UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 1, 2000
---------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____________ to_______________
Commission file number: 33-57505
--------
Roundy's, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-0854535
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
23000 Roundy Drive
Pewaukee, Wisconsin 53072
- ---------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (262)953-7999
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
As of March 15, 2000, 11,300 shares of Class A (voting)
Common Stock and 1,172,248 shares of Class B (non-voting)
Common Stock were outstanding. All of the outstanding
shares of Class A Common Stock on January 1, 2000 were held
of record by the Roundy's, Inc. Voting Trust which may be
deemed an affiliate of the registrant. There is no
established public trading market for either class of such
stock.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
--------- -------------------
Portions of Annual Report to Part II, Items 6, 7, 8
Stockholders for the year
ended January 1, 2000
<PAGE>
PART I
The discussions in this Annual Report on Form 10-K and in
the Company's 1999 Annual Report to stockholders
incorporated herein by reference contain forward-looking
statements within the meaning of Section 27A of the
Securities Exchange Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical facts
included herein or therein are forward-looking statements.
In particular, without limitation, terms such as
"anticipate," "believe," "estimate," "expect," "indicate,"
"may be," "objective," "plan," "predict," "should," and
"will" are intended to identify forward-looking statements.
Forward-looking statements are subject to certain risks,
uncertainties and assumptions which could cause actual
results to differ materially from those predicted.
Important factors that could cause actual results to differ
materially from such expectations ("Cautionary Factors") are
disclosed herein (see "Cautionary Factors" at the end of
Item 1, below). Although the Company believes that the
expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that such
expectations will prove to have been correct. All
subsequent written or oral forward-looking statements
attributable to the Company or persons acting on behalf of
the Company are expressly qualified in their entirety by the
Cautionary Factors.
ITEM 1. Business.
---------
GENERAL
-------
Roundy's, Inc. and its subsidiaries (collectively the "Company") are
engaged principally in the wholesale distribution of food and nonfood
products to supermarkets and warehouse food stores located in Wisconsin,
Illinois, Michigan, Indiana, Ohio, Kentucky, Missouri, Arkansas,
Minnesota, Pennsylvania, Tennessee and West Virginia. As of January 1,
2000, the Company also owns and operates 14 retail warehouse food stores
under the name "Pick 'n Save" or "Park & Save," and nine conventional
food stores under the names "Park & Shop", "Orchard Foods", "Village
Market" or "Buy Low Foods." The Company offers its retail customers a
complete line of nationally-known name brand merchandise, as well as a
number of its own private and controlled labels. The Company services
822 retail grocery stores.
In addition to the distribution and sale of food and nonfood products,
the Company provides specialized support services for retail grocers,
including promotional merchandising and advertising programs, accounting
and inventory control, store development and financing and assistance
with other aspects of store management. The Company maintains a staff
of trained retail counselors who advise and assist individual owners and
managers with store operations.
Roundy's, Inc. was incorporated in 1952 under the Wisconsin Business
Corporation Law. The Company's executive offices are located at 23000
Roundy Drive, Pewaukee, Wisconsin 53072, and its telephone number is
(262)953-7999. Unless the context indicates otherwise, as used herein,
the term "Company" refers to Roundy's, Inc. and its subsidiaries and the
term "Roundy's" refers to Roundy's, Inc. without its subsidiaries.
Roundy's operates on a 52 or 53 week fiscal year ending on the Saturday
closest to December 31. In this report, unless the context indicates
otherwise, the terms "1999" and "fiscal 1999" refer to the 52-week
fiscal year ended January 1, 2000; the terms "1998" and "fiscal 1998"
refer to the 52-week fiscal year ended January 2, 1999; and the terms
"1997" and "fiscal 1997" refer to the 53-week fiscal year ended January
3, 1998.
<PAGE>
CAPITAL STRUCTURE/PATRONAGE DIVIDENDS
-------------------------------------
As of January 1, 2000, all of Roundy's outstanding Class A (Voting)
Common Stock is owned by the owners ("stockholder-customers") of 120
retail grocery stores serviced by Roundy's. These stockholder-
customers, who own approximately 73% of the combined total of Class A
Common and Class B Common, may receive patronage dividends from Roundy's
based on the level of their purchases from Roundy's. Approximately 27%
of the outstanding combined Class A Common and Class B Common Stock is
held by employees or former customers of Roundy's and, although they
participate in the accumulation of equity in the Company, they do not
receive patronage dividends and do not own any Class A Common. Roundy's
is obligated by Article 5 of its By-Laws, as amended, to pay a patronage
dividend to its stockholders-customers out of and based upon the net
earnings from business done by Roundy's with such stockholder-customers
in any fiscal year in an amount which would reduce the net income of the
Company to such amount as will result in an increase of 8% in the book
value of outstanding Roundy's stock as of the close of such year
(calculated after the payment of patronage dividends). In the event
that such net earnings level is not reached, no patronage dividends will
be paid for that year. In February 1998, the Board of Directors adopted
a resolution amending the By-Laws to change the required increase in
net book value per share from 10% to 8%, beginning in fiscal 1998. The
patronage dividend is payable at least 20% in cash and the remainder in
Class B Common. Patronage dividends for fiscal 1999, 1998 and 1997 were
payable 30% in cash and 70% in Class B Common.
OPERATION AS A COOPERATIVE
--------------------------
Roundy's has historically operated its food wholesale business on a
cooperative basis, and therefore determined its Federal income tax
liabilities under Subchapter T of the Internal Revenue Code, which
governs the taxation of corporations operating on a cooperative basis.
Under Subchapter T of the Internal Revenue Code, patronage dividends are
deducted by Roundy's in determining taxable income, and are generally
taxable to the stockholder-customers (including the value of the Class B
Common), for Federal income tax purposes.
Roundy's anticipates that in the future it will continue to operate on a
cooperative basis in substantially this manner, although it is not
required to do so and its operation on this basis, as well as its
practice of paying patronage dividends, could be terminated at any time
by action of the Board of Directors.
The applicable laws, regulations, rulings and judicial decisions
affecting the determination of whether a corporation is operating on a
cooperative basis for Federal income tax purposes under Subchapter T of
the Internal Revenue Code are subject to interpretation. Although
management believes that Roundy's qualifies as a cooperative for such
purposes, Roundy's has not obtained, and does not intend to seek a
ruling or other assurance from the IRS that this is the case. If the
Internal Revenue Service were to successfully challenge Roundy's
cooperative status, Roundy's might incur a Federal income tax liability
with respect to patronage dividends previously paid to stockholder-
customers during the tax years in question and which were deducted by
Roundy's. Roundy's thereafter might incur significantly increased
consolidated Federal income tax liabilities in future tax years.
Roundy's subsidiaries do not operate as cooperatives. The customers
serviced by these subsidiaries are independent grocers, operating 702
retail stores. They do not receive patronage dividends.
<PAGE>
WHOLESALE FOOD DISTRIBUTION
---------------------------
The Company distributes a broad range of food and nonfood products to
its customers and to corporate-owned retail stores. The Company has
seven product lines: dry grocery, frozen food, fresh produce, meat,
dairy products, bakery goods and nonfood products. The Company sells
brand name merchandise of unrelated manufacturers, including most
nationally advertised brands. In addition, the Company sells numerous
products under private and controlled labels, including but not limited
to "Roundy's," "Old Time," "Shurfine" and "Buyers' Choice." Private
label product sales for the Company accounted for $182,855,000,
$173,339,000 and $179,032,000 of the Company's sales during fiscal 1999,
1998 and 1997, respectively. The Company has no long-term purchase
commitments and management believes that the Company is not dependent
upon any single source of supply. No source of supply accounted for
more than 9% of the Company's purchases in fiscal 1999.
As described above, Roundy's, not including its subsidiaries, has
historically operated on a cooperative basis with respect to its
wholesale food distribution business. Roundy's cooperative operations
accounted for approximately 40% of the Company's consolidated net sales
and service fees for fiscal 1999, 39% for fiscal 1998 and 37% for fiscal
1997. At January 1, 2000, Roundy's had 58 stockholder-customers
actively engaged in the retail grocery business, operating a total of
120 retail grocery stores. Roundy's cooperative wholesale food business
is focused primarily in Wisconsin, where all but 3 of the 120 retail
grocery stores are located (3 are in Illinois). At January 1, 2000 the
Company (including its subsidiaries) had 702 independent retail food
store customers. Sales by the Company to the independent retail food
stores accounted for 48%, 50% and 52% of the Company's consolidated net
sales and service fees for fiscal 1999, 1998 and 1997, respectively.
The Company's primary marketing objective is to be the principal source
of supply to both its stockholder-customers and other independent
retailers. In a 12 state area the Company serviced 120 retail grocery
stores operated by its stockholder-customers, 702 retail stores operated
by non- stockholders and 23 Company-owned and operated retail stores
during fiscal 1999. Of the Company's consolidated net sales and service
fees for this period, $727,576,000 or 26.8% were attributable to five
customers, with one customer, Mega Marts, Inc., accounting for
$330,686,800 or 12.2% of such sales. The Company has entered into a
letter of intent to purchase Mega Marts, Inc. and intends to operate
these 17 retail grocery stores as Company-owned retail stores.
Approximately 78% or 643 retail stores purchased less than $3,000,000
each from the Company in fiscal 1999. 107 customers owned more than one
retail food store, with one customer owning 40 retail food stores.
The Company is subject to regulation by the United States Food and Drug
Administration and to certain state and local health regulations in
connection with the operations of its facilities and its wholesale food
business. The Company has not been subject to any actions brought under
such regulations in the past five years.
Services to Customers
- ---------------------
Stockholder-customers are provided, and independent retailers are
offered, a variety of services to help them maintain a competitive
position within the retail grocery industry. These services include
pricing services, ordering assistance, point-of-sale host-computer
support, detailed reports of purchases, store engineering, retail
accounting, group advertising, centralized bakery purchasing,
merchandising, insurance, real estate services and retail training. The
<PAGE>
Company charges its stockholder-customers for some of these services,
however, the income generated by such charges is not material. The
foregoing services are also available to the Company's independent
retailers on a fee basis.
Customer Loans, Guarantees and Leases
- -------------------------------------
The Company has maintained a continuous effort to assist qualified
stockholder-customers and independent retailers to remodel and expand
existing retail locations and to develop new retail outlets and has made
various loans to these individuals and entities for such purposes.
Loans outstanding as of January 1, 2000 were as follows:
<TABLE>
<CAPTION>
Outstanding
Number Balance Range of Range of
of Original as of Interest Maturity
Loans Amount Jan. 1, 2000 Rates Dates
<S> <C> <C> <C> <C> <C>
Inventory
Equipment
Loans 74 $43,045,400 $21,838,300 Variable(1) 2000-2011
(1) Variable rates based on the Company's cost of borrowing.
</TABLE>
The Company's guarantees of customer bank loans and customer leases
amounted to $53,300 and $170,800, respectively at January 1, 2000.
The Company has a lease program under which it may in its discretion
lease store sites and equipment for sublease to qualified customers.
This enables customers to compete with large grocery store chains for
store sites at favorable rates. The Company presently has such real
estate and equipment leases with lease terms from 2000 to 2023.
Aggregate lease rentals received under this program were $23,312,300,
$23,207,000 and $21,249,900 in fiscal 1999, 1998 and 1997, respectively.
Marketing and Distribution of Products
- --------------------------------------
The Company generally distributes its various product lines by a fleet
of 272 tractor cabs and 664 trailers and some products are shipped
direct from manufacturers to customer locations. Most customers order
for their stores on a weekly basis and receive deliveries from one to
five days a week. Orders are generally transmitted directly to a
warehouse computer center for prompt assembly and dispatch of shipments.
The Company has retail counselors and merchandising specialists who
serve its customers in a variety of ways, including the analysis of and
recommendation on store facilities and equipment; development of
programs and objectives for establishing efficient methods and
procedures for receipt, handling, processing, checkout and other
operations; informing customers on latest industry trends; assisting and
dealing with training needs of customers; and, if the need arises,
acting as liaison or problem solver between the Company and the
customers. The retail counselors and specialists are assigned a
specific geographic area and periodically visit each customer within
their assigned area.
Terms of Sales and Bad Debt Experience
- --------------------------------------
The Company renders statements to its customers on a weekly basis to
coincide with regular delivery schedules. Roundy's accounts of single
<PAGE>
storeowners are considered delinquent if not paid on the statement date.
Accounts of multiple storeowners are considered delinquent if not paid
within three days of the statement date. Accounts of Roundy's
subsidiaries are considered delinquent if not paid within seven days of
the statement date. The majority of accounts are collected via the
Automated clearinghouse ("ACH") system. Delinquent accounts are charged
interest at the rate of prime plus 5%, computed on a daily basis.
During each of the past three fiscal years, the Company's bad debt
expense has been less than 0.1% of sales. In 1999, 1998 and 1997, the
Company's bad debt expense was $1,596,100, $2,189,300 and $2,389,100,
respectively.
Roundy's stockholder-customers are required to maintain buying deposits
with Roundy's equal to the greater of the average amount of a
stockholder-customer's purchases over a two-week period or $20,000. The
book value of Class A and Class B Common Stock of Roundy's owned by a
stockholder-customer is credited against the buying deposit requirement,
and Roundy's has a lien against all such stock to secure any
indebtedness to Roundy's.
RETAIL FOOD STORES
------------------
The Company operates two types of corporate stores (high volume-limited
service retail "warehouse" stores and conventional retail stores). The
high volume-limited service warehouse stores are designated as "Pick 'n
Save" or "Park & Save" which generally offer, at discount prices,
complete food and general merchandise lines to the customer, emphasizing
higher demand items, with stores ranging from 33,000 to 73,000 square
feet per store. Conventional retail stores operated under the names
"Park & Shop," "Orchard Foods," "Village Market" or "Buy Low Foods,"
generally emphasize full service to the customer at competitive prices.
These stores range from 9,000 to 42,000 square feet. The number of
stores operated by the Company at the end of its three most recent
fiscal years was as follows:
<TABLE>
<CAPTION>
Type of Store 1999 1998 1997
<S> <C> <C> <C>
High Volume-Limited Service
Stores....................... 14 13 14
Conventional Retail
Stores....................... 9 6 7
</TABLE>
Sales by Company-operated stores during the three most recent fiscal
years were $323,857,300, $284,127,500 and $291,612,600 for fiscal 1999,
1998 and 1997, respectively. The additional volume of wholesale sales
generated by the retail stores owned and operated by the Company helps
to reduce the overhead of the business and increases the Company's
return to its stockholders.
EMPLOYEES
---------
At January 1, 2000, the Company employed full-time 1,140 executive,
administrative and clerical employees, 1,517 warehouse and processing
employees and drivers and 980 retail employees, and had 1,980 part-time
employees. Substantially all of the Company's warehouse employees,
drivers and retail employees are represented by unions, with contracts
expiring in 2000 through 2003. The Company considers its employee
relations to be normal. There have been no significant work stoppages
during the last five years. Substantially all full-time employees are
covered by group life, accident, and health and disability insurance.
<PAGE>
COMPETITION
-----------
The grocery industry, including the wholesale food distribution
business, is characterized by intense competition and low profit
margins. The shifting of market share among competitors is typical of
the wholesale food business as competitors attempt to increase sales in
any given market. In order to compete effectively, the Company must
have the ability to meet rapidly fluctuating competitive market prices,
provide a wide range of perishable and nonperishable products, make
prompt and efficient delivery, and provide the related services which
are required by modern supermarket operations.
The Company competes with a number of local and regional grocery
wholesalers and with a number of major businesses, which market their
products directly to retailers, including companies having greater
assets and larger sales volume than the Company. The Company's
customers and the Company's corporate stores also compete at the retail
level with several chain store organizations, which have integrated
wholesale and retail operations. The Company's competitors range from
small local businesses to large national and international businesses.
The Company's success is in large part dependent upon the ability of its
independent retail customers to compete with larger grocery store chains.
In the Milwaukee area, the "Pick 'n Save" group, which consists of both
independently-owned and Company-owned stores, continues to be the market
share leader with 52% of households in the Milwaukee metropolitan
statistical area purchasing "most of their groceries" from "Pick 'n
Save" as reported in the Milwaukee Journal Consumer Analysis Survey
taken in the fall of 1999.
In competing for customers, emphasis is placed on high quality and a
wide assortment of products, low service fees and reliability of
scheduled deliveries. The Company believes that the range and quality
of other business services provided to retail store customers by the
wholesaler are increasingly important factors, and that success in the
wholesale food industry is dependent upon the success of the Company's
customers who are also engaged in an intensely competitive, low profit
margin industry.
CAUTIONARY FACTORS
------------------
This report and other documents or oral statements which have been and
will be prepared or made in the future contain or may contain forward-
looking statements by or on behalf of the Company. Such statements are
based on management's expectations at the time they are made. In
addition to the assumptions and other factors referred to specifically
in connection with such statements, the following factors, among others,
could cause actual results to differ materially from those contemplated.
These factors are in addition to any other cautionary statements,
written or oral, which may be made or referred to in connection with any
such forward-looking statement.
Factors that could cause actual results to differ materially from those
contemplated include:
<PAGE>
Wholesale Business Risks - The Company's sales and earnings at wholesale
are dependent on the Company's ability to retain existing customers and
attract new customers, as well as its ability to control costs. Certain
factors could adversely impact the Company's results, including:
decline of its independent retailer customer base due to competition and
other factors; loss of corporate retail sales due to increased
competition and other risks detailed more fully below; consolidations of
retailers or competitors; increased self-distribution by chain retailers;
increase in operating costs; the possibility that the Company will
incur additional costs and expenses due to further investment in,
or consolidation of, distribution centers; and entry of new or non-
traditional distribution systems into the industry.
Retail Business Risks - The Company's retail segment faces risks which
may prevent the Company from maintaining or increasing retail sales and
earnings including: competition from other retail chains, supercenters,
non-traditional competitors, and emerging alternative formats; operating
risks of certain strategically important retail operations; and adverse
impact from the entry of other retail chains, supercenters and non-
traditional or emerging competitors into markets where the Company has a
retail concentration.
Litigation - The Company is involved in various litigation matters
arising in the normal course of business. While the Company believes
that it is currently not subject to any material litigation, the costs
and other effects of legal and administrative cases and proceedings and
settlements are impossible to predict with certainty. The current
environment for litigation involving food wholesalers may increase the
risk of litigation being commenced against the Company. The Company
would incur the costs of defending any such litigation whether or not
any claim had merit.
THE FOREGOING LIST SHOULD NOT BE CONSTRUED AS EXHAUSTIVE AND THE COMPANY
DISCLAIMS ANY OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS TO
REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS OR TO
REFLECT THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS.
ITEM 2. Properties.
-----------
The Company's principal executive offices are located in Pewaukee,
Wisconsin on a 7-acre site, which is owned by Roundy's.
Wholesale activities are conducted by the Company from the following
warehouses:
<PAGE>
<TABLE>
<CAPTION>
Approximate
Warehouse
Location Products Distributed Square Footage
<S> <C> <C>
Wauwatosa, Wisconsin All product lines, 745,000 (O)
(two facilities) except nonfood products 192,000 (L)
Mazomanie, Wisconsin Dry groceries and 225,000 (L)
nonfood products
Westville, Indiana All product lines, 683,000 (O)
except nonfood products
Lima, Ohio All product lines, 515,000 (O)
(two facilities) except produce and 94,000 (L)
nonfood products
Eldorado, Illinois Dry grocery products 384,000 (O)
Evansville, Indiana Frozen food, meat 136,000 (O)
and dairy products
Van Wert, Ohio Nonfood products 115,000 (L)
Muskegon, Michigan All product lines, 215,000 (O)
except produce
O = Owned L = Leased
</TABLE>
In addition to the above, as of January 1, 2000, the Company operates 23
retail grocery stores, ranging from 9,000 to 73,000 square feet. These
facilities are primarily leased. As of March 15, 2000, the Company owns
and operates 29 retail grocery stores.
The Company believes its current properties are well maintained and, in
general, are adequately sized to house existing operations.
Transportation
- --------------
The Company's transportation fleet for distribution operations as of
January 1, 2000 consisted of 272 tractor cabs, 664 trailers and 5
straight delivery trucks. In addition, the Company owns 26 automobiles.
The fleet is primarily owned by the Company.
Computers
- ---------
The Company owns most of its computer and related peripheral equipment.
The computers are used for inventory control, billing and all other
general accounting purposes. The Company believes that the computer
systems are adequate for the Company's operations.
ITEM 3. Legal Proceedings.
------------------
The Company is involved in various litigation matters arising in the
normal course of business. It is the view of management that the
Company's recovery or liability, if any, under pending litigation is not
expected to have a material effect on the Company's financial
statements, although no assurance to that effect can be given. See
"Cautionary Statements - Litigation" above.
<PAGE>
ITEM 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1999.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
-----------------------------------------------------
The transfer of shares of Roundy's Class A Common and Roundy's Class B
Common is substantially restricted, and there is no established public
trading market for Roundy's stock. As of January 1, 2000, all of the
outstanding shares of Roundy's Class A (voting) Common Stock were held
of record by the Roundy's, Inc. Voting Trust. Further information on
the Voting Trust is found in Item 12 of this report. There is also no
established public trading market for Roundy's Voting Trust Certificates
and there were 58 holders of such Certificates on January 1, 2000. On
January 1, 2000 an aggregate of 200 persons held shares of Roundy's
Class B Common Stock and/or Voting Trust Certificates. Except for
patronage dividends (see Item 1, Business, and Note 3 to Roundy's
consolidated financial statements), no dividends have ever been paid on
the Common Stock of Roundy's. There is no intention of paying
dividends, other than patronage dividends, in the foreseeable future.
ITEM 6. Selected Financial Data.
------------------------
The information required by this Item is incorporated by reference from
the Registrant's Annual Report to Stockholders for the fiscal year ended
January 1, 2000 (the "Annual Report") under the caption "Selected
Financial Data."
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation.
-----------------------------------------------------------
The information required by this Item is incorporated by reference from
the Annual Report under the caption "Financial and Operational Review."
ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk.
----------------------------------------------------------
The Company's only exposure to market risk relates to interest rate risk
associated with its long-term debt. The effect of a 10% change in the
interest rates would not have a material effect on future earnings, fair
values or cash flows.
ITEM 8. Financial Statements and Supplementary Data.
--------------------------------------------
The required Financial Statements are incorporated by reference from the
Annual Report; see response to Item 14(a)(1) of this report. The
required financial statement schedules are filed with this report; see
the response to Item 14(a)(2) of this report. Supplementary data is not
furnished pursuant to Item 302(a)(5) of Regulation S-K.
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
-----------------------------------------------------------
None.
<PAGE>
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
---------------------------------------------------
The Directors and Executive Officers of Roundy's are as follows:
<TABLE>
<CAPTION>
Position(s) Held with Roundy's
Name Age And Business Experience
- ------------------ --- ---------------------------------
<S> <C> <C>
Gerald F. Lestina 57 President and Chief Executive
Officer since 1995; Director since
1991 (term expires 2002)
Roger W. Alswager 51 Vice President of Real Estate since 1989
Londell J. Behm 49 Vice President of Advertising since 1987
Ralph D. Beketic 53 Vice President-Wholesale since 1996;
President of Milwaukee Division 1993-1995
David C. Busch 51 Vice President of Administration since 1993
Edward G. Kitz 46 Vice President, Secretary & Treasurer since 1995
Charles H. Kosmaler,Jr. 57 Vice President Planning and Information Services
since 1999; Vice President of Logistics and
Planning 1993-1998
Debra A. Lawson 44 Vice President of Human Resources since 1997;
Vice President Administration-Milwaukee
Division 1994-1996
John E. Paterson 52 Vice President-Distribution since 1997;
Vice President of Operations-Milwaukee
Division 1993-1996
Robert D. Ranus 59 Vice President and Chief Financial
Officer since 1987; Director since
1987 (term expires 2000)
Michael J. Schmitt 51 Vice President-Sales and Development since 1995
Marion H. Sullivan 53 Vice President of Marketing since 1989
Robert E. Bartels 62 Director since 1994 (term expires 2000);
President and Chief Executive Officer of
Martin's Super Markets, Inc., South Bend,
Indiana
Charles R. Bonson 53 Director since 1994 (term expires 2000);
President of Bonson's Foods, Inc.,
Eagle River, Wisconsin
<PAGE>
Robert S. Gold 57 Director since 1998 (term expires 2001);
President and Stockholder of B. & H. Gold
Corporation, Gold's Market, Inc., Gold's, Inc.
and Gold's of Mequon, LLC in Brown Deer,
Milwaukee, Grafton and Mequon, Wisconsin
George C. Kaiser 67 Director since 1986 (term expires 2001);
Chairman and Chief Executive Officer Hanger
Tight Company since 1988; Chief Executive
Officer of George C. Kaiser and Co. since 1988;
Director of The Baird Funds, Inc. since 1992
Henry Karbiner, Jr. 59 Director since 1999 (term expires 2002);
Chairman, President and Director of both Tri
City National Bank and Tri City Bankshares
Corporation, Oak Creek, Wisconsin
Patrick D. McAdams 50 Director since 1995 (term expires 2001);
General Manager and Treasurer of McAdams, Inc.,
Wales, Wisconsin
George E. Prescott 52 Director since 1999 (term expires 2002);
Chairman and Chief Executive Officer of
Prescott's Supermarkets, Inc., West Bend,
Wisconsin
Gary R. Sarner 53 Director since 1997 (term expires 2001);
Chairman and Chief Executive Officer of Total
Logistic Control, LLC since 1996; President
and Chief Operating Officer of Christiana
Companies, Inc. 1992-1997
</TABLE>
Directors of Roundy's are elected by class and generally serve three-
year terms; approximately one-third of the Board of Directors is elected
annually. Of the ten current members of the Board of Directors, two are
currently Executive Officers of Roundy's (Messrs. Lestina and Ranus) and
four are "Retailer Directors" (Messrs. Bonson, Gold, McAdams and
Prescott). The terms of the Roundy's, Inc. Voting Trust provide that
each year the Trustees will vote to elect one stockholder-customer,
chosen by a plurality vote of the Voting Trust Certificate Holders, to
serve a three-year term as Director; however, the Roundy's, Inc. Voting
Trust provides that in every third year, Voting Trust Certificate
Holders will choose two Retailer Directors. Therefore, at any time
there should be four Retailer Directors serving.
<PAGE>
ITEM 11. Executive Compensation.
-----------------------
The following table shows the compensation for the past three years of
Roundy's five most highly compensated executive officers performing
policy making functions for Roundy's, including the Chief Executive
Officer (the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation(2)
Long-Term
Compensation All Other
Name and Securities Compen-
Principal Underlying sation
Position Year Salary (1) Bonus Options (3)
- ------------------- ---- ---------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Gerald F. Lestina 1999 $410,231 $126,646 - $12,625
President and Chief 1998 380,000 114,000 4,000 12,152
Executive Officer 1997 371,058 105,120 - 9,994
Officer
Robert D. Ranus 1999 232,500 69,283 - 11,613
Vice President and 1998 227,500 68,250 - 8,829
Chief Financial 1997 221,077 62,496 - 11,409
Officer
Ralph D. Beketic 1999 195,077 59,598 - 13,869
Vice President 1998 182,000 54,600 - 13,147
Wholesale 1997 177,981 50,400 - 5,562
Marion H. Sullivan 1999 180,000 53,638 - 10,296
Vice President 1998 172,000 51,600 - 6,993
of Marketing 1997 167,981 47,520 - 8,910
Michael J. Schmitt 1999 172,616 53,638 - 7,908
Vice President 1998 160,000 48,000 - 6,880
of Sales & 1997 157,596 44,640 - 8,580
Development
</TABLE>
(1) Includes amounts (if any) deferred pursuant to Roundy's Deferred
Compensation Plan.
(2) Pursuant to applicable SEC regulations, perquisites and other
personal benefits are omitted because they did not exceed the
lesser of either $50,000 or 10% of the total of salary and bonus.
(3) The amounts shown in this column for 1999, 1998, and 1997,
respectively, were derived from the following figures. Term life
insurance premiums paid by Roundy's and Roundy's contributions to
the 401(k) plan, respectively, for the named executive officers
are shown below. For 1999 - Mr. Lestina: $7,625 and $5,000. Mr.
Ranus: $6,613 and $5,000. Mr. Beketic: $9,419 and $4,450. Mr.
Sullivan: $5,844 and $4,452. Mr. Schmitt: $3,329 and $4,579. For
1998 - Mr. Lestina: $7,152 and $5,000. Mr. Ranus: $3,829
and $5,000. Mr. Beketic: $9,347 and $3,800. Mr. Sullivan:
$2,725 and $4,268. Mr. Schmitt: $3,192 and $3,688. For 1997 -
Mr. Lestina: $6,819 and $3,175. Mr. Ranus: $7,861 and $3,547.
Mr. Beketic: $2,670 and $2,891. Mr. Sullivan: $6,019 and
$2,891. Mr. Schmitt: $6,061 and $2,518.
<PAGE>
Life Insurance
- --------------
The executive officers of Roundy's are each covered by $250,000 of
executive equity life insurance. In addition, executives are covered by
a group life carve-out plan in the amount of three times salary, which
is in lieu of the group term life insurance provided to substantially
all nonunion employees under a Roundy's-sponsored Plan. The executive
officers of Roundy's are also covered by an executive disability income
insurance wrap-around plan which is in addition to the disability income
insurance provided to substantially all nonunion employees under a
Roundy's-sponsored Plan.
Loan Guarantees
- ---------------
The Board of Directors of the Company has authorized the Company to
guarantee the repayment of any loans incurred by senior executives and
key employees for the purpose of exercising certain stock options
granted by the Company. The guarantee is limited to a total aggregate
principal amount of loans of $2,000,000. There were no employee
guarantees outstanding as of January 1, 2000.
Change in Control
- -----------------
Roundy's has Deferred Compensation Agreements with certain executive
officers, including Messrs. Lestina, Ranus, Beketic, Sullivan and
Schmitt. The Deferred Compensation Agreements provide generally that
the Company will pay to the employee a "deferred compensation amount,"
if at any time within three years after the occurrence of a "change in
control" of the Company, the employee's employment is terminated by the
Company, other than for "good cause." If the termination date occurs
within two years after the date on which a "change in control" occurs,
the "deferred compensation amount" will be equal to the "monthly benefit
amount" times twenty-four. If the termination date occurs more than two
years, but not more than three years, after the date on which a "change
of control" occurs, the "deferred compensation amount" will be equal to
the "monthly benefit amount" times twenty-four minus the number of
calendar months between the date two years after the date on which a
"change of control" occurs and the termination date. The "monthly
benefit amount" is equal to 1/12 of the employee's annual base salary.
The number by which the "monthly benefit amount" is multiplied to
determine the "deferred compensation amount" is defined as the "monthly
multiplier." If the employee becomes entitled to the payment of a
"deferred compensation amount," the Company will continue to provide to
the employee those health and life insurance benefits to which the
employee was entitled as of the termination date for that number of
months following the termination date which is equal to the "monthly
multiplier."
Deferred Compensation Plan
- --------------------------
The Company established a Deferred Compensation Plan (the "Plan"),
applicable to Officers who have been elected by the Board of Directors,
("Elected Officers"), to assist the Elected Officers in deferring income
until their retirement, death, or other termination of employment. The
Plan participants may make deferral commitments that are not less than
$10,000 over a period of not more than 7 years and not less than $2,000
in any one-year. The aggregate annual deferral may not exceed $100,000
per calendar year for all participants combined unless the Company's
Board of Director approves an amount in excess of that limit. For 1999,
the Board of Directors approved an annual deferral of $146,000. Monthly
interest is credited to each participant's account based on the Moody's
Long Term Bond Rate in effect on January 1 of each year plus 2%. The
Company established a Trust to hold assets to be used to pay benefits
under the Plan, however, the rights of any participant, beneficiary or
estate to benefits under the Plan are solely those of an unsecured
creditor of the Company. Upon death of a participant prior to
<PAGE>
termination of employment and before any periodic payments have started,
the Company will pay to the participant's Designated Beneficiary a pre-
retirement death benefit equal to five times the total aggregate
deferral commitment of the participant payable in equal annual
installments over a ten-year period. The Company has purchased life
insurance policies on the lives of the participants to fund its
liabilities under the Plan.
Severance and Non-Competition Agreement
- ---------------------------------------
Roundy's has a severance and non-competition agreement with Gerald F.
Lestina. This agreement continues in effect until October 10, 2007.
Upon Roundy's termination of Mr. Lestina's employment (other than for
"good cause" as defined in the agreement), or Mr. Lestina's termination
of his employment (for "good reason" as defined in the agreement),
Roundy's will pay Mr. Lestina a "severance benefit" over a period of two
years following the termination date, without interest, provided that if
such termination occurs within a three year period following a "change
in control," as defined in the agreement, then the entire amount of the
severance benefit shall be paid in a lump sum within 30 days after the
termination date. The "severance benefit" means the sum of the
following multiplied by two: (i) Mr. Lestina's annual base salary in
effect as of the termination date; plus (ii) the amount of any bonus
paid or payable to Mr. Lestina for the preceding fiscal year. Upon a
termination, Roundy's will continue to provide to Mr. Lestina those
health and life insurance benefits to which he was entitled as of the
termination date, for a period of two years. If Mr. Lestina ceases to
be employed by Roundy's (including by reason of his death) at any time
after attaining age 55 (he is currently 57) and while he is then an
officer and a director of Roundy's (unless employment is terminated for
"good cause"), Roundy's will provide coverage for Mr. Lestina and his
spouse under the employee health, medical and life insurance plans
maintained by Roundy's for its executive personnel, until, in addition
to other parameters, the deaths of Mr. Lestina and his spouse.
For a period of one year following the termination of Mr. Lestina's
employment under circumstances giving rise to Roundy's obligation to pay
the severance benefit under this agreement, Mr. Lestina agrees not to
compete with Roundy's in the states of Wisconsin, Michigan, Illinois,
Indiana and Ohio, plus to the extent not included in those states, the
area encompassed within a radius of 400 miles of any warehouse or
distribution facility operated by Roundy's, or any affiliate of
Roundy's, as of the termination date.
Other
- -----
Pursuant to a resolution of the Board of Directors of Roundy's, if Mr.
Ranus ceases to be employed by Roundy's (including by reason of his
death) at any time after attaining age 55 (he is currently 59) and while
he is then an officer and a director of Roundy's (unless employment is
terminated for "good cause"), Roundy's will provide coverage for Mr.
Ranus, his spouse and son under the employee health, medical and life
insurance plans maintained by Roundy's for its executive personnel,
until, in addition to other parameters, the deaths of Mr. Ranus, his
spouse and son.
Stock Incentive Plan
- --------------------
Effective November 1, 1991, the Board of Directors adopted the 1991
Stock Incentive Plan (the "Plan") under which up to 75,000 shares of
Class B Common Stock may be issued pursuant to the exercise of stock
options. The Plan also authorizes the grant of up to 25,000 stock
appreciation rights ("SARs"). Options and SARs may be granted to senior
executives and key employees of the Company by the Executive Compen-
<PAGE>
sation Committee of the Board of Directors. No options or SARs may be
granted under the Plan after November 30, 2001. Options granted become
exercisable based on a vesting schedule, which ranges from 20% at the
date of grant to 100% eight years from the date of grant. SAR holders
are entitled, upon exercise of a SAR, to receive cash in an amount equal
to the excess of the fair market value, as defined in the plan, per
share of the Company's common stock as of the date on which the SAR is
exercised over the base price of the SAR. SARs granted become
exercisable based on the vesting rate, which ranges from 20% on the last
day of the fiscal year of the grant to 100% eight years from the last
day of the fiscal year of the grant. In the event of a change in
control of the Company, all options and SARs previously granted and not
exercised, become exercisable.
Option/SAR Grants
- -----------------
There were no options or SARs granted during fiscal 1999.
Option/SAR Exercises
- --------------------
The following table provides information on the Named Executive Officers'
option and SAR exercises in 1999 and the value of unexercised options at
January 1, 2000.
<TABLE>
<CAPTION>
Number of
Unexercised
Shares (A)Options Value ($) of
Acquired (B)SARs Unexercised In-The
on Exercise at 01/01/00 Money (A)Options
(A)Options Value($) Exercisable/ (B)SARs at 01/01/00
Name (B)SARs Realize Unexercisable Exercisable/Unexercisable
- ----------------- ------------ ------- ------------- -------------------------
<S> <C> <C> <C> <C> <C>
Gerald F. Lestina (A) - - 18,833/2,667 1,171,075 68,275
(B) - - - - - -
Robert D. Ranus (A) - - 10,500/ - 756,800 -
(B) - - - - - -
Ralph D. Beketic (A) - - 1,950/50 110,865 3,560
(B) - - 1,750/250 110,195 16,530
Marion H. Sullivan (A) - - 1,450/50 108,890 3,560
(B) - - 2,350/150 161,105 10,045
Michael J. Schmitt (A) - - 3,050/450 212,650 29,500
(B) - - 1,450/50 108,890 3,560
</TABLE>
Retirement Plan
- ---------------
Benefits under the Roundy's, Inc. Retirement Plan are, in general, an
amount equal to 50% of average compensation minus 50% of the
participant's primary Social Security benefit; provided, however, that
if the employee has fewer than 25 years of credited service, the monthly
amount so determined is multiplied by a fraction, the numerator of
which is the years of credited service and the denominator of which is 25.
In addition, if credited service is greater than 25 years, the benefit is
increased by 1% of average compensation for each year of credited service
in excess of 25 years to a maximum of 10 additional years.
<PAGE>
The following table sets forth the estimated annual pensions (before
deduction of the Social Security offset described below) which persons
in specified categories would receive if they had retired on January 1,
2000, at the age of 65:
<TABLE>
<CAPTION>
Average
Annual Annual Pension After Specified
Compensation Years of Credited Service
During Last
Five Completed
Calendar Years 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years
- --------------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$100,000 $20,000 $30,000 $40,000 $ 50,000 $ 55,000 $ 60,000
125,000 25,000 37,500 50,000 62,500 68,800 75,000
150,000 29,800 44,700 59,600 74,500 82,000 89,400
175,000 31,200 46,800 62,400 78,000 85,800 93,600
200,000 31,200 46,800 62,400 78,000 85,800 93,600
225,000 32,200 48,900 65,700 82,500 90,000 100,000
250,000 33,600 52,300 71,000 89,600 98,900 110,100
300,000 36,300 58,200 80,100 102,000 114,600 127,700
400,000 36,300 58,200 80,100 102,000 114,600 127,700
450,000 36,300 58,200 80,100 102,000 114,600 127,700
500,000 36,300 58,200 80,100 102,000 114,600 130,000
</TABLE>
All of the Named Executive Officers are covered by the Roundy's, Inc.
Retirement Plan. Their average annual compensation would be the
combined amount listed under Salary and Bonus shown in the Summary
Compensation Table. The estimated credited years of service for each of
the Named Executive Officers is as follows: Mr. Lestina: 30 years, Mr.
Ranus: 13 years, Mr. Beketic: 9 years, Mr. Sullivan: 12 years, and
Mr. Schmitt: 22 years.
Supplemental Plan
- -----------------
Messrs. Lestina, Ranus, Beketic and Sullivan participate in the
Roundy's, Inc. Supplemental Employee Retirement Plan (the "Supplemental
Plan") which is designed to supplement the retirement benefits which are
payable through the Roundy's, Inc. Retirement Plan (the "Retirement
Plan"), so that the effects of the limitation on compensation under the
Retirement Plan due to Section 401(a) (17) of the Internal Revenue Code
are eliminated. The benefit under the Supplemental Plan is equal to the
difference between (i) 50% of the participant's final average annual
earnings for the last 5 years and (ii) the value of the participant's
benefits under the Retirement Plan, payable in the form of a 15 year
term certain annuity. A survivor benefit is payable to the
participant's beneficiary. The Company established a Trust to hold
assets to be used to pay benefits under the Supplemental Plan, however,
the rights of any participant, beneficiary or estate to benefits under
the Supplemental Plan are solely those of an unsecured creditor of
Roundy's. Roundy's has purchased life insurance policies on the lives
of the participant's to fund its liabilities under the Supplemental Plan.
Directors Compensation
- -----------------------
Directors who are employees of Roundy's receive no fees for serving as
Directors. Customer-directors each received $500 per meeting during
1999; outside Directors each received $15,000, prorated on an annual
basis, plus $500 per Board of Directors meeting plus $500 per committee
meeting not held the same day as a Board of Directors meeting for their
services during 1999.
<PAGE>
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
Roundy's is authorized by its Articles of Incorporation to issue 60,000
shares of Class A Common, $1.25 par value, and 2,400,000 shares of Class B
Common, $1.25 par value. On January 1, 2000, 12,000 shares of Class A Common
and 1,148,563 shares of Class B Common were outstanding.
Roundy's has a Voting Trust (the "Trust") which was established in August,
1971 (was amended and restated in 1983 and was further amended in 1986 and
1995), as the successor to an initial voting trust created at the time
Roundy's was organized. The Trust has an indefinite term, although it may
be terminated upon the vote of the Voting Trust Certificate Holders as
provided therein. The main purpose for the establishment of the Trust, and
its predecessor, was to insure the stability of management necessary to
obtain long-term warehouse and other financing. As of March 30, 2000, all
of the outstanding shares of Roundy's Class A Common held by current
stockholder-customers were on deposit in the Trust. The Voting Trust
Agreement authorizes the Trustees to vote all shares deposited in the Trust,
in their discretion, for the election of all but four of the Directors
(there are currently ten Directors). On other matters submitted to a
vote of stockholders (including the election of one Retailer Director each
year and two every three years), the Trustees are required to vote the
shares deposited in the Trust as a block as directed by a vote of the
holders of outstanding Voting Trust Certificates (with each share of Class
A Common in the Trust entitling the depositor thereof to one vote).
The Trustees of the Trust currently are Victor C. Burnstad, Gary N.
Gundlach, Bronson J. Haase, Edward G. Kitz, Gerald F. Lestina,
David J. Spiegelhoff, and Robert R. Spitzer. Mr. Lestina is President and
Chief Executive Officer of Roundy's, Inc., and is a member of Roundy's Board
of Directors. Mr. Kitz is Vice President, Secretary and Treasurer of
Roundy's, Inc. Mr. Burnstad is President and Stockholder of Burnstad Bros.,
Inc., a stockholder-customer of Roundy's. Mr. Gundlach is the owner of Pick
`n Save retail stores in Columbus, DeForest, Madison, McFarland,
Stoughton and Sun Prairie, Wisconsin, and is a stockholder-customer of
Roundy's. Mr. Spiegelhoff is Vice President of Portage Pick 'n Saves, Inc.
and Spiegelhoff Super Food Market, Inc., stockholder-customers of Roundy's.
In the event of the death, resignation, incapacity or inability of
any of the Trustees, a successor Trustee may be named by a majority of the
remaining Trustees.
Vacancies need not be filled, except that there must be at least three
Trustees acting as such at all times, and one Trustee must always be a
stockholder-customer (or a principal of an entity which is a stockholder-
customer) of Roundy's.
<PAGE>
The following table sets forth the beneficial ownership of equity
securities of Roundy's as of March 15, 2000, by (i) each director; (ii)
each Named Executive Officer; (iii) all directors and executive officers
as a group; and (iv) each person who is known to the Company to be the
beneficial owner of 5% or more of Class A Common Stock, which is the
Company's only class of voting securities. Except as set forth in the
table below, no other person (or group who, directly or indirectly,
through any relationship, has or shares the power to vote, or to direct
the voting) owns of record or is known by Roundy's to own beneficially
more than 5% of the outstanding Roundy's Voting Trust Certificates
representing shares of Class A Common.
Beneficial Ownership (1)
----------------------------------
Class A Common Class B Common
--------------- ---------------
Number Percent Number Percent
of of of of
Shares Class Shares Class
(2) (2)
--------------- ---------------
Woodman's Food Market, Inc. (3) 700 6.19% 105,165 8.97%
McAdams, Inc. (4) 700 6.19% 81,199 6.93%
Mega Marts, Inc. and NDC, Inc. (5) 1,700 15.04% 131,929 11.25%
Gerald F. Lestina (6) -(7) -(7) 23,272 1.95%
Robert D. Ranus (8) -(7) -(7) 14,925 1.26%
George C. Kaiser (9) -(7) -(7) 4,667 *
Robert E. Bartels (10) -(7) -(7) 4,916 *
Gary R. Sarner -(7) -(7) 1,333 *
George E. Prescott (11) 600 5.31% 85,686 7.31%
Gary N. Gundlach (12) 600 5.31% 30,632 2.61%
Robert S. Gold (17) 400 3.54% 37,969 3.24%
Charles R. Bonson (13) 200 1.77% 22,038 1.88%
Patrick D. McAdams (4) 700 6.19% 81,199 6.93%
Ralph D. Beketic (14) -(7) -(7) 1,950 *
Marion H. Sullivan (15) -(7) -(7) 1,450 *
Michael J. Schmitt (16) -(7) -(7) 5,217 *
All Directors and Executive 1,900 16.81% 299,006 24.53%
Officers as a Group (18)
(1) Direct ownership except as otherwise noted, and except
that all shares of Class A Common Stock shown in the
table are owned of record by the Trustees of the
Roundy's, Inc. Voting Trust.
(2) Asterisk (*) denotes less than 1%.
(3) Voting and investment power over the shares owned by
Woodman's Food Market, Inc., whose address is 2919
North Lexington, Janesville, Wisconsin 53545, is solely
held by its owner, Willard R. Woodman, Jr.
(4) Voting and investment power over the shares owned by
McAdams, Inc., whose address is W320 S1807 State Road
83, Wales, Wisconsin 53183, is solely held by its
owner, John A. McAdams. The shares shown for Patrick
D. McAdams reflect all shares owned by McAdams, Inc. of
which Patrick D. McAdams is General Manager and
Treasurer.
(5) Voting and investment power over the shares owned by
Mega Marts, Inc. and NDC, Inc., whose address is 150 W.
Holt Avenue, Milwaukee, Wisconsin 53207, is solely held
by a trust. The Company has entered into a letter of
intent to acquire Mega Marts, Inc. and upon the
consummation of such acquisition, these shares will
become treasury shares.
<PAGE>
(6) Includes options for 20,166 shares that are exercisable
within 60 days of March 15, 2000.
(7) The Class A Common may only be held by the owners
("stockholder-customers") of retail grocery stores
serviced by Roundy's.
(8) Includes options for 10,500 shares that are exercisable
within 60 days of March 15, 2000.
(9) Includes 667 shares owned by FTC Master Profit Sharing
Plan for George C. Kaiser & Company.
(10) Includes 3,949 shares owned by Martin's Super Markets,
Inc., of which Mr. Bartels is President and
shareholder.
(11) Includes 600 shares of Class A Common Stock and 56,928
shares of Class B Common Stock owned by Prescott's
Supermarkets, Inc. of which Mr. Prescott is the
principal shareholder; also includes 11,895 shares of
Class B Common Stock owned by the George E. Prescott
and Judith A. Prescott Revocable Trust of which George
E. Prescott is Trustee; also includes 16,863 shares of
Class B Common Stock held in certain Trusts for the
benefit of certain members of Mr. Prescott's family, as
to which 16,863 shares Mr. Prescott disclaims
beneficial ownership.
(12) Relates to shares owned by Gary N. Gundlach, as sole
proprietor and of GEM, Inc. of which Mr. Gundlach is
principal shareholder.
(13) Relates to shares owned by Bonson's Foods, Inc. of
which Mr. Bonson is principal shareholder.
(14) Includes options for 1,950 shares that are exercisable
within 60 days of March 15, 2000.
(15) Includes options for 1,450 shares that are exercisable
within 60 days of March 15, 2000.
(16) Includes options for 3,050 shares that are exercisable
within 60 days of March 15, 2000.
(17) Relates to shares owned by Robert S. Gold, as a sole
proprietor, and B. & H. Gold Corp., Gold's Market,
Inc., Gold's, Inc. and
Gold's of Mequon, LLC, of which Mr. Gold is principal
shareholder.
(18) The group of directors and executive officers who
control stockholder-customers and therefor may
beneficially own Class A Common (see Note (4)) consists
of four (4) persons: Messrs. Bonson, Gold, McAdams and
Prescott. The group of directors and executive
officers who own or may own Class B Common consists of
twenty (20) persons. The total shown for Class B
Common for the group includes options for 46,916 shares
that are exercisable within 60 days of March 15, 2000,
but does not include options for an additional 2,084
shares that have been granted but are not exercisable
within 60 days of March 15, 2000.
<PAGE>
ITEM 13. Certain Relationships and Related Transactions.
-----------------------------------------------
Proposed Acquisition of Mega Marts, Inc. and Certain Assets of
NDC, Inc. Roundy's, Inc. has entered into a letter of intent with
the shareholders of Mega Marts, Inc. ("Mega Marts") and NDC, Inc. ("NDC"),
pursuant to which the Company proposes to purchase all of the voting
securities of Mega Marts and certain assets of NDC. The purchase price
for the securities of Mega Marts is expected to be approximately
$123,000,000, subject to certain post-closing adjustments, and was
determined pursuant to arm's length negotiations between management
and representatives of the Company and management and representatives of
Mega Marts. In connection with its proposed acquisition of the voting
securities of Mega Marts, the Company also agreed to purchase certain of
the assets of NDC, whose voting securities are held by some of the
shareholders of Mega Marts. The purchase price for the NDC assets is
expected to be approximately $11,000,000, and was determined pursuant to
arm's length negotiations between management and representatives
of the Company and management and representatives of NDC. Several
offerices of the registrant, under the direction of Gerald F. Lestina,
were primarily responsible for determining the purchase price for these
assets. As consideration for a non-competition agreement, with a five
year term, from Gary L. Fryda, John M. Rupcich and David A. Ulrich, Jr.,
shareholders of Mega Marts, the Company will pay an aggregate of
$1,000,000 over a five year period. The anticipated closing of these
transactions is March 31, 2000. Mega Marts and NDC beneficially owned
15.04% of the voting securities of Roundy's, Inc. as of March 15, 2000
and Henry Karbiner, Jr., who is an officer of Tri City National Bank
and Tri City Bankshares Corporation, which the Company believes are
affiliates of Mega Marts and NDC, is a director of Roundy's, Inc.
Sale of Certain Assets to Prescott Supermarkets, Inc. On January 28,
2000, Roundy's, Inc. sold certain assets and inventory of a retail
grocery store to Prescott Supermarkets, Inc. for a price of approximately
$4,100,000. The sale price for these assets was determined pursuant to
arm's length negotiations between management and representatives of the
Company and management and representatives of Prescott Supermarkets, Inc.
Several officers of the registrant, under the direction of Gerald F.
Lestina, were primarily responsible for determining the purchase price for
these assets. Prescott Supermarkets, Inc. beneficially owned 5.31% of the
voting securities of Roundy's, Inc. as of March 15, 2000 and George E.
Prescott, a shareholder of Prescott Supermarkets, Inc., is a director of
Roundy's, Inc.
Merchandise Purchases and Other Transactions. Certain of the
Roundy's, Inc. directors, Retailer Trustees of the Roundy's, Inc. Voting
Trust, and owners of more than 5% of the outstanding Voting Trust
Certificates as of March 15, 2000 own and/or operate retail food stores
which purchase merchandise from the Company. The Company also engages
in certain other transactions with such retail food stores and other
affiliates of such persons. All of such merchandise purchases are made
from the Company, and all such other transactions are engaged in, in the
ordinary course of business and on the same basis and conditions as
merchandise purchases and other similar transactions between the Company
and its other stockholder-customers. The following table and the notes
thereto set forth certain information about such transactions:
<PAGE>
<TABLE>
<CAPTION>
Merchandise Purchases (Amount)
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Robert E. Bartels (1) $114,177,900 $118,724,000 $114,306,000
Charles R. Bonson (2) 17,372,000 14,043,000 8,471,000
Victor C. Burnstad (3) 22,280,800 20,540,000 19,320,000
Robert S. Gold (4) 67,534,400 61,681,000 52,712,000
Gary N. Gundlach (5) 55,954,300 48,643,000 47,514,000
Patrick D. McAdams/
McAdams, Inc. (6) 97,272,100 88,239,000 70,639,000
David J. Spiegelhoff (7) 45,669,800 39,948,000 20,469,000
George E. Prescott/
Prescott Supermarkets, Inc. (8) 87,682,500 81,668,000 78,218,000
Woodman's Food Market, Inc. 54,943,300 54,195,000 51,395,000
Mega Marts, Inc. and NDC, Inc. (9) 330,686,800 294,483,000 271,690,000
Gary R. Sarner (10) n/a n/a n/a
</TABLE>
1. Through Martin's Super Markets, Inc.
2. Through Bonson's Foods, Inc. Bonson's Foods, Inc. is
currently subleasing land and buildings from the Company for eight
years for an annual rental of approximately $137,400.
3. Through Burnstad Bros., Inc. Burnstad Bros., Inc. is
currently subleasing land and a building from the Company for a
period of three years, for an annual rental of approximately
$44,000. In November, 1997, Burnstad Bros., Inc. issued promissory
notes to Roundy's, Inc. in the amount of $48,200. The amount
outstanding as of January 1, 2000 was $24,000.
4. Through B. & H. Gold Corporation, Gold's Market, Inc., Gold's,
Inc., and Gold's of Mequon LLC. These entities are currently
subleasing land and buildings from the Company for periods of six
to 25 years at four store sites, for an aggregate annual rental of
approximately $1,197,600.
5. Through retail grocery stores owned by Mr. Gundlach as sole
proprietor. Mr. Gundlach is currently subleasing land and buildings
from the Company for periods of nine to 20 years at five store
sites, for an aggregate annual rental of approximately $1,474,000.
6. Through McAdams, Inc. McAdams, Inc. is currently subleasing
land and buildings from the Company for periods of 10 and 11 years
at two store sites, for an aggregate annual rental of approximately
$555,000. During fiscal 1999, McAdams Realty Company purchased a
24 acre parcel of land from the Company for approximately $1.5 million.
7. Through Speigelhoff's Super Food Market, Inc. and Portage Pick
'n Saves, Inc. Speigelhoff's Super Food Market, Inc. and Portage
Pick 'n Saves, Inc. are currently subleasing land and buildings
from the Company for periods of seven to 17 years at four store
sites for an aggregate annual rental of approximately $1,079,500.
8. Prescott Supermarkets, Inc. is currently subleasing land and
buildings from the Company for periods of three to 13 years at five
store sites, for an aggregate annual rental of approximately
$1,775,000.
9. Mega Marts, Inc. is subleasing land and buildings from the
Company for periods of two to 15 years at seven store sites and one
additional storage site, for an aggregate annual rental of
approximately $2,356,900.
10. The Company made payments in fiscal 1999 aggregating
$1,615,100 for handling, order selecting and storage of frozen
food, meat and ice cream to Total Logistic Control, LLC of which
Mr. Sarner is Chairman.
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
----------------------------------------------------------------
(a)(1) Financial Statements
The following consolidated financial statements of the Company are
incorporated by reference from its Annual Report to Stockholders for the
year ended January 1, 2000, filed as an exhibit hereto:
Independent Auditors' Report
Statements of Consolidated Earnings for the years ended
January 1, 2000, January 2, 1999 and January 3, 1998.
Consolidated Balance Sheets at January 1, 2000 and
January 2, 1999
Statements of Consolidated Stockholders' Equity for the years ended
January 1, 2000, January 2, 1999
and January 3, 1998
Statements of Consolidated Cash Flows for the years ended
January 1, 2000, January 2, 1999 and January 3, 1998.
Notes to Financial Statements
(a)(2) Financial Statement Schedules for the years ended
January 1, 2000, January 2, 1999 and January 3,1998
Page
Independent Auditors' Report....................... 27
Schedule VIII - Valuation and qualifying
accounts............................ 28
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or the notes
thereto.
(a)(3) Exhibits
2.1 Asset Purchase Agreement by and between the Registrant and
Ultra Mart, Inc. dated December 23, 1999. FILED HEREWITH.
3.1 Articles of Incorporation of the Registrant, as
amended, incorporated herein by reference to Exhibit
4.1 of Registrant's Registration Statement on Form S-
2 (File No. 2-94485) dated December 5, 1984.
3.2 By-Laws of the Company as amended February 24, 1998,
incorporated herein by reference to Exhibit 3.2 of
Registrant's Annual Report on Form 10-K for fiscal
year ended January 3, 1998, filed with the Commission
on April 2, 1998, Commission File No. 33-57505.
4.1 Policy Relating to Redemption of Stock by Inactive
Customer Shareholders and Former Employees,
incorporated herein by reference to Exhibit 4.1 of
the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 28, 1996, filed with the
Commission on March 26, 1997, Commission File No. 33-
57505 (included as Exhibit D to the prospectus which
forms a part of the Registration Statement).
4.2 Note Agreement dated December 15, 1991 (effective
December 30, 1991), between Roundy's, Inc. and
Massachusetts Mutual Life Insurance Company and
United of Omaha Life Insurance Company, incorporated
herein by reference to Exhibit 4.9 of Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1991, filed with the Commission on March
26, 1992, Commission File No. 2-66296.
4.3 Note Agreement dated December 15, 1992 between
Roundy's, Inc. and Connecticut Mutual Life Insurance
Company, The Ohio National Life Insurance Company,
Provident Mutual Life Insurance Company of
Philadelphia, Providentmutual Life and Annuity
Company of America, Guarantee Mutual Life Company,
Woodmen Accident and Life Company and United of Omaha
Life Insurance Company, incorporated herein by
reference to Exhibit 4.11 of Registrant's Annual
Report on Form 10-K for the fiscal year ended January
2, 1993, filed with the Commission on March 30, 1993,
Commission File No. 2-66296.
4.4 Policy Regarding Issuance and Sales of Roundy's, Inc.
Stock, incorporated herein by reference to Exhibit
4.11 of Registrant's Registration Statement on Form S-
2 (File No. 33-57505) filed with the Commission on
January 30, 1995 (included as Exhibit E to the
prospectus which forms a part of the Registration
Statement).
4.5 Note Agreement dated December 22, 1993 (effective
December 22, 1993), between Roundy's, Inc. and The
Variable Annuity Life Insurance Company, The Life
Insurance Company of Virginia, Phoenix Home Life
Mutual Insurance Company, Phoenix American Life
Insurance Company, Washington National Insurance
Company, and TMG Life Insurance Company, incorporated
herein by reference to Exhibit 4.14 of Registrant's
Annual Report on Form 10-K for the fiscal year ended
January 1, 1994, filed with the Commission on March
31, 1994, Commission File No. 2-66296.
4.6 Form of Subscription Agreement, incorporated by
reference to Exhibit 4.14 of Registrant's
Registration Statement on Form S-2 (File No. 33-
57505) filed with the Commission on January 30, 1995
(included as Exhibit A to the prospectus which forms
a part of the Registration Statement).
4.7 Form of Buying Deposit Agreement, incorporated by
reference to Exhibit 4.15 of Registrant's
Registration Statement on Form S-2 (File No. 33-
57505) filed with the Commission on January 30, 1995
(included as Exhibit B to the prospectus, which forms
a part of the Registration Statement).
4.8 Article V of Registrant's By-Laws "Fiscal Year
Accounting and Patronage Rebates," as amended on
February 24, 1998, incorporated by reference to
Exhibit 4.8 of Registrant's Registration Statement on
Form S-2 (File No. 33-57505) filed with the
Commission on April 28, 1998 (included as Exhibit C
to the prospectus which forms a part of the
Registration Statement).
4.9 First Amendment dated May 1, 1996 to Note Agreements
dated December 15, 1991 and Note Agreements dated
December 15, 1992 and Note Agreements dated December
22, 1993, incorporated herein by reference to Exhibit
4.16 of Registrant's Form 10-Q for the quarterly
period ended June 29, 1996, filed with the Commission
on August 13, 1996, Commission File No. 33-57505.
4.10 Note Agreement dated May 15, 1996 between Roundy's,
Inc. and The Ohio National Life Insurance, Phoenix
American Life Insurance Company, Provident Mutual
Life Insurance, Providentmutual Life and Annuity
Company of America, United of Omaha Life Insurance
Company, John Alden Life Insurance Company, Oxford
Life Insurance Company, The Security Mutual Life
Insurance Company of Lincoln, Nebraska and Woodman
Accident and Life Company, incorporated herein by
reference to Exhibit 4.17 of Registrant's Form 10-Q
for the quarterly period ended June 29, 1996, filed
with the Commission on August 13, 1996, Commission
File No. 33-57505.
4.11 Credit Agreement dated December 13, 1996, between
Roundy's, Inc. and PNC Bank, NA (as agent),
incorporated herein by reference to Exhibit 4.11 of
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 28, 1996, filed with the
Commission on March 26, 1997, Commission File No. 33-
57505.
9 Amended and Restated Voting Trust Agreement dated
September 16, 1983, incorporated herein by reference
to Exhibit 9 of Registrant's Annual Report on Form 10-
K for the year ended December 31, 1983, filed with
the Commission on March 30, 1984, Commission File No.
2-66296.
9(a) Amendments No. 1 and 2, dated April 8, 1986 to
Amended and Restated Voting Trust Agreement,
incorporated herein by reference to Exhibit 9(a) of
Registrant's Registration Statement on Form S-2 (File
No. 2-66296), dated April 29, 1986.
9(b) Amendment No. 1987-1 to Amended and Restated Voting
Trust Agreement, incorporated herein by reference to
Exhibit 9(b) of Registrant's Registration Statement
on Form S-2 (File No. 2-66296), dated April 29, 1987.
9(c) Amendment 1995-1 to the Roundy's, Inc. Voting Trust
Agreement, incorporated herein by reference to
Exhibit 9(c) of Registrant's Registration Statement
on Form S-2 (File No. 33-57505), dated May 1, 1995.
9(d) Amendment 1995-2 to the Roundy's, Inc. Voting Trust
Agreement, incorporated herein by reference to
Exhibit 9(d) of Registrant's Registration Statement
on Form S-2 (File No. 33-57505), dated April 26,
1996.
10.1 Deferred Compensation Agreement between the Registrant
and certain executive officers including Messrs. Ranus,
Beketic, Sullivan and Schmitt, incorporated herein by
reference to Exhibit 10.1, of Registrant's Registration
Statement on Form S-2 (File No. 33-57505) dated April 24,
1997.
10.1(a) Amendment to Deferred Compensation Agreement between the
Registrant and certain executive officers including Messrs.
Ranus, Beketic, Sullivan and Schmitt, dated March 31,1998,
incorporated herein by reference to Registrant's Registration
Statement on Form S-2 (File No. 33-57505) filed with the
Commission on April 28, 1998.
10.2 Directors and Officers Liability and Corporation
Reimbursement Policy issued by American Casualty
Company of Reading, Pennsylvania (CNA Insurance
Companies) as of June 13, 1986, incorporated herein
by reference to Exhibit 10.3 of Registrant's Annual
Report on Form 10-K for the fiscal year ended January
3, 1987, filed with the Commission on April 3, 1987,
Commission File No. 2-66296.
10.2(a) Declarations page for renewal through November 1,
2001 of Directors and Officers Liability and
Corporation Reimbursement Policy. FILED HEREWITH.
10.3 Severance and Non-Competition Agreement dated April
13, 1998 between the Registrant and Gerald F.
Lestina, incorporated herein by reference to Exhibit
10.4 of Registrant's Registration Statement on Form S-
2 dated April 28, 1998, Commission File No. 33-57505.
10.4 Roundy's, Inc. Deferred Compensation Plan, effective
March 19, 1996, incorporated herein by reference to
Exhibit 10.5 of Registrant's Registration Statement
on Form S-2 (File No. 33-57505), dated April 26,
1996.
10.5 1991 Stock Incentive Plan, as amended June 3, 1998,
incorporated herein by reference to Exhibit 10.6 of
Registrant's Form 10-Q for the quarterly period ended
October 3, 1998, filed with the Commission on November 10,
1998, Commission File No. 33-57505.
10.6 Form of Stock Appreciation Rights Agreement for certain
executive officers including Beketic, Sullivan and Schmitt,
incorporated herein by reference to exhibit 10.7 of
Registrant's Form 10-Q for the quarterly period ended
October 3, 1998, filed with the Commission on November 10,
1998, Commission File No. 33-57505.
10.7 Amendment to Severance and Non-Competition Agreement
between the Registrant and Gerald F. Lestina, incorporated
herein by reference to exhibit 10.8 of Registrant's Form 10-
Q for the quarterly period ended October 3, 1998, filed with
the Commission on November 10, 1998, Commission File No. 33-57505.
10.8 Form of Second Amendment to Deferred Compensation Agreement for
certain executive officers including Ranus, Beketic, Sullivan and
Schmitt, incorporated herein by reference to exhibit 10.9 of
Registrant's Form 10-Q for the quarterly period ended October 3,
1998, filed with the Commission on November 10, 1998, Commission
File No. 33-57505.
10.9 Roundy's, Inc. Supplemental Employee Retirement Plan
for certain executive officers including Lestina,
Ranus, Beketic and Sullivan, incorporated herein by
reference to Exhibit 10.9 of Registrant's Form 10-Q
for the quarterly period ended July 3, 1999, filed
with the Commission on August 9, 1999, Commission No. 33-57505.
13 Portions of 1999 Annual Report to Stockholders of
Roundy's, Inc. (except to the extent incorporated by
reference, the Annual Report to Stockholders shall
not be deemed to be filed with the Securities and
Exchange Commission as part of this Annual Report on
Form 10-K)
21 Subsidiaries of Roundy's, Inc.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
On November 8, 1999, the Company filed a Form 8-k stating that on
November 3, 1999, the Board of Directors of Roundy's, Inc. ("Roundy's")
of Pewaukee, Wisconsin, has approved the acquisition of the supermarket
assets of Ultra Mart, Inc., an independent owner/operator of seven
Pick 'n Save store in Wisconsin. Also, on November 5, 1999, the Board
of Directors of Roundy's, Inc. has authorized the purchase of the
common stock of Mega Marts, Inc. and the assets of Tri City Pick 'n
Save store owned by N.D.C., Inc., an affiliate of Mega Marts, Inc.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Directors of Roundy's, Inc.:
We have audited the consolidated financial statements of
Roundy's, Inc. and its subsidiaries as of January 1, 2000
and January 2, 1999, and for each of the three years in the
period ended January 1, 2000 and have issued our report
thereon dated February 25, 2000; such consolidated financial
statements and report are included in your 1999 Annual
Report to Stockholders and are incorporated herein by
reference. Our audits also included the financial statement
schedule of Roundy's, Inc. listed in Item 14. This
financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such
consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements
taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
February 25, 2000
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII
ROUNDY'S, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
---------------------------------------------------------
COLUMN COLUMN COLUMN COLUMN COLUMN
A B C D E
---------------------------------------------------------
ADDITIONS
Balance at Charged Charged Balance
Beginning to Cost To Other At End
Description Of Period & Expenses Accounts Deductions(A) of Period
- --------------------------- ---------- ---------- -------- ------------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED January 1, 2000:
Allowance for Losses:
Current receivables $6,361,600 $ 474,100 $1,325,900 $5,509,800
Notes receivable, long-term 6,015,000 1,122,000 - 7,137,000
YEAR ENDED January 2, 1999:
Allowance for Losses:
Current receivables: $5,648,700 $1,473,300 $ 760,600 $6,361,600
Notes receivable, long-term 5,299,000 716,000 - 6,015,000
YEAR ENDED January 3, 1998:
Allowance for Losses:
Current receivables $6,314,700 $2,389,100 $3,055,100 $5,648,700
Notes receivable, long-term 5,576,000 - 277,000 5,299,000
(A) Amounts in Column D represent accounts written off less recoveries.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, Roundy's, Inc. has duly
caused this report to be signed on its behalf of the
undersigned, thereunto duly authorized.
ROUNDY'S, INC.
GERALD F. LESTINA ROBERT D.RANUS
- ----------------------------- ---------------------
By: Gerald F. Lestina By: Robert D. Ranus
(Principal Executive Officer) (Principal Financial
Officer and Principal
Accounting Officer)
Date: March 21, 2000
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons (constituting a majority of the Board of Directors)
on behalf of the Registrant and in the capacities and on the
dates indicated:
ROBERT E. BARTELS GERALD F. LESTINA
- ------------------ ------------------
Robert E. Bartels Gerald F. Lestina
March 21, 2000 March 21, 2000
(Director) (Director)
CHARLES R. BONSON PATRICK D. MCADAMS
- ------------------ -------------------
Charles R. Bonson Patrick D. McAdams
March 21, 2000 March 21, 2000
(Director) (Director)
ROBERT S. GOLD GEORGE E. PRESCOTT
- ----------------- --------------------
Robert S. Gold George E. Prescott
March 21, 2000 March 21, 2000
(Director (Director
ROBERT D. RANUS
- ----------------- -------------------
George C. Kaiser Robert D. Ranus
March 21, 2000 March 21, 2000
(Director) (Director)
HENRY KARBINER, JR. GARY R. SARNER
- -------------------- ---------------------
Henry Karbiner, Jr. Gary R. Sarner
March 21, 2000 March 21, 2000
(Director) (Director)
<PAGE>
SUPPLEMENTAL INFORMATION TO BE
FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(d)
OF THE ACT BY REGISTRANTS
WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT
Registrant's annual report to securityholders for the year
ended January 1, 2000 is incorporated by reference in this
report.
Registrant does not furnish proxy-soliciting material to its
securityholders.
<PAGE>
Index to Exhibits
Exhibit Description
- ------- ------------
2.1 Asset Purchase Agreement by and between the Registrant and
Ultra Mart, Inc. dated December 23, 1999. FILED HEREWITH.
3.1 Articles of Incorporation of the Registrant, as
amended, incorporated herein by reference to Exhibit
4.1 of Registrant's Registration Statement on Form S-
2 (File No. 2-94485) dated December 5, 1984.
3.2 By-Laws of the Company as amended February 24, 1998,
incorporated herein by reference to Exhibit 3.2 of
Registrant's Annual Report on Form 10-K for fiscal
year ended January 3, 1998, filed with the Commission
on April 2, 1998, Commission File No. 33-57505.
4.1 Policy Relating to Redemption of Stock by Inactive
Customer Shareholders and Former Employees,
incorporated herein by reference to Exhibit 4.1 of
the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 28, 1996, filed with the
Commission on March 26, 1997, Commission File No. 33-
57505 (included as Exhibit D to the prospectus which
forms a part of the Registration Statement).
4.2 Note Agreement dated December 15, 1991 (effective
December 30, 1991), between Roundy's, Inc. and
Massachusetts Mutual Life Insurance Company and
United of Omaha Life Insurance Company, incorporated
herein by reference to Exhibit 4.9 of Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1991, filed with the Commission on March
26, 1992, Commission File No. 2-66296.
4.3 Note Agreement dated December 15, 1992 between
Roundy's, Inc. and Connecticut Mutual Life Insurance
Company, The Ohio National Life Insurance Company,
Provident Mutual Life Insurance Company of
Philadelphia, Providentmutual Life and Annuity
Company of America, Guarantee Mutual Life Company,
Woodmen Accident and Life Company and United of Omaha
Life Insurance Company, incorporated herein by
reference to Exhibit 4.11 of Registrant's Annual
Report on Form 10-K for the fiscal year ended January
2, 1993, filed with the Commission on March 30, 1993,
Commission File No. 2-66296.
4.4 Policy Regarding Issuance and Sales of Roundy's, Inc.
Stock, incorporated herein by reference to Exhibit
4.11 of Registrant's Registration Statement on Form S-
2 (File No. 33-57505) filed with the Commission on
January 30, 1995 (included as Exhibit E to the
prospectus which forms a part of the Registration
Statement).
4.5 Note Agreement dated December 22, 1993 (effective
December 22, 1993), between Roundy's, Inc. and The
Variable Annuity Life Insurance Company, The Life
Insurance Company of Virginia, Phoenix Home Life
Mutual Insurance Company, Phoenix American Life
Insurance Company, Washington National Insurance
Company, and TMG Life Insurance Company, incorporated
herein by reference to Exhibit 4.14 of Registrant's
Annual Report on Form 10-K for the fiscal year ended
January 1, 1994, filed with the Commission on March
31, 1994, Commission File No. 2-66296.
4.6 Form of Subscription Agreement, incorporated by
reference to Exhibit 4.14 of Registrant's
Registration Statement on Form S-2 (File No. 33-
57505) filed with the Commission on January 30, 1995
(included as Exhibit A to the prospectus which forms
a part of the Registration Statement).
4.7 Form of Buying Deposit Agreement, incorporated by
reference to Exhibit 4.15 of Registrant's
Registration Statement on Form S-2 (File No. 33-
57505) filed with the Commission on January 30, 1995
(included as Exhibit B to the prospectus, which forms
a part of the Registration Statement).
4.8 Article V of Registrant's By-Laws "Fiscal Year
Accounting and Patronage Rebates," as amended on
February 24, 1998, incorporated by reference to
Exhibit 4.8 of Registrant's Registration Statement on
Form S-2 (File No. 33-57505) filed with the
Commission on April 28, 1998 (included as Exhibit C
to the prospectus which forms a part of the
Registration Statement).
4.9 First Amendment dated May 1, 1996 to Note Agreements
dated December 15, 1991 and Note Agreements dated
December 15, 1992 and Note Agreements dated December
22, 1993, incorporated herein by reference to Exhibit
4.16 of Registrant's Form 10-Q for the quarterly
period ended June 29, 1996, filed with the Commission
on August 13, 1996, Commission File No. 33-57505.
4.10 Note Agreement dated May 15, 1996 between Roundy's,
Inc. and The Ohio National Life Insurance, Phoenix
American Life Insurance Company, Provident Mutual
Life Insurance, Providentmutual Life and Annuity
Company of America, United of Omaha Life Insurance
Company, John Alden Life Insurance Company, Oxford
Life Insurance Company, The Security Mutual Life
Insurance Company of Lincoln, Nebraska and Woodman
Accident and Life Company, incorporated herein by
reference to Exhibit 4.17 of Registrant's Form 10-Q
for the quarterly period ended June 29, 1996, filed
with the Commission on August 13, 1996, Commission
File No. 33-57505.
4.11 Credit Agreement dated December 13, 1996, between
Roundy's, Inc. and PNC Bank, NA (as agent),
incorporated herein by reference to Exhibit 4.11 of
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 28, 1996, filed with the
Commission on March 26, 1997, Commission File No. 33-
57505.
9 Amended and Restated Voting Trust Agreement dated
September 16, 1983, incorporated herein by reference
to Exhibit 9 of Registrant's Annual Report on Form 10-
K for the year ended December 31, 1983, filed with
the Commission on March 30, 1984, Commission File No.
2-66296.
9(a) Amendments No. 1 and 2, dated April 8, 1986 to
Amended and Restated Voting Trust Agreement,
incorporated herein by reference to Exhibit 9(a) of
Registrant's Registration Statement on Form S-2 (File
No. 2-66296), dated April 29, 1986.
9(b) Amendment No. 1987-1 to Amended and Restated Voting
Trust Agreement, incorporated herein by reference to
Exhibit 9(b) of Registrant's Registration Statement
on Form S-2 (File No. 2-66296), dated April 29, 1987.
9(c) Amendment 1995-1 to the Roundy's, Inc. Voting Trust
Agreement, incorporated herein by reference to
Exhibit 9(c) of Registrant's Registration Statement
on Form S-2 (File No. 33-57505), dated May 1, 1995.
9(d) Amendment 1995-2 to the Roundy's, Inc. Voting Trust
Agreement, incorporated herein by reference to
Exhibit 9(d) of Registrant's Registration Statement
on Form S-2 (File No. 33-57505), dated April 26,
1996.
10.1 Deferred Compensation Agreement between the Registrant
and certain executive officers including Messrs. Ranus,
Beketic, Sullivan and Schmitt, incorporated herein by
reference to Exhibit 10.1, of Registrant's Registration
Statement on Form S-2 (File No. 33-57505) dated April 24,
1997.
10.1(a) Amendment to Deferred Compensation Agreement between the
Registrant and certain executive officers including Messrs.
Ranus, Beketic, Sullivan and Schmitt, dated March 31,1998,
incorporated herein by reference to Registrant's Registration
Statement on Form S-2 (File No. 33-57505) filed with the
Commission on April 28, 1998.
10.2 Directors and Officers Liability and Corporation
Reimbursement Policy issued by American Casualty
Company of Reading, Pennsylvania (CNA Insurance
Companies) as of June 13, 1986, incorporated herein
by reference to Exhibit 10.3 of Registrant's Annual
Report on Form 10-K for the fiscal year ended January
3, 1987, filed with the Commission on April 3, 1987,
Commission File No. 2-66296.
10.2(a) Declarations page for renewal through November 1,
2001 of Directors and Officers Liability and
Corporation Reimbursement Policy. FILED HEREWITH.
10.3 Severance and Non-Competition Agreement dated April
13, 1998 between the Registrant and Gerald F.
Lestina, incorporated herein by reference to Exhibit
10.4 of Registrant's Registration Statement on Form S-
2 dated April 28, 1998, Commission File No. 33-57505.
10.4 Roundy's, Inc. Deferred Compensation Plan, effective
March 19, 1996, incorporated herein by reference to
Exhibit 10.5 of Registrant's Registration Statement
on Form S-2 (File No. 33-57505), dated April 26,
1996.
10.5 1991 Stock Incentive Plan, as amended June 3, 1998,
incorporated herein by reference to Exhibit 10.6 of
Registrant's Form 10-Q for the quarterly period ended
October 3, 1998, filed with the Commission on November 10,
1998, Commission File No. 33-57505.
10.6 Form of Stock Appreciation Rights Agreement for certain
executive officers including Beketic, Sullivan and Schmitt,
incorporated herein by reference to exhibit 10.7 of
Registrant's Form 10-Q for the quarterly period ended
October 3, 1998, filed with the Commission on November 10,
1998, Commission File No. 33-57505.
10.7 Amendment to Severance and Non-Competition Agreement
between the Registrant and Gerald F. Lestina, incorporated
herein by reference to exhibit 10.8 of Registrant's Form 10-
Q for the quarterly period ended October 3, 1998, filed with
the Commission on November 10, 1998, Commission File No. 33-57505.
10.8 Form of Second Amendment to Deferred Compensation Agreement for
certain executive officers including Ranus, Beketic, Sullivan and
Schmitt, incorporated herein by reference to exhibit 10.9 of
Registrant's Form 10-Q for the quarterly period ended October 3,
1998, filed with the Commission on November 10, 1998, Commission
File No. 33-57505.
10.9 Roundy's, Inc. Supplemental Employee Retirement Plan
for certain executive officers including Lestina,
Ranus, Beketic and Sullivan, incorporated herein by
reference to Exhibit 10.9 of Registrant's Form 10-Q
for the quarterly period ended July 3, 1999, filed
with the Commission on August 9, 1999, Commission No. 33-57505.
13 Portions of 1999 Annual Report to Stockholders of
Roundy's, Inc. (except to the extent incorporated by
reference, the Annual Report to Stockholders shall
not be deemed to be filed with the Securities and
Exchange Commission as part of this Annual Report on
Form 10-K)
21 Subsidiaries of Roundy's, Inc.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
On November 8, 1999, the Company filed a Form 8-K stating that on
November 3, 1999, the Board of Directors of Roundy's, Inc. ("Roundy's")
of Pewaukee, Wisconsin, has approved the acquisition of the supermarket
assets of Ultra Mart, Inc., an independent owner/operator of seven
Pick 'n Save stores in Wisconsin. Also, on November 5, 1999, the
Board of Directors of Roundy's, Inc. has authorized the purchase
of the common stock of Mega Marts, Inc and the assets of the Tri
City Pick 'n Save store owned by N.D.C., Inc., an affiliate of
Mega Marts, Inc.
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made this 23rd day of December, 1999, by
and among ULTRA MART, INC., a Wisconsin corporation (being
referred to hereinafter as "Seller"); Robert A. Farrell, Scott A.
Sylla (being referred to hereinafter collectively as the
"Principal Shareholders" and individually as a "Principal
Shareholder"), ULTRA MART FOODS, INC., a Wisconsin corporation
(being referred to hereinafter as "Buyer"); and ROUNDY'S, INC., a
Wisconsin corporation (being referred to hereinafter as
"Roundy's");
RECITALS:
WHEREAS, Seller owns and operates a total of seven (7)
grocery supermarkets at the locations set forth in Exhibit A
attached hereto (each such supermarket being hereinafter
individually referred to as a "Store" and all such supermarkets
being collectively referred to as the "Stores" and the business
conducted in the Stores being hereinafter referred to as the
"Business");
WHEREAS, Seller desires to sell and Buyer desires to
purchase the Business and substantially all of Seller's assets
used in the conduct of the Business at all of the Stores upon the
terms and conditions set forth in this Agreement; and
WHEREAS, the Principal Shareholders collectively own
approximately eighty one percent (81%) of the outstanding common
stock of Seller, and as such will benefit substantially by the
Seller's consummation of the transactions contemplated hereby,
and Buyer and Roundy's are unwilling to purchase the Stores and
the Business unless the Principal Shareholders join with Seller
in this Agreement on the terms set out herein;
WHEREAS, Buyer is a wholly-owned subsidiary of Roundy's and
Roundy's is therefore willing to join with Buyer as a party to
this Agreement and guaranty the obligations of Buyer hereunder;
THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
AGREEMENT:
1. SALE OF ASSETS.
(a) Assets Sold. On the Closing Date (as hereinafter
defined), subject to the terms and conditions set forth in this
Agreement, Seller shall sell, convey, transfer, assign and
deliver to Buyer and Buyer shall purchase the following assets
(collectively the "Purchased Assets"):
(i) Inventory. All inventory (including video
tapes) owned by Seller and held for sale (or rental) in the
ordinary course of business, and all store supplies, at the
Stores as of the Effective Time, to the extent such
inventory is usable, saleable, and not outdated or damaged
(the "Inventory");
(ii) Cash. All operating cash (including for this
purpose all food stamps and any unsold gift certificates
purchased by Seller from Roundy's, but excluding checks and
coupons) on hand (the "Cash on Hand") and located in the
Stores as of the Effective Time;
(iii) Trademarks, Trade Names and Other
Intellectual Property. All intellectual property owned by
Seller or in which Seller has any rights, and utilized in
the operation of the Business (including but not limited to
all trademarks, service marks, trade names, pending
trademark, service mark and trade name applications and
registrations, copyrights, the corporate name "Ultra Mart,"
and the Seller's rights to its internet domain name
"ultrafoods.com") ("Intellectual Property");
(iv) Equipment. All fixtures, equipment,
furniture, machinery, tools, racks, partitions, shelving,
exterior signs, refrigeration equipment, leasehold
improvements, computer hardware, terminals and peripheral
equipment and scanning systems owned by Seller or in which
Seller has any interest, including any leasehold interest,
located at the Stores and used in the operation of the
Business (the "Equipment");
(v) Assigned Contracts. All right, title and
interest of the Seller in, to and under the "Assigned
Contracts" (as hereinafter defined);
(vi) Permits. Only to the extent transferable,
all right, title and interest of Seller in, to and under all
transferable licenses, permits, orders, certificates,
approvals and other government authorizations owned by
Seller exclusively in connection with Seller's occupancy or
operation of the Stores;
(vii) Corporate Office Assets. Those assets
located at Seller's corporate offices that are listed on
Section 1(a)(vii) of the Disclosure Schedule; and
(viii) Other Personal Property. All other
personal property of every nature or description owned by
Seller, and located at the Stores and used in the operation
of the Business, including, but not limited to, general
intangibles, and the goodwill and going concern value of the
Business.
(b) Excluded Assets. Notwithstanding anything in
Section 1(a) above to the contrary, the following assets, rights,
interests and other properties of the Seller (the "Excluded
Assets") shall not be sold, transferred, assigned, conveyed or
delivered to Buyer:
(i) Cash and Cash Equivalents. All cash and cash
equivalents other than Cash on Hand, including all bank
deposits, checking and saving accounts and the like;
(ii) Accounts Receivable. All of Seller's
accounts receivable (including checks and coupons) relating
to any of the Stores;
(iii) Prepaid Expenses. All prepaid expenses
relating to any of the Stores other than prorated prepaid
expenses (the "Prepaid Expenses");
(iv) Roundy's Stock. Any stock of Roundy's, Inc.
owned by the Seller;
(v) Corporate Records. All corporate and
financial books and records, Seller's corporate charter and
similar items;
(vi) Insurance Policies. All insurance policies
owned by Seller;
(vii) Non-Operating Assets. Except for the
assets set forth in Section 1(a)(vii) of the Disclosure
Schedule, all assets located at Seller's corporate offices;
and
(viii) Equipment of Non-Assigned Leases. All
equipment leased under a lease which is not an "Assigned
Contract" (as hereinafter defined).
(c) Assignment and Assumption of Contracts. The
"Assigned Contracts" consist of all of those leases, subleases,
contracts and agreements that are set forth on Section 6(e) of
the Disclosure Schedule hereto and which are designated thereon
as "Assigned Contracts," as well as Seller's obligation to accept
and pay for supplies and Inventory ordered by Seller prior to the
Effective Time in the ordinary course of business and in
quantities consistent with Seller's past practices, but not yet
received as of the Effective Time. At the Closing, effective as
of the Effective Time (as hereinafter defined) Seller will assign
and transfer to Buyer all of Seller's right, title and interest
in, to and under the Assigned Contracts, and Buyer will assume,
perform and discharge all of Seller's obligations and liabilities
arising after the Effective Time (and attributable to time
periods after the Effective Time) under the Assigned Contracts
(hereinafter "Contract Liabilities"); provided, that the Contract
Liabilities assumed by Buyer shall not in any event include:
(i) any liability or obligation of Seller under
any employment agreement, collective bargaining agreement,
agreements, plans or arrangements concerning employee
bonuses, insurance, or other agreement with any employee,
officer, or shareholder of Seller; or any other liability or
obligation of any nature whatsoever of Seller to any
employee or former employee, whether pursuant to contract,
arising by operation of law, or otherwise; or
(ii) any liability or obligation attributable to
or arising as a result of any breach, violation, or non-
performance of any Assigned Contract by Seller prior to and
through the Effective Time, including, without limitation,
any breach or violation arising as a result of the
transactions contemplated by this Agreement, except as
provided in Section 10(m)(vi) .
(d) Assumption of Employee Accruals. Buyer will
assume the liability of Seller for vacation pay due from Seller
to the "Transferred Employees" (as that term is defined in
Section 12(b)), but only in the amount and to those persons for
which Buyer receives a credit as provided in Section 12(b) herein
(the "Assumed Employee Accruals").
(e) Fox Point Lease. Seller is currently a sublessee
of Jondex Corp. (an affiliate of Buyer) under a sublease (as
amended) relating to a store site previously operated by Seller
at 828 Fox Point Plaza, Neenah, Wisconsin (the "Fox Point
Sublease"). At the Closing, Roundy's will cause Jondex Corp. to
release Seller and the Principal Shareholders from any further
liability under the Fox Point Sublease (to the extent such
liability and costs relate to periods following the Effective
Time), in consideration of which Robert A. Farrell will
personally indemnify Jondex Corp. and Roundy's against any
liability they may incur (for payment of rent, other payments due
the landlord under the Prime Lease (as hereinafter defined), and
other costs incurred under the Prime Lease or associated with the
occupancy of the premises) under the prime lease between Jondex
Corp. and the owner of the subject property (the "Prime Lease")
relating to the time periods after December 31, 2004 through
December 31, 2008. Such release and indemnification agreement
will be in the form of that attached hereto as Exhibit 1(c)(iii)
(the "Fox Point Sublease Agreement"). The Fox Point Sublease
Agreement will provide further that if Roundy's desires to
terminate the Prime Lease (on terms acceptable to Roundy's in its
sole discretion) in exchange for the payment of consideration to
the prime lessor, and the amount of such consideration (the
"Release Price") exceeds the then present value (using a discount
rate of 9%) of the remaining rent and other payments and
financial obligations due under the Prime Lease through December
31, 2004 (the "Remaining Roundy's Costs"), then Mr. Farrell will
contribute to the Release Price an amount equal to the lesser of
(i) the excess of the Release Price over the Remaining Roundy's
Costs, and (ii) fifty percent (50%) of the present value (as of
the later of January 1, 2005 or the date of termination of the
Prime Lease) (using a discount rate of 9%) of the remaining rent
and other payments and financial obligations due under the Prime
Lease from January 1, 2005 through December 31, 2008 (the
"Remaining Farrell Costs"). Roundy's will use its reasonable
efforts, in good faith, to negotiate a termination of the Prime
Lease provided that the terms of such termination include a deed
restriction or other provision, reasonably acceptable to
Roundy's, which precludes the operation of a full line retail
grocery store on the premises or elsewhere in the shopping center
of which the premises are a part, for a term through December 31,
2018 (or shorter term acceptable to Roundy's in its sole
discretion) (the "Deed Restriction"). Except as provided in the
preceding sentence, Roundy's will be under duty or obligation to
terminate the Prime Lease.
2. LIABILITIES; SETTLEMENT OF ACCOUNTS BETWEEN SELLER AND
ROUNDY'S.
(a) Except for the Contract Liabilities expressly
assumed by Buyer under Section 1(c) above and the Assumed
Employee Accruals assumed by Buyer pursuant to Section 1(d)
above, Buyer shall not in any manner assume nor be liable or
responsible for any of the liabilities, debts, or obligations of
Seller or any Principal Shareholder, of any nature whatsoever,
including, but without limiting the generality of the foregoing,
the following:
(i) Past, current and future liabilities and
obligations of Seller for federal, state or local taxes of
any nature, including, without limitation, any interest,
penalties, additions to tax or costs of defense, and
including any taxes occasioned by the sale contemplated by
this Agreement, except for real and personal property taxes
to be pro-rated between Buyer and Seller as provided in
Section 12 hereof; or
(ii) Liabilities or obligations of Seller of any
nature to employees or former employees relating to services
performed prior to the Effective Time, including, without
limitation, liabilities or obligations for wages,
withholding and employment taxes, vacation, sick pay,
bonuses, severance pay, retirement and fringe benefits, and
"Pre-Closing Claims" under "Seller's Health and Dental Plan"
(as those terms are defined in Section 15 hereof ) incurred
prior to and through the Closing Date, except for Assumed
Employee Accruals; or
(iii) Any liability of Seller for the costs
incurred in connection with the recent remodeling of
Seller's store on Good Hope Road in Milwaukee.
(b) Seller shall pay and discharge, when due (except
to the extent the same are being contested in good faith), any
and all of the debts, liabilities and obligations of Seller which
are not assumed by Buyer.
(c) At the Closing Date it is expected that Seller
will be obligated for, among other things, rent, percentage rent,
tenant's shares of real estate taxes, common area maintenance
expenses and other payments ("Tenant Costs") payable by Seller
for periods prior to and through December 31, 1999 under the
Store subleases between Seller and Roundy's affiliate Jondex
Corp. (and the lease of the Store at Neenah (Green Bay Road)).
At the Closing Buyer will withhold from the portion of the
Purchase Price otherwise payable at the Closing the sum of
$500,000.00, as of the date hereof the estimated total of the
Seller's liability for Tenant Costs for periods through December
31, 1999 under such subleases in excess of amounts payable from
existing escrow arrangements under those subleases (the "Sublease
Obligations Holdback"). To the extent (if any) that the Tenant
Costs that comprised the estimated amount set forth in the
preceding sentence have been settled and paid by Seller prior to
the Closing, the amount of the Sublease Obligations Holdback will
be reduced accordingly. Following the Closing Date the parties
will cooperate in reconciling the actual amounts of these Tenant
Costs, and the difference between the net amount thereof finally
determined to be due from Seller and the amount of the Sublease
Obligations Holdback will be paid by Seller to Roundy's, or by
Roundy's to Seller, as the case may be.
3. PURCHASE PRICE. The purchase price to be paid by Buyer
to Seller for the Purchased Assets shall be Thirty Million Five
Hundred Thousand Dollars ($30,500,000), plus an amount equal to
(i) the Cash on Hand and (ii) the value of the Inventory (valued
and determined in accordance with Section 5 hereof) as of the
Applicable Inventory Date (as hereinafter defined), and adjusted
by the prorations provided for in Section 12 hereof (the
"Purchase Price").
4. PAYMENT AND ALLOCATION OF PURCHASE PRICE.
(a) Buyer shall pay the Purchase Price to Seller as
follows:
(i) At Closing, the sum of $30,500,000 plus the
portion of the Purchase Price attributable to Cash on Hand
and the Inventory (to the extent of the parties' agreement
as to the value thereof as of the Closing Date), less the
Sublease Obligations Holdback and the Health Insurance
Holdback (as defined in Section 15 below) shall be paid by
wire transfer of immediately available funds to an account
designated by Seller;
(ii) The balance of the Purchase Price, adjusted
as provided in this Agreement, shall be paid by wire
transfer of immediately available funds to an account
designated by Seller upon final determination of the value
of the Cash on Hand and the Inventory, and the approval by
Seller and Buyer of the final closing statement. If the
value of the Inventory and Cash on Hand has not been finally
determined within fourteen (14) days after the Closing Date,
the amount of the Purchase Price that is withheld with
respect to such unresolved Inventory and Cash on Hand value
shall bear interest at an annual rate of seven percent (7%),
beginning on the fifteenth day following the Closing Date.
Upon the parties' mutual approval of the final determination
of the Inventory and Cash on Hand and the final closing
statement, the amount of the Purchase Price as thus
determined shall be final and binding upon the parties.
(b) The Purchase Price shall be allocated as follows:
(i) A portion of the Purchase Price equal to the
Cash on Hand shall be allocated to cash;
(ii) A portion of the Purchase Price equal to the
value of the Inventory, as determined pursuant to Section 5
hereof, shall be allocated to Inventory;
(iii) $7,500,000 shall be allocated to
property and equipment;
(iv) $1,500,000 shall be allocated to the
leasehold improvements;
(v) The remainder of the Purchase Price shall be
allocated to goodwill and the going concern value of the
Business.
The parties agree that they will file any reports
required to be filed (including, without limitation, I.R.S. Form
8594) under Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code"), consistent with the foregoing allocation
and will not take a position for income tax purposes which is
inconsistent with this Agreement.
5. PHYSICAL INVENTORY; DETERMINATION OF INVENTORY AND CASH
ON HAND PRICE; CLOSING.
(a) As soon as practical after Buyer has received all
licenses and permits required for its ownership and operation of
the Stores (including, without limitation, liquor licenses, food
stamp permits and "WIC" permits), or, if later, when the waiting
period under the HSR Filings has duly expired, the parties will
jointly select a date, for each of the Stores, on which the
amount of Cash on Hand, inventory and store supplies at such
Store will be determined by a physical inventory tabulation (the
date of such inventory for each Store being hereinafter referred
to as the "Applicable Inventory Date" for that Store). Such
physical inventory and the necessary extensions of the costs for
such inventory and store supplies at each Store shall be
conducted by Star Inventory Service (the "Inventory Service")
(Buyer and Seller shall each have representatives present during
the physical inventory), and the expense thereof shall be borne
equally by Buyer and Seller. The physical inventory tabulation
(and the purchase price to be paid by Buyer for the Inventory)
shall not include inventory which is damaged, spoiled, outdated,
obsolete or otherwise unsalable at normal retail price in the
ordinary course of business at the Stores, as mutually determined
by the parties, and Buyer shall have no obligation to purchase
any of such inventory. At the Closing the parties will append to
this Agreement a schedule setting forth the Applicable Inventory
Date and the Effective Time (as defined below) for each of the
Stores.
(b) For purposes of this Agreement (including Section
3 hereof) the Inventory will be valued at Seller's cost thereof,
determined in the following manner:
(i) the cost of Inventory shall be the retail
selling price thereof as of the Applicable Inventory Date
less the margin percentage by department for the Stores as
set forth in Section 5(b) of the Disclosure Schedule
attached hereto, except for such meat, produce, deli,
bakery, seafood, supplies and other perishable items for
which the cost is readily ascertainable in which case the
actual cost of such items shall be used. The margin
percentages set forth in Section 5(b) of the Disclosure
Schedule reflect gross margins per department after
allocation to the several departments of the estimated
amount of Roundy's "Advantage" rebates and other vendor
rebates and allowances (but not Roundy's volume rebates or
patronage dividends) ("Estimated Rebate Amounts"),
notwithstanding the fact that in the preparation of its
regular financial statements and reports Seller does not
reflect such rebates and allowances in determining
departmental gross profit. The margin percentages set forth
on Section 5(b) of the Disclosure Schedule will not be
adjusted to account for differences between the Estimated
Rebate Amounts and the actual amounts of such rebates, when
they are known.
(ii) The video tape inventory shall be valued at
six dollars ($6.00) per tape.
(iii) Supplies will be valued at Seller's
actual cost.
(c) The complete inventory prepared by the Inventory
Service shall be prepared in accordance with the usual and
customary practices of the industry and shall show the amount of
Cash on Hand and the total cost of such Inventory and supplies
for each Store determined in the manner provided above. In the
event the parties do not agree on the value of the Inventory and
supplies for any Store because the parties disagree as to whether
certain items are damaged, spoiled, outdated, obsolete or
otherwise unsalable at normal retail prices in the ordinary
course of business or as to Seller's cost thereof, the opinion of
the Inventory Service shall be final and binding on the parties.
(d) Buyer shall be given physical possession of each
Store and the Business conducted thereon immediately upon
completion of the taking of the inventory at such Store. Unless
the Closing fails to occur (other than by reason of a breach of
this Agreement by Seller), all sales made and expenses incurred
after such time shall be for the account of Buyer.
(e) The transactions contemplated hereby will be
closed, and the sale and purchase of the Purchased Assets thereby
consummated, on a date, selected by agreement of the parties, as
soon as practical after the last of the Applicable Inventory
Dates (the "Closing" or "Closing Date"), but in no event later
than two (2) business days after the last of the Applicable
Inventory Dates. However, the Closing shall be deemed effective
as to each Store as of the time of completion of the physical
inventory at such Store on such Store's Applicable Inventory Date
(the "Effective Time"). This transaction shall be closed at the
offices of Whyte Hirschboeck Dudek S.C., 111 East Wisconsin
Avenue, Milwaukee, Wisconsin, or at such other place as the
parties may mutually agree.
6. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
PRINCIPAL SHAREHOLDERS.
To induce Buyer to enter into this Agreement, Seller
and the Principal Shareholders, jointly and severally, make the
following representations and warranties:
(a) Corporate Organization. Seller is a corporation
duly organized and validly existing under the laws of the State
of Wisconsin, all filings necessary for the maintenance of its
corporate existence have been made, and there are no proceedings
pending for its dissolution. Seller has all requisite corporate
power and corporate authority to carry on the Business as it is
now being conducted and to own and lease the properties and
assets it now owns and leases.
(b) Authorization, Validity. Seller has all requisite
corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by Seller's
stockholders and Board of Directors. No other corporate
proceedings on the part of Seller are necessary to authorize this
Agreement or the transactions contemplated hereby, and this
Agreement constitutes the valid and legally binding obligation of
Seller, enforceable in accordance with its terms.
(c) Compliance. Except for any necessary consents to
assignment that must be obtained, neither the execution nor
delivery of this Agreement by Seller nor the consummation by
Seller of the transactions contemplated hereby, will result in
any violation of or be in conflict with, or constitute a default
under, any provision of Seller's Articles of Incorporation or By-
Laws, or any contract, agreement, security agreement, pledge,
document, commitment, instrument, judgment, decree, order,
statute, rule or governmental regulation to which Seller or any
Principal Shareholder is a party or by which they are bound, or
which is applicable to Seller or any Principal Shareholder, the
Purchased Assets or the Business, or give any third party any
right to terminate or cancel any such contract, security
agreement, pledge, document, commitment or instrument, or
accelerate any obligation evidenced thereby.
(d) Good Title. The Purchased Assets (in the case of
leased assets, Seller's leasehold interests therein) are free and
clear of all security interests, encumbrances, liens, mortgages,
pledges, charges, conditional sale or title retention agreements
and restrictions, except liens for personal property taxes not
due and payable, and those security interests described in
Section 6(d) of the Disclosure Schedule for which full and
complete releases will be obtained by Seller at or prior to the
Closing. Except as set forth in Section 6(d) of the Disclosure
Schedule, there are no currently effective Uniform Commercial
Code financing statements of record covering any of the Purchased
Assets.
(e) Leases, Contracts, Etc. All material leases,
subleases, maintenance agreements, service agreements and all
other agreements of any nature, whether written or oral,
affecting any of the Stores or the Business or the Purchased
Assets ("Contracts") are listed on Section 6(e) of the Disclosure
Schedule attached hereto. Said Section 6(e) of the Disclosure
Schedule designates those of the Contracts that are Assigned
Contracts. Buyer has been provided with access to correct and
complete copies of the Assigned Contracts. Each such Assigned
Contract is in full force and effect and no event has occurred
which (with or without the lapse or passage of time and/or giving
of notice) would constitute a default thereunder by Seller, nor,
to the knowledge of the Seller or the Principal Shareholders,
would constitute a default thereunder by any other party.
(f) Inventory. The quantities and types of items
comprising the Inventory are reasonable in the present
circumstances of the Business and consistent with Seller's
historical practices.
(g) Equipment. Section 6(g) of the Disclosure
Schedule is a true, correct and complete list of all items of
machinery, equipment and other personal property capitalized on
Seller's books in accordance with Seller's past practices (other
than Inventory and supplies, but including leasehold
improvements) that are used in the Business or included among the
Purchased Assets and owned or leased by Seller as of the date of
such list, indicating in each case whether owned or leased;
provided that some listed items may be located at a Store that is
different than the Store indicated on the list. All of the
assets set forth on such list (or, in the case of leased assets,
the leases pursuant to which they are leased) are included among
the Purchased Assets and Seller has not disposed of any such
assets since the date of such list, except for dispositions of
assets in the ordinary course of business, all of which, to the
extent material to the Business, have been replaced. All of the
tangible personal property included among the Purchased Assets
(as well as any that is leased pursuant to any of the Assigned
Contracts) is in good operating condition and repair (considering
its age), except for ordinary wear and tear and the requirement
of normal, routine maintenance, which maintenance Seller has not
deferred unreasonably, and suitable and adequate for the purposes
to which it is currently put in the conduct of the Business.
(h) Financial Statements. Seller has delivered to
Buyer copies of the audited financial statements of Seller for
the fiscal years ended December 28, 1996, January 3, 1998 and
January 2, 1999 and unaudited interim financial statements for
the period ended October 2, 1999 (such financial statements,
including all notes thereto, hereinafter being referred to
collectively as the "Financial Statements"). The Financial
Statements (i) have been prepared from and are consistent with
the books and records of the Company, (ii) are complete and
correct in all material respects, in accordance with generally
accepted accounting principles ("GAAP"), (iii) have been prepared
in accordance with GAAP consistently applied during the periods
covered thereby, and (iv) fairly and accurately present the
financial condition, results of operations and cash flows of the
Company as at the dates, and for the periods, stated therein;
provided, that the unaudited interim financial statements do not
reflect customary year end and audit adjustments and accruals
(including without limitation adjustments that would be required
based on physical inventories), none of which, individually or in
the aggregate, would be material to the financial condition or
results of operations of Seller for the period covered thereby.
Neither Seller nor either of the Principal Shareholders is making
any representation or warranty regarding the future performance
of the Business or the financial results of Buyer's operation of
the Stores.
(i) Absence of Certain Changes or Events. Since
January 2, 1999, Seller has conducted the Business solely in the
ordinary course and consistent with past practice, and, without
limiting the foregoing, except as set forth in Section 6(i) of
the Disclosure Schedule, (i) there has not been any material
adverse change in the financial condition or operation of the
Business and no event has occurred which materially and adversely
affects the Business or the Purchased Assets (provided that Buyer
hereby acknowledges the competitive nature of the grocery
supermarket business and the significant increase in the number
of entities operating grocery supermarkets in the state of
Wisconsin as well as the existence of several grocery
supermarkets stores in close proximity to the Stores), (ii)
Seller has not waived any rights which are material to the
Business, (iii) there has not been any damage, destruction or
loss (whether or not covered by insurance) which singly or in the
aggregate materially and adversely affects the Purchased Assets
or the Business, (iv) Seller has not entered into or terminated
any material agreement, lease, license or commitment which
relates to the Business or the Purchased Assets, (v) Seller has
not disposed of any material assets other than inventory sold in
the ordinary course of business, and (vi) Seller has not made any
material change in any method of accounting or accounting
practice.
(j) Litigation and Other Proceedings. Except for
those matters disclosed in Section 6(j) of the Disclosure
Schedule, no action, suit, proceeding or investigation before any
court, arbitrator, governmental authority or instrumentality is
pending against Seller or either Principal Shareholder, or to the
Seller's or either Principal Shareholder's knowledge is
threatened against Seller or any Principal Shareholder, which
involves the Business, the Purchased Assets or the consummation
by Seller of the transactions contemplated by this Agreement,
and, to Seller's and the Principal Shareholders' knowledge, no
valid basis exists for any such action, suit, proceeding or
investigation.
(k) Consents and Approvals. Except as set forth on
Section 6(k) of the Disclosure Schedule and except for the filing
of notices with the appropriate authorities under the Hart-Scott-
Rodino Antitrust Improvements Act ("HSR Filings") and the
expiration of the waiting periods thereunder, no consent,
approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority or
agency, whether federal, state or local, is required in
connection with the execution or delivery of this Agreement by
Seller or the consummation by Seller of any of the transactions
contemplated hereby. Except as set forth in Section 6(k) of the
Disclosure Schedule, no consent of any other entity, agency or
person is required in connection with the execution or delivery
of this Agreement by Seller or the consummation by Seller of any
of the transactions contemplated hereby, including, without
limitation, consents from any party to any Contract (whether or
not an Assigned Contract) to which Seller is a party, or which is
applicable to the Business or the Purchased Assets.
(l) Taxes. Except as set forth in Section 6(l) of the
Disclosure Schedule:
(i) Seller has properly and timely filed all
federal, state and local tax reports and returns required to
be filed by it, and all taxes, license fees, and charges and
levies of every kind, character and description (including,
without limitation, those due in respect to their
properties, income, franchise, occupations, licenses, sales
and payrolls), as shown by such reports or returns to be due
and payable, or levied, assessed or imposed on the Business
or Seller through the date hereof (except for those which by
their terms are not yet due and payable) have been paid. No
taxing authority has asserted against Seller any claim for
the assessment of any additional tax liability which has not
been resolved as of the date hereof.
(ii) There are no tax liens upon any property or
assets of Seller except liens for current taxes not yet due
and payable.
(iii) No examination or audit of any tax
return or report of Seller is in progress or to Seller's or
any Principal Shareholder's knowledge is contemplated.
(m) Condition of Leased Real Estate.
(i) The structures, plants, improvements, systems
and fixtures (including, without limitation, storage tanks
or other impoundment vessels, whether above or below ground)
located on the real estate where the Stores are located (the
"Real Estate") conform in all material respects with all
Federal, state and local statutes and laws and all
ordinances, rules, regulations and similar governmental and
regulatory requirements, and, considering their age, are in
good operating condition and repair, except for ordinary
wear and tear and the requirement of normal, routine
maintenance, which maintenance Seller has not deferred
unreasonably. Except as set forth on Section 6(m) of the
Disclosure Schedule, the Real Estate, in view of the
purposes for which it is currently used, conforms in all
material respects with all covenants or restrictions of
record and conforms in all material respects with all
applicable building codes and zoning requirements, and
current, valid certificates of occupancy (or equivalent
governmental approvals) have been issued for the Real Estate
to the extent required by law; and neither Seller nor either
of the Principal Shareholders is aware of any proposed
material change in any such governmental or regulatory
requirements or in any such zoning requirements.
Considering their age, all existing electrical, plumbing,
fire sprinkler, lighting, cooling, refrigeration, air
conditioning, heating, ventilation, elevator and other
mechanical systems located in or about the Real Estate are
in good operating condition and repair, except for ordinary
wear and tear and the requirement of normal, routine
maintenance, which maintenance Seller has not deferred
unreasonably.
(ii) Notwithstanding subsection 6(m)(i) above:
with respect to each parcel of Real Estate, Seller and the
Principal Shareholders make no representation or warranty
under this Section 6(m) with regard to liens, encumbrances,
building and use restrictions, covenants, easements, or
similar matters which are specifically disclosed in the
prime lease of the parcel affected thereby; and with respect
to each parcel of Real Estate other than the Neenah (Green
Bay Road) Store, Seller and the Principal Shareholders make
no representation or warranty under this Section 6(m) with
regard to the condition of or any matters affecting such
parcel with respect to which all of the following conditions
are met: (A) such matter or condition existed at the time
Seller's occupancy of such parcel commenced, (B) such matter
or condition is not attributable to and was not caused by
any act or omission of Seller, and (C) Seller and the
Principal Shareholders have no knowledge of such matter or
condition.
(n) Employment Practices. None of Seller's employees
is represented by any labor organization. During the five (5)
years preceding the date hereof, there has not been any request
by any employees of the Business for an election or certification
of a union to represent them, and there does not exist, and to
the Seller's and the Principal Shareholders' knowledge there is
not threatened or contemplated, any strike, slow-down, picketing
or work stoppage by any employees, or any lock-out by Seller of
any employees. During the preceding five (5) years, Seller has
not experienced any significant labor dispute. Seller is not
engaged in any unfair labor practice, no unfair labor practice
complaint has been asserted or is pending or, to the Seller's and
the Principal Shareholders' knowledge, threatened against Seller,
no grievance or arbitration proceeding is pending or, to the
Seller's and the Principal Shareholders' knowledge, is
threatened, and there is no claim, suit or proceeding filed or,
to the Seller's and the Principal Shareholders' knowledge,
threatened against Seller, alleging discrimination against any
past or present Employee based on age, sex, national origin,
religion or race, except as set forth in Section 6(n) of the
Disclosure Schedule. Seller has complied in all material
respects with all laws, statutes, rules and regulations
applicable with respect to employees in every one of the
jurisdictions in which it operates and/or does business. In
particular, Seller has complied in all material respects with all
laws, statutes, rules and regulations applicable to and/or
directed at discriminatory practices (including, without
limitation, discrimination based on race, age, sex or sexual
preference, in particular with respect to employment, equal pay
and/or discharge), labor standards and working conditions,
payment of minimum wages and overtime rates, or otherwise
relating to the conduct of employers with respect to its
employees or potential employees, and there have been no claims
made or, to the knowledge of the Seller and the Principal
Shareholders, threatened thereunder against Seller arising out
of, relating to or alleging any violation of any of the
foregoing. Seller has complied in all material respects with the
employment eligibility verification form requirements under the
Immigration and Naturalization Act, as amended ("INA"), in
recruiting, hiring, reviewing and documenting prospective
employees for employment eligibility verification purposes and
Seller has complied in all material respects with the record-
keeping and reporting provisions and anti-discrimination
provisions of the INA. To the knowledge of the Seller and the
Principal Shareholders, Seller is not currently employing any
workers unauthorized to work.
(o) Environmental Matters.
(i) Except (in the case of clauses (W) and (Y) of
this sentence) for Hazardous Substances (as hereinafter
defined) generated, stored, treated, manufactured, refined,
handled, produced, disposed of or used by Seller in the
ordinary course of its business, in compliance with the
requirements of currently applicable laws, rules and
regulations or otherwise in a manner which would not give
rise to any liabilities or obligations under such laws,
rules and regulations, (V) to the knowledge of the Seller
and the Principal Shareholders there are no tanks, vessels
or other containers used (or formerly used) for the storage
of Hazardous Substances on or below the surface of the Real
Estate and to the knowledge of the Seller and the Principal
Shareholders there is no asbestos nor are there any asbestos
containing materials contained in any of the buildings or
structures located on the Real Estate, (W) Seller has not,
and to the knowledge of the Seller and the Principal
Shareholders no other party has, caused any Hazardous
Substances (as that term is hereinafter defined) to be
present in, on or under any of the Real Estate of such a
nature or to such an extent that they could (1) have a
material adverse effect on the value of such Real Estate for
its present use, (2) limit the ability of Buyer to conduct
the Business on such Real Estate, or (3) limit the ability
of Buyer (or increase Buyer's cost) to expand, improve or
renovate the buildings and structures on such Real Estate
for continued use in the same business; (X) none of the Real
Estate has been designated, restricted or investigated by
any governmental authority as a result of the actual or
suspected presence, spillage, leakage, discharge or other
emission of Hazardous Substances, nor do the Principal
Shareholders or the Seller have any reason to believe that
there is any basis for any such designation, restriction or
investigation attributable to any act of Seller or, to their
knowledge, of any other party; (Y) no Hazardous Substances
have been generated, used, stored, treated, manufactured,
refined, handled, produced or disposed of in, on or under,
and no Hazardous Substances have been transported, released
or disposed of at, from or to, any of the Real Estate by
Seller or by any persons or agents operating under the
control, direction and supervision of Seller, including,
without limitation, all employees, agents and contractors of
Seller, nor to the Seller's and the Principal Shareholders'
knowledge, by any other party; and (Z) Seller has not
received any written or oral notice, order, inquiry,
investigation, environmental audit or assessment or any
lien, encumbrance, decree, easement, covenant, restriction,
servitude or proceeding concerning, or arising by reason of,
the actual or suspected presence, spillage, leakage,
discharge, disposal or other emission of any Hazardous
Substance in, on, under, around, about or in the vicinity
of, or the transportation of any Hazardous Substance at,
from or to, any of the Real Estate.
(ii) Neither Seller nor any Store premises nor
any aspect of the manner in which the Business is or has
been conducted is in material violation of, or subject to
any material liabilities as a result of any past or current
violations of, any existing federal, state or local law
(including common law), statute, ordinance, rule or
regulation of any federal, state or local governmental
authority relating to occupational health and safety or
relating to pollution or protection of the environment,
including, without limitation, statutes, laws, ordinances,
rules and regulations relating to the emission, generation,
discharge, spillage, leakage, storage, off-site dumping,
release or threatened release of Hazardous Substances into
ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Substances (collectively,
"Environmental Laws"), and, to the Seller's and the
Principal Shareholders' knowledge, no expenditures are
required in connection with the operation of the Business as
presently conducted in order to bring the Business into
compliance with any such Environmental Laws.
(iii) Notwithstanding subsections 6(n)(i) and
(ii) above, with respect to each parcel of Real Estate other
than the Neenah (Green Bay Road) Store, Seller and the
Principal Shareholders make no representation or warranty
under this Section 6(n) with respect to any matter or
condition described in the preceding paragraphs (i) and (ii)
affecting such parcel, with respect to which all of the
following conditions are met: (A) such matter or condition
existed at the time Seller's occupancy of such parcel
commenced, (B) such matter or condition is not attributable
to and was not caused by any act or omission of Seller, and
(C) Seller and the Principal Shareholders have no knowledge
of such matter or condition.
(iv) For purposes of this Agreement, the term
"Hazardous Substance" shall mean any product, substance,
chemical, contaminant, pollutant, effluent, waste or other
material, other than products offered for sale in the Stores
in the forms and quantities in which they are so offered for
sale, whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation,
emission, discharge, spill, release or effect is either: (a)
regulated or monitored by any governmental authority or (b)
defined or listed in, or otherwise classified pursuant to,
any statute, law, ordinance, rule or regulation applicable
to the Real Estate or the Business as "hazardous
substances," "hazardous materials," "hazardous wastes,"
"infectious wastes" or "toxic substances". Hazardous
Substances shall include, but not be limited to, (a)(A) any
"hazardous substance" as defined in the Comprehensive
Environmental Response, Compensation and Liability Act, (B)
any "regulated substance" as defined in the Solid Waste
Disposal Act or (C) any substance subject to regulation
pursuant to the Toxic Substances Control Act, as such laws
are now in effect or may be amended through the Effective
Time and any rule, regulation or administrative or judicial
policy statement, guideline, order or decision under such
laws, (b) petroleum and refined petroleum products, (c)
asbestos, asbestos-containing products, and presumed
asbestos-containing material (as defined in 29 CFR
1910.1001(b), (d) flammable explosives, (e) radioactive
materials, (f) radon, (g) polychlorinated biphenyls, whether
contained or not, and (h) any other substance that is
regulated or classified as hazardous or toxic under any
federal, state or local law, statute, ordinance, rule or
regulation.
(p) All Necessary Assets. Except for the Excluded
Assets, the Purchased Assets comprise all of the assets,
properties and rights (including, without limitation,
intellectual property rights and any data processing equipment,
software and/or data files located at the corporate offices of
Seller) required to operate the Business in the manner in which
it has heretofore been operated by Seller.
(q) Compliance with Laws. Seller has complied in all
material respects with all applicable foreign or domestic laws
and statutes and all ordinances, codes, rules, regulations,
judgments, orders, injunctions, writs or decrees of any Federal,
state, local or foreign court or any governmental body or agency
thereof to which Seller is subject or which are applicable to or
otherwise affect the operations, Business or assets of Seller,
including, without limitation, rules or regulations of the Food
and Drug Administration and similar state, local and foreign
agencies (including, without limitation, all product labeling
requirements thereof). Neither Seller nor either of the
Principal Shareholders has any knowledge of any inquiry,
investigation or proceeding relating thereto.
(r) Permits and Licenses. Seller has in force and
effect, and has complied with all of the conditions and
requirements imposed by, all material permits, licenses,
exemptions, consents, authorizations and approvals used in or
required for the conduct of its Business as currently conducted
("Licenses and Permits"). Section 6(r) of the Disclosure
Schedule contains a list by each Store location of all Licenses
and Permits currently used in the Business or required for the
conduct of the Business as currently conducted. Neither Seller
nor either of the Principal Shareholders has received any notice
of, nor has any knowledge of, any intention on the part of any
appropriate authority to cancel, revoke or modify, or any
inquiries, proceedings or investigations the purpose or possible
outcome of which is the cancellation, revocation or modification
of any such material permit, license, exemption, consent,
authorization or approval.
(s) Patents, Trademarks, Etc. Seller uses the trade
names and trademarks set forth on Section 6(s) of the Disclosure
Schedule (collectively, the "Intangible Rights"), in the
operation of the Business. To the Seller's and the Principal
Shareholders' knowledge, no aspect of the Seller's Business
(including, without limitation, Seller's use of the Intangible
Rights) conflicts with any intellectual property or similar
rights of others. There are no licenses, agreements or
commitments outstanding or effective granting any other person
any right to use, operate under, license or sublicense, or
otherwise concerning, the Intangible Rights. To the knowledge of
Seller and the Principal Shareholders, there is no material
infringement or violation by any other person of Seller's rights
in any of the Intangible Rights. Notwithstanding the foregoing,
Seller makes no representation or warranty with respect to any
trademarks or trade names of other parties attached to or forming
a part of the merchandise offered for sale by Seller.
(t) Brokers' Fees. Except for commissions due to KPMG
Peat Marwick, LLP (which commissions will be paid by Seller and
against which Seller will indemnify Buyer) Seller and the
shareholders of Seller have no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which the
Buyer could become liable or obligated.
(u) Transactions with Related Parties. Section 6(u)
of the Disclosure Schedule contains an accurate and complete list
of all agreements, arrangements and understandings relating to
the provision of services (other than services as an employee on
normal, arms-length terms), use or transfer or property or
assets, or outstanding indebtedness which are currently in effect
or which were in effect or occurred at any time after January 1,
1996 between the Seller and any of the following (each, a
"Related Party"): (i) each person who is now or at the time in
question was a shareholder, director or officer of Seller; (ii)
the spouses, children, grandchildren, siblings, parents,
grandparents, uncles, aunts, nieces, nephews or first cousins of
any person described in (i) (collectively, "near relatives");
(iii) any trust for the benefit of any person described in (i) or
any of their respective near relatives; and (iv) any corporation,
partnership, joint venture or other entity owned or controlled by
any person described in (i) or any of their respective near
relatives.
(v) Year 2000 Compliance. Except to the extent
disclosed on Section 6(e) of the Disclosure Schedule, to the
Seller's and the Principal Shareholders' knowledge, all devices,
systems, machinery, information technology, computer software and
hardware, and other date sensitive technology that are included
in the Purchased Assets (the "Systems") are "Year 2000
Compliant." "Year 2000 Compliant" means, with respect to any
System or Systems, that such System or Systems are designed to be
used prior to, during and after the Gregorian calendar year 2000
A.D. and will operate during each such time period without error
relating to date data, specifically including any error relating
to, or the product of, date data which represents or references
different centuries or more than one century, in each case to any
extent that could result in a material disruption of any aspect
of the Business.
(w) Computer Software. No computer programs or
software used by Seller in the conduct of the Business and
material to the conduct of the Business have been written or
designed or materially modified specifically for Seller. All
computer software used by Seller or installed on any computers
owned or used by Seller is either (i) owned by Seller or (ii)
used pursuant to valid and effective licenses from the owners
thereof. Seller is not in breach or default under any of such
licenses, and has not received any notice suggesting or alleging
that any such breach or default has occurred or that Seller is
using or has used any computer software without an appropriate
license therefor.
(x) Knowledge of Seller and Principal Shareholders.
For those warranties and representations set forth in this
Section 6 which are qualified by reference to the Seller's and or
the Principal Shareholders' "awareness" or "knowledge," the
Seller and the Principal Shareholders shall be deemed to have
knowledge and be aware of (i) any matter, fact, or thing that is,
as of the date hereof or the Closing Date, actually known to any
Principal Shareholder or to any officer or director of the
Seller; and (ii) any matter, fact or thing which reasonably
should be known by any Principal Shareholder after "due inquiry"
by such Principal Shareholder, taking into account any and all
roles or positions which such Principal Shareholder may hold with
the Seller and any and all duties and responsibilities he or she
may have vis-a-vis the Seller and its business. For this
purpose, "due inquiry" shall include a review of the accounting
and financial records and books of account of the Seller; a
review of the Seller's regularly maintained files and records
relating to its assets, liabilities, and business; a review of
the minute books and stock records of the Seller; a visual
inspection of the Seller's Real Property and tangible personal
property; and an inquiry of the managers of Seller's departments
of Information Services, Human Resources, Finance and Operations,
and Seller's Maintenance and Repair Support Specialist, Director
of Meat, Director of Perishables, Director of Marketing and
Advertising, Grocery Store Specialist, and Seller's principal law
firm and outside auditing firm.
7. REPRESENTATIONS AND WARRANTIES OF BUYER AND ROUNDY'S.
To induce Seller and the Principal Shareholders to enter into
this Agreement, Buyer and Roundy's, jointly and severally, make
the following representations, warranties and agreements:
(a) Corporate Organization. Buyer and Roundy's are
each corporations duly organized and validly existing under the
laws of the State of Wisconsin, all filings necessary for the
maintenance of their corporate existence have been made, and
there are no proceedings pending for their dissolution. Buyer
and Roundy's have all requisite corporate power and corporate
authority to carry on their businesses as they are now being
conducted and to own and lease the properties and assets they now
own and lease.
(b) Authorization; Validity. Buyer and Roundy's each
have all requisite corporate power and authority to enter into
this Agreement and to carry out their obligations hereunder, and
the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized
by their Boards of Directors. No other corporate proceedings on
the part of Buyer or Roundy's are necessary to authorize this
Agreement or the transactions contemplated hereby and this
Agreement constitutes the valid and legally binding obligation of
Buyer and Roundy's, enforceable in accordance with its terms.
(c) Compliance. Neither the execution nor delivery of
this Agreement by Buyer or Roundy's nor the consummation by Buyer
or Roundy's of the transactions contemplated hereby, will result
in any violation of or be in conflict with, or constitute a
default under, any provision of Buyer or Roundy's Articles of
Incorporation or By-Laws, or any contract, agreement, security
agreement, pledge, document, commitment, instrument, judgment,
decree, order, statute, rule or governmental regulation to which
Buyer or Roundy's is a party or by which either is bound, or
which is applicable to Buyer or Roundy's, or give any third party
any right to terminate or cancel any such contract, security
agreement, pledge, document, commitment or instrument, or
accelerate any obligation evidenced thereby.
(d) Litigation. There are no lawsuits, claims or
other proceedings pending or threatened against Buyer or Roundy's
which would adversely affect Buyer's or Roundy's ability to
perform their obligations hereunder.
(e) Consents and Approvals. Except for the filing of
notices with the appropriate authorities under the Hart-Scott-
Rodino Antitrust Improvements Act ("HSR Filings") and the
expiration of the waiting period thereunder, no consent approval
or authorization of, or declaration, filing or registration with,
any governmental or regulatory authority or agency, whether
federal, state or local, is required in connection with the
execution or delivery of this Agreement by Buyer and Roundy's or
the consummation by Buyer or Roundy's of any of the transactions
contemplated hereby. No consent of any other entity, agency or
person is required in connection with the execution or delivery
of this Agreement by Buyer and Roundy's or the consummation by
Buyer and Roundy's of any of the transactions contemplated
hereby.
(f) Brokers' Fees. Buyer and Roundy's have no
liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Seller or the Principal
Shareholders could become liable or obligated.
(g) Resale. Buyer is purchasing the Inventory for
resale.
8. CONDUCT OF BUSINESS PRIOR TO CLOSING. Seller and the
Principal Shareholders, jointly and severally covenant that from
the date of this Agreement through the Effective Time, except
with the prior written consent of Buyer or as otherwise
specifically provided for by this Agreement, Seller shall:
(a) carry on the Business in the normal and ordinary
course in a manner consistent with the manner in which the
Business has heretofore been conducted (including but not limited
to maintaining the Stores and all leasehold improvements and
equipment contained therein in good condition, repair and working
order);
(b) not enter into any material contract (other than
for purchases of inventory and supplies in the usual and ordinary
course of business upon terms consistent with past practices);
(c) not encumber any of the Purchased Assets (except
for encumbrances that will be released at or prior to Closing) or
enter into any transaction or make any commitment relating to the
Purchased Assets or the Business, other than in the usual and
ordinary course of business;
(d) not hire any additional employees (except in the
ordinary course of business and consistent with past practices)
or grant any increase in the salaries or rates of pay of any
employee (except for normal periodic merit or seniority increases
under existing agreements or established policies and practices
of Seller and consistent in amount and timing with Seller's prior
practices), establish any new retirement or fringe benefit plan
or grant any increase in benefits under any existing plan;
(e) maintain all of its property, casualty, liability
and other insurance in effect as of the date hereof; and
(f) promptly pay when and as due all taxes, license
fees, charges, franchises and contributions required to be paid
by Seller to governmental agencies or taxing authorities, with
respect to the operation of the Business.
9. COVENANTS OF BUYER AND ROUNDY'S
(a) Resale Certificate. Buyer shall provide to Seller
at or before the Effective Time, a properly completed resale
certificate, in a form acceptable to Seller's counsel, with
respect to the Inventory.
(b) Applications for Permits and Licenses. In a
timely and expeditious manner, Buyer shall make all necessary
filings and applications and take all other appropriate steps to
obtain the permits, licenses, consents, approvals and the like
necessary for operation of the Business, as contemplated by
Section 10(g) below.
(c) Operation of Stores. From and after the Effective
Time though Closing, Buyer and Roundy's shall:
(i) with respect to each Store of which they have
possession, operate said Store in the normal and ordinary
course in a manner consistent with the manner in which the
Business has heretofore been conducted (including, without
limitation, maintaining said Stores, all leasehold
improvements and the Equipment contained therein and
adequate levels of inventory);
(ii) not enter into any material contract (other
than for purchases of inventory or services in the usual and
ordinary course of business upon terms consistent with past
practices);
(iii) not encumber or sell any of the assets
at the Stores (other than sales of inventory in the ordinary
course of business consistent with past practice);
(iv) maintain adequate property, casualty,
liability and other appropriate insurance coverage in
amounts consistent with Seller's past practice; and
(v) promptly pay when due all taxes, license
fees, charges, franchises and contributions required to be
paid to governmental agencies or taxing authorities in
connection with the Stores and between the Effective Time
and Closing.
10. CONDITIONS TO OBLIGATIONS OF BUYER AND ROUNDY'S. Buyer
and Roundy's obligation to purchase the Purchased Assets under
this Agreement shall be subject to the satisfaction, at or before
the Closing, of each of the following conditions, unless waived
in writing by Buyer:
(a) Representations and Warranties True. Each and
every representation and warranty of Seller and the Principal
Shareholders contained in Section 6 hereof, and in each
certificate and other document delivered or to be delivered by
Seller or its representatives pursuant hereto or in connection
with the transactions contemplated hereby, shall be true and
accurate in all material respects as of the date when made and as
of the Effective Time and the Closing Date (except to the extent
the inaccuracy of any such representation or warranty is
attributable solely to acts or omissions of Buyer in its conduct
of the Business between the Effective Time and the Closing Date),
as though such representation and warranty were made by Seller
and the Principal Shareholders at the Effective Time and at the
Closing Date.
(b) Performance. Seller and the Principal
Shareholders shall have performed and complied in all material
respects with each and every covenant, obligation and condition
required by this Agreement to be performed or complied with by
them at or prior to the Closing.
(c) No Proceedings or Litigation. As of the Closing,
no suit, action, investigation, inquiry or other proceeding by or
before any court or governmental body or other regulatory or
administrative agency or commission shall be threatened,
instituted or pending which questions the validity or legality of
this Agreement or the consummation of the transactions
contemplated hereby.
(d) No Injunction. As of the Closing, there shall not
be any effective injunction, writ, preliminary restraining order
or any order of any nature issued by a court, governmental or
regulatory agency directing that the transactions provided for
herein or any of them not be consummated as so provided or
imposing any condition on the consummation of any of the
transactions contemplated hereby.
(e) No Material Adverse Change. There shall have been
no material adverse change in the financial condition, results of
operations, cash flows, assets, liabilities, business or
operations of the Seller during the period between January 2,
1999 and the last Applicable Inventory Date, except for such
changes as are attributable solely to acts or omissions of Buyer
after each Store's Applicable Inventory Date. For this purpose,
any failure of the Seller's systems, or those of any third party
with which the Seller's systems interacts, to be Year 2000
Compliant (as defined in Section 6(v)) in any material respect
will constitute such a material adverse change, regardless of
whether such noncompliance or potential noncompliance is
disclosed on the Disclosure Schedule.
(f) Consents, Approvals, Permits, Etc. All consents,
authorizations, approvals, exemptions, licenses or permits of, or
registrations, qualifications, declarations or filings with, any
governmental body or agency thereof that are required in
connection with the sale and transfer of the Purchased Assets to
the Buyer pursuant to this Agreement and the consummation of the
transactions contemplated hereby shall have been duly obtained or
made in form and substance reasonably satisfactory to the Buyer
and its counsel and shall be effective at and as of the Closing
Date, including without limitation, the expiration of the waiting
periods under the HSR Filings.
(g) Permits, Licenses. Buyer shall have received all
necessary permits, licenses, consents, approvals and the like
from third parties and governmental and administrative agencies
necessary for Buyer's conduct of the Business as presently
conducted.
(h) Estoppel Certificate. Buyer shall have received
an estoppel certificate in form and substance satisfactory to
Buyer in its reasonable discretion from the landlord under the
lease for the Store located on Green Bay Road in Neenah,
Wisconsin (the "Estoppel Certificate").
(i) Termination and Release Agreement. Roundy's,
Seller and the shareholders of Seller shall have entered into an
agreement among them, in form and substance satisfactory to them
and their respective counsel, whereby all agreements (including
the "Pick `N Save" trademark license and supply agreements)
entered into between the parties (or their affiliates) prior to
the date hereof (the "Existing Agreements") are terminated and
the parties mutually release each other from and against any and
all claims, demands, causes of action, liabilities, costs,
expenses, or obligations (other than those arising out of this
Agreement) that any party may have against any other arising out
of or relating to the Existing Agreements or the business
relationships existing between the parties (the "Termination and
Release Agreement"). The Termination and Release Agreement will
not apply to the obligation of any party to pay any amount due to
the other party in the ordinary course of business and relating
to the purchase of merchandise by Seller from Roundy's or its
affiliates, including, by way of example, the purchase price of
merchandise purchased by Seller; rebates, discounts and
allowances due Seller by Roundy's; patronage dividends; "We Care"
payments; and similar matters.
(j) Conversion of Stock. The Class A Voting Stock of
Roundy's held by Seller (and the Voting Trust Certificates issued
in respect thereof under the Roundy's, Inc. Voting Trust) shall
have been canceled, and an equal number of new shares of Roundy's
Class B Stock shall have been issued in exchange therefor.
(k) Benefit of Stop Loss Policy. Buyer shall have had
extended to it the benefit of the "Stop Loss Policy" with respect
to "Post-Closing Claims" under the "Buyer's Health and Dental
Plan" (as those terms are defined in Section 15(b)), the form and
manner in which the same is effected and the coverage afforded to
Buyer thereunder to be consistent with the provisions of Section
15(b) and satisfactory to Buyer and its counsel;
(l) Employee Census Data. Seller shall have delivered
to Buyer, at least two weeks prior to Closing, a list by each
Store location of all of Seller's employees, both full and part
time, including their respective wages or salaries, and any other
employee related information that Buyer may reasonably request
for the purpose of entering the Transferred Employees into
Buyer's payroll system, complying with applicable employment and
employment tax laws and regulations, and similar purposes;
(m) Deliveries at or Prior to Closing. Seller shall
have delivered or caused to be delivered to Buyer the following
at or prior to the Closing, all in form reasonably satisfactory
to Buyer's counsel:
(i) Copies of resolutions of Seller's Board of
Directors and its shareholders authorizing the execution,
delivery and performance by Seller of this Agreement and the
consummation by Seller of the transactions contemplated
hereby, and authorizing Seller's officers, employees and
agents to carry out and perform the terms and provisions
hereof, certified by the corporate secretary of Seller.
(ii) a closing certificate from the President or a
Vice President of Seller certifying the fulfillment of the
conditions set forth in this Section.
(iii) a legal opinion from Seller's counsel in
substantially the form attached hereto as Exhibit
10(m)(iii).
(iv) a certificate of status of Seller issued by
the Department of Financial Institutions of the State of
Wisconsin, dated not more than ten (10) days prior to the
Closing Date.
(v) Documents in form and substance satisfactory
to Buyer to amend Seller's Articles of Incorporation to
eliminate from Seller's corporate name the words "Ultra
Mart" and any other words or terms confusingly similar
thereto.
(vi) The written consents of all parties that are
required for the assignment by Seller to Buyer of the
Assigned Contracts (including without limitation the consent
of the lessor under the lease of the Store site on Green Bay
Road in Neenah); provided that, if with respect to any
Assigned Contract, Buyer waives the receipt of any such
consent and agrees to proceed with the Closing in the
absence thereof, then Buyer shall indemnify Seller for any
liabilities arising under such Assigned Contract due to the
failure to obtain such waived consent.
(vii) The Fox Point Sublease Agreement, duly
executed by Seller and Robert A. Farrell.
(viii) All other instruments and documents
required by this Agreement to be delivered by Seller or the
Principal Shareholders to Buyer, and such other instruments
and documents which Buyer or its counsel may reasonably
request not inconsistent with the provisions hereof so as to
effectively transfer to Buyer all of Seller's right, title
and interest in and to the Purchased Assets as provided by
this Agreement, including, without limitation:
(A) a warranty bill of
sale for the Purchased Assets;
(B) an assignment of the
Assigned Contracts;
(C) assignments of the
Intellectual Property;
(D) certificates of
title to any motor vehicles constituting
Purchased Assets.
11. CONDITIONS TO OBLIGATIONS OF SELLER. Each and every
obligation of Seller and the Principal Shareholders under this
Agreement (other than those contained in Section 8) to be
performed at or before the Closing shall be subject to the
satisfaction, at or before the Closing, of each of the following
conditions, unless waived in writing by Seller:
(a) Representations and Warranties True. Each and
every representation and warranty of Buyer and Roundy's contained
in Section 7 hereof, and in each certificate and other document
delivered or to be delivered by Buyer or Roundy's or its
representatives pursuant hereto or in connection with the
transactions contemplated hereby, shall be true and accurate in
all material respects as of the date when made and as of the
Closing Date as though such representation and warranty were made
by Buyer and Roundy's on the Closing Date.
(b) Performance. Buyer and Roundy's shall have
performed and complied in all material respects with each and
every covenant, obligation and condition required by this
Agreement to be performed or complied with by them at or prior to
the Closing.
(c) No Proceedings or Litigation. As of the Closing,
no suit, action, investigation, inquiry or other proceeding by or
before any court or governmental body or other regulatory or
administrative agency or commission shall be threatened,
instituted or pending which questions the validity or legality of
this Agreement or the consummation of the transactions
contemplated hereby.
(d) No Injunction. As of the Closing, there shall not
be any effective injunction, writ, preliminary restraining order
or any order of any nature issued by a court, governmental or
regulatory agency directing that the transactions provided for
herein or any of them not be consummated as so provided or
imposing any condition on the consummation of any of the
transactions contemplated hereby.
(e) Consents, Approvals, Permits, Etc. All consents,
authorizations, approvals, exemptions, licenses or permits of, or
registrations, qualifications, declarations or filings with, any
governmental body or agency thereof that are required in
connection with the sale and transfer of the Purchased Assets to
the Buyer pursuant to this Agreement and the consummation of the
transactions contemplated hereby shall have been duly obtained or
made in form and substance reasonably satisfactory to the Seller
and its counsel and shall be effective at and as of the Closing
Date, including without limitation, the expiration of the waiting
periods under the HSR Filings.
(f) Deliveries at Closing. Buyer shall have delivered
to Seller at the Closing:
(i) that portion of the Purchase Price payable at
the Closing, net of the Sublease Obligations Holdback and
the Health Insurance Holdback;
(ii) the Termination and Release Agreement and the
Fox Point Sublease Agreement, duly executed by Buyer and
Roundy's, as appropriate;
(iii) a closing certificate from the President
or a Vice President of Buyer and Roundy's certifying the
fulfillment of the conditions set forth in this Section 11;
and
(iv) a legal opinion from Roundy's counsel in
substantially the form attached hereto as Exhibit 11(f)(iv).
12. PRORATIONS and ACCRUALS.
(a) Personal property taxes applicable to the
Purchased Assets for the year (or other period) in which the
Effective Time occurs shall be prorated as of the Effective Time
on the basis of the personal property tax bills for the year
1999. Utility charges for the billing periods in which the
Closing occurs will be apportioned between Buyer and Seller based
on actual meter readings as of the Effective Time.
(b) Buyer will be entitled to a credit against the
Purchase Price for the amount of all accrued but unpaid vacation
pay due as of the Effective Time to those employees of the Stores
that accept Buyer's offer of employment ("Transferred
Employees"). For purposes of this Section 12(b), accrued
employee vacation pay for which Buyer will be entitled to a
credit will include that which each Transferred Employee has
earned but not used as of the Effective Time ("Earned Vacation
Pay"), as well as a pro-rata portion of that which each
Transferred Employee has accrued through the Effective Time, even
though the employee may not be entitled thereto unless he or she
would have remained employed by Seller for some additional time
after the Effective Time ("Accruing Vacation Pay"). For purposes
of this Section 12(b), the amount of Accruing Vacation Pay will
be reduced to reflect the amount thereof that would reasonably be
expected to be forfeited by Transferred Employees on account of
the termination of their employment before such Accruing Vacation
Pay has been earned, based on the Company's past experience. If,
notwithstanding Buyer's assumption of the Assumed Employee
Accruals, Seller is required to (and does) pay any amount
included therein for which Buyer received a credit as provided in
this Section 12(b), and as a result Buyer is relieved of any
obligation to pay such amount, then Buyer will reimburse Seller
for the amount Buyer would otherwise have been obligated to pay.
(c) All costs, charges or prepayments paid or payable
by or to Seller under any Assigned Contracts will be prorated as
of the Applicable Inventory Date.
(d) Rent, percentage rent, tenant's shares of real
estate taxes, common area maintenance expenses and other payments
payable by Seller under the leases and subleases for the Real
Estate ("Store Leases"), except to the extent the same are
settled through the Sublease Obligations Holdback as provided in
Section 2(c) above, shall be prorated as of the Effective Time
based on actual amounts incurred or assessed for the year 1999.
With respect to time periods between December 31, 1999 and the
Effective Time, such prorations will be determined on the basis
of actual amounts incurred or assessed for the year 1999, and
will not be adjusted after the Closing Date to reflect actual
amounts incurred or assessed for periods after December 31, 1999.
13. NONCOMPETITION.
(a) Seller and Principal Shareholder Robert A. Farrell
("Farrell") hereby covenant and agree with Buyer and Roundy's
that for the five (5) year period following the Closing, they
will not, directly or indirectly, as a principal, agent, owner,
employee, trustee, beneficiary, distributor, partner, co-
venturer, officer, director, shareholder or in any other
capacity, engage, own, operate, manage, join, finance, control or
participate in the ownership, management, operation or control
of, or be paid or employed by or acquire any securities of, or
otherwise become associated with or provide assistance to any
entity, business, activity or enterprise (other than as a 5% or
less shareholder of a publicly held corporation) which is engaged
within the state of Wisconsin in the business of operating one or
more retail grocery supermarkets ("Competing Business").
(b) Principal Shareholder Scott A. Sylla ("Sylla")
hereby covenants and agrees with Buyer and Roundy's that for the
five (5) year period following the Closing, he will not, directly
or indirectly, own or have any financial or equity interest in
(other than as a 5% or less shareholder either (i) of a publicly
held corporation or (ii) through employee stock options, stock
purchase plans or similar arrangement), or control as a
principal, owner, trustee, beneficiary, partner, co-venturer or
shareholder, or acquire securities of any Competing Business.
(c) Seller and Farrell and Sylla acknowledge and agree
that the restrictions set forth in this Section 13 are founded on
valuable consideration and are reasonable in duration and
geographic area in view of the circumstances under which this
Agreement is executed and that such restrictions are necessary to
protect the legitimate interests of Buyer and Roundy's. In the
event that any provision of this Section 13 is determined to be
invalid by any court of competent jurisdiction, the provisions of
this Section 13 shall be deemed to have been amended and the
parties agree to execute any documents and take whatever action
is necessary to evidence such amendment, so as to eliminate or
modify any such invalid provision and to carry out the intent of
this Section 13 so as to render the terms of this Section 13
enforceable in all respects as so modified.
(d) Seller and Farrell and Sylla acknowledge and agree
that irreparable injury may result to Buyer and Roundy's in the
event Seller or Farrell or Sylla breaches any covenant contained
in this Section 13, and that the remedy at law for the breach of
any such covenant will be inadequate. Therefore, if Seller or
Farrell or Sylla engages or threatens to engage in any act in
violation of the provisions of this Section 13, Buyer and
Roundy's shall be entitled, in addition to such other remedies as
may be available to it at law or under this Agreement, to
injunctive relief to enforce the provisions of this Section 13.
14. FURTHER ASSURANCES; BOOKS AND RECORDS.
(a) From time to time after the Closing, Seller shall,
without cost to Buyer, execute and deliver to or cause to be
executed and delivered to Buyer such other and further transfer
documents and instruments, and take such other action as Buyer
may reasonably request to carry out more effectively the sale of
the Purchased Assets contemplated by this Agreement and to
protect Buyer's right, title and interest in and enjoyment of the
Purchased Assets and the Business.
(b) Following the Closing, for a period of five (5)
years, Seller will preserve those of its books, records, files
and other materials which are not part of the Purchased Assets
hereunder but that relate to the operation of the Stores and/or
the Purchased Assets, and will make the same available to Buyer,
during reasonable times and upon reasonable advance notice, for
Buyer's inspection and copying (at Buyer's cost), for purposes
reasonably related to Buyer's operation of the Business and/or
ownership of the Purchased Assets.
15. EMPLOYEES.
(a) Termination by Seller and Hiring By Buyer. Seller
shall terminate all of the employees employed by it at the Stores
immediately prior to the Effective Time. Buyer will offer
reasonably equivalent employment to substantially all of the
store level employees of Seller at each Store ("Store
Employees"). For purposes of this Agreement, the phrase
"substantially all" and "affected employees" are defined as
provided in Section 109.07 of the Wisconsin Statutes and the
regulations thereunder. Buyer shall offer employment to a
sufficient number of Store Employees so as to ensure that
(assuming all such offers of employment are accepted, and further
assuming that no employees of Seller who are not Store Employees
lose their employment with Seller) a notice is not required to be
given under the Worker Adjustment and Retraining Notification
Act, 29 U.S.C. Section 2101, et. seq. (the "WARN Act"). Seller
acknowledges that Buyer intends to hire only a limited number of
the corporate office employees and other non-store level
employees of Seller, and agrees that Seller will be solely
responsible for (and indemnify Buyer against) any liability under
any plant closing or similar law (including the federal WARN Act
and its Wisconsin counterpart) that may arise as a result of the
failure of Buyer to hire any such corporate office or non-store
level employees or the termination of their employment by Seller.
The employees of Seller hired by Buyer as of the Effective Time
are referred to herein as "Transferred Employees."
(b) Self-Insured Health Insurance. Seller maintains a
self-insured health insurance plan and a self-insured dental
insurance plan for certain of its employees (the "Seller's Health
and Dental Plan"), the health insurance plan being administered
by PrimeCare and the dental insurance plan being administered by
Delta Dental (PrimeCare and Delta Dental being collectively
referred to as the "TPA"). Seller also maintains excess loss
insurance coverage in connection with the Seller's Health and
Dental Plan through PrimeCare (the "Stop Loss Policy").
(i) Seller will retain liability to its covered
employees and to the TPA under the Seller's Health and
Dental Plan for all claims incurred by Seller's employees
pursuant to Seller's Health and Dental Plan (whether or not
reported, including claims reported but not fully paid)
prior to the Effective Time ("Pre-Closing Claims"), and
Buyer will not assume any liability of Seller whatsoever (to
its employees, to the TPA, or otherwise) in respect of any
Pre-Closing Claims. For this purpose a claim will be deemed
to have been "incurred" on the date on which the service
provider has provided to the insured the services for which
the reimbursement is sought by the insured, except that in
the case of an insured who is hospitalized on an inpatient
basis all claims for hospital charges incurred in connection
with such hospitalization and until the insured's discharge
will be deemed to have been incurred on the date such
hospitalization commenced (it being the parties intent that
with regard to the characterization of any claim as a "Pre-
Closing Claim" or a "Post-Closing Claim" (as hereinafter
defined), the matter will be resolved by reference to the
practices and customs employed by the health insurance
industry in the case of changes in an insured's coverage
from one insurer to another).
(ii) To facilitate uninterrupted health and dental
insurance coverage for the Transferred Employees, it is
Buyer's intention to implement and maintain a self-insured
health insurance plan and a self-insured dental insurance
plan for the Transferred Employees who participate in
Seller's Health and Dental Plan on terms and conditions
substantially identical to the Seller's Health and Dental
Plan (the "Buyer's Health and Dental Plan"), and to have the
Buyer's Health and Dental Plan administered by the TPA.
Deductible and co-pay obligations (if any) of the
Transferred Employees for the year in which the Effective
Time occurs will be treated under the Seller's Health and
Dental Plan and the Buyer's Health and Dental Plan as though
the two plans were a single plan. Buyer will have the
benefit of the Stop Loss Policy with respect to claims
incurred by Transferred Employees after the Effective Time,
and prior to the Closing Date Seller and Buyer will
cooperate in taking such actions as are necessary or
appropriate, and as may be required by the TPA, to extend
the benefit of the Stop Loss Policy to Buyer with respect to
Post-Closing Claims. Premiums on the Stop Loss Policy for
periods after the Effective Time will be paid by Buyer;
provided that Seller will reimburse Buyer for an allocable
portion of the premium attributable to any employees or
former employees of Seller other than Transferred Employees
with respect to whom the Stop Loss Policy continues to
afford coverage. There will be no waiting period for
Transferred Employees to participate in Buyer's Health and
Dental Plan, nor will coverage thereunder be excluded on the
ground that any otherwise-covered condition is a preexisting
condition of a Transferred Employee.
(iii) With respect to claims incurred by
Transferred Employees after the Effective Time ("Post-
Closing Claims"), Buyer and Seller will instruct the TPA to
seek payment and/or reimbursement from Buyer and not from
Seller. In any event, Seller will have no liability in
respect of such Post-Closing Claims, and Buyer will hold
Seller harmless from any such liability (to the TPA or to
any employee).
(iv) Subject to the following paragraph (v), Buyer
will have no liability (to the TPA or to any employee) in
respect of any Pre-Closing Claims, and Seller will hold
Buyer harmless from any such liability.
(v) Solely to facilitate the settlement of Pre-
Closing Claims with the TPA, Buyer will act as Seller's
agent after the Closing Date in making payments to the TPA
for any Pre-Closing Claims to the extent such claims are to
be paid pursuant to the terms of the Seller's Health and
Dental Plan, and will authorize the TPA to seek such
payments directly from Buyer. In consideration thereof,
Buyer will be entitled to a credit against that portion of
the Purchase Price otherwise due at the Closing for the
amount accrued or reserved on Seller's books as of the
Effective Time for incurred but not reported and reported
but not paid Pre-Closing Claims (such amount to be
determined on a consistent basis in the manner heretofore
employed by Seller in recording such accrual or reserve)
(the "Health Insurance Holdback"). Buyer will not be
required to investigate or inquire as to the propriety or
appropriateness of any Pre-Closing Claim submitted to it for
payment as Seller's agent, but rather may rely solely on the
advice of the TPA that all Pre-Closing Claims for which the
TPA requests reimbursement are properly payable under the
Seller's Health and Dental Plan. Any questions or
controversies that may arise regarding the propriety or
appropriateness of any such Pre-Closing Claim will be
resolved solely between Seller, the TPA, and the employee in
question, and Seller will indemnify and hold the Buyer
harmless from any liability it may incur in connection with
any such controversy (including, without limitation, any
costs incurred by Buyer in participating in or defending any
action or proceeding to which it may be made a party).
(vi) All amounts paid by Buyer in respect of Pre-
Closing Claims in the manner provided in the preceding
paragraph ("Buyer Payments") will be charged against the
Health Insurance Holdback, and Buyer will provide Seller
with an accounting thereof at reasonable intervals, and in
any event no less often than once each calendar quarter.
Following the expiration of one year after the Closing Date
(or, if later, after all Pre-Closing Claims have been fully
paid), Buyer will provide Seller with a final accounting of
all Buyer Payments, and the difference between the total of
the Buyer Payments and the Health Insurance Holdback will be
paid by Seller to Buyer, or by Buyer to Seller, as
appropriate; provided, that if the total Buyer Payments
exceed the Health Insurance Holdback prior to the expiration
of such one year period, Seller will pay such excess,
together with an estimate of the amount of the total
remaining Buyer Payments expected to be incurred with
respect to all then outstanding Pre-Closing Claims, to Buyer
upon Buyer's request.
(vii) Nothing herein shall be deemed an
assumption by Buyer of any liability of Seller (to its
employees or former employees, to the TPA or otherwise)
under or relating to Seller's Health and Dental Plan, it
being acknowledged that with respect to the payment of Pre-
Closing Claims as provided in the preceding paragraph, Buyer
is acting solely as Seller's agent for the convenience of
Seller and the TPA.
(viii) Nothing in this Agreement is intended to
impose on Buyer any obligation to maintain the Buyer's
Health and Dental Plan, or any terms, features or provisions
thereof, for any period of time following the Closing Date,
and Buyer retains the sole and absolute discretion to
discontinue, amend, modify, or replace the Buyer's Health
and Dental Plan at any time and from time to time.
(c) Insured Health Insurance. For those Transferred
Employees who do not participate in Seller's Health and Dental
Plan, but instead are insured by Seller under an insured health
plan, Buyer will provide reasonably equivalent health insurance
coverage effective immediately upon the commencement of their
employment by Buyer, with no waiting period nor any exclusions
from coverage for otherwise-covered conditions that are
preexisting.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY.
(a) Survival. All representations and warranties of a
party contained in this Agreement or in any certificate or other
document delivered pursuant hereto shall survive the Closing Date
(regardless of any investigation by the other party to this
Agreement) for a period of two (2) years following the Closing,
except for the representations and warranties contained in
Subsections 6(a), (b), (c), (d), (k) and Subsections 7(a), (b)
(c) and (e) which shall survive indefinitely, and those contained
in Subsection 6(l) which shall survive until the expiration of
the applicable statutes of limitations (the period of survival
of any representation or warranty being referred to as its
"Survival Period").
(b) General. From and after the Closing, the parties
shall indemnify each other as provided in this Section 16. The
party seeking indemnification is sometimes referred to herein as
the "Indemnified Party" and the party from which indemnification
is sought is sometimes referred to as the "Indemnifying Party."
The remedies provided in this Section 16 shall be the exclusive
remedy of the parties with respect to any breach of any provision
of this Agreement (except as provided in Section 13).
(c) Seller's and Principal Shareholders'
Indemnification Covenants. It being acknowledged that although
the Principal Shareholders only own approximately eighty one
percent (81%) of Seller's outstanding stock, the Principal
Shareholders and Seller, jointly and severally, will indemnify
Buyer and Roundy's and their affiliates and hold them harmless
from and against one hundred percent (100%) of any and all
liabilities, demands, claims, suits, proceedings, actions or
causes of action, assessments, losses, penalties, costs, damages
and expenses, including reasonable attorneys' and expert witness
fees (collectively, "Damages"), sustained or incurred by Buyer or
Roundy's or their affiliates as a result of, arising out of or
incidental to:
(i) any breach or inaccuracy of any
representation or warranty made by Seller or either
Principal Shareholder in this Agreement or in any
certificate or other document or instrument delivered by
Seller or either Principal Shareholder to Buyer or Roundy's
in connection with the transactions contemplated hereby;
(ii) any failure of Seller or either Principal
Shareholder to comply with, or any breach or nonfulfillment
by Seller or either Principal Shareholder of, any covenant
of Seller or the Principal Shareholders set forth in this
Agreement or in any certificate or other document or
instrument delivered by Seller or either Principal
Shareholder to Buyer or Roundy's in connection with the
transactions contemplated hereby;
(iii) any failure of Seller or either
Principal Shareholder to timely pay, perform or discharge
when due any liability or obligation of Seller (including,
without limitation, any tax liabilities including sales and
withholding tax liabilities (whether or not the
representation and warranty contained in Section 6(l) hereof
is breached)), except for the Contract Liabilities and
Assumed Employee Accruals expressly assumed by Buyer
hereunder;
(iv) any failure of Seller to comply with the
requirements of any bulk sales or bulk transfer law; and
(v) any act or omission of Seller occurring prior
to the Effective Time, including, without limitation, any
liability for any infringement of the intellectual property
rights of others by Seller or by any of Seller's Intangible
Rights, to the extent such liability relates to time periods
prior to the Effective Time (whether or not the
representation and warranty contained in Section 6(s) hereof
is breached).
(d) Buyer's Indemnification Covenants. Buyer and
Roundy's, jointly and severally, will indemnify Seller and the
Principal Shareholders for and hold them harmless from and
against any and all liabilities, demands, claims, suits,
proceedings, actions or causes of action, assessments, losses,
penalties, costs, damages and expenses, including reasonable
attorneys' and expert witness fees (collectively, "Damages"),
sustained or incurred by Seller or the Principal Shareholders as
a result of, arising out of or incidental to:
(i) any breach or inaccuracy of any
representation or warranty made by Buyer or Roundy's in this
Agreement or in any certificate or other document or
instrument delivered by Buyer or Roundy's to Seller or the
Principal Shareholders in connection with the transactions
contemplated hereby;
(ii) any failure of Buyer or Roundy's to comply
with, or any breach or nonfulfillment by Buyer or Roundy's
of any covenant of Buyer or Roundy's set forth in this
Agreement or in any certificate or other document or
instrument delivered by Buyer or Roundy's to Seller or the
Principal Shareholders in connection with the transactions
contemplated hereby; or
(iii) any failure of Buyer to timely pay,
perform or discharge any of the liabilities of Seller
expressly assumed by Buyer hereunder.
(iv) any and all liabilities arising after
the Effective Time and attributable to Buyer's conduct of
the Business after the Effective Time.
(e) Claims for Indemnification.
(i) Promptly upon an Indemnified Party's
obtaining knowledge of any facts causing it to believe that
it has or will have a claim for indemnification against any
Indemnifying Party or Parties hereunder, the Indemnified
Party shall give written notice of such claim to the
Indemnifying Party or Parties. Such written notice shall
set forth the nature and (to the extent then known) the
amount of Damages incurred by or threatened against the
Indemnified Party. Notwithstanding the foregoing, the right
of indemnification hereunder shall not be affected by any
failure of the Indemnified Party to give or by its delay in
giving such notice unless, and then only to the extent that,
the rights of the Indemnifying Party are prejudiced as a
result of such failure or delay.
(ii) The Indemnified Party shall tender to the
Indemnifying Party the defense of any claim, suit,
proceeding, action or assessment brought by any third party
(hereinafter "Third Party Claim"). Failure by the
Indemnifying Party to notify the Indemnified Party of its
election to defend any such Third Party Claim within ten
(10) days after the Indemnified Party's notice to the
Indemnifying Party of the same shall be deemed a waiver by
the Indemnifying Party of its right so to defend. If the
Indemnifying Party assumes such defense, the obligations of
the Indemnifying Party hereunder as to such Third Party
Claim shall include taking all steps reasonably necessary in
the defense or settlement thereof and holding the
Indemnified Party harmless from and against any and all
Damages sustained or incurred by the Indemnified Party which
result from, arise out of or are incidental to any
settlement approved by the Indemnifying Party or any
judgment in connection therewith. Legal counsel engaged by
the Indemnifying Party to defend such claim shall be
reasonably acceptable to the Indemnified Party. Except with
the written consent of the Indemnified Party, the
Indemnifying Party, in the defense of any such Third Party
Claim, shall not consent to the entry of any judgment
against or adversely affecting the Indemnified Party (other
than a judgment of dismissal on the merits and without
costs) or enter into any settlement unless such settlement
provides that the Indemnified Party is fully released by the
third party as to such Third Party Claim.
(iii) If the Indemnifying Party does not
assume the defense of any such Third Party Claim as provided
herein, the Indemnified Party may defend against such Third
Party Claim in such manner as the Indemnified Party deems
advisable or appropriate and may settle such Third Party
Claim or consent to the entry of judgment with respect
thereto upon such terms as it deems advisable or
appropriate, and in such event the Indemnifying Party shall
promptly reimburse the Indemnified Party for the amount of
such settlement or judgment and for any and all Damages
sustained or incurred by the Indemnified Party which result
from, arise out of or are incidental to the defense or
settlement of such Third Party Claim.
(f) Time Limitations on Claims. An Indemnified Party
shall not be entitled to indemnification pursuant to this Section
16 with respect to any claim for indemnification pursuant to
subparagraph 16(c)(i) or Subparagraph 16(d)(i) unless written
notice of such claim is given by the Indemnified Party to the
Indemnifying Party within the applicable Survival Period.
(g) Indemnification Threshold and Cap.
Notwithstanding anything to the contrary herein and except as
provided in Section 16(h): (i) any claim by an Indemnified Party
against any Indemnifying Party under Sections 16(c)(i) or
16(d)(i) shall be payable by the Indemnifying Party only in the
event and to the extent that the accumulated amount of all claims
against such Indemnifying Party shall exceed the amount of One
Hundred Thousand Dollars ($100,000) in the aggregate (the
"Indemnification Threshold"); and (ii) the maximum amount for
which an Indemnifying Party shall be obligated to provide
indemnification hereunder shall not exceed the Purchase Price
(the "Indemnification Cap"). In applying the Indemnification
Threshold and the Indemnification Cap, Buyer and Roundy's, on the
one hand, and all Seller and the Principal Shareholders, on the
other hand, shall be considered to be one "Indemnifying Party."
At such time as the aggregate amount of claims against an
Indemnifying Party shall exceed the Indemnification Threshold,
such party shall thereafter be liable on a dollar-for-dollar
basis for the full amount of all further claims beyond the
Indemnification Threshold, subject to the Indemnification Cap.
Further, the Indemnification Threshold shall not apply in the
case of any single claim or series of related claims that itself
or themselves exceed the Indemnification Threshold (provided,
that the Indemnification Threshold shall continue to be available
for all other claims to which this sentence does not apply).
(h) Zero-Threshold Claims. Notwithstanding the
preceding Section 16(g), the following categories of claims for
indemnification ("Zero-Threshold Claims") shall not be subject to
the Indemnification Threshold or the Indemnification Cap, but
shall be payable on a dollar-for-dollar basis without any
exclusion therefor or limitation thereon:
(i) any claims related to a breach of the
representations and warranties contained in Subsections
6(a), (b), (c), (d), (k) or Subsections 7(a), (b) and (c);
(ii) any claims by either party against the other
for payment or return of the Purchase Price or any portion
thereof, including any adjustments to the Purchase Price
payable under Section 4 or 5 hereof.
(i) Tax Effect of Losses; Insurance. In determining
the amount of any indemnification claim for purposes of this
Section 16: (A) there shall be taken into account any income or
other Tax benefit which the Indemnified Party may actually have
received or be entitled to receive (if in the future, at its
present value) as a result of the Damages forming the basis of
such claim, and there shall also be taken into account any income
or other Tax cost which the Indemnified Party would incur as a
result of its receipt of any indemnification payment from the
Indemnifying Party (including any such indemnification payment
which the Indemnified Party would be entitled to receive but for
the provisions of Section 16(g)); and (B) the Indemnifying Party
shall have the benefit of any insurance proceeds payable to the
Indemnified Party in respect of the Damages forming the basis of
such claim.
17. COUPONS. Buyer will not acquire hereunder any of the
rights of Seller to be reimbursed for any coupons accepted by
Seller from customers prior to the Effective Time, and Buyer does
not assume hereunder (and Seller will hold Buyer harmless from)
any liability of Seller relating to such coupons or the Seller's
acceptance thereof.
18. GENERAL PROVISIONS.
(a) Amendment and Modification. This Agreement may be
amended, modified and supplemented prior to the Closing only by
written agreement of the parties hereto or as otherwise provided
herein.
(b) Waiver of Compliance. Any failure of Buyer or
Roundy's or Seller or the Principal Shareholders to comply with
any obligation, covenant, agreement or condition contained herein
may be expressly waived in writing by an officer of Seller or an
officer of Buyer, respectively, but such waiver or failure to
insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
(c) Fees and Expenses. Whether or not the
transactions contemplated by this Agreement are consummated, and
except as otherwise provided in this Agreement, all fees and
expenses incurred by a party in connection with this Agreement
shall be borne by such party, including, without limitation, all
fees of its counsel, consultants and accountants; provided,
however, that Seller shall be liable for and pay all sales taxes,
transfer taxes, and recording fees incurred in connection with
the transactions contemplated by this Agreement, and for any fee
or commission due any KPMG Peat Marwick LLP or any other broker,
finder or agent engaged by Seller or its shareholders.
(d) Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given when
personally delivered or when sent by U.S. certified or registered
mail, postage prepaid:
If to Buyer or to Roundy's, to:
Roundy's, Inc.
23000 Roundy Drive
Pewaukee, WI 53072
ATTN: Edward G. Kitz, Vice President,
Secretary and Treasurer
with a copy to:
Whyte Hirschboeck Dudek S.C.
111 East Wisconsin Avenue, Suite 2100
Milwaukee, WI 53202
ATTN: John F. Emanuel
or to such other person or address as Buyer or Roundy's shall
furnish to Seller and the Principal Shareholders in writing in
accordance with this Section.
If to Seller, to:
Ultra Mart, Inc.
W173 N9170 St. Francis Drive
Menomonee Falls, WI 53051
ATTN: Robert A. Farrell
with a copy to:
Norman Matar
Davis & Kuelthau, S.C.
111 East Kilbourn Avenue
Milwaukee, WI 53202
If to Scott A. Sylla, to:
Scott A. Sylla
c/o Ultra Mart, Inc.
W173 N9170 St. Francis Drive
Menomonee Falls, WI 53051
with a copy to:
Norman Matar
Davis & Kuelthau, S.C.
111 East Kilbourn Avenue
Milwaukee, WI 53202
and:
Robert Bellin
Reinhart, Boerner, Van Deuren,
Norris and Rieselbach, S.C.
1000 North Water Street
Milwaukee, WI 53202
If to Robert A. Farrell, to:
Robert A. Farrell
c/o Ultra Mart, Inc.
W173 N9170 St. Francis Drive
Menomonee Falls, WI 53051
with a copy to:
Norman Matar
Davis & Kuelthau, S.C.
111 East Kilbourn Avenue
Milwaukee, WI 53202
or to such other person or address as Seller or the Principal
Shareholders shall furnish to Buyer and Roundy's in writing in
accordance with this Section.
Notwithstanding the foregoing, written notice given in any
manner shall nonetheless be effective upon its actual receipt by
the party or parties entitled thereto.
(e) Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other
party, whether by operation of law or otherwise; provided that
Buyer may, prior to the first Applicable Inventory Date assign
its rights and delegate its duties and obligations hereunder with
respect to the purchase of one or more of the Stores to one or
more affiliates of Buyer, provided further that no such
assignment or delegation by Buyer shall relieve Buyer or Roundy's
of any of their respective obligations or liabilities hereunder.
(f) Governing Law. This Agreement and the legal
relations among the parties hereto shall be governed by and
construed in accordance with the internal laws of the State of
Wisconsin.
(g) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(h) Captions. The section and paragraph headings
contained in this Agreement are for convenience only and shall
not be deemed to affect the meaning or interpretation of any
provision of this Agreement.
(i) Roundy's Guaranty. Roundy's hereby guarantees the
full, prompt and complete performance by Buyer of each and every
obligation of Buyer under this Agreement.
(j) Entire Agreement. This Agreement, including the
Disclosure Schedule and Exhibits hereto, and together with the
Fox Point Sublease Agreement, the Termination and Release
Agreement, and the other documents and certificates delivered
pursuant to the terms hereof, set forth the entire agreement and
understanding of the parties hereto in respect of the subject
matter contained herein, and supersede all prior agreements,
promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any
officer, employee or representative of either party hereto.
(k) Severability. The invalidity of any provision of
this Agreement or portion of a provision shall not affect the
validity of any other provision of this Agreement or the
remaining portion of the applicable provision.
(l) No Third Party Beneficiaries. Neither this
Agreement nor any provision hereof, nor any statement, schedule,
certificate, instrument or other document delivered or to be
delivered pursuant hereto, nor any agreement entered into or to
be entered into pursuant hereto or any provision thereof, is
intended to create any right, claim or remedy in favor of, or
impose any obligation upon, any person or entity other than the
parties hereto and their respective successors, personal
representatives, executors, heirs, beneficiaries, and permitted
assigns.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
SELLER: BUYER:
ULTRA MART, INC. ULTRA MART FOODS, INC.
By: By:
Robert A. Farrell, President Charles H. Kosmaler, Jr., Vice-
President
PRINCIPAL SHAREHOLDERS: ROUNDY'S, INC.
By:
Robert A. Farrell, Michael J. Schmitt, Vice-
Individually President - Sales & Development
Scott A. Sylla,
Individually
Section ______ of the Disclosure to
Asset Purchase Agreement
dated December , 1999
between
Ultra Mart Foods, Inc.
Ultra Mart, Inc.
Exhibit 10.2(a)
Executive Protection Policy
DECLARATIONS
EXECUTIVE PROTECTION POLICY
Policy Number 8132-05-32D
Federal Insurance Company, a stock
insurance company, incorporated
under the laws of Indiana, herein
called the Company.
Item 1. Parent Organization:
ROUNDY'S, INC.
23000 ROUNDY DRIVE
PEWAUKEE, WISCONSIN
53072
Item 2. Policy Period: From 12:01 A.M. on NOVEMBER 01, 1998
To 12:01 A.M. NOVEMBER 01, 2001
Local time at the address shown in
Item 1.
Item 3. Coverage Summary
Description
GENERAL TERMS AND CONDITIONS
EXECUTIVE LIABILITY AND INDEMNIFICATION
Item 4. Termination of
Prior Policies: 8132-05-32C
THE EXECUTIVE LIABILITY AND INDEMNIFICATION, FIDUCIARY LIABILITY,
OUTSIDE DIRECTORSHIP LIABILITY AND EMPLOYMENT PRACTICES LIABILITY
COVERAGE SECTIONS (WHICHEVER ARE APPLICABLE) ARE ALL WRITTEN ON A
CLAIMS MADE BASIS. EXCEPT AS OTHERWISE PROVIDED, THESE COVERAGE
SECTIONS COVER ONLY CLAIMS FIRST MADE AGAINST THE INSURED DURING
THE POLICY PERIOD. PLEASE READ CAREFULLY.
In witness whereof, the Company issuing this policy has caused
this policy to be signed by its authorized officers, but it shall
not be valid unless also signed by a duly authorized
representative of the Company.
FEDERAL INSURANCE COMPANY
HENRY A. GULICK DEAN R. OFFURE
_______________________ ______________________
Secretary President
OCTOBER 15, 1998 ROBERT HAMBURGER
_______________________ ----------------------
Date Authorized
Representative
DECLARATIONS
EXECUTIVE LIABILITY AND
INDEMNIFICATION COVERAGE SECTION
Item 1. Parent Organization:
Roundy's, Inc.
Item 2. Limits of Liability:
(A) Each Loss $15,000,000
(B) Each Policy Period $15,000,000
Note that the limits of liability and any deductible or retention
are reduced or exhausted by defense costs.
Item 3. Coinsurance Percent: None
Item 4. Deductable Amount:
Insuring Clause 2 $ 150,000.
Item 5. Insured Organization:
Roundy's, Inc.
and its subsidiaries
Richwood Cardinal Supermarket
Item 6. Insured Persons:
Any person who has been, now is, or shall become duly elected
director or a duly elected or appointed officer of the Insured
Organization, including Trustees, Advisory Committee, and Sherry
Noll, Risk Manager at Roundy's, Inc.
Item 7. Extended Reporting Period:
(A) Additional Premium: 75% of annual premium
(B) Additional Period: 365 days
Item 8. Pending or Prior Date: 06-13-83
Item 9. Continuity Date: 06-13-83
EXHIBIT 13
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
($000 omitted except for
per share data and ratios) 1999 1998 1997 1996 1995
- ---------------------------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net sales and service fees $2,717,216 $2,576,222 $2,610,697 $2,579,010 $2,488,196
Net earnings 17,609 11,898 11,204 10,267 9,022
Patronage dividends 6,447 5,976 5,687 5,568 5,129
Total assets 497,325 462,412 440,310 434,641 407,337
Long-term debt less current maturities 48,564 73,298 83,458 93,615 78,850
Stockholders' equity (1) 153,919 134,811 122,460 109,945 100,033
Book value per share 129.95 114.80 104.35 94.30 85.15
Working capital 67,937 84,743 84,074 90,498 90,740
Current ratio 1.25:1 1.38:1 1.39:1 1.42:1 1.43:1
Earnings before patronage
dividends as a percent of net
sales and service fees 1.33% 1.01% 0.97% 0.91% 0.81%
</TABLE>
(1) includes redeemable common stock
<PAGE>
Message to our Stockholders
- ---------------------------
Once more I address our management, our associates, our stockholders and
our suppliers with a message of an increasingly competitive market, one
which will require diligence and the spirit of competitiveness, quality
and customer service that has made this Company grow to be the leader in
the marketplace.
Once more, in spite of marketplace conditions, Roundy's has risen to the
occasion. Our Company in 1999 had a record year, in many respects, the
best in its 127-year history. It was a year that we had predicted several
years ago when we forecasted "a new era of unbridled prosperity for Roundy's."
We must continue to work together as a team to stay ahead of the
competition in 2000 and beyond. We can enjoy our success, but we must
always be prepared for greater competition.
We are a good company, a strong company, and a company that believes in its
communities, its roots and its people. We have been successful because we
are a team, a team that is alert to our customers' needs at all times, even
in times of prosperity. Now, let's take a look at some of the factors that
made 1999 such a great year.
As I mentioned earlier, industry challenges continued throughout 1999.
In spite of increased retail chain competition, a continued lack of
inflation and a $3.4 million dollar expense for Y2K compliance, our
Company had one of the finest years in its 127-years of operation.
1. Sales increased 5.5 percent to $2,717,216,400, a Company
record.
2. Earnings before patronage dividends increased 38.6 percent to
$36,065,600, which is also a Company record. This amount as a
percent to sales was 1.33 percent, which represents the highest
ratio in 19 years.
3. In addition to stock growth of 13.2 percent, we paid out a patronage
dividend of $6,446,900, which is another Company record.
4. Net earnings of $17,609,400 reached record levels for the fifth
consecutive year.
5. Long-term debt decreased $24,734,500. Our long-term debt to equity
ratio of 0.32:1 is the lowest ratio in 21 years.
6. Our sales per full-time employee ratio, which measures how efficient
our Company is utilizing employees to generate sales, hit a historical
high at $616,000.
7. The capital reinvestment we have made in our buildings, fleet and
technology demonstrates our commitment to our long-term future.
Last 5 years (1995-1999) - $147,039,300
Prior 5 years (1990-1994) - $ 79,828,100
8. Our EBITDA (earnings before interest, taxes, depreciation and
amortization) increased $9,294,900, or 17.8 percent to another Company
record.
WHOLESALE OPERATIONS
The Lima Division had a state-of-the-art warehouse system installed in
April 1998, which created many opportunities for cost savings, improved
production and service for our customers. These savings continued and were
fully realized in 1999. For example, warehouse outs were dramatically
reduced from 5,000 per week to 100 or less. Production standards on
selection and forklifts improved production and reduced hours in the
warehouse.
Installation of the directed put-away system in three of the warehouses
was completed in the spring of 1999. Immediate gains were seen in
productivity, reduced forklift errors, better tracking of errors and
improved utilization of warehouse space.
In early 1999, the new perishable facility at our Evansville Division was
brought into full production with total shipments of frozen food, meat and
ice cream. The advanced building design and rack layout combined with the
new warehouse management system, provided efficiencies in product receiving,
storing and shipping. The modern refrigeration system installed in the new
facility also enhanced temperature control and product quality. In July the
Eldorado facility transferred all dairy products to the Evansville Division,
enabling all refrigerated products to be shipped from the new facility.
The Milwaukee Division's warehouse management system was replaced to
accommodate Y2K during the month of March 1999. With an enormous amount of
coordination and planning, which affected 600 associates, the system was
successfully replaced overnight. In addition, a new pilot project was
implemented in August 1999 to reduce selection errors and shortages. Using
a headset, microphone and radio transceiver the selector communicates with
the voice directed selection systems. The pilot proved to be successful
and the program is scheduled to be implemented throughout the Milwaukee
Division's warehouses by July 2000.
Without a doubt, the addition of 126,000 square feet of freezer and
perishable space was the highlight of the Westville Division's year. This
brought the facility to approximately 683,000 square feet. Construction
began in June and is now complete with the first frozen food shipments
scheduled for March 2000.
For the past 18 months, Roundy's has been working to build a collective
share group procurement system (consortium) that allows Roundy's to partner
with two other large co-ops in order to combine purchasing power. During
1999, this effort became a successful reality. The early results have been
extremely positive. As a group, all members have agreed to accelerate the
timetable that was originally established.
The year 1999 proved to be a successful year in Roundy's company-wide,
counter super-center initiative. With our stores using an early intervention
strategy, the majority of the markets have proven to produce excellent
results.
Roundy's private label program had another strong sales year with a sales
increase of 5.5 percent or $9,515,900 for the year. A major contributing
factor in the growth was strong perishable sales.
One to one customer specific marketing became a reality. Utilizing new
software, Roundy's initiated a direct-marketing campaign where specific
mailers were sent to households based upon information in Roundy's data
warehouse. Effective at building customer loyalty, direct-marketing will
also be used to increase card usage, build perimeter sales, increase sales
of Roundy's private label products and reward our stores best customers.
Additional mailers will be developed in 2000 to increase sales in eroding
categories.
NEW BUSINESS
Roundy's is delighted to be associated with the following new customers in
addition to the existing customers who are the most important factor of our
success.
Our Westville Division experienced the gain of a new Polly's store in
Dexter, Michigan plus the four-month impact of supplying produce to the
three new corporate stores in Indiana. In addition, remodels were completed
or replacement stores were opened by Martin's in Elkhart, Indiana; Tysen's
in DeMotte, Indiana; Key Markets in Lake Station, Indiana; and Northland
in Kingsley, Michigan.
Our Lima Division began supplying three Mor For Less stores in Cumberland,
Maryland; Auburn, Indiana; and Cleveland, Ohio.
Our Eldorado/Evansville Divisions brought on eight new customers, adding
fifty new stores. Houchens, a long respected name in Kentucky and
Tennessee, represented forty of the new stores.
Our Milwaukee Division began supplying four new Pick 'n Save locations
in Waukegan, Illinois, and in Walworth, Madison and Wausau, Wisconsin.
In addition, the Milwaukee Division welcomed new customers. These
families own and operate the following stores: the Creske and Maloney
families of Wausau-Wausau Pick 'n Save; the Balistreri family-Sendiks
of Whitefish Bay; and Randy and Kathryn Braunreiter-Randy's of Milwaukee.
Finally, several major remodel projects were concluded in 1999. These
include the Stoughton Pick 'n Save, Park & Save of Sheboygan, Shawano
Pick 'n Save, Good Hope Pick 'n Save and Dee Jay Foods in Glencoe,
Illinois.
Our Van Wert and Mazomanie General Merchandise facilities not only had
increased sales, but expanded to other classes of trade-discount drug stores.
RETAIL OPERATIONS
In the year 1999, the retail operations group continued its trend of
eliminating non-performing stores with store closings in Michigan and
Ohio. We have continued the policy of reviewing each store that doesn't
meet the minimum profit level for both retail and warehouse operations.
The previous year's trend of positive sales growth continued. Same store
sales, among Corporate-owned stores, continued to show improvement, even
while competition opened new stores in the Wisconsin market. Wal-Mart,
Kohl's, Jewel-Osco and Sentry all opened new stores.
The Milwaukee Journal Consumer Analysis Survey reported that in the past
year, Pick 'n Save maintained its 52 percent market share. The market
studies indicate an increase of our image in both the meat and produce
departments. The growth in these two departments enabled us to stop the
sales growth our competitors had planned in this marketplace. The growth
in these categories is directly related to the market strategy of using
only national brands. The produce image has increased each year to the
point that we are now seen as the market leader in this category. The
meat department has also increased its image through the use of USDA
Choice meats. It is our belief that Pick 'n Save can now honestly say
"We have the best meat in town." This certainly has always been our goal
over the years, but now it's our customers who are telling us this fact.
This gives us the confidence to continue product upgrades and advertising
messages that will increase our expectation with consumers.
In the year 2000, we plan to continue our rollout of even more signature
items in the deli and produce departments. Ready-to-eat products offer
consumers the last minute decision that fast food and casual dining now
offer them. We continue to expand the ready-to-eat items in our meal
centers located in each of our stores.
Our advertising campaign, "Simplified Savings" continues to reap benefits
for our retailers as more customers switch away from high/low retailers to
our customer-friendly programs. The benefits of the frequent shopper card
have only begun to change the landscape of retailing in our trading area.
Many stores are now approaching an 80 percent penetration level with our
consumers. We believe our database is #1 in the greater Milwaukee trading
area. Now that we know our customers' habits, this invaluable information
enables us to better service the consumers' needs.
The Pick 'n Save "WE CARE" Program began tracking customer charity
contributions on the Saver's Club Card. Each quarter over 4,000 checks
were issued to Wisconsin charities totaling $2.5 million in contributions
by year-end. This continues to be the largest grocery charity program in
Wisconsin.
The retail group is well positioned to have a solid year in 2000. The
acquisitions of the Ultra Mart and Mega Mart stores will increase the retail
side of our business to approximately $1 billion in sales for the year 2000.
This will allow us to continue as the market leader.
TECHNOLOGY
In 1999 management information systems (MIS) continued to make some
significant advances in positioning itself for future strategic endeavors in
order to meet our critical, changing business needs. Emphasis remains
focused on wholesale, while emerging business needs are being identified
for further retail development.
As referenced in the 1998 Annual Report, Y2K was the most critical endeavor
in 1999 that concluded with a successful, "well done" declaration of victory
as the calendar turned to the new century. These projects were measured in
remediated code allowing the business to continue without interruption.
Once again, we continue to focus our efforts on standardization and
centralization. In 1999, we also undertook 21 major projects excluding
all Y2K related endeavors. These included data center upgrades,
introducing new reporting and analysis tools and disaster/business
contingency efforts. This continues to mold the environment at the
divisions to be identical to each other and supported from a central
location at Pewaukee. Consolidation became most apparent in 1999 by
eliminating all mainframes at the divisions.
As we have continued to install standard applications such as warehouse
management systems, buying and financial systems, considerable effort in
the past year has been directed to completing the "circle of
standardization." In order to complete this circle, Roundy's must eliminate
the seven distinct but disparate order entry/billing systems. A single
order management system (OMS), meeting all retailer needs, and more, is
nearing completion from a development perspective and will be initially
installed at the Michigan Division in the fourth quarter of 2000.
A very aggressive roll out schedule is anticipated that will enable us
to have this system deployed enterprise wide by the end of the fourth
quarter of 2001.
Once again, this install will allow the removal of the old mainframe
resulting in a substantial reduction of operating expenses, one of the
original objectives of the standardization/centralization initiative.
With the removal of this hardware, we further reduce the attendant cost
for maintenance in addition to eliminating a major operating system
within our environment.
Although the development and initial deployment of the OMS System is a
critical strategic objective in year 2000, other software and hardware
changes continue to enhance our operating environment. Continuous
uninterrupted operations reflecting exceptional service levels for the
industry will become paramount as our business continues to grow within
the established physical confines. Back-up and contingency plans will
be formulated and executed in 2000. This back-up plan will allow us,
within four hours, to re-establish computer processing in any warehouse
in the event that there is a serious hardware problem with the local
division processor. This endeavor is to meet our demands that require
product flow twenty-four hours a day, every day.
Closely linked and parallel to our technological endeavors is our continuing
effort to encourage our associates to develop the new skill sets required
to facilitate our business data model, new case tools to develop code more
rapidly, new operating systems in addition to new, more efficient
data bases. Change is occurring rapidly and we must maintain skill sets
through educational opportunities that provide meaningful career enhancing
avenues for each associate. These investments, measured in dollars and
human endeavor are expanding each year, but must be made in order to
attract and maintain a level of competency that will retain our competitive
position. In today's marketplace, this challenge is never ending,
particularly when certain skill sets are in high demand, but also in a
continued state of flux.
Such needs will likely gravitate to the Internet. Resources will be required
to fulfill our needs, both technical and business driven, derived from the
Internet or Intranet utilizing "business to business" or perhaps "business
to consumer" transactions. E-Commerce is a new emerging business process
that will develop new relationships with existing trading partners while
simultaneously opening up new opportunities to Roundy's and its electronic
relationships within the business community.
Clearly, when our existing projects are integrated with new opportunities,
the future remains exciting. Yet, we are faced with uncertainties
requiring continued collaboration between MIS and other core competencies
within Roundy's, thus allowing us to maintain our leadership role within
our industry.
THE FUTURE
Competition is what made this country great, and it will continue to make
Roundy's a better company. Some of the new entrants to the market come
from out-of-state and are larger than Roundy's, yet none comes close to
the customer loyalty and satisfaction or the quality of our products.
We will continue to move forward as a team, we will meet the competition
wherever it goes, and we will continue to make Roundy's the best company
it can be.
As such, we will pursue the following areas in 2000:
1. Continued implementation and execution of our strategic
plan throughout the year 2000 and beyond.
2. Organic growth and growth through acquisition.
3. New program development such as above ground fueling
stations and development of organic and natural food
departments at retail will enhance our consumer image
and provide value-added sales both at wholesale and
retail.
4. Reinvestment in technology, especially at retail.
With our recent retail acquisitions, we assure ourselves of continuation
of volume through our Milwaukee Division, which enables us to maintain a
low cost of product to all customers.
In closing, we are proud of the achievement of last year. These results
could not have been achieved without the full support of our stockholders,
customers, associates and suppliers. All truly worked together as a team.
I would also like to thank our Board of Directors, Trustees and our Retail
Advisory Committee for their guidance and direction throughout the year.
I look forward to facing the challenges of 2000 with all of you.
Sincerely,
Gerald F. Lestina
President & CEO
<PAGE>
Financial & Operational Review
Capital
Structure
(in millions) 1999 1998
- -------------- -------------- --------------
Long-term debt $ 48.6 24.0% $ 73.3 35.2%
Stockholders' equity(1) 153.9 76.0% 134.8 64.8%
-------------- --------------
Total capital $202.5 100.0% $208.1 100.0%
(l) Includes redeemable common stock
LIQUIDITY AND CAPITAL RESOURCES
The final year of the millennium - 1999, proved to be a year of challenges
and opportunities for Roundy's. The challenges included industry-wide
consolidations, intense competition within our marketing area from both
retail chains and super-centers and the avoidance of Y2K problems which
would impact operations.
Within this year of trepidation, the Company achieved record sales
and earnings and also posted a record patronage dividend. Yet,
there are still opportunities. Specifically, the Company continues
to experience a growing demand for capital. This demand is fueled by
the many acquisition opportunities available to us. In conjunction with
our Strategic Plan, the Company reacted positively to certain acquisition
opportunities. Moreover, the Board of Directors approved two acquisitions
which will make Roundy's a stronger retail player in the new millenium. The
acquisitions will not be completed until the end of the first quarter of
2000. The Company will incur additional long-term debt to fund the
acquisitions.
Essential to the attainment of Roundy's strategic planning goals is the
continued availability of capital. As in the past, a key element of our
capital is Roundy's cash position. The Company completed 1999 on a strong
note with over $68 million in cash at year-end. This is $3.7 million less
than at the end of 1998, but $16.0 million greater than at the end of 1997.
Significant to the modest decline in the 1999 balance is the increase in
capital expenditures in 1999. Total capital expenditures, net of insurance
proceeds, were $10.9 million greater than 1998 and $13.1 million greater
than 1997. The construction of a new freezer addition to the Westville
warehouse accounted for over $8.3 million of the increase. With the current
growth in the market, Management decided to move from the antiquated South
Bend freezer and build a freezer at the Westville warehouse. This will
enable the division to expand its produce and meat offerings, as well as
supply all frozen products from the same facility. The Company financed
the capital expenditures through operating cash flow.
Other factors, which impacted the change in cash, included a $9.6 million
increase in accounts receivable and an $9.0 million increase in accounts
payable. Receivables are a function of credit sales. Accounts receivable
increased compared to the prior year due to the record sales in 1999. The
Company continues to monitor its receivables closely and focus on quality
accounts. Moreover, Roundy's 1999 ratio of "accounts receivable days
outstanding" improved slightly to 8.5 average days outstanding versus 8.6
average days outstanding for 1998 and 9.2 in 1997. Accounts payable are
impacted by inventory growth and turns. Management has continued to strive
to improve average inventory turns, thereby controlling the growth in
inventory. The major reason for the increase in year-end inventories
and payables was due to a build-up in wholesale inventories in selected
categories to offset potential product shortages because of Y2K problems.
An analysis was made of all key commodities and planned inventory increases
were made in each category to insure that customers would have a continuous
supply in the first three weeks of 2000. Inventories and accounts payable
balances reflected more normal levels at the end of January 2000.
The Company believes that its cash flow from operations together with other
available sources of funds will be adequate to meet its financing
requirements. In the event, the Company makes significant future capital
expenditures or acquisitions, it may raise funds through additional
borrowings.
As a result of its strong cash flow, the Company was able to decrease its
average outstanding debt. Average outstanding debt for 1999 was $81.7
million versus $91.9 million for 1998 and $102.1 million for 1997. The
Company had a $60 million borrowing line available during the year, but
none was used in 1999. With the positive trend of lower debt, Roundy's
long-term debt to equity ratio declined to 0.32:1 at the end of 1999
versus 0.54:1 in 1998 and 0.68:1 in 1997. The average interest rate
applicable to borrowings during 1999, 1998 and 1997 was 7.7%. Additional
long-term debt will be required in 2000 to fund the acquisitions of
retail stores.
With improved management controls and positive cash flows, the Company
was able to invest excess funds in various interest earning vehicles
during 1999. Daily investments averaged $45.8 million in 1999 versus
$41.9 million in 1998 and $26.7 million in 1997.
RESULTS OF OPERATIONS
Net Sales and Service Fees
Net sales and service fees for 1999 were $141 million greater than 1998
and $107 million greater than 1997. The 5.5% increase in 1999 sales
and fees can be attributed to strong sales at wholesale aided by the
acquisition of seven new Corporate stores and the replacement of a large
portion of the business lost due to a 1998 fire which destroyed the
Evansville, Indiana warehouse. The warehouse has been rebuilt and became
fully operational in January 1999 which enabled the Company to
aggressively grow the business. Further, the Company continued to evolve
its "frequent shopper card" which has served as a significant, positive
factor in helping to combat the growth of retail chains and super-centers
in Roundy's service territories. Finally, the potential that Y2K
problems would cause product shortages has contributed to the sales
increase for the year, with December sales attaining record levels.
Net sales and service fees for 1998 were off approximately $34.5
million or 1.3% compared to 1997. This decrease was primarily due to the
sales lost at the Eldorado and Evansville Divisions because of the fire
that destroyed the Evansville facility, and partially due to the 53rd week
in 1997.
Gross Profits
Gross profits for the year were 9.8% versus 9.5% for 1998 and 9.5%
for 1997. The modest increase in gross profits was due mainly to
the increase in retail stores owned by Roundy's. This segment of the
business has a significantly higher gross profit level than wholesale.
Retail sales represented 11.9% of total Roundy's sales and service fees
in 1999 compared to 11.0% in 1998 and 11.2% in 1997. Wholesale gross
profit levels continued to reflect the competitiveness of the industry
remaining at 7.7% for 1999 versus 7.5% for 1998 and 7.7% for 1997. With
the continued growth of super-centers within Roundy's markets and the
consolidation of retail chains, opportunities for significant increases
in gross profits at the wholesale level are limited. The Company continues
to keep price increases at minimum levels and has made a strategic
decision to increase the number of corporate-owned retail stores.
With the ongoing changes in the industry and vendor funding being
directed more and more to retail, Roundy's long-term financial strength
is in increasing this segment of its business.
OPERATING AND ADMINISTRATIVE EXPENSES
Total operating and administrative expenses increased in 1999 to 8.6% of
net sales and service fees compared to 8.3% in 1998 and 8.4% in 1997.
The 0.3% increase over 1999 is primarily attributable to the growth in
retail operations. In accordance with the Company's Strategic Plan to
expand its Corporate retail operations, Roundy's acquired seven stores
during 1999. Retail operations have higher wage expense and operating
cost as a percent of net sales and service fees. Accordingly, total 1999
retail operating costs were 15.4% greater than 1998 and 12.6% more
than 1997. In contrast, wholesale operating costs remained flat
compared to 1998 and were 0.2% below 1997 levels. A key element of
Roundy's Strategic Plan is improving efficiencies and eliminating costs
from the systems. Specific programs include standardizing all major systems
and centralizing computer operations. In conjunction with the efforts to
identify and rectify any potential Y2K problems, standardization efforts
were implemented and significant progress was achieved. A second major
undertaking was to increase sales in Roundy's warehouses with the
goal of improving customer service, improving throughput and reducing costs
through greater efficiency and reduced overhead. Another major effort
in 1999 was the construction of a 126,000 square foot freezer addition to
the Westville warehouse and the planned closing of the South Bend
facility. A $1.7 million provision was made for the closedown of the
South Bend facility and the related costs associated with the closing.
The Westville warehouse, with the new addition, now handles all commodities
except nonfood products.
INTEREST EXPENSE
Interest expense in 1999 decreased $0.8 million from 1998 and by $0.9
million from 1998 to 1997. This expense, as a percent to net sales and
service fees, decreased to 0.24% from 0.28% in 1998 and 0.31% in 1997.
With the positive trend in sales, earnings and cash flow, the Company did
not have to utilize any of its borrowing capacity and, in fact, reduced
total debt by $10.2 million. Debt reductions in 1999 were comparable to
1998 and 1997 levels. With additional long-term debt necessary to fund the
acquisitions, interest expense will increase in 2000 and future years.
TAXES
The effective income tax rates for 1999, 1998 and 1997 were 40.5%,
40.7% and 42.6%, respectively. The improvement from 1997 to 1998 is due
to the Company's efforts to reduce state and local income taxes.
NET EARNINGS
Net earnings, as a percent of net sales and service fees, attained
a record level at 0.65% compared to 0.46% for 1998 and 0.43% for 1997.
Several factors contributed to the increased earnings including record
sales, reduced debt, higher investment income and the recording of $5.5
million gain which resulted from the insurance settlement on the Evansville
fire. However, excluding this gain and adjusting for the provision for
closing the South Bend warehouse, earnings, as a percent of net sales and
service fees, would still reflect a record level of 0.51%. The continued
adherence to the fundamentals of the Company's Strategic Plan - acquisitions,
cost containment and standardized systems continue to serve as the basis
for the strong net earnings growth.
OTHER MATTERS
In February 1998, the Company lost its Evansville Division warehouse to a
fire. Roundy's erected a new building on the same site and the facility
was in full operation by January 30, 1999.
The Company has been in negotiations with its insurance carrier since the
fire. Due to the extent of the fire, the total claim is multi-phased
including a building claim, an inventory claim, an equipment claim, a
claim for the added costs to service customers during the period the
building was being reconstructed and the business interruption element
of the claim addressing lost profits while the facility was being rebuilt.
In the fourth quarter of 1998, a settlement was reached on the claim
for inventory lost in the fire. In 1999, settlements were also reached
with the insurance carrier on the building and equipment claims which
resulted in a gain of $5.5 million, which is included in Other-net revenues.
The issues which still remained unsettled at year end are related to (1)
the extra costs incurred to service the business and (2) the business
interruption claim which addresses the income lost due to the fire.
YEAR 2000
Many computer programs used only two digits to identify years. These
programs were designed without consideration for the effect of the change
in the century, and if not corrected, could have failed or created erroneous
results at the year 2000. Essentially all of the Company's information
technology-based systems, as well as many non-information based systems,
were potentially affected by the Year 2000 issue.
In order to prepare for the Year 2000 issue, the Company implemented the
following remediation plan for technology-based systems:
1. Identification of all applications and hardware with
potential Year 2000 issues.
2. For each item identified, perform an assessment to deter-
mine an appropriate action plan and timetable for reme-
diation of each item.
3. Implementation of the specific action plan.
4. Test each application upon completion.
5. Place the new process into production and conduct sys-
tem integration testing.
The Company successfully implemented the above remediation plan for all
affected information technology-based systems and other remediation plans
related to non-Management Information Systems efore the turn of the
century. Following the arrival of the Year 2000, the Company has not
experienced any problems. There was no interruption in the Company's
ability to deliver its products and transact business with its suppliers
and customers. The Company continues to monitor its systems, suppliers
and products for any unanticipated issues that may not yet have manifested.
The total cost of achieving Year 2000 compliance was approximately $8.3
million.
<PAGE>
Independent Auditors' Report
To the Stockholders and Directors of Roundy's, Inc:
We have audited the accompanying consolidated balance sheets of Roundy's,
Inc. and its subsidiaries as of January 1, 2000 and January 2, 1999 and
the related consolidated statements of earnings, stockholders' equity and
cash flows for each of the three years in the period ended January 1, 2000.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the companies at
January 1, 2000 and January 2, 1999, and the results of their operations
and their cash flows for each of the three years in the period ended
January 1, 2000 in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
February 25, 2000
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED EARNINGS
For the Years Ended
January 1, 2000, January 2, 1999 and January 3, 1998
1999 1998 1997
-------------- -------------- -------------
<S> <C> <C> <C>
Revenues:
Net sales and service fees........... $2,717,216,400 $2,576,222,100 $2,610,696,700
Other - net ......................... 10,117,900 2,428,500 3,695,700
-------------- -------------- --------------
2,727,334,300 2,578,650,600 2,614,392,400
-------------- -------------- --------------
Costs and Expenses:
Cost of sales........................ 2,450,462,300 2,330,300,800 2,362,355,200
Operating and administrative ........ 234,302,800 215,034,300 218,610,500
Interest............................. 6,503,600 7,293,100 8,220,900
-------------- -------------- --------------
2,691,268,700 2,552,628,200 2,589,186,600
-------------- -------------- --------------
Earnings Before Patronage Dividends.. 36,065,600 26,022,400 25,205,800
Patronage Dividends ................. 6,446,900 5,975,700 5,687,000
-------------- -------------- --------------
Earnings Before Income Taxes ........ 29,618,700 20,046,700 19,518,800
-------------- -------------- --------------
Provision (Credit) for Income Taxes:
Current-Federal ................... 10,544,600 8,400,000 7,786,000
-State ..................... 2,407,700 1,539,000 1,722,300
Deferred .......................... (943,000) (1,790,000) (1,193,100)
-------------- -------------- --------------
12,009,300 8,149,000 8,315,200
-------------- -------------- --------------
Net Earnings ........................ $ 17,609,400 $ 11,897,700 $ 11,203,600
============== ============== ==============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
As of January 1, 2000 and January 2, 1999
1999 1998
------------- ------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents .................................. $ 68,385,800 $ 72,094,500
Notes and accounts receivable, less allowance for losses,
$5,509,800 and $6,361,600, respectively ................. 87,659,000 78,489,000
Merchandise inventories .................................... 166,514,000 159,743,100
Prepaid expenses ........................................... 5,362,000 5,347,000
Future income tax benefits ................................. 8,026,800 6,373,800
------------ ------------
Total current assets ............................... 335,947,600 322,047,400
Other Assets:
Notes receivable, less allowance for losses,
$7,137,000 and $6,015,000, respectively ................. 10,650,600 11,013,000
Goodwill and other assets .................................. 9,532,000 10,140,600
Other real estate .......................................... 5,705,000 4,081,300
Deferred income tax benefit ................................ 3,782,000 4,492,000
------------ ------------
Total other assets .................................. 29,669,600 29,726,900
------------ ------------
Property and Equipment - At Cost:
Land ....................................................... 6,017,500 5,640,500
Buildings .................................................. 87,899,000 75,843,500
Equipment .................................................. 136,621,600 120,581,900
Leasehold improvements ..................................... 13,872,700 12,526,400
------------ ------------
244,410,800 214,592,300
Less accumulated depreciation and amortization ............. 112,703,300 103,955,000
------------ ------------
Property and equipment-net ............................ 131,707,500 110,637,300
------------ ------------
$497,324,700 $462,411,600
============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
As of January 1, 2000 and January 2, 1999
1999 1998
------------- ------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of long-term debt ...................... $ 24,734,500 $ 10,159,700
Accounts payable .......................................... 174,893,000 165,801,200
Accrued expenses .......................................... 62,981,000 52,824,600
Income taxes .............................................. 5,402,600 4,418,600
------------ ------------
Total current liabilities ............................ 268,011,100 233,204,100
------------ ------------
Long-Term Debt, Less Current Maturities ...................... 48,563,600 73,298,100
Other Liabilities ............................................ 26,830,600 21,098,100
------------ ------------
Total liabilities .................................... 343,405,300 327,600,300
------------ ------------
Commitments and Contingencies (Note 10)
Redeemable Common Stock ...................................... 9,948,800 9,007,700
------------ ------------
Stockholders' Equity:
Common stock:
Voting (Class A) ........................................ 15,000 14,900
Non-voting (Class B) .................................... 1,356,600 1,327,300
------------ ------------
Total common stock ................................... 1,371,600 1,342,200
Patronage dividends payable in common stock ............... 3,078,000 4,060,000
Additional paid-in capital ................................ 36,305,800 31,582,600
Reinvested earnings ....................................... 104,346,400 89,950,000
------------ ------------
145,101,800 126,934,800
Less:
Treasury stock, at cost ................................ 1,131,200 1,131,200
------------ ------------
Total stockholders' equity ........................... 143,970,600 125,803,600
------------ ------------
$497,324,700 $462,411,600
============ ============
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 1, 2000, JANUARY 2, 1999 AND JANUARY 3, 1998
Common Stock Patronage
---------------------------------------- Dividends Additional
Class A Class B Payable in Paid-in Reinvested
Shares Amount Shares Amount Common Stock Capital Earnings
---------------------------------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 28, 1996. 13,000 $16,300 1,060,180 $1,325,000 $ 3,779,000 $24,920,000 $75,051,100
Net earnings .......... 11,203,600
Common stock issued .... 1,100 1,400 51,219 64,000 (3,779,000) 4,756,700
Common stock purchased . (1,500) (1,900) (15,539) (19,400) (568,900) (1,332,200)
Redeemable common stock. (18,575) (23,200) (520,100) (1,395,000)
Patronage dividends 3,738,000
payable in common stock
------- ------- --------- ---------- ----------- ----------- -----------
Balance, January 3, 1998 ... 12,600 15,800 1,077,285 1,346,600 3,738,000 28,588,300 83,527,500
Net earnings ............ 11,897,700
Common stock issued ..... 500 600 50,857 63,600 (3,738,000) 5,160,900
Common stock purchased .. (1,200) (1,500) (28,120) (35,200) (945,900) (2,364,300)
Redeemable common stock . (38,148) (47,700) (1,220,700) (3,110,900)
Patronage dividends
payable in common stock 4,060,000
------- ------- --------- ---------- ----------- ----------- -----------
Balance, January 2, 1999 .. 11,900 14,900 1,061,874 1,327,300 4,060,000 31,582,600 89,950,000
Net earnings ........... 17,609,400
Common stock issued .... 700 900 52,546 65,700 (4,060,000) 5,955,200
Common stock purchased . (600) (800) (6,743) (8,400) (426,000) (1,137,600)
Redeemable common stock (22,388) (28,000) (806,000) (2,075,400)
Patronage dividends
payable in common stock 3,078,000
------- ------- --------- ---------- ----------- ----------- ------------
Balance, January 1, 2000 .. 12,000 $15,000 1,085,289 $1,356,600 $ 3,078,000 $36,305,800 $104,346,400
======= ======= ========= ========== =========== =========== ============
Treasury Stock, January 1, 2000,
January 2, 1999 and January 3, 1998 ......... 13,285 $1,131,200
========= ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Years Ended January 1, 2000, January 2, 1999, and January 3, 1998
1999 1998 1997
------------- ------------- ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Earnings .............................................. $ 17,609,400 $ 11,897,700 $ 11,203,600
Adjustments to reconcile net earnings to net
cash flows provided by operating activities:
Depreciation and amortization .......................... 18,823,400 18,782,300 17,132,300
Allowance for losses ................................... 1,596,100 2,189,300 2,389,100
Loss on sale of property and equipment ................. 426,000 2,527,300 612,900
Patronage dividends payable in common stock ............ 3,078,000 4,060,000 3,738,000
(Increase) decrease in operating assets net of
the effects of business acquisitions
and disposition:
Notes and accounts receivable .......................... (9,644,100) 6,899,000 8,975,000
Merchandise inventories ................................ (3,723,000) (8,398,300) 5,808,200
Prepaid expenses ....................................... 6,300 (129,100) (2,450,300)
Future income tax benefits ............................. (1,653,000) (146,000) 1,589,600
Other assets ........................................... (269,100) (433,900) (76,500)
Deferred income tax benefit ............................ 710,000 (1,644,000) (1,087,000)
Increase (decrease) in operating liabilities
net of the effects of business acquisitons
and disposition:
Accounts payable ....................................... 9,045,300 10,804,400 (4,036,600)
Accrued expenses ....................................... 10,009,400 6,877,200 6,092,900
Income taxes ........................................... 984,000 2,091,500 1,391,000
Other liabilities ...................................... 5,732,500 240,100 235,300
------------ ------------ ------------
Net cash flows provided by operating activities ........... 52,731,200 55,617,500 51,517,500
------------ ------------ ------------
Cash Flows From Investing Activities:
Capital expenditures - net of insurance proceeds .......... (35,868,500) (24,936,000) (22,726,700)
Proceeds from sale of property and equipment .............. 1,363,000 4,004,700 1,740,200
Payment for business acquisition net of cash acquired ..... (7,812,100) (4,586,300) (3,967,400)
Other real estate ......................................... (1,623,800) 3,071,200 (2,712,800)
(Increase) decrease in notes receivable ................... (759,600) 320,000 1,059,000
------------ ------------ ------------
Net cash flows used in investing activities ............... (44,701,000) (22,126,400) (26,607,700)
------------ ------------ ------------
Cash Flows From Financing Activities:
Reductions in debt ........................................ (10,159 700) (10,156,800) (10,225,800)
Proceeds from sale of common stock ........................ 1,961,800 1,487,100 1,043,100
Common stock purchased .................................... (3,541,000) (5,093,800) (3,702,500)
------------ ------------ ------------
Net cash flows used in financing activities ............... (11,738,900) (13,763,500) (12,885,200)
Net (Decrease) Increase in Cash and Cash Equivalents ......... (3,708,700) 19,727,600 12,024,600
Cash And Cash Equivalents, Beginning Of Year ................. 72,094,500 52,366,900 40,342,300
------------ ------------ ------------
Cash And Cash Equivalents, End Of Year ....................... $ 68,385,800 $ 72,094,500 $ 52,366,900
============ ============ ============
Cash Paid During The Year For:
Interest .................................................. $ 6,574,600 $ 7,487,600 $ 8,084,600
Income Taxes .............................................. 11,965,700 7,853,400 6,433,100
Supplemental Noncash Financing Activities-Patronage Dividends
Payable in Common Stock ................................... 3,078,000 4,060,000 3,738,000
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Fiscal year-The Company's fiscal year is the 52 or 53 week period
ending the Saturday nearest to December 31. The years ended January 1,
2000 and January 2, 1999 included 52 weeks. The year ended January 3,
1998 included 53 weeks.
Consolidation practice-The financial statements include the accounts of
the Company and its subsidiaries. Significant intercompany balances and
transactions are eliminated.
Revenue recognition-Wholesale revenues are recognized at the time
product is shipped and retail revenues are recognized at the point of
sale.
Use of estimates-The preparation of financial statements in conformity
with generally accepted accounting principles requires Management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and cash equivalents-The Company considers all highly liquid
investments, with maturities of three months or less when acquired, to
be cash equivalents.
Inventories-Inventories are recorded at the lower of cost, on the first-
in, first-out method, or market.
Goodwill and long-lived assets-The excess of cost over the fair value of
net assets of businesses acquired (goodwill) is being amortized on a
straight-line basis over 20 years. Accumulated amortization at January
1, 2000 and January 2, 1999 was $6,440,600 and $5,714,000, respectively.
The Company periodically evaluates the carrying value of long-lived
assets in accordance with Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." The Company analyzes the
future recoverability of the long-lived assets using the related
undiscounted future cash flows of the business and recognizes any
adjustments to its carrying value on a current basis.
Depreciation-Depreciation and amortization of property and equipment
are computed primarily on the straight-line method over their estimated
useful lives, which are generally thirty-nine years for buildings,
three to ten years for equipment and ten to twenty years for leasehold
improvements.
Closed facilities reserve-When a facility is closed the remaining
investment, net of expected salvage value, is expensed. For properties
under lease agreements, the present value of any remaining future
liability under the lease, net of expected sublease recovery, is also
expensed. The amounts charged to operations in 1999, 1998 and 1997 for
the present value of these remaining future liabilities were not
significant.
Reclassifications-Certain reclassifications were made to prior year's
financial statements to conform with the current year financial
presentation.
Income Taxes-The Company provides income taxes in accordance with SFAS
No. 109, "Accounting for Income Taxes," which requires an asset and
liability approach to financial and reporting for income taxes.
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts
in the future on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
Related Parties-During fiscal 1999, 1998 and 1997 the Company had
wholesale sales to related party retailers in the amounts of
$981,870,700, $918,547,800 and $827,749,000, respectively. In
addition, the Company had received sublease payments from related
party retailers of $11,819,900, $10,477,400 and $11,262,000 in
fiscal 1999, 1998 and 1997, respectively.
2. ACQUISITIONS
On April 12, 1999, the Company purchased a grocery retailer for
$5,682,500 in cash. On August 24, 1999, the Company purchased a
grocery retailer for $2,129,600 in cash. On December 8, 1998, the
Company purchased a grocery retailer for $4,586,300 in cash. On
September 15, 1997, the Company purchased a grocery retailer for
$3,967,400 in cash. The acquisitions have been accounted for as
purchases and the results of operations have been included in the
Consolidated Financial Statements since the dates of acquisition. On
an unaudited pro-forma basis, the effect of the acquisitions was not
significant to the Company's 1999, 1998 and 1997 results of operations.
3. PATRONAGE DIVIDENDS
The Company's By-Laws require that, to the extent permitted by the
Internal Revenue Code, patronage dividends are to be paid out of
earnings from business activities with stockholder-customers in an
amount which will reduce the net earnings of the Company to an amount
which will result in an 8% increase in the book value of its common
stock. For the year 1997, a 10% increase in book value was required.
The dividends are payable at least 20% in cash and the remainder in Class
B common stock. Dividends for the years ended January 1, 2000,
January 2, 1999 and January 3, 1998 were payable 30% in cash.
4. NOTES AND ACCOUNTS RECEIVABLE
The Company extends long-term credit to certain independent retailers
it serves to be used primarily for store expansion or improvements.
Loans to independent retailers are primarily collateralized by the
retailer's inventory, equipment, personal assets and pledges of
Company stock. Interest rates are generally in excess of the prime
rate and terms of the notes are up to 15 years. Included in current
notes and accounts receivable are amounts due within one year
totalling $4,050,700 and $6,357,000 at January 1, 2000 and January
2, 1999, respectively. The Company is exposed to credit risk with
respect to accounts receivable, although it is generally limited
due to short payment terms. The Company continually monitors its
receivables with customers by reviewing, among other things,
credit terms, collateral and guarantees.
5. LONG-TERM DEBT
Long-term debt, exclusive of current maturities, consists of the
following at the respective year-ends:
1999 1998
Senior unsecured notes payable:
9.26%, due 2001 .................... $ 2,500,000 $ 5,000,000
7.57% to 8.26%, due 2001 to 2008 ... 5,100,000 17,300,000
6.94%, due 2001 to 2003 ............ 19,285,700 25,714,300
7.86%, due 2001 to 2006 ............ 21,428,500 25,000,000
Other long-term debt .................. 249,400 283,800
----------- -----------
Total .............................. $48,563,600 $73,298,100
=========== ===========
At January 1, 2000, $60,000,000 was available to the Company under its
revolving credit agreements, all of which was unused. The loan
agreements include, among other provisions, minimum working capital
and net worth requirements ($103,038,000 at January 1,2000) and limit
stock repurchases and total debt outstanding.
Repayment of principal on long-term debt outstanding is as follows:
2000 .................................... $ 24,734,500
2001 .................................... 13,738,000
2002 .................................... 11,242,000
2003 .................................... 11,246,400
2004 .................................... 4,122,700
Thereafter .............................. 8,214,500
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, as defined in SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments," consist
primarily of cash, accounts and notes receivable, accounts payable,
accrued liabilities and long-term debt. The carrying amounts for cash,
accounts and notes receivable, accounts payable and accrued liabilities
approximate their fair values. Based on the borrowing rates currently
available to the Company for long-term debt with similar terms and
maturities, the fair value of long-term debt, including current
maturities, is approximately $71,979,000 and $83,950,000 as of
January 1, 2000 and January 2,1999, respectively.
7. STOCKHOLDERS' EQUITY
The authorized capital stock of the Company is 60,000 shares of Class
A common stock and 2,400,000 shares of Class B common stock with
a par value of $1.25 a share. Inactive customers are required to
exchange Class A voting stock held for Class B non-voting stock.
The issuance and redemption of common stock is based on the book value
thereof as of the preceding year-end. The year-end book value was
$129.95, $114.80 and $104.35 for 1999, 1998 and 1997, respectively.
The Company is obligated, upon request, to repurchase common stock
held by inactive customers or employees. The amount available for such
repurchases in any year is subject to limitations under certain
loan agreements.
Class B common stock which is subject to redemption
is reflected outside of stockholders' equity. Redeemable common
stock is held by inactive customers and former employees. As of
January 1, 2000 and January 2, 1999, 76,559 and 78,464 shares,
respectively, were subject to redemption. The Class B common stock
subject to redemption is payable over a five year period based upon
the book value at the preceding fiscal year end. The Company expects
to repurchase shares of 26,586, 17,324, 15,960, 12,143 and 4,546 in
2000, 2001, 2002, 2003 and 2004, respectively.
Effective November 1991, the Board of Directors adopted the 1991
Stock Incentive Plan (the "Plan") under which up to 75,000 shares
of Class B common stock may be issued pursuant to the exercise of
stock options. The Plan also authorizes the grant of up to 25,000
stock appreciation rights ("SARs"). Options and SARs may be granted
to senior executives and key employees of the Company by the Compensation
Committee of the Board of Directors. No options or SARs may be granted
under the Plan after November 30, 2001.
Option and SAR transactions are as follows:
<TABLE>
<CAPTION>
Options
Weighted
Average
Options SAR's Price Price
------- ------ --------------- --------
<S> <C> <C> <C> <C>
Outstanding, December 28, 1996 ................. 41,500 16,000 $53.10 - $77.40 $ 61.54
Granted ..................................... 4,300 4,200 94.30 94.30
------ ------ ---------------
Outstanding, January 3, 19998 .................. 45,800 20,200 53.10 - 94.30 64.62
Granted ..................................... 4,200 800 104.35 104.35
------ ------ ---------------
Outstanding, January 2, 1999 ................... 50,000 21,000 53.10 - 104.35 67.96
------ ------ ---------------
Outstanding, January 1, 2000 ................... 50,000 21,000 $53.10 -$104.35 67.96
====== ====== ===============
Excercisable at January , 2000 ................. 46,516 19,483 $53.10 -$104.35 65.91
====== ====== ===============
Available for grant after January 1, 2000 ...... 1,000 184
====== ======
</TABLE>
Options exercisable at January 1, 2000, January 2, 1999 and January
3, 1998 were 46,516, 43,966 and 39,880 with a weighted average price
of $65.91, $64.92 and $62.97, respectively.
The following table summarizes information concerning currently
outstanding and excercisable options:
<TABLE>
<CAPTION>
Stock Options Outstanding
-------------------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
of Contractual Excercise of Excercise
Shares Life Price Shares Price
------ ----------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C>
Range of Exercise Price
-----------------------
$50.00 - 65.00 24,500 2.3 $ 55.06 24,150 $ 55.01
$65.01 - 80.00 17,000 4.9 70.89 16,600 71.03
$80.01 - 95.00 4,300 7.3 94.30 4,300 94.30
$95.01 - 110.00 4,200 8.3 104.35 1,466 104.35
------ ------- ------ -------
50,000 $ 67.96 46,516 65.91
====== ======= ====== =======
</TABLE>
Options granted become exercisable based on the vesting rate which
ranges from 20% at the date of grant to 100% eight years from the
date of grant.
SAR holders are entitled, upon exercise of an SAR, to receive cash
in an amount equal to the excess of the Fair Market Value per share of
the Company's common stock as of the date on which the SAR is exercised
over the base price of the SAR. SARs granted become exercisable based
on the vesting rate which ranges from 20% on the last day of the fiscal
year of the grant to 100% eight years from the last day of the fiscal
year of the grant. Compensation expense was not material in 1999, 1998
and 1997. In the event of a change in control of the Company, all
options and SARs previously granted and not exercised, become exercisable.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," but applies Accounting
Principles Board Opinion No. 25 and related interpretations in accounting
for its plans. Compensation expense was immaterial for 1999,
1998 and 1997. If the Company had elected to recognize compensation
cost for the Plan based on the fair value of the options at the grant
dates, consistent with the method prescribed by SFAS No. 123, the
decrease in 1999, 1998 and 1997 net earnings would have been less
than $80,000.
8. EMPLOYEE BENEFIT PLANS
Substantially all non-union employees of the Company and employees
of its subsidiaries are covered by defined benefit pension plans.
Benefits are based on either years of service and the employee's
highest compensation during five of the most recent ten years of
employment or on stated amounts for each year of service. The
Company intends to annually contribute only the minimum contributions
required by applicable regulations.
The following tables, set forth pension obligations and plan
assets as of January 1, 2000 and January 2, 1999:
1999 1998
Change in benefit obligation: ------------ ------------
Benefit Obligation-Beginning of Year .... $ 52,579,100 $ 45,893,300
Service cost ............................ 3,099,300 2,811,400
Interest cost ........................... 3,604,300 3,272,400
Plan amendments ......................... 284,300
Acturial (gain) loss .................... (8,619,000) 2,282,200
Benefits paid ........................... (1,769,000) (1,680,200)
------------ ------------
Benefit Obligation-End of Year .......... $ 49,179,000 $ 52,579,100
============ ============
Change in plan assets:
Fair Value-Beginnig of Year ............. $ 42,521,600 $ 37,631,100
Actual return on plan assets ............ 6,887,900 3,247,100
Company contribution .................... 309,300 3,323,600
Benefits paid ........................... (1,769,000) (1,680,200)
------------ ------------
Fair Value-End of Year .................. $ 47,949,800 $ 42,521,600
============ ============
Funded status
As of year end .......................... $ (1,229,200) $(10,057,500)
Unrecognized cost:
Acturarial and investment (gains)losses, net (4,266,600) 7,295,700
Prior service cost ..................... 216,300 252,200
Transition asset ....................... (373,300) (547,300)
------------ ------------
Accrued benefit cost .................... $ (5,652,800) $ (3,056,900)
============ ============
The componets of pension cost are as folows:
<TABLE>
<CAPTION> 1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Benefits earned during the year ................. $ 3,099,300 $ 2,811,400 $ 2,238,700
Interest cost on projected benefit obligation ... 3,604,300 3,272,400 2,937,100
Expected return on plan assets .................. (3,771,100) (3,444,100) (2,993,000)
Net amortization and deferral
Unrecognized net loss .......................... 110,900 23,900
Unrecognized prior service cost ................ 35,900 35,900 35,900
Unrecognized net asset ......................... (174,100) (174,100) (174,100)
----------- ----------- -----------
Net pension cost ................................ $ 2,905,200 $ 2,525,400 $ 2,044,600
=========== =========== ===========
</TABLE>
The assumptions used in accounting were as follows:
1999 1998 1997
----- ----- -----
Discount Rate .............................. 8.00% 7.00% 7.25%
Rate of increase in compensation levels .... 4.00% 4.00% 4.00%
Expected long-term rate of return on assets. 9.00% 9.00% 9.00%
The change in the discount rate in 1999 resulted in a $8,200,000
decrease in the projected benefit obligation in 1999 and is
expected to result in a decrease in the 2000 pension expense of
approximately $800,000.
The Company and its subsidiaries also participate in various multi-
employer plans which provide defined benefits to employees under
collective bargaining agreements. Amounts charged to pension
expense for such plans were $5,093,900, $4,655,000 and $4,530,300
in 1999, 1998 and 1997, respectively. Also, the Company has a
defined contribution plan covering substantially all salaried and
hourly employees not covered by a collective bargaining agreement.
Total expense for the plan amounted to $1,251,500, $1,181,400
and $858,400 in 1999, 1998 and 1997, respectively.
9. INCOME TAXES
Federal income tax at the statutory rate of 35% in 1999, 1998
and 1997 and income tax expense as reported are reconciled as
follows:
<TABLE>
<CAPTION> 1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Federal income tax at statutory rate ............. $10,366,500 $ 7,016,400 $ 6,831,600
State income taxes, net of federal tax benefits .. 1,565,000 1,000,300 1,119,500
Other-net ........................................ 77,800 132,300 364,100
----------- ----------- -----------
Income tax expense ............................... $12,009,300 $ 8,149,000 $ 8,315,200
=========== =========== ===========
</TABLE>
The approximate tax effects of temporary differences at January 1, 2000
and January 2, 1999 are as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------------------- -------------------------------------
Assets Liabilities Total Assets Liabilities Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts............... $ 1,287,000 $ 1,287,000 $ 1,084,000 $ 1,084,000
Inventories .................................. $(1,209,200) (1,209,200) $(1,419,200) (1,419,200)
Employee benefits ............................ 6,914,000 6,914,000 5,764,000 5,764,000
Accrued expenses not currently deductible .... 1,035,000 1,035,000 945,000 945,000
----------- ----------- ----------- ----------- ----------- -----------
Current ...................................... 9,236,000 (1,209,200) 8,026,800 7,793,000 (1,419,200) 6,373,800
----------- ----------- ----------- ----------- ----------- -----------
Allowance for doubtful accounts .............. 2,431,000 2,431,000 2,431,000 2,431,000
Depreciation and amortization ................ (9,287,000) (9,287,000) (6,602,000) (6,602,000)
Employee benefits ............................ 5,837,000 5,837,000 5,067,000 5,067,000
Accrued expenses not currently deductible .... 5,033,000 5,033,000 3,828,000 3,828,000
Other ........................................ (232,000) (232,000) (232,000) (232,000)
----------- ----------- ----------- ----------- ----------- -----------
Noncurrent ................................... 13,301,000 (9,519,000) 3,782,000 11,326,000 (6,834,000) 4,492,000
----------- ----------- ----------- ----------- ----------- -----------
Total ........................................ $22,537,000 $(10,728,200) $11,808,800 $19,119,000 $(8,253,200) $10,865,800
=========== ============ =========== =========== =========== ===========
</TABLE>
10.LEASE OBLIGATIONS AND CONTINGENT LIABILITIES
Rental payments and related subleasing rentals under operating
leases are as follows:
<TABLE>
<CAPTION>
RENTAL PAYMENTS
------------------------
SUBLEASING
MINIMUM CONTINGENT RENTALS
------------ ---------- ------------
<S> <C> <C> <C>
1997 ... $ 28,625,700 $ 406,600 $ 21,249,900
1998 ... 29,883,200 414,300 23,207,000
1999 ... 30,083,100 445,900 23,312,300
</TABLE>
Contingent rentals may be paid under certain store leases on the basis
of the store's sales in excess of stipulated amounts.
Future minimum rental payments under long-term operating leases are
as follows at January 1, 2000:
2000 ............... $ 30,486,000
2001 ............... 28,597,000
2002 ............... 27,810,600
2003 ............... 26,606,900
2004 ............... 25,921,600
Thereafter ......... 162,955,900
------------
$302,378,000
============
Total minimum rentals to be received in the future under non-
cancelable subleases as of January 1, 2000 are $228,599,100.
The Company is involved in various claims and litigation arising
in the normal course of business. In the opinion of Management,
the ultimate resolution of these actions will not materially
affect the consolidated financial position, results of operations
or cash flows of the Company.
11. EARNINGS PER SHARE
Earnings per share are not presented because they are not deemed
meaningful. See Notes 3 and 7 relating to patronage dividends and
common stock repurchase requirements.
12. EVANSVILLE FIRE
During fiscal 1998, fire destroyed the Evansville, Indiana
warehouse, inventory and equipment. The Division supplied frozen
food and meat products to Roundy's customers in the
Southern Midwest area. Settlements have been reached on the
inventory, building and equipment. Discussions are in process with
the insurance carrier relating to the business interruption losses
incurred.
Through January 1, 2000, cash advances aggregating $15.3 million
were received from the insurance carrier relative to (1) the cost
of the inventory destroyed in the fire ($4.1 million), (2) the cost
of the destroyed building and equipment ($8.3 million) and (3)
certain costs of demolishing the building and removing debris from
the site, transportation costs and a partial advance on the
business interruption losses incured ($2.9 million). During
fiscal 1999 the Company recorded a $5.5 million gain. This amount
is reflected in Other-net revenues in the Company's Consolidated
Statements of Earnings.
The Company elected to rebuild the facility on the existing site
and completed the project in January 1999 at a cost of approximately
$10.8 million. The new facility was fully operational by January
30, 1999, again supplying frozen food and meat products to Roundy's
customers.
Due to the complexity of the loss, the Company anticipates that
the final settlement may require an extended period of negotiation.
However, Management believes that the Company's insurance coverage was
sufficient and that the final settlement with its insurance carrier
will not have a material adverse impact on the Company's future
financial statements.
13. SEGMENT REPORTING
The Company and its subsidiaries sell and distribute food and
nonfood products that are typically found in supermarkets
primarily located in the Midwest. The Company's wholesale
distribution segment sell to both corporately and independently
owned retail food stores, while the retail segment sells directly
to the consumer.
During fiscal 1999, 1998 and 1997 the Company had one
customer which accounted for 12.2%, 11.4% and 10.4%, respectively,
of the Company's net sales and service fees.
Gross profit represents net sales, less cost of sales.
Eliminations represent the activity between wholesale and
Company owned retail stores. Inter-segment revenues are recorded
at amounts consistent with those charged to independent retail
stores.
Identifiable assets are those used exclusively by that
industry segment. Corporate assets are principally cash and cash
equivalents, notes receivable, corporate office facilities and
equipment.
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- --------------
<S> <C> <C> <C>
NET SALES AND SERVICE FEES
Wholesale ............................... $ 2,610,159,300 $ 2,512,268,000 $ 2,503,067,600
Retail .................................. 323,857,300 284,127,500 291,612,600
Eliminations ............................ (216,800,200) (220,173,400) (183,983,500)
--------------- --------------- ---------------
Total ................................. $ 2,717,216,400 $ 2,576,222,100 $ 2,610,696,700
=============== =============== ===============
GROSS PROFIT
Wholesale ............................... $ 199,829,500 $ 188,767,200 $ 191,931,500
Retail .................................. 70,048,900 60,132,300 59,048,700
Eliminations ............................ (3,124,300) (2,978,200) (2,638,700)
--------------- --------------- ---------------
Total ................................. $ 266,754,100 $ 245,921,300 $ 248,341,500
=============== =============== ===============
IDENTIFIABLE ASSETS
Wholesale ............................... $ 319,419,500 $ 304,322,200 $ 296,886,900
Retail .................................. 62,525,700 54,856,500 59,645,800
Eliminations ............................ 115,379,500 103,232,900 83,777,100
--------------- --------------- ---------------
Total ................................. $ 497,324,700 $ 462,411,600 $ 440,309,800
=============== =============== ===============
DEPRECIATION AND AMORTIZATION
Wholesale ............................... $ 7,432,200 $ 8,311,100 $ 7,393,000
Retail .................................. 4,961,400 4,296,800 4,070,700
Eliminations ............................ 6,429,800 6,174,400 5,668,600
--------------- --------------- ---------------
Total ................................. $ 18,823,400 $ 18,782,300 $ 17,132,300
=============== =============== ===============
CAPITAL EXPENDITURES
Wholesale ............................... $ 17,846,700 $ 12,942,400 $ 6,266,000
Retail .................................. 3,365,200 3,353,400 5,565,700
Eliminations ............................ 14,656,600 8,640,200 10,895,000
--------------- --------------- ---------------
Total ................................. $ 35,868,500 $ 24,936,000 $ 22,726,700
=============== =============== ===============
</TABLE>
14. SUBSEQUENT EVENTS
On February 2, 2000, the Company purchased seven grocery
retail stores for approximately $37 million. In addition, on
October 25, 1999 the Company entered into a letter of intent to
purchase 17 grocery retail stores.
Divisional Map
1. Corporate Office - Roundy's, Inc.
23000 Roundy Drive
Pewaukee, WI 53072
2. Milwaukee Division
11300 W. Burleigh Street
Wauwatosa, WI 53222
3. Roundy's General Merchandise Division
400 Walter Road
Mazomanie, WI 53560
4. Eldorado Division
Route 45 South
Eldorado, IL 62930
5. Evansville Perishable Division
4501 Peters Road
Evansville, IN 47711
6. Westville Division
6500 South U.S. 421
Westville, IN 46391
7. Muskegon Division
1764 Creston Street
Muskegon, MI 49443
8. Van Wert Division
1200 N. Washington
Van Wert, OH 45891
9. Lima Division
1100 Prospertity Road
Lima, OH 45802
Board of Directors
1. Robert E. Bartels
Martin's Super Markets, Inc.
South Bend, IN
2. Robert D. Ranus
Vice President & Chief Financial Officer
3. Henry Karbiner, Jr.
Chairman & President
Tri City Bankshares Corporation
Oak Creek, WI
4. Charles R. Bonson
Bonson's Foods, Inc.
Eagle River, WI
5. Gerald F. Lestina
President & CEO
6. Gary R. Sarner
Chairman Total Logistic
Control, LLC
Milwaukee, WI
7. George C. Kaiser
Milwaukee, WI
8. Robert S. Gold
Gold's of Mequon, LLC.
Mequon, WI
9. Patrick D. McAdams
McAdams, Inc.
Wales, WI
10. George E. Prescott
Chairman Prescott's
Supermarkets, Inc.
West Bend, WI
Elected Corporate Officers
Gerald F. Lestina
President & CEO
Ralph D. Beketic
Vice President - Wholesale
David C. Busch
Vice President of Administration
Edward G. Kitz
Vice President, Secretary & Treasurer
Charles H. Kosmaler, Jr.
Vice President-Planning and Information Services
Robert D. Ranus
Vice President & Chief Financial Officer
Michael J. Schmitt
Vice President - Sales and Developement
Marion H. Sullivan
Vice President OF Marketing
ADVISORY COMMITTEE
Chuck Benjamin
Prescott's Supermarkets, Inc.
P.o. Box 818
West Bend, WI 53095
Tom Czerwonka
Pick 'n Save - Two Rivers
1010 22nd Street
Two Rivers, WI 54241
Bob Glisch
Mega Marts, Inc.
150 w. Holt Avenue
Milwaukee, WI 53207
Lance Johanneson
PICK 'N SAVE - Kimberly
850 E. Maes Avenue
Kimberly, WI 54136
Joe McAdams
Pick 'n Save - Wales
W320 S1807 State Road 83
Wales, WI 53183
Frank Serio
PICK 'N SAVE - CUDAHY
5851 SOUTH PACKARD AVENUE
CUDAHY, WI 53110
Steve Spiegelhoff
PICK 'N SAVE - Burlington
1120 Milwaukee Avenue
Burlington, WI 53105
Mark Stinebrink
PICK 'N SAVE - Lake Geneva
100 East Geneva Square
Lake Geneva, WI 53147
Dan Zinke
Zinke's Shop-Rite
216 Washington Ave.
Wisconsin Dells, WI 53965
TRUSTEES
Gerald F. Lestina
President & CEO
Edward G. Kitz
Vice President, Secretary & Treasurer
Victor C. Burnstad
Burnstad Bros., Inc.
Tomah, WI
Gary N. Gundlach
Pick 'n Save - Stoughton
Stoughton, WI
David J. Spiegelhoff
Pick 'n Save - Burlington
Burlington, WI
Bronson J. Haase
President & CEO
Wisconsin Gas Company
Milwaukee, WI
Robert R. Spitzer
President Emeritus
Milwaukee School of Engineering
Milwaukee, WI
EXHIBIT 21
ROUNDY'S, INC.
Subsidiaries
Roundy's, Inc. has ten wholly-owned first-tier subsidiaries,
each a Wisconsin corporation (except as otherwise noted) doing
business under their corporate names. These subsidiaries
are:
Badger Assurance, Ltd. (1) Kee Trans, Inc.
CD of Wisconsin, Inc. Midland Grocery of Michigan, Inc.(5)
Holt Public Storage, Inc. Ropak, Inc.
I.T.A., Inc. Scot Lad Foods, Inc.
Jondex Corp. Ultra Mart Foods, Inc.
Five Wisconsin corporations doing business under their
corporate names are wholly owned subsidiaries of Ropak, Inc.
These corporations are:
Insurance Planners, Inc. Shop-Rite, Inc.
Pick `n Save Warehouse Foods,Inc. Villard Avenue Shop-Rite, Inc.
Rindt Enterprises, Inc.
Three corporations doing business under their corporate
names are wholly owned subsidiaries of Scot Lad Foods, Inc.
These corporations are:
Spring Lake Merchandise, Inc. (3) Cardinal Foods, Inc.(4)
Scot Lad-Lima, Inc.(3)
Two corporations doing business under their corporate names
are wholly owned subsidiaries of Cardinal Foods, Inc. These
corporations are:
Wilson's Cardinal Supermarket, Inc. (3) Gardner's Food Galleries, Inc.(3)
Two corporations doing business under their corporate names
are subsidiaries of Shop-Rite, Inc. These corporations are:
The Midland Grocery Company (3) (6) Village Market, LLC (2)
One corporation doing business under its corporate name is a
50% owned subsidiary of Jondex Corp. The corporation is:
Clintonville Land Co., LLC (7)
_____________
(1) A Bermuda corporation. (4) A Delaware corporation.
(2) An Indiana limited liability company. (5) A Michigan corporation.
(3) An Ohio corporation. (6) Partially owned by Cardinal
Foods, Inc.
(7) A Wisconsin limited liability
company.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ROUNDY'S, INC. FROM 10K-405 FOR THE PERIOD ENDED 01-01-2000 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JAN-02-2000
<CASH> 68,385,800
<SECURITIES> 0
<RECEIVABLES> 87,659,000
<ALLOWANCES> 0
<INVENTORY> 166,514,000
<CURRENT-ASSETS> 335,947,600
<PP&E> 244,410,800
<DEPRECIATION> 112,703,300
<TOTAL-ASSETS> 497,324,700
<CURRENT-LIABILITIES> 268,011,100
<BONDS> 48,563,600
0
0
<COMMON> 1,371,600
<OTHER-SE> 141,467,800
<TOTAL-LIABILITY-AND-EQUITY> 497,324,700
<SALES> 2,717,216,400
<TOTAL-REVENUES> 2,727,334,300
<CGS> 2,450,462,300
<TOTAL-COSTS> 2,450,462,300
<OTHER-EXPENSES> 239,153,600
<LOSS-PROVISION> 1,596,100
<INTEREST-EXPENSE> 6,503,600
<INCOME-PRETAX> 29,618,700
<INCOME-TAX> 12,009,300
<INCOME-CONTINUING> 17,609,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,609,400
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
