<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 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 February 1, 1994.<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>
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>
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>
<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 Gilbert A. Foster, H. Lawrence
Montgomery, Marlin A. Smythe, Dennis Blasingame, Craig Danielson, James C.
Vickers, David Neal, Peter J. O'Neal, and Arthur Thenell.
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.
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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."
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