REGISTRATION NO. 333-26285
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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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) 833-1000
(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) 833-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
Miller, Nash, Wiener, Hager & Carlsen LLP
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 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.
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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
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1. Forepart of the Registration Statement and Cover page
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 and Ratio Prospectus Summary; Risk Factors
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 Risk Factors; Introduction;
Registered Description of Membership
Stock; Description of Notes
10. Interests of Named Experts and Counsel *
11. Information with Respect to Prospectus Summary; Risk Factors;
the Registrant Introduction;
The Company; Recent Developments;
Incorporation of Certain Documents
by Reference
12. Incorporation of Certain Information Incorporation of Certain
by Reference Documents by Reference
13. Disclosure of Commission Position on *
Indemnification for Securities
Act Liabilities
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* Omitted either because the item is inapplicable or because the answer is in the negative.
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UNITED GROCERS, INC.
(Portland, Oregon)
250,000 SHARES
COMMON STOCK, $5 PAR VALUE
$50,000,000 SERIES K 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 6.25% per annum during the period March 16, 1996, to June 15, 1997, on
all Notes outstanding at any time during that period. On June 16, 1997, 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
6.25% 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 June 15, 1997, 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.
PRICE TO UNDERWRITING PROCEEDS
PUBLIC DISCOUNTS AND TO UNITED
COMMISSIONS
Per Share $61.53 None $61.53
Per Note 100% None 100%
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 MAY ___, 1997
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TABLE OF CONTENTS
Page
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Statement of Available Information.............................................2
Incorporation of Certain Documents by Reference................................2
Prospectus Summary.............................................................4
Risk Factors...................................................................7
Note Regarding Forward-Looking Statements.....................................11
Introduction..................................................................11
The Company...................................................................13
Recent Developments...........................................................16
Description of Membership Stock...............................................17
Description of Notes..........................................................18
Legal Matters.................................................................21
Experts.......................................................................21
Additional Information........................................................21
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 files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission
("Commission"). The public may read and copy any reports, statements and other
information filed by United at the Commission's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. United's filings
are also available to the public from commercial document retrieval services and
at the Internet web site maintained by the SEC at "http://www.sec.gov."
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 September 27, 1996, and (ii) the material
under the captions "Board of Directors" and "Management" and the information on
pages 1 through 20 of the bound insert included in United's annual report to its
security holders for the year ended September 27, 1996. In addition, all
documents filed by United pursuant to Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934, as amended, after September 27, 1996 (the end
of the most recent fiscal year), shall be deemed to be incorporated by reference
in this prospectus and to be a part hereof from the date of filing of the
documents (such documents, and the documents enumerated above, are hereinafter
referred to as "Incorporated Documents"). Any statement contained in an
Incorporated Document shall be deemed to be modified or superseded for purposes
of this prospectus and the registration statement of which it is a part to the
extent that a statement contained herein or in any other subsequently filed
Incorporated Document or in an accompanying prospectus supplement modifies or
supersedes the statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
prospectus or the registration statement.
This prospectus is accompanied by a copy of United's 1996 annual
report to security holders, its quarterly report on Form 10-Q for the quarter
ended December 27, 1996, amendment No. 1 to its quarterly report on Form 10-Q
for the quarter ended December 27, 1996, filed on April 4, 1997, its current
report on Form 8-K filed April 29, 1997, and its quarterly report on Form 10-Q
for the quarter ended March 27, 1997. United will provide, without charge, to
each person to whom a copy of
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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)
833-1000.
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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) 833-1000.
Principal Business A wholesale grocery distributor which operates
as a cooperative. United sells groceries and related
products at wholesale to approximately 353 independent
retail grocery stores operated by its members in Oregon,
western Washington and northern California.
Use of Proceeds of Working capital and general corporate purposes.
Offering
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 ($61.53 per share, or
$12,306 for 200 shares, during 1997).
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 dividends other than
Tax Consequences 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."
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NOTES
Notes Offered Series K 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
6.25% per annum during the period March 16, 1996, to June
15, 1997, on all Notes outstanding at any time during
that period. On June 16, 1997, 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 6.25% 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 June 15,
1997, 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 policy has been to prepay
any Note, upon 10 days' notice, at the request of the
holder. However, United may discontinue such policy at
any time. In April and May 1997, prepayments were
temporarily suspended due to an unusual volume of
requests. 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 September
27, 1996, was approximately $156,200,000. There is no
limit upon the amount of Senior Indebtedness that United
may incur.
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 First Bank National Association.
See "Introduction" and "Description of Notes."
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SELECTED FINANCIAL DATA
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FISCAL YEARS ENDED
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SEPT. 27 SEPT. 29 SEPT. 30 OCT. 1 OCT. 2
1996 1995 1994 1993 1992
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(Dollars in thousands, except per share amounts)
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Income Statement(1):
Net sales and operating
revenues $1,301,507 $1,018,248 $954,220 $876,985 $896,587
Income before members'
patronage dividends, income
taxes, and accounting change 4,227 10,503 11,294 11,291 13,314
Patronage dividends 4,000 8,350 8,730 9,000 10,211
Net income(2)(3)(9) 152 1,379 1,563 1,714 2,723
Balance Sheet:
Working capital(4)(8) 59,224 52,510 45,258 41,819 53,326
Total assets(7) 384,144 322,456 306,836 285,342 261,289
Liabilities
Current(9) 195,238 159,937 147,443 136,809 113,759
Long-term 143,134 115,624 114,669 105,539 104,645
Members' equity(8) 41,459 42,357 40,425 39,112 39,141
Adjusted book value per share(5) 61.53 62.14 59.50 57.00 53.94
Ratio of adjusted income
to fixed charges(1)(6) 1.19 1.58 1.79 1.85 1.97
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(1) 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.
(2) 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.
(3) In fiscal 1992, United changed its method of accounting for income
taxes, resulting in a one-time increase in net income of $526,314.
(4) 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.
(5) 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,
unrealized gain on investments, and undistributed equity from
investments accounted for on the equity method, and dividing the
resulting amount by shares outstanding at fiscal year end.
(6) 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, less capitalized interest. Fixed
charges consist of interest on all indebtedness and that portion of
rentals considered to be the interest factor.
(7) In fiscal 1994, United changed its method of accounting for reinsurance.
Amounts for fiscal 1993 have been restated to reflect the change. See
Note 10 to the Consolidated Financial Statements.
(8) In fiscal 1995, United changed its method of accounting for investments
to comply with SFAS No. 115. The change is not applied retroactively to
prior years financial statements. See Note 2 to the Consolidated
Financial Statements.
(9) In fiscal 1996, United changed its method of accounting for post
retirement benefits other than pensions. The change is not applied
retroactively to prior years' financial statements. See Note 12 to the
Consolidated Financial Statements.
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."
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RISK FACTORS
Persons considering purchasing the Membership Stock and Notes
offered hereby should carefully consider the following risk factors in addition
to the other information contained in this Prospectus.
LACK OF MARKET FOR UNITED'S MEMBERSHIP STOCK OR NOTES. There is
no established market for the Membership Stock or Subordinated Redeemable
Capital Investment Notes presently outstanding, and it is unlikely that a market
will be available in which the Membership Stock and Notes offered by this
Prospectus can be sold. The shares of Membership Stock offered hereby may not be
sold or otherwise transferred or pledged by the holder without United's written
consent. Notes are issued in noncertificated form and, accordingly, may not be
readily salable. See "Description of Membership Stock,"
"Introduction--Membership Stock Offered," and "Introduction--Notes Offered."
SUBORDINATION OF NOTES. Payment of the principal and interest on
the Notes offered hereby is subordinated in right of payment, in case of
liquidation of United, to the prior payment in full of the principal of and
interest on Senior Indebtedness, as set forth in the Supplemental Indenture. As
of September 27, 1996, Senior Indebtedness (as defined in the Supplemental
Indenture) amounted to approximately $156,200,000. There is no restriction on
the Company's ability to incur additional Senior Indebtedness from time to time.
In addition, if a default occurs and is continuing beyond the expiration of any
grace period on any Senior Indebtedness, United may not make any payment on the
Notes or in connection with the redemption or purchase of Notes during the
continuation of the default. See "Introduction--Notes Offered" and "Description
of Notes--Subordination."
RISKS OF LEVERAGE. The majority of United's operating capital
consists of borrowed funds. United intends to borrow additional funds for
various purposes in the future. Borrowings will have to be repaid with cash flow
from operations or proceeds of capital transactions, which could reduce the
amounts otherwise available for distribution to members as patronage dividends
or as payment of principal or interest on the Notes. See "The Company--Cost
Savings." Until recently, United was out of compliance with one of the financial
covenants contained in United's loan agreements. United's lenders waived
United's noncompliance and have modified the covenants to bring United into
compliance. In consideration for the waivers and modifications, United has
agreed to increase the interest rates charged on amounts borrowed by United from
certain lenders. In addition, the amended loan agreements provide for security
interests in United's inventory, accounts receivable, real property, and other
assets. United's dependence on borrowed funds in general and the increased
interest and other costs it may incur as a result of changes in loan agreements
may affect United's ability to pay dividends on Membership Stock, to pay
principal and interest on Notes, or to repurchase Membership Stock or Notes; may
make United more susceptible to economic downturns; may limit United's ability
to withstand competitive pressure; and may affect United's ability to obtain
financing in the future for working capital, capital expenditures, and general
corporate purposes.
NO OBLIGATION TO REDEEM NOTES. United is not legally obligated
to prepay Notes except upon the death of the holder. Although it has been
United's policy to prepay any Note upon 10 days' notice at request of the
holder, United may discontinue this policy at any time. In April and May 1997,
United temporarily suspended prepayments because of an unusual volume of
requests. See "Introduction-- Notes Offered."
DEPENDENCE ON KEY PERSONNEL. United's success depends to a
significant extent upon the continued service of its executive officers and
other key personnel. United's President and Chief Executive Officer, Alan C.
Jones, announced his retirement effective May 30, 1997. Pending selection of a
successor, a team of senior management employees will be responsible for
United's operations.
NO OBLIGATION TO PAY MORE THAN STATED INTEREST RATE. Notes bear
interest at a stated interest rate 5% per annum. United's board of directors has
voluntarily decided to pay interest at 6.25% per annum from December 16, 1996,
to March 15, 1997, after which date the interest rate on all Notes will revert
to the stated rate of 5% per annum unless United's board of directors takes
further action.
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There can be no assurance that the interest rate payable on Notes after March
15, 1997, will exceed 5% per annum. See "Introduction--Notes Offered."
RE-ENGINEERING, RESTRUCTURING, AND BUSINESS COMBINATION PLANS.
United has adopted a program to re-engineer its operations and dispose of
certain assets in order to improve its efficiencies and reduce costs. Although
there is no certainty that these changes will result in achieving the desired
improvements, United believes the improvements are important if United is to
remain competitive. In addition, United has agreed to exchange information with
Associated Grocers, Inc., in order to evaluate the feasibility of a business
combination (which may consist of a merger) to maximize the strengths of both
companies. If a business combination were to be consummated, the value of the
Membership Stock could be affected.
ONE VOTE PER MEMBER. United's bylaws and articles of
incorporation provide that each holder of record of Membership Stock is entitled
to one vote regardless of the number of shares owned. Members who control family
corporations or other separate entities that hold shares may control more than
one vote because each controlled entity is a separate holder of record. See
"Introduction--Notes Offered" and "Description of Membership Stock."
LIMITATIONS ON INVESTMENT RETURN. Although United has regularly
paid patronage dividends to its members in the past, no assurance can be given
as to when or whether patronage dividends will be paid in the future. There can
be no assurance that United will have in any year sufficient net earnings from
United's cooperative business to permit the payment of patronage dividends. See
"The Company--Membership." Dividends other than patronage dividends have not
been paid by United, and it is not anticipated that any dividends other than
patronage dividends will be paid in the future. See "The Company--Cost Savings,"
"The Company--Deposit," "Description of Membership Stock," and
"Introduction--Membership Stock Offered."
SHARE REDEMPTION--LIMITATIONS. In general, United has no
obligation to redeem or otherwise repurchase Membership Stock. In addition, upon
termination of membership or upon a member's tender of shares for redemption,
the member's Membership Stock will be purchased by United only if the purchase
is permitted by United's redemption policy and by restrictions imposed by
corporate law. Under the Oregon Business Corporation Act, a redemption is
permitted only if after paying the redemption price, in the judgment of United's
board of directors: (a) United would be able to pay its debts as they become due
in the usual course of business; and (b) United's total assets would at least
equal the sum of its total liabilities plus the amount that would be needed to
satisfy the preferential rights of shareholders upon dissolution. There is no
assurance that United's financial condition will always be such that it will be
legally permitted or able to repurchase shares tendered for redemption. In
addition, United's bylaws provide that the repurchase price for the redemption
of any shares over and above the number of shares the member was required to
purchase as a condition of membership may, in the discretion of United's board
of directors, be paid in 20 quarterly installments with interest or in such
other manner as the board of directors may determine. Redemptions may be
effected by payment to the member or credit to the member's account. Because
shares will be issued and redeemed at a price based on adjusted book value as of
the close of the fiscal year last ended, any decrease in book value between
issuance and redemption could result in a reduction in value to the member. See
"Introduction--Membership Stock Offered," "The Company--Membership," and
"Description of Membership Stock."
POSSIBLE CHANGE OF MEMBERSHIP STOCK BOOK VALUE. United's
Membership Stock is offered at its adjusted book value, which is subject to
change. There can be no assurance that the adjusted book value of the Membership
Stock will not decline. See "Description of Membership Stock" and
"Introduction--Membership Stock Offered."
NO ASSURANCE OF SALE. 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.
The offering of Membership Stock is being made only to persons who are engaged
in the operation of retail food stores that are customers of United and who have
applied for and been accepted for membership by United's board of directors. In
addition, the offering of Membership Stock and Notes is not underwritten.
Accordingly, there can be no assurance that all or any portion of the
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Membership Stock or Notes offered hereby will be sold. See "The
Company--Membership," "Description of Membership Stock," and
"Introduction--Membership Stock Offered."
MEMBERSHIP STOCK AND PATRONAGE DIVIDENDS SET OFF AGAINST MEMBER
INDEBTEDNESS. United's bylaws provide that a member's Membership Stock is made a
guarantee fund to United and its subsidiaries for any and all advances, debts,
liabilities and obligations of every kind owed by the member to United or any of
its subsidiaries. Therefore, before United makes any payment for Membership
Stock upon termination of a membership, United is entitled, at its option, to
deduct from the book value of the member's Membership Stock the full amount of
all obligations owed by the member to United or any of its subsidiaries.
United's bylaws also provide that, prior to the distribution of patronage
dividends to a holder of Membership Stock, United may apply such patronage
dividends as an offset against any indebtedness owed to United by the holder,
provided that the holder shall nevertheless receive in cash 20% of the total
patronage dividends distributable to that holder for that year. By becoming a
holder of Membership Stock, each member is deemed to have granted United a first
lien upon (1) all patronage dividends accrued for the account of such holder
with respect to which United possesses a right of offset and (2) any document
which constitutes a written notice of allocation held by the holder at any time.
These bylaw provisions may result in a reduction in the amount otherwise payable
to a holder of Membership Stock in exchange for Membership Stock or as patronage
dividends. United's board of directors is further entitled to expel a member
(and to purchase the member's Membership Stock at book value less indebtedness
owed by the member to United or any of its subsidiaries) if the member discloses
confidential information, misuses his or her position as an officer or director
of United, purchases goods for the benefit of a party who does not hold
Membership Stock, violates any federal or state law or any bylaw of United, or
otherwise acts in a dishonorable or dishonest manner or in a manner detrimental
to United or its members.
RISKS RELATED TO EXPANSION. In fiscal year 1996, United acquired
the assets and certain liabilities and lease exposure associated with the
wholesale operations of Bay Area Foods, Inc., in California. Acquisitions
involve a number of risks, including the diversion of management's attention to
the assimilation of the operations, personnel, and assets of the acquired
businesses, integration of management information systems, retention of key
management personnel, renegotiation of bank credit lines, adjustment of
relationships with customers and suppliers, and increases in general and
administrative expenses. No assurance can be given that the California
acquisition will not materially adversely affect United or that the acquisition
will enhance United's performance.
COMPETITION. Generally, food products are commodities and
retailers base their purchasing decisions principally on the delivered price of
the product. As a result, the grocery industry, including the wholesale food
distribution business, is characterized by intense competition and low profit
margins. United competes with a number of local, regional, and national grocery
wholesalers and with a number of major businesses that market their products
directly to retailers, including companies having greater assets and larger
sales volumes than United. United's customers also compete at the retail level
with independent grocery and food retailers and several chain grocery store
organizations, some of which have integrated wholesale and retail operations. A
decision by any large company to focus on United's existing markets or target
markets could have a material adverse effect on United's business and results of
operations. Although United believes that it competes favorably with respect to
factors such as quality, merchandising, service, systems of sales and
distribution, name recognition, and loyalty, there can be no assurance that
United will not experience competitive pressure, particularly with respect to
pricing, that could adversely affect its results of operations.
PRODUCT SUPPLY. The supply and price of many food products and
commodities purchased and sold by United can be affected by a number of factors
beyond the control of United, such as economic factors affecting growing
decisions, frosts, drought, floods, other weather conditions, various plant
diseases, pests, and other acts of nature. There can be no assurance that these
factors will not materially and adversely affect United's results of operations
in the future.
GEOGRAPHIC CONCENTRATION. United's members are concentrated in
California, Oregon, and Washington. As such, United's sales may be adversely
affected by natural occurrences, economic downturns, and other conditions
affecting those markets.
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RISKS ASSOCIATED WITH PERISHABLE PRODUCTS. The food products
sold by United include fresh fruits, vegetables, dairy products, and other
perishable goods with a limited shelf life. Because it is not practicable to
hold excess inventory of perishable products, United's results of operations are
partly dependent on its ability to accurately forecast its near-term sales in
order to adjust supply of perishable items accordingly. Failure to accurately
forecast such sales could result in United either being unable to meet higher
than anticipated demand or carrying excess inventory that cannot be profitably
sold, and could have an adverse effect on United's business or results of
operations.
COST SENSITIVITY AND PRICING; DEPENDENCE ON SUPPLIERS. United's
profitability is highly sensitive to cost increases that cannot always be passed
on to its customers in the form of higher prices or otherwise recovered.
Moreover, certain products sold by United are obtained from a single or limited
number of suppliers. Although United believes it could develop alternative
sources for all of its products, significant delays or interruptions in the
delivery of products from current suppliers could adversely affect United's
profitability.
INCOME TAX LIABILITY FOR PATRONAGE DIVIDENDS. A purchaser of
shares of Membership Stock will be required to report as gross income, for
federal income tax purposes, the patronage dividends, if any, distributed by
United to such purchaser. Shares of Membership Stock issued as a portion of a
patronage dividend must be reported as income at their full stated dollar
amount, along with cash received as the other portion of such dividends.
Although a minimum of 20 percent of each recipient's total annual patronage
dividend is required to be paid by United in cash, the cash portion may be
insufficient, depending upon the income tax bracket of each recipient, to
provide funds for the full payment of the federal income tax liability incurred
by the recipient with respect to such patronage dividends. Shares of Membership
Stock distributed as patronage dividends are subject to state income taxes in
Oregon and to state income and corporation franchise taxes in California, and
may be subject to such taxes in other states. See "The Company--Patronage
Dividends and Tax Matters."
COOPERATIVE TAX STATUS. Although United is incorporated as an
Oregon business corporation, it has historically operated and anticipates that
it will continue to operate as a cooperative, reporting its tax liability in
accordance with rules applicable to corporations operating on a cooperative
basis. Because applicable laws, regulations, rulings, and judicial
interpretations with respect to taxation of cooperatives have been subject to
change from time to time, no assurance can be given that the cooperative income
tax status of United could not be challenged successfully by the Internal
Revenue Service based on a future change in or interpretation of law. If such
status were to be challenged successfully, United would incur a significant
income tax liability. See "The Company--Patronage Dividends and Tax Matters."
OWNERSHIP OF PROPERTIES. United owns or leases certain retail
grocery store sites (the "Store Sites") which it in turn leases to members.
United's revenues will depend in part on the success of the particular grocery
stores operated on the Store Sites. The success of these grocery stores will be
affected by a number of factors, including, for example, the managerial and
financial capabilities of the members to which the Store Sites are leased, the
location of other competitive grocery stores in relation to the Store Sites, the
ability of United to compete with other grocery store suppliers generally, and
the assistance and services provided by United to its members.
RISKS OF DECREASES, DELAYS, OR DEFAULTS IN RENTAL PAYMENTS. A
decrease in the amount of rentals paid to United with respect to one or more of
the Store Sites (for example, because of sales decline or because a grocery
store is no longer operated on a Store Site) would affect adversely United's
return on its investment. In addition, United would be affected adversely by
failure of member-lessees to make their required rental payments in a timely
manner or by a default in the payment of rent due under such members' leases.
Such delays or defaults could require United to apply its funds to pay amounts
that otherwise would be borne by the member-lessees, such as local property
taxes, rents due under leases on the Store Sites, and maintenance and other
costs with respect to the Store Sites. United does not require its
member-lessees to carry lease insurance that could fund payment of rent under
the leases in case of a default by the member-lessees.
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus and the
information incorporated by reference, including without limitation statements
containing the words "believes," "anticipates," "intends," "expects" and words
of similar import, constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. The forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of United to be
materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. These factors with
respect to United include, among others, the following: adverse changes in
national or local economic conditions, competition from other grocery
wholesalers, changes in the availability, cost and terms of financing, changes
in operating expenses, United's ability to successfully complete business
improvement initiatives, and other risks and uncertainties described in this
Prospectus. Certain of these factors are discussed in more detail elsewhere in
this Prospectus, including without limitation under the captions "Risk Factors,"
"The Company," "Recent Developments," "Description of Membership Stock," and
"Description of Notes." Given these uncertainties, shareholders and prospective
investors are cautioned not to place undue reliance on the forward-looking
statements. United disclaims any obligation to update any such factors or to
publicly announce the result of any revisions to any of the forward-looking
statements contained herein to reflect future events or developments.
INTRODUCTION
GENERAL. United is offering to sell 250,000 shares of its
Membership Stock and $50,000,000 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, unrealized gain on
investments, and undistributed equity from investments accounted for on the
equity method and dividing the resulting amount by shares outstanding at fiscal
year end. At September 27, 1996, the adjustment for investments accounted for on
the equity method was primarily due to United's investment in Western Family
Holding Company. The
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adjusted book value at September 27, 1996, was $61.53 per share. Thus, the
offering price for 200 shares during calendar year 1997 is $12,306.
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.
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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 6.25% per annum during the period
March 16, 1996, to June 15, 1997, on all Notes outstanding at any time during
that period. On June 16, 1997, 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 6.25% 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 June 15, 1997, 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 September 27, 1996, was approximately $156,200,000 (consisting of
approximately $88,489,000 in unsubordinated long-term debt and approximately
$67,711,000 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.
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United also sells groceries and related products at wholesale
through 37 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 Dick Leonard, Dean Ryan,
Gordon Smith, Robert A. Lamb, Ron Mansacola, H. Larry Montgomery, Kenneth W.
Findley, Gaylon Baese, and James Glassel.
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. Alan C. Jones, the current President and Chief Executive Officer,
announced his retirement effective May 30, 1997. Pending selection of a
successor, a team of senior management employees will be responsible for
United's operations.
Additional information is set forth in the documents
incorporated herein by reference.
MEMBERSHIP. United has approximately 248 members operating a
total of approximately 353 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
--------------------------------------------------------------------------------
SEPT. 27 SEPT. 29 SEPT. 30 OCT. 1 OCT. 2
1996 1995 1994 1993 1992
---- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C>
Adjusted book value per share $61.53 $62.14 $59.50 $57.00 $53.94
</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
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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 1996,
the board decided to distribute 86.65% 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 percent 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.
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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 percent in cash and 80 percent 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 percent in cash and 20 percent 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 percent 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.
RECENT DEVELOPMENTS
OPERATING ACTIVITIES. The Company has begun an enterprise
re-engineering effort in order to reduce the costs of its operations.
Specifically, the Company is isolating its costs and revenues for each service,
activity, and commodity so its member customers can receive necessary
information to improve costs and efficiencies at the wholesale level.
Anticipated completion date of this effort is mid- 1997.
Throughout the next two years, the Company intends to continue
to close redundant warehouse locations. The closure of the Company's Medford
warehouse facility and shift in business emphasis to California and Portland,
Oregon, are expected to improve distribution efficiencies and create cash as
assets are sold and inventory levels are reduced.
The Company's information systems integration efforts are
expected to be substantially completed over the next two years. The system
integration is expected to support consolidation of certain distribution
operations, allow for the creation of increased operating controls across
multiple warehouse locations, and develop the flexibility to manage customers
with many different needs.
FINANCIAL POSITION. The Company plans to reduce its number of
non-operating properties over the next two years. These properties are primarily
assets associated with retail property locations acquired in settlement of
outstanding loans, and many are now pending sale or are under lease to other
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entities. The closure of redundant warehouse distribution properties is also
expected to reduce total assets and corresponding debt levels. To resolve the
Company's noncompliance with certain financial covenants in its existing credit
agreements, the Company has been engaged in and has recently completed
discussions with its lenders to renegotiate such credit agreements.
CHIEF EXECUTIVE OFFICER. Alan C. Jones announced his intended
retirement from his position as Chief Executive Officer and President effective
May 30, 1997. Pending selection of a successor, a team of senior management
employees will be responsible for United's operations.
POSSIBLE BUSINESS COMBINATION. United has agreed to exchange
certain business information with Associated Grocers, Inc., for the purpose of
evaluating the feasibility of a future business combination among both
companies, including a potential merger.
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, unrealized gain on investments, and
undistributed equity from investments accounted for on the equity method 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 6.25%) 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
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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 tenth 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, July 6, 1992, January 9, 1995, and January 21, 1997, (which
indenture, as so supplemented, is herein referred to as the "Indenture"). First
Bank 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 January
21, 1997. 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, except for Series K Notes issued upon registration of, transfer
of, or in exchange or in lieu of other Series K Notes as described below, are
limited to $50,000,000 aggregate principal amount, all of which 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
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<PAGE>
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 September 27, 1996, 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 policy has
been to prepay the principal amount of any Note, together with accrued interest
to the date of payment, upon 10 days' notice at the request of the holder. In
April and May 1997, prepayments were temporarily suspended because of an unusual
volume of requests.
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; (d) arising under any document
creating an absolute or contingent obligation of United to purchase promissory
notes and related documents from third parties; or (e) for fees, expenses, and
other obligations of United due in connection with indebtedness of United that
constitutes Senior Indebtedness; 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*) 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 beyond the expiration of any grace period on any
Senior Indebtedness, no payment may be made on the
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<PAGE>
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 percent 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)
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<PAGE>
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 LLP,
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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<PAGE>
PART II
Information Not Required in Prospectus
Item 16. Exhibits.
The exhibits are listed in the accompanying index to exhibits.
II-1
<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 May
___, 1997.
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 May ___, 1997.
Name Title
Principal executive officer
- ---------------------------
/s/ ALAN C. JONES President
Alan C. Jones
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
- ------------------------------------
* DICK LEONARD Director
Dick Leonard
* DEAN RYAN Director
Dean Ryan
* GORDON SMITH Director
Gordon Smith
* ROBERT A. LAMB Director
Robert A. Lamb
* RON MANCASOLA Director
Ron Mancasola
* H. LARRY MONTGOMERY Director
H. Larry Montgomery
* KENNETH W. FINDLEY Director
Kenneth W. Findley
* GAYLON BAESE Director
Gaylon Baese
<PAGE>
* JAMES GLASSEL Director
James Glassel
* By /s/ JOHN W. WHITE
John W. White
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- --- -----------
2.A Copy of agreement for sale and purchase of business assets
dated December 7, 1994, between Commissary Cash & Carry,
Inc., and the registrant (incorporated by reference to
Exhibit 10.1 to the registrant's quarterly report on Form
10-Q for the period ended
March 31, 1995).
2.B Copy of agreement for sale and purchase of business assets
dated December 22, 1994, between Rich and Rhine, Inc., and
the registrant (incorporated by reference to Exhibit 10.2
to the registrant's quarterly report on Form 10-Q for the
period ended March 31, 1995).
2.C Copy of asset purchase agreement dated as of November 10,
1995, between Bay Area Foods, Inc., and the registrant
(incorporated by reference to Exhibit 2 to the registrant's
current report on Form 8-K dated December 13, 1995).
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 January 21,
1997, between the registrant and First Bank National
Association, as trustee, relating to the registrant's
Series K 5% Subordinated Redeemable Capital Investment
Notes.*
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 3 to the registrant's quarterly
report on Form 10-Q for the period ended March 29, 1996).
5 Opinion of Miller, Nash, Wiener, Hager & Carlsen LLP.
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).
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<PAGE>
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.B** 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).
10.C** 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.D1a Copy of amended and restated credit agreement dated as of
May 31, 1996, among the registrant, Bank of America NW,
N.A., United States National Bank of Oregon, and HongKong
and Shanghai Banking Corporation, Limited.*
10.D1b Copy of Amendment Number One to Amended and Restated Credit
Agreement of May 31, 1996, dated as of July 25, 1996, by
and among the registrant, Bank of America NW, N.A., United
States National Bank of Oregon, and The HongKong and
Shanghai Banking
Corporation, Limited.*
10.D1c Copy of Amendment Number Two to Amended and Restated Credit
Agreement of May 31, 1996, dated as of September 27, 1996,
by and among the registrant, Bank of America NW, N.A.,
United States National Bank of Oregon, and The HongKong and
Shanghai Banking Corporation, Limited.*
10.D1d Copy of Amendment Number Three to Amended and Restated
Credit Agreement of May 31, 1996, dated as of October 28,
1996, by and among the registrant, Bank of America NW,
N.A., United States National Bank of Oregon, and The
HongKong and Shanghai Banking Corporation, Limited.*
10.D1e Copy of Amendment Number Four to Amended and Restated
Credit Agreement of May 31, 1996, dated as of November 29,
1996, by and among the registrant, Bank of America NW,
N.A., United States National Bank of Oregon, and The
HongKong and Shanghai Banking Corporation, Limited.*
10.D1f Copy of Amendment Number Five to Amended and Restated
Credit Agreement of May 31, 1996, dated as of December 26,
1996, by and among the registrant, Bank of America NW,
N.A., United States National Bank of Oregon, and The
HongKong and Shanghai Banking Corporation, Limited.*
10.D1g Copy of Amendment Number Six to Amended and Restated Credit
Agreement of May 31, 1996, dated as of January 31, 1997, by
and among the registrant, Bank of America NW, N.A., United
States National Bank of Oregon, and The HongKong and
Shanghai Banking Corporation, Limited.*
II-5
<PAGE>
10.D1h Copy of Amendment Number Seven to Amended and Restated
Credit agreement of May 31, 1996, dated as of February 28,
1997, by and among the registrant, Bank of America NW,
N.A., United States National Bank of Oregon, and The
HongKong and Shanghai Banking Corporation, Limited.*
10.D2a 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.D2b Copy of First Amendment to Note Agreement of September 20,
1991, dated as of February 12, 1993, among the registrant
and various purchasers.
10.D2c Copy of Second Amendment to Note Agreement of September 20,
1991, dated as of May 9, 1997, among the registrant and
various purchasers.
10.D3 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, 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.D4 Copy of Loan Purchase and Servicing Agreement dated as of
May 13, 1994, between United Resources, Inc., as Seller and
Servicer, the registrant, as Guarantor, and National
Consumer Cooperative Bank, as Buyer, relating to the
selling of loans originated by the registrant's subsidiary,
United Resources, Inc. (incorporated by reference to
Exhibit 4.F1 to the registrant's Form 10-K for the fiscal
year ended September 30, 1994).
10.D5 Copy of First Amendment to Loan Purchase and Servicing
Agreement of May 13, 1994, dated as of July 15, 1994, among
United Resources, Inc., the registrant, and National
Consumer Cooperative Bank (incorporated by reference to
Exhibit 4.F2 to the registrant's Form 10-K for the fiscal
year ended September 30, 1994).
10.D6a Copy of Second Amendment to Loan Purchase and Servicing
Agreement of May 13, 1994, dated as of September 28, 1995,
among United Resources, Inc., the registrant, and National
Consumer Cooperative Bank (incorporated by reference to
Exhibit 4.F3 to the registrant's Form 10-K for the fiscal
year ended September 29, 1995).
10D6b Copy of letter agreement dated May 16, 1997, amending Loan
Purchase and Servicing Agreement dated May 13, 1994.
II-6
<PAGE>
10.D7 Copy of Loan Purchase and Servicing Agreement (Holdback
Program) dated as of September 28, 1995, between United
Resources, Inc., as Seller and Servicer, and National
Consumer Cooperative Bank, as Buyer, and related guaranty
agreement between the registrant and National Consumer
Cooperation Bank (incorporated by reference to Exhibit 4.F4
to the registrant's Form 10-K for the fiscal year ended
September 29, 1995).
10.D8a Copy of Note Agreement dated October 10, 1994, between the
registrant and Phoenix Home Life Mutual Insurance Company
(incorporated by reference to Exhibit 4.G to the
registrant's Form 10-K for the fiscal year ended September
30, 1994).
10.D8b Copy of Waiver and First Amendment to Note Agreement of
October 10, 1994, dated as of May 9, 1997, between the
registrant and Phoenix Home Life Mutual Insurance Company.
10.D9 Interest rate and currency exchange agreement dated as of
April 22, 1993, between the registrant and Bank of America
National Trust and Savings Association (incorporated by
reference to Exhibit 10-C19 to Post-Effective Amendment No.
1 to the registrant's registration statement on Form S-2,
No. 33-57272).
10.E1 Typical forms executed in connection with loans to members,
including directors:
10.E1a Installment note (Stevens-Ness form 217), with optional
interest rate riders.*
10.E1b Promissory note (Stevens-Ness form 216), with optional
interest rate riders.*
10.E1c Installment note (incorporated by reference to Exhibit
10-D1c to the registrant's Form 10-K for the fiscal year
ended September 29, 1995).
10.E1d Renewal note for fixed rate loan (incorporated by reference
to Exhibit 10-D1d to the registrant's Form 10-K for the
fiscal year ended September 29, 1995).
10.E1e Subsequent note (four forms).*
10.E1f Loan agreement (two forms).*
10.E1g Loan agreement for subsequent notes (two forms).*
10.E1h Amendment to loan and security agreements, including
optional clauses.*
10.E1i Amendment to installment note and security agreements
(incorporated by reference to Exhibit 10-D1i to the
registrant's Form 10-K for the fiscal year ended September
29, 1995).
10.E1j Security agreement (Stevens-Ness form 1201).*
10.E1k Purchase money security agreement (Stevens-Ness form
1202).*
10.E1l Security agreement for equipment (Stevens-Ness form 1203).*
10.E1m Inventory loan and security agreement (Stevens-Ness form
1206).*
10.E1n Security agreement (equipment and inventory).*
10.E1o Security agreement for subsequent notes.*
II-7
<PAGE>
10.E1p Capital Stock Note.*
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 30, 1996, appears in Item 13.C
of the registrant's Form 10-K for the fiscal year ended September 27, 1996. The
registrant agrees to furnish a copy of any omitted loan document to the
Securities and Exchange Commission upon request.
10.E2a Typical form of residual stock redemption note executed in
connection with redemption of common stock from members,
including directors.*
10.E2b 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.F Copy of sublease agreement for Tigard store dated August
28, 1991, between the registrant and Howards on Scholls,
Inc., and Gaylon Baese, a director of the registrant.*
10.G1 Copy of sublease agreement for Troutdale store dated
December 15, 1993, between the registrant and a partnership
in which Robert A. Lamb, a director of the registrant, is a
partner (incorporated by reference to Exhibit 10.F1 to the
registrant's Form 10-K for the fiscal year ended September
29, 1995).
10.G2 Copy of sublease agreement for Wilsonville store dated June
25, 1991, between the registrant and a partnership in which
Robert A. Lamb, a director of the registrant, is a partner
(incorporated by reference to Exhibit 10.F2 to the
registrant's Form 10-K for the fiscal year ended September
29, 1995).
10.G3 Copy of guarantee from the registrant to Key Bank on behalf
of Garden Home store owned by a partnership in which Robert
A. Lamb, a director of the registrant, is a partner.*
10.H1 Copy of sublease agreement for Magalia store dated March
15, 1994, between the registrant and Al Mancasola Grocery
Markets, Inc., a corporation controlled by Ronald L.
Mancasola, a director of the registrant (incorporated by
reference to Exhibit 10.G to the registrant's Form 10-K for
the fiscal year ended September 29, 1995).
10.H2 Copy of sublease agreement for Shasta Lake store dated
April 8, 1996, between the registrant and Al Mancasola's
Grocery Markets, Inc., a company in which Ron Mancasola, a
director of the registrant, has an ownership interest.*
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<PAGE>
10.I1 Copy of operating agreement of Willamette Foods
Marketplace, LLC, effective as of March 3, 1996, between
United Resources, Inc., a subsidiary of registrant and PML
Investments, LLC.*
10.I2 Copy of operating agreement of West Linn Foods Marketplace,
LLC, effective as of March 3, 1996, between United
Resources, Inc., a subsidiary of the registrant, and PML
Investments, LLC.*
10.J Copy of Purchase Agreement entered into as of August 5,
1996, between registrant and H. Larry Montgomery (a
director of the registrant) and Frances M. Montgomery.
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
September 27, 1996).
13 1996 annual report to security holders.* (Pursuant to item
601(b)(13) of Regulation S-K, only those portions of such
annual report which are expressly incorporated by reference
in the prospectus forming a part of this registration
statement shall be deemed "filed" with the Securities and
Exchange Commission.)
23.A Consent of Miller, Nash, Wiener, Hager & Carlsen LLP (filed
as part of Exhibit 5).
23.B Consent of DeLap, White & Raish.*
24 Power of attorney.*
25 Statement of Eligibility of Trustee.*
27 Financial Data Schedule.*
* Previously filed.
** Denotes management contract or compensatory plan or arrangement.
II-9
May 1, 1997
United Grocers, Inc.
Post Office Box 22187
Portland, Oregon 97222-0082
Subject: United Grocers, Inc.
Registration Statement on Form S-2
Gentlemen:
Reference is made to the Registration Statement on Form S-2
executed April 28, 1997, and filed by United Grocers, Inc., an Oregon
corporation ("United"), with the Securities and Exchange Commission on May 1,
1997, for the purpose of registering under the Securities Act of 1933, as
amended, United's common stock, $5 par value ("Stock") and $50,000,000 in
aggregate principal amount of United's Series K 5% Subordinated Capital
Investment Notes maturing approximately ten years from date of issue ("Notes").
As special counsel for United, we are familiar with the
actions taken by United with respect to the authorization and issuance of the
Stock and Notes covered by the Registration Statement. We have examined
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, certificates of public officials and other documents as
we have deemed necessary or relevant as a basis for the opinion set forth
herein.
Based on the foregoing, it is our opinion that:
1. Upon the issuance of the Stock covered by the Registration
Statement in the manner described therein and in accordance with applicable
state securities laws and upon receipt of full payment therefor, such Stock will
be legally issued, fully paid and nonassessable.
2. Upon compliance by United with the provisions of Section
3.10 of the indenture dated as of February 1, 1978, between United States
National Bank of Oregon, as
<PAGE>
United Grocers, Inc. - 2 - May 1, 1997
trustee, and United, including the due execution and delivery of a supplemental
indenture between United and First Bank National Association, as trustee,
relating to the Notes in the form filed as an exhibit to the Registration
Statement, and upon issuance of the Notes covered by the Registration Statement
in the manner described therein and in accordance with applicable state
securities laws, such Notes will be legally issued, fully paid and nonassessable
and will be binding obligations of United.
We hereby consent to the use of this opinion in the
Registration Statement, in any filings required to qualify or register the Notes
in the states of California, Oregon, and Washington, and in any amendments to
the Registration Statement or such filings, and to the use of our name under the
caption "Legal Matters" in the Registration Statement.
Very truly yours,
/s/ Miller, Nash, Wiener, Hager & Carlsen LLP
MILLER, NASH, WIENER, HAGER & CARLSEN LLP
FIRST AMENDMENT TO NOTE AGREEMENT
THE FIRST AMENDMENT TO THE NOTE AGREEMENT, dated as of February 12,
1993 (this "Amendment"), by and among UNITED GROCERS, INC. (the "Company"), an
Oregon corporation, and EACH OF THE NOTEHOLDERS NAMED ON THE SIGNATURE Pages
HEREOF (collectively, the "Holders").
WHEREAS, the Company and the Holders have entered into a Note Agreement
dated as of September 20, 1991 (the "Note Agreement"); and
WHEREAS, pursuant to the Note Agreement, the Company issued its 9.15%
Senior Notes, due October 1, 2000, in an aggregate principal amount of
$30,000,000 (the "Notes"); and
WHEREAS, pursuant to the provisions of Section 7 of the Note Agreement,
the Company and the Holders wish to amend Section 5.14 of the Note Agreement in
certain respects as set forth herein.
NOW, THEREFORE, in consideration of the agreement herein contained the
parties agree as follows:
Part I
AMENDMENT TO NOTE AGREEMENT
Subject to the satisfaction of the conditions set forth in Section 7 of
the Note Agreement, the Note Agreement is amended in accordance with this Part
I. Except as so amended, the Note Agreement shall continue in full force and
effect.
SUBPART 1.1. Section 5.14 - Restricted Payments and Restricted
Investments. Section 5.14(a)(ii) is hereby amended to read in its entirety as
follows:
(ii) the Company and its Restricted Subsidiaries may make
Restricted Payments and Restricted Investments, provided that
immediately after giving effect to any such Restricted Payment or
Restricted Investment, (A) no Default or Event of Default would exist,
(B) the Company would be able to incur at least $1.00 of additional
Senior funded Debt under Section 5.10, and (C) the aggregate amount of
all Restricted Payments made during the period from and after October
1, 1990 to and including the date of such Restricted Payment or
Restricted Investment, together with the amount of Outstanding
Restricted Investments, would not exceed the sum of (1) $6,000,000 plus
50% of Consolidated Net Income for such period, computed on a
cumulative basis for said entire period (or if such Consolidated Net
Income is a deficit figure, then minus 100% of such deficit), and (2)
100% of the amount of any issuance of new capital stock. The Company or
any Restricted Subsidiary will not declare a dividend which constitutes
a Restricted Payment payable more than 60 days
- 1 -
<PAGE>
after the date of declaration thereof. For the purposes of this Section
5.14(a) the amount of any Restricted Payment or Restricted Investment
declared, made, paid or distributed in property of the Company or any
Restricted Subsidiary shall be deemed to be the greater of the book
value or fair market value (as determined in good faith by the Board of
Directors of the corporation making the payment) of such property at
the time of making such Restricted Payment or Restricted Investment.
Part II
CONDITION PRECEDENT TO AMENDMENT
SUBPART 2.1. Required percentage. Holders holding at least 66 2/3% in
aggregate principal amount of the outstanding Notes shall have executed and
delivered counterparts of this Amendment.
Part III
MISCELLANEOUS PROVISIONS
SUBPART 3.1. Ratification of and References to the Note Agreement. This
Amendment shall be deemed to be an amendment to the Note Agreement, and the Note
Agreement, as amended hereby, is ratified, approved and confirmed in each and
every respect by each of the Holders. All references to the Note Agreement in
any other document instrument, agreement or writing executed under or in
connection with the Note Agreement shall hereafter be deemed to refer to the
Note Agreement as amended.
SUBPART 3.2. Execution in Counterparts, Effectiveness, etc.. This
Amendment to the Note Agreement may be executed by the parties hereto in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute together but one and the same agreement. This Amendment shall
become effective when counterparts hereof executed on behalf of the Company and
each of the Holders, shall have been received by the Holders and notice thereof
shall have been given by the Company to each of the Holders.
SUBPART 3.3. Severability. Any provision of this Amendment or any other
instrument delivered in connection herewith which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Amendment or such instrument or affecting the validity or
enforceability of such provision in any other jurisdiction.
SUBPART 3.4. Waivers and Amendments. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated orally, or by any
action or inaction, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought (provided that Section 7, of each of the Amended Note Agreements shall
continue to govern any amendments and waivers with respect thereto.)
- 2 -
<PAGE>
SUBPART 3.5. Section Headings. The titles of the sections hereof appear
as a matter of convenience only, do not constitute a part of this Agreement and
shall not affect the construction hereof.
SUBPART 3.6. Governing Law; Entire Agreement. THIS AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH COLORADO LAW. This Amendment and
such other documents constitute the entire understanding among the parties
hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers (as applicable) thereunto duly authorized
as of the day and year first above written.
UNITED GROCERS, INC.
By: /s/ Alan C. Jones
Name: Alan C. Jones
Title: President and C.E.O.
Accepted as of April 22, 1997.
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By: /s/ Wayne T. Hoffmann
Name: Wayne T. Hoffmann
Title: Vice President
Private Placement Investments
By: /s/ James G. Lowery
Name: James G. Lowery
Title: Assistant Vice President
Private Placement Investments
UNITED OF OMAHA LIFE
INSURANCE COMPANY
By: /s/ M. G. Echtenkamp
Name: M. G. Echtenkamp
Title: Second Vice President
- 3 -
<PAGE>
MUTUAL OF OMAHA
INSURANCE COMPANY
By: /s/ M. G. Echtenkamp
Name: M. G. Echtenkamp
Title: Second Vice President
COMPANION LIFE INSURANCE COMPANY
By: /s/ Burton D. Jay
Name: Burton D. Jay
Title: Vice President and Actuary
By: /s/ Richard A. Witt
Name: Richard A. Witt
Title: Second Vice President
& Assistant Treasurer
AMERICAN REPUBLIC
INSURANCE COMPANY
By: /s/ Michael E. Abbott
Name: Michael E. Abbott
Title: President & Chief Financial
Officer
By: /s/ G. Fritz Sheldon
Name: G. Fritz Sheldon
Title: Senior Vice President, Investments
UNITED WORLD LIFE
INSURANCE COMPANY
By: /s/ M. G. Echtenkamp
Name: M. G. Echtenkamp
Title: Authorized Signer
- 4 -
SECOND AMENDMENT TO NOTE AGREEMENT
THIS SECOND AMENDMENT dated as of May 9, 1997 (the or this "Amendment")
to the Note Agreement dated as of September 20, 1991 is between UNITED GROCERS,
INC., an Oregon corporation (the "Company"), and each of the institutions which
is a signatory to this Amendment (collectively, the "Noteholders").
RECITALS:
A. The Company and each of the Noteholders have heretofore entered into
a Note Agreement dated as of September 20, 1991, as amended (the "Note
Agreement"). The Company has heretofore issued the $30,000,000 9.15% Senior
Notes Due October 1, 2000 (the "Notes") dated September 24, 1991 pursuant to the
Note Agreement.
B. The Company and the Noteholders now desire to amend the Note
Agreement in the respects, but only in the respects, hereinafter set forth.
C. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Agreement unless herein defined or the context
shall otherwise require.
D. All requirements of law have been fully complied with and all other
acts and things necessary to make this Amendment a valid, legal and binding
instrument according to its terms for the purposes herein expressed have been
done or performed.
NOW, THEREFORE, the Company and the Noteholders, in consideration of
good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, do hereby agree as follows:
Section 1. AMENDMENT.
1.1 Section 5.7 of the Note Agreement shall be and is hereby amended in
its entirety to read as follows:
"5.7. Fixed Charge Coverage. The Company will, as of the end
of each Fiscal Quarter specified below, maintain the ratio of
Consolidated Net Income Available for Fixed Charges for the immediately
preceding 12-month period to Fixed Charges for such 12-month period at
not less than the ratio set forth opposite such period:
Fiscal Quarters Ending Ratio
- ---------------------- -----
From the Closing Date through
June 28, 1996 1.4 to 1
1
<PAGE>
September 27, 1996 through
June 28, 1997 1 to 1
October 3, 1997 1.15 to 1
January 2, 1998 and thereafter 1.4 to 1"
Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
2.1 To induce the Noteholders to execute and deliver this Amendment
(which representations shall survive the execution and delivery of this
Amendment), the Company represents and warrants to the Noteholders that:
(a) this Amendment has been duly authorized, executed and
delivered by it and this Amendment constitutes the legal, valid and
binding obligation, contract and agreement of the Company enforceable
against it in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws or equitable principles relating to or limiting creditors'
rights generally;
(b) the Note Agreement, as amended by this Amendment,
constitutes the legal, valid and binding obligation, contract and
agreement of the Company enforceable against it in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally;
(c) the execution, delivery and performance by the Company of
this Amendment (i) has been duly authorized by all requisite corporate
action and, if required, shareholder action, (ii) does not require the
consent or approval of any governmental or regulatory body or agency,
and (iii) will not (A) violate (1) any provision of law, statute, rule
or regulation or its certificate of incorporation or bylaws, (2) any
order of any court or any rule, regulation or order of any other agency
or government binding upon it, or (3) any provision of any material
indenture, agreement or other instrument to which it is a party or by
which its properties or assets are or may be bound, or (B) result in a
breach or constitute (alone or with due notice or lapse of time or
both) a default under any indenture, agreement or other instrument
referred to in clause (iii)(A)(3) of this Section 2.1(c);
(d) as of the date hereof and after giving effect to this
Amendment, no Default or Event of Default has occurred which is
continuing; and
(e) all the representations and warranties contained in
Section 3.1 of the Note Agreement are true and correct in all material
respects with the same force and effect as if made by the Company on
and as of the date hereof.
2
<PAGE>
Section 3. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT.
3.1 This Amendment shall not become effective until, and shall become
effective when, each and every one of the following conditions shall have been
satisfied:
(a) executed counterparts of this Amendment, duly executed by
the Company and the holders of at least 100% of the outstanding
principal of the Notes, shall have been delivered to the Noteholders;
(b) each of the Noteholders shall have been paid a fee equal
to two-tenths of one percent (0.002%) of the outstanding principal
amount of the Note held by such Noteholder; and
(c) the representations and warranties of the Company set
forth in Section 2 hereof are true and correct on and with respect to
the date hereof.
Section 4. WAIVER.
4.1 Upon and by virtue of this Amendment, the failure of the Company to
comply with the provisions of Section 5.7 of the Note Agreement on or prior to
the date hereof which constitutes an Event of Default under the Note Agreement
shall be deemed to have been waived by the Noteholders which Event of Default
has occurred solely as a result of the Company's failure to maintain the ratio
of Net Income Available for Fixed Charges to Fixed Charges for the 12-month
period ending on September 27, 1996, December 28, 1996 and March 28, 1997. The
Company understands and agrees that the waiver contained in this Section 3.1
pertains only to the Default and Event of Default herein described and to the
extent so described and not to any other Default or Event of Default which may
exist under, or any other matters arising in connection with, the Note Agreement
or to any rights which the Noteholders have by virtue of any such other actions
or matters.
Section 5. MISCELLANEOUS.
5.1 This Amendment shall be construed in connection with and as part of
the Note Agreement, and except as modified and expressly amended by this
Amendment, all terms, conditions and covenants contained in the Note Agreement
and the Note are hereby ratified and shall be and remain in full force and
effect.
5.2 Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this Amendment may
refer to the Note Agreement without making specific reference to this Amendment
but nevertheless all such references shall include this Amendment unless the
context otherwise requires.
5.3 The descriptive headings of the various Sections or parts of this
Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
3
<PAGE>
5.4 This Amendment shall be governed by and construed in accordance
with Colorado law.
5.5 The execution hereof by you shall constitute a contract between us
for the uses and purposes hereinabove set forth, and this Amendment may be
executed in any number of counterparts, each executed counterpart constituting
an original, but all together only one agreement.
UNITED GROCERS, INC.
By
Its
Accepted and Agreed to:
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By
Its
By
Its
UNITED OF OMAHA LIFE INSURANCE
COMPANY
By
Its
MUTUAL OF OMAHA INSURANCE
COMPANY
By
Its
4
<PAGE>
COMPANION LIFE INSURANCE COMPANY
By
Its
By
Its
AMERICAN REPUBLIC INSURANCE
COMPANY
By
Its
By
Its
UNITED WORLD LIFE INSURANCE
COMPANY
By
Its
5
National Cooperative Bank
1401 Eye Street, N.W., Suite 700
Washington, D.C. 20003
(202) 336-7700
Fax (202) 336-7622
May 16, 1997
Mr. John White
CFO
United Grocers, Inc.
P.O. Box 22187
6433 S.E. Lake Rd.
Portland, Oregon 97222
VIA FAX
Dear John:
Currently, United Grocers, Inc. and NCB have a `covenant package' as part of
their Loan Sale and Purchase Agreement dated May 13, 1994. This letter shall
serve to modify the ratio of consolidated Net Income available to Fixed Charges
as follows:
The company will keep and maintain the ratio of
consolidated net Income Available for Fixed Charges for the
immediately preceding 12-month period to Fixed Charges for
such 12-month period at not less than 1.4 to 1.0, except for:
(a) quarters ending September 27, 1996; December 28, 1996;
March 28, 1997; and June 28, 1997, wherein the ratio of Consolidated
Net Income Available for Fixed Charges for the immediately preceding
12-month period to Fixed Charges for such 12-month period shall not be
less than 1.0 to 1.0;
(b) quarter ending October 3, 1997, wherein the ratio of
Consolidated Net Income Available for Fixed Charges for the immediately
preceding 12-month period to Fixed Charges for such 12-month period
shall not be less than 1.15 to 1.0;
(c) quarter ending January 2, 1998, wherein the ratio of
Consolidated Net Income Available for Fixed Charges for the immediately
preceding 12-month period to Fixed Charges for such 12-month period
shall not be less than 1.20 to 1.0; and
(d) quarter ending April 3, 1998, wherein the ratio of
Consolidated Net Income Available for Fixed Charges for the immediately
preceding 12-month period to Fixed Charges for such 12-month period
shall not be less than 1.25 to 1.0.
<PAGE>
Further, this letter modifies only the Fixed Charge ratio. All other covenants
in the Loan Purchase and Sale Agreement remain unchanged or modified.
Sincerely,
/s/ Tom W. Sowell
Tom W. Sowell
Vice President
Agreed and Accepted to:
By: /s/ John W. White By: /s/ Judith E. Sandberg
Title: Vice President Title: Managing Director
Date: 5/19/97 Date: 5-20-97
WAIVER AND FIRST AMENDMENT TO NOTE AGREEMENT
THIS WAIVER AND FIRST AMENDMENT TO THE NOTE AGREEMENT, dated
as of May 9, 1997 (this "Amendment"), by and between UNITED GROCERS, INC., an
Oregon corporation (the "Company"), and PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY ("Holder").
WHEREAS, the Company and the Holder have entered into a Note
Agreement dated as of October 10, 1994 (the "Note Agreement");
WHEREAS, pursuant to the Note Agreement, the Company issued
its 8.42% Senior Notes, due November 1, 2005, in an aggregate principal amount
of $20,000,000 (the "Notes"); and
WHEREAS, pursuant to the provisions of Section 7 of the Note
Agreement, the Company and the Holder wish to waive specific Company covenants
contained in Section 5.6 and amend Section 5.6 of the Note Agreement in certain
respects as set forth herein.
NOW, THEREFORE, in consideration of the agreement herein
contained, the parties agree as follows:
PART I
WAIVER
Subject to the satisfaction of the conditions set forth in
Section 7 of the Note Agreement, the Holder hereby waives compliance of
Company's covenant at Section 5.6 Fixed Charges, for the quarters ending
September 1996, December 1996, and March 1997.
PART II
AMENDMENT TO NOTE AGREEMENT
Subject to the satisfaction of the conditions set forth in
Section 7 of the Note Agreement, the Note Agreement is amended in accordance
with this Part II. Except as so amended, the Note Agreement shall continue in
full force and effect.
SUBPART 2.1 Section 5.6 - Fixed Charges. Section 5.6 is hereby
amended to read in its entirety as follows:
The Company will keep and maintain the ratio of
Consolidated Net Income Available for Fixed Charges for the
immediately preceding 12-month period at not less than 1.4 to
1.0, except for:
Page 1--WAIVER AND FIRST AMENDMENT TO NOTE AGREEMENT
<PAGE>
(a) quarters ending September 27, 1996; December 28,
1996; March 28, 1997; and June 28, 1997, wherein the ratio of
Consolidated Net Income Available for Fixed Charges for the
immediately preceding 12-month period to Fixed Charges for
such 12-month period shall not be less than 1.0 to 1.0;
(b) quarter ending October 3, 1997, wherein the ratio
of Consolidated Net Income Available for Fixed Charges for the
immediately preceding 12-month period shall not be less than
1.15 to 1.0;
(c) quarter ending January 2, 1998, wherein the ratio
of Consolidated Net Income Available for Fixed Charges for the
immediately preceding 12-month period to Fixed Charges for
such 12-month period shall not be less than 1.25 to 1.0.
PART III
CONDITION PRECEDENT TO AMENDMENT
SUBPART 3.1 Required Percentage. Holder(s), holding at least
66 2/3% in aggregate principal amount of the outstanding Notes, shall have
executed and delivered counterparts of this Amendment.
PART IV
MISCELLANEOUS PROVISIONS
SUBPART 4.1 Ratification of and Reference to the Note
Agreement. This Amendment shall be deemed to be an amendment to the Note
Agreement, and the Note Agreement, as amended hereby, is ratified, approved and
confirmed in each and every respect by the Holder. All references to the Note
Agreement in any other document, instrument, agreement, or writing executed
under or in connection with the Note Agreement shall hereafter be deemed to
refer to the Note Agreement, as amended.
SUBPART 4.2 Execution in Counterparts; Effectiveness, Etc.
This Amendment to the Note Agreement may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original and all of
which shall constitute together but one and the same agreement. This Amendment
shall become effective when counterparts hereof executed on behalf of the
Company and the Holder, if applicable, shall have been given by the Company to
the Holder.
SUBPART 4.3 Severability. Any provision of this Amendment or
any other instrument delivered in connection herewith which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Amendment or such
Page 2--WAIVER AND FIRST AMENDMENT TO NOTE AGREEMENT
<PAGE>
instrument or affecting the validity or enforceability of such provision in any
other jurisdiction.
SUBPART 4.4 Waivers and Amendments. Neither this Amendment nor
any term hereof may be changed, waived, discharged, or terminated orally, or by
any action or inaction, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge, or termination is
sought (provided that Section 7 of each of the Amended Note Agreements shall
continue to govern any amendments and waivers with respect thereto).
SUBPART 4.5 Section Headings. The titles of the sections
hereof appear as a matter of convenience only, do not constitute a part of this
Amendment and shall not affect the construction hereof.
SUBPART 4.6 Governing Law; Entire Agreement. THIS AMENDMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH NEW YORK LAW. This
Amendment and such other documents constitute the entire understanding between
the parties hereto with respect to the subject matter hereof and supersede any
prior agreements, written or oral, with respect thereto.
IN WITNESS WHEREOF, the parties hereto caused this Amendment
to be executed by their respective officers (as applicable) thereunto duly
authorized as of the day and year first above written.
United Grocers, Inc.
By /s/ John W. White
Name: John W. White
Title: Vice President
Accepted as of May 9, 1997
Phoenix Home Life Mutual
Insurance Company
By /s/ Keith D. Robbins
Name: Keith D. Robbins
Title: Vice President
Page 3--WAIVER AND FIRST AMENDMENT TO NOTE AGREEMENT
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made this 5th day of August, 1996, between H. Larry
Montgomery and Frances M. Montgomery, husband and wife, as Joint Tenants,
hereinafter called Seller, and United Grocers, Inc., an Oregon Corporation,
hereinafter called Buyer, as follows:
1. In consideration of the payment to Seller of a deposit in the amount of TEN
DOLLARS ($10.00), Seller hereby grants to Buyer the exclusive right to purchase
for ONE HUNDRED FORTY THOUSAND TWO HUNDRED NINETY THREE and NO/100 DOLLARS
($140,293.00), the following described real property and all improvements
thereon in the County of Lake, State of California, as outlined in RED on the
Exhibit "A" attached hereto and described on the Exhibit "B" legal description
attached hereto, together with all of Seller's right, title and interest, in
adjoining street and alleys.
2. Prior to the close of escrow, Buyer and its employees, agents, servants,
representatives and contractors, may enter the property at reasonable times and
in a reasonable manner for purposes of making or performing such borings,
surveys, engineering studies, soil tests and studies, environmental sampling
and/or tests, general inspections and tests thereon as buyer deems necessary or
advisable. Buyer shall indemnify and hold Seller harmless from any liability or
damage caused by Buyer or Buyer's agents for the activities permitted in this
Paragraph 2. In the event any of the soils tests, borings, surveys or
engineering studies referred to above determines the property, or any part
thereof is unsuitable for construction, in Buyer's sole discretion, Buyer may
cancel this agreement upon ten (10) days written notice.
3. This agreement shall constitute a contract for the purchase of said property
on the terms and conditions hereinafter set forth.
4. The purchase price of ONE HUNDRED FORTY THOUSAND TWO HUNDRED NINETY THREE AND
NO/100 DOLLARS ($140,293.00) shall be payable on delivery of the deed and
completion of the escrow as hereinafter provided.
5. Buyer and Seller hereby acknowledge that an escrow covering the purchase and
sale of said property has been opened by Buyer with Lake County Title Company at
P.O. Box 9, 180 Third Street, Lakeport, California 95453, hereinafter called
escrow agent, and Buyer shall deposit with escrow agent an executed copy of this
agreement. Seller shall, prior to the close of escrow, deposit a Grant Deed of
said property to Buyer and all title papers required by escrow agent or Buyer.
6. Buyers title to said property shall be evidenced by an owner's policy of
title insurance in the amount of the purchase price written by First American
Title Insurance Company. Title shall be subject only to current taxes not yet
delinquent and shall be free and clear of all other matters not approved by
Buyer in writing. Said other matters include, without
- 1 -
<PAGE>
limitations, all encumbrances, leases, tenancies, rental agreements,
reservations, covenants, conditions, restrictions, easements, right of way and
encroachments on to or from said property. Seller promises to furnish Buyer with
copies of all written leases, tenancies and rental agreements and to advise
Buyer fully as to any not written. Seller further promises that Buyer, at
Buyer's expense, will be able to obtain a survey confirming that said property
extends to the street line of all adjacent streets and that there are no
easements, rights of way or encroachments. Should Buyer inform Seller of matters
not acceptable to Buyer, Seller shall make every effort to correct such matters.
7. Seller agrees that Buyer's obligation to purchase said property is subject to
satisfaction of the following conditions upon completion of escrow, and Seller
further agrees Buyer may waive any of the following conditions prior to the
close of escrow:
A. Said property will be zoned for retail business use and any zoning shall not
impose conditions unsatisfactory to Buyer concerning the construction and
operation of any buildings, parking or related improvements.
B. If any portion of said property is transacted or separated from another
portion of said property, said streets and alleys shall be unconditionally
vacated, free and clear of all easements on terms satisfactory to Buyer, and
title thereto shall be transferred to Buyer concurrently with the transfer of
said property to Buyer. Seller agrees to cooperate fully with Buyer in obtaining
such vacation.
Buyer shall have all the time necessary to satisfy itself as to the conditions
set forth in this paragraph, provided Buyer proceeds with reasonable diligence.
8. Within twenty (20) days after (A) Seller complied with its agreements and
promises made herein, (B) all conditions specified herein have been satisfied or
waived and (C) escrow agent has advised Buyer that it is prepared to complete
the escrow under the terms hereof, Buyer shall forward to escrow agent the
balance of the purchase price and Buyer's closing instructions. The escrow shall
close within thirty (30) days of the escrow agents receipt of Buyer's funds and
closing instructions.
9. Seller promises to and shall deliver possession of the property described in
paragraph 1 on the date title is transferred.
10. Rents and real property taxes shall be prorated as of the date of transfer
of title, and each party shall pay half of the escrow fee. Buyer and Seller
shall each pay half of the following items: any assessments for improvements,
completed or partially completed prior to the date hereof, notary fees and
expenses of placing title in proper condition and/or abstracting charges to
insure that condition, and all governmental impositions incurred as a result of
the transfer of title to Buyer, the cost of recording the deed and the title
premium.
11. Buyer and Seller represent and warrant to each other that there are no
brokers entitled to a real estate commission with respect to the purchase and
sale of the property. Buyer and
- 2 -
<PAGE>
Seller shall indemnify, hold harmless and defend the other party from the
payment of any and all brokers and finders expenses, commissions, fees or other
forms of compensation which may have been earned by any third party acting on
behalf of the indemnifying party in connection with the negotiation and
execution hereof and the consummation of the transaction contemplated hereby.
12. Seller hereby represents and warrants, that at the time of closing, the
transferred real property will be free and clear of all hazardous wastes and
substances and Seller will indemnify and hold Buyer harmless from any and all
liability arising out of and incident to the presence of such substances as of
the date of closing. This representation and warranty shall survive the delivery
of the deed and date of closing.
A. Seller has provided Buyer with an environmental inspection and audit report
("audit") which is sufficient to constitute an appropriate inquiry into the
previous ownership(s) and uses of the property, and an appropriate inspection of
the property for the presence of hazardous wastes, substances or materials so as
to qualify Buyer as an innocent landowner under CERCLA.
B. The audit is in a form and of content satisfactory to Buyer.
13. Seller warrants that there are no pending assessments, bonds, or other
liens, other than those as may be disclosed by a title insurance report.
14. This agreement may be terminated by Buyer by written notice to seller if it
reasonably appears to Buyer that within a reasonable time all of the conditions
in Paragraph 7 A and B, cannot be completed. If Buyer so terminates this
agreement Seller shall return said deposit(s). Further, if Seller has not
complied with the agreements made herein within twelve (12) months after the
date hereof, Buyer may terminate this agreement by giving ten (10) days' written
notice to escrow agent and seller, in event of such termination, Seller shall
return said deposit(s) to Buyer. Should Buyer fail to so deposit its funds or
escrow instructions as provided in paragraph 10, hereof, Seller may give ten
(10) days' written notice to escrow agent and Buyer, Buyer's default is not
cured within such ten (10) days, this agreements shall terminate and Seller
shall, as its sole remedy, retain the said deposit(s) paid to Seller.
BUYER AND SELLER AGREE BY PLACING THEIR INITIALS HERE (_______BUYER
______SELLER) THAT IF SELLER TERMINATES THIS AGREEMENT UPON THE BUYER'S DEFAULT
AS SET FORTH IN THIS AGREEMENT, SELLER MAY RETAIN THE DEPOSIT(S) REFERRED TO IN
THIS AGREEMENT HEREOF AS LIQUIDATED DAMAGES FOR SUCH DEFAULT.
15. Notices. Any notice provided for herein shall be given by registered or
certified United States mail, postage prepaid or expedited delivery service
(i.e., Federal Express) or by hand delivery addressed, if to Seller, at P.O. Box
3760, Eureka, Ca 95502; Attention:
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<PAGE>
Larry Montgomery. And Buyer, to it at: 2335 Telegraph Hill, El Dorado Hills, Ca
95762; Attention Gary Chamberlain.
The person and place to which notices are to be mailed or delivered may be
changed by either party by notice to the other party.
16. In the event a suit or action is instituted to enforce any term or provision
of this agreement, then, in that event the prevailing party shall be entitled to
its costs and reasonable attorneys fees incurred incident to such preceding.
17. All rights and obligations of the parties hereto shall bind and inure to the
benefit of their respective heirs, personal representatives, successors and
assigns. The singular number herein includes the plural and any gender includes
all others.
IN WITNESS WHEREOF, each of said parties has executed this Agreement.
H. Larry and Frances M. Montgomery United Grocers, Inc.
(husband and wife, as Joint Tenants) (an Oregon Corporation)
By: /s/ H. Larry Montgomery By: /s/ Alan C. Jones
President & CEO
By: /s/ Frances M. Montgomery
(Seller) (Buyer)
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<PAGE>
LEGAL DESCRIPTION
Parcel 1 as shown on a map filed in the office of the County Recorder of said
Lake County on May 19, 1995, in Book 34 of Parcel Maps at Pages 30 and 31.
AP #004-055-46 formerly known as AP #004-055-39
EXHIBIT "B"
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