Default") with respect to such party:
(i) Failure to Pay. Failure by the party to pay, when due, any
amount required to be paid by it under this Agreement if such
failure is not remedied on or before the third Business Day after
notice of such failure to pay is given to the party;
(ii) Breach of Agreement. Failure by the party to comply with
or perform any agreement or obligation (other than an obligation
to pay any amount required to be paid by it under this Agreement
or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i) or 4(d)) to be complied with or
performed by the party in accordance with this Agreement if such
failure is not remedied on or before the thirtieth day after
notice of such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any applicable Specified
Entity to comply with or perform any agreement or obligation
to be complied with or performed by the party or such
Specified Entity in accordance with any Credit Support
Document if such failure is continuing after any applicable
grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document, or the ceasing of such Credit Support Document to
be in full force and effect, prior to the final Scheduled
Payment Date of each Swap Transaction to which such Credit
Support Document relates without the written consent of the
other party; or
(3) the party or such Specified Entity repudiates, or
challenges the validity of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than a
representation under Section 3(c) or (f)) made or repeated or
deemed to have been made or repeated by the party or any
applicable Specified Entity in this Agreement or any Credit
Support Document relating to this Agreement proves to have been
incorrect or misleading in any material respect when made or
repeated or deemed to have been made or repeated;
(v) Default under Specified Swaps. The occurrence of an event
of default in respect of the party, or any applicable Specified
Entity under a Specified Swap which, following the giving of any
applicable notice or the lapse of any applicable grace Period,
has resulted in the designation or occurrence of an early
termination date in respect of such Specified Swap;<PAGE>
<PAGE>
(vi) Cross Default. If "Cross Default" is specified in Part I
of the Schedule as applying to the party, (1) the occurrence or
existence of an event or condition in respect of such party or
any applicable Specified Entity under one or more agreements or
instruments relating to Specified Indebtedness of such party or
any such Specified Entity in an aggregate amount of not less than
the Threshold Amount (as specified in Part I of this Schedule)
which has resulted in such Specified Indebtedness becoming, or
becoming capable at such time of being declared, due and payable
under such agreements or instruments, before it would otherwise
have been due and payable or (2) the failure by such party or any
such Specified Entity to make one or more payments at maturity in
an aggregate amount of not less than the Threshold Amount under
such agreements or instruments (after giving effect to any
applicable grace period):
(vii) Bankruptcy. The party or any applicable Specified Entity:
(1) is dissolved; (2) becomes insolvent or fails or is unable
or admits in writing its inability generally to pay its debts
as they become due; (3) makes a general assignment,
arrangement or composition with or for the benefit of its
creditors: (4) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or
any other relief under any bankruptcy or insolvency law or
other similar law affecting creditors' rights, or a petition
is presented for the winding-up or liquidation of the party
or any such Specified Entity, and, in the case of any such
proceeding or petition instituted or presented against it,
such proceeding or petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief
or the making of an order for the winding-up or liquidation
of the party or such Specified Entity or (B) is not
dismissed, discharged, stayed or restrained in each case
within 30 days of the institution or presentation thereof;
(5) has a resolution passed for its winding-up or
liquidation; (6) seeks or becomes subject to the appointment
of an administrator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its
assets (regardless of how brief such appointment may be, or
whether any obligations are promptly assumed by another
entity or whether any other event described in this clause
(6) has occurred and is continuing); (7) any event occurs
with respect to the party or any such Specified Entity which,
under the applicable laws of any jurisdiction, has an
analogous effect to any of the events specified in clauses
(1) to (6) (inclusive); or (8) takes any action<PAGE>
<PAGE>
in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the
foregoing acts;
other than in the case of clause (1) or (5) or, to the extent it
relates to those clauses, clause (8), for the purpose of a
consolidation. amalgamation or merger which would not constitute
an event described in (viii) below; or
(viii) Merger Without Assumption. The party consolidates or
amalgamates with, or merges into. or transfers all or
substantially all its assets to another entity and, at the time
of such consolidation, amalgamation, merger or transfer:
(1) the resulting, surviving or transferee entity fails
to assume all the obligations of such party under this
Agreement by operation of law or pursuant to an agreement
reasonably satisfactory to the other party to this Agreement:
or
(2) the benefits of any Credit Support Document relating
to this Agreement fail to extend (without the consent of the
other party) to the performance by such resulting, surviving
or transferee entity of its obligations under this Agreement.
(b) Termination Events. The occurrence at any time with respect to a
party or, if applicable, any Specified Entity of such party of any event
specified below constitutes an illegality if the event is specified in (i)
below, a Tax Event if the event is specified in (ii) below. a Tax Event
Upon Merger if the event is specified in (iii) below or a Credit Event Upon
Merger if the event is specified in (iv) below:
(i) Illegality. Due to the adoption of, or any change in, any
applicable law after the date on which such Swap Transaction is
entered into, or due to the promulgation of, or any change in,
the interpretation by any court, tribunal or regulatory authority
with competent jurisdiction of any applicable law after such
date, it becomes unlawful (other than as a result of a breach by
the party of Section 4(b)) for such party (which will be the
Affected Party):
(1) to perform any absolute or contingent obligation to
make a payment or to receive a payment in respect of such
Swap Transaction or to comply with any other material
provision of this Agreement relating to such Swap
Transaction; or
(2) to perform, or for any applicable Specified Entity to
perform, any contingent or other obligation which the<PAGE>
<PAGE>
party (or such Specified Entity) has under any
Credit Support Document relating to such Swap
Transaction;
(ii) Tax Event.
(1) The party (which will be the Affected Party) will be
required on the next succeeding Scheduled Payment Date to pay
to the other party an additional amount in respect of an
Indemnifiable Tax under Section 2(d)(i)(4) (except in respect
of interest under Section 2(e)) as a result of a Change in
Tax Law; or
(2) there is a substantial likelihood that the party
(which will be the Affected Party) will be required on the
next succeeding Scheduled Payment Date to pay to the other
party an additional amount in respect of an indemnifiable Tax
under Section 2(d)(i)(4) (except in respect of interest under
Section 2(e)) and such substantial likelihood results from an
action taken by a taxing authority or brought in a court of
competent jurisdiction, on or after the date on which such
Swap Transaction was entered into (regardless of whether such
action was taken or brought with respect to a party to this
Agreement).
(iii) Tax Event Upon Merger. The party (the "Burdened Party")
on the next succeeding Scheduled Payment Date will either (1) be
required to pay an additional amount in respect of an
indemnifiable Tax under Section 2(d)(i)(4) (except in respect of
interest under Section 2(e)) or (2) receive a payment from which
an amount has been deducted or withheld for or on account of any
Indemnifiable Tax in respect of which the other party is not
required to pay an additional amount, in either case as a result
of a party consolidating or amalgamating with, or merging into,
or transferring all or substantially all its assets to another
entity (which will be the Affected Party) where such action does
not constitute an event described in Section 5(a)(viii); or
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is
specified in Part I of the Schedule as applying to the party,
such party ("X") consolidates or amalgamates with, or merges
into, or transfers all or substantially all its assets to,
another entity and such action does not constitute an event
described in Section 5(a)(viii) but the creditworthiness of the
resulting surviving or transferee entity (which will be the
Affected Party) is materially weaker than that of X immediately
prior to such action.
(c) Event of Default and Illegality. If an event or circumstance
which would otherwise constitute or give rise to an Event of<PAGE>
<PAGE>
Default also constitutes an illegality, it will be treated as an Illegality
and will not constitute an Event of Default.
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an
Event of Default with respect to a party (the "Defaulting Party") has
occurred and is then continuing, the other party may, by not more than 20
days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective
as an Early Termination Date in respect of all outstanding Swap
Transactions. However, an Early Termination Date will be deemed to have
occurred in respect of all Swap Transactions immediately upon the
occurrence of any Event of Default specified in Section 5(a)(vii)(1), (2),
(3), (5), (6), (7) or (8) and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence of any Event of Default specified in
Section 5(a)(vii)(4).
(b) Right to Terminate Following Termination Event.
(i) Notice. Upon the occurrence of a Termination Event, an
Affected Party will promptly upon becoming aware of the same,
notify the other party thereof, specifying the nature of such
Termination Event and the Affected Transactions relating thereto.
The Affected Party will also give such other information to the
other party with regard to such Termination Event as the other
party may reasonably require.
(ii) Transfer to Avoid Termination Event. If either an
Illegality under Section 5(b)(i)(1) or a Tax Event occurs and
there is only one Affected Party, or if a Tax Event Upon Merger
occurs and the Burdened Party is the Affected Party, the Affected
Party will as a condition to its right to designate an Early
Termination Date under Section 6(b)(iv) use all reasonable
efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20
days after it gives notice under Section 6(b)(i) all its rights
and obligations under this Agreement in respect of the Affected
Transactions to another of its offices, branches or Affiliates so
that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will
give notice to the other party to that effect within such 20 day
period, whereupon the other party may effect such a transfer
within 30 days after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be
subject to and conditional upon the prior written consent<PAGE>
<PAGE>
of the other party, which consent will not be withheld
if such other party's policies in effect at such time
would permit it to enter into swap transactions with
the transferee on the terms proposed.
(iii) Two Affected Parties. If an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there are two
Affected Parties, each party will use all reasonable efforts to
reach agreement within 30 days after notice thereof is riven
under Section 6(b)(i) on action that would cause such Termination
Event to cease to exist.
(iv) Right to Terminate. lf:
(1) a transfer under Section 6(b)(ii) or an agreement
under Section 6(b)(iii), as the case may be, has not been
effected with respect to all Affected Transactions within 30
days after an Affected Party gives notice under
Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2) or a Credit Event
Upon Merger occurs, or a Tax Event Upon Merger occurs and the
Burdened Party is not the Affected Party.
either party in the case of an Illegality, the Burdened Party in
the case of a Tax Event Upon Merger, any Affected Party in the
case of a Tax Event, or the party which is not the Affected Party
in the case of a Credit Event Upon Merger, may, by not more than
20 days notice to the other party and provided that the relevant
Termination Event is then continuing, designate a day not earlier
than the day such notice is effective as an Early Termination
Date in respect of all Affected Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given
under Section 6(a) or (b), the Early Termination Date will occur
on the date so designated, whether or not the relevant Event of
Default or Termination Event is continuing on the relevant Early
Termination Date.
(ii) Upon the effectiveness of notice designating an Early
Termination Date (or the deemed occurrence of an Early
Termination Date), the obligations of the parties to make any
further payments under Section 2(a)(i) in respect of the
Terminated Transactions will terminate, but without prejudice to
the other provisions of this Agreement.
(d) Calculations.
<PAGE>
<PAGE>
(i) Statement. Following the occurrence of an Early Termination
Date, each party will make the calculations (including
calculation of applicable interest rates) on its part
contemplated by Section 6(e) and will provide to the other party
a statement (1) showing, in reasonable detail, such calculations
(including all relevant quotations) and (2) giving details of the
relevant account to which any payment due to it under
Section 6(c) is to be made. In the absence of written
confirmation of a quotation obtained in determining a Market
Quotation from the source providing such quotation, the records
of the "party obtaining such quotation will be conclusive
evidence of the existence and accuracy of such quotation.
(ii) Due Date. The amount calculated as being payable under
Section 6(c) will be due on the day that notice of the amount
payable is effective (in the case of an Early Termination Date
which is designated or deemed to occur as a result of an Event of
Default) and not later than the day which is two Business Days
after the day on which notice of the amount payable is effective
(in the case of an Early Termination Date which is designated as
a result of a Termination Event). Such amount will be paid
together with (to the extent permitted under applicable law)
interest thereon in the Termination Currency from (and including)
the relevant Early Termination Date to (but excluding) the
relevant due date, calculated as follows:
(1) if notice is given designating an Early Termination
Date or if an Early Termination Date is deemed to occur, in
either case as a result of an Event of Default, at the
Default Rate; or
(2) if notice is given designating an Early Termination
Date as a result of a Termination Event, at the Default Rate
minus 1% per annum.
Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(e) Payments on Early Termination.
(i) Defaulting Party or One Affected Party. If notice is given
designating an Early Termination Date or if an Early Termination
Date is deemed to occur and there is a Defaulting Party or only -
one Affected Party, the other party will determine the Settlement
Amount in respect of the Terminated Transactions and:
(1) if there is a Defaulting Party, the Defaulting Party
will pay to the other party the excess, if a positive number,
of (A) the sum of such Settlement Amount and the Termination
Currency Equivalent of the Unpaid Amounts<PAGE>
<PAGE>
owing to the other party over (B) the
Termination Currency Equivalent of the Unpaid
Amounts owing to the Defaulting Party; and
(2) if there is an Affected Party, the payment to be made
will be equal to (A) the sum of such Settlement Amount and
the Termination Currency Equivalent of the Unpaid Amounts
owing to the party determining the Settlement Amount ("X")
less (B) the Termination Currency Equivalent of the Unpaid
Amounts owing to the party not determining the Settlement
Amount Y").
(ii) Two Affected Parties. If notice is given of an Early
Termination Date and there are two Affected Parties, each party
will determine a Settlement Amount in respect of the Terminated
Transactions and the payment to be made will be equal to (1) the
sum of (A) one-half of the difference between the Settlement
Amount of the party with the higher Settlement Amount ("X") and
the Settlement Amount of the party with the lower Settlement
Amount ("Y") and (B) the Termination Currency Equivalent of the
Unpaid Amounts owing to X less (2) the Termination Currency
Equivalent of the Unpaid Amounts owing to Y.
(iii) Party Owing. If the amount calculated under
Section 6(e)(i)(2) or (ii) is a positive number, Y will pay such
amount to X; if such amount is a negative number, X will pay the
absolute value of such amount to Y.
(iv) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date is deemed to occur, the amount determined under
Section 6(e)(i) will be subject to such adjustments as are
appropriate and permitted by law to reflect any payments made by
one party to the other under this Agreement (and retained by such
other party) during the period from the relevant Early
Termination Date to the date for payment determined under
Section 6(d)(ii).
(v) Pre-Estimate of Loss. The parties agree that the amounts
recoverable under this Section 6(e) are a reasonable preestimate
of loss and not a penalty. Such amounts are payable for the loss
of bargain and the loss of protection against future risks and
except as otherwise provided in this Agreement neither party will
be entitled to recover any additional damages as a consequence of
such losses.
7. Transfer
Subject to Section 6(b) and to any exception provided in the Schedule,
neither this Agreement nor any interest or obligation in or under this
Agreement may be transferred by either party without the prior written
consent of the other party (other than pursuant<PAGE>
<PAGE>
to a consolidation or amalgamation with, or merger into, or transfer of all
or substantially all its assets to, another entity) and any purported
transfer without such consent will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this
Agreement will be made in the relevant currency specified in this Agreement
for that payment (the "Contractual Currency"). To the extent permitted by
applicable law, any obligation to make payments under this Agreement in the
Contractual Currency will not be discharged or satisfied by any tender in
any currency other than the Contractual Currency, except to the extent such
tender results in the actual receipt by the party to which payment is owed,
acting in a reasonable manner and in good faith in converting the currency
so tendered into the Contractual Currency, of the full amount in the
Contractual Currency of all amounts due in respect of this Agreement. If
for any reason the amount in the Contractual Currency so received falls
short of the amount in the Contractual Currency due in respect of this
Agreement, the party required to make the payment will, to the extent
permitted by applicable law, immediately pay such additional amount in the
Contractual Currency as may be necessary to compensate for the shortfall.
If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency due in respect of this
Agreement, the party receiving the payment will refund promptly the amount
of such excess.
(b) Judgments. Tp the extent permitted by applicable law, if any
judgment or order expressed in a currency other than the Contractual
Currency is rendered (i) for the payment of any amount owing in respect of
this Agreement, (ii) for the payment of any amount relating to any early
termination in respect of this Agreement or (iii) in respect of a judgment
or order of another court for the payment of any amount described in (i) or
(ii) above. the party seeking recovery, after recovery in full of the
additional amount to which such party is entitled pursuant to the judgment
or order, will be entitled to receive immediately from the other party the
amount of any shortfall of the Contractual Currency received by such party
as a consequence of sums paid in such other currency and will refund
promptly to the other party any excess of the Contractual Currency received
by such party as a consequence of sums paid in such other currency if such
shortfall or such excess arises or results from any variation between the
rate of exchange at which the Contractual Currency is converted into the
currency of the judgment or order for the purposes of such judgment or
order and the rate of exchange at which such party is able, acting in a
reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with
the amount of the currency of the judgment or order actually received by
such party. The term "rate of exchange" includes, without limitation, any
premiums and costs of exchange<PAGE>
<PAGE>
payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law,
these indemnities constitute separate and independent obligations from the
other obligations in this Agreement, will be enforceable as separate and
independent causes of action, will apply notwithstanding any indulgence
granted by the party to which any payment is owed and will not be affected
by judgment being obtained or claim or proof being made for any other sums
due in respect of this Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss
had an actual exchange or purchase been made.
9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties with respect to its subject
matter and supersedes all oral communication and prior writings with
respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of
this Agreement will be effective unless in writing and executed by each of
the parties or confirmed by an exchange of telexes.
(c) Survival of Obligations. Except as provided in Section 6(c)(ii),
the obligations of the parties under this Agreement will survive the
termination of any Swap Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the
rights, powers, remedies and privileges provided in this Agreement are
cumulative and not exclusive of any rights, powers, remedies, and
privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement may be executed in counterparts. each of
which will be deemed an original.
(ii) A Confirmation may be executed in counterparts or be
created by an exchange of telexes, which in either case will be
sufficient for all purposes to evidence a binding supplement to
this Agreement. Any such counterpart or telex will specify that
it constitutes a Confirmation.
(f) No Waiver of Rights. A failure, or delay in exercising any
right, power or privilege in respect of this Agreement will not be presumed
to operate as a waiver, and a single or partial exercise of any right,
power or privilege will not be presumed to preclude<PAGE>
<PAGE>
any subsequent or further exercise of that right, power or privilege or the
exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for
convenience of reference only and are not to affect the construction of or
to be taken into consideration in interpreting this Agreement.
10. Multibranch Parties
If a party is specified as a Multibranch Party in Part 4 of the Schedule,
such Multibranch Party may make and receive payments under any Swap
Transaction through any of its branches or offices listed in the
Schedule (each an "Office"). The Office through which it so makes and
receives payments for the purpose of any Swap Transaction will be specified
in the relevant Confirmation and any change of Office for such purpose
requires the prior written consent of the other party. Each Multibranch
Party represents to the other party that, notwithstanding the place of
payment, the obligations of each Office are for all purposes under this
Agreement the obligations of such Multibranch Party. This representation
will be deemed to be repeated by such Multibranch Party on each date on
which a Swap Transaction is entered into.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other
party for and against all reasonable out-of-pocket expenses, including
legal fees and Stamp Tax, incurred by such other party by reason of the
enforcement and protection of its rights under this Agreement or by reason
of the early termination of any Swap Transaction, including, but not
limited to, costs of collection.
12. Notices
(a) Effectiveness. Any notice or communication in respect of this
Agreement will be sufficiently given to a party if in writing and delivered
in person, sent by certified or registered mail (airmail, if overseas) or
the equivalent (with return receipt requested) or by overnight courier or
riven by telex (with answer back received) at the address or telex number
specified in Part 4 of the Schedule. A notice or communication will be
effective:
(i) if delivered by hand or sent by overnight courier on
the day it is delivered (or if that day is not a day on which
commercial banks are open for business in the city specified in
the address for notice provided by the recipient (a "Local
Banking Day"), or if delivered after the close of business on a
Local Banking Day, on the first following day that is a Local
Banking Day);
<PAGE>
<PAGE>
(ii) if sent by telex, on the day the recipient's answer back is
received (or if that day is not a Local Banking Day, or if after
the close of business on a Local Banking Day, on the first
following day that is a Local Banking Day; or
(iii) if sent by certified or registered mail (airmail, if
overseas) or the equivalent (return receipt requested), three
Local Banking Days after despatch if the recipient's address for
notice is in the same country as the place of despatch and
otherwise seven Local Banking Days after despatch.
(b) Change of addresses. Either party may by notice to the other
chance the address or telex number at which notices or communications are
to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed
in accordance with the law specified in Part 4 of the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings
relating to this Agreement ("Proceedings"), each party irrevocably:
(i) submits to the jurisdiction of the English courts, if
this Agreement is expressed to be governed by English law, or to
the non-exclusive jurisdiction of the courts of the State of New
York and the United States District Court located in the Borough
of Manhattan in New York City, if this Agreement is expressed to
be governed by the laws of the State of New York; and
(ii) waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such court,
waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with
respect to such Proceedings, that such court does not have
jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings
in any other jurisdiction (outside, if this Agreement is expressed to be
governed by, English law, the Contracting States, as defined in
Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any
modification, extension or re-enactment thereof for the time being in
force) nor will the bringing of Proceedings in any one or more
jurisdictions preclude the bringing of Proceedings in any other
jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process
Agent (if any) specified opposite its name in Part 4 of the Schedule to
receive, for it and on its behalf, service of process<PAGE>
<PAGE>
in any Proceedings. If for any reason any party's Process Agent is unable
to act as such, such party will promptly notify the other party and within
30 days appoint a substitute process agent acceptable to the other party.
The parties irrevocably consent to service of process given in the manner
provided for notices in Section 12. Nothing in this Agreement will affect
the right of either party to serve process in any other manner permitted by
law.
(d) Waiver of Immunities. Each party irrevocably waives, to the
fullest extent permitted by applicable law, with respect to itself and its
revenues and assets (irrespective of their use or intended use), all
immunity on the grounds of sovereignty or other similar grounds from
(i) suit, (ii) jurisdiction of any court, (iii) relief by way of
injunction, order for specific performance or for recovery of property,
(iv) attachment of its assets (whether before or after judgment) and (v)
execution or enforcement of any judgment to which it or its revenues or
assets might otherwise be entitled in any Proceedings in the courts of any
jurisdiction and irrevocably agrees, to the extent permitted by applicable
law, that it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:-
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Swap
Transactions affected by the occurrence of such Termination Event and (b)
with respect to any other Termination Event, all Swap Transactions.
"Affiliate" means, subject to Part 4 of the Schedule, in relation to any
person, any entity controlled, directly or indirectly, by the person, any
entity that controls, directly or indirectly, the person or any entity
under common control with the person. For this purpose, "control" of any
entity or person means ownership of a majority of the voting power of the
entity or person.
"Burdened Party" has the meaning specified in Section 5(b).
"Business Day" means (a) in relation to any payment due under
Section 2(a)(i), a day on which commercial banks and foreign exchange
markets are open for business in the place(s) specified in the relevant
Confirmation and (b) in relation to any other payment, a day on which
commercial banks and foreign exchange markets are open for business in the
place where the relevant account is located and, if different, in the
principal financial centre of the currency of such payment.
<PAGE>
"Change in Tax Law" means the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or after
the date on which the relevant Swap Transaction is entered into.
"consent" includes a consent, approval, action, authorization, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument which is
specified as such in this Agreement.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) of
funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date specified as such in a notice given
under Section 6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a).
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be
imposed in respect of a payment under this Agreement but for a present or
former connection between the jurisdiction of the government or taxation
authority imposing such Tax and the recipient of such payment or a person
related to such recipient (including, without limitation, a connection
arising from such recipient or related person being or having been a
citizen or resident of such jurisdiction, or being or having been
organized, present or engaged in a trade or business in such jurisdiction,
or having or having had a permanent establishment or fixed place of
business in such jurisdiction, but excluding a connection arising solely
from such recipient or related person having executed, delivered, performed
its obligations or received a payment under, or enforced, this Agreement or
a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the
case of tax matters, by the practice of any relevant governmental revenue
authority) and "lawful" and "unlawful" will be construed accordingly.
"Loss" means, with respect to a Terminated Transaction and a party, an
amount equal to the total amount (expressed as a positive amount) required,
as determined as of the relevant Early<PAGE>
<PAGE>
Termination Date (or, if an Early Termination Date is deemed to occur, as
of a time as soon thereafter as practicable) by the party in good faith, to
compensate it for any losses and costs (including loss of bargain and costs
of funding but excluding legal fees and other out-of-pocket expenses) that
it may incur as a result of the early termination of the obligations of the
parties in respect of such Terminated Transaction. If a party determines
that it would gain or benefit from such early termination, such party's
Loss will be an amount (expressed as a negative amount) equal to the amount
of the gain or benefit as determined by such party.
"Market Quotation" means, with respect to a Terminated Transaction and a
party to such Terminated Transaction making the determination, an amount
(which may be negative) determined on the basis of quotations from
Reference Market-makers for the amount that would be or would have been
payable on the relevant Early Termination Date, either by the party to the
Terminated Transaction making the determination (to be expressed as a
positive amount) or to such party (to be expressed as a negative amount),
in consideration of an agreement between such party and the quoting
Reference Market-maker and subject to such documentation as they may in
good faith agree, with the relevant Early Termination Date as the date of
commencement of such agreement (or, if later, the date specified as the
effective date of such Terminated Transaction in the relevant
Confirmation), that would have the effect of preserving for such party the
economic equivalent of the payment obligations of the parties under
Section 2(a)(i) in respect of such Terminated Transaction that would, but
for the occurrence of the relevant Early Termination Date, fall due after
such Early Termination Date (excluding any Unpaid Amounts in respect of
such Terminated Transaction but including, without limitation, any amounts
that would, but for the occurrence of the relevant Early Termination Date,
have been payable (assuming each applicable condition precedent had been
satisfied) after such Early Termination Date by reference to any period in
which such Early Termination Date occurs). The party making the
determination (or its agent) will request each Reference Market-maker to
provide its quotation to the extent practicable as of the same time
(without regard to different time zones) on the relevant Early Termination
Date (or, if an Early Termination Date is deemed to occur, as of a time as
soon thereafter as practicable). The time as of which such quotations are
to be obtained will, if only one party is obliged to make a determination
under Section 6(e), be selected in good faith by that party and otherwise
will be agreed by the parties. If more than three such quotations are
provided, the Market Quotation will be the arithmetic mean of the
Termination Currency Equivalent of the quotations, without regard to the
quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation
remaining after disregarding the quotations having the highest and lowest
values. <PAGE>
<PAGE>
If fewer than three quotations are provided, it will be deemed that the
Market Quotation in respect of such Terminated Transaction cannot be
determined.
"Office" has the meaning specified in Section 10.
"Potential Event of Default" means any event which, with the giving of
notice or the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant swap
market selected by the party determining a Market Quotation in good faith
(a) from among dealers of the highest credit standing which satisfy all
the criteria that such party applies generally at the time in deciding
whether to offer or to make an extension of credit and (b) to the extent
practicable, from among such dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions
(a) in which the party is incorporates, organized, managed and controlled
or considered to have its seat, (b) where a branch or office through which
the party is acting for purposes of this Agreement is located, (c) in which
the party executes this Agreement and (d) in relation to any payment, from
or through which such payment is made.
"Scheduled Payment Date" means a date on which a payment is due under
Section 2(a)(i) with respect to a Swap Transaction.
"Settlement Amount" means, with respect to a party and any Early
Termination Date, the sum of:-
(a) the Termination Currency Equivalent of the Market Quotations
(whether positive or negative) for each Terminated Transaction for which a
Market Quotation is determined; and
(b) for each Terminated Transaction for which a Market Quotation is
not, or cannot be, determined, the Termination Currency Equivalent of such
party's Loss (whether positive or negative);
provided that if the parties agree that an amount may be payable under
Section 6(e) to a Defaulting Party by the other party, no account shall be
taken of a Settlement Amount expressed as a negative number.
"Specified Entity" has the meaning specified in Part 1 of the Schedule.
"Specified Indebtedness" means, subject to Part 1 of the Schedule, any
obligation (whether present or future, contingent or otherwise, as
principal or surety or otherwise) in respect of borrowed money.<PAGE>
<PAGE>
"Specified Swap" means, subject to Part 1 of the Schedule, any rate swap or
currency exchange transaction now existing or hereafter entered into
between one party to this Agreement (or any applicable Specified Entity)
and the other party to this Agreement (or any applicable Specified Entity).
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties and
additions thereto) that is imposed by any government or other taxing
authority in respect of any payment under this Agreement other than a
stamp, registration, documentation or similar tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means (a) with respect to any Early Termination
Date occurring as a result of a Termination Event, all Affected
Transactions and (b) with respect to any Early Termination Date occurring
as a result of an Event of Default, all Swap Transactions, which in either
case are in effect as of the time immediately preceding the effectiveness
of the notice designating such Early Termination Date (or, in the case of
an Event of Default specified in Section 5(a)(vii), in effect as of the
time immediately preceding such Early Termination Date).
"Termination Currency" has the meaning specified in Part 1 of the Schedule.
"Termination Currency Equivalent" means, in respect of any amount
denominated in the Termination Currency, such Termination Currency amount
and, in respect of any amount denominated in a currency other than the
Termination Currency (the "Other Currency"), the amount in the Termination
Currency determined by the party making the relevant determination as being
required to purchase such amount of such Other Currency as at the relevant
Early Termination Date with the Termination Currency at the rate equal to
the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination
Currency at or about 11:00 a.m. (in the city in which such foreign exchange
agent is located) on such date as would be customary for the determination
of such a rate for the purchase of such Other Currency for value the
relevant Early Termination Date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be
selected in good faith by that party and otherwise will be agreed by the
parties.
<PAGE>
<PAGE>
"Termination Event" means an Illegality, a Tax Event, a Tax Event Upon
Merger or a Credit Event Upon Merger.
"Unpaid Amounts" owing to any party means, with respect to any Early
Termination Date, the aggregate of the amounts that became due and payable
(or that would have become due and payable but for Section 2(a)(iii) or the
designation or occurrence of such Early Termination Date) to such party
under Section 2(a)(i) in respect of all Terminated Transactions by
reference to all periods ended on or prior to such Early Termination Date
and which remain unpaid as at such Early Termination Date, together with
(to the extent permitted under applicable law and in lieu of any interest
calculated under Section 2(e)) interest thereon, in the currency of such
amounts, from (and including) the date such amounts became due and payable
or would have become due and payable to (but excluding) such Early
Termination Date, calculated as follows:-
(a) in the case of notice of an Early Termination Date given as a
result of an Event of Default:-
(i) interest on such amounts due and payable by a
Defaulting Party will be calculated at the Default
Rate; and
(ii) interest on such amounts due and payable by the other
party will be calculated at a rate per annum equal to
the cost to such other party (as certified by it) if
it were to fund such amounts (without proof or
evidence of any actual cost); and
(b) in the case of notice of an Early Termination Date given as a
result of a Termination Event, interest on such amounts due and payable by
either party will be calculated at a rate per annum equal to the arithmetic
mean of the cost (without proof or evidence of any actual cost) to each
party (as certified by such party and regardless of whether due and payable
by such party) if it were to fund or of funding such amounts.
Such amounts of interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
IN WITNESS WHEREOF the parties have executed this document as of the date
specified on the first page of this document.
BANK OF AMERICA
NATIONAL
UNITED GROCERS, INC. TRUST AND SAVINGS ASSOCIATION
(Name of party) (Name of party)
By: /s/ John W. White By: /s/ George Handjinicolaou
Name: John W. White Name: George Handjinicolaou
Title: Vice President Title: Senior Vice President<PAGE>
<PAGE>
SCHEDULE
to the
Interest Rate and Currency Exchange Agreement
dated as of April 22, 1993
between United Grocers, Inc. ("Party A" and Bank of America
National Trust and Savings Association ("Party B")
Note: Italicized words (other than headings) in this
Schedule indicate variations made by Party B to the form of
Schedule attached to the Interest Rate and Currency Exchange
Agreement published by the International Swap Dealers Association.
Part 1
Termination Provisions
In this Agreement:
(1) "Specified Entity" means in relation to Party A for the
purpose of:
Section 5 (a)(iii) and (iv) and 5(b)(i): Not Applicable
Section 5(a)(v): Not Applicable
Section 5(a)(vi): Not Applicable
Section 5(a)(vii): Not Applicable
"Specified Entity" means in relation to Party B for the purpose
of:
Section 5 (a)(iii) and (iv) and 5(b)(i): Not Applicable
Section 5(a)(v): Not Applicable
Section 5(a)(vi): Not Applicable
Section 5(a)(vii): Not Applicable
(2) "Specified Swap" will have the meaning specified in
Section 14 and will also include any of the following
additional transactions: forward rate agreements, rate "cap"
agreements, rate "floor" agreements, rate "collar" agreements
and other similar interest rate protection agreements however
entitled
(3) The "Cross Default" provisions of Section 5(a)(vi):
will apply to Party A
will not apply to Party B
<PAGE>
<PAGE>
If such provisions apply:
"Specified Indebtedness" will have the meaning specified in
Section 14.
"Shareholders' Equity" means with respect to an entity, at any
time, the sum at such time of (i) its capital stock (including
preferred stock) outstanding, taken at par value, (ii) its capital
surplus and (iii) its retained earnings, minus (iv) treasury
stock, each to be determine in accordance with generally accepted
accounting principles.
"Threshold Amount" means, as to Party A only, three percent (3%)
of Shareholders' Equity.
(4) "Termination Currency" means United States Dollars ("US$").
(5) The "Credit Event Upon Merger" provisions of
Section 5(b)(iv):
will apply to Party A
will apply to Party B
Part 2
Tax Representations
Not Applicable
Part 3
Documents to be delivered
For the purpose of Section 4(a):
(1) Tax forms, documents or certificates to be delivered are:
(a) By Party A:
Form/Document/Certificate Date by which to be delivered
Any document allowing
Party B to make payments
under this Agreement
without withholding or
deduction on account of
any Tax or with such
withholding or deduction
at a reduced rate.<PAGE>
Within ten (10) days of
learning that such
documentation is needed.
(b) By Party B:
Form/Document/Certificate Date by which to be delivered
<PAGE>
<PAGE>
Any document allowing
Party A to make payments
under this Agreement
without withholding or
deduction on account of
any Tax or with such
withholding or deduction
at a reduced rate.<PAGE>
Within ten (10) days of
learning that such
documentation is needed.
(2) Other documents to be delivered are:
(a) By Party A:
Form/Document/Certificate Date by which to be Covered by
(See Exhibit 1) delivered Section 3(d)
Representation
Corporate Resolution Upon executing Yes
Agreement
Specimen Signature Certificate Upon executing Yes
Agreement
(b) By Party B:
Form/Document/Certificate Date by which to be Covered by
(See Exhibit 1) delivered Section 3(d)
Representation
Corporate Resolution Upon executing Yes
Agreement
Specimen Signature Certificate Upon executing Yes
Agreement
Part 4
Miscellaneous
(1) Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New
York without reference to choice of law doctrine.
(2) Process Agent. For the purpose of Section 13(c):
Party A appoints as its Process Agent: Not Applicable
Party B appoints as its Process Agent: Not Applicable
(3) "Affiliate" will have the meaning specified in Section 14.
<PAGE>
<PAGE>(4) Multibranch Party. For the purpose of Section 10:
Party A is not a Multibranch Party and will act only through
its Portland, Oregon Office.
Party B is a Multibranch Party and may act through the
following Offices:
Its London Branch at Its San Francisco Head
Office at
Bank of America House 555 California Street
1 Ahe Street San Francisco, California
94104
London El 8DE
England
Its Frankfurt Branch at Its Tokyo Branch at
Mainzer Landstrasse 46 ARK Mori Building, 34th
Floor
P. 0. Box 11 0243 12-32 Akasaka, 1-chome,
Minato-ku
D-6000 Frankfurt am Main - I Tokyo 107
West Germany Japan
Its Zunch Branch at Its Grand Cayman Branch at
Claridenstrasse 45 Anchorage Center
P. 0. Box 8022 Zurich Harbour Drive
Switzerland P.O. Box 1078
Grand Cayman
B.W.I.
Its Antwerp Branch at Its Hong Kong Branch at
Van Eycklei 34 Bank of America Tower
B-2018Antwerp 23rd Floor
Belgium 12 Harcourt Road
G.P.O. Box 472
Hong Kong
Its Dublin Branch at Its Paris Branch at
Russell Court 43/47 Avenue de la Grand
Armee
St. Stephen's Green F-75782 Paris,
Cedex 16,
Dublit4 2 France
Republic of Ireland
Its Amsterdam Branch at Its Milan Branch at
Herengracht 469 Corso Matteotti 10
101 7 BS Amsterdam 20121 Milano
1000 BP Amsterdam Italy
Netherlands
<PAGE>
<PAGE>
(5) Addresses for Notices. For the purpose of Section 12(a):
Address for notices or communications to Party A:
Address: United Grocers, Inc.
6433 SE Lake Road
Portland, OR 97222-2198
Attention: John W. White, Vice President & Chief Financial
Officer
Facsimile: (503) 652-7378
(For all purposes)
Addresses for notices or communications to Party B:
Address: Bank of America National Trust and Savings
Association
555 California Street
San Francisco, California 94104, U.S.A
Attention: Interest Rate Swap Administrator (Unit No.: 3269)
Telex No.: 249839
Answerback: OPRST UR Facsimile: (415) 622-3548
(6) Credit Support Document. Details of any Credit Support
Document: None.
(7) Netting of Payments. Netting will apply as to and within
each individual Swap Transaction hereunder; however, for the
purposes of Section 2(c) of the Agreement, Net
Payments-Corresponding Payment Dates shall not apply.
Part 5
Other Provisions
(1) Section 11 is revised by inserting after the word "against"
in the first line the words "all allocated costs of in-house
counsel and" and by inserting after the word "Agreement" in the
third line the following.
"(including, without limitation, any such costs and
expenses incurred in connection with a work-out or
otherwise, as a result of the occurrence of an Event of
Default whether or not an Early Termination Date has
occurred or been deemed to have occurred)".
<PAGE>
<PAGE>
(2) Party B shall be the Calculation Agent for all Swap
Transactions under this Agreement.
(3) This Schedule shall include paragraphs (1), (2) and (3) of
the ISDA May 1989 Addendum for Caps, Floors and Collars (attached
hereto as Addendum A) and paragraphs (1), (2), (3) and (4) of the
ISDA July 1990 Addendum for Options (attached hereto as
Addendum B) as if said paragraphs were set forth in their entirety
herein below.
(4) Full Two-Way Payments. For purposes of calculating payments
due in respect of an Early Termination Date (including any
payments under Section 6(d) and an Unpaid Amounts), any event or
condition constituting an Event of Default under this Agreement
shall be treated as if it were a Termination Event with the
Defaulting Party as the Affected Party, (and for such Purposes the
provision of the definition of "Settlement Amount" shall be deemed
of no force and effect).
(5) Setoff on Early Termination. If a party has an obligation to
pay any amount pursuant to Section 6(e) in connection with a
Termination Event or an event treated hereunder as a Termination
Event, it shall be entitled to set off that amount to the extent
possible against any amount payable to it by the other party
pursuant to this or any other agreement between the parties, and
each party hereby expressly authorizes the other to exercise that
right of setoff, to the extent permitted by applicable law,
without prior notice or other action
UNITED GROCERS, INC. BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By John W. White By George Handjinicolaou
Name: John W. White Name: George Handjinicolaou
Title Vice President Title Senior Vice President
<PAGE>
<PAGE>
Exhibit 1
For the purpose of Section 4 of the Agreement relating to
documents (other than tax forms) to be delivered by a party, the
following terms shall have the following meanings:-
"Corporate Resolution" means a copy of a resolution adopted by the
Board of Directors of such party, certified by the Secretary or an
Assistant Secretary, authorizing the execution and delivery of
this Agreement and any Confirmation thereunder and the performance
of its obligations under the Agreement and such Confirmations.
"Specimen Signature Certificate" means a certificate of the
Secretary or an Assistant Secretary of such party certifying the
name and true signature of each officer of such party authorized
to sign the Agreement and any Confirmation thereunder.
<PAGE>
<PAGE>
ADDENDUM A
International Swap Dealers Association, Inc.
May 1989 Addendum to Schedule to
Interest Rate and Currency Exchange Agreement
Interest Rate Caps, Collars and Floors
(1) As used in this Agreement or in a Confirmation,
(i) "Rate Protection Transaction" will mean any Swap Transaction
that is identified in the related Confirmation as a Rate
Protection Transaction, Rate Cap Transaction, Rate Floor
Transaction or Rate Collar Transaction and (ii) "Specified Swap"
means, notwithstanding Section 14 of this Agreement but subject to
Part 1 of this Schedule, any rate swap, rate cap, rate floor, rate
collar, currency exchange transaction, forward rate agreement, or
other exchange or rate protection transaction, or any combination
of such transactions or agreements or any option with respect to
any such transaction now existing or hereafter entered into
between one party to this Agreement (or any applicable Specified
Entity) and the other party to this Agreement (or any applicable
Specified Entity).
(2) Notwithstanding anything to the contrary in this
Agreement or in any Interest Rate and Currency Exchange
Definitions published by the International Swap Dealers
Association, Inc. and incorporated in any Confirmation, the
following provisions will apply with respect to a Rate Protection
Transaction:
(a) the Floating Rate applicable to any
Calculation Period will be (i) with respect to a
Floating Rate Payer for which a Cap Rate is specified,
the excess, if any, of the Floating Rate calculated as
provided in this Agreement (without reference to this
paragraph 2(a)) over the Cap Rate and (ii) with respect
to a Floating Rate Payer for which a Floor Rate is
specified, the excess, if any, of the Floor Rate over
the Floating Rate calculated as provided in this
Agreement (without reference to this paragraph 2(a));
(b) "Cap Rate" means, in respect of any
Calculation Period, the per annum rate specified as such
for that Calculation Period; and
(c) "Floor Rate" means, in respect of any
Calculation Period, the per annum rate specified as such
for that Calculation Period.
<PAGE>
<PAGE>
(3) For purposes of the determination of a Market Quotation
for a Terminated Transaction in respect of which a party ("X")
had, immediately prior to the designation or occurrence of the
relevant Early Termination Date, no future payment obligations,
whether absolute or contingent, under Section 2(a)(i) of this
Agreement with respect to the Terminated Transaction, (i) the
quotations obtained from Reference Market-makers shall be such as
to preserve the economic equivalent of the payment obligations of
the party ("Y") that had, immediately prior to the designation or
occurrence of the relevant Early Termination Date, future payment
obligations, whether absolute or contingent, under Section 2(a)(i)
of this Agreement with respect to the Terminated Transaction and
(ii) if X is making the determination such amounts shall be
expressed as positive amounts and if Y is making the determination
such amounts shall be expressed as negative amounts.
<PAGE>
<PAGE>
ADDENDUM B
International Swap Dealers Association, Inc.
July 1990 Addendum to Schedule to
Interest Rate and Currency Exchange Agreement
Options
(1) As used in this Agreement or in any Confirmation,
"Option" means any Swap Transaction that is identified in the
related Confirmation as an Option and provides for the grant by
Seller to Buyer of (i) the right to cause an underlying Swap
Transaction, the terms of which are identified in that
Confirmation (an "Underlying Swap Transaction"), to become
effective, (ii) the right to cause Seller to pay Buyer pursuant to
Section 2(a)(i) of this Agreement the Cash Settlement Amount, if
any, in respect of the Underlying Swap Transaction on the Cash
Settlement Payment Date, (iii) the right to cause the Optional
Termination Date to become the Termination Date and, if so
specified in the related Confirmation, the Final Exchange Date of
the related Swap Transaction that is identified in that
Confirmation (a "Related Swap Transaction") or (iv) any other
right or rights specified in the related Confirmation. An Option
may provide for the grant of one or more of the foregoing rights,
all of which can be identified in a single Confirmation.
(2) The following capitalized terms, if used in relation to
an Option, have the respective meanings specified in or pursuant
to the related Confirmation (or elsewhere in this Agreement):
"Buyer", "Seller", "Option Premium", "Option Premium Payment
Date', "Cash Settlement Payment Date", "Cash Settlement Amount",
"Optional Termination Date", "Exercise Terms" and "Option Exercise
Period".
(3) The following provisions win apply with respect to an
Option:
(a) Buyer will pay Seller pursuant to
Section 2(a)(i) of this Agreement the Option Premium, if
any, on the Option Premium Payment Date or Dates.
(b) On the terms set forth in this Agreement
(including, the related Confirmation), Seller grants to
Buyer pursuant to the Option, (i) if "Physical
Settlement" is specified to be applicable to the Option,
the right to cause the Underlying Swap Transaction to
become effective, (ii) if "Cash Settlement" is specified
to be applicable to the Option, the right to cause
Seller to pay Buyer pursuant to Section 2(a)(i) of this
Agreement the Cash Settlement Amount, if any, in respect
of the Underlying Swap Transaction on the Cash
Settlement Payment Date or <PAGE>
<PAGE>
(iii) if "Optional Termination" is specified to be
applicable to the Option, the right to cause the
Optional Termination Date to become the Termination Date
and, if so specified in the related Confirmation, the
Final Exchange Date of the Related Swap Transaction.
The Underlying Swap Transaction, if any, shall not
become effective unless (i) "Physical Settlement" is
specified to be applicable to the Option and (ii) the
right to cause that Underlying Swap Transaction to
become effective has been exercised.
(c) Buyer may exercise the right or rights granted
pursuant to the Option cable notice (a "Notice of
Exercise") to Seller (which, notwithstanding any other
provision of this Agreement, may be delivered orally
(including by telephone)). The Notice of Exercise must
become effective during the Option Exercise Period and
must include the Exercise Terms, if any.
(d) Buyer will, if "Written Confirmation" is
specified to be applicable to the Option or upon demand
from Seller (which, notwithstanding any other provision
of this Agreement may be delivered orally (including by
telephone)), (i) execute a written confirmation
confirming the substance of the Notice of Exercise and
deliver the same to Seller or (ii) issue a telex to
Seller setting forth the substance of the Notice of
Exercise. Buyer shall cause such executed written
confirmation or telex to be received by Seller within
one Local Banking Day following the date that the Notice
of Exercise or Seller's demand, as the case may be,
becomes effective. If not received within such time,
Buyer will be deemed to have satisfied its obligations
under the immediately preceding sentence at the time
that such executed written confirmation or telex becomes
effective.
(e) Any notice or communication given, and
permitted to be given, orally (including by telephone)
in connection with the Option will be effective when
actually received by the recipient.
(4) For purposes of the determination of a Market Quotation
for a Terminated Transaction that is identified as an Option, and
quotations obtained from Reference Market-makers shall take into
account, as of the relevant Early Termination Date, the economic
equivalent of the right or rights granted pursuant to that Option
which are or may become exercisable.
<PAGE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
STOCK REDEMPTION NOTES PAYABLE TO
DIRECTORS AND NOMINEES
PRINCIPAL AMOUNT
NAME AT OCTOBER 1, 1993
<S> <C>
Craig Danielson $273,121.81
Gilbert A. Foster 104,819.89
Dennis Blasingame 16,422.09
</TABLE>
The interest rate on stock redemption notes is equal to the
interest rate paid on capital investment notes. On October 1,
1993, the interest rate was 5.75% per annum.<PAGE>
<PAGE>
<PAGE>
UNITED GROCERS 1993 ANNUAL REPORT
SUMMARY OF SALES AND OPERATIONS
<TABLE>
<CAPTION>
(Dollars in Thousands)
For Fiscal Year Ended
October 1, 1993 October 2, 1992 September 27, 1991
Percentage Percentage Percentage
of Total of Total of Total
Products & Revenue Revenue Revenue Revenue Revenue Revenue
Services
<S> <C> <C> <C> <C> <C> <C>
Grocery<F1> $370,237 42.20 $381,679 42.58 $385,538 43.68
Dairy & Deli 97,425 11.11 101,868 11.36 99,359 11.25
Meat 86,115 9.82 86,115 9.60 85,011 9.63
Produce 46,462 5.30 44,672 4.98 43,820 4.96
Frozen Foods 49,078 5.60 51,787 5.78 48,862 5.53
Gen. Merchandise 42,494 4.85 44,901 5.01 41,449 4.69
Institutional<F2> 155,572 17.74 156,705 17.48 144,947 16.42
Retail Services 7,683 .88 7,477 .83 14,373 1.63
Insurance 19,545 2.23 18,441 2.05 16,325 1.85
Store Finance 2,374 .27 2,942 .33 3,194 .36
TOTAL $876,985 100.00 $896,587 100.00 $882,878 100.00
<FN>
<F1> Grocery revenues include sales from retail stores operated on a
temporary basis.
<F2> Institutional revenues include sales of all product lines.
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollars in Thousands)
For Fiscal Year Ended
Oct. 1, Oct. 2, Sept. 27, Sept. 28,Sept. 30,
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Net sales and
operations $876,985 $896,587 $882,878 873,685 $796,768
Net income 1,714 2,723 1,712 1,394 1,262
Total Assets 280,600 261,289 249,205 218,143 200,489
Long-term obligations 105,539 104,645 98,685 82,918 72,172
</TABLE>
No dividends on common stock have been declared during any of the fiscal
years presented.
Sales are reported on a 52/53 week year basis. The year ending October 2,
1992 was 53 weeks, all other years are 52 weeks.
The amounts prior to 1993 have been restated to reflect changes in
accounting for inventories, income taxes and investments as described in
the notes to financial statements.
ANNUAL 10-K REPORT
Stockholders may obtain a copy of the Company's 1993 Form 10-K Report filed
with the Securities and Exchange Commission without charge by writing to
John White, Vice-President, United Grocers, Inc., Box 22187, Portland, OR
97222.
<PAGE>
A BRIEF REVIEW
United Grocers, Inc. (United) an Oregon corporation organized in 1915,
taxed as a cooperative, is a wholesale grocery distributor. It supplies
groceries and related products to retail grocers located in Oregon, western
Washington, and northern California. United's goal is to supply grocery
products to retailers at prices which enable them to compete effectively in
the retail market, and to furnish them other services, such as marketing
assistance, engineering, accounting, financing, and insurance, which are
important to the successful operation of a retail grocery business.
The Common Stock of United is sold only to members who must be retail
grocers. Upon termination of membership, a member's shares of stock are
redeemed. Sales and redemptions of stock are made at book value. United's
Board of Directors consists of nine members serving staggered three-year
terms, and they may not be elected to consecutive terms. Directors, all
grocers, must either be proprietors or partners in a partnership owning a
membership in United or the holder of a substantial interest in a
corporation owning a membership in United. The management of the
corporation is under the direction of a President and Chief Executive
Officer who is guided by the Board of Directors.
United, operating upon a cooperative basis, usually returns most of
its earnings to its members every year in the form of "patronage
dividends." These payments are based on the excess of revenues over
expenses on sales to members for the year. Consequently, net income of the
corporation is relatively low, but not unusual for a cooperative. The
patronage dividends are paid partly in cash and partly in Common Stock.
United also sells groceries and related products to restaurants,
hospitals, and other institutional buyers, as well as to retailers who are
not members. These sales are through 28 company-owned Cash and Carry stores
located throughout its marketing area.
Grocers Insurance Group, Inc. is a holding company for United's
insurance related subsidiaries. Grocers Insurance Group, Inc. assists in
marketing insurance related services offered by those subsidiaries. Grocers
Insurance Agency, Inc. is an insurance agency. Sales of insurance are made
to members and nonmembers in fourteen states. United Employers Insurance
Co., based in Oregon, and UGIC, Ltd., based in Bermuda, are both insurance
companies. United Workplace Consultants, Inc. offers rehabilitation
services to insurance companies. Affiliated General Agency is a Texas
insurance agency.
Western Passage Express, Inc. provides freight services to United and
others. Northwest Process, Inc. dba Creative Process provides printing
services. United Resources, Inc. and its subsidiaries provide financing and
engineering services. In addition, it is involved in retail store
development activities.
United owns 22 percent of the stock of Western Family Holding Company,
an Oregon-based corporation which pools the buying power of its
stockholders in order to obtain lower cost, high-quality merchandise.
Purchases from Western Family Holding Company, which account for about 10
percent of United's total purchases, are distributed under "Western
Family," and "Cottage" labels.
In existence for 78 years, United is proud of its record growth and
success. But more important, United takes special pride in the success of
its retailers, who own the Corporation, depend on it as their principal
supplier, and are the ultimate source of its success.
The general public knows United's 363 member stores and 250
stockholders by the name of their advertising groups; e.g., Thriftway
Stores, Sentry Markets, Select Stores, Food Warehouse, Food Connection,
Holiday, or by the individual store name; e.g., Hanks, Kienow's, Meister's,
Murphy's, Strohecker's, Wizer's, etc. Almost all the leading independent
retailers in our marketing area are members of United.
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
United Grocers, Inc.
We have audited the accompanying consolidated balance sheets of United
Grocers, Inc. and subsidiaries as of October 1, 1993 and October 2, 1992,
and the related consolidated statements of income, members' equity and cash
flows for each of the three years in the period ended October 1, 1993.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these 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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
United Grocers, Inc. and subsidiaries as of October 1, 1993 and October 2,
1992, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended October 1, 1993, in
conformity with generally accepted accounting principles.
As discussed in Note 4 to the consolidated financial statements, the
Company changed its method of accounting for inventories in 1992-93. Also,
as discussed in Note 1.e. and 7, the Company changed its method of
accounting for investments and income taxes in 1991-92.
DELAP, WHITE & RAISH
Certified Public Accountants
Portland, Oregon
November 24, 1993 <PAGE>
<PAGE>
<TABLE>
<CAPTION>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED OCTOBER 1, 1993, OCTOBER 2, 1992, and SEPTEMBER 27, 1991
1993 1992 1991
<S> <C> <C> <C>
Net sales and
operations $876,985,353 $896,587,372 $882,877,880
Costs and expenses:
Cost of sales (Note 1.d.) 749,447,130 772,846,658 768,765,478
Operating expenses 88,046,293 83,656,610 75,786,118
Selling and administrative expenses 9,441,916 9,866,765 9,059,295
Depreciation and amortization 4,737,401 4,290,543 4,080,430
Interest:
Interest expense 8,217,017 8,724,766 9,051,471
Interest income (3,552,107) (3,547,423) (4,108,202)
Interest expense, net 4,664,910 5,177,343 4,943,269
Total costs and expenses 856,337,650 875,837,919 862,634,590
Net income before members'
allowances, patronage dividends,
income taxes and cumulative effect
of change in accounting principle 20,647,703 20,749,453 20,243,290
Members' allowances (9,356,885) (7,435,167) (7,116,824)
Members' patronage dividends (Note 9) (9,000,000) (10,211,000) (10,427,000)
Net income before income taxes and
cumulative effect of change in
accounting principle 2,290,818 3,103,286 2,699,466
Provision for income taxes (Note 8) (576,435) (906,690) (987,388)
Cumulative effect of change in
accounting principle (Note 7) -- 526,314 --
Net income $ 1,714,383 $ 2,722,910 $ 1,712,078
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 1, 1993, and OCTOBER 2, 1992
<TABLE>
<CAPTION>
ASSETS
1993 1992
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 18,807,473 $ 18,390,835
Investments (Note 1.e. and 2) 34,397,583 30,215,455
Accounts and notes receivable (Note 3) 40,514,016 41,274,624
Inventories (Note 1.d. & 4) 73,866,416 70,508,402
Other current assets 3,477,033 3,714,734
Deferred income taxes (Note 7 & 8) 2,823,829 2,981,576
Total current assets 173,886,350 167,085,626
Non-current assets:
Notes receivable (Note 3) 33,250,562 24,966,526
Investment in affiliated
company (Note 1.c. & 16) 1,929,929 1,929,157
Other receivables 8,875,247 9,484,211
Other non-current assets (Note 5) 3,156,301 3,065,478
Total non-current assets 47,212,039 39,445,372
Property, plant and equipment - (net
of accumulated depreciation and
amortization) (Note 6) 59,501,356 54,757,794
Total $280,599,745 $261,288,792
</TABLE>
LIABILITIES AND MEMBERS' EQUITY
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Current liabilities:
Notes payable - bank (Note 10) $ 24,730,400 $ 14,548,920
Accounts payable 57,886,107 52,137,163
Insurance reserves 29,021,276 25,545,601
Compensation and other taxes payable 2,256,970 3,364,853
Other accrued expenses 4,143,272 3,903,469
Members' patronage and other
refunds payable 7,214,927 7,739,974
Current installments on long-term
liabilities (Note 11) 6,814,221 6,519,491
Total current liabilities 132,067,173 113,759,471
Long-term liabilities (Note 11) 105,539,231 104,645,193
Deferred income taxes (Note 7 & 8) 3,281,135 3,097,674
Deferred income (Note 14) 599,804 645,138
Members' equity:
Common stock (authorized, 10,000,000
shares at $5.00 par value; issued
and outstanding, 632,312 shares in
1993 and 651,250 shares in 1992) 3,285,755 3,464,735
Additional paid-in capital 21,006,563 20,642,128
Retained earnings 14,820,084 15,034,453
Total members' equity 39,112,402 39,141,316
Commitments and contingencies (Note 18)
Total $280,599,745 $261,288,792
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
YEARS ENDED OCTOBER 1, 1993, AND SEPTEMBER 27, 1991
<TABLE>
<CAPTION>
Common stock Additional
Number paid-in Retained
Description of shares Amount capital earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balance,
09/28/90 611,829 $3,431,345 $16,330,906 $14,120,525 $33,882,776
Stock: Issued 103,480* 145,200 1,190,543 -- 1,335,743
Repurchased (83,209) (416,045) (1,456,680) (1,858,665) (3,731,390)
Patronage
dividend To be issued
80,600 shares -- 403,000 3,491,592 -- 3,894,592
Net income -- -- -- 1,712,078 1,712,078
Balance,
09/27/91 632,100 3,563,500 19,556,361 13,973,938 37,093,799
Stock: Issued 87,069* 32,345 334,723 -- 367,068
Repurchased (67,919) (339,595) (1,291,015) (1,662,395) (3,293,005)
Patronage
dividend To be issued
41,697 shares -- 208,485 2,042,059 -- 2,250,544
Net income -- -- --- 2,722,910 2,722,910
Balance,
10/02/92 651,250 3,464,735 20,642,128 15,034,453 39,141,316
Stock: Issued 57,448* 78,755 759,972 -- 838,727
Repurchased (76,386) (381,930) (1,687,165) (1,928,752) (3,997,847)
Patronage
dividend To be issued
24,839 shares -- 124,195 1,291,628 -- 1,415,823
Net income -- -- -- 1,714,383 1,714,383
Balance,
10/01/93 632,312 $3,285,755 $21,006,563 $14,820,084 $39,112,402
* Includes prior year patronage dividend to be issued.
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 1, 1993, OCTOBER 2, 1992, and SEPTEMBER 27, 1991
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 1,714,383 $ 2,722,910 $ 1,712,078
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 4,737,401 4,290,543 4,080,430
Provision for doubtful accounts 2,182,551 2,108,346 1,876,769
Patronage dividends payable
in common stock 1,415,823 2,250,544 3,894,592
(Gain) loss on sale of assets (472,126) (173,596) 82,991
Equity in earnings of affiliate (772) (1,170) (1,509)
Deferred income taxes 341,209 (227,982) (402,786)
Decrease (increase) in non-cash
current assets:
Accounts and notes receivable 2,005,201 10,019,086 (10,792,435)
Inventories (3,358,014) 623,364 (4,578,406)
Other current assets 237,701 (564,271) 1,753,354
Increase (decrease) in non-cash
current liabilities:
Accounts payable and
insurance reserves 9,224,619 (1,648,717) 984,033
Compensation and other
taxes payable (1,107,883) 122,475 881,889
Other accrued expenses 239,803 872,465 (248,698)
Members' patronage and other
refunds (525,047) 1,187,271 153,685
Decrease (increase) in other
non-current assets 518,142 (1,955,120) (1,446,385)
Net cash provided by (used in)
operating activities 17,152,991 19,626,148 (2,050,398)
Cash flows from investing activities:
Loans to members (18,766,639) (15,158,344) (17,518,366)
Collections on loans to members 6,155,085 5,044,961 7,434,436
Proceeds from sale of member loans 900,373 5,805,685 5,650,126
Sale and redemption of investments 3,857,384 242,223 3,638,203
Purchase of investments (8,039,512) (5,079,844) (13,370,961)
Sale of property, plant
and equipment 2,936,809 3,361,255 2,408,514
Purchase of property, plant
and equipment (11,990,981) (20,479,941) (9,210,367)
Net cash used in investing
activities (24,947,481) (26,264,005) (20,968,415)
Cash flows from financing activities:
Sale of common stock $ 838,727 $ 367,068 $ 1,335,743
Repurchase of common stock (3,997,847) (3,293,005) (3,731,390)
Proceeds of long-term liabilities:
Revolving bank lines of credit 510,100,000 519,500,000 452,350,000
Mortgages and notes 5,505,830 6,014,106 821,064
Redeemable notes and certificates 25,322,100 22,887,400 15,809,200
Repayment of long-term liabilities:
Revolving bank lines of credit (499,918,520)(522,001,080)(430,400,000)
Mortgages and notes (10,893,362) (5,809,105) (2,716,889)
Redeemable notes and certificates (18,745,800) (13,957,700) (10,744,000)
Net cash provided by
financing activities 8,211,128 3,707,684 22,723,728
Net increase (decrease) in cash
and cash equivalents 416,638 (2,930,173) (295,085)
Cash and cash equivalents,
beginning of year 18,390,835 21,321,008 21,616,093
Cash and cash equivalents,
end of year $18,807,473 $18,390,835 $21,321,008
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED OCTOBER 1, 1993
1. Summary of significant accounting policies
a. Reporting year
United Grocers, Inc. and subsidiaries (the Company) reports on a
fiscal year of 52 or 53 weeks which is the fiscal year of the
distribution segment. The Company's fiscal closing date is the Friday
nearest September 30. The fiscal year of the subsidiaries involved in
the insurance segment is September 30.
b. Organization
As a cooperative, the Company's stock is owned by its member
customers. Sales to stockholders are approximately 80% of wholesale
grocery sales.
c. Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries: Grocers Insurance Group,
Inc., Grocers Insurance Agency, Inc., UGIC, Ltd., United Employers
Insurance Co., United Workplace Consultants, Inc., Western Passage
Express, Inc., United Store Development Ltd., Northwest Process, Inc.,
UG Resources, Inc., United Resources, Inc., Affiliated General Agency,
Inc., Employee Management Services, Inc., Western Security Services,
Inc. and BAT Enterprises, Inc. All intercompany balances and
transactions have been eliminated upon consolidation. Investment in
the common stock of Western Family Holding Company is stated at cost
plus the Company's share of undistributed earnings since acquisition
(see Note 16).
d. Inventories and cost of sales
Inventories are valued at the lower of cost or market. The cost of all
inventories is determined under the first-in, first-out (FIFO) method.
See Note 4 for change in accounting for inventories.
Cost of sales includes the cost of distribution and insurance
operations. The distribution operation costs include the purchases of
product, the net of allowances paid and received on purchases, less
the net advertising department margins, plus the handling allowances
made to members based upon the cost of servicing their accounts. The
insurance operation costs include losses reported, a provision for
losses incurred but not reported and premium refunds.
e. Investments
Investments are primarily in non-equity securities and as such are
carried at cost. The market value of these investments at October 1,
1993 and October 2, 1992 is $36,464,552 and $31,441,399, respectively.
The Company, effective September 28, 1991 changed its method of
accounting for investments. Previously, investments were considered to
be long term as the investments were in long term bonds being held
until maturity. Only those bonds that were to mature within the next
year were classified as current assets. Under the new method, the same
investments are all classified as current assets regardless of the
maturity date. The Company's reason for this change is to more
appropriately match the current assets with the current liabilities.
In this case, the investments should be matched with the insurance
reserves which are current liabilities. The effect of this change is
to increase the current assets at October 2, 1992 by $26,684,291 with
a corresponding decrease in non-current assets.
f. Property, plant and equipment
Property, plant and equipment is carried at cost and includes
expenditures for new facilities and those which substantially increase
the useful lives of the existing plant and equipment. The Company<PAGE>
<PAGE>
capitalizes interest as a component of the cost of significant
construction projects. During the years ended October 1, 1993 and
October 2, 1992, interest was capitalized in the amount of $64,929 and
$578,611, respectively out of a total interest of $8,281,946 and
$9,303,377 which resulted in an increase in the net income of
approximately $49,000 and $410,000. No interest was capitalized during
the year ended September 27, 1991.
Depreciation is computed using the straight-line method over the
estimated useful lives of the respective assets. Estimated useful
lives are generally as follows:
<TABLE>
<CAPTION>
<S> <C>
Buildings . . . . . . . . . . . . . . . 40-75 years
Building improvements . . . . . . . . . Balance of building life
Warehouse equipment . . . . . . . . . . 5-20 years
Truck equipment . . . . . . . . . . . . 3-8 years
Office equipment. . . . . . . . . . . . 5-10 years
</TABLE>
g. Amortization
Long-term liability loan costs, software costs, and non-competition
agreements are being amortized on a straight-line basis over five to
twenty years.
h. Income taxes
The Company and its subsidiaries file a consolidated federal income
tax return. The Company operates and is taxed as a cooperative.
Accordingly, amounts distributed as patronage dividends are not
included in its taxable income but are instead taxed to the individual
members receiving the patronage dividends. Deferred income taxes are
recorded to reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year end. No valuation allowances
were considered necessary to reduce deferred tax assets to the amount
expected to be realized. See Note 8 for details of timing differences
and Note 7 for change in accounting method.
i. Earnings per common share
The Company's policy is to distribute earnings only in the form of
patronage dividends. No dividends have ever been declared on the
common stock of the Company, and all earnings not distributed as
patronage dividends have been retained. Earnings per common share are
not shown because no earnings are available for the purpose of paying
dividends on the common stock.
j. Treasury stock
The Company uses the par value method of accounting for treasury
stock. Under Oregon corporation law, treasury stock must be cancelled
upon redemption.
k. Statement of cash flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
l. Reclassifications
Certain reclassifications have been made to prior year balances to
conform to the current year classification.
<PAGE>
<PAGE>
2. INVESTMENTS
The amortized cost and estimated market value of investments in debt
securities and other investments are as follows:
<TABLE>
<CAPTION>
Carrying
amount and
Number amortized Market
Name of issuer and of shares cost of value of
title of each issue or units each issue each issue
<S> <C> <C> <C>
1993:
United States Government
and its agencies 16,010,000 $16,634,109 $17,824,552
Any state of the United
States and its agencies 2,275,000 2,375,434 2,480,717
Political subdivision of
a state of the United
States and its agencies 8,320,000 8,691,136 9,076,131
Corporate bonds 6,160,000 6,218,187 6,598,802
Subtotal - debt securities 33,918,866 35,980,202
Corporate stocks 271 1,481 7,114
Real estate mortgage -- 477,236 477,236
Total $34,397,583 $36,464,552
1992:
United States Government
and its agencies 14,500,000 $14,708,874 $15,499,176
Any state of the United
States and its agencies 2,015,000 2,127,450 2,189,623
Political subdivision of
a state of the United
States and its agencies 6,350,000 6,776,902 6,830,069
Corporate bonds 6,060,000 6,120,495 6,437,438
Subtotal - debt securities 29,733,721 30,956,306
Corporate stocks 181 1,483 4,842
Real estate mortgage -- 480,251 480,251
Total $30,215,455 $31,441,399
</TABLE>
The amortized cost and estimated market value of debt securities at October
1, 1993, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Amortized Market
cost value
<S> <C> <C>
Due in one year or less $ 3,546,086 $ 3,645,477
Due after one year through five years 19,073,123 20,498,132
Due after five years through ten years 9,852,844 10,323,560
Due after ten years 1,446,813 1,513,033
Total $33,918,866 $35,980,202
</TABLE>
3. ACCOUNTS AND NOTES RECEIVABLE
These consisted of the following as of:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Accounts receivable (due principally
from members) $38,057,797 $38,980,811
Less allowance for doubtful accounts (1,283,681) (1,434,097)
Net accounts receivable 36,774,116 37,546,714
Notes receivable from members -
current portion 3,788,864 3,782,549
Less allowance for doubtful accounts (48,964) (54,639)
Net current notes receivable 3,739,900 3,727,910
Net current accounts and
notes receivable $40,514,016 $41,274,624
Notes receivable from members -
non-current portion $33,577,706 $25,332,056
Less allowance for doubtful accounts (327,144) (365,530)
Net non-current notes receivable $33,250,562 $24,966,526
</TABLE>
<PAGE>
<PAGE>
4. CHANGE IN ACCOUNTING FOR INVENTORIES
Effective October 3, 1992, the Company changed its method of accounting for
the cost of the general wholesale grocery category of inventories from the
last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method.
The Company believes that the use of the FIFO method better matches current
costs with current revenues and more appropriately reflects its financial
condition. This change has also been made for income tax purposes.
The change in the method of valuing inventories has been applied
retroactively and comparative amounts for prior periods have been restated.
The effect of this change on retained earnings and net income for the
restated periods is as follows:
<TABLE>
<CAPTION>
1991-92 1990-91
<S> <C> <C>
Change in beginning retained earnings:
Balance as previously reported $13,311,329 $13,537,166
LIFO inventory adjustment 958,912 835,000
Less tax effect (296,303) (251,641)
Net adjustment 662,609 583,359
As restated beginning of year $13,973,938 $14,120,525
Change in net income:
As previously reported $ 3,275,772 $ 1,632,828
LIFO inventory adjustment (780,878) 125,000
Less tax effect 228,016 (45,750)
Net adjustment (552,862) 79,250
As restated $ 2,722,910 $ 1,712,078
Cumulative effect on ending
retained earnings October 2, 1992:
As previously reported $14,924,706
LIFO inventory adjustment 178,034
Less tax effect (68,287)
Net adjustment 109,747
As restated $15,034,453
</TABLE>
5. OTHER NON-CURRENT ASSETS
Other non-current assets consist of the following:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Covenant not to compete - net
of accumulated amortization of
$518,059 in 1993 and $219,564
in 1992 $ 1,014,338 $ 1,180,833
Software - net of accumulated
amortization of $730,587 in
1993 and $300,289 in 1992 1,559,449 1,448,389
Loan fees - net of accumulated
amortization of $490,814 in
1993 and $461,796 in 1992 322,630 301,573
Other 259,884 134,683
Total $ 3,156,301 $ 3,065,478
/TABLE
<PAGE>
<PAGE>
6. PROPERTY, PLANT AND EQUIPMENT (AT COST)
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Land $ 3,032,145 $ 3,222,969
Buildings and improvements 50,265,721 42,321,030
Warehouse and truck equipment 32,212,528 32,939,197
Office equipment 7,515,498 6,517,247
Construction in progress 4,366,038 5,614,110
Total property, plant and
equipment 97,391,930 90,614,553
Less accumulated depreciation
and amortization (37,890,574) (35,856,759)
Net property, plant and
equipment $59,501,356 $54,757,794
</TABLE>
7. CHANGE IN ACCOUNTING FOR INCOME TAXES
The Company adopted, effective September 28, 1991, the Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes,
issued in February, 1992. Under the liability method specified by SFAS No.
109, the deferred tax liability is determined based on the difference
between the financial statement and tax bases of assets and liabilities as
measured by the enacted tax rates which will be in effect when these
differences reverse. Deferred tax expense is the result of changes in the
liability for deferred taxes. The principal types of differences between
assets and liabilities for financial statement and tax return purposes are
accumulated depreciation, insurance loss reserves, allowance for doubtful
accounts, and capitalized costs in inventory.
The deferred method, used in the years prior to 1992, required the
Company to provide for deferred tax expense based on certain items of
income and expense which were reported in different years in the financial
statements and the tax returns as measured by the tax rate in effect for
the year the difference occurred.
As allowed by SFAS No. 109, the Company did not restate the years
prior to the year ended October 2, 1992 and, accordingly, the cumulative
effect of the accounting change on the prior years of $526,314 is included
in the earnings for the year ended October 2, 1992.
<PAGE>
<PAGE>
8. INCOME TAXES
The provision for income taxes for the three years consists of the
following:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Current payable (refund):
Federal $ 162,758 $ 624,516 $1,282,555
State 72,468 (16,158) 107,696
Deferred (credit) 341,209 298,332 (402,863)
Total $ 576,435 $ 906,690 $ 987,388
</TABLE>
The effective income tax rate for the three years ended October 1,
1993 does not correspond with the Federal tax rate. The
reconciliation of this rate to the effective income tax rate is as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Statutory income tax rate (34%) $ 778,878 $1,055,117 $ 917,818
State income taxes, net of
Federal income tax benefit 47,829 (10,664) 71,079
Tax exempt interest (133,080) (104,537) (16,960)
Refunds as a result of carrybacks (184,980) -- --
Other 67,788 (33,226) 15,451
Income tax expense $ 576,435 $ 906,690 $ 987,388
Effective income tax rate 25.2 % 29.2 % 36.6%
</TABLE>
The significant components of the deferred income taxes - asset and
liability as of October 1, 1993 and October 2, 1992 are as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Deferred income taxes - asset:
Insurance reserves $1,230,094 $1,138,494
Inventories 712,212 647,577
Unearned insurance premiums 496,405 498,461
Allowance for doubtful accounts 478,866 564,400
Other (93,748) 132,644
Total $2,823,829 $2,981,576
/TABLE
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Deferred income taxes - liability:
Accumulated depreciation and
amortization $4,173,575 $3,583,794
Deferred income (230,325) (262,325)
Other (246,090) (223,795)
Alternative minimum tax (AMT) credit (416,025) --
Total $3,281,135 $3,097,674
</TABLE>
The significant components of deferred income tax expense for 1993
and 1992 are as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Decrease (increase) in deferred income
taxes - asset $ 157,747 $ (273,942)
Increase in deferred income taxes -
liability after applying AMT credit 183,462 572,274
Total $ 341,209 $ 298,332
</TABLE>
The sources of deferred income tax expense timing differences (prior
to SFAS No. 109) for the year ended September 27, 1991 are as
follows:
<TABLE>
<CAPTION>
<S> <C>
Excess of tax over (under) financial
statement:
Depreciation, net of basis adjustments
on sales $ 637,776
Pension expense (216,498)
Excess of financial statement over
tax:
Loss reserves and other items (294,872)
Bad debt expense (295,766)
Vacation pay (69,786)
Capitalization of certain costs
under uniform capitalization rules (163,717)
Net credit $ (402,863)
</TABLE>
The Company has net operating loss carryovers and unused energy tax
credits for state income tax purposes to apply against future years
state income taxes.
<PAGE>
<PAGE>
9. MEMBERS' PATRONAGE DIVIDENDS
The Company's net income from sales to members, before income taxes and
patronage dividends, is available, at the discretion of the Board of
Directors, to be returned to the members in the form of patronage
dividends.
As of year end, the Board of Directors voted to distribute the following in
patronage dividends:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Payable in cash and shown as
a current liability $ 7,584,177 $ 7,960,456 $ 6,532,408
Distributable in the form
of common stock 1,415,823 2,250,544 3,894,592
Total $ 9,000,000 $10,211,000 $10,427,000
</TABLE>
The amounts allocated between cash and common stock for 1992 have been
restated because the actual distribution was significantly different
due to certain members not being required to invest in additional
common stock as originally computed. The restatement had the
following effect on 1992 amounts:
<TABLE>
<CAPTION>
As originally As
reported Adjustment restated
<S> <C> <C> <C>
Patronage dividends
distributable in the form
of common stock $ 3,104,571 $ (854,027) $ 2,250,544
Common stock $ 3,543,850 $ (79,115)*$ 3,464,735
Additional paid-in capital 21,417,040 (774,912) 20,642,128
Total $24,960,890 $ (854,027) $24,106,863
* 15,823 shares
</TABLE>
10. NOTES PAYABLE - BANK
Notes payable - bank consists of borrowings on bank lines of credit at an
average interest rate of 3.95% at October 1, 1993 and 3.94% at October 2,
1992.
At October 1, 1993 and October 2, 1992, the Company had unused lines
of credit totaling $10,300,000 and $15,500,000, respectively.
In April of 1993, the Company entered into a three year reverse
interest swap agreement with a bank. Under the agreement, the Company
receives a fixed rate of 4.40% on $20 million (notional amount) and pays a
floating rate based on LIBOR, as determined in six month intervals. The
transaction effectively changes a portion of the Company's interest rate
exposure from a fixed rate to a floating rate basis. This swap agreement
has been entered into with a major financial institution which is expected
to fully perform under the terms of the agreement thereby further
mitigating the risk from the transaction.
<PAGE>
<PAGE>
11. LONG-TERM LIABILITIES
Long-term liabilities consist of the following:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Notes payable - bank:
Credit agreement notes maturing
on April 30, 1995 with interest
rates of 3.98% per annum at
October 1, 1993 and 3.95% per
annum at October 2, 1992. The
interest rates ranged from 3.94%
to 4.78% in 1993 and from 3.95%
to 6.31% in 1992. $ 25,000,000 $ 30,000,000
Notes payable - insurance companies:
Senior notes payable to six
insurance companies with an
interest rate of 9.15% per annum.
Interest payable monthly. Principal
repayments annually commencing
October 1, 1992 in the amount of
$3,336,000 and each October 1
thereafter in the amount of
$3,333,000, maturing in full October
2, 2000. 23,331,000 26,664,000
Notes payable - other:
Capital stock residual notes, payable
in twenty quarterly installments with
a variable interest rate based on the
current capital investment note rate. 2,878,311 2,386,209
Three notes with interest at 9.25% per
annum payable in monthly installments
of $50,660 beginning January 21, 1988
(secured by equipment). 715,022 1,230,610
A real property contract for the
purchase of an office building,
payable in 180 monthly installments
of $2,346 including interest at
12.5% per annum until 1999 (secured
by real property). 116,171 128,920
Other notes payable 55,000 9,688
Mortgage notes (secured by real property):
A note payable in monthly installments
of $41,449 including interest at 9%
until 1996. $ 1,276,922 $ 1,641,377
A note payable in monthly installments
of $43,721 including interest at 10.30%
per annum until 1995. 909,026 1,316,937
<PAGE>
<PAGE>
A note payable in monthly installments
of $31,615 including interest at 7.25%
until 2013. 4,000,000 --
A note payable in monthly installments
of $34,140 including interest at 10.875%
per annum until 1993. -- 291,243
Redeemable notes and certificates:
Capital investment notes
(subordinated), interest ranging
from 5.75% to 8%. Maturity ranges
from 1993 to 2003 which is ten
years from dates of issue. 50,395,400 43,624,300
Registered redeemable building
notes (subordinated), interest
at 8%. No fixed maturity date. 3,615,600 3,808,600
Redeemable transferable notes,
(subordinated), interest at
5.75%. No fixed maturity. 61,000 62,800
Total 112,353,452 111,164,684
Less current installments (6,814,221) (6,519,491)
Total long-term liabilities $105,539,231 $104,645,193
</TABLE>
<TABLE>
<CAPTION>
Total maturities of long-term liabilities in each of the next five
fiscal years are:
<S> <C>
1994 $ 6,814,221
1995 31,446,877
1996 6,040,992
1997 6,681,018
1998 5,120,090
</TABLE>
The Company's bank loan agreements require the maintenance of
certain financial ratios and a minimum amount of capital and
subordinated debt. The Company was in compliance with these
requirements as of October 1, 1993 and October 2, 1992.
<PAGE>
<PAGE>
12. SEGMENT REPORTING
The Company has two operating segments which are located primarily in the
Pacific Northwest. The distribution segment includes all operations
relating to wholesale grocery and related product sales, retail grocery
sales, service department revenues, and financing income and fees. The
insurance segment includes all operations relating to insurance
underwriting, commissions, and reinsurance primarily to provide workers'
compensation and property-casualty coverage.
A summary of information about the Company's operations by segment
before inter-segment eliminations is as follows:
<TABLE>
<CAPTION>
October 1, October 2, September 27,
1993 1992 1991
<S> <C> <C> <C>
Net sales and operating income:
Distribution $857,439,871 $878,146,111 $866,552,769
Insurance 20,525,392 19,555,963 17,993,010
Total $877,965,263 $897,702,074 $884,545,779
Net income before allowances,
dividends, income taxes and
accounting change:
Distribution $ 18,162,132 $ 17,860,059 $ 18,215,380
Insurance 2,485,571 2,889,394 2,027,910
Total $ 20,647,703 $ 20,749,453 $ 20,243,290
Total assets at year end:
Distribution $226,346,768 $209,063,967 $203,401,231
Insurance 59,849,620 55,677,996 48,428,350
Total $286,196,388 $264,741,963 $251,829,581
</TABLE>
<TABLE>
<CAPTION>
October 1, October 2, September 27,
1993 1992 1991
<S> <C> <C> <C>
Depreciation and amortization
expense:
Distribution $ 4,643,401 $ 4,163,138 $ 3,963,071
Insurance 94,000 127,405 117,359
Total $ 4,737,401 $ 4,290,543 $ 4,080,430
Capital expenditures:
Distribution $ 11,310,048 $ 19,922,924 $ 9,089,909
Insurance 680,933 557,017 120,458
Total $ 11,990,981 $ 20,479,941 $ 9,210,367
</TABLE>
For net sales and operating income, wholesale grocery sales during
the three years ended October 1, 1993 accounted for approximately
93%, 95% and 96%, respectively, of the distribution total. Premium
revenue accounted for approximately 90%, 86% and 89%, respectively,
of the insurance total.
The change in the method of accounting for inventories (Note 4)
related to and affected only the distribution segment.<PAGE>
<PAGE>
13. PENSION PLANS
The Company has a Company-sponsored pension plan that covers substantially
all of its salaried employees. The Company also has separate
Company-sponsored 401(k) plans for salaried and union employees. The Company
has made annual contributions to the plans equal to the amount accrued for
pension expense. The Company's funding policy is to satisfy the funding
requirements of the Employees' Retirement Income Security Act.
The Company also participates in several multi-employer pension plans
for the benefit of its employees who are union members. The data available
from administrators of the multi-employer plans is not sufficient to
determine the accumulated benefit obligation, nor the net assets attributable
to the multi-employer plans in which the Company union employees participate.
The financial statements include pension expense for the Company
sponsored pension plan as determined using Statement of Financial Accounting
Standards No. 87 (SFAS 87). The effect of SFAS 87 was a decrease of pension
expense in the amount of $484,020 for 1993 and $317,193 for 1992 and an
increase of pension expense in the amount of $188,587 for 1991. The Company's
unrecognized net asset resulting from the initial application of SFAS 87 is
being amortized over eighteen years.
In determining the actuarial present value of the projected benefit
obligation, a discount rate of 8% and a future maximum compensation increase
rate of 4% were used. The expected long-term rate of return on assets was 8%.
Pension costs for all plans for the three years consist of the
following:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Company-sponsored:
Service costs of benefits
earned $ 910,214 $ 832,866 $ 784,320
Interest cost on the projected
benefit obligation 1,339,393 1,102,517 1,126,884
Expected return on plan assets (1,443,513) (1,199,657) (1,131,786)
Net amortization of unrecognized
net asset (168,168) (154,154) (168,168)
Unrecognized net losses -- -- 24,239
Unrecognized prior service cost 73,760 1,164 1,270
Net salaried pension cost 711,686 582,736 636,759
Multi-employer plan costs 2,176,159 2,183,086 2,163,804
Matching costs of 401(k) plans 441,534 395,731 506,662
Total pension expense $ 3,329,379 $ 3,161,553 $ 3,307,225
</TABLE>
The following table sets forth the Company-sponsored plan's funded status
as of year end:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested $12,397,747 $10,951,935 $10,329,561
Non-vested 819,479 675,609 577,831
Accumulated benefit obligation 13,217,226 11,627,544 10,907,392
Effect of projected future
compensation levels 4,501,814 4,237,333 3,955,631<PAGE>
<PAGE>
Projected benefit obligation 17,719,040 15,864,877 14,863,023
Plan assets at fair value,
primarily listed stocks, fixed
income, and bond and equity
funds 21,056,267 17,981,115 16,509,901
Excess of plan assets over
projected benefit obligation 3,337,227 2,116,238 1,646,878
Unrecognized prior service cost 1,031,162 14,965 16,129
Unrecognized net (gain) loss (2,273,777) (273,680) 87,044
Unrecognized net asset, net of
amortization (2,065,671) (2,233,839) (2,387,993)
Prepaid (accrued)
pension cost $ 28,941 $ (376,316) $ (637,942)
</TABLE>
In addition to pension benefits, the Company provides health benefits for
certain retired salaried employees. The Financial Accounting Standards
Board has issued Statement of Financial Accounting Standards No. 106,
"Employer's Accounting for Post Retirement Benefits Other Than Pensions."
This statement will require accrual of such benefits during the years an
employee provides services. The costs of these benefits are currently
expensed on a pay-as-you-go basis. The cost of this retiree health care
is funded out of current operations and was approximately $282,000 in
1993, $257,000 in 1992 and $200,000 in 1991. The impact of this new
standard has not been fully determined, but the change likely will result
in greater expense being recognized for these benefits. The Company plans
to adopt this Statement in 1995.
<PAGE>
<PAGE>
14. LEASES
The Company is obligated under one hundred and seventeen significant leases
in 1993. Forty of these leases are for twenty to twenty-five years with
renewal options and involve supermarket properties which are subleased to
members. Fifteen of these leases are subleased to affiliated companies. The
leases expire at various dates, the last expiring in 2013. Rental expense for
the three years consists of the following:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Minimum rentals $14,082,104 $12,447,688 $10,133,371
Less sublease income (6,554,855) (6,355,385) (5,258,992)
Net rental expense $ 7,527,249 $ 6,092,303 $ 4,874,379
</TABLE>
The following is a schedule by years showing future minimum rental
payments required under operating leases that have initial or remaining
non-cancelable lease terms in excess of one year as of October 1, 1993:
<TABLE>
<CAPTION>
Fiscal Minimum Minimum Net
year payments (A) receipts (B) minimum
<S> <C> <C> <C>
1993-1994 $ 14,036,472 $ 5,550,288 $ 8,486,184
1994-1995 13,667,159 5,603,161 8,063,998
1995-1996 12,234,841 5,555,337 6,679,504
1996-1997 10,566,829 5,001,660 5,565,169
1997-1998 8,901,347 3,959,493 4,941,854
Later years 80,242,271 37,966,494 42,275,777
Total $139,648,919 $63,636,433 $76,012,486
Summary:
Building leases $127,289,174 $61,119,240 $66,169,934
Equipment leases 12,359,745 2,517,193 9,842,552
Total $139,648,919 $63,636,433 $76,012,486
</TABLE>
(A) Minimum payments are those required by the Company over the terms of
the significant leases.
(B) Minimum receipts are those to be received by the Company from sublease
agreements.
Nineteen of the subleases as of October 1, 1993, are insured by the
Company's foreign subsidiary, UGIC, Ltd. The annual rental for these
leases is approximately $2,042,000. The total minimum payments over
the lease term for these same leases is approximately $35,700,000.
In 1992 and 1991, the Company entered into sale-leaseback transactions
for three cash and carry outlets. The sales resulted in deferred gains of
approximately $800,000 which are being amortized over the leaseback period of
fifteen years. The total lease commitments are approximately $2,500,000
over fifteen years with an annual rental of approximately $155,000 for each
of the first five years.
<PAGE>
<PAGE>
15. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Supplemental disclosures:
Cash paid during the year for:
Interest $ 8,292,247 $ 8,952,346 $ 9,028,722
Income taxes 647,836 982,169 1,284,614
Supplemental schedule of
noncash investing and
financing activities:
Patronage dividends payable
in common stock 1,415,823 2,250,544 3,894,592
</TABLE>
<PAGE>
<PAGE>
16. INVESTMENT IN AND TRANSACTIONS WITH AFFILIATE
The Company owns 22.42% of the outstanding common stock of Western Family
Holding Company (the Affiliate). The amount of consolidated retained earnings
represented by undistributed earnings of the Affiliate as of October 1, 1993
is $1,654,629, and $1,653,857 as of October 2, 1992.
An officer of the Company is a director of the Affiliate. The Company
and certain other retailer owned grocery wholesalers located primarily in the
Pacific Northwest organized the Affiliate to provide a source for the
Affiliate private label brand.
An approximate summary of transactions with this affiliate for the three
years is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Purchases $70,334,000 $71,994,000 $72,371,000
Volume incentive rebate 1,231,000 1,260,000 1,086,000
Open accounts payable 5,150,000 4,000,000 3,700,000
</TABLE>
17. CONCENTRATION OF CREDIT RISK
The Company holds its cash and cash equivalents in several banks located in
the Pacific Northwest and a zero balance bank account located in the Midwest.
Each bank is covered by FDIC insurance; balances in excess of coverage are
not insured.
As a cooperative, the majority of the Company's accounts receivable
represent sales to its members who are located throughout the Pacific
Northwest. These accounts are not generally secured by collateral but each
member has stock holdings in the Company as well as patronage rebates which
the Company could apply against account balances.
The Company makes store financing loans to members from time to time
mainly to finance the acquisition of grocery store properties and equipment.
These loans are represented by notes receivable which are secured by
collateral consisting of personal property, securities and guarantees.
The insurance subsidiaries have investments primarily in federal
securities and state municipal bonds which are backed by the full faith and
credit of the respective governmental agency.
18. COMMITMENTS AND CONTINGENCIES
a. During 1991 and 1990, the Company entered into agreements under which
it sold and continues to sell certain of its notes receivable from members
subject to limited recourse provisions. These are secured by collateral which
usually consists of personal property, securities and guarantees. The Company
is responsible for collection of the notes, for which it receives a
collection fee, and remits the net proceeds to the purchaser on a monthly
basis. In 1993, 1992 and 1991, the Company sold notes totaling approximately
$900,000, $5,800,000 and $5,650,000, respectively. The balances of
transferred notes that were outstanding and subject to recourse provisions
were $13,441,000, $20,934,000 and $24,482,000 at October 1, 1993, October 2,
1992 and September 27, 1991, respectively.
b. In connection with its loan activities to members, the Company has
approved loan applications totaling approximately $13,000,000 for which funds
have been committed, but not disbursed, as of October 1, 1993.
c. The Company is guarantor of a covenant by a member as of October 1,
1993 totaling $400,000 with annual principal payments of approximately
$50,000.
d. The Company is a party to various litigation and claims arising in
the ordinary course of business. While the ultimate effect of such actions
cannot be predicted with certainty, the Company expects that the outcome of
these matters will not result in a material adverse effect on the Company's
consolidated financial position or results of operations.<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
During 1993, net sales and operations decreased 2.2% to $877.0 million. This
compares to a 1.6% increase in 1992 to $896.6 million. Net income before
member rebates, allowances, and taxes decreased $0.1 million to $20.6 million
(2.35% of sales). This compares to $20.7 million (2.31% of sales) and $20.2
million (2.29% of sales) in 1992 and 1991, respectively.
During 1993, the decrease in net sales and operations was primarily
attributable to a 52 week accounting period, lower warehouse unit sales, and
lower levels of store financing interest income, offset by increased service
income, insurance segment written premiums, and sales from retail store
operations. The Company enjoyed increased profits in 1993 within the
distribution segment's Cash & Carry and service income areas. Within the
insurance segment, United Employers Insurance increased its profitability due
to premium volume, increased investment income, and reduced operating
expenses. These profit improvements were offset by increased member allowance
payments and operating losses in retail store operations.
In 1992, the gain in net sales and operations resulted primarily from
the 53 week accounting period. For a 52 week period comparable to 1991, most
operations had no gains or slight declines in sales due to reduced unit
volumes. Equipment sales were also lower in 1992 reflecting a lower level of
member new store openings and remodels. Net sales and operations reflected an
increase in revenue from retail stores owned by the Company in 1992. During
1992, the Company's profits improved due to improved earnings at the Cash &
Carry division and improved insurance subsidiary earnings. These
profitability improvements were offset by nonrecurring expenses associated
with the Company's Portland facility expansion, increased operating losses in
retail store operations, and a higher provision for bad debts.
NET SALES AND OPERATIONS
The Company's warehouse and Cash & Carry distribution segment sales recorded
a 3.6% decrease in sales to $822.0 million for the 52 week period ending
October 1, 1993, compared to sales of $852.9 million for the 53 week period
ending October 2, 1992. When compared to a 52 week period comparable to 1992,
1993 sales declined 1.9%. Inflation during 1993 added approximately 0.8% to
warehouse sales.
Member distribution sales were negatively impacted by continuing
consumer trends toward lower cost items, more private label products, and
reduced retail store development. The trend in retail store development is
expected to reverse in 1994, as several new member stores plan to open
throughout the year. Cash & Carry sales increased slightly to $155.6 million
from last year's comparable 52 week sales of $154.5 million, reflecting sales
from new stores. Distribution segment interest income declined $0.6 million
to $2.3 million reflecting lower interest rate levels.
Sales at retail stores increased $16.1 million to $40.9 million in 1993,
continuing a recent trend of increasing retail store sales. During the year,
the Company disposed of two stores, and acquired an additional four stores,
increasing the number of retail stores to seven.
In 1993, the insurance segment's net insurance premiums, commissions, and
fees increased by $0.9 million to $20.5 million from $19.6 million in 1992.
This increase was due to increases in policy volume and rehabilitation
service fees, offset by lower commissions earned and increased reinsurance
premiums paid.
<PAGE>
<PAGE>
GROSS OPERATING INCOME
Gross operating income increased to $127.5 million (14.5% of sales) from
$123.7 million (13.8% of sales) and $114.1 million (12.9% of sales) in 1992
and 1991, respectively. The increase in gross operating income occurred due
to improved gross margins in Cash & Carry operations, and a shift in
distribution segment's sales mix in favor of retail store and Cash & Carry
operations. Further, the impact of changes in member volume allowance program
shifted the member sales mix away from grocery sales towards produce and
perishable sales.
These trends were partially offset by an increase in claims losses and
loss adjustment expenses in the insurance segment. In 1993, loss and loss
adjustment expenses were 83.3% of total premium income, compared to 75.5% and
79.6% in 1992 and 1991, respectively.
COSTS AND EXPENSES
1993 operating, selling and administrative expenses were $97.5 million (11.1%
of sales). These expenses amounted to $93.5 million (10.4% of sales) and
$84.8 million (9.6% of sales) in 1992 and 1991, respectively. The components
of these expenses are summarized below.
<TABLE>
<CAPTION>
Percent of Total Sales
1993 1992 1991
<S> <C> <C> <C>
Salaries & Wages 6.3 5.9 5.5
Rents, Maintenance,
and Repairs 1.6 1.6 1.5
Taxes, Other Than Income 0.9 0.8 0.8
Utilities, Supplies
and Services 1.5 1.5 1.3
Other Expenses 0.5 0.4 0.3
Provision for Doubtful
Accounts 0.3 0.2 0.2
Total 11.1 10.4 9.6
</TABLE>
In 1993, operating, selling and administrative expense as a percent of
sales increased primarily due to increased volume in retail store operations.
The benefits of increased labor productivity only partially offset 1993
bargaining unit contract increases and the effect of lower unit volume in
warehouse operations.
These expense trends in the distribution segment were partially offset
by improved efficiencies in the insurance segment. For 1993, insurance
operating and administrative expenses were 26.4% of segment sales, compared
to 28.1% of sales in 1992.
Provision for doubtful accounts was $2.1 million in 1993, unchanged from
1992. Interest expense decreased primarily due to lower short term interest
rates and average borrowings, offset by increases in subordinated debt
levels.
<PAGE>
<PAGE>
MEMBER ALLOWANCES AND DIVIDENDS
In 1993, total member allowances and dividends increased 4.0% to $18.4
million. In 1992, total allowances and dividends increased 0.6% to $17.6
million from $17.5 million in 1991. Lower patronage dividends were offset by
the increased cost of the Company's new partnership incentive volume
allowance program.
Total member allowances and dividends as a percent of member sales were
2.75%, compared to 2.53% and 2.57% in 1992 and 1991, respectively.
The associated costs of the new allowance program totalled $2.1 million
in 1993. The Company expects that incremental costs of the new member
allowance program in 1994 could potentially be as much as $1.9 million.
NET INCOME AND INCOME TAXES
In 1993, net income before taxes was $2.3 million (0.3% of sales) compared to
$3.1 million (0.3% of sales) and $2.7 million (0.3% of sales) in 1992 and
1991, respectively.
The Company's effective tax rate decreased to 25.2% from 29.2% in 1992
and 36.6% in 1991. The reduction in effective rate was primarily caused by
depreciation deductions and a shift in the investment portfolio toward tax
exempt investments. In 1993, net income after tax decreased to $1.7 million
(0.2% of sales) from $2.7 million (0.3% of sales) and $1.7 million (0.2% of
sales) in 1992 and 1991, respectively.
LIQUIDITY AND CAPITAL SOURCES
CASH FLOW FROM OPERATIONS
In 1993, the Company provided $17.2 million in cash from its operating
activities. Increased insurance reserves due to increased policy volume,
improvements in accounts payable management, and reductions in accounts
receivable offset increases in distribution segment inventories and lower
after tax profits. The Company's operating cash flow was reduced on account
of the payment of a greater portion of member dividends in cash, and a
smaller portion issued in stock.
CASH FLOW FROM INVESTING ACTIVITIES
In 1993, the Company used $24.9 million in its investing activities, a
decrease of $1.4 million from the $26.3 million used in 1992. Total Company
capital expenditures fell as the Portland facility expansion was completed.
The volume of member finance notes sold to the banks decreased $4.9 million
in 1993, as the Company funded its store finance operations with its bank
agreements while its member note purchase program was being updated. The
updated member note purchase program should be in place in 1994, and the
Company intends to finance the majority of its member note activity through
this program.
In fiscal year 1994, anticipated capital expenditures will approximate
$7.5 million, representing $3.5 million in replacement assets, $2.0 million
for new Cash & Carry units, and $2.0 million in investments for upgraded
operations software.
CASH FLOW FROM FINANCING ACTIVITIES
In 1993, the Company provided $8.2 million from its financing activities. The
Company continued its present funding policies favoring the use of
subordinated debt in its capital structure. Subordinated debt increased by
$6.6 million, while senior term debt decreased $5.4 million.
CAPITAL STRUCTURE AND RESOURCES
The following table summarizes the Company's capital structure for the last
two years.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended
October 1, 1993 October 2, 1992
$ 000 % $ 000 %
<S> <C> <C> <C> <C>
Average Short Term
Borrowings During the Year 17,000 10.1 23,231 13.4
End of Year Amounts
Senior Term Debt 58,342 34.6 63,732 36.7
Subordinated Debt 54,011 32.1 47,433 27.3
Equity 39,112 23.2 39,141 22.6
Total $168,465 100.0 $173,537 100.0
</TABLE>
In 1993, the Company's capital structure continued to shift toward a
greater reliance upon subordinated debt and equity. This trend reflects the
Company's strategic funding plan to emphasize subordinated debt and equity in
its capital structure.
The Company's working capital was $41.8 million in 1993, a decrease of
$11.5 million from $53.3 million in 1992. This decrease is principally
attributable to the financing of member store notes under the Company's short
term bank agreement in anticipation of the completion of its updated member
note purchase program in 1994.
The Company's main sources of funds include earnings, bank borrowings,
private placement debt, note purchase programs, capital investment notes, and
member capital stock. As of October 1, 1993, the Company had $10.3 million in
unused credit lines available. Management believes that current funding
sources are adequate to meet present Company needs.
United Employers Insurance Co. investments are held to support the
payment of claims. These investments are not available to the Company to meet
its capital needs due to restrictions imposed by insurance regulators
regarding intercompany loans and advances.
<PAGE>
BOARD OF DIRECTORS
<PAGE>
Pictured above seated Pictured above standing
from left to right: from left to right:
JAMES C. VICKERS CRAIG T. DANIELSON
J.C. Market, Inc. - term expires Dan Inc. Oregon - term expires
January 1996 January 1996
Member: UGPAC Chairperson: Compensation Committee
Member: Executive Finance Committee
ARNIE L. ATKINS K. MICHAEL OWEN
CHAIRMAN Owen's Sentry Market, Inc. - term
Arlind, Ltd. - term expires January expires January 1994
1994 Chairperson: Facility Planning
Chairperson: Executive Finance Committee
Committee, Audit Committee
Member: Compensation Committee, UGPAC
MARLIN A. SMYTHE BERT G. BABB
VICE-CHAIRMAN West Lane Thriftway - term expires
MCS Management Company - January 1994
term expires January 1995 Chairperson: Nominating Committee
Chairperson: Bylaw Committee Member: Executive Finance
Member: Executive Finance Committee, Committee, Audit Committee, UGPAC
Compensation Committee
H. LARRY MONTGOMERY DENNIS K. BLASINGAME
Larry's Market, Inc. - term expires DA Boys Market - term expires
January 1995 January 1996
Member: Audit Committee, Facility Member: Facility Planning
Committee Committee
MANAGEMENT
ALAN C. JONES - President & CEO
RONALD E. DOVE - Director of Operations
GEORGE P. FLEMING - Assistant Secretary - President of
United Resources, Inc.
ROSS E. DWINELL - President of Grocers Insurance Group, Inc.
RALPH P. MATILE III - Medford Division Manager
KEITH A. MILLER - Director of Purchasing & Marketing
JAMES E. ROBINSON - President, Thriftway Stores, Inc.
SUSAN D. WEBER - Director of Human Resources
JOHN W. WHITE - Vice President & CFO
JOHN M. WILLIS - Director of Foodservice
R. DAVID MAY - Director of Retail Services<PAGE>
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
We hereby consent to the
incorporation by reference of (i) our report dated November 24, 1993, with
respect to the financial statements of United Grocers, Inc., and (ii) our
report dated November 24, 1993, with respect to the financial statement
schedules, both of which are included in the annual report on Form 10-K of
United Grocers, Inc., for the year ended October 1, 1993, into the
prospectus constituting part of the Registration Statements on Form S-2
(Nos. 33-49450 and 33-57272) of United Grocers, Inc.
DeLAP, WHITE & RAISH
Certified Public Accountants
Portland, Oregon
January 5, 1994<PAGE>
