<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 2)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CERTIFIED GROCERS OF CALIFORNIA, LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CERTIFIED GROCERS OF CALIFORNIA, LTD.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
PRELIMINARY COPY
CERTIFIED GROCERS OF CALIFORNIA, LTD.
2601 SOUTH EASTERN AVENUE, LOS ANGELES, CALIFORNIA 90040
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 2, 1996
The Annual Meeting of Shareholders of Certified Grocers of California, Ltd.,
a California corporation, will be held at the Wyndham Garden Hotel, 5757
Telegraph Road, City of Commerce, California, on April 2, 1996 at 9:00 a.m., for
the following purposes:
1. To elect the fifteen members of the Board of Directors for the
ensuing year, twelve by the holders of Class A Shares and three by the
holders of Class B Shares.
2. To transact such other business as may properly come before the
meeting, other than the approval of loans to or guaranties of the
obligations of any patron of the Company upon the security of shares of
stock of the Company or any director of the Company. As to the approval of
such loans or guaranties, the Company is soliciting separate proxies for the
purpose of authorizing the proxy holders designated therein to execute
written consents with respect to the approval of loans or guaranties of the
type and satisfying the conditions described in the accompanying proxy
statement.
The names of the nominees intended to be presented by the Board of Directors
for election as Directors for the ensuing year are set forth in the accompanying
proxy statement.
Only shareholders of record at the close of business on February 6, 1996
will be entitled to vote at the meeting and to give proxies respecting the
approval of such loans or guaranties.
All shareholders are cordially invited to attend the meeting in person.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, IT IS REQUESTED THAT YOU
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY RELATING TO THE ANNUAL MEETING AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY REVOKE YOUR PROXY IF YOU
ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
DAVID A. WOODWARD, CORPORATE SECRETARY
February , 1996
<PAGE>
PRELIMINARY COPY
CERTIFIED GROCERS OF CALIFORNIA, LTD.
2601 SOUTH EASTERN AVENUE, LOS ANGELES, CALIFORNIA 90040
------------------------
PROXY STATEMENT
-------------------
INTRODUCTION
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of
Certified Grocers of California, Ltd. (the "Company") of proxies for use (1) at
the Annual Meeting of Shareholders to be held April 2, 1996, or at any
adjournment thereof (see, "SOLICITATION OF PROXIES FOR USE AT ANNUAL MEETING"),
and (2) by the designated proxy holders in connection with the approval of
certain loans or guaranties by the Company or its subsidiaries of the type and
satisfying the conditions described herein (see, "SOLICITATION OF PROXIES
REGARDING LOANS OR GUARANTIES"). Separate forms of proxy apply to the Annual
Meeting and to the approval of such loans or guaranties. These separate forms of
proxy accompany this proxy statement.
A shareholder giving a proxy may revoke it at any time before it is
exercised by filing with the Secretary of the Company a written revocation or a
fully executed proxy bearing a later date. A proxy may also be revoked if the
shareholder who has executed it is present at the meeting and elects to vote in
person.
These proxy materials were first mailed to shareholders on or about February
, 1996. The cost of soliciting the proxies, including the printing, handling
and mailing of the proxies and related material, will be paid by the Company.
Proxies may be solicited by officers and regular employees of the Company by
telephone or in person. These persons will receive no additional compensation
for their services.
SOLICITATION OF PROXIES FOR USE
AT ANNUAL MEETING
OUTSTANDING SHARES AND VOTING RIGHTS
Only the holders of Class A Shares of record and the holders of Class B
Shares of record at the close of business on February 6, 1996 are entitled to
vote at the Annual Meeting. On that date, the Company had outstanding 50,600
Class A Shares and 365,529 Class B Shares.
The Board of Directors of the Company consists of 15 directors, 12 of whom
are to be elected at the Annual Meeting by the holders of the Company's Class A
Shares and 3 of whom are to be elected by the holders of the Company's Class B
Shares.
Each class of shares is entitled to one vote for each share on those matters
with respect to which the class is entitled to vote. However, if any shareholder
gives notice of his intention to cumulate his votes in the election of
directors, then all shareholders may cumulate their votes in the election of
directors. To be effective, such notice (which need not be written) must be
given by the shareholder at the Annual Meeting before any votes have been cast
in such election. Under cumulative voting, each holder of Class A Shares may
give one nominee a number of votes equal to the number of Class A Shares which
the holder is entitled to vote multiplied by the number of directors to be
elected by the holders of Class A Shares (12 at this meeting) or the holder may
distribute such votes among any or all of the nominees as he sees fit.
Similarly, the Class B Shares entitled to be voted may be voted cumulatively by
the holders of such shares for the 3 directors to be elected by the holders of
Class B Shares. Discretionary authority to cumulate votes is solicited. The
proxy holders named on the enclosed form of proxy relating to the Annual Meeting
have no present intention to give notice of their intention to cumulate votes,
but they may elect to do so in the event of a contested election or any
presently unexpected circumstances.
In the election of directors, the nominees receiving the highest number of
affirmative votes of the class of shares entitled to be voted for them, up to
the number of directors to be elected by such class, will be elected. Under the
California Corporations Code, votes against a nominee and votes withheld have no
legal effect.
<PAGE>
On all matters coming before the Annual Meeting, other than the election of
directors, each Class A Share is entitled to one vote, and, except as may be
required by California law, each Class B Share has no vote. California law
extends to non-voting shares the right to vote upon certain matters such as
certain amendments to the Articles of Incorporation which affect the rights of
non-voting shares, certain reorganizations in which other securities are to be
issued in exchange for the non-voting securities, and voluntary dissolution. No
such matter is proposed to be submitted by management at the Annual Meeting and
management is not aware that any such matter will be submitted by any other
person.
ELECTION OF DIRECTORS
At the Annual Meeting 15 directors (constituting the entire board) are to be
elected to serve until the next Annual Meeting and until their successors are
elected and qualified. Twelve directors are to be elected by the holders of the
Company's Class A Shares and 3 directors are to be elected by the holders of the
Company's Class B Shares.
The following table sets forth certain information concerning the Board of
Directors' nominees for election. All of the nominees are currently serving as
directors of the Company, except for Mr. Bonfonte and Mr. DeLano. As of the date
of this proxy statement, all nominees have consented to being named herein as
nominees and to serve as directors if elected.
<TABLE>
<CAPTION>
YEAR
AGE AS OF FIRST PRINCIPAL OCCUPATION
NAME 12/31/95 ELECTED DURING LAST 5 YEARS
- ------------------------------ --------- ------- ----------------------------------------
<S> <C> <C> <C>
NOMINEES FOR ELECTION
BY CLASS A SHARES
Louis A. Amen 66 1974 President, Super A Foods, Inc.
John Berberian 44 1991 President, Berberian Enterprises, Inc.,
operating Jons Markets
Lyle A. Hughes(1) 58 1987 General Manager, Yucaipa Food Fair,
Inc., operating Calimesa Food Fair
Darioush Khaledi 49 1993 Chairman of the Board and Chief Execu-
tive Officer, K.V. Mart Co., operating
Top Valu Markets and Valu Plus Food
Warehouse
Mark Kidd 45 1992 President, Mar-Val Food Stores, Inc.
Willard R. MacAloney 60 1981 President and Chief Executive Officer,
Mac Ber, Inc., operating Jax Market
Jay McCormack 45 1993 Owner-Operator, Alamo Market;
Co-owner, Glen Avon Market
Morrie Notrica 66 1988 President and Chief Operating Officer,
Joe Notrica, Inc., operating The
Original 32nd Street Market
Michael A. Provenzano 53 1986 President, Pro & Son's, Inc., operating
Southland Market since 1993; formerly
President, Carlton's Market, Inc.
Allan Scharn 60 1988 President, Gelson's Markets
James R. Stump 57 1982 President, Stump's Market, Inc.
Kenneth Young 51 1994 Vice President, Jack Young's Super-
markets; Vice President, Bakersfield
Food City, Inc. dba Young's Markets
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
YEAR
AGE AS OF FIRST PRINCIPAL OCCUPATION
NAME 12/31/95 ELECTED DURING LAST 5 YEARS
- ------------------------------ --------- ------- ----------------------------------------
NOMINEES FOR ELECTION BY CLASS
B SHARES
<S> <C> <C> <C>
Michael Bonfonte(2) 51 -- Chairman, President and Chief Executive
Officer,
Nob Hill General Store, Inc.
Harley DeLano 58 -- President, Cala Co.
Roger K. Hughes(1) 61 1985 Chairman of the Board and Director,
Hughes Markets, Inc.
</TABLE>
- --------------
(1) Messrs. Lyle A. Hughes and Roger K. Hughes are unrelated.
(2) Mr. Bonfonte previously served on the Company's Board of Directors from
September 1989 until January 1992.
The proxy holders named on the enclosed form of proxy relating to the Annual
Meeting will vote the proxies received by them for the election of the above
nominees unless such authority is withheld as provided in the proxy. In the
unanticipated event that any nominee should become unavailable for election as a
director, the proxies will be voted for any substitute nominee named by the
present Board of Directors. In their discretion, the proxy holders may cumulate
the votes represented by the proxies received. If additional persons are
nominated for election as directors by persons other than the Board of
Directors, the proxy holders intend to vote all proxies received by them in such
manner in accordance with cumulative voting as will assure the election of as
many of the above nominees as possible, with the specific nominees to be voted
for to be determined by the proxy holders.
SOLICITATION OF PROXIES REGARDING
LOANS OR GUARANTIES
BACKGROUND
The Company and its subsidiaries make available to all patrons of the
Company, including patrons holding the Class A Shares and Class B Shares of the
Company and patrons serving as directors of the Company, or patrons affiliated
with persons serving as directors, various forms of retail and financial
assistance. Among these is assistance in the form of loans by the Company or its
subsidiaries to such patrons, or guaranties by the Company or its subsidiaries
of the obligations of such patrons. Such loans or guaranties are available to,
and the Company presently intends to enter into loans or guaranties with,
qualified patrons for such purposes as the acquisition of inventory and
equipment, the remodeling or expansion of existing retail locations, the
acquisition, leasing or development of new retail locations, and other general
business purposes of such patrons.
To be eligible for financial assistance in the form of loans or guaranties,
the applicant must be a patron in good standing which is in compliance with all
member requirements and policies and is not in default of any obligations to the
Company or its subsidiaries. In addition to appropriate credit searches, and
lien and title searches where security is involved, financial statements for two
complete years are required, as well as interim and pro forma financial
information. Additionally, the patron must make application and the transaction
must be approved by the Company's Loan Committee. Where the transaction exceeds
$3 million (including the amount of any outstanding loans), involves a guaranty,
or involves a director or a patron affiliated with a director, Board of
Directors approval (without counting the vote of any interested director) is
also required.
The terms of loan transactions vary depending upon the type of loan
involved. Loans for the purpose of purchasing equipment are limited to a maximum
term of seven years in the case of new equipment and five years in the case of
used equipment. The maximum loan amount is 95% of the equipment cost, and is
less depending upon the age and condition of the equipment. Loans for the
purpose of purchasing inventory are limited to a maximum term of five years, and
the maximum loan amount is 75% of the inventory cost. Loans
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<PAGE>
for the purpose of satisfying deposit fund requirements are limited to a maximum
term of five years, and the maximum loan amount is 100% of the deposit fund
requirement. Loans for the purpose of purchasing an existing retail market
location are limited to a maximum term of seven years, and the maximum loan
amount is 75% of fair market value.
With the exception of deposit fund loans, all loans are collateralized by
the assets being financed. Proceeds of deposit fund loans are retained by the
Company to satisfy deposit fund requirements and, thus, are available for
offset. Loans are not made on a non-recourse basis, although the Company would
be an unsecured creditor or as to any amounts owing in excess of amounts
realized from collateral sales.
Guaranty transactions principally involve patron lease obligations and are
generally limited to base rent, common area maintenance charges, taxes and
insurance. Guaranties of percentage rent and continuous operation requirements
are not provided absent Board of Directors approval. Approval of lease
guaranties requires favorable site evaluations respecting the rentals involved
and the suitability of the site for the operation of a retail market of the type
proposed. Guaranties of non-lease obligations arise infrequently and involve
terms which are less standardized. The Company generally seeks to limit such
guaranties to only a portion of the underlying obligation amount. Additionally,
obligations guaranteed must relate to the patron's grocery business purposes,
such as the remodeling, expansion or acquisition of market locations. All
guaranty transactions are subject to the patron eligibility requirements and
application and approval process previously discussed, including Board of
Directors approval. In connection with guaranties, patrons are required to
execute agreements providing for the reimbursement and indemnification of the
Company with respect to all liabilities under the guaranty. Additionally,
patrons are required to pay a monthly guaranty fee equal to 5% of the monthly
base rent under the lease or 5% of the guaranty amount in the case of non-lease
obligations.
Where such loans or guaranties are made to shareholding patrons, they are
made upon the security of the Class A Shares and Class B Shares of such patrons
in that it is a condition of share ownership in the Company that the shares of
such patrons be pledged as security for all their obligation to the Company. It
is also important to the Company that those patrons serving as directors of the
Company, and those patrons affiliated with persons serving as directors of the
Company, not be precluded by the fact of such service from receiving such loans
or guaranties from the Company and its subsidiaries when such would be available
to them under the Company's retail and financial assistance programs absent such
service. However, the California Corporations Code provides that unless approved
by a majority of the shareholders entitled to act thereon (which in the case of
the Company means the holders of Class A Shares), a corporation may not make any
loan of money or property to, or guarantee the obligation of, (1) any person
upon the security of shares of such corporation or its parent if such
corporation's recourse in the event of default is limited to the security for
the loan or guaranty, unless the loan or guaranty is adequately secured without
considering these shares, or (2) any director or officer of such corporation or
its parent.
Under the California Corporations Code, any person entitled to vote shares
may authorize another person or persons to act by proxy with respect to such
shares. The enclosed form of proxy regarding loans or guaranties is being
solicited in order to enable the designated proxy holders to vote, consider, act
upon and, in their discretion, approve loans of money or property to, or
guaranties of the obligations of, any patron of the Company upon the security of
the Company's stock, and any director of the Company, provided that, in each
case, the loan or guaranty is of the type and satisfies the conditions described
herein. By its terms, the enclosed form of proxy is valid through April 1, 1997.
Until that time, and unless revoked by the person granting it, the proxy would
empower the proxy holders to execute written consents to the taking of the
foregoing actions without a meeting on behalf of the holders of the shares
represented by the proxies.
Proxies are not being solicited with respect to the approval of loans or
guaranties in favor of officers of the Company, and the enclosed form of proxy
does not confer any authority upon the proxy holders with respect to such
matters.
4
<PAGE>
VOTING RIGHTS
The enclosed form of proxy regarding loans or guaranties is being solicited
from the holders of Class A Shares of record at the close of business on
February 6, 1996. On that date, the Company had outstanding 50,600 Class A
Shares. Proxies are not being solicited from the holders of Class B Shares since
loans or guaranties of the type involved do not require the approval of the
holders of such shares.
In voting upon loans or guaranties of the type here involved, Class A Shares
would be entitled to one vote for each share, and there would be no right to
cumulate votes. Approval of such loans or guaranties by means of the written
consent of shareholders requires the written consent of the holders of a
majority of the Class A Shares outstanding and entitled to vote, with the shares
owned by the affected patron or director not being entitled to vote.
In order for a loan or guaranty to be approved by the proxy holders, such
loan or guaranty would have to be of the type and satisfy the conditions
described herein and such proxy holders would be required to hold proxies
entitled to be voted "In Favor" (as explained below) representing a majority of
the outstanding Class A Shares then entitled to vote with respect to such loan
or guaranty, with the shares represented by the proxy of the affected patron or
director not being entitled to vote. In addition, at least two of the proxy
holders would have to exercise their discretion to vote the shares represented
by such proxies to approve the loan or guaranty, and in the case of a loan or
guaranty in favor of a director of the Company, approval would be required by at
least two of the proxy holders, excluding any proxy holder affiliated with the
director. Since approval of such loans or guaranties requires the proxy holders
to hold proxies entitled to be voted "In Favor" representing a majority of the
outstanding Class A Shares entitled to vote, the withholding by a shareholder of
a proxy or the return of a proxy marked "Abstain" (as explained below) amounts
to a vote by such shareholder against the approval of such loans or guaranties.
The enclosed form of proxy provides boxes whereby the person giving the
proxy may designate how it is to be exercised and voted. If the box labeled "In
Favor" is marked, the proxy holders will give written consents with respect to
the shares represented by the proxy in their discretion respecting approval of
loans or guaranties of the type and satisfying the conditions described herein;
if the box labeled "Against" is marked, the proxy holders will vote the shares
represented by the proxy against the approval of such loans or guaranties; and,
if the box labeled "Abstain" is marked, the proxy holders will not vote the
shares represented by the proxy respecting approval of such loans or guaranties.
If none of the foregoing designations is made, the proxy holders will give
written consents with respect to the shares represented by the proxy as if the
box labeled "In Favor" had been marked.
INTEREST OF CERTAIN PERSONS
Inasmuch as the enclosed form of proxy is being solicited in part for the
purpose of enabling the proxy holders to approve loans or guaranties of the
foregoing types to directors of the Company, all directors of the Company and
all persons nominated for election as directors of the Company, have a potential
interest in the matter. Patrons serving as directors or nominated for election
as directors, and patrons affiliated with such directors and nominees, have
sought such loans or guaranties from the Company and its subsidiaries in the
past and may be expected to do so in the future. In such event, they would have
a direct interest in the approval by the proxy holders of any such loan or
guaranty.
PRINCIPAL STOCKHOLDERS
As of February 6, 1996, no person is known by the Company to own
beneficially more than five percent (5%) of the outstanding Class A Shares of
the Company, and the only shareholders known by the Company to own beneficially
more than 5% of the outstanding Class B Shares of the Company are Cala Co., Bay
Area Warehouse Stores, Inc. and Ralphs Grocery Company, 777 South Harbor
Boulevard, La Habra, California 90631 (28,620 Class B Shares or approximately
7.83% of the outstanding Class B Shares) (Cala Co. and Bay Area Warehouse
Stores, Inc. are wholly owned by Ralphs Grocery Company which is in turn wholly
owned by The Yucaipa Companies, 10000 Santa Monica Boulevard, Los Angeles,
California 90067); and Hughes Markets, Inc., 14005 Live Oak Avenue, Irwindale,
California 91706 (26,106 Class B Shares or approximately 7.14% of the
outstanding Class B Shares).
5
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Class A Shares and Class B Shares, as of February 6, 1996, by each director and
nominee, or their affiliated companies, and by all directors and nominees, and
their affiliated companies, as a group. No officer of the Company owns shares of
any class of the Company's stock.
<TABLE>
<CAPTION>
SHARES OWNED
----------------------------------------------
CLASS A SHARES CLASS B SHARES
-------------------- -----------------------
NAME AND NO. % OF TOTAL NO. % OF TOTAL
AFFILIATED COMPANY SHARES OUTSTANDING SHARES OUTSTANDING
---------------------------------------- ------ ----------- --------- -----------
<S> <C> <C> <C> <C>
Louis A. Amen
Super A Foods, Inc..................... 100 0.20% 9,718 2.66%
Michael Bonfonte
Nob Hill General Store, Inc.(1)....... 100 0.20% 10,803 2.96%
Harley DeLano
Ralphs Grocery Company(1)(2).......... 100 0.20% 28,620 7.83%
John Berberian
Berberian Enterprises, Inc............ 100 0.20% 7,615 2.08%
Lyle A. Hughes
Yucaipa Trading Co., Inc.(3)(4)....... 100 0.20% 0 --
Roger K. Hughes
Hughes Markets, Inc.(1)(3)............ 100 0.20% 26,106 7.14%
Darioush Khaledi
K. V. Mart Co. ....................... 100 0.20% 13,796 3.77%
Mark Kidd
Mar-Val Food Stores, Inc. ............ 100 0.20% 1,787 0.49%
Willard R. MacAloney
Mac Ber, Inc.......................... 100 0.20% 2,523 0.69%
Jay McCormack
Alamo Market(5)....................... 100 0.20% 732 0.20%
Morrie Notrica
Joe Notrica, Inc. .................... 100 0.20% 8,148 2.23%
Michael A. Provenzano
Pro & Son's, Inc. .................... 100 0.20% 672 0.18%
Allan Scharn
Gelson's Markets(6)................... 100 0.20% 7,123 1.95%
James R. Stump
Stump's Market, Inc. ................. 100 0.20% 1,866 0.51%
Michael A. Webb
SavMax Foods, Inc.(7)................. 100 0.20% 8,410 2.30%
Kenneth Young
Jack Young's Supermarkets(8).......... 100 0.20% 2,660 0.73%
------ --- --------- -----
1,600 3.16% 130,579 35.72%
------ --- --------- -----
------ --- --------- -----
</TABLE>
- ------------------------
(1) Elected by holders of Class B Shares.
(2) These Class B Shares are owned by Ralphs Grocery Company and its affiliates,
Cala Co. and Bay Area Warehouse Stores, Inc. Ralphs Grocery Company also
owns an additional 100 Class A Shares.
(3) Messrs. Lyle A. Hughes and Roger K. Hughes are unrelated.
(4) Mr. Lyle Hughes is also affiliated with Yucaipa Food Fair, Inc. which owns
546 Class B Shares (0.15% of the outstanding Class B Shares).
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<PAGE>
(5) Mr. McCormack also is affiliated with Glen Avon Food, Inc. which owns 100
Class A Shares and 336 Class B Shares (0.01% of the outstanding Class B
Shares) and Yucaipa Trading Co., Inc. which owns 100 Class A Shares and no
Class B Shares.
(6) These shares are owned by Arden Mayfair, Inc., the parent company of
Gelson's Markets.
(7) Mr. Webb has not been nominated for election by the Board of Directors.
(8) Mr. Young also is affiliated with Bakersfield Food City, Inc. dba Young's
Markets which owns 100 Class A Shares and 355 Class B Shares. (0.01% of the
outstanding Class B Shares).
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings during
the fiscal year ended September 2, 1995. Each incumbent director who was in
office during such year attended more than 75% of the aggregate of the total
number of meetings of the board and the total number of meetings held by those
committees of the board on which he served.
The Company has an Audit Committee which presently consists of Gene Fulton,
Lyle Hughes and Kenneth Young, who are directors of the Company. Willard R.
MacAloney, Chairman of the Board of Directors, is an ex-officio member of the
Committee. This Committee, which met two times during the Company's last fiscal
year, is primarily responsible for approving and reviewing the services
performed by the Company's independent auditors, reviewing the annual results of
their audit, and reviewing the Company's accounting practices and system of
internal accounting controls.
The Company has a Personnel and Executive Compensation Committee which
presently consists of Louis A. Amen, Roger Hughes, Darioush Khaledi, James R.
Stump and Michael A. Webb, who are directors of the Company. Willard R.
MacAloney, Chairman of the Board of Directors, is an ex-officio member of this
Committee. This Committee, which met two times during the Company's last fiscal
year, is responsible for reviewing salaries and other compensation arrangements
of all officers and for making recommendations to the Board of Directors for its
approval concerning such matters.
The Company has a Nominating Committee which presently consists of Gene A.
Fulton, Mark Kidd, Jay McCormack and Morrie Notrica who are directors of the
Company. Willard R. MacAloney, Chairman of the Board of Directors, and Alfred A.
Plamann, President and CEO, are ex-officio members of this Committee. This
Committee, which met two times during the Company's last fiscal year, is
responsible for selecting nominees to be submitted by the Board of Directors to
the shareholders for election to the Board of Directors. The Nominating
Committee will consider the recommendations of shareholders concerning persons
to be nominated for election to the Board of Directors. The Company's Bylaws
require that a director be either an employee of the Company, a shareholder, or
that the director be a member of a partnership which is a shareholder, or an
employee of a corporation which is a shareholder. Persons recommended to the
Nominating Committee can be considered ONLY if they satisfy these requirements.
All recommendations must be in writing and must be submitted to the Nominating
Committee on or before September 1 of each year. Recommendations should be
submitted to the Nominating Committee at the address of the Company's principal
executive office set forth on the first page of this proxy statement.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted under the caption "Board Meetings and Committees", the Company's
Personnel and Executive Compensation Committee (presently consisting of
Directors Louis A. Amen, Roger Hughes, Darioush Khaledi, James R. Stump, Michael
A. Webb, and ex-officio member and Chairman of the Board, Willard R. MacAloney)
is responsible for reviewing salaries and other compensation arrangements of the
officers of the Company and for making recommendations to the Board of Directors
concerning such matters.
Except for Mr. MacAloney, no member of the Personnel and Executive
Compensation Committee is, or has been at any time in the past, an officer or
employee of the Company or any of its subsidiaries. As
7
<PAGE>
Chairman of the Board, Mr. MacAloney is an officer under the Bylaws of the
Company, although he is not an employee and does not receive any compensation or
expense reimbursement beyond that to which other directors are entitled.
The Company guarantees annual rent and certain other obligations of Mr.
MacAloney as lessee under a lease of store premises located in La Puente,
California. Annual rent under the lease is $62,487, and the lease term expires
in April 1997. The Company also guarantees annual rent and certain other
obligations of G & M Company, Inc., of which Mr. MacAloney is a shareholder,
under a lease of store premises located in Santa Fe Springs, California. Annual
rent under the lease is $82,544, and the lease term expires in October 1997. In
consideration of its guarantees, the Company receives a monthly fee from G & M
Company, Inc. equal to 5% of the base monthly rent under each lease.
Grocers Capital Company ("GCC"), a subsidiary, guarantees a portion of a
loan made by National Consumer Cooperative Bank ("NCCB") to K.V. Mart Co., of
which director Darioush Khaledi is the President and a shareholder, and KV
Property Company, of which director Darioush Khaledi is a general partner. The
term of the loan is eight years, maturing January 1, 2002, and the loan bears
interest at a floating rate based on the commercial loan base rate of NCCB. The
loan is collateralized by certain real and personal property. The guarantee by
GCC is limited to 10% of the $2.1 million principal amount of the loan. In
consideration of its guarantee, GCC will receive an annual fee from K.V. Mart
Co. equal to approximately 5% of the guarantee amount.
GCC has guaranteed a portion of a $5,000,000 revolving loan made by NCCB to
K.V. Mart Co. in November 1995. The loan has an initial maturity of two years,
with the outstanding balance then converting to a five year term loan. The loan
bears interest at a floating rate based on the commercial loan rate of NCCB. The
loan is collateralized by certain real and personal property of K.V. Mart Co.
The guaranty of GCC is limited to 10% of the outstanding principal amount of the
loan. Since its inception, the highest outstanding principal amount of the loan
has been and is presently $785,000. In consideration of its guaranty, GCC will
receive an annual fee from K.V. Mart Co. equal to 5% of the guaranty amount.
The Company is proposing to enter into a guaranty of rent and certain other
obligations of K.V. Mart Co. under a lease of store premises to be constructed
in Lynwood, California. The guaranty would be for a term of seven years. Annual
rent under the lease will be $408,000. In consideration of its guaranty, the
Company will receive an annual fee from K.V. Mart Co. equal to 5% of the annual
rent.
In December 1995, GCC purchased 10% of the common stock of K.V. Mart Co. for
a purchase price, based upon appraised values, of approximately $3,000,000. In
connection with this purchase, K.V. Mart Co., GCC, Mr. Khaledi and the other
shareholders of K.V. Mart Co. agreed that GCC will have certain preemptive
rights to acquire additional common shares, rights to have its common shares
included proportionately in any transfer of common shares by the other
shareholders, and rights to have its common shares included in certain
registered public offerings of common stock which may be made by K.V. Mart Co.
In addition, GCC has the option to require the repurchase of its shares for any
reason after December 2000, and until that time has the option to require
repurchase upon the occurrence of certain specified events, including a material
breach of the supply agreement referred to below, changes in management or
control, and noncompliance with financial ratios. After December 1999, the
repurchase price is fair market value as determined by appraisal, and until that
time is the greater of a declining premium over fair market value or the
original purchase price of the shares plus an agreed annual compounded rate of
return. K.V. Mart Co. has the option to repurchase GCC's shares at any time and
also in the event of a change in control of GCC or the Company or a material
breach by the Company under the supply agreement referred to below. In the
absence of a change in control or a material breach under the supply agreement,
and until December 1999, the repurchase price is the greater of a declining
premium over fair market value or the original purchase price of the shares plus
an agreed annual compounded rate of return, and after December 1999 is fair
market value. In the event of a change in control or a material breach under the
supply agreement, and until December 1999, the repurchase price is the lesser of
a declining discount from fair market value or the original purchase price of
the shares, and after December 1999 is fair market value. In connection with
these transactions, K.V. Mart Co. entered into a seven year supply agreement
with the Company whereunder K.V.
8
<PAGE>
Mart Co. is required to purchase a substantial portion of its merchandise
requirements from the Company. As of February 3, 1996, these purchases totalled
approximately $5,659,000. The supply agreement is subject to earlier termination
in certain situations.
The Company guarantees annual rent and certain other obligations of Stump's
Market, Inc., of which director James R. Stump is the President and a
shareholder, as leasee under a lease of store premises located in San Diego,
California. Annual rent under the lease is $26,325, and the lease term expires
in May 1998. The Company also guarantees annual rent and certain other
obligations of Stump's Market, Inc. as lessee under a lease of store premises at
a second location in San Diego, California. Annual rent under this lease is
$36,075, and the lease term expires in November 1997. In consideration of these
guaranties, the Company receives a monthly fee from Stump's Market, Inc. equal
to 5% of the base monthly rent under these leases.
In fiscal 1994, GCC acquired 25,000 shares of preferred stock of SavMax
Foods, Inc. ("SavMax"), of which director Michael A. Webb is the President and a
shareholder. The purchase price was arbitrarily set at $100 per share. At the
time, GCC owned 40,000 shares of preferred stock of SavMax which it acquired in
fiscal 1992. As part of the new purchase of preferred stock, the annual
cumulative dividend on the 65,000 shares of preferred stock owned by GCC was
increased from $8.25 per share to $8.50 per share, payable quarterly. Mandatory
partial redemption of this stock at a price of $100 per share began in 1994 and
will continue annually thereafter for eight years, at which time the stock is to
be completely retired. GCC also purchased from Mr. Webb and another member of
his immediate family, 10% of the common stock of SavMax for a price of $2.5
million, which price was approximately the same as the repurchase price paid by
SavMax for the common stock of a third party shareholder unrelated to GCC, Mr.
Webb or his family member. In connection with this purchase, Mr. Webb, SavMax
and GCC agreed that GCC will have certain preemptive rights to acquire
additional common shares, rights to have its common shares included
proportionately in any transfer of common shares by Mr. Webb, and rights to have
its common shares included in certain registered public offerings of common
stock which may be made by SavMax. In addition, GCC has the option to require
the repurchase of its shares for any reason after October 1998, and until that
time has the option to require repurchase upon the occurrence of certain
specified events, including a material breach of the supply agreement referred
to below, changes in management or control, and noncompliance with financial
ratios. After October 1998, the repurchase price is fair market value as
determined by appraisal, and until that time is the greater of a declining
premium over fair market value or the original purchase price of the shares plus
an agreed annual compounded rate of return, or in certain events, is the greater
of fair market value or the original purchase price of the shares. SavMax has
the option to repurchase GCC's shares at any time and also in the event of a
change in control of GCC or the Company or a material breach by the Company
under the supply agreement referred to below. In the absence of a change in
control or a material breach under the supply agreement, and until October 1998,
the repurchase price is the greater of a declining premium over fair market
value or the original purchase price of the shares plus an agreed annual
compounded rate of return, and after October 1998 is fair market value. In the
event of a change in control or a material breach under the supply agreement,
and until October 1998, the repurchase price is the lesser of a declining
discount from fair market value or the original purchase price of the shares,
and after October 1998 is fair market value. In connection with these
transactions, SavMax entered into a seven year supply agreement with the Company
(to replace an existing supply agreement) whereunder SavMax is required to
purchase a substantial portion of its merchandise requirements from the Company.
As of February 3, 1996, these purchases totalled approximately $4,323,000 during
fiscal 1996. The supply agreement is subject to earlier termination in certain
situations.
The Company guarantees certain obligations of SavMax under three leases of
market premises located in Sacramento, San Jose and San Leandro, California.
Each of these guaranties relates to the obligation of SavMax to pay base rent,
common area maintenance charges, real estate taxes and insurance during the
initial 20 year terms of these leases. However, the guaranties are such that the
Company's obligation under each of them is limited to an amount equal to sixty
monthly payments (which need not be consecutive) of the obligations guaranteed.
Base rent is $40,482 per month under the Sacramento lease and $56,756 per month
under the San Jose lease, in each case subject to a 7 1/2% increase at the end
of each five years. Base rent is
9
<PAGE>
$42,454 per month under the San Leandro lease, subject to a 10% increase at the
end of each five years. In consideration of these guaranties, the Company
receives a monthly fee from SavMax equal to 5% of the base monthly rent under
these leases.
The Company guarantees certain obligations of SavMax under two leases of
market premises located in Ceres and Vacaville, California. The leases have
initial terms expiring in January 2005 and April 2007, respectively. Base
monthly rent under the Ceres lease is presently $32,175, increasing to $34,425
in January of 2000. Base monthly rent under the Vacaville lease is presently
$29,167, increasing by $25,000 per year in April of 1997 and 2002. In
consideration of these guaranties, the Company will receive a monthly fee from
SavMax equal to 5% of the base monthly rent under these leases.
The Company leases certain market premises located in Sacramento and
Vallejo, California, and in turn subleases these premises on the same rental
terms to SavMax. The Sacramento sublease provides for a term of 20 years and the
Vallejo sublease provides for a term of 10 years. Neither sublease contains
options to extend, although SavMax has the option under each sublease to acquire
the Company's interest under its lease on the condition that the Company is
released from all further liability thereunder. The term of the Sacramento
sublease commenced in September of 1994. The Sacramento premises consist of
approximately 50,000 square feet and annual base rent under the lease and
sublease is at the following per square foot rates: $8.00 during years 1 and 2;
$8.40 during years 3 through 5; $8.82 during years 6 through 10; $9.26 during
years 11 through 15; and, $9.72 during years 16 through 20. The term of the
Vallejo sublease commenced in September of 1995 and annual base rent under the
sublease is $279,000. In addition, under each of these subleases, the Company
receives monthly an additional amount equal to 5% of the base monthly rent under
the sublease.
The Company is proposing to lease certain market premises to be constructed
and located in Los Banos, California, which it in turn will sublease on the same
rental terms to Maxco Foods, Inc. ("Maxco"), a corporation of which SavMax is a
shareholder. The sublease to Maxco would provide for a term of 20 years, without
options to extend, although Maxco will have the option to acquire the Company's
interest under its lease on the condition that the Company is released from all
further liability thereunder. The premises will consist of approximately 50,000
square feet and annual base rental under the lease and sublease is as follows:
$390,000 during years 1 through 5; $424,125 during years 6 through 10; $461,236
during years 11 through 15; and, $501,594 during years 16 through 20. In
addition, the Company will receive monthly an additional amount equal to 5% of
the base monthly rent under the sublease. In connection with this transaction,
Maxco will enter into a seven year supply agreement with the Company whereunder
Maxco would be required to purchase a substantial portion of its merchandise
requirements from the Company. The supply agreement will be subject to earlier
termination in certain situations.
With respect to the Los Banos sublease, GCC is proposing to make a seven
year equipment loan in the amount of $1,620,000, a five year inventory loan in
the amount of $675,000 and a five year deposit fund loan in the amount of
$350,000 to Maxco. The equipment and inventory loans will bear interest at prime
plus 3%, and the deposit fund loan will bear interest at prime plus 2%. The
loans will be secured by a security interest in all of the equipment, fixtures
and inventory at the Los Banos store and by personal guarantees. In addition, in
certain events, SavMax is required to assume the obligations of Maxco under the
loans, the sublease of the Los Banos premises and the obligations of Maxco under
its supply agreement with the Company.
Since the Company's retail and financial assistance programs are only
available to persons and entities which are patrons of the Company, it is not
possible to assess whether the foregoing transactions are less favorable to the
Company than similar transactions with unrelated third parties. However,
management believes that each such transaction is on terms no more favorable to
the patron than those which would be available to other similar patrons.
REPORT OF PERSONNEL AND EXECUTIVE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
The principal components of the Company's executive compensation program
consist of an annual salary, an annual cash bonus the payment of which is
dependent upon Company performance during the preceding fiscal year, and certain
pension, retirement and life insurance benefits.
10
<PAGE>
SALARY
In determining officer salaries, including that of the Chief Executive
Officer ("CEO"), the Personnel and Executive Compensation Committee's policy is
to set salaries at levels which recognize officer performance, are commensurate
with the responsibilities assigned to the various officer positions, and will
enable the Company to attract and retain highly qualified executives for its
officer positions.
In providing for increases in officer salaries for calendar year 1995, the
Committee took note of the on-going cost reduction efforts implemented by the
officer group under the direction of the CEO. These efforts were undertaken in
response to the significant volume declines experienced by the Company as a
result of a reduction in purchases by certain large retailers who commenced
self-distribution programs or were acquired by chains already engaged in
self-distribution. These efforts resulted in the consolidation of Company
operations into fewer facilities and substantial savings in payroll expenses
through significant reductions in the number of employees.
In providing for an increase in the CEO's salary and the award of a bonus,
as noted below, the Committee recognized the substantial efforts made under the
CEO's leadership toward a restructuring of Company operations. Under the
Company's newly launched comprehensive strategic initiative, labeled "C(3)" for
"Certified's Commitment to Customers," an in-depth examination of Company
operations, services and business practices was commenced, with a focus on
commitment to growth, quality, cost efficiency and superior service. As a
result, fiscal 1995 saw the addition of major new customers in Northern
California and Arizona which are estimated to provide more than $250 million in
new sales volume to the Company. In addition, reductions in prices to customers
were also achieved through decreased transportation fees. Streamlining of
Company operations resulting in cost efficiencies also moved forward under the
CEO's direction, notably with respect to the Company's dairy manufacturing
operations and the consolidation of the Company's equipment, facilities and
transportation departments into a single function.
The Committee's procedure in approving officers' salaries, including that of
the CEO, involves meeting in closed session and without the CEO or other
management personnel being present. In addition to the considerations mentioned
above, this process, which is subjective in nature, centers on the Committee's
consideration of the CEO's evaluation of each individual officer based on the
CEO's perception of their performance in accordance with individual officer
responsibilities as defined by personal and organizational goals and objectives,
(such as cost reduction, increased efficiency, improvement of member services
and product quality and streamlining of business operations), the relative value
and importance of individual officer contribution toward organizational success,
relative levels of officer responsibilities and changes in the scope of officer
responsibilities, and officer accomplishments and contributions during the
preceding fiscal year. The Committee also reviews and discusses the salary
recommendations made by the CEO for each officer. These recommendations do not
include any recommendation as to the CEO's salary, and the Committee sets the
CEO's salary based on its assessment of his performance in light of the
foregoing policies and considerations. The salaries as approved by the Committee
are submitted to the Board of Directors, which made no changes in the salaries
submitted for 1995.
ANNUAL BONUSES
In recognition of the relationship between Company performance and
enhancement of shareholder value, Company officers may be awarded annual cash
bonuses. Bonuses are paid from a bonus pool which is created if the Company has
achieved an established minimum level of pre-patronage income for the preceding
fiscal year. The amount of the bonus pool is calculated as a percentage of
pre-patronage income, with the percentage varying depending on the level of
pre-patronage income as a percentage of net sales. Amounts in the bonus pool are
allocated among the Company's officers by the CEO, subject to the approval of
the Board of Directors. The CEO does not participate in the bonus pool. However,
a bonus was awarded to the CEO by the Board of Directors based on his
performance as discussed above under "Salary." Bonuses awarded to the CEO and
the named executives are disclosed in the Summary Compensation Table.
BENEFITS
Consistent with the objective of attracting and retaining qualified
executives, the compensation program includes the provision of pension benefits
to Company employees, including officers, under the Company's defined benefit
pension plan, which is described in connection with the Pension Plan Table. In
11
<PAGE>
addition, Company employees, including officers, may defer income from their
earnings through voluntary contributions to the Company's Employees' Sheltered
Savings Plan adopted pursuant to Section 401(k) of the Internal Revenue Code and
the Company's Employees' Excess Benefit Plan, which is a nonqualified plan. In
the case of those officers who elect to defer income under these plans, the
Company makes additional contributions for their benefit. The amount of these
additional contributions made during fiscal year 1995 for the benefit of the CEO
and the other named executive officers is set forth in the footnotes to the
Summary Compensation Table. The Company also provides additional retirement
benefits to its officers pursuant to an Executive Salary Protection II, which is
described in connection with the Pension Plan Table.
Members of the Personnel and Executive Compensation Committee:
Darioush Khaledi, Chairman
Louis A. Amen
Willard R. MacAloney
James R. Stump
Michael A. Webb
EXECUTIVE OFFICER COMPENSATION
The following table sets forth information respecting the compensation paid
during the Company's last three fiscal years to the President and Chief
Executive Officer (CEO) and to certain other executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------------
OTHER
FISCAL ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)
- ------------------------------ ------ ------------ -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Alfred A. Plamann 1995 322,150 50,000 0 24,290(2)
President & CEO 1994 236,827 0 205 31,431
1993 164,800 0 310 25,419
Donald W. Dill(1) 1995 147,047 0 167 175,169(3)
Senior Vice President 1994 163,366 0 576 38,127
1993 153,346 0 1,016 37,392
Daniel T. Bane(1) 1995 200,000 20,000 195 1,231(4)
Senior Vice President & CFO 1994 21,539 0 0 0
1993 0 0 0 0
Charles J. Pilliter 1995 172,000 15,000 0 13,174(5)
Senior Vice President 1994 167,577 0 127 20,591
1993 151,924 0 188 18,241
Donald G. Grose 1995 147,000 7,500 357 11,232(6)
Senior Vice President 1994 143,760 0 438 31,700
1993 135,116 0 955 30,372
</TABLE>
- ------------------------
(1) Mr. Dill retired July 27, 1995 and Mr. Bane joined the Company July 26,
1994.
(2) Consists of a $6,392 Company contribution to the Company's Employees'
Sheltered Savings Plan, and a $17,898 Company contribution to the Company's
Employees' Excess Benefit Plan.
(3) Consists of $162,000 in severance benefits (representing 52 weeks of salary
paid in accordance with the Company's past practices), a $3,466 Company
contribution to the Company's Employees' Sheltered Savings Plan, and a
$9,703 Company contribution to the Company's Employees' Excess Benefit Plan.
(4) Consists of a $385 Company contribution to the Company's Employees'
Sheltered Savings Plan, and a $846 Company contribution to the Company's
Employees' Excess Benefit Plan.
(5) Consists of a $3,467 Company contribution to the Company's Employees'
Sheltered Savings Plan, and a $9,707 Company contribution to the Company's
Employee Excess Benefit Plan.
(6) Consists of a $7,158 Company contribution to the Company's Employees'
Sheltered Savings Plan, and a $4,074 Company contribution to the Company's
Employees' Excess Benefit Plan.
In September 1994, the Board of Directors authorized a new supplemental
executive pension plan (effective January 4, 1995) which provides retirement
income based on each participant's final salary and
12
<PAGE>
years of service with the Company. The plan, called the Company's Executive
Salary Protection Plan II ("ESPP II"), provides additional post-termination
retirement income based on each participant's final salary and years of service
with the Company. The funding of this benefit will be facilitated through the
purchase of life insurance policies, the premiums of which will be paid by the
Company and participant contributions. The Company also has a defined benefit
pension plan covering its non-union and executive employees. Benefits under the
defined benefit plan are equal to credited service times the sum of 95% of
earnings up to the covered compensation amount plus 1.45% of earnings in excess
of the covered compensation amount. The covered compensation is based on IRS
Tables.
ESPP II supersedes and replaces the Executive Salary Protection Plan I
("ESPP I"). Under ESPP I, Certified purchased life insurance policies for
certain officers. Upon reaching age 65 (or upon termination, if earlier), the
employee was given the cash surrender value of the policy, plus any additional
income taxes incurred by the employee as a result of such distribution.
The following table sets forth the estimated annual benefits under the
defined benefit plan and the ESPP II plan which qualifying officers with
selected years of service would receive if they had retired on September 2, 1995
at the age of 65.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------
REMUNERATION 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 33 YEARS
- -------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$100,000...................... $ 26,008 $ 52,016 $ 68,024 $ 69,032 $ 70,040 $ 71,653
125,000....................... 32,530 65,060 85,090 86,370 87,650 89,697
150,000....................... 39,052 78,104 89,455 91,007 92,559 95,042
175,000....................... 45,302 87,904 89,455 91,007 92,559 95,042
200,000....................... 51,552 87,904 89,455 91,007 92,559 95,042
225,000....................... 57,802 87,904 89,455 91,007 92,559 95,042
250,000....................... 64,052 87,904 89,455 91,007 92,559 95,042
300,000....................... 76,552 87,904 89,455 91,007 92,559 95,042
350,000....................... 86,352 87,904 89,455 91,007 92,559 95,042
400,000....................... 86,352 87,904 89,455 91,007 92,559 95,042
450,000....................... 86,352 87,904 89,455 91,007 92,559 95,042
</TABLE>
The Company's ESPP II is designed to provide a retirement benefit up to 65%
of a participant's final compensation, based on a formula which considers an
executive's final compensation and years of service. Remuneration under ESPP II
is based upon an executive's highest annual base wage during the previous three
completed years, which includes his or her annual salary as determined by the
Board of Directors plus an automobile allowance with a 4% annual increase. The
benefit is subject to an offset of the annual benefit which would be received
from the defined benefit plan, calculated as a single life annuity at age
sixty-two. To qualify for participation in the benefit, the executive must
complete three years of service as an officer elected by the Board of Directors
of the Company. Executives will vest at a rate of 5% per year with all years of
continuous service credited. The ESPP II maximum annual benefit upon retirement
for calendar 1995 shall not exceed $84,800 and will be paid over a 15-year
certain benefit. This maximum benefit will increase annually thereafter at the
rate of 6%. Lesser amounts are payable if the executive retires before age
sixty-five. The maximum annual amount payable by years of service is reflected
within the table at the compensation level of $450,000. As of September 2, 1995,
credited years of service for named officers are: Mr. Plamann, 6 years; Mr.
Bane, 1 year; Mr. Dill, 37 years; Mr. Gross, 14 years; and Mr. Pilliter, 19
years.
EXECUTIVE EMPLOYMENT AND TERMINATION ARRANGEMENT
In February 1996, the Company entered into an employment contract with
Alfred A. Plamann, the Company's President and Chief Executive Officer. The
contract has a three year term and provides for potential extensions to the
contract if there is mutual agreement. Under the contract, Mr. Plamann will
serve as the Company's President and Chief Executive Officer and will receive a
salary of $365,000, subject to annual review and upward adjustment at the
discretion of the Board of Directors. Mr. Plamann will also be
13
<PAGE>
eligible for annual bonuses at the discretion of the Board of Directors based
upon a review of his performance. The exact formula for future bonuses had not
been determined at the date of the contract and will be added as an amendment to
the contract at a later date. Additionally, Mr. Plamann will receive employee
benefits such as life insurance and Company pension and retirement
contributions.
The contract is terminable at any time by the Company, with or without
cause, and will also terminate upon Mr. Plamann's resignation, death or
disability. Except where termination is for cause or is due to Mr. Plamann's
resignation, death or disability, the contract provides that Mr. Plamann will be
entitled to receive his highest base salary during the previous three years,
plus an annual bonus equal to the average of the most recent three annual bonus
payments, throughout the balance of the term of the agreement. Mr. Plamann would
also continue to receive employee benefits such as life insurance and Company
pension and retirement contributions throughout the balance of the term of the
agreement.
DIRECTOR COMPENSATION
Each director receives a fee of $300 for each regular board meeting
attended, $100 for each committee meeting attended and $100 for attendance at
each board meeting of a subsidiary of the Company on which the director serves.
In addition, directors are reimbursed for Company related expenses.
CUMULATIVE TOTAL SHAREHOLDER RETURN
The following graph sets forth the five year cumulative total shareholder
return on the Company's common stock as compared to the cumulative total return
for the same period of the S&P 500 Index and Peer Issuers consisting of Spartan
Stores, Inc. and Roundy's, Inc. Like the Company, Spartan Stores and Roundy's
are retailer-owned wholesale grocery distributors. While Spartan Stores pays a
dividend on its stock, the Company and Roundy's do not. The shares of the
Company and the Peer Issuers are not traded on any exchange and there is no
established public market for such shares. The price of the Company's shares
during each of its fiscal years is the book value of such shares as of the end
of the prior fiscal year.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG THE COMPANY, S&P 500 INDEX AND PEER ISSUERS**
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPANY S&P 500 PEER ISSUERS
<S> <C> <C> <C>
1990 100 100 100
1991 94.1 122.6 104.9
1992 89.5 128.4 110.8
1993 90.1 143.7 117.8
1994 89.9 147.4 125.9
1995 91.4 174.2 136.6
</TABLE>
Assumes $100 invested on August 31, 1990 in
Company common stock, S&P 500 Index and Peer
Issuers common stock
* Total return assumes reinvestment of dividends
** Fiscal years ended August 31, 1991, August 29,
1992, August 28, 1993, September 3, 1994 and
September 2, 1995
14
<PAGE>
TRANSACTIONS WITH MANAGEMENT
All firms with which directors and nominees are affiliated purchase
groceries, related products and store equipment from the Company or its
subsidiaries in the ordinary course of business at prices and on terms available
to patrons generally. During the fiscal year ended September 2, 1995, Ralphs
Grocery Co. and its affiliated companies (including Cala Co. of which nominee
Harley DeLano is the President) accounted for a combined total of approximately
9.5% of consolidated sales. No other firm with which directors or nominees are
affiliated accounted for in excess of 5% of the Company's consolidated sales.
In September 1992, the Company guaranteed the obligations of Mar-Val Food
Stores, Inc., of which director Mark Kidd is the President and a shareholder,
under a lease of market premises located in Valley Springs, California. The
guarantee is of the obligations of Mar-Val Food Stores, Inc. to pay base rent,
common area costs, real estate taxes and insurance during the initial fifteen
year term of the lease. Base rent under the lease is $10,080 per month. The
Company's total obligation under the guarantee, however, is limited to the sum
of $736,800. In consideration of its guarantee, the Company receives a monthly
fee from Mar-Val Food Store, Inc. equal to 5% of the base monthly rent under the
lease.
The Company leases its produce warehouse to Joe Notrica, Inc., of which
director Morrie Notrica is the President and a shareholder. The lease is for a
term of five years expiring in November 1998 and contains an option to extend
for an additional five year period. Monthly rent during the initial term is
$24,000. If the option to extend is exercised, rent during the option period
will be the lesser of fair rental value or the monthly rent during the initial
term as adjusted to reflect the change in the Customer Price Index during the
initial term.
In September 1995, the Company entered into a supply agreement with Nob Hill
General Store, Inc. ("Nob Hill"), of which Nominee Michael Bonfonte is the
President. The agreement provides for the purchase by Nob Hill of a substantial
amount of its merchandise requirements in each fiscal year of the Company. The
agreement contains provisions for adjustments in the amount based upon the
number of stores operated by Nob Hill. The agreement has a term of seven years,
subject to earlier termination in certain situations.
Cala Co. (of which nominee Harley DeLano is the President) acquired the
stock of Bell Markets, Inc. in June 1989. The Company guaranteed the payment by
Cala Co. of certain promissory notes in favor of the selling shareholders. The
promissory notes mature in June 1996 and total $8 million; however, the
Company's guaranty obligation is limited to $4 million. In addition, and in
connection with the acquisition, the Company guaranteed the lease obligations of
Bell Markets, Inc. during a 20-year period under a lease relating to two retail
grocery stores located in San Francisco, California. Annual rent under the lease
is $327,019. In the event the Company's guaranty is ever called upon, the
Company has the right to receive an assignment of the lease relating to the
locations. Concurrently with the foregoing transactions, Bell Markets, Inc.
entered into a 5-year agreement to purchase a substantial portion of its
merchandise requirements from the Company.
Grocers General Merchandise Company ("GM"), a subsidiary, and Food 4 Less
GM, Inc. ("F4LGM"), an indirect subsidiary of Ralphs Grocery Company, are
parties to a joint venture agreement. Under the agreement, GM and F4LGM are
partners in a joint venture partnership known as Golden Alliance Distribution
("GAD"). The partnership was formed for the purpose of providing for the shared
use of the Company's general merchandise warehouse located in Fresno,
California, and each of the partners has entered into a supply agreement with
Golden Alliance Distribution providing for the purchase of general merchandise
products from Golden Alliance Distribution.
The Company guarantees certain obligations under a sublease of market
premises located in Pasadena, California, and under which Berberian Enterprises,
Inc., of which Director John Berberian is the President and a shareholder, is
the sublessor. The guaranty is of the obligations of the sublessee to pay
minimum rent, common area costs, real estate taxes and insurance during the
first seven years of the term of the sublease, which commenced in September
1995. Minimum rent under the sublease is $10,000 per month. In consideration of
its guaranty, the Company receives a monthly fee from the sublessee equal to 5%
of the monthly amounts guaranteed.
15
<PAGE>
Since the Company's retail and financial assistance programs are only
available to persons and entities which are patrons of the Company, it is not
possible to assess whether the foregoing transactions are less favorable to the
Company than similar transactions with unrelated third parties. However,
management believes that each such transaction is on terms no more favorable to
the patron than those which would be available to other similar patrons.
On February 1, 1995, GCC made a loan of $69,000 to Corwin J. Karaffa, the
Company's Vice President-Distribution. The loan was for the purpose of assisting
Mr. Karaffa in acquiring a home in connection with his becoming employed by the
Company. The loan bears interest at 8% per annum and is secured by a second deed
of trust on the home. The loan has a term of eight years, with interest only
payable during the first five years. While the terms of the loan are perhaps
more favorable than would have been available to Mr. Karaffa from a third party
lender, the Company believes the terms to be fair and appropriate given that the
relatively higher cost of housing in Southern California is an impediment to the
hiring of qualified executives.
Certain other transactions involving other directors of the Company are
described in the section of this proxy statement entitled "Compensation
Committee Interlocks and Insider Participation."
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Coopers & Lybrand, L.L.P., served as the Company's independent
public accountants for the fiscal year ended September 2, 1995. The Board of
Directors has not yet selected the Company's independent public accountants for
the current fiscal year. Such selection normally occurs in May of each year. A
representative of Coopers & Lybrand is expected to be available at this year's
Annual Meeting to respond to appropriate questions and to make a statement if
such firm desires to do so.
SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
Under the present rules of the Securities and Exchange Commission (the
"Commission"), the deadline for shareholders to submit proposals to be
considered for inclusion in the Company's proxy statement for next year's Annual
Meeting of Shareholders is expected to be October 16, 1996. Such proposals may
be included in next year's proxy statement if they comply with certain rules and
regulations promulgated by the Commission. Such proposals should be submitted to
the Secretary of the Company at the address of the Company's principal executive
office shown on the first page of this proxy statement.
OTHER BUSINESS
The Board of Directors is not aware of any other matters which may be
presented for action at the Annual Meeting. If any matters not referred to in
the form of proxy relating to the Annual Meeting come before the Annual Meeting,
the proxy holders named in such form will vote the shares represented thereby in
accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Dated: February , 1996
DAVID A. WOODWARD, CORPORATE SECRETARY
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND
EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED SEPTEMBER 2, 1995, EXCLUDING
EXHIBITS, MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO THE CORPORATE SECRETARY
OF THE COMPANY AT THE ADDRESS OF THE COMPANY'S PRINCIPAL EXECUTIVE OFFICE SHOWN
ON THE FIRST PAGE OF THIS PROXY STATEMENT.
16
<PAGE>
P R O X Y
SOLICITED BY THE BOARD OF DIRECTORS OF
CERTIFIED GROCERS OF CALIFORNIA, LTD.
FOR ANNUAL MEETING OF SHAREHOLDERS ON APRIL 2, 1996
The undersigned, revoking any previous proxies respecting the subject matter
hereof, hereby appoints WILLARD R. MACALONEY, ALFRED A. PLAMANN and DAVID A.
WOODWARD attorneys and proxies (each with power to act alone and with power of
substitution) to vote all of the Class A Shares which the undersigned is
entitled to vote and all of the Class B Shares which the undersigned is entitled
to vote, with all powers which the undersigned would possess if personally
present, at the Annual Meeting of Shareholders of Certified Grocers of
California, Ltd. (the "Company"), to be held on April 2, 1996, notice of which
meeting and the proxy statement accompanying the same have been received by the
undersigned, or at any adjournment thereof, as follows:
1. ELECTION OF TWELVE DIRECTORS BY CLASS A SHARES.
Nominees: Louis A. Amen, John Berberian, Lyle A. Hughes, Darioush
Khaledi, Mark Kidd, Willard R. MacAloney, Jay McCormack, Morrie Notrica,
Michael A. Provenzano, Allan Scharn, James R. Stump and Kenneth Young
/ / VOTE FOR all nominees listed above, EXCEPT ANY WHOSE NAMES ARE
CROSSED OUT IN THE ABOVE LIST (the Board of Directors favors an
instruction to vote for all nominees).
/ / WITHHOLD AUTHORITY to vote for all nominees listed above.
2. ELECTION OF THREE DIRECTORS BY CLASS B SHARES.
Nominees: Michael Bonfonte, Harley DeLano and Roger K. Hughes
/ / VOTE FOR all nominees listed above, EXCEPT ANY WHOSE NAMES ARE
CROSSED OUT IN THE ABOVE LIST (the Board of Directors favors an
instruction to vote for all nominees).
/ / WITHHOLD AUTHORITY to vote for all nominees listed above.
3. In their discretion, on such other matters as may properly come before
the meeting or any adjournment thereof, other than the approval of loans
to or guaranties of the obligations of any patron of the Company upon the
security of shares of stock of the Company or any director of the
Company.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED, BUT IF NO
DIRECTION IS INDICATED IT WILL BE VOTED FOR ITEMS 1 AND 2, AND ACCORDING TO THE
DISCRETION OF THE PROXIES ON ANY OTHER PROPERLY PRESENTED MATTERS.
<TABLE>
<S> <C>
DATED: --------------, 1996
- -------------------------------------------- --------------------------------------------
Signature Title
- -------------------------------------------- --------------------------------------------
Signature Title
- -------------------------------------------- --------------------------------------------
Signature Title
</TABLE>
PLEASE READ: Execution should be exactly in the name in which the
shares are held; if by a fiduciary, the fiduciary's full title
should be shown; if by a corporation, execution should be in the
corporate name by its chairman of the board, president or a vice
president, or by other officers authorized by resolution of its
board of directors or its bylaws; if by a partnership, execution
should be in the partnership name by an authorized person.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
P R O X Y
SOLICITED BY THE BOARD OF DIRECTORS OF
CERTIFIED GROCERS OF CALIFORNIA, LTD.
REGARDING APPROVAL OF LOANS OR GUARANTIES
The undersigned, revoking any previous proxies respecting the subject matter
hereof, hereby appoints MARSHALL ITALIANO, ARTHUR REICHER and DAVID A. WOODWARD,
or any two of said persons, as attorneys and proxies (each with power of
substitution) to act for the undersigned, to execute written consents without a
meeting or prior notice, and otherwise to represent all of the Class A Shares of
Certified Grocers of California, Ltd. ("Company") which the undersigned would be
entitled to vote, to consider, act upon and, in said proxies' discretion,
approve loans of money or property by the Company or any of its subsidiaries to,
or guaranties by the Company or any of its subsidiaries of the obligations of,
the following: (1) Any patron of the Company upon the security of the shares of
stock of the Company held by such patron, or (2) Any director of the Company, in
which case approval shall be required by two of the proxy holders, excluding any
proxy holder affiliated with the director; provided that, in each case, the loan
or guaranty is of the type and satisfies the conditions described in the
Company's proxy statement dated February , 1996 accompanying this proxy.
The shares of stock represented by this proxy shall be voted as follows:
/ / IN FAVOR / / AGAINST / / ABSTAIN
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF "IN FAVOR",
IT WILL BE VOTED IN SAID PROXIES' DISCRETION RESPECTING APPROVAL OF SUCH LOANS
OR GUARANTIES; IF "AGAINST", IT WILL BE VOTED AGAINST SUCH LOANS OR GUARANTIES;
AND, IF "ABSTAIN", IT WILL NOT BE VOTED RESPECTING APPROVAL OF SUCH LOANS OR
GUARANTIES. IF NO DIRECTION IS INDICATED, IT WILL BE VOTED AS IF "IN FAVOR" HAD
BEEN DIRECTED.
UNLESS REVOKED, THIS PROXY SHALL BE VALID THROUGH APRIL 1, 1997.
<TABLE>
<S> <C>
DATED: --------------, 1996
- -------------------------------------------- --------------------------------------------
Signature Title
- -------------------------------------------- --------------------------------------------
Signature Title
- -------------------------------------------- --------------------------------------------
Signature Title
</TABLE>
PLEASE READ: Execution should be exactly in the name in which the
shares are held; if by a fiduciary, the fiduciary's full title
should be shown; if by a corporation, execution should be in the
corporate name by its chairman of the board, president or a vice
president, or by other officers authorized by resolution of its
board of directors or its bylaws; if by a partnership, execution
should be in the partnership name by an authorized person.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
