<PAGE>
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE) FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended August 30, 1997
[_] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
COMMISSION FILE NUMBER 0-10815
---------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-0615250
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2601 S. EASTERN AVENUE, LOS ANGELES 90040
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (213) 723-7476
---------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
------------------- ---------------------
Class A Shares None
Class B Shares 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]
The Company's shares are not publicly traded and therefore market value is
not readily ascertainable.
The number of shares outstanding of each of the registrant's classes of
common stock, as of November 1, 1997 were as follows:
<TABLE>
<S> <C>
Class A 47,900 shares
Class B 385,990 shares
Class C 15 shares
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
None.
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<PAGE>
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<C> <S> <C>
1. Business........................................................... 3
2. Properties......................................................... 8
3. Legal Proceedings.................................................. 9
4. Submission of Matters to a Vote of Security Holders................ 9
PART II
Market for Registrant's Common Equity and Related Shareholder
5. Matters............................................................ 9
6. Selected Financial Data............................................ 9
Management's Discussion and Analysis of Financial Condition and
7. Results of Operations.............................................. 10
8. Financial Statements and Supplementary Data........................ 14
Changes in and Disagreements with Accountants on Accounting and
9. Financial Disclosure............................................... 38
PART III
10. Directors and Executive Officers of the Registrant................. 39
11. Executive Compensation............................................. 40
12. Security Ownership of Certain Beneficial Owners and Management..... 43
13. Certain Relationships and Related Transactions..................... 44
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K... 45
Signatures............................................................... 50
</TABLE>
2
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PART I
Certified Grocers of California, Ltd. and its consolidated subsidiaries are
hereinafter referred to as "Certified" or the "Company."
ITEM 1. BUSINESS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS REPORT ON FORM 10-K ARE FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES, INCLUDING BUT NOT LIMITED TO ECONOMIC,
COMPETITIVE, GOVERNMENTAL AND TECHNOLOGICAL FACTORS AFFECTING THE COMPANY'S
OPERATIONS, MARKETS, PRODUCTS, SERVICES AND PRICES, AND OTHER FACTORS
DISCUSSED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION.
GENERAL
Certified is the largest grocery wholesaler serving independent supermarket
chains in California. The Company also serves retail food stores in Nevada,
Arizona, Hawaii and various foreign countries in the South Pacific and
elsewhere. In addition to offering a complete line of dry grocery, frozen
food, deli, meat, dairy, bakery and general merchandise products, the Company
also provides finance, insurance, store design and real estate services to its
patrons. As of August 30, 1997, Certified provided products and services to
2,781 retail food stores operated by 729 patrons. The Company's marketing
platform is built on offering its patrons greater value than found elsewhere
by combining competitive pricing with superior selection, quality, service and
convenience.
A California corporation organized in 1922 and incorporated in 1925,
Certified does business primarily with those patrons who qualify and have been
accepted as "member-patrons." Certified is owned by its member-patrons who are
primarily independent grocers. The Company is operated and, with the exception
of its subsidiaries, is taxed on a cooperative basis. The primary businesses
operated by Certified's subsidiary companies include the distribution of
general merchandise, health and beauty care and specialty products and the
sale of insurance, finance and store planning services primarily to operators
of retail food stores. The earnings of the Company's subsidiaries are
generally retained by the Company, while the earnings of the parent company
("Cooperative") are generally distributed to its patrons in the form of
patronage dividends. The benefit of this structure is that taxes are paid on
the Cooperative's earnings only once, that is, when notice of a patronage
dividend payout is received by the patron. (See "BUSINESS--Tax Matters") The
Company establishes minimum purchase requirements for the member-patrons,
which may be modified from time to time. Patrons which do not meet purchasing
requirements are termed "associate patrons."
Associate patrons do not own shares in the Company; accordingly, they are
not allowed to vote on matters requiring shareholder approval. However,
associate patrons have the same deposit requirements and are entitled to other
benefits similar to member-patrons.
WHOLESALE DISTRIBUTION
Certified's wholesale distribution business represented approximately 98% of
fiscal 1997 sales. The wholesale business includes a broad range of branded
and private label products in dry grocery, frozen, delicatessen, general
merchandise, boxed meat, service deli, ice cream, bakery and dairy.
The Company distributes its various product lines from warehouse and
manufacturing complexes located in Los Angeles, Stockton, and Fresno,
California.
Certified sells a full line of branded grocery and nonfood items supplied by
unrelated manufacturers and also sells merchandise under its own private
labels, including the Springfield, Gingham, Special Value, La
3
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Corona, and Golden Creme labels. Certified also operates its own bakery and
dairy facilities. The Company is not dependent upon any single source of
supply in any of its businesses. Management believes that alternative
suppliers are available for substantially all of its products and that the
loss of any one supplier would not have a material adverse effect on the
Company's business.
The Company currently makes certain charges in addition to the listed prices
for merchandise, including fees for warehousing and delivery, based on
published schedules. Warehousing fees (also known as service fees) are
primarily based on average order sizes and frequency of orders, while delivery
fees are based primarily on the distance from the Company's supplying
warehouse and the amount of capacity or cube used by the load.
SUPPORT BUSINESSES
The Company's retail support businesses collectively accounted for
approximately 2% of the Company's total sales in fiscal 1997. Retail support
operations include Grocers Capital Company ("GCC"), which provides financing
for inventory purchases, equipment purchases, store remodeling and new store
acquisitions, and Grocers Equipment Company ("GEC"), which provides store
planning and development services, retail pricing comparisons, scanning
support and also sells and leases equipment to the Company's customers. During
fiscal 1997, the Company operated three conventional supermarkets and one
limited assortment store in Northern California and one limited assortment
store in Southern California. The Company also provides insurance brokerage
services for retailers through Grocers and Merchants Insurance Services, Inc.,
and underwrites selected insurance risks through two insurance subsidiaries.
RETAIL DEVELOPMENT
The Company recently introduced a banner store program designed to convert
older stores into state-of-the-art retail operations. Operating under the
common name "Apple Markets", the stores are owned and operated by patrons of
Certified or by Certified; however, they have the look of a chain store
because each store carries the same name and logo, and utilize the same design
layout throughout the stores. Other formats to meet the diverse needs of
independent retailers are also in the development stage.
COMPETITION
The food industry is characterized by intense competition and low profit
margins. In order to compete effectively, the Company must provide its patrons
with the capability to meet rapidly fluctuating competitive market prices,
provide a wide range of perishable and nonperishable products, make prompt and
efficient deliveries, and provide the services which are required by modern
market operations. The Company competes with local, regional and national
grocery wholesalers and with a number of major manufacturers which market
their products directly to retailers. The Company's success is dependent upon
its ability to supply food and nonfood products and services to its patrons in
a cost-effective manner and upon the ability of its independent retail
customers to compete with the large chain store operations.
CUSTOMERS
The Company's patrons are primarily retail grocery store operators ranging
in size from single store operators to multiple store chains. The Company's
largest customer and ten largest customers accounted for approximately 5% and
31%, respectively, of net sales in fiscal 1997.
STOCK OWNERSHIP
Class A Shares
Class A Shares are issued to and may be held only by member-patrons of
Certified. In order to qualify for and retain membership as a member-patron, a
person or other entity (1) must patronize Certified in such amounts and
manner, and otherwise must comply with the Bylaws and with such rules,
regulations and policies, as may be established by Certified; (2) must have
and maintain acceptable financial standing; (3) must make application in such
form as is prescribed; and (4) must be accepted as a member after approval by
the Board of Directors.
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Each member-patron of Certified is required to hold exactly 100 Class A
Shares. The price for such shares will be the book value per share of the
outstanding shares at the close of the fiscal year ended prior to acceptance
as a member-patron.
Class B Shares
The Board of Directors may approve the issuance of Class B Shares to any
person and for any purpose. However, the Board of Directors does not intend to
authorize the issuance of Class B Shares except to member-patrons.
With the exception of new members (see below), each member-patron is
required to hold Class B Shares having combined Issuance Values (as defined
below) in an amount equal to the lesser of the member-patron's required
subordinated cash deposit (see "BUSINESS--Patron Deposits") or twice the
member-patron's average weekly purchases ("Class B Share Requirement"). For
purposes of this requirement, each Class B Share held by a member-patron is
valued at the book value of Certified's outstanding shares as of the close of
the fiscal year ended prior to the issuance of such Class B Share ("Issuance
Value").
Class B Shares are generally issued to new member-patrons as part of the
patronage dividends (see "BUSINESS--Patronage Dividends") paid to such member-
patron over a period of five consecutive fiscal years, beginning with the
second fiscal year following admission as a member-patron. The Class B
issuance formula provides that the member-patron will hold Class B Shares
having Issuance Values equal to 20% of the member-patron's Class B Share
Requirement after the first patronage dividend, 40% of the Class B Share
Requirement after the second patronage dividend, and so on until the member-
patron reaches 100% of their Class B Share Requirement after the fifth
patronage dividend.
If following the issuance of Class B Shares as part of the patronage
dividend for any given fiscal year, the member-patron would not hold Class B
Shares having combined Issuance Values equal to the amount of Class B Shares
required to be held by the member-patron, then additional Class B Shares would
be issued to the member-patron in a quantity sufficient to achieve the
required amount. Issuance of these additional Class B Shares would be paid for
by charging the member-patron's cash deposit account in an amount equal to the
Issuance Value of such additional Class B Shares.
At August 30, 1997, the book value per share of Certified's Class A and
Class B Shares was $175.22.
Class C Shares
Class C Shares are held one share each by the members of the Board of
Directors. Each board member purchases one Class C Share for $10. Class C
Shares are nonvoting shares and would share in liquidation only to the extent
of $10 per share.
PATRONAGE DIVIDENDS
Certified distributes patronage dividends based upon the net patronage
earnings of the Cooperative during the fiscal year. The divisional dividends
are approved by the Board of Directors. Patronage dividends are distributed to
each patron in proportion to the dollar volume of patronage purchases from
each division of the Cooperative by the patron. Patronage dividends are
distributed after the close of the fiscal year, except for dividends on dairy
products which are distributed after the close of each fiscal quarter.
5
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The following table shows the patronage dividend experience of the Company
during the past three fiscal years.
<TABLE>
<CAPTION>
DIVISION 1997 1996 1995
-------- ------- ------- -------
(THOUSANDS OMITTED)
<S> <C> <C> <C>
Dairy................................................ $ 9,154 $ 8,100 $ 7,701
Dry Grocery.......................................... 2,970 2,940 2,610
Delicatessen......................................... 1,030 940 480
Frozen Food.......................................... 730 660 350
Beans and Rice....................................... 400 390 320
Ice Cream............................................ 180 170 110
------- ------- -------
Total(1)........................................... $14,464 $13,200 $11,571
======= ======= =======
</TABLE>
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(1) Certified expects to continue to distribute patronage dividends in the
future, although there can be no assurance of the amounts of such
dividends.
Certified's bylaws provide that patronage dividends may be distributed in
cash or in any other form that constitutes a written notice of allocation
under Section 1388 of the Internal Revenue Code. Section 1388 defines the term
"written notice of allocation" to mean any capital stock, revolving fund
certificate, retain certificate, certificate of indebtedness, letter of
advice, or other written notice, that discloses to the recipient the stated
dollar amount allocated to the recipient by Certified and the portion thereof,
if any, which constitutes a patronage dividend.
Dairy patronage dividends are generally paid in cash. Patronage dividends
for the remaining divisions are currently paid out in the following order and
manner: first, member-patrons receive 20% in cash; second, member-patrons
receive the required amount of Class B Shares (see "BUSINESS--Stock
Ownership"); third, the remainder is credited to the member-patron's deposit
account (see "BUSINESS--Patron Deposits"). In addition, Certified issued
subordinated patronage dividend certificates (see Footnote 8 to Notes to
Consolidated Financial Statements) evidencing the retention of a portion of
patronage dividends ("Patronage Certificates") for fiscal years 1993, 1994 and
1995. The amounts retained as Patronage Certificates in those years were
deducted from each member-patron's patronage dividend prior to the issuance of
Class B Shares to such member-patron.
PATRON DEPOSITS
The Company generally requires that its cooperative patrons maintain a
subordinated cash deposit equal to the greater of twice the amount of each
patron's average weekly purchases or twice the amount of the patron's average
purchases, if such purchases are not on a regular basis. Required deposits are
determined twice a year, at the end of the Company's second and fourth fiscal
quarters, based upon a review of the patron's purchases from certain of the
cooperative divisions during the preceding two quarters. Member-patrons
meeting certain qualifications established by the Board of Directors may elect
to maintain a reduced required deposit of $500,000 or one and one-quarter
weeks' average purchases, whichever is greater.
Member-patrons holding Class B Shares are presently given credit against the
above described cash deposit requirement based upon the respective book values
of such shares as of the fiscal years last ended prior to their issuance. The
Company pays no interest on the required deposits. Interest is paid on cash
deposits which are in excess of patrons' required deposits.
In addition, patrons who participate in the Company's price reservation
program are required to maintain a noninterest-bearing deposit based upon the
value of their inventory included in this program. Under the Company's price
reservation program, patrons are permitted to submit price reservations in
advance for their dry grocery, frozen, delicatessen and general merchandise
purchases. For the patron to get the benefit of the price reservation, an
actual order must be placed. The price which the patron will be charged is the
price in effect at the time of the reservation.
6
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The required deposits of patrons are contractually subordinated and subject
to the prior payment in full of certain senior indebtedness of the Company. As
a condition of becoming a patron, each patron is required to execute a
subordination agreement providing for the subordination of the patron's
required deposits. Generally, the subordination is such that no payment can be
made by the Company with respect to the required deposits in the event of an
uncured default by the Company with respect to senior indebtedness, or in the
event of dissolution, liquidation, insolvency or other similar proceedings,
until all senior indebtedness has been paid in full.
Upon request, the Company will return to patrons the amount of cash deposits
that are in excess of the required deposits, provided the patron is not in
default of its obligations to the Company. On termination of membership,
patrons are entitled to a return of deposits, less all amounts that may be
owing by the patron to the Company. In all cases, however, return of that
portion of the patron's cash deposits which consists of required deposits will
be governed by the applicable subordination provisions.
TAX MATTERS
The Company is a corporation operating primarily on a cooperative basis. The
Company is subject to federal and state income and franchise taxes and must
pay other taxes applicable to corporations, such as sales, excise, real and
personal property taxes.
As a corporation operating on a cooperative basis, the Company is subject to
Subchapter T of the Internal Revenue Code ("Subchapter T"). Under Subchapter
T, the Company pays patronage dividends to patrons pertaining to its fiscal
year within 8 1/2 months of the close of such fiscal year. To qualify as
patronage dividends, payments are made on the basis of the value of the
business done with or for patrons, under a pre-existing obligation to make
such payment, and with reference to the net earnings from business done with
or for the Cooperative's patrons. Patronage dividends are paid in cash or
written notices of allocation. A written notice of allocation is distributed
to the patron and provides notice of the amount allocated to the patron by the
Company and the portion thereof which constitutes a patronage dividend.
Under Subchapter T, the Company may deduct, in the fiscal year for which
they are paid, the amount of patronage dividends paid in cash and qualified
notices of allocation. A written notice of allocation will be qualified if the
Company pays at least 20% of the patronage dividend in cash, and the patron
consents to take the stated dollar amount of the written notice into income in
the year in which it is received. The Company deducts for tax purposes the
entire amount of its patronage dividends by paying at least 20% in cash and
issuing qualified notices of allocation for the remainder.
The Company currently intends to continue to make patronage distributions to
member-patrons comprised of cash and qualified notices of allocation
(including its Class B Shares). At least 20% of patronage dividends are
expected to be paid in cash. The Company will notify patrons of the stated
dollar amount allocated to them and the portion thereof which is a patronage
dividend. Patrons are required to consent to include in their gross income, in
the year received, all cash as well as the stated dollar amount of all
qualified notices of allocation including the Patronage Certificates and the
book value of the Class B Shares distributed to them as patronage dividends.
Patronage Certificates and Class B Shares distributed as part of the
patronage dividend are also subject to state income and corporation franchise
taxes in California and may be subject to such taxes in other states.
The Company is subject to federal income tax and California franchise tax on
net earnings of business with or for patrons which is not distributed as
deductible patronage dividends and on net earnings derived from nonpatronage
business. The Company files consolidated income tax returns with its
subsidiaries, none of which is a cooperative and each of which is therefore
subject to tax.
To the extent that Class B Shares are received by the patron as patronage
dividends under Subchapter T, the Internal Revenue Service ("IRS") has held
that if such Class B Shares are redeemed in full or in part or are
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otherwise disposed of, there will be included in the computation of the gross
income of the patron, as ordinary income, in the year of redemption or other
disposition, the excess of the amount realized on the redemption or other
disposition over the amount previously included in the computation of gross
income. However, since Class B Shares may be issued other than as a part of
patronage dividends, it is possible that the IRS could take the position that
the proceeds from a partial redemption of Class B Shares should be taxed as a
dividend. Patrons are strongly urged to consult with their tax advisors for
further clarification of this issue and for the impact the position of the IRS
may have on their own federal and state tax returns.
The Company's subsidiaries do not pay patronage dividends and are not taxed
in accordance with Subchapter T.
EMPLOYEES
The Company employs approximately 2,400 employees, of whom approximately
1,420 are members of one of several unions, the largest being the
International Brotherhood of Teamsters ("IBT"). The IBT contracts cover
approximately 1,320 employees and have various expiration dates. The Stockton
and Southern California warehouse workers' and truck drivers' IBT contract
covers approximately 1,160 employees and expires on September 13, 1998. The
IBT contract which covers approximately 130 Fresno warehouse workers and truck
drivers expires on February 3, 1999. The IBT contract which covers
approximately 30 mechanical maintenance workers expires on March 29, 1999. The
Company believes its labor relations to be good.
ENERGY MATTERS
The Company's operations are dependent upon the continued availability of
electric power, diesel fuel, and gasoline. The Company's trucking operations
are extensive. Diesel fuel storage capacity represents approximately two weeks
average usage. A shortage of diesel fuel and gasoline could materially affect
deliveries of merchandise and the activities of the Company's service
representatives and, thus, adversely affect the Company's sales.
ITEM 2. PROPERTIES
FACILITIES
The Company's corporate offices, warehouses, retail stores, and
manufacturing facilities as of August 30, 1997 are summarized as follows:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE FOOTAGE
-----------------
DESCRIPTION OWNED LEASED
----------- --------- -------
<S> <C> <C>
Corporate offices.......................................... 162,000 121,000
Dry grocery................................................ 1,994,000 851,000
General merchandise........................................ 323,000
Frozen foods, delicatessen and meat........................ 473,000
Bakery..................................................... 91,000
Dairy and ice cream........................................ 119,000
Retail stores.............................................. 116,000
</TABLE>
All of the Company's warehouse facilities are located in California.
As of September 12, 1997, the Company entered into an agreement to sell
approximately 24 acres of property located in Commerce, California. This
transaction will require certain administrative offices and distribution
facilities to be relocated. The Company expects to utilize its remaining
properties to accommodate most of the displaced facilities. This sale is not
expected to have an adverse impact on the ongoing operations of the Company.
8
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ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in a number of cases currently in litigation or
potential claims encountered in the normal course of business that are being
vigorously defended. In the opinion of management, the resolutions of these
matters will not have a material adverse effect on the Company's financial
position or results of operations.
The United States Environmental Protection Agency ("EPA") notified the
Company in 1993 that, together with others, it was a potentially responsible
party ("PRP") for the disposal of hazardous substances at a landfill site
located in Monterey Park, California. Cleanup of this site consists of five
phases: site control and monitoring; management and leachate treatment;
landfill gas control and landfill cover; final remedy and ground water
treatment; and thirty-year post cleanup site control and monitoring. As of
August 1997, the Company's share of cleanup costs for the first three phases
was approximately $379,000. This amount was paid in October 1996. While the
Company's share of the cost for the last two phases of cleanup has not yet
been established, based upon overall estimates of the range of potential cost,
the Company believes that its share of the remaining cost for all five phases
of cleanup will not exceed the amounts which the Company has reserved. As of
August 30, 1997, the total reserve established with respect to environmental
liabilities is approximately $1.2 million. The Company is pursuing recovery of
a portion of its reserve from its insurance carriers.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
There is no market for the Company's Class A Shares, Class B Shares, or
Class C Shares. As of November 1, 1997, the Company's Class A Shares were held
of record by 479 shareholders, Class B Shares were held of record by 515
shareholders, and the Company's Class C Shares were held of record, one share
each, by the 15 directors of the Company. In the past, the Company has not
paid cash dividends on its stock, and it has no intention to do so in the
future.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) (52 WEEKS)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales............... $1,927,092 $1,948,919 $1,822,804 $1,873,872 $2,007,288
Operating income........ 31,549 29,502 27,197 25,639 30,040
Declared patronage
dividends.............. 14,464 13,200 11,571 10,837 12,880
Net earnings............ 2,307 1,517 769 94 473
Total assets............ 394,002 374,737 398,603 398,569 403,979
Long-term notes payable. 92,217 75,617 129,686 149,673 158,585
Book value per share.... 175.22 167.94 165.86 163.03 163.52
</TABLE>
9
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the Financial Statements and
notes thereto included under Item 8 in this Form 10-K.
RESULTS OF OPERATIONS
The following table sets forth selected financial data of the Company
expressed as a percentage of net sales for the periods indicated below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
AUGUST 30, AUGUST 31, SEPTEMBER 2,
1997 1996 1995
---------- ---------- ------------
<S> <C> <C> <C>
Net sales................................... 100.0% 100.0% 100.0%
Cost of sales............................... 91.0 90.8 90.7
Distribution, selling and administrative.... 7.4 7.7 7.8
Operating income............................ 1.6 1.5 1.5
Interest expense............................ 0.7 0.7 0.8
Earnings before patronage dividends and
provision for income taxes................. 0.9 0.8 0.7
Declared patronage dividends................ 0.7 0.7 0.7
Provision for income taxes.................. 0.1 0.0 0.0
Net earnings................................ 0.1 0.1 0.0
</TABLE>
FISCAL YEAR ENDED AUGUST 30, 1997 ("FISCAL 1997") COMPARED TO FISCAL YEAR
ENDED AUGUST 31, 1996 ("FISCAL 1996")
Net sales. Fiscal 1997 sales decreased $21.8 million or 1.1% from fiscal
1996. This decrease is a result of reduced purchases by Food 4 Less GM, Inc.
("F4LGM"), reduced sales to Megafoods Stores, Inc. ("Megafoods"), and the sale
of the Company's Hawaiian subsidiary, Hawaiian Grocery Stores, Ltd. ("HGS") in
May 1996. Effective December 1996, the Arizona stores previously owned by
Megafoods were sold to Basha's Inc. ("Basha's"). Basha's self-distributes most
of the products previously supplied to Megafoods by the Company. Accordingly,
the Company's sales to Megafoods have been significantly impacted by this
transaction. During fiscal 1997, sales relating to F4LGM, Megafoods and HGS
were approximately $120 million below fiscal 1996. These sales decreases were
partially offset by additional sales in all divisions resulting from the
benefits of the Company's impact-based pricing strategy, which was implemented
at the beginning of fiscal 1997. Sales have also increased as a result of
three Northern California retail stores acquired at the beginning of fiscal
1997, the addition of a significant dairy customer in February 1996, and the
expansion of meat distribution in Northern California in September 1996.
Cost of sales. Cost of sales increased from 90.8% of sales in fiscal 1996 to
91.0% of sales in fiscal 1997. The impact-based pricing program has resulted
in an increase in the cost of sales as a percent of sales due to the reduced
fees charged to customers who contribute to the efficiency of the warehouse.
This fee reduction has been partially offset by the reduced cost of sales
associated with the retail stores operated by the Company in Northern
California.
Distribution, selling and administrative. Distribution, selling and
administrative expenses were $142.6 million or 7.4% of net sales in fiscal
1997, as compared to $149.1 million or 7.7% of net sales in fiscal 1996. The
Company has implemented several new programs and procedures in its
distribution facilities over the past two years that have impacted the level
of operating costs as a percentage of sales. Two significant examples of these
changes, and the associated benefits are: (1) radio frequency transmitters
have been installed on forklifts in some facilities, which facilitates the
receiving and selection process and (2) plastic pallets have replaced wooden
pallets in most facilities, which reduces the cost of pallet repairs and
allows for greater utilization of truck space for backhauls.
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Operating income. Operating income increased to $31.5 million in fiscal
1997, representing a $2.0 million increase over fiscal 1996. This increase is
due to the reduction in operating costs, which more than offset the impact of
lost sales and reduced margins.
Interest expense. Interest expense decreased from $14.4 million in fiscal
1996 to $13.0 million in fiscal 1997. The decrease is due to lower borrowing
requirements resulting from the sale of finance receivables in August 1996,
January 1997 and August 1997.
Other (expense) income, net. Other expense of $655,000 in fiscal 1997
resulted from a $1.5 million reduction in the fair value of the Company's
investment in SavMax Foods, Inc., offset by gains realized from the sale of
finance receivables and the remainder of the Company's minority interest in
Major Market, Inc. ("MMI").
Net earnings. Net earnings for fiscal 1997 were $2.3 million compared to net
earnings of $1.5 million for fiscal 1996, an increase of $790,000 or 52%. The
earnings increase reflects the benefits generated from the Company's
subsidiaries, whose earnings are retained by the Company.
FISCAL YEAR ENDED AUGUST 31, 1996 ("FISCAL 1996") COMPARED TO FISCAL YEAR
ENDED SEPTEMBER 2, 1995 ("FISCAL 1995")
Net sales. Sales increased $126.1 million or 6.9% over fiscal 1995. This
increase is a result of $134.8 million of additional large customer volume
added during fiscal 1995 and 1996, and $47.6 million of increased sales to the
existing membership. These improvements in sales volume were offset by lower
volume in its general merchandise division of approximately $56.3 million,
resulting from the reduction in general merchandise and health and beauty care
purchases by F4LGM.
Cost of sales. Cost of sales for fiscal 1996 totaled $1.8 billion, an
increase of $116.7 million or 7.1% over fiscal 1995. The increase is related
to the additional sales discussed above, and as a percentage of sales, is
slightly higher than the fiscal 1995 average. This increase is reflective of
pricing efficiencies passed on to the Company's membership as a result of the
additional volume.
Distribution, selling and administrative. Distribution, selling and
administrative expenses were $149.1 million or 7.7% of net sales in fiscal
1996, as compared to $141.9 million or 7.8% of net sales in fiscal 1995. The
level of expenses for fiscal 1996 is relatively consistent with fiscal 1995,
reflecting only the required marginal increase in costs associated with the
additional volume.
Operating income. As a result of the Company's continued cost control
measures and the benefits of additional volume, operating income increased
over fiscal 1995 by 8.5%. Operating income totaled $29.5 million for fiscal
1996 compared to $27.2 million for fiscal 1995.
Interest expense. Interest expense totaled $14.4 million for fiscal 1996,
which is approximately $0.9 million or 5.6% lower than fiscal 1995. The
decrease is primarily associated with lower borrowing requirements due to the
Company's improved cash flow management.
Other (expense) income, net. In the third quarter of fiscal 1996, the
Company sold 100% of its common stock ownership in HGS for $2.4 million. The
sale resulted in a pretax gain of $366,000. Pursuant to this transaction, the
Company retained an ownership interest in HGS represented by 1,000 shares of
preferred stock with a total book value of $1 million. The Company and HGS
intend to continue a business relationship in the future through supply and
joint purchasing arrangements. Fiscal 1995 reflects a $511,000 gain on the
sale of a substantial portion the Company's investment in preferred and common
stock of MMI.
Net earnings. Net earnings for fiscal 1996 increased to $1,517,000. Fiscal
1996 earnings represent a 97% increase over fiscal 1995 earnings of $769,000.
The earnings increase reflects the benefits generated from the Company's
subsidiaries, whose earnings are retained by the Company.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company relies upon cash flow from operations, patron deposits,
Patronage Certificates, shareholdings and borrowings under the Company's
credit lines, to finance operations. Net cash provided from operating
activities totaled $6.2 million for fiscal 1997, $38.2 million for fiscal
1996, and $9.1 million for fiscal 1995. The Company's cost and expense
reductions, revised marketing programs, and the dividend retention program
provide adequate operating cash flow to conduct the Company's business
operations. At August 30, 1997, working capital was $59.0 million, and the
current ratio was 1.3 and 1.4 at fiscal year end 1997 and 1996, respectively.
Working capital varies throughout the year primarily as a result of seasonal
inventory requirements.
Capital expenditures totaled $15.2 million in fiscal 1997, $13.4 million in
fiscal 1996, and $9.4 million in fiscal 1995.
The Company has agreements with certain banks that provide for committed
lines of credit for general working capital, acquisitions, and maturing long-
term debt. The credit agreements contain various financial covenants
pertaining to working capital, debt-to-equity ratios, tangible net worth,
earnings, and similar provisions. In addition, required member deposits and
Class A and Class B Shares cannot be redeemed if there exists a default with
respect to any senior indebtedness, as defined, until such default has been
cured or waived or until such senior indebtedness has been paid in full.
A $135 million credit agreement is collateralized by accounts receivable,
inventory and certain other assets of the Company and two of its principal
subsidiaries, excluding equipment, real property and the assets of GCC. The
maturity date is March 17, 1999, but is subject to extension by the mutual
consent of the Company and the banks. $79.4 million of this credit line was
not utilized at August 30, 1997. The unused portion of this credit line is
subject to annual commitment fees of 0.375%.
A $10 million credit agreement is collateralized by GCC's member loan
receivables. The primary function of GCC is to provide loan financing to the
Company's member-patrons. The funding for loans made by GCC is provided by
GCC's cash reserves as well as the $10 million credit agreement. The maturity
date of the credit agreement is September 20, 2001, but is subject to an
annual extension of one year by the mutual consent of GCC and the bank. No
amounts were outstanding under this credit line at August 30, 1997. The unused
portion of this credit line is subject to commitment fees of 0.125% plus
$25,000 annually.
Member loans receivable are periodically sold by GCC to a bank through a
loan purchase agreement. The loan purchase agreement maturity date is August
20, 2001, but is subject to extension by mutual agreement of the Company and
the bank for an additional one year on each anniversary date of the initial
purchase date. Total loan purchases under the agreement are limited to a total
aggregate principal outstanding of $50 million. At August 30, 1997, the
aggregate principal outstanding balance of loans purchased by the bank was
$22.1 million. The loan sales are subject to limited recourse provisions.
Patrons are generally required to maintain subordinated deposits with the
Company and member-patrons purchase Class B shares to satisfy this
requirement. Upon termination of patron status, the withdrawing patron will be
entitled to recover deposits in excess of its obligations to the Company if
permitted by the applicable subordination provisions, and a member-patron also
will be entitled to have its shares redeemed, subject to applicable legal
requirements, Company policies and credit agreement limitations. The Company's
current redemption policy limits the Class B Shares that the Company is
obligated to redeem in any fiscal year to 5% of the number of Class B Shares
deemed outstanding at the end of the preceding fiscal year. In fiscal 1997,
this limitation restricted the Company's redemption of shares to 19,191 shares
for $3,222,937. In fiscal 1998, the 5% limitation will restrict the Company's
redemption of shares to 19,300 shares for $3,381,746. The number of shares
tendered for redemption at October 31, 1997 totaled 67,234 (or approximately
$11.8 million, using fiscal 1997 year end book value), which exceeds the
amount that can be redeemed in fiscal 1998. Consequently, the Company will be
required to make redemptions in fiscal 1998, 1999, 2000, and 2001, with such
redemptions approximating $11.8 million based on fiscal 1997 year-end book
value. The redemption price for shares is based
12
<PAGE>
upon their book value as of the end of the year preceding redemption. Cash
flow to fund redemption of shares is provided from operations, patron
deposits, Patronage Certificates, current shareholdings and borrowings under
the Company's credit lines.
On November 7, 1997, a transaction was announced in which the Company's
fourth largest customer, Hughes Markets, Inc., would come under common
ownership with Ralphs Grocery Company ("Ralphs"). The parties have announced
that the transaction is expected to be completed in the first quarter of 1998.
Ralphs has indicated its intention to convert the existing Hughes stores into
the Ralphs format. The financial impact of this transaction on Certified is
unknown at this time.
13
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Certified Grocers of California, Ltd.
We have audited the accompanying consolidated balance sheets of Certified
Grocers of California, Ltd. and subsidiaries (the "Company") as of August 30,
1997 and August 31, 1996, and the related consolidated statements of earnings,
shareholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 referred to above
present fairly, in all material respects, the consolidated financial position
of the Company as of August 30, 1997 and August 31, 1996, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
October 31, 1997
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Certified Grocers of California, Ltd.
We have audited the related consolidated statements of earnings,
shareholders' equity, and cash flows of Certified Grocers of California, Ltd.
and subsidiaries for the fiscal year ended September 2, 1995. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of the operations and
cash flows of Certified Grocers of California, Ltd. and subsidiaries for the
fiscal year ended September 2, 1995, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
November 27, 1995
15
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
AUGUST 30, 1997 AND AUGUST 31, 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $ 7,900 $ 6,451
Accounts and notes receivable, net........................ 94,493 98,424
Inventories............................................... 135,272 136,303
Prepaid expenses.......................................... 4,907 4,625
Deferred taxes............................................ 3,427 5,356
-------- --------
Total current assets................................... 245,999 251,159
Properties, net............................................ 76,135 73,571
Investments................................................ 36,714 27,541
Notes receivable........................................... 19,515 8,309
Other assets............................................... 15,639 14,157
-------- --------
TOTAL ASSETS.......................................... $394,002 $374,737
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $104,498 $ 98,468
Accrued liabilities....................................... 54,320 59,235
Current portion of notes payable.......................... 11,329 11,440
Patrons' excess deposits and declared patronage dividends. 16,826 15,157
-------- --------
Total current liabilities.............................. 186,973 184,300
Notes payable, due after one year.......................... 92,217 75,617
Long-term liabilities, other............................... 18,151 20,041
Commitments and contingencies
Patrons' deposits and certificates:
Patrons' required deposits................................ 14,358 15,524
Subordinated patronage dividend certificates.............. 6,276 6,549
Shareholders' equity
Class A Shares............................................ 5,361 5,305
Class B Shares............................................ 57,349 56,504
Retained earnings......................................... 13,162 11,436
Net unrealized gain (loss) on appreciation (depreciation)
of investments........................................... 238 (284)
Minimum pension liability adjustment...................... (83) (255)
-------- --------
Total shareholders' equity............................. 76,027 72,706
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............ $394,002 $374,737
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
16
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
FOR FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996, AND SEPTEMBER 2, 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................. $1,927,092 $1,948,919 $1,822,804
Costs and expenses:
Cost of sales............................. 1,752,899 1,770,339 1,653,660
Distribution, selling and administrative.. 142,644 149,078 141,947
---------- ---------- ----------
Operating income........................... 31,549 29,502 27,197
Interest expense........................... (13,020) (14,406) (15,260)
Other (expense) income, net................ (655) 366 509
---------- ---------- ----------
Earnings before patronage dividends and
provision for income taxes................ 17,874 15,462 12,446
Declared patronage dividends............... (14,464) (13,200) (11,571)
---------- ---------- ----------
Earnings before income tax provision....... 3,410 2,262 875
Provision for income taxes................. 1,103 745 106
---------- ---------- ----------
Net earnings............................... $ 2,307 $ 1,517 $ 769
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
17
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
FOR FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996, AND SEPTEMBER 2, 1995
<TABLE>
<CAPTION>
NET UNREALIZED
GAIN (LOSS) ON MINIMUM
CLASS A CLASS B APPRECIATION PENSION
-------------- ---------------- RETAINED (DEPRECIATION) LIABILITY
SHARES AMOUNT SHARES AMOUNT EARNINGS OF INVESTMENTS ADJUSTMENT
------ ------ ------- ------- -------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 3,
1994................... 49,100 $4,704 388,286 $56,593 $10,313 $(304)
Class A Shares issued.. 7,800 1,271
Class A Shares
redeemed.............. (6,600) (683) (393)
Class B Shares issued.. 15,895 2,637
Class B Shares
redeemed.............. (19,414) (2,964) (201)
Net earnings........... 769
Net unrealized gain on
appreciation of
investments (net of
deferred tax liability
of $216).............. 418
------ ------ ------- ------- ------- -----
Balance, September 2,
1995................... 50,300 5,292 384,767 56,266 10,488 114
Class A Shares issued.. 4,800 796
Class A Shares
redeemed.............. (6,000) (783) (212)
Class B Shares issued.. 18,286 3,072
Class B Shares
redeemed.............. (19,238) (2,834) (357)
Net earnings........... 1,517
Net unrealized loss on
depreciation of
investments (net of
deferred tax benefit
of $205).............. (398)
Minimum pension
liability adjustment
(net of deferred tax
benefit of $195)...... $(255)
------ ------ ------- ------- ------- ----- -----
Balance, August 31,
1996................... 49,100 5,305 383,815 56,504 11,436 (284) (255)
Class A Shares issued.. 4,100 689
Class A Shares
redeemed.............. (5,300) (633) (257)
Class B Shares issued.. 21,366 3,744
Class B Shares
redeemed.............. (19,191) (2,899) (324)
Net earnings........... 2,307
Net unrealized gain on
appreciation of
investments (net of
deferred tax liability
of $271).............. 522
Minimum pension
liability adjustment
(net of deferred tax
liability of $132).... 172
------ ------ ------- ------- ------- ----- -----
Balance, August 30,
1997................... 47,900 $5,361 385,990 $57,349 $13,162 $ 238 $ (83)
====== ====== ======= ======= ======= ===== =====
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FOR FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996, AND SEPTEMBER 2, 1995
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings........................................ $ 2,307 $ 1,517 $ 769
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization...................... 12,204 10,022 9,982
Deferred taxes..................................... (107) (3,819) (273)
Disposition on sale of investments in affiliates,
member loan receivables, and properties, net...... (562) (524) (145)
Reduction in fair value of investment.............. 1,500
(Increase) decrease in assets:
Accounts and notes receivable, net................ (93) 1,892 (7,757)
Inventories....................................... 1,031 6,893 (3,976)
Prepaid expenses.................................. (282) 131 (1,041)
Notes receivable.................................. (13,462) (10,547) 293
Increase (decrease) in liabilities:
Accounts payable.................................. 6,030 14,905 4,825
Accrued liabilities............................... (2,474) 9,846 70
Patrons' excess deposits and declared patronage
dividends........................................ 1,669 2,943 673
Long-term liabilities, other...................... (1,586) 4,963 5,644
------- ------- -------
Net cash provided by operating activities........... 6,175 38,222 9,064
------- ------- -------
Cash flows from investing activities:
Purchase of properties............................. (15,166) (13,350) (9,363)
Investment in securities, net...................... (9,839) (4,888) (1,316)
Proceeds from sales of notes receivable............ 6,256 27,860
Proceeds from sales of properties.................. 1,229 1,846 12,489
Increase in other assets........................... (3,100) (1,635) (1,793)
Sales of investments in affiliates, net of cash
disposed*......................................... 500 1,785 (479)
------- ------- -------
Net cash (utilized) provided by investing
activities......................................... (20,120) 11,618 (462)
------- ------- -------
Cash flows from financing activities:
Additions (reductions) in long-term notes payable,
net............................................... 27,929 (37,329) (7,534)
Reduction of short-term notes payable.............. (11,440) (11,573) (2,658)
(Redemption) issuance of patronage dividend
certificates...................................... (249) 2,117
Repurchase of shares from members.................. (4,112) (4,186) (4,224)
Decrease in members' required deposits............. (1,166) (1,498) (567)
Issuance of shares to members...................... 4,432 3,868 3,891
------- ------- -------
Net cash provided (utilized) by financing
activities......................................... 15,394 (50,718) (8,975)
------- ------- -------
Net increase (decrease) in cash and cash
equivalents........................................ 1,449 (878) (373)
Cash and cash equivalents at beginning of year...... 6,451 7,329 7,702
------- ------- -------
Cash and cash equivalents at end of year............ $ 7,900 $ 6,451 $ 7,329
======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest........................................... $13,264 $14,929 $15,006
======= ======= =======
Income taxes....................................... $ 2,688 $ 980 $ 2,388
======= ======= =======
*Sales of investments in affiliates, net of cash
disposed:
Working capital, other than cash................... $ 7,188 $ (980)
Property, plant and equipment...................... 460 1,596
Note receivable.................................... (2,580)
Investment in preferred stock...................... (1,000)
Other assets....................................... 71 1,857
Proceeds in excess of net assets of affiliates
sold, net......................................... $ 500 366 511
Long-term debt..................................... (5,300) (883)
------- ------- -------
Net cash effect from sales of investments in
affiliates....................................... $ 500 $ 1,785 $ (479)
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation:
The consolidated financial statements include the accounts of Certified
Grocers of California, Ltd. and its subsidiaries ("Certified" or the
"Company"). Intercompany transactions and accounts with subsidiaries have been
eliminated.
Nature of Business:
The Company is a cooperative organization engaged primarily in the
distribution of food products and related nonfood items primarily to retail
establishments owned by shareholders of the Company. All establishments with
which directors are affiliated, as members of the Company, purchase groceries,
related products and store equipment from the Company in the ordinary course
of business pursuant to published terms or according to the provisions of
supply agreements.
The Company's fiscal year ends on the Saturday nearest to August 31.
Use of Estimates:
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassifications:
Certain reclassifications have been made to prior years' financial
statements to present them on a basis comparable with the current year's
presentation.
Cash Equivalents:
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Inventories:
Inventories are valued at the lower of cost (first-in, first-out) or market.
Depreciation:
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, which are 40 years for buildings and 10 years for
equipment. Leasehold improvements are amortized based on the estimated life of
the asset or the life of the lease, whichever is shorter. Expenditures for
replacements or major improvements are capitalized; expenditures for normal
maintenance and repairs are charged to operations as incurred. Upon sale or
retirement of properties, the cost and accumulated depreciation are removed
from the accounts, and any gain or loss is included in operations.
Environmental Costs:
The Company expenses, on a current basis, certain recurring costs incurred
in complying with environmental regulations and remediating environmental
pollution. The Company also reserves for certain non-recurring future costs
required to remediate environmental pollution for which the Company is liable
whenever,
20
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
by diligent legal and technical investigation, the scope or extent of
pollution has been determined, the Company's contribution to the pollution has
been ascertained, remedial measures have been specifically identified as
practical and viable, and the cost of remediation and the Company's
proportionate share can be reasonably estimated.
Impairment of Long-Lived Assets:
The Financial Accounting Standards Board ("FASB") issued 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," which
requires an entity to review long-lived assets for impairment and recognize a
loss if expected future cash flows are less than the carrying amount of the
assets; such losses are measured as the difference between the carrying value
and the estimated fair value of the assets. The estimated fair value is
determined based on expected future cash flows. The Company adopted this
standard in fiscal 1997. The adoption of this standard had no impact on the
1997 consolidated financial statements.
Transfers and Servicing of Financial Assets:
The FASB issued SFAS No. 125 "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," which was adopted in
1997. The Statement provides for standards that are based on consistent
application of a financial-components approach that focuses on control. Under
that approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This Statement provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. Accordingly, the Company conformed to
the new requirements of SFAS No. 125 for transactions involving the sale of
member loans receivable for applicable transactions occurring after December
31, 1996.
Disclosures about Segments of an Enterprise and Related Information:
The FASB issued SFAS No. 131 "Disclosures about Segments of an Enterprise
and Related Information," which establishes standards for reporting
information about operating segments and requires reporting for selected
information about operating statements in financial statements. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. This statement is effective for
financial statements for periods beginning after December 15, 1997. Management
estimates that the adoption of this pronouncement will not have a material
impact on the Company.
2. PROPERTIES:
Properties at August 30, 1997, and August 31, 1996 stated at cost, are
comprised of:
<TABLE>
<CAPTION>
1997 1996
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Land...................................................... $ 8,812 $ 8,812
Buildings and leasehold improvements...................... 66,185 64,269
Equipment................................................. 82,849 74,839
Equipment under capital leases............................ 7,595 7,779
------- -------
165,441 155,699
Less accumulated depreciation and amortization............ 89,306 82,128
------- -------
$76,135 $73,571
======= =======
</TABLE>
21
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
On September 12, 1997, the Company entered into an agreement to sell
approximately 24 acres of property located in Commerce, California. This
transaction will require certain administrative offices and distribution
facilities to be relocated. The Company expects to utilize its remaining
properties to accommodate most of the displaced facilities. This sale is not
expected to have an adverse impact on the ongoing operations of the Company.
3. INVESTMENTS:
The amortized cost and fair values of investments available-for-sale,
including equity securities, were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
AUGUST 30, 1997 COST GAINS LOSSES VALUE
--------------- --------- ---------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed Maturities:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies....... $11,569 $ 73 $143 $11,499
Corporate securities............. 6,227 271 58 6,440
Mortgage backed securities....... 4,952 48 22 4,978
------- ---- ---- -------
Sub-total....................... 22,748 392 223 22,917
Redeemable preferred stock........ 8,946 204 12 9,138
Equity securities................. 4,658 1 4,659
------- ---- ---- -------
$36,352 $597 $235 $36,714
======= ==== ==== =======
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
AUGUST 31, 1996 COST GAINS LOSSES VALUE
--------------- --------- ---------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed Maturities:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies....... $10,219 $ 21 $350 $ 9,890
Corporate securities............. 3,008 32 110 2,930
Mortgage backed securities....... 1,052 35 1,017
------- ---- ---- -------
Sub-total....................... 14,279 53 495 13,837
Redeemable preferred stock........ 7,739 22 10 7,751
Equity securities................. 5,953 5,953
------- ---- ---- -------
$27,971 $ 75 $505 $27,541
======= ==== ==== =======
</TABLE>
Fixed maturity investments are due as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
AUGUST 30, 1997 COST VALUE
--------------- --------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Fixed Maturities Available for Sale:
Due after one year through five years.................. $ 7,356 $ 7,395
Due after five years through ten years................. 10,739 10,874
Due after ten years.................................... 4,653 4,648
------- -------
$22,748 $22,917
======= =======
</TABLE>
22
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
<TABLE>
<CAPTION>
AMORTIZED FAIR
AUGUST 31, 1996 COST VALUE
--------------- --------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Fixed Maturities Available for Sale:
Due after one year through five years.................. $ 6,109 $ 6,006
Due after five years through ten years................. 5,173 5,004
Due after ten years.................................... 2,997 2,827
------- -------
$14,279 $13,837
======= =======
</TABLE>
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties. Mortgage-backed securities are shown as being
due at their average expected maturity dates.
Investment income is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Fixed maturities..................................... $1,728 $1,834 $1,469
Preferred stock...................................... 91 350 563
Equity securities.................................... 75 132
Cash and cash equivalents............................ 332 197 171
------ ------ ------
2,226 2,513 2,203
Less investment expenses............................. 137 95 85
------ ------ ------
Net investment income.............................. $2,089 $2,418 $2,118
====== ====== ======
</TABLE>
Investments carried at fair values of $20,359,000 and $11,586,000 at August
30, 1997 and August 31, 1996, respectively, are on deposit with regulatory
authorities in compliance with insurance company regulations. Equity
securities which do not have readily determinable fair values are accounted
for using the cost method.
The Company owns an equity interest in SavMax Foods, Inc., a member-patron
of Certified. The investment consists of (a) 10% of the outstanding Series A
common stock with an original cost of $2,500,000 and (b) $6,300,000 of 8.5%
Series B cumulative redeemable preferred stock. The Company has also entered
into lease guarantees or subleases (see Note 6) on seven SavMax stores. The
current minimum annual rent on locations underlying such lease guarantees or
subleases is $3,251,000. The commitments have expiration dates through 2012.
In addition, Grocers Capital Company ("GCC") has made loans to SavMax for
tenant improvements with an aggregate outstanding principal balance of
$1,136,000 at August 30, 1997.
At March 1, 1997, SavMax was in default under the terms of the Preferred
Stock Purchase Agreement and was in default on its bank debt. SavMax completed
a restructuring of its financing arrangements with its bank and Certified in
May 1997. This restructuring required SavMax to make certain changes to its
operations.
Pursuant to the restructuring:
(i) Certified agreed to guarantee SavMax obligations to a bank consisting
of a $3,000,000 line of credit and an $850,000 term loan;
(ii) $4,000,000 due Certified by SavMax with respect to inventory
purchases was converted into a note payable at prime plus 1%, with monthly
interest payments commencing June 1997 and monthly principal payments of
$111,111 commencing in December 1998, with the balance due in November
2001;
23
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
(iii) Defaults with respect to dividends and mandatory redemptions of the
preferred stock, and the remedies associated therewith, were waived so long
as there is no default by SavMax with respect to its obligations to the
bank or to Certified in accordance with the Restructuring Agreement;
(iv) SavMax executed a new supply agreement expanding the purchases to be
made from Certified;
(v) SavMax and its principal shareholder agreed to a neutral sale process
in the event of a default with respect to the obligations owed to the bank
or to Certified;
(vi) SavMax, Certified and the SavMax shareholders agreed to a mutual
release of claims arising prior to closing of the restructuring; and
(vii) SavMax agreed to reduce the salaries of certain key officers and
implement plans to reduce ongoing operating costs.
In December 1995, GCC purchased 10% of the common stock of K.V. Mart Co. ,
of which Certified director Darioush Khaledi is affiliated, for a purchase
price of approximately $3,000,000. The stock purchase agreement contains
certain provisions which allow K.V. Mart Co. to repurchase the shares and GCC
to acquire additional shares upon the occurrence of certain events.
4. ACCRUED LIABILITIES:
Accrued liabilities at August 30, 1997 and August 31, 1996 are summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Insurance loss reserves & other liabilities................. $19,676 $15,492
Accrued wages & related taxes............................... 9,966 9,119
Accrued income & other taxes payable........................ 6,952 9,641
Accrued promotional liabilities............................. 3,940 12,686
Other accrued liabilities................................... 13,786 12,297
------- -------
$54,320 $59,235
======= =======
</TABLE>
5. NOTES PAYABLE:
Notes payable at August 30, 1997 and August 31, 1996 are summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Notes payable to banks under a $135,000,000 revolving credit
agreement, expiring March 17, 1999, interest rate at prime
(8.5% at August 30, 1997) plus 1/2% or Eurodollar (5.82% at
August 30, 1997) plus 1 1/2%................................ $55,626 $27,682
Subordinated note payable to a life insurance company, due
April 1, 1999, interest rate of 10.8%, $8,750,000 due April
1 each year................................................. 17,500 26,250
Senior note payable to a life insurance company, collateralized
through an inter-creditor agreement with banks under the
revolving credit agreement of $135,000,000, due January 15,
2005, interest rate of 9.55%, $62,500 due monthly each year
through 2000 and then $220,833 monthly until maturity....... 15,000 15,750
Notes payable, collateralized by land and warehouses, payable
monthly, approximately $60,000 plus interest at 9.88%, due
February 1, 2006............................................ 12,724 13,636
Obligations under capital leases............................. 2,696 3,739
------- -------
103,546 87,057
Less portion due within one year............................. 11,329 11,440
------- -------
$92,217 $75,617
======= =======
</TABLE>
24
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
Maturities of notes payable as of August 30, 1997 are:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
1998................................................ $ 11,329
1999................................................ 66,978
2000................................................ 4,039
2001................................................ 4,334
2002................................................ 4,141
Thereafter.......................................... 12,725
--------
$103,546
========
</TABLE>
During fiscal 1997, the Company maintained two credit agreements with
certain banks that provide for committed lines of credit for general working
capital, acquisitions, and maturing long-term debt. The credit agreements
contain various financial covenants pertaining to working capital, debt-to-
equity ratios, tangible net worth, earnings, and similar provisions. In
addition, required member deposits and Class A and Class B Shares cannot be
redeemed if a default exists with respect to any senior indebtedness, as
defined, until such default has been cured or waived or until such senior
indebtedness has been paid in full.
The $135,000,000 credit agreement is collateralized by accounts receivable,
inventory and certain other assets of the Company and two of its principal
subsidiaries, excluding equipment, real property and the assets of GCC. The
maturity date is March 17, 1999, but is subject to extension by the mutual
consent of the Company and the banks. $79,400,000 of this credit line was not
utilized at August 30, 1997. The unused portion of this credit line is subject
to annual commitment fees of 0.375%.
A $10,000,000 credit agreement is collateralized by GCC's member loan
receivables. The primary function of GCC is to provide loan financing to the
Company's member-patrons. Member loans are made at a market rate of interest
starting at prime plus 1/2%. The funding for loans made by GCC is provided by
GCC's cash reserves as well as the $10,000,000 credit agreement. The maturity
date of the credit agreement is September 20, 2001, but is subject to an
annual extension of one year by the mutual consent of GCC and the bank. The
credit agreement bears interest at prime (8.5% at August 30, 1997) plus 1/2%
or Eurodollar (5.82% at August 30, 1997) plus 1 1/2%. No amounts were
outstanding under this credit line at August 30, 1997. The unused portion of
this credit line is subject to commitment fees of 0.125% plus $25,000
annually.
Member loans receivable are periodically sold by GCC to a bank through a
loan purchase agreement. The maturity date of the loan purchase agreement is
August 20, 2001, but is subject to extension by mutual agreement of the
Company and the bank for an additional one year on each anniversary date of
the initial purchase date. Total loan purchases under the agreement are
limited to a total aggregate principal outstanding of $50,000,000. At August
30, 1997, the aggregate principal outstanding balance of loans purchased by
the bank was $22,100,000. The loan sales are subject to limited recourse
provisions.
The Company and GCC have also guaranteed loans made directly to members by
third party lenders. At August 30, 1997, the maximum principal amount of these
guarantees was $8,200,000. Member loans, provided by GCC and third parties,
are generally secured with collateral which usually consists of personal and
real property owned by member-patrons and personal guarantees of member-
patrons.
As a result of maturing long-term debt (a noncash financing activity), the
Company reclassified from long to short-term debt $11,329,000, $11,440,000,
and $11,570,000 in fiscal 1997, 1996, and 1995, respectively.
25
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
6. LEASES:
The Company has entered into operating and capital leases for certain
warehouse, transportation and data processing equipment. The Company has also
entered into operating leases for approximately 24 retail supermarkets. The
majority of these locations are subleased to various member-patrons of the
Company. The operating leases and subleases are noncancelable, renewable,
include purchase options in certain instances, and require payment of real
estate taxes, insurance and maintenance.
In addition, the Company is contingently liable with respect to lease
guarantees for certain member-patrons. The total current annual rent on
locations underlying such lease guarantees is approximately $5,800,000. The
commitments have expiration dates through 2017. The Company believes the
locations underlying these leases are marketable and, accordingly, the Company
would be able to recover a substantial portion of the guaranteed amounts in
the event the Company is required to satisfy its obligations under the
guarantees.
In consideration of lease guarantees and subleases, the Company receives a
monthly fee equal to 5% of the monthly rent under the leases and subleases.
Obligations of member-patrons to the Company, including lease guarantees, are
generally supported by the Company's right of offset, upon default, against
the member-patrons' cash deposits, shareholdings and Patronage Certificates,
as well as in certain instances, personal guarantees and reimbursement and
indemnification agreements.
Total rent expense was $17,050,000, $20,539,000, and $21,051,000 in 1997,
1996, and 1995 respectively. Sublease rental income was $5,300,000,
$6,214,000, and $5,308,000 in 1997, 1996, and 1995, respectively.
Minimum rentals on properties leased by the Company, including properties
subleased to third parties, as of August 30, 1997 are summarized as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
1998..................................................... $1,000 $14,050
1999..................................................... 852 12,552
2000..................................................... 852 10,106
2001..................................................... 340 8,536
2002..................................................... 7,221
Thereafter............................................... 46,637
------ -------
Total minimum lease payments............................ 3,044 $99,102
=======
Less amount representing interest........................ 348
Present value of net minimum lease payments.............. 2,696
Less current portion..................................... 823
------
Total long term portion................................. $1,873
======
</TABLE>
26
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
Future minimum sublease rental income as of August 30, 1997 is summarized as
follows:
<TABLE>
<CAPTION>
OPERATING LEASES
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1998................................................ $ 4,971
1999................................................ 3,999
2000................................................ 2,815
2001................................................ 2,762
2002................................................ 2,685
Thereafter.......................................... 21,923
-------
$39,155
=======
</TABLE>
In fiscal 1995, the Company completed a sale leaseback transaction with
Trinet Corporate Realty Trust, Inc. ("Trinet"), an unaffiliated third party,
with respect to an office building in the Los Angeles metropolitan area. The
total sales price for the property was $11,500,000. Concurrent with the sale
of the real property, the Company and Trinet entered into a twenty year lease
of the property, with two ten year extension options. The monthly rental is
approximately $108,000 and is subject to CPI adjustment commencing on the
first day of the sixth, eleventh and sixteenth years. However, such CPI
adjustments shall not exceed four percent per annum on a cumulative basis
during each five year period. The deferred gain on this transaction was
$1,200,000 of which $55,000, $55,000 and $41,000 was recognized during fiscal
1997, 1996 and 1995, respectively.
7. INCOME TAXES:
The significant components of income tax expense are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current...................................................... $ 932 $3,641 $290
Deferred..................................................... 162 (2,849) (72)
------ ------ ----
1,094 792 218
------ ------ ----
State:
Current...................................................... 278 923 114
Deferred..................................................... (269) (970) (226)
------ ------ ----
9 (47) (112)
------ ------ ----
$1,103 $ 745 $106
====== ====== ====
</TABLE>
27
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
The effects of temporary differences and other items that give rise to
deferred tax assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
AUGUST 30, AUGUST 31,
1997 1996
---------- ----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accounts receivable................................... $ 2,808 $ 5,058
Accrued benefits...................................... 7,188 6,368
Closed store reserves................................. 60 886
Deferred income....................................... 575 559
Insurance reserves.................................... 2,034 1,794
Investment valuation adjustment....................... 646
Accrued environmental liabilities..................... 530 693
Alternative minimum tax and other credits............. 435 1,309
Net operating loss carryforwards...................... 301 12
Other................................................. 1,177 1,107
------- -------
Total gross deferred tax assets...................... 15,754 17,786
Less valuation allowance.............................. 1,400 1,400
------- -------
Deferred tax assets.................................. $14,354 $16,386
======= =======
Deferred tax liabilities:
Property, plant and equipment......................... $ 5,648 $ 5,226
Capitalized software.................................. 1,864 1,587
Intangible assets..................................... 629 676
Deferred state taxes.................................. 610 679
Other................................................. 59 199
------- -------
Total gross deferred tax liabilities................. $ 8,810 $ 8,367
======= =======
Net deferred tax asset............................... $ 5,544 $ 8,019
======= =======
</TABLE>
Net deferred tax assets of $3,427,000 and $5,356,000 are included in
deferred taxes, current and $2,117,000 and $2,663,000 in other assets on the
Company's accompanying consolidated balance sheets as of August 30, 1997 and
August 31, 1996, respectively.
A valuation allowance is provided to reduce the deferred tax assets to a
level which, more likely than not, will be realized. The remaining balance of
the net deferred tax assets should be realized through future operating
results, the reversal of taxable temporary differences, and tax planning
strategies.
The provision for income taxes at the Company's effective tax rate differed
from the provision for income taxes at the statutory rate (34%) as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ---- ----
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Federal income tax expense at the statutory rate......... $1,159 $769 $297
State income taxes, net of federal income tax benefit.... 209 139 (75)
Insurance subsidiary not recognized for state taxes...... (324) (123)
Other, net............................................... 59 (40) (116)
------ ---- ----
Provision for income taxes............................... $1,103 $745 $106
====== ==== ====
</TABLE>
28
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
At August 30, 1997, the Company has alternative minimum tax credit
carryforwards of approximately $281,000 available to offset future regular
income taxes payable to the extent such regular taxes exceed alternative
minimum taxes payable.
8. SUBORDINATED PATRONAGE DIVIDEND CERTIFICATES:
The Company has a patronage dividend retention program whereby, subject to
annual Board approval, it may retain a portion of the patronage dividends and
issue Patronage Certificates (the "Patronage Certificates") evidencing the
indebtedness respecting the retained amounts. The program provides for the
issuance of the Patronage Certificates to patrons in a portion and at an
interest rate determined by the Board in connection with its approval of a
particular issuance. The Patronage Certificates are unsecured general
obligations, subordinated to certain indebtedness of Certified, and
nontransferable without the consent of Certified.
The Company has issued Patronage Certificates for fiscal years 1993, 1994
and 1995. The outstanding Patronage Certificates have a seven year term and
bear interest payable annually on December 15 in each year. The following
table represents a summary of the outstanding Patronage Certificates and their
respective terms:
<TABLE>
<CAPTION>
AGGREGATE ANNUAL
PRINCIPAL INTEREST MATURITY
FISCAL YEAR AMOUNT RATE DATE
----------- ---------- -------- --------
<S> <C> <C> <C>
1993......................................... $1,909,000 7% 12/15/00
1994......................................... $2,350,000 8% 12/15/01
1995......................................... $2,017,000 7% 12/15/02
</TABLE>
During fiscal 1997 and 1996, Certified set off approximately $273,000 and
$12,000, respectively, in Patronage Certificates against a portion of amounts
owed to the Company by the holders.
Patronage Certificates have not been issued subsequent to fiscal 1995.
However, the program has not been discontinued, and the Board could authorize
the issuance of Patronage Certificates in connection with patronage dividends
payable in future years.
9. CAPITAL SHARES:
The Company requires that each member-patron hold 100 Class A Shares. Each
member-patron must also hold Class B Shares having combined issuance values
equal to the lesser of the amount of the member-patron's required deposit or
twice the member-patron's average weekly purchases (the "Class B Share
requirement"). For this purpose, each Class B Share held by a member-patron
has an issuance value equal to the book value of Certified's outstanding
shares as of the close of the fiscal year last ended prior to the issuance of
such Class B Share.
After payment of at least 20% of patronage dividend in cash and the issuance
of the Patronage Certificates, Class B Shares are issued as a portion of each
member-patron's patronage dividend and, to the extent necessary to fulfill the
member-patron's Class B Share requirement, by crediting the member-patron's
cash deposit account for the issuance values of such shares.
All shares of a terminated member, or member who holds Class B Shares in
excess of their Class B Share requirement, may be redeemed by the Company
(subject to certain legal limitations, provisions of the Company's redemption
policy, and provisions of certain of the Company's committed lines of credit)
at a price equal to the book value of the shares as of the close of the fiscal
year ended prior to the redemption, less all amounts that may be owing by the
member to the Company. All shares are pledged to the Company to secure the
Company's
29
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
redemption rights and as collateral for all obligations to the Company. The
Company is not obligated in any fiscal year to redeem more than 5% of the sum
of the number of Class B Shares outstanding as of the close of the preceding
fiscal year and the number of Class B Shares issued as a part of the patronage
dividend for the preceding year (the "5% limit"). Thus, shares tendered for
redemption in a given fiscal year may not necessarily be redeemed in that
fiscal year. The 5% limit for fiscal year 1998 will allow for redemption of
19,300 shares. Additionally, 483 shares have been tendered for redemption
between August 31, 1997 and October 31, 1997. The following table summarizes
the Class B Shares tendered and presently approved for redemption, shares
redeemed, and the remaining number of shares pending redemption:
<TABLE>
<CAPTION>
FISCAL YEAR TENDERED REDEEMED REMAINING BOOK VALUE
----------- -------- -------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Years prior to 1995... 75,695 $13,263
1995.................. 22,950 19,414 79,231 13,883
1996.................. 14,875 19,238 74,868 13,118
1997.................. 11,074 19,191 66,751 11,696
</TABLE>
Because the 5% limit for fiscal year 1998 has been met, Board approval would
be required to redeem the remaining 47,934 shares (or approximately $8.4
million, using fiscal 1997 year end book value) not redeemed in fiscal year
1998, as well as the redemption of any additional Class B Shares tendered
during fiscal 1998. At present, such approvals are not expected to be given.
The total of Class B Shares tendered and awaiting redemption will also cause
the 5% limits for fiscal 1999 through 2001 to be met, thereby delaying the
redemption of Class B Shares tendered during those years. The redemptions
required for fiscal years 1998 through 2001 are estimated to be $11.8 million
based on the fiscal 1997 year end book value. The funds needed to redeem
shares are expected to be provided from operations, patron deposits, new share
issuances and borrowings under the Company's credit lines. Any additional
tenderings of Class B Shares could also potentially cause 5% limits beyond
fiscal 2001 to be exceeded.
There are 500,000 authorized Class A Shares, of which 47,900 and 49,100 were
outstanding at August 30, 1997 and August 31, 1996, respectively. There are
2,000,000 authorized Class B Shares, of which 385,990 and 383,815 were
outstanding at August 30, 1997 and August 31, 1996, respectively, including
21,366 and 18,286 respectively issued after year-end. Once redeemed, such
shares are not available for reissuance to member-patrons.
No member-patron may hold more than 100 Class A Shares. However, it is
possible that a member may have an interest in another member, or that a
person may have an interest in more than one member, and thus have an interest
in more than 100 Class A Shares. The Board of Directors is authorized to
accept member-patrons without the issuance of Class A Shares when the Board of
Directors determines that such action is justified by reason of the fact that
the ownership of the patron is the same, or sufficiently the same, as that of
another member-patron holding 100 Class A Shares. The price for such shares
will be the book value per share of outstanding shares at the close of the
fiscal year last ended.
There are also 15 authorized Class C Shares of which 15 are outstanding.
These shares are valued at $10 per share, and ownership is limited to members
of the Board of Directors with no rights as to dividends or other
distributions.
Holders of Class A Shares are entitled to vote such shares cumulatively for
the election of 12 of the directors on the Board of Directors. Holders of the
Class B Shares are entitled to vote such shares cumulatively for the election
of 3 of the directors on the Board of Directors. Except as required by
California law, the Class C Shares have no voting rights.
30
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
10. BENEFIT PLANS:
The Company has a noncontributory, defined benefit pension plan covering
substantially all of its nonunion employees. The benefits under the plan
generally are based on the employee's years of service and average earnings
for the three highest consecutive calendar years of compensation during the
ten years immediately preceding retirement. The Company makes contributions to
the pension plan in amounts which are at least sufficient to meet the minimum
funding requirements of applicable laws and regulations but no more than
amounts deductible for federal income tax purposes. Benefits under the plan
are included in a trust providing benefits through annuity contracts, and part
of the plan assets are held by a trustee.
The funded status of the plan and the amounts recognized in the balance
sheet are:
<TABLE>
<CAPTION>
1997 1996
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested benefits.. $23,679 $23,259
Effect of assumed future increase in compensation levels.... 10,834 10,484
------- -------
Projected benefit obligation for services rendered to date.. 34,513 33,743
Plan assets at fair value.................................... 37,276 33,711
------- -------
Plan assets in (excess) deficiency of projected benefit obli-
gations..................................................... (2,763) 32
Unrecognized net loss........................................ (807) (3,570)
Unrecognized transition asset................................ 1,221 1,530
Unrecognized prior service cost.............................. 265 303
------- -------
Prepaid pension costs at June 1.............................. (2,084) (1,705)
Fourth quarter contribution.................................. (600)
Fourth quarter net periodic pension cost..................... 241 328
------- -------
Prepaid pension cost at fiscal year-end...................... $(2,443) $(1,377)
======= =======
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Net pension cost for the fiscal years ending included
the following components:
Service cost -- benefits earned during the period.... $1,514 $1,448 $1,398
Interest cost on projected benefit obligation........ 2,641 2,709 2,650
Actual return on plan assets......................... (6,292) (6,321) (2,845)
Net amortization and deferral........................ 3,102 3,476 100
------ ------ ------
Net periodic pension cost............................ $ 965 $1,312 $1,303
====== ====== ======
Major assumptions:
Assumed discount rate................................ 7.5% 7.5% 7.5%
Assumed rate of future compensation increases........ 5.5% 5.5% 5.5%
Expected rate of return on plan assets............... 8.5% 8.5% 8.5%
</TABLE>
The method used to compute the vested benefit obligation is the actuarial
present value of the vested benefits to which the employee is entitled if the
employee separates immediately. The vested benefit obligation was $23,303,000,
$22,927,000, and $24,007,000 in 1997, 1996, and 1995, respectively.
The Company also made contributions of $6,120,000, $5,713,000, and
$5,368,000 in 1997, 1996, and 1995, respectively, to collectively bargained,
multiemployer defined benefit pension plans in accordance with the
31
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
provisions of negotiated labor contracts. Information from the plans'
administrators is not available to permit the Company to determine its
proportionate share of termination liability, if any.
The Company has an Employees' Sheltered Savings Plan ("SSP"), which is a
defined contribution plan, adopted pursuant to Section 401(k) of the Internal
Revenue Code for its nonunion employees. The Company matches each dollar
deferred up to 4% of compensation and, at its discretion, matches 40% of
amounts deferred between 4% and 8%. At the end of each fiscal year, the
Company also contributes an amount equal to 2% of the compensation of those
participants employed at that date. The Company contributed approximately
$2,168,000, $2,100,000, and $2,100,000, in 1997, 1996, and 1995, respectively.
Also, the Company has an Employee Savings Plan ("ESP"), which is a defined
contribution plan, for all union and nonunion employees hired prior to March
1, 1983. Subsequent to March 1, 1983, the Company's contribution to the ESP in
any fiscal year is based on net earnings as a percentage of total sales and is
applicable to union employees only. In the event net earnings are less than
1.5% of total sales, no contribution is required. All corporate (nonunion)
employees who had a previous balance in the ESP Plan had their balances
transferred to the SSP Plan effective first quarter of fiscal 1992. No expense
was incurred in fiscal years 1997, 1996, and 1995.
The Company's Executive Salary Protection Plan ("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 is facilitated through the purchase of life insurance policies, the
premiums of which are paid by the Company.
The amounts recognized in the balance sheet are:
<TABLE>
<CAPTION>
1997 1996
------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested
benefits................................................ $3,648 $3,807
Effect of assumed future increase in compensation levels. 317 283
------ ------
Projected benefit obligation for services rendered to
date.................................................... 3,965 4,090
------ ------
Plan assets in deficiency of projected benefit obligation. 3,965 4,090
Unrecognized net loss..................................... (618) (868)
Unrecognized prior service cost........................... (1,459) (1,571)
------ ------
Accrued pension cost as of June 1......................... 1,888 1,651
Fourth quarter net periodic pension cost.................. 159 140
Additional minimum liability.............................. 1,601 2,016
------ ------
Accrued pension cost at fiscal year end................... $3,648 $3,807
====== ======
</TABLE>
The additional minimum liability represents the excess of the unfunded
accumulated benefit obligation over previously accrued pension costs. A
corresponding intangible asset was recorded as an offset to this additional
liability as prescribed. Because the asset recognized may not exceed the
amount of unrecognized prior service cost, the balance, net of tax benefits,
of $83,000 is reported as a separate reduction of shareholders' equity at
August 30, 1997.
32
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
The components of the net periodic pension cost for the fiscal years ending
include:
<TABLE>
<CAPTION>
1997 1996
----- -----
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Service cost -- benefits attributed to service during the
period.................................................... $ 193 $ 194
Interest cost on projected benefit obligation.............. 303 257
Net amortization and deferral.............................. 141 110
----- -----
Net periodic pension cost.................................. $ 637 $ 561
===== =====
Major assumptions:
Assumed discount rate...................................... 7.5% 7.5%
Assumed rate of future compensation increases.............. 4.0% 4.0%
Expected rate of return on plan assets..................... 8.5% 8.5%
</TABLE>
The method used to compute the vested benefit obligation is the actuarial
present value of the vested benefits to which the employee is entitled if the
employee separates immediately. The vested benefit obligation was $3,648,000
and $3,807,000 in 1997 and 1996, respectively.
11. POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS:
The Company sponsors postretirement benefit plans that cover both nonunion
and union employees. Retired nonunion employees are eligible for a plan
providing medical benefits. A certain group of retired nonunion employees
participate in a plan providing life insurance benefits for which currently
active nonunion employees are no longer eligible. Most union and all nonunion
employees have separate plans providing a lump-sum payout for unused days in
the sick leave bank. The postretirement health care plan is contributory for
nonunion employees retiring after January 1, 1990, with the retiree
contributions adjusted annually. The life insurance plan and the sick leave
payout plans are noncontributory.
The plans are unfunded. The amounts recognized in the balance sheet are:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees...................................... $14,377 $12,159 $10,335
Fully eligible active plan participants....... 4,160 3,687 3,783
Other active plan participants................ 9,915 8,660 8,927
------- ------- -------
Accumulated postretirement benefit obligation.. 28,452 24,506 23,045
Unrecognized transition obligation............. (17,977) (19,101) (20,224)
Unrecognized net (loss) gain................... (1,017) 1,736 1,912
------- ------- -------
Accrued postretirement benefit cost at June 1.. 9,458 7,141 4,733
Fourth quarter contributions................... (380) (369) (303)
Fourth quarter net periodic postretirement ben-
efit cost..................................... 1,052 950 1,044
------- ------- -------
Accrued postretirement benefit cost at fiscal
year-end...................................... $10,130 $ 7,722 $ 5,474
======= ======= =======
</TABLE>
33
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
The components of the net periodic postretirement benefit cost for the
fiscal year ending include:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Service cost -- benefits attributed to service
during the period................................. $ 788 $ 796 $ 867
Interest cost on accumulated postretirement benefit
obligation........................................ 1,960 1,855 2,052
Amortization of transition obligation over 20
years............................................. 1,124 1,124 1,124
Net amortization and deferral...................... 19 (2) 133
------ ------ ------
Net periodic postretirement benefit cost........... $3,891 $3,773 $4,176
====== ====== ======
</TABLE>
For measurement purposes, a 7.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for fiscal year 1998; the
rate was assumed to decrease gradually to 5.25% in fiscal 2001 and remain at
that level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by one percentage point in each year
would increase the accumulated postretirement benefit obligation as of August
30, 1997 by $3,893,000 and the aggregate benefit cost for the year then ended
by $428,000.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%.
The Company's union employees participate in a multiemployer plan that
provides health care benefits. Amounts charged to postretirement benefit cost
and contributed to the plan totaled $1,100,000 in fiscal 1997, $1,100,000 in
fiscal 1996, and $1,300,000 in fiscal 1995.
12. CONTINGENCIES:
Litigation. The Company is a defendant in a number of cases currently in
litigation or potential claims encountered in the normal course of business
which are being vigorously defended. In the opinion of management, the
resolutions of these matters will not have a material adverse effect on the
Company's financial position, results of operations, or cash flow.
Environmental Matters. The United States Environmental Protection Agency
("EPA") notified the Company in 1993 that, together with others, it was a
potentially responsible party ("PRP") for the disposal of hazardous substances
at a landfill site located in Monterey Park, California. Cleanup of this site
consists of five phases: site control and monitoring; management and leachate
treatment; landfill gas control and landfill cover; final remedy and ground
water treatment; and thirty-year post cleanup site control and monitoring. As
of August 1997, the Company's share of cleanup costs for the first three
phases was approximately $379,000. This amount was paid in October 1996. While
the Company's share of the cost for the last two phases of cleanup has not yet
been established, based upon overall estimates of the range of potential cost,
the Company believes that its share of the remaining cost for all five phases
of cleanup will not exceed the amounts which the Company has reserved. As of
August 30, 1997, the total reserve established with respect to environmental
liabilities is approximately $1,200,000. The Company is pursuing recovery of a
portion of its reserve from its insurance carriers.
13. CONCENTRATION OF CREDIT RISK:
Financial instruments which potentially expose the Company to concentrations
of credit risk consist primarily of trade receivables and lease guarantees for
certain member-patrons. These concentrations of credit risk may be affected by
changes in economic or other conditions affecting the Western United States,
particularly California. However, management believes that receivables are
well diversified, and the allowances for doubtful
34
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
accounts are sufficient to absorb estimated losses. Obligations of member-
patrons to the Company, including lease guarantees, are generally supported by
the Company's right of offset, upon default, against the member-patrons' cash
deposits, shareholdings and Patronage Certificates, as well as personal
guarantees and reimbursement and indemnification agreements.
The Company's largest customer and ten largest customers accounted for
approximately 5% and 31%, respectively, of net sales in fiscal 1997.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and cash equivalents
The carrying amount approximates fair value due to the short maturity of
these instruments.
Investments and Notes receivable
The fair values for investments and notes receivable are based primarily
on quoted market prices for those or similar instruments. Equity securities
which do not have readily determinable fair values are accounted for using
the cost method. The Company regularly evaluates securities carried at cost
to determine whether there has been any diminution in value that is deemed
to be other than temporary and adjusts the value accordingly.
Notes payable, Notes payable due after one year and Subordinated patronage
dividend certificates
The fair values for notes payable, notes payable due after one year, and
subordinated patronage dividend certificates are based primarily on rates
currently available to the Company for debt with similar terms and
remaining maturities. At August 30, 1997, notes payable and notes payable
due after one year had a carrying value of $103,546,000 and an estimated
fair value of $102,385,000. At August 30, 1997, subordinated patronage
dividend certificates had a carrying value of $6,276,000 which approximated
fair value.
The methods and assumptions used to estimate the fair values of the
Company's financial instruments at August 30, 1997 were based on estimates of
market conditions, estimates using present value and risks existing at that
time. These values represent an approximation of possible value and may never
actually be realized.
15. RELATED PARTY TRANSACTIONS:
Members affiliated with directors of the Company make purchases of
merchandise from the Company and also may receive benefits and services which
are offered by the Company to its eligible members generally.
Since the programs listed below are only available to patrons of the
Company, it is not possible to assess whether transactions with members of the
Company, including directors of the Company, are less favorable to the Company
than similar transactions with unrelated third parities. However, management
believes such transactions are on terms which are consistent with terms
available to other patrons similarly situated.
35
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
A brief description of the specific benefits and services utilized by
members affiliated with directors of the Company follows:
Loans and Loan Guarantees:
As described in Note 5 "Notes Payable", GCC provides loan financing to its
members. GCC had the following loans outstanding at August 30, 1997 to members
affiliated with directors of the Company:
<TABLE>
<CAPTION>
AGGREGATE LOAN
BALANCES AT AUGUST 30,
1997 MATURITY
DIRECTOR (DOLLARS IN THOUSANDS) DATE(S)
-------- ---------------------- ---------
<S> <C> <C>
Michael Provenzano.......................... $886 1999-2004
</TABLE>
As described in Note 5 "Notes Payable", member loans are periodically sold
to a bank, subject to limited recourse provisions. At August 30, 1997, the
principal balances of loans to members affiliated with directors of the
Company that were sold with recourse were as follows:
<TABLE>
<CAPTION>
AGGREGATE LOAN
BALANCES AT AUGUST 30,
1997 MATURITY
DIRECTOR (DOLLARS IN THOUSANDS) DATES
-------- ---------------------- ---------
<S> <C> <C>
Darioush Khaledi............................ $2,170 1998-1999
Mark Kidd................................... 768 1997-2003
Willard R. "Bill" MacAloney................. 648 2002
Jay McCormack............................... 495 1998-2001
John Berberian.............................. 429 1999-2000
James R. Stump.............................. 303 1999-2001
Michael A. Provenzano....................... 282 1997-2000
</TABLE>
As described in Note 5 "Notes Payable" the Company provides loan guarantees
to its members. The Company has guaranteed 10% of the principal amount of
certain third party loans to K.V. Mart Co. of which director Darioush Khaledi
is an affiliate. At August 30, 1997, the maximum principal amount of this
guarantee was $609,000.
Lease Guarantees and Subleases:
As described in Note 6 "Leases", the Company provides lease guarantees and
subleases to its members. The Company has executed lease guarantees or
subleases to members affiliated with directors of the Company as follows:
<TABLE>
<CAPTION>
TOTAL CURRENT ANNUAL
NO. OF RENT EXPIRATION
DIRECTOR STORES (DOLLARS IN THOUSANDS) DATE(S)
-------- ------ ---------------------- ----------
<S> <C> <C> <C>
Darioush Khaledi.................... 3 $975 2004-2016
Willard R. "Bill" MacAloney......... 3 385 2002-2011
Michael Provenzano.................. 2 351 2016-2017
Harley DeLano....................... 2 327 2009
Morrie Notrica...................... 1 181 1998
James R. Stump...................... 3 143 1998-2002
Mark Kidd........................... 1 121 2008
John Berberian...................... 1 120 2004
</TABLE>
36
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED AUGUST 30, 1997, AUGUST 31, 1996 AND SEPTEMBER 2, 1995
Other Leases:
The Company leases its produce warehouse to Joe Notrica, Inc., with which
director Morrie Notrica is affiliated. The lease is for an initial 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.
Rent during the option period will be the lesser of fair rental value or the
current rent adjusted to reflect the change in the Consumer Price Index.
Supply Agreements:
During the course of its business, the Company enters into supply agreements
with members of the Company. These agreements require the member to purchase
certain agreed amounts of its merchandise requirements from the Company and
obligate the Company to supply such merchandise under agreed terms and
conditions relating to such matters as pricing, delivery, discounts and
allowances. Members affiliated with directors Bonfante, DeLano, Khaledi, Kidd,
MacAloney, McCormack and Provenzano have entered into supply agreements with
the Company. These supply agreements vary in terms and length, and expire at
various dates through 2004, but are subject to earlier termination in certain
events.
Other:
In August 1997, the Company entered into an agreement with Ralphs Grocery
Company ("Ralphs") providing for the dissolution of Golden Alliance
Distribution ("GAD"), a joint venture partnership previously formed for the
purpose of providing for the shared use of the Company's general merchandise
warehouse located in Fresno, California. The dissolution agreement provides
that certain amounts owed by Ralphs to Certified at August 30, 1997 will be
offset by future redemptions of excess Class B shares (see Note 9) held by
Ralphs and its affiliates. If redemptions of Class B shares are insufficient
to satisfy the remaining obligation at December 31, 2000, Ralphs will satisfy
the shortfall with a cash payment.
37
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective April 3, 1996, the Company dismissed Coopers & Lybrand L.L.P. as
its principal accountant to audit the financial statements of the Company.
The report issued by Coopers & Lybrand L.L.P. on the consolidated statement
of earnings, shareholders' equity, and cash flows for fiscal 1995 did not
contain an adverse opinion or a disclaimer of opinion, and was not qualified
or modified as to uncertainty, audit scope, or accounting principles.
The decision to change accountants was recommended by the audit committee of
the Company following the solicitation and review of bids from other
independent accountants, including Coopers & Lybrand L.L.P., and was approved
by the Board of Directors on April 3, 1996.
During the two most recent fiscal years and the interim fiscal period prior
to such dismissal, there were no disagreements with Coopers & Lybrand L.L.P.
on matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.
Effective April 3, 1996, the Company engaged Deloitte & Touche LLP as its
principal accountant to audit the financial statements of the Company.
38
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information about the directors of
the Company.
<TABLE>
<CAPTION>
YEAR
AGE AT FIRST
NAME OF DIRECTOR DECEMBER 31, 1997 ELECTED PRINCIPAL OCCUPATION
---------------- ----------------- ------- -------------------------------------------
<S> <C> <C> <C>
Louis A. Amen (Chairman 68 1974 President, Super A Foods, Inc.
of the Board)
John Berberian 46 1991 President, Berberian Enterprises, Inc.
Michael Bonfante 56 1995 Chairman, President and CEO, Nob Hill
General Store, Inc.
Harley J. DeLano 60 1995 President of Cala Foods, Inc., Division of
Ralphs Grocery Co.
John T. Fujieki 48 1997 President and Chief Operating Officer, Star
Markets, Ltd.
Roger K. Hughes 63 1985 Chairman and Chief Executive Officer,
Hughes Markets, Inc.
Darioush Khaledi 51 1993 Chairman of the Board and Chief Executive
Officer, K.V. Mart Co.
Mark Kidd 47 1992 President, Mar-Val Food Stores, Inc.
Willard R. "Bill" MacAloney 62 1981 President and Chief Executive Officer, Mac Ber, Inc.
Jay McCormack 47 1993 Owner-Operator, Alamo Market; Co-owner,
Glen Avon Market
Morrie Notrica 68 1988 President and Chief Operating Officer, Joe
Notrica, Inc.
Michael A. Provenzano 55 1986 President, Pro & Son's, Inc.; President,
Provo Inc.; and President Pro and Family
Inc.; formerly President, Carlton's
Market, Inc.
Gail Gerrard Rice 49 1997 Vice President, Gerrard's Markets
James R. Stump 59 1982 President, Stump's Market, Inc.
Kenneth Young 53 1994 Vice President, Jack Young's Supermarkets;
Vice President, Bakersfield Food City,
Inc.
</TABLE>
The following table sets forth certain information about executive officers
of the Company.
<TABLE>
<CAPTION>
AGE AT
DECEMBER 31,
OFFICER'S NAME 1997 BUSINESS EXPERIENCE DURING LAST FIVE YEARS
-------------- ------------ --------------------------------------------------------------
<S> <C> <C>
Alfred A. Plamann 55 Corporate President and Chief Executive Officer since February
1994; previously Senior Vice President -- Finance and Chief
Financial Officer.
Daniel T. Bane 50 Senior Vice President -- Finance & Administration and Chief
Financial Officer since February 1996; Senior Vice President
and Chief Financial Officer, July 1994 to February 1996;
Chief Operating Officer, Spensley Horn Jubas & Lubitz,
December 1993 to July 1994; previously Chief Financial
Officer, Standard Brands Paint Company.
George D. Gardner 44 Vice President since May 1996; General Manager of Grocers
Specialty Co., June 1995 to May 1996; Vice President &
General Manager Ingro Mexican Foods, Inc., May 1993 to June
1995; previously Vice President Sales & Marketing, Festin
Foods, Corp.
Margaret A. Huebner 47 Vice President -- Human Resources and Labor Relations since
February 1996; previously Vice President Human Resources
NavCom Defense Electronics, Inc.
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
AGE AT
DECEMBER 31,
OFFICER'S NAME 1997 BUSINESS EXPERIENCE DURING LAST FIVE YEARS
-------------- ------------ --------------------------------------------------------------
<S> <C> <C>
Corwin J. Karaffa 43 Vice President -- Distribution since January 1995; previously
Facilities Manager, Proctor and Gamble Distribution Co.
Robert M. Ling, Jr. 40 Senior Vice President, General Counsel and Secretary since
October 1997; Vice President, General Counsel and Secretary
since August 1996; Vice President and General Counsel, April
1996 to August 1996; Vice President, General Counsel and
Secretary, Megafoods Stores, Inc., July 1994 to April 1996;
previously Vice President, General Counsel and Secretary,
Reliable Drug Stores, Inc.
Charles J. Pilliter 49 Senior Vice President and President -- Northern California.
Jack E. Scott II 47 Vice President and Chief Information Officer since June 1996;
Chief Information Officer, World Vision United States,
November 1993 to May 1996; previously Vice President
Management Information Systems, Standard Brands Paint
Company.
Philip S. Smith 47 Vice President -- Procurement since October 1997; Executive
Director --Purchasing, July 1997 to October 1997; General
Manager -- Northern California, June 1996 to July 1997;
Manager -- Product Sales, September 1994 to June 1996;
previously Division Manager, Market Wholesale.
David A. Woodward 55 Treasurer since August 1996; previously Corporate
Secretary/Treasurer.
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1997, the Company's Executive Compensation Committee
consisted of director Darioush Khaledi, Committee Chairman, and directors
Roger K. Hughes, Mark Kidd, Willard R. "Bill" MacAloney, Jay McCormack, and
James R. Stump, as well as ex-officio member Louis A. Amen, Chairman of the
Board.
As Chairman of the Board, Mr. Amen 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 which other directors are entitled. The
Company's President and Chief Executive Officer, Alfred A. Plamann, is a
member of the Board of Directors of K.V. Mart Co., of which Committee member
and director Darioush Khaledi is Chairman and Chief Executive Officer.
The Company has provided loans, subleases and guarantees on loans and leases
to, and holds equity interests in, member-patrons with which members of the
Executive Compensation Committee are associated. These relationships are
discussed in Footnote 15 to Notes to Consolidated Financial Statements, which
is incorporated herein by reference.
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.
40
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------
FISCAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- --------------------------- ------ -------- -------- ------------
<S> <C> <C> <C> <C>
Alfred A. Plamann 1997 $383,750 $168,000 $31,919(1)
President & CEO 1996 352,500 100,000 27,895
1995 322,150 50,000 24,290
Daniel T. Bane 1997 235,000 60,000 16,137(2)
Senior Vice President & CFO 1996 215,000 55,000 14,446
1995 200,000 20,000 1,231
Charles J. Pilliter 1997 195,000 49,500 15,733(3)
Senior Vice President 1996 183,000 46,500 14,459
1995 172,000 15,000 13,174
Robert M. Ling, Jr. 1997 184,000 47,400 5,466(4)
Vice President -- General 1996 65,962 35,000 20,000
Counsel and Secretary
Corwin J. Karaffa 1997 159,750 32,400 11,083(5)
Vice President -- 1996 151,000 30,600 6,458
Distribution 1995 89,231 7,000
</TABLE>
- --------
(1) Consists of $8,961 Company contribution to the Company's Employees'
Sheltered Savings Plan, $20,432 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation Plan,
and $2,526 representing the economic benefit associated with the Company
paid premium on the Executive Life Plan.
(2) Consists of $9,344 Company contribution to the Company's Employees'
Sheltered Savings Plan, $5,814 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation Plan,
and $979 representing the economic benefit associated with the Company paid
premium on the Executive Life Plan.
(3) Consists of $9,358 Company contribution to the Company's Employees'
Sheltered Savings Plan, $5,578 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation Plan,
and $797 representing the economic benefit associated with the Company paid
premium on the Executive Life Plan.
(4) Consists of $5,466 Company contribution to the Company's Employees'
Sheltered Savings Plan.
(5) Consists of $10,200 Company contribution to the Company's Employees'
Sheltered Savings Plan, $493 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation Plan,
and $390 representing the economic benefit associated with the Company paid
premium on the Executive Life Plan.
The Company has a defined benefit pension plan which covers its non-union and
executive employees. Benefits under this plan are based on formulas using
compensation and employee service periods and are subject to the appropriate
IRS tables and limitations. The Company's Executive Salary Protection Plan
("ESPPII"), provides additional post-termination retirement income based upon
the participant's salary and years of service. The funding for this benefit is
facilitated through the purchase of life insurance policies, the premiums for
which are paid by the Company.
ESPPII is targeted to provide eligible executives with a retirement benefit,
including the defined benefit, of up to 65% of the participant's final salary,
based on formulas which include years of service and salary. Executives become
eligible for ESPPII after three years of service as an executive officer of the
Company. Upon eligibility, executives vest at a rate of 5% per year (with all
years of continuous service credited) up to a maximum of 13 years. The ESPPII
benefit is limited to a maximum amount payable per year based on the year in
which the executive retires. That amount for persons retiring in 1997 is
$89,888. This limitation is subject to increase based on amounts approved by
the Board of Directors. Payments under ESPPII are discounted for
41
<PAGE>
executives who retire prior to age sixty-five. At August 30, 1997, credited
years of service for named officers are: Mr. Plamann, 8 years; Mr. Bane, 3
years; Mr. Pilliter, 21 years; Mr. Karaffa, 2 years; and Mr. Ling, 1 year.
The following table illustrates the estimated annual benefits under the
combined defined benefit plan and ESPPII plan. The amounts shown represent
annual compensation for qualifying executives with selected years of service
as if such executives had retired on August 30, 1997 at age sixty-five.
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------
10 15 20 25 33
REMUNERATION 5 YEARS YEARS YEARS YEARS YEARS YEARS
------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000........................ $26,088 $52,176 $68,264 $69,352 $70,440 $72,181
125,000........................ 32,610 65,220 85,330 86,690 88,049 90,225
150,000........................ 39,132 78,264 102,395 104,027 105,659 108,270
160,000........................ 41,741 83,481 109,222 110,962 112,703 115,487
175,000........................ 44,766 89,531 116,797 117,812 118,828 120,452
200,000........................ 51,016 102,031 120,315 130,458 135,078 136,702
225,000........................ 57,266 110,173 120,315 130,458 140,600 152,952
250,000........................ 63,516 110,173 120,315 130,458 140,600 156,828
300,000........................ 76,016 110,173 120,315 130,458 140,600 156,828
350,000........................ 88,516 110,173 120,315 130,458 140,600 156,828
400,000 and above.............. 100,030 110,173 120,315 130,458 140,600 156,828
</TABLE>
EXECUTIVE EMPLOYMENT, TERMINATION AND SEVERANCE AGREEMENTS
The Company is a party to an employment contract with Alfred A. Plamann, the
Company's President and Chief Executive Officer. The contract has a three year
term, presently expiring in February 2000. During the first five years, the
contract is renewed annually at the end of the first year for one additional
year unless notice is given prior to year end by either party of intent to
terminate. After the fifth year, such notice is to be given prior to the end
of the second year of the then existing term and unless given, the contract is
extended for one year. Under the contract, Mr. Plamann serves as the Company's
President and Chief Executive Officer and receives a base salary, currently
$390,000, subject to annual review and upward adjustment at the discretion of
the Board of Directors. Mr. Plamann is also eligible for annual bonuses, up to
a maximum of 48% of base salary, based on performance criteria established by
the board of directors at the beginning of each fiscal year. 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.
The Company has executed Severance Agreements with Senior Vice Presidents
Daniel T. Bane and Charles J. Pilliter. The agreements extend for three years
until April 2, 2000 and contain provisions for annual extensions subject to
certain parameters. Among other provisions, the agreements provide for the
payment of one year's salary plus bonus upon termination, as defined in the
agreement.
DIRECTOR COMPENSATION
Each director receives a fee of $500 for each regular board meeting
attended, $200 for each committee meeting attended and $200 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.
42
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
As of November 1, 1997, the only shareholders known by the Company to own
beneficially more than 5% of the outstanding Class B Shares of the Company
were Ralphs Grocery Company and its affiliates, 1100 West Artesia Boulevard,
Compton, California 90220 (24,702 Class B Shares or approximately 6.39% of the
outstanding Class B Shares; Cala Co. and Bay Area Warehouse Stores Inc. are
wholly-owned by Ralphs Grocery Company) and Hughes Markets, Inc., 14005 Live
Oak Avenue, Irwindale, California 91706 (22,739 Class B Shares or
approximately 5.89% of the outstanding Class B Shares).
The following table sets forth, as of November 1, 1997, the name of each
director of the Company, his or her position with and name of the member-
patron, and the amount of Class A Shares and Class B Shares of the Company
owned by the member-patron.
<TABLE>
<CAPTION>
SHARES OWNED
--------------------------------------
CLASS A SHARES CLASS B SHARES
------------------ -------------------
NO. % OF TOTAL NO. % OF TOTAL
NAME OF DIRECTOR AND MEMBER-PATRON SHARES OUTSTANDING SHARES OUTSTANDING
---------------------------------- ------ ----------- ------- -----------
<S> <C> <C> <C> <C>
Louis A. Amen;
President, Super A Foods, Inc.......... 100 0.21% 9,613 2.49%
John Berberian;
President, Berberian Enterprises, Inc.. 100 0.21% 7,615 1.97%
Michael Bonfante;
Chairman, President & CEO, Nob Hill
General Store, Inc..................... 100 0.21% 12,614 3.27%
Harley DeLano;
President of Cala Foods, Inc., Division
of Ralphs Grocery Company (1).......... 100 0.21% 24,702 6.39%
John T. Fujieki;
President and Chief Operating Officer,
Star Markets, Ltd...................... 100 0.21% 8,380 2.17%
Roger K. Hughes;
Chairman and Chief Executive Officer,
Hughes Markets, Inc.................... 100 0.21% 22,739 5.89%
Darioush Khaledi;
Chairman of the Board and Chief Execu-
tive Officer, K.V. Mart Co............. 100 0.21% 15,967 4.14%
Mark Kidd;
President, Mar-Val Food Stores, Inc.... 100 0.21% 1,950 0.51%
Willard R. "Bill" MacAloney;
President and Chief Executive Officer,
Mac Ber, Inc........................... 100 0.21% 2,933 0.76%
Jay McCormack;
Owner-Operator, Alamo Market (2)....... 100 0.21% 1,398 0.36%
Morrie Notrica;
President and Chief Operating Officer,
Joe Notrica, Inc....................... 100 0.21% 9,520 2.47%
Michael A. Provenzano;
President, Pro & Sons, Inc.; President,
Provo Inc.; President, Pro and Family
Inc.................................... 100 0.21% 982 0.25%
Gail Gerrard Rice;
Vice President, Gerrard's Markets...... 100 0.21% 1,414 0.37%
James R. Stump;
President, Stump's Market, Inc......... 100 0.21% 2,131 0.55%
Kenneth Young;
Vice President, Jack Young's Supermar-
kets (3)............................... 100 0.21% 3,015 0.78%
----- ---- ------- -----
1,500 3.15% 124,973 32.37%
===== ==== ======= =====
</TABLE>
43
<PAGE>
- --------
(1) These shares are owned by Ralphs Grocery Company and its affiliates, Cala
Foods, Inc., and Bay Area Warehouse Stores, Inc.
(2) Mr. McCormack also is affiliated with Glen Avon Food, Inc., which owns 100
Class A Shares (0.21% of the outstanding class of shares) and 361 Class B
Shares (0.09% of the outstanding class of shares), and Yucaipa Trading
Co., Inc., which owns 100 Class A Shares (0.21% of the outstanding class
of shares) and 694 Class B Shares (0.18% of the outstanding class of
shares).
(3) Mr. Young also is affiliated with Bakersfield Food City Inc. dba Young's
Markets, which owns 100 Class A Shares (0.21% of the outstanding class of
shares) and 355 Class B Shares (0.09% of the outstanding class of shares).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
All firms with which directors are affiliated, as members of the Company,
purchase groceries, related products and store equipment from the Company in
the ordinary course of business. As members, firms with which directors are
affiliated may receive benefits for which all members are eligible, including
patronage dividends, allowances and retail support services. See Footnote 15
to Notes to Consolidated Financial Statements, which is incorporated herein by
this reference, for a description of related party transactions.
44
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)Financial Statements
Reports of Independent Accountants.
Consolidated Balance Sheets as of August 30, 1997 and August 31, 1996.
Consolidated Statements of Earnings for the Fiscal Years Ended August 30,
1997, August 31, 1996 and September 2, 1995.
Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended
August 30, 1997, August 31, 1996, and September 2, 1995.
Consolidated Statements of Cash Flows for the Fiscal Years Ended August 30,
1997, August 31, 1996, and September 2, 1995.
(b)Reports on Form 8-K
None.
(c)Exhibits
<TABLE>
<C> <S>
3.1 Articles of Incorporation of the Registrant (as amended through May 5,
1997).
3.2 Bylaws of the Registrant (as amended through June 21, 1994)
(incorporated by reference to Exhibit 4.2 to Post Effective Amendment
No. 6 to Form S-2 Registration Statement of the Registrant filed on
December 15, 1994, File No. 33-38152).
4.1 Retail Grocer Application and Agreement for Continuing Service
Affiliation With Certified Grocers of California, LTD. And Pledge
Agreement (incorporated by reference to Exhibit 4.7 to Amendment No. 2
to Form S-1 Registration Statement of the Registrant filed on December
31, 1981, File No. 2-70069).
4.2 Retail Grocer Application And Agreement For Service Affiliation With And
The Purchase Of Shares Of Certified Grocers Of California, LTD. And
Pledge Agreement (incorporated by reference to Exhibit 4.2 to Post
Effective Amendment No. 7 to Form S-2 Registration Statement of the
Registrant filed on December 13, 1989, File No. 33-19284).
4.3 Agreement respecting directors' shares (incorporated by reference to
Exhibit 4.9 to Amendment No. 2 to Form S-1 Registration Statement of the
Registrant filed on December 31, 1981, File No. 2-70069).
4.4 Subordination Agreement (Existing Member-Patron) (incorporated by
reference to Exhibit 4.4 to Post-Effective Amendment No. 4 to Form S-2
Registration Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.5 Subordination Agreement (Existing Associate Patron) (incorporated by
reference to Exhibit 4.5 to Post-Effective Amendment No. 4 to Form S-2
Registration Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.6 Subordination Agreement (New Member-Patron) (incorporated by reference
to Exhibit 4.6 to Post-Effective Amendment No. 4 to Form S-2
Registration Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.7 Subordination Agreement (New Associate Patron) (incorporated by
reference to Exhibit 4.7 to Post-Effective Amendment No. 4 to Form S-2
Registration Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
</TABLE>
45
<PAGE>
<TABLE>
<C> <S>
4.8 Form of Class A Share Certificate (incorporated by reference to
Exhibit 4.5 to Post Effective Amendment No. 6 to Form S-2
Registration Statement of the Registrant filed on December 15, 1994,
File No. 33-38152).
4.9 Form of Class B Share Certificate (incorporated by reference to
Exhibit 4.6 to Post Effective Amendment No. 6 to Form S-2
Registration Statement of the Registrant filed on December 15, 1994,
File No. 33-38152).
4.10.1 Articles FIFTH and SIXTH of the Registrant's Articles of
Incorporation (See Exhibit 3.1).
4.10.2 Article I, Section 5, and Article VII of the Registrant's Bylaws (See
Exhibit 3.2).
4.11 Indenture between the Registrant and First Interstate Bank of
California, as Trustee, relating to $3,000,000 Subordinated Patronage
Dividend Certificates Due December 15, 2000 (incorporated by
reference to Exhibit 4.3 to Amendment No. 1 to Form S-2 Registration
Statement of the Registrant filed on September 27, 1993, File No. 33-
68288).
4.12 Indenture between the Registrant and First Interstate Bank of
California, as Trustee, relating to $5,000,000 Subordinated Patronage
Dividend Certificates due December 15, 2001 (incorporated by
reference to Exhibit 4.3 to Form S-2 Registration Statement of the
Registrant filed on October 12, 1994, File No. 33-56005).
4.13 Indenture between the Registrant and First Interstate Bank of
California, as Trustee, relating to $3,000,000 Subordinated Patronage
Dividend Certificates due December 15, 2002 (incorporated by
reference to Exhibit 4.3 to Form S-2 Registration Statement of the
Registrant filed on October 13, 1995, File No. 33-63383).
4.14 $135,000,000 Amended and Restated Loan and Security Agreement dated
as of March 17, 1994 between Certified Grocers of California, Ltd.,
Grocers General Merchandise Company, Grocers Specialty Company, and
BT Commercial Corporation, as agent, Union Bank, as co-agent, and
First National Bank of Boston as co-agent; and Amendment Number One
dated as of November 1, 1994 (incorporated by reference to Exhibit
4.13 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended September 3, 1994, File No. 0-10815).
4.14.1 Amendment Number Two to Amended and Restated Loan and Security
Agreement date as of December 3, 1994, between Certified Grocers of
California, Ltd., Grocers General Merchandise Company, Grocers
Specialty Company, and BT Commercial Corporation, as agent, Union
Bank, as co-agent, and First National Bank of Boston, as co-agent
(incorporated by reference to Exhibit 4.14.1 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended September 2,
1995, File No. 0-10815).
4.14.2 Amendment Number Three to Amended and Restated Loan and Security
Agreement dated as of May 24, 1996, between Certified Grocers of
California, Ltd., Grocers General Merchandise Company, Grocers
Specialty Company, and BT Commercial Corporation, as agent, Union
Bank, as co-agent, and First National Bank of Boston, as co-agent
(incorporated by reference to Exhibit 4.14.2 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31, 1996,
File No. 0-10815).
4.14.3 Amendment Number Four to Amended and Restated Loan and Security
Agreement dated as of June 27, 1996, between Certified Grocers of
California, Ltd., Grocers General Merchandise Company, Grocers
Specialty Company, and BT Commercial Corporation, as agent, Union
Bank, as co-agent, and First National Bank of Boston, as co-agent
(incorporated by reference to Exhibit 4.14.3 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31, 1996,
File No. 0-10815).
4.14.4 Amendment Number Five to Amended and Restated Loan and Security
Agreement dated as of September 30, 1996, between Certified Grocers
of California, Ltd., Grocers General Merchandise Company, Grocers
Specialty Company, and BT Commercial Corporation, as agent, Union
Bank, as co-agent, and First National Bank of Boston, as co-agent
(incorporated by reference to Exhibit 4.14.4 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31, 1996,
File No. 0-10815).
</TABLE>
46
<PAGE>
<TABLE>
<C> <S>
4.14.5 Amendment Number Six to Amended and Restated Loan and Security
Agreement dated as of April 7, 1997, between Certified Grocers of
California, Ltd., Grocers General Merchandise Company, Grocers
Specialty Company, and BT Commercial Corporation, as agent, Union
Bank, as co-agent, and First National Bank of Boston, as co-agent.
4.14.6 Amendment Number Seven to Amended and Restated Loan and Security
Agreement dated as of October 21, 1997, between Certified Grocers of
California, Ltd., Grocers General Merchandise Company, Grocers
Specialty Company, and BT Commercial Corporation, as agent, Union
Bank, as co-agent, and First National Bank of Boston, as co-agent.
4.15 Subordinated Note Agreement dated March 27, 1989 between Certified
Grocers of California, Ltd. and Aetna Life Insurance Company
regarding $35,000,000 10.80% subordinated notes due April 1, 1999;
and letter amendment dated January 30, 1992 (incorporated by
reference to Exhibit 4.15 to the Registrant's Annual Report on Form
10-K for the fiscal year ended August 28, 1993 filed on November 26,
1993, File No. 0-10815).
4.15.1 Amendment to Subordinated Note Agreement dated as of March 17, 1994
between Certified Grocers of California, Ltd. and Aetna Life
Insurance Company (incorporated by reference to Exhibit 4.15.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 3, 1994, File No. 0-10815).
4.16 Note Purchase Agreement dated January 15, 1990 between Certified
Grocers of California, Ltd. and Massachusetts Mutual Life Insurance
Company regarding $20,000,000 9.55% Senior Notes due January 15,
2005; and Amendment Dated January 30, 1991, First Amendment dated
September 4, 1991, and Amendment No. 2 dated October 19, 1993
(incorporated by reference to Exhibit 4.16 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended August 28, 1993 filed
on November 26, 1993, File No. 0-10815).
4.16.1 Amendment No. 3 to Note Purchase Agreement dated as of March 17,
1994, and Amendment No. 4 to Note Purchase Agreement dated as of
September 29, 1994, each between Certified Grocers of California,
Ltd. and Massachusetts Mutual Life Insurance Company (incorporated by
reference to Exhibit 4.16.1 to the Registrant's Annual Report on Form
10-K for the fiscal year ended September 3, 1994, File No. 0-10815).
4.17 $18,700,000 Loan Agreement dated August 23, 1979 between Certified
Grocers of California, Ltd., First Interstate Bank of California, as
Trustee, and the other Lenders named therein; Secured Promissory
Notes dated August 23, 1979; Deed of Trust and Assignment of Rents
dated August 23, 1979; and, Assignment of Rents and Leases dated
August 23, 1979 (incorporated by reference to Exhibit 4.17 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
August 28, 1993 filed on November 26, 1993, File No. 0-10815).
4.18 Loan Purchase and Service Agreement Dated as of August 29, 1996
between Grocers Capital Company and National Consumer Cooperative
Bank (incorporated by reference to Exhibit 4.18 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 31, 1996
filed on November 5, 1996, File No. 0-10815).
4.19 $10,000,000 Credit Agreement and Security Agreement each dated as of
September 20, 1996 between Grocers Capital Company and National
Cooperative Bank as agent (incorporated by reference to Exhibit 4.19
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended August 31, 1996 filed on November 5, 1996, File No. 0-10815).
10.1 Comprehensive Amendment to Retirement Plan for Employees of Certified
Grocers of California, Ltd. dated as of July 27, 1995.
10.3 Comprehensive Amendment to Certified Grocers of California, Ltd.
Employees' Sheltered Savings Plan dated as of July 27, 1995.
</TABLE>
47
<PAGE>
<TABLE>
<C> <S>
10.4 Certified Grocers of California, Ltd., Executive Salary Protection
Plan II ("ESPP II"), Master Plan Document, effective January 4, 1995
(incorporated by reference to Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended September 2,
1995 filed on December 1, 1995, File No. 0-10815).
10.5 Master Trust Agreement For Certified Grocers of California, Ltd.
Executive Salary Protection Plan II, dated as of April 28, 1995
(incorporated by reference to Exhibit 10.5 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended September 2,
1995 filed on December 1, 1995, File No. 0-10815).
10.6 Certified Grocers of California, Ltd. Executive Insurance Plan Split
dollar Agreement and Schedule of Executive Officers party thereto
(incorporated by reference to Exhibit 10.6 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended September 2,
1995 filed on December 1, 1995, File No. 0-10815).
10.7 Comprehensive Amendment to Certified Grocers of California, Ltd.
Employees' Excess Benefit Plan dated as of December 5, 1995.
10.8 Comprehensive Amendment to Certified Grocers of California, Ltd.
Employees' Supplemental Deferred Compensation Plan dated as of
December 5, 1995.
10.9 Comprehensive Amendment to Certified Grocers of California, Ltd.
Employee Savings Plan dated as of August 18, 1995.
10.10 Joint Venture Agreement of Golden Alliance Distribution, dated as of
April 8, 1992, between Food 4 Less GM, Inc. and Grocers General
Merchandise Company (incorporated by reference to Exhibit 10.7 to
Form S-2 Registration Statement of the Registrant filed on September
2, 1993. File No. 33-68288.
10.10.1 Agreement Regarding Termination and Dissolution of Joint Venture
Agreement of Golden Alliance Distribution, dated as of August 15,
1997, between Food 4 Less GM, Inc. and Grocers General Merchandise
Company
10.11 Lease, dated as of December 23, 1986, between Cercor Associates and
Grocers Specialty Company (incorporated by reference to Exhibit 10.8
to Form S-2 Registration Statement of the Registrant filed on
September 2, 1993. File No. 33-68288).
10.12 Expansion Agreement, dated as of May 1, 1991, and Industrial Lease,
dated as of May 1, 1991, between Dermody Properties and the
Registrant (incorporated by reference to Exhibit 10.9 to Form S-2
Registration Statement of the Registrant filed on September 2, 1993.
File No. 33-68288).
10.12.1 Lease Amendment, dated June 20, 1991, between Dermody Properties and
the Registrant (incorporated by reference to Exhibit 10.9.1 to Form
S-2 Registration Statement of the Registrant filed on September 2,
1993. File No. 33-68288).
10.12.2 Lease Amendment, dated October 18, 1991, between Dermody Properties
and the Registrant (incorporated by reference to Exhibit 10.9.2 to
Form S-2 Registration Statement of the Registrant filed on September
2, 1993. File No. 33-68288).
10.13 Preferred Stock Purchase Agreement by and between Food-4-Less of
Modesto, Inc. and Grocers Capital Company, dated as of July 1, 1992
(incorporated by reference to Exhibit 10.10 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 28, 1993
filed on November 26, 1993, File No. 0-10815).
10.14 Preferred Stock Purchase Agreement by and between SavMax Foods, Inc.
and Grocers Capital Company, dated as of December 17, 1993
(incorporated by reference to Exhibit 10.11 to Post Effective
Amendment No. 6 to Form S-2 Registration Statement of the Registrant
filed on December 15, 1994, File No. 33-38152).
10.14.1 Forbearance and Debt Restructure Agreement, dated May 15, 1997,
between SavMax Foods, Inc., Michael A. Webb, Grocers Capital
Company, and the Registrant
</TABLE>
48
<PAGE>
<TABLE>
<S> <C>
10.15 Common Stock Purchase Agreement by and between Michael A. Webb and Grocers Capital Company, dated as
of December 17, 1993 (incorporated by reference to Exhibit 10.12 to Post Effective Amendment No. 6
to Form S-2 Registration Statement of the Registrant filed on December 15, 1994, File No. 33-38152).
10.16 Agreement Regarding Common Stock by and between Michael A. Webb, SavMax Foods, Inc. and Grocers
Capital Company, dated as of December 17, 1993 (incorporated by reference to Exhibit 10.13 to Post
Effective Amendment No. 6 to Form S-2 Registration Statement of the Registrant filed on December 15,
1994, File No. 33-38152).
10.17 Commercial Lease-Net dated December 6, 1994 between TriNet Essential Facilities XII and the
Registrant (incorporated by reference to Exhibit 10.17 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended September 2, 1995 filed on December 1, 1995,
File No. 0-10815).
10.18 Purchase Agreement dated November 21, 1994 between the Registrant and TriNet Corporate Realty Trust,
Inc. (incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended September 2, 1995 filed on December 1, 1995,
File No. 0-10815).
10.19 Form of Employment Agreement between the Company and Alfred A. Plamann (incorporated by reference to
Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31,
1996 filed on November 5, 1996, File No. 0-10815).
10.20 Severance Agreement between the Company and Daniel T. Bane
10.21 Severance Agreement between the Company and Charles J. Pilliter
10.22 Form of Indemnification Agreement between the Company and each Director and Officer (incorporated by
reference to Exhibit A to the Registrant's Proxy Statement dated February 24, 1997 filed on February
24, 1997, File No. 0-10815).
10.23 Annual Incentive Plan for Chief Executive Officer
10.24 Annual Incentive Plan for Senior Management.
10.25 Agreement to Sell and Purchase Real Property and Escrow Instructions, dated September 12, 1997
between the Registrant and Smart & Final Stores Corporation
21 Subsidiaries of the Registrant.
27. Financial Data Schedule.
</TABLE>
(d)Financial Statement Schedules
All required schedule information is presented in the financial statements
or notes thereto. Other schedule information is either not applicable or
not material.
49
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CERTIFIED GROCERS OF CALIFORNIA,
LTD.
/s/ Alfred A. Plamann
By __________________________________
Alfred A. Plamann
President and
Chief Executive Officer
/s/ Daniel T. Bane
By __________________________________
Daniel T. Bane
Senior Vice President -- Finance &
Administration and
Chief Financial Officer
/s/ Randall G. Scoville
By __________________________________
Randall G. Scoville
Corporate Controller
Date: November 24, 1997
50
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Louis A. Amen Director November 24, 1997
____________________________________
Louis A. Amen
(Chairman of the Board)
/s/ Jay McCormack Director November 24, 1997
____________________________________
Jay McCormack
(1st Vice Chairman)
/s/ Mark Kidd Director November 24, 1997
____________________________________
Mark Kidd
(2nd Vice Chairman)
/s/ John Berberian Director November 24, 1997
____________________________________
John Berberian
/s/ Michael Bonfante Director November 24, 1997
____________________________________
Michael Bonfante
/s/ Harley J. DeLano Director November 24, 1997
____________________________________
Harley J. DeLano
/s/ John T. Fujieki Director November 24, 1997
____________________________________
John T. Fujieki
/s/ Roger K. Hughes Director November 24, 1997
____________________________________
Roger K. Hughes
/s/ Darioush Khaledi Director November 24, 1997
____________________________________
Darioush Khaledi
/s/ Willard R. "Bill" MacAloney Director November 24, 1997
____________________________________
Willard R. "Bill" MacAloney
/s/ Morrie Notrica Director November 24, 1997
____________________________________
Morrie Notrica
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Michael A. Provenzano Director November 24, 1997
____________________________________
Michael A. Provenzano
/s/ Gail Gerrard Rice Director November 24, 1997
____________________________________
Gail Gerrard Rice
/s/ James R. Stump Director November 24, 1997
____________________________________
James R. Stump
/s/ Kenneth Young Director November 24, 1997
____________________________________
Kenneth Young
</TABLE>
52
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
------- ----------- ----------
<C> <S> <C>
3.1 Articles of Incorporation of the Registrant (as amended
through May 5, 1997).
3.2 Bylaws of the Registrant (as amended through June 21,
1994) (incorporated by reference to Exhibit 4.2 to Post
Effective Amendment No. 6 to Form S-2 Registration
Statement of the Registrant filed on December 15, 1994,
File No. 33-38152).
4.1 Retail Grocer Application and Agreement for Continuing
Service Affiliation With Certified Grocers of
California, LTD. And Pledge Agreement (incorporated by
reference to Exhibit 4.7 to Amendment No. 2 to Form S-1
Registration Statement of the Registrant filed on
December 31, 1981, File No. 2-70069).
4.2 Retail Grocer Application And Agreement For Service
Affiliation With And The Purchase Of Shares Of Certified
Grocers Of California, LTD. And Pledge Agreement
(incorporated by reference to Exhibit 4.2 to Post
Effective Amendment No. 7 to Form S-2 Registration
Statement of the Registrant filed on December 13, 1989,
File No. 33-19284).
4.3 Agreement respecting directors' shares (incorporated by
reference to Exhibit 4.9 to Amendment No. 2 to Form S-1
Registration Statement of the Registrant filed on
December 31, 1981, File No. 2-70069).
4.4 Subordination Agreement (Existing Member-Patron)
(incorporated by reference to Exhibit 4.4 to Post-
Effective Amendment No. 4 to Form S-2 Registration
Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.5 Subordination Agreement (Existing Associate Patron)
(incorporated by reference to Exhibit 4.5 to Post-
Effective Amendment No. 4 to Form S-2 Registration
Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.6 Subordination Agreement (New Member-Patron)
(incorporated by reference to Exhibit 4.6 to Post-
Effective Amendment No. 4 to Form S-2 Registration
Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.7 Subordination Agreement (New Associate Patron)
(incorporated by reference to Exhibit 4.7 to Post-
Effective Amendment No. 4 to Form S-2 Registration
Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.8 Form of Class A Share Certificate (incorporated by
reference to Exhibit 4.5 to Post Effective Amendment No.
6 to Form S-2 Registration Statement of the Registrant
filed on December 15, 1994, File No. 33-38152).
4.9 Form of Class B Share Certificate (incorporated by
reference to Exhibit 4.6 to Post Effective Amendment No.
6 to Form S-2 Registration Statement of the Registrant
filed on December 15, 1994, File No. 33-38152).
4.10.1 Articles FIFTH and SIXTH of the Registrant's Articles of
Incorporation (See Exhibit 3.1).
4.10.2 Article I, Section 5, and Article VII of the
Registrant's Bylaws (See Exhibit 3.2).
4.11 Indenture between the Registrant and First Interstate
Bank of California, as Trustee, relating to $3,000,000
Subordinated Patronage Dividend Certificates Due
December 15, 2000 (incorporated by reference to Exhibit
4.3 to Amendment No. 1 to Form S-2 Registration
Statement of the Registrant filed on September 27, 1993,
File No. 33-68288).
4.12 Indenture between the Registrant and First Interstate
Bank of California, as Trustee, relating to $5,000,000
Subordinated Patronage Dividend Certificates due
December 15, 2001 (incorporated by reference to Exhibit
4.3 to Form S-2 Registration Statement of the Registrant
filed on October 12, 1994, File No. 33-56005).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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4.13 Indenture between the Registrant and First Interstate
Bank of California, as Trustee, relating to $3,000,000
Subordinated Patronage Dividend Certificates due
December 15, 2002 (incorporated by reference to Exhibit
4.3 to Form S-2 Registration Statement of the Registrant
filed on October 13, 1995, File No. 33-63383).
4.14 $135,000,000 Amended and Restated Loan and Security
Agreement dated as of March 17, 1994 between Certified
Grocers of California, Ltd., Grocers General Merchandise
Company, Grocers Specialty Company, and BT Commercial
Corporation, as agent, Union Bank, as co-agent, and
First National Bank of Boston as co-agent; and Amendment
Number One dated as of November 1, 1994 (incorporated by
reference to Exhibit 4.13 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended September
3, 1994, File No. 0-10815).
4.14.1 Amendment Number Two to Amended and Restated Loan and
Security Agreement date as of December 3, 1994, between
Certified Grocers of California, Ltd., Grocers General
Merchandise Company, Grocers Specialty Company, and BT
Commercial Corporation, as agent, Union Bank, as co-
agent, and First National Bank of Boston, as co-agent
(incorporated by reference to Exhibit 4.14.1 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended September 2, 1995, File No. 0-10815).
4.14.2 Amendment Number Three to Amended and Restated Loan and
Security Agreement dated as of May 24, 1996, between
Certified Grocers of California, Ltd., Grocers General
Merchandise Company, Grocers Specialty Company, and BT
Commercial Corporation, as agent, Union Bank, as co-
agent, and First National Bank of Boston, as co-agent
(incorporated by reference to Exhibit 4.14.2 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended August 31, 1996, File No. 0-10815).
4.14.3 Amendment Number Four to Amended and Restated Loan and
Security Agreement dated as of June 27, 1996, between
Certified Grocers of California, Ltd., Grocers General
Merchandise Company, Grocers Specialty Company, and BT
Commercial Corporation, as agent, Union Bank, as co-
agent, and First National Bank of Boston, as co-agent
(incorporated by reference to Exhibit 4.14.3 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended August 31, 1996, File No. 0-10815).
4.14.4 Amendment Number Five to Amended and Restated Loan and
Security Agreement dated as of September 30, 1996,
between Certified Grocers of California, Ltd., Grocers
General Merchandise Company, Grocers Specialty Company,
and BT Commercial Corporation, as agent, Union Bank, as
co-agent, and First National Bank of Boston, as co-agent
(incorporated by reference to Exhibit 4.14.4 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended August 31, 1996, File No. 0-10815).
4.14.5 Amendment Number Six to Amended and Restated Loan and
Security Agreement dated as of April 7, 1997, between
Certified Grocers of California, Ltd., Grocers General
Merchandise Company, Grocers Specialty Company, and BT
Commercial Corporation, as agent, Union Bank, as co-
agent, and First National Bank of Boston, as co-agent.
4.14.6 Amendment Number Seven to Amended and Restated Loan and
Security Agreement dated as of October 21, 1997, between
Certified Grocers of California, Ltd., Grocers General
Merchandise Company, Grocers Specialty Company, and BT
Commercial Corporation, as agent, Union Bank, as co-
agent, and First National Bank of Boston, as co-agent.
4.15 Subordinated Note Agreement dated March 27, 1989 between
Certified Grocers of California, Ltd. and Aetna Life
Insurance Company regarding $35,000,000 10.80%
subordinated notes due April 1, 1999; and letter
amendment dated January 30, 1992 (incorporated by
reference to Exhibit 4.15 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended August 28,
1993 filed on November 26, 1993, File No. 0-10815).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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4.15.1 Amendment to Subordinated Note Agreement dated as of
March 17, 1994 between Certified Grocers of California,
Ltd. and Aetna Life Insurance Company (incorporated by
reference to Exhibit 4.15.1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended September
3, 1994, File No. 0-10815).
4.16 Note Purchase Agreement dated January 15, 1990 between
Certified Grocers of California, Ltd. and Massachusetts
Mutual Life Insurance Company regarding $20,000,000
9.55% Senior Notes due January 15, 2005; and Amendment
Dated January 30, 1991, First Amendment dated September
4, 1991, and Amendment No. 2 dated October 19, 1993
(incorporated by reference to Exhibit 4.16 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended August 28, 1993 filed on November 26, 1993,
File No. 0-10815).
4.16.1 Amendment No. 3 to Note Purchase Agreement dated as of
March 17, 1994, and Amendment No. 4 to Note Purchase
Agreement dated as of September 29, 1994, each between
Certified Grocers of California, Ltd. and Massachusetts
Mutual Life Insurance Company (incorporated by reference
to Exhibit 4.16.1 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended September 3, 1994,
File No. 0-10815).
4.17 $18,700,000 Loan Agreement dated August 23, 1979 between
Certified Grocers of California, Ltd., First Interstate
Bank of California, as Trustee, and the other Lenders
named therein; Secured Promissory Notes dated August 23,
1979; Deed of Trust and Assignment of Rents dated August
23, 1979; and, Assignment of Rents and Leases dated
August 23, 1979 (incorporated by reference to Exhibit
4.17 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended August 28, 1993 filed on November
26, 1993, File No. 0-10815).
4.18 Loan Purchase and Service Agreement Dated as of August
29, 1996 between Grocers Capital Company and National
Consumer Cooperative Bank (incorporated by reference to
Exhibit 4.18 to the Registrant's Annual Report on Form
10-K for the fiscal year ended August 31, 1996 filed on
November 5, 1996, File No. 0-10815).
4.19 $10,000,000 Credit Agreement and Security Agreement each
dated as of September 20, 1996 between Grocers Capital
Company and National Cooperative Bank as agent
(incorporated by reference to Exhibit 4.19 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended August 31, 1996 filed on November 5, 1996,
File No. 0-10815).
10.1 Comprehensive Amendment to Retirement Plan for Employees
of Certified Grocers of California, Ltd. dated as of
July 27, 1995.
10.3 Comprehensive Amendment to Certified Grocers of
California, Ltd. Employees' Sheltered Savings Plan dated
as of July 27, 1995.
10.4 Certified Grocers of California, Ltd., Executive Salary
Protection Plan II ("ESPP II"), Master Plan Document,
effective January 4, 1995 (incorporated by reference to
Exhibit 10.4 to the Registrant's Annual Report on Form
10-K for the fiscal year ended September 2, 1995 filed
on December 1, 1995, File No. 0-10815).
10.5 Master Trust Agreement For Certified Grocers of
California, Ltd. Executive Salary Protection Plan II,
dated as of April 28, 1995 (incorporated by reference to
Exhibit 10.5 to the Registrant's Annual Report on Form
10-K for the fiscal year ended September 2, 1995 filed
on December 1, 1995, File No. 0-10815).
10.6 Certified Grocers of California, Ltd. Executive
Insurance Plan Split dollar Agreement and Schedule of
Executive Officers party thereto (incorporated by
reference to Exhibit 10.6 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended September
2, 1995 filed on December 1, 1995, File No. 0-10815).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
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10.7 Comprehensive Amendment to Certified Grocers of
California, Ltd. Employees' Excess Benefit Plan dated
as of December 5, 1995.
10.8 Comprehensive Amendment to Certified Grocers of
California, Ltd. Employees' Supplemental Deferred
Compensation Plan dated as of December 5, 1995.
10.9 Comprehensive Amendment to Certified Grocers of
California, Ltd. Employee Savings Plan dated as of
August 18, 1995.
10.10 Joint Venture Agreement of Golden Alliance
Distribution, dated as of April 8, 1992, between Food 4
Less GM, Inc. and Grocers General Merchandise Company
(incorporated by reference to Exhibit 10.7 to Form S-2
Registration Statement of the Registrant filed on
September 2, 1993. File No. 33-68288.
10.10.1 Agreement Regarding Termination and Dissolution of
Joint Venture Agreement of Golden Alliance
Distribution, dated as of August 15, 1997, between Food
4 Less GM, Inc. and Grocers General Merchandise Company
10.11 Lease, dated as of December 23, 1986, between Cercor
Associates and Grocers Specialty Company (incorporated
by reference to Exhibit 10.8 to Form S-2 Registration
Statement of the Registrant filed on September 2, 1993.
File No. 33-68288).
10.12 Expansion Agreement, dated as of May 1, 1991, and
Industrial Lease, dated as of May 1, 1991, between
Dermody Properties and the Registrant (incorporated by
reference to Exhibit 10.9 to Form S-2 Registration
Statement of the Registrant filed on September 2, 1993.
File No. 33-68288).
10.12.1 Lease Amendment, dated June 20, 1991, between Dermody
Properties and the Registrant (incorporated by
reference to Exhibit 10.9.1 to Form S-2 Registration
Statement of the Registrant filed on September 2, 1993.
File No. 33-68288).
10.12.2 Lease Amendment, dated October 18, 1991, between
Dermody Properties and the Registrant (incorporated by
reference to Exhibit 10.9.2 to Form S-2 Registration
Statement of the Registrant filed on September 2, 1993.
File No. 33-68288).
10.13 Preferred Stock Purchase Agreement by and between Food-
4-Less of Modesto, Inc. and Grocers Capital Company,
dated as of July 1, 1992 (incorporated by reference to
Exhibit 10.10 to the Registrant's Annual Report on Form
10-K for the fiscal year ended August 28, 1993 filed on
November 26, 1993, File No. 0-10815).
10.14 Preferred Stock Purchase Agreement by and between
SavMax Foods, Inc. and Grocers Capital Company, dated
as of December 17, 1993 (incorporated by reference to
Exhibit 10.11 to Post Effective Amendment No. 6 to Form
S-2 Registration Statement of the Registrant filed on
December 15, 1994, File No. 33-38152).
10.14.1 Forbearance and Debt Restructure Agreement, dated May
15, 1997, between SavMax Foods, Inc., Michael A. Webb,
Grocers Capital Company, and the Registrant
10.15 Common Stock Purchase Agreement by and between Michael
A. Webb and Grocers Capital Company, dated as of
December 17, 1993 (incorporated by reference to
Exhibit 10.12 to Post Effective Amendment No. 6 to Form
S-2 Registration Statement of the Registrant filed on
December 15, 1994, File No. 33-38152).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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NUMBER DESCRIPTION PAGE NO.
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10.16 Agreement Regarding Common Stock by and between Michael
A. Webb, SavMax Foods, Inc. and Grocers Capital Company,
dated as of December 17, 1993 (incorporated by reference
to Exhibit 10.13 to Post Effective Amendment No. 6 to
Form S-2 Registration Statement of the Registrant filed
on December 15, 1994, File No. 33-38152).
10.17 Commercial Lease-Net dated December 6, 1994 between
TriNet Essential Facilities XII and the Registrant
(incorporated by reference to Exhibit 10.17 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended September 2, 1995 filed on December 1, 1995,
File No. 0-10815).
10.18 Purchase Agreement dated November 21, 1994 between the
Registrant and TriNet Corporate Realty Trust, Inc.
(incorporated by reference to Exhibit 10.18 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended September 2, 1995 filed on December 1, 1995,
File No. 0-10815).
10.19 Form of Employment Agreement between the Company and
Alfred A. Plamann (incorporated by reference to Exhibit
10.19 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended August 31, 1996 filed on November
5, 1996, File No. 0-10815).
10.20 Severance Agreement between the Company and Daniel T.
Bane
10.21 Severance Agreement between the Company and Charles J.
Pilliter
10.22 Form of Indemnification Agreement between the Company and
each Director and Officer (incorporated by reference to
Exhibit A to the Registrant's Proxy Statement dated
February 24, 1997 filed on February 24, 1997, File No. 0-
10815).
10.23 Annual Incentive Plan for Chief Executive Officer
10.24 Annual Incentive Plan for Senior Management.
10.25 Agreement to Sell and Purchase Real Property and Escrow
Instructions, dated September 12, 1997 between the
Registrant and Smart & Final Stores Corporation
21 Subsidiaries of the Registrant.
27. Financial Data Schedule.
</TABLE>
(d)Financial Statement Schedules
All required schedule information is presented in the financial statements
or notes thereto. Other schedule information is either not applicable or
not material.
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
CERTIFIED GROCERS OF CALIFORNIA, LTD.
(as amended through May 5, 1997)
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, Geo. W. Burch, E.
L. Cables, H. E. Coburn, W. H. Dick, Auburn G. Fox, C. W. Gard, E. F. Kidder,
Wm. E. Lind, John McMunn, J. V. Pugh, David P. Reid, Sam Zeidler, D. L. Strine,
T. H. Williams, and M. Woolf, a majority of whom are citizens and residents of
the State of California, have this day voluntarily associated ourselves together
for the purpose of forming a corporation under the laws of the State of
California.
AND WE HEREBY CERTIFY:
FIRST: That the name of the corporation shall be the "Certified Grocers of
California, Ltd."
SECOND: That the purposes for which it is formed are as follows:
(a) For the purpose of, and to facilitate, collective buying, in
quantities, of goods, wares, and merchandise at the lowest possible price with
the intent and power to resell the same to its stockholders, members, and to
other persons, for the purpose of manufacturing hereinafter named commodities to
resell the same.
(b) Also, for the purpose of carrying on and conducting the business of
either a wholesale or retail grocer and generally to engage in the buying and
the selling at wholesale or retail prices, of goods, wares, merchandise,
groceries, fresh meats, cured meats, provisions, food
<PAGE>
stuffs, tobacco in any form, cereals, hay, grain, products of the soil, canned
goods of all varieties, and, only to the extent allowed by United States of
America, State and City laws and ordinances, to buy, sell, or store either
nonintoxicating or intoxicating beverages.
(c) Also, for the purpose of enjoying the power to own, lease, possess,
use, occupy, and maintain grocery stores, warehouses, terminal facilities, real
property, or chattels for the delivery, reception, storage, or shipment of the
above described commodities, as well as for the sale thereof either in wholesale
or retail quantities either within the State of California, or in any other
state, or within any territory.
(d) Also, for the purpose of collective, or corporate, advertising for the
purpose of furthering the business of its stockholders in the retail and
wholesale grocery business.
(e) Also, for the purpose of enjoying the power to own, hold, possess, and
deal in the stocks, bonds, securities, and other evidences of indebtedness of
other corporations, or trusts, or associations engaged in the same or similar
line of business as this corporation either within the State of California, or
within any other state, or within any territory.
(f) Also, for the purpose of enjoying the power to create lawful
indebtedness, in the proper form or forms, which may become necessary to the
welfare of the corporation.
(g) Also, for the purpose of enjoying the benefits of those general powers
of corporations enumerated in section #354 of the Civil Code of California which
section is hereby incorporated herein by reference as though it were set out
herein in full.
(h) Also, for the purpose of acquiring, disposing of, manufacturing,
owning, investing in, holding, encumbering, using, leasing or otherwise dealing
in or with any property, real or personal, tangible or intangible, of any kind
whatever.
-2-
<PAGE>
(i) Also, to engage in any one or more businesses or transactions which
the Board of Directors of this corporation may from time to time authorize or
approve, whether related or unrelated to those described in clauses (a) through
(h) of this Article.
(j) Also, to act as principal, agent, joint venturer, partner or in any
other capacity which may be authorized or approved by the Board of Directors of
this corporation.
(k) To do business anywhere in the world.
(l) To have and to exercise all the rights and powers that are now or may
hereafter be granted to a corporation by law.
The above purpose clauses are not limited by reference to or inference from
one another. Each clause is to be construed as a separate statement conferring
independent purposes and powers on the corporation.
THIRD: That the county in the State of California where the principal
office for the transaction of business of the corporation is to be located is
the County of Los Angeles.
FOURTH: That the corporate existence of this corporation shall continue
perpetually unless otherwise expressly provided by law.
FIFTH: The number of directors of this corporation shall be fifteen (15).
The holders of the Class A Shares, voting as a class, shall be entitled to elect
twelve (12) of the fifteen (15) directors. The holders of the Class B Shares,
voting as a class, shall be entitled to elect three (3) of the fifteen (15)
directors. If there are no Class B Shares issued and outstanding, then the
holders of the Class A Shares shall be entitled to elect all fifteen (15)
directors.
SIXTH: (a) This corporation is authorized to issue three classes of
shares, all without par value, to be designated "Class A Shares," "Class B
Shares," and "Class C Shares,"
-3-
<PAGE>
respectively. The total number of Class A Shares which this corporation is
authorized to issue is five hundred thousand (500,000); the total number of
Class B Shares which this corporation is authorized to issue is two million
(2,000,000); the total number of Class C Shares which this corporation is
authorized to issue is nineteen 19).
(b) The rights, preferences, privileges and restrictions granted to or
imposed upon the Class A Shares are as follows:
(1) The Class A Shares of this corporation shall be issued only to,
and may be held only by, "member-patrons" of this corporation as that term
is defined in the bylaws of this corporation.
(2) It being the intent and purpose of this corporation to limit
ownership of its Class A Shares to qualified and active member-patrons as
defined in the bylaws, the Class A Shares may not be transferred except to
the corporation or except with the consent of the corporation to a
transferee approved by the corporation, in accordance with and subject to
the bylaws of the corporation.
(3) Except as otherwise expressly provided in these Articles of
Incorporation or expressly required by the California General Corporation
Law, the holders of the Class A Shares shall have exclusive voting rights
and powers, including the exclusive right to notice of shareholders'
meetings.
(c) The rights, preferences, privileges and restrictions granted to or
imposed upon the Class B Shares are as follows:
-4-
<PAGE>
(1) Except as otherwise expressly provided by these Articles of
Incorporation or expressly required by the California General Corporation Law,
the holders of Class B Shares shall have no voting rights.
(2) The corporation, at the option of the Board of Directors, may at any
time or from time to time redeem any outstanding Class B Shares that:
(A) Are held by other than a qualified and active member-patron of
this corporation as that term is defined in the bylaws; or
(B) Have been declared by the Board of Directors to be "Excess Class
B Shares" as that term is defined in the bylaws.
Such redemption shall be accomplished by the corporation's giving a notice
of redemption, as hereafter described, and by paying the redemption price for
such shares which shall be the greater of:
(i) One cent ($0.01) per share, or
(ii) An amount which is calculated by (x) multiplying the number
of shares to be redeemed by the book value per share as of the close
of the corporation's fiscal year last ended prior to such purchase, as
conclusively determined by the board of directors, and (y) subtracting
from the amount computed in clause (x) the amounts of any and all
indebtedness that may be owing the corporation or any of its
subsidiaries by either the holder or the member-patron from whom the
holder has acquired said shares if such acquisition was without the
written consent of the corporation.
-5-
<PAGE>
The notice of redemption called for above shall be given, in writing, to
each holder(s) of record, or his designate, of the Class B Shares to be redeemed
by personal delivery or mail, postage prepaid, to the last-known address of the
holder as shown on the records of the corporation.
On or before the date fixed for such redemption, each holder, or his
designate if in possession of the certificates, of any Class B Shares called for
redemption shall surrender the certificate or certificates for such share or
shares to the corporation at the place designated in the notice and shall
thereupon be entitled to receive payment of the redemption price. If such notice
of redemption shall have been duly given and if on the date fixed for
redemption, funds necessary for the redemption shall be available therefor, then
all rights with respect to such Class B Share or Shares so called for
redemption, whether or not surrendered, shall terminate except for the rights of
the holders to receive the redemption price, without interest, upon surrender of
the certificate or certificates therefor.
Without prejudice to the foregoing, if, on, after, or prior to any date
fixed for any such redemption of any Class B Share or Shares this corporation
deposits with any bank or trust company in the City of Los Angeles, State of
California, as a trust fund, a sum sufficient to redeem on the date fixed for
redemption thereof, the Class B Share or Shares called for redemption, with
irrevocable instructions and authority to the bank or trust company to give the
notice of redemption thereof if such notice shall not previously have been given
by this corporation, or to complete the giving of such notice if theretofore
commenced, and to pay, on and after the date fixed for redemption or prior
thereto, the redemption price of the Class B Share or Shares to their respective
holders upon the surrender of their share certificates, then from and
-6-
<PAGE>
after the date of the deposit (although prior to the date fixed for redemption),
the Class B Share or Shares so called shall be deemed to be redeemed. The
deposit shall be deemed to constitute full payment of the Class B Share or
Shares to the holders thereof and from and after the date of the deposit such
Class B Share or Shares shall be deemed to be no longer outstanding, and the
holders thereof shall cease to be shareholders with respect to such Class B
Share or Shares, and shall have no rights with respect thereto except the right
to receive from the bank or trust company payment of the redemption price of
such Class B Share or Shares without interest, upon the surrender of their
certificates therefor.
(d) The rights, preferences, privileges and restrictions granted to or
imposed upon the Class C Shares are as follows:
(1) Except as otherwise expressly provided by these Articles of
Incorporation or expressly required by the California General Corporation
Law, the holders of Class C Shares shall have no voting rights.
(2) In the event of a voluntary or involuntary liquidation,
dissolution or winding up of this corporation, the holders of Class C
Shares shall not be entitled to receive, with respect to such shares, more
than Ten Dollars ($10.00) per share.
(e) Upon amendment of this ARTICLE SIXTH to read as hereinabove set forth,
each share of presently authorized "Common" Stock is, and shall simultaneously
with the effectiveness of this amendment, be converted into 100 Class A Shares;
each share of presently authorized "Class B" Stock is, and shall simultaneously
with the effectiveness of this amendment, be converted into one Class C Share.
-7-
<PAGE>
SEVENTH: That the amount of said Capital Stock which has been actually
subscribed is Six Thousand Two Hundred Dollars ($6,200.00) and the following are
the names of the persons by whom the same has been subscribed, to wit:
<TABLE>
<CAPTION>
Names of Subscribers Shares Amount
- -------------------- ------ -------
<S> <C> <C>
Wm. E. Lind Ten $200.00
C. W. Gard Ten $200.00
H. E. Coburn Ten $200.00
J. V. Pugh Ten $200.00
Reid and Stermer
by and for D. P. Reid Ten $200.00
Woolf & Woolf by and for
M. Woolf Ten $200.00
Auburn G. Fox Ten $200.00
J. L. McMunn Ten $200.00
H. N. Pease Ten $200.00
Joseph Jaeger Ten $200.00
Geo. W. Burch Ten $200.00
W. H. Dick Ten $200.00
C. O. Whitford Ten $200.00
E. L. Cables Ten $200.00
Baldwin Pk Dept. Store
by and for N. L. Foto Ten $200.00
Carl A. Naegele Ten $200.00
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Names of Subscribers Shares Amount
- -------------------- ------ -------
<S> <C> <C>
T. H. Williams Ten $200.00
F. E. Teter Ten $200.00
Cornelius Smith Ten $200.00
G. H. Fort Ten $200.00
Strine Bro. Co., by and
for D. L. Strine Ten $200.00
F. P. McConnelley Ten $200.00
Cooper & Son by and
for H. S. Cooper Ten $200.00
W. W. Mahr Ten $200.00
Slick Bro. by and
for F. A. Slick Ten $200.00
Oneonta Cash Groc. by and
for R. Aldridge Ten $200.00
J. A. Seargeant Ten $200.00
Kidder Bro. by and
for E. F. Kidder Ten $200.00
Cooley Bro. by and
for R. E. Cooley Ten $200.00
Sam Zeidler Ten $200.00
Garten & Rengler by and
for Mr. Garten Ten $200.00
</TABLE>
-9-
<PAGE>
EIGHTH: (a) The liability of the directors of the corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
(b) The corporation is authorized to indemnify agents (as defined in
Section 317 of the Corporations Code) of the corporation to the fullest extent
permissible under California law.
-10-
<PAGE>
EXHIBIT 4.14.5
AMENDMENT NUMBER SIX
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER SIX TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (this "Amendment"), dated as of April 7, 1997, is entered into by and
among CERTIFIED GROCERS OF CALIFORNIA, LTD., a California corporation
("CerGro"), GROCERS GENERAL MERCHANDISE COMPANY, a California corporation
("GGMC"), and GROCERS SPECIALTY COMPANY, a California corporation ("GSC")
(Cergro, GGMC, and GSC are jointly and severally referred to herein as
"Borrower"), on the one hand, and the financial institutions which are
signatories hereto (hereinafter collectively referred to as the "Lenders" and
individually as a "Lender"), BT COMMERCIAL CORPORATION, a Delaware corporation,
as agent ("Agent"), UNION BANK OF CALIFORNIA, N.A., a national banking
association, as co-agent, and THE FIRST NATIONAL BANK OF BOSTON, a national
banking association, as co-agent, on the other hand, in light of the following
facts:
RECITALS
A. The parties hereto have previously entered into that certain Amended
and Restated Loan and Security Agreement, dated as of March 17, 1994, as amended
by that certain Amendment Number One to Amended and Restated Loan and Security
Agreement, dated as of November 1, 1994, as further amended by that certain
Amendment Number Two to Amended and Restated Loan and Security Agreement, dated
as of December 3, 1994, as further amended by that certain Amendment Number
Three to Amended and Restated Loan and Security Agreement, which is undated but
was executed in May of 1996, as further amended by that certain Amendment Number
Four to Amended and Restated Loan and Security Agreement, dated as of June 27,
1996, and as further amended by that certain Amendment Number Five to Amended
and Restated Loan and Security Agreement, dated as of September 30, 1996
(collectively, the "Agreement").
B. Borrower's subsidiary, Grocers Capital Company, currently owns
Sixty-Three Thousand (63,000) shares of preferred stock of Sav Max Foods, Inc.,
a California corporation ("Sav Max"), and Two Hundred Seventy-Five Thousand
(275,000) shares of common stock of Sav Max constituting ten percent (10%) of
the issued and outstanding common stock of Sav Max.
C. Borrower has requested that Lenders agree to allow Borrower to purchase
approximately Four Million Dollars ($4,000,000) of Sav Max's obligations to Well
Fargo Bank, National Association, as well as, to permit Borrower to convert
certain past due accounts receivable owned by Save Max to Borrower into a note
with an original principal amount of up to Four Million Dollars ($4,000,000).
<PAGE>
D. Lenders are agreeing to permit the foregoing purchase and
conversion, subject and pursuant to the terms of this Amendment.
NOW THEREFORE, the parties hereto agree as follows:
A G R E E M E N T
1. Defined Terms. All initially capitalized terms used but not
-------------
defined herein shall have the meanings assigned to such terms in the Agreement.
2. Amendment to Section 1.1. Section 1.1 of the Agreement is hereby
------------------------
amended by adding the following definitions thereto in alphabetical order:
"`Sav Max' means Sav Max Foods, Inc., a California corporation."
"`Sav Max Loan Purchase Agreement' means that certain Loan
Purchase Agreement, dated as of April __, 1997, by and between CerGro and Wells
Fargo, respecting the obligations of Sav Max under the Wells Fargo Loan
Agreement."
"`Wells Fargo' means Wells Fargo Bank, National Association, a
national banking association."
"`Wells Fargo Loan Agreement' means that certain Credit
Agreement, dated as of February 5, 1996, by and between Sav Max and Wells Fargo,
as amended, and as the same may be amended, replaced, supplemented or otherwise
modified from time to time."
3. Amendment to Section 6.21. Section 6.21 of the Agreement is hereby
-------------------------
deleted in its entirety and replaced with the following:
"6.21 Use of Proceeds. Borrower shall use the proceeds of the Loans
---------------
made hereunder solely: (a) to replace and refinance the Prior Agreement, (b) to
prepay the Existing Subordinated Debt in accordance with Section 6.3(g), (c) to
purchase the obligations of Sav Max to Wells Fargo under the Wells Fargo Loan
Agreement pursuant to the Sav Max Loan Purchase Agreement, and (d) for general
working capital."
4. Amendment to Section 6.25. Section 6.25 of the Agreement is hereby
-------------------------
amended by adding the following subsection (l) at the end of such Section:
"(l) Borrower may acquire the Debt of Sav Max pursuant to the terms of
the Sav Max Loan Purchase Agreement."
<PAGE>
5. Amendment to Section 6.26. Section 6.26 of the Agreement is amended
-------------------------
to delete subsection (a) in its entirety and to replace such subsection with the
following:
"(a) Borrower may perform and maintain, but not amend (except as
required in connection with the closing of the GCC Credit Agreement) the GCC
Operating Agreement and GCC Investment Agreement. Borrower also may convert, up
to Four Million Dollars ($4,000,000) of past due Accounts owed to Borrower by
Sav Max into a promissory note, payable to the order of Borrower, in an original
principal amount not to exceed Four Million Dollars ($4,000,000), and in form
and substance satisfactory to Agent."
6. Amendment to Section 6.27. Section 6.27 of the Agreement is hereby
-------------------------
amended by adding the following subsection (e) to the end of such Section:
"(e) Accommodation Obligations consisting of the Sav Max Loan Purchase
Agreement."
7. Conditions Precedent. The effectiveness of this Amendment is subject
--------------------
to and conditioned upon the fulfillment of each and all of the following
conditions precedent:
(a) Agent shall have received this Amendment duly executed by
Borrower and the Lenders.
(b) Agent shall have received a consent and affirmation duly executed
by each of CerGro, GGMC, and GSC indicating the consent by each such guarantor
to the execution and delivery by Borrower of this Amendment and the
affirmation of the continued effectiveness of each such guarantor's guaranty of
the Obligations.
(c) Agent shall have received payment of all Agent's Expenses
incurred by Agent in connection with the negotiation, preparation and execution
of this Amendment.
(d) Agent shall have received an copy of the Sav Max Loan Purchase
Agreement substantially in the form to be executed by Borrower, and in form and
substance satisfactory to Agent.
8. Counterparts; Effectiveness. This Amendment may be executed in any
---------------------------
number of counterparts and by different parties on separate counterparts, each
of which when so executed and delivered shall be deemed to be an original. All
such counterparts, taken together, shall constitute but one and the same
Amendment. This Amendment shall become effective upon the fulfillment of all of
the conditions set forth in Section 5 hereof.
<PAGE>
9. Reaffirmation of the Agreement. Except as specifically amended by
------------------------------
this Amendment, the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be executed
at Los Angeles, California as of the date first hereinabove written.
CERTIFIED GROCERS OF CALIFORNIA, LTD.,
a California corporation
By /s/ DANIEL BANE
---------------------------------------
Title: Senior Vice President, Finance &
Admin. and Chief Financial Officer
----------------------------------
GROCERS GENERAL MERCHANDISE COMPANY,
a California corporation
By /s/ DANIEL BANE
---------------------------------------
Title: Vice President and
Chief Financial Officer
----------------------------------
GROCERS SPECIALTY COMPANY,
a California corporation
By /s/ DANIEL BANE
---------------------------------------
Title: Vice President and
Chief Financial Officer
----------------------------------
BT COMMERCIAL CORPORATION,
a Delaware corporation,
individually and as Agent
By /s/ SIGNATURE ILLEGIBLE
---------------------------------------
Title: SVP
----------------------------------
4
<PAGE>
THE FIRST NATIONAL BANK OF
BOSTON, a national banking association,
individually and as Co-Agent
By /s/ SIGNATURE ILLEGIBLE
----------------------------------
Title: VICE PRESIDENT
----------------------------
UNION BANK OF CALIFORNIA, N.A.,
individually and as Co-Agent
By /s/ SIGNATURE ILLEGIBLE
----------------------------------
Title: VICE PRESIDENT
----------------------------
DG BANK DEUTSCHE
GENOSSENSCHATFTSBANK,
a German bank acting through
its New York Branch
By /s/ S. Gaeusslen
----------------------------------
Title: S. Gaeusslen AT
----------------------------
By /s/ Wolfgang Bollmann
----------------------------------
WOLFGANG BOLLMANN
Title: Senior Vice President
----------------------------
5
<PAGE>
DRESDNER BANK, AG,
New York branch and
Grand Cayman Branch, as a bank
By /s/ John W. Sweeney
----------------------------------
JOHN W. SWEENEY
Title: Assistant Vice President
----------------------------
By /s/ Christopher E. Sarisky
----------------------------------
CHRISTOPHER E. SARISKY
Title: Assistant Treasurer
----------------------------
NATIONAL BANK OF CANADA,
a Canadian Chrtered Bank,
New York Branch
By /s/ SIGNATURE ILLEGIBLE
----------------------------------
Title: Vice President
----------------------------
By /s/ SIGNATURE ILLEGIBLE
----------------------------------
Title: VICE PRESIDENT
----------------------------
SANWA BANK CALIFORNIA,
a California banking corporation
By__________________________________
Title:____________________________
6
<PAGE>
SANWA BUSINESS CREDIT
CORPORATION, a Delaware corporation
By__________________________________
Title:____________________________
THE SAKURA BANK, LIMITED,
a Japanese bank acting through
its Los Angeles agency
By__________________________________
Title:____________________________
By__________________________________
Title:____________________________
MANUFACTURERS BANK
By /s/ SIGNATURE ILLEGIBLE
----------------------------------
Title: Vice President
----------------------------
CITY NATIONAL BANK,
a national banking association
By /s/ Linda G. Ferrari
----------------------------------
LINDA G. FERRARI
Title: SENIOR VICE PRESIDENT
----------------------------
7
<PAGE>
CONSENT OF GUARANTORS
Each of the undersigned, as a guarantor of the obligations of
CERTIFIED GROCERS OF CALIFORNIA, LTD., a California corporation ("CerGro"),
GROCERS GENERAL MERCHANDISE COMPANY, a California corporation ("GGMC"), and
GROCERS SPECIALTY COMPANY, a California corporation ("GSC") (CerGro, GGMC and
GSC are collectively referred to herein as "Borrower"), arising out of that
certain Amended and Restated Loan and Security Agreement, dated as of March 17,
1994, as amended by that certain Amendment Number One to Amended and Restated
Loan and Security Agreement, dated as of November 1, 1994, as further amended by
that certain Amendment Number Two to Amended and Restated Loan and Security
Agreement, dated as of December 3, 1994, as further amended by that certain
Amendment Number Three to Amended and Restated Loan and Security Agreement,
which is undated but was executed in May of 1996, as further amended by that
certain Amendment Number Four to Amended and Restated Loan and Security
Agreement, dated as of June 27, 1996, and as further amended by that certain
Amendment Number Five to Loan and Security Agreement, dated as of September 30,
1996 (collectively, the "Agreement"), among BT Commercial Corporation, a
Delaware corporation, Union Bank of California, N.A., a national banking
association, The First National Bank of Boston, a national banking association
(collectively, "Agents"), and the other lenders party thereto (collectively,
"Lenders"), on the one hand, and Borrower, on the other hand, hereby
acknowledges receipt of a copy of that certain Amendment Number Six to Amended
and Restated Loan and Security Agreement, dated as of April 7, 1997, among
Agents, Lenders and Borrower, consents to the terms contained therein, and
agrees that the Continuing Guaranty executed by each of the undersigned shall
remain in full force and effect as a continuing guaranty of the obligations of
Borrower owing to Agents and Lenders under the Agreement.
Although Agents have informed us of the matters set forth above, and
we have acknowledged same, we understand and agree that Agents have no duty
under the Agreement, the Guaranties or any other agreement between us to so
notify us or to seek an
<PAGE>
acknowledgment, and nothing contained herein is intended to or shall create
such a duty as to any advances or transactions hereafter.
IN WITNESS WHEREOF, each of the undersigned has caused this Consent of
Guarantors to be duly executed by their respective authorized officers as of
March 21, 1997.
CERTIFIED GROCERS OF
CALIFORNIA, LTD., a California
corporation
By /s/ DANIEL BANE
----------------------------------
Title: Senior Vice President,
Finance & Admin. and Chief
Financial Officer
GROCERS GENERAL MERCHANDISE
COMPANY, a California corporation
By /s/ DANIEL BANE
----------------------------------
Title: Vice President and Chief
Financial Officer
GROCERS SPECIALTY COMPANY, a
California corporation
By /s/ DANIEL BANE
----------------------------------
Title: Vice President and Chief
Financial Officer
<PAGE>
EXHIBIT 4.14.6
AMENDMENT NUMBER SEVEN
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER SEVEN TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (this "Amendment"), dated as of October 21, 1997, is entered into by
and among CERTIFIED GROCERS OF CALIFORNIA, LTD., a California corporation
("CerGro"), GROCERS GENERAL MERCHANDISE COMPANY, a California corporation
("GGMC"), and GROCERS SPECIALTY COMPANY, a California corporation ("GSC")
(CerGro, GGMC, and GSC are jointly and severally referred to herein as
"Borrower"), on the one hand, and the financial institutions which are
signatories hereto (hereinafter collectively referred to as the "Lenders" and
individually as a "Lender"), BT COMMERCIAL CORPORATION, a Delaware corporation,
as agent ("Agent"), UNION BANK OF CALIFORNIA, N.A., A national banking
association, as co-agent, and BANKBOSTON N.A. as co-agent, on the other hand, in
light of the following facts:
RECITALS
A. The parties hereto have previously entered into that certain
Amended and Restated Loan and Security Agreement, dated as of March 17, 1994, as
amended by that certain Amendment Number One to Amended and Restated Loan and
Security Agreement, dated as of November 1, 1994, as further amended by that
certain Amendment Number Two to Amended and Restated Loan and Security
Agreement, dated as of December 3, 1994, as further amended by that certain
Amendment Number Three to Amended and Restated Loan and Security Agreement,
which is undated but was executed in May of 1996, as further amended by that
certain Amendment Number Four to Amended and Restated Loan and Security
Agreement, dated as of June 27, 1996, as further amended by that certain
Amendment Number Five to Amended and Restated Loan and Security Agreement, dated
as of September 30, 1996, and as further amended by that certain Amendment
Number Six to Amended and Restated Loan and Security Agreement, dated as of
April 7, 1997 (collectively, the "Agreement").
B. Borrower represents that it is required to assist its retailers
with their growth plans in order to secure Borrower's growth within its current
membership. Further, Borrower represents that there are situations where, in
obtaining a new member from another wholesaler, Borrower may be required to
assume the such wholesaler's accommodations.
1
<PAGE>
C. Borrower has requested that Lenders agree to amend the Agreement
regarding Borrower's Capital Expenditures and Accommodation Obligation covenants
as set forth herein. In particular, with regard to Accommodation Obligations,
Borrower has requested that Lenders agree to permit all sublease accommodations,
exclude guarantees of debt from the accommodation basket and define such
guarantees as debt to be included in any debt test, and allow lease guarantees
in excess $5,000,000 basket be permitted if allowed for within the debt test.
NOW THEREFORE, the parties hereto agree as follows:
AGREEMENT
1. Defined Terms. All initially capitalized terms used but not
-------------
defined herein shall have the meanings assigned to such terms in the Agreement.
2. Amendment to Section 6.13(b)(i). Section 6.13(b)(i) of the
-------------------------------
Agreement is hereby deleted in its entirety and replaced with the following:
(i) Borrower's Capital Expenditures for such period shall
not exceed an amount equal to the lower of: (A) Borrower's Consolidated
annual allocation to depreciation reserves for such fiscal year calculated
in accordance with GAAP and (B) Twelve Million Five Hundred Thousand
Dollars ($12,500,000) or, for fiscal years 1997 and 1998 only, Sixteen
Million Dollars ($16,000,000); and such foregoing amount plus the unused
----
amount of Capital Expenditures permitted for the immediately preceding
fiscal year but not in excess of fifty percent (50%) of the permitted
amount of Capital Expenditures for the immediately preceding fiscal year;
and"
3. Amendment to Section 6.27(a). Section 6.27(a) of the Agreement is
----------------------------
hereby deleted in its entirety and replaced with the following:
"Accommodation Obligations set forth on Schedule 6.27(a), attached hereto,
----------------
and any refinancing, renewals, or extensions of such Accommodation
Obligations on terms substantially similar to the original terms thereof;
and, in addition, all Accommodation Obligations consisting of subleases;
and"
4. Amendment to Section 6.27(b). Section 6.27(b) of the Agreement is
----------------------------
hereby deleted in its entirety and replaced with the following:
"Accommodation Obligations with respect to obligations of other Persons
that do not, in the aggregate, have scheduled payments in
2
<PAGE>
any of Borrower's fiscal years in excess of Five Million Dollars
($5,000,000), provided, however, that Accommodation Obligations consisting
-----------------
of any lease guarantee in excess of $5,000,000 are permitted so long as the
amount of any such lease guarantee will not cause a breach of and are
permitted under any debt test of this Agreement, including, but not limited
to, any test with regard to the Funded Debt Ratio; and"
5. Amendment 1 to Section 1.1. Section 1.1 of the Agreement is
--------------------------
hereby amended by deleting the definition of "Accommodation Obligation" and
replaced such definition with the following:
" "Accommodation Obligation" means, as applied to any Person and
without duplication of amounts, any indebtedness, obligation of such Person
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-
made, discounted, or sold with recourse to such Person) any lease,
sublease, dividend, letter of credit, or other obligation ("primary
obligation") of any other Person ("primary obligor") in any manner, whether
directly or indirectly, including any obligation of such Person
(irrespective of whether contingent) (a) to purchase any such primary
obligation or any Asset constituting direct or indirect security therefor,
(b) to advance or supply funds (whether in the form of a loan, advance,
stock purchase, capital contribution, or otherwise) (i) for the purchase,
repurchase, or payment of any such primary obligation or any Asset
constituting direct or indirect security therefor, or (ii) to maintain
working capital or equity capital of the primary obligor, or to otherwise
maintain the net worth, solvency, or other financial condition of the
primary obligor, (c) to purchase or make payment for any Asset, security,
service, or lease if primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) to otherwise assure or hold
harmless the owner of such primary obligation against loss in respect
thereof; provided, however, that the term "Accommodation Obligation" shall
-------- -------
not include (i) endorsements of instruments for deposit or collection in
the ordinary course of such Person's business, (ii) indemnities arising in
the ordinary course of business, including indemnities arising in
connection with the sale or other disposition of a Person's Assets or in
connection with the incurrence of Debt, or (iii) guarantees of debt. The
amount of any Accommodation Obligation shall be deemed to be an amount
equal to the maximum amount of a Person's liability with respect to the
stated or determinable amount of the primary obligation for which such
Accommodation Obligation is incurred, or, if not stated or
3
<PAGE>
determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as
determined by Agents."
6. Amendment to Section 1.1. Section 1.1 of the Agreement is hereby
-------------------------
amended by deleting the definition of "Debt" and replaced such definition with
the following:
" "Debt" means, with respect to any Person, the aggregate amount
of, without duplication: (a) all obligations of such Person for borrowed
money; (b) all obligations of such Person evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other
obligations of such Person in respect of letters of credit, bankers
acceptances, or interest rate swaps; (c) all obligations of such Person to
pay the deferred purchase price of Assets or services, exclusive of trade
payables which are incurred in the ordinary course of such Person's
business consistent with past practices; (d) all Capitalized Lease
Obligations of such Person; (e) all obligations or liabilities of others
secured by a Lien on any Asset owned by such Person, irrespective of
whether such obligation or liability is assumed, to the extent of the
lesser of such obligation or liability or the fair market value of such
Asset; (f) all Accommodation Obligations with respect to Debt of another
Person; and (g) guarantees of debt."
7. Amendment to Section 6.25. Section 6.25 of the Agreement is
--------------------------
hereby amended by adding the following subsection (m) at the end of such
Section:
" (m) Borrower may incur Debt comprised of guarantees of debt
so long as such Debt does not violate any term of this Agreement and such
Debt comports with the covenants under Section 6.13 of this Agreement with
regard to the Funded Debt Ratio."
8. Amendment to Schedule 6.27(a). Schedule 6.27(a) of the Agreement
------------------------------
is hereby amended by appending thereto Appendix 1-"Certified Grocers of
California, Summary of Accommodations," appended hereto.
9. Conditions Precedent. The effectiveness of this Amendment is
--------------------
subject to and conditioned upon the fulfillment of each and all of the following
conditions precedent:
(a) Agent shall have received this Amendment duly executed by
Borrower and the Lenders.
4
<PAGE>
(b) Agent shall have received a consent and affirmation duly
executed by each of CerGro, GGMC, and GSC indicating the consent by each such
guarantor to the execution and delivery by Borrower of this Amendment and the
affirmation of the continued effectiveness of each such guarantor's guaranty of
the Obligations.
(c) Agent shall have received payment of all Agent's Expenses
incurred by Agent in connection with the negotiation, preparation and execution
of this Amendment.
10. Counterparts; Effectiveness. This Amendment may be executed in
---------------------------
any number of counterparts and by different parties on separate counterparts,
each of which when so executed and delivered shall be deemed to be an original.
All such counterparts, taken together, shall constitute but one and the same
Amendment. This Amendment shall become effective upon the fulfillment of all of
the conditions set forth in Section 9 hereof.
11. Reaffirmation of the Agreement. Except as specifically amended by
------------------------------
this Amendment, the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed at Los Angeles, California as of the date first hereinabove written.
CERTIFIED GROCERS OF CALIFORNIA,
LTD., a California corporation
By
----------------------------------
Title:
------------------------------
GROCERS GENERAL MERCHANDISE
COMPANY, a California corporation
By
----------------------------------
Title:
------------------------------
5
<PAGE>
GROCERS SPECIALTY COMPANY,
a California corporation
By
----------------------------------
Title:
------------------------------
BT COMMERCIAL CORPORATION,
a Delaware corporation,
individually and as Agent
By
----------------------------------
Title:
------------------------------
BANKBOSTON, N.A.,
individually and as Co-Agent
By
----------------------------------
Title:
------------------------------
UNION BANK OF CALIFORNIA, N.A.,
individually and as Co-Agent
By
---------------------------------
Title:
------------------------------
6
<PAGE>
DG BANK DEUTSCHE
GENOSSENSCHATFTSBANK,
a German bank acting through
its New York branch
By
----------------------------------
Title:
------------------------------
By
----------------------------------
Title:
------------------------------
DRESDNER BANK, AG,
New York branch and
Grand Cayman Branch, as a bank
By
----------------------------------
Title:
------------------------------
By
----------------------------------
Title:
------------------------------
NATIONAL BANK OF CANADA,
a Canadian Chartered Bank,
New York Branch
By
----------------------------------
Title:
------------------------------
By
----------------------------------
Title:
------------------------------
7
<PAGE>
SANWA BANK CALIFORNIA,
a California banking corporation
By
----------------------------------
Title:
------------------------------
SANWA BUSINESS CREDIT
CORPORATION, a Delaware corporation
By
----------------------------------
Title:
------------------------------
THE SAKURA BANK, LIMITED,
a Japanese bank acting through
its Los Angeles agency
By
----------------------------------
Title:
------------------------------
By
----------------------------------
Title:
------------------------------
MANUFACTURERS BANK
By
----------------------------------
Title:
------------------------------
8
<PAGE>
CITY NATIONAL BANK,
a national banking association
By
----------------------------------
Title:
------------------------------
9
<PAGE>
CONSENT OF GUARANTORS
Each of the undersigned, as a guarantor of the obligations of CERTIFIED
GROCERS OF CALIFORNIA, LTD., a California corporation ("CerGro"), GROCERS
GENERAL MERCHANDISE COMPANY, a California corporation ("GGMC"), and GROCERS
SPECIALTY COMPANY, a California corporation ("GSC") (CerGro, GGMC and GSC are
collectively referred to herein as "Borrower"), arising out of that certain
Amended and Restated Loan and Security Agreement, dated as of March 17, 1994, as
amended by that certain Amendment Number One to Amended and Restated Loan and
Security Agreement, dated as of November 1, 1994, as further amended by that
certain Amendment Number Two to Amended and Restated Loan and Security
Agreement, dated as of December 3, 1994, as further amended by that certain
Amendment Number Three to Amended and Restated Loan and Security Agreement,
which is undated but was executed in May of 1996, as further amended by that
certain Amendment Number Four to Amended and Restated Loan and Security
Agreement, dated as of June 27, 1996, as further amended by that certain
Amendment Number Five to Loan and Security Agreement, dated as of September 30,
1996, and as further amended by that certain Amendment Number Six to Amended and
Restated Loan and Security Agreement, dated as of April 7, 1997 (collectively,
the "Agreement"), among BT Commercial Corporation, a Delaware corporation, Union
Bank of California, N.A., a national banking association, BankBoston, N.A.
(collectively, "Agents"), and the other lenders party thereto (collectively,
"Lenders"), on the one hand, and Borrower, on the other hand, hereby
acknowledges receipt of a copy of that certain Amendment Number Seven to Amended
and Restated Loan and Security Agreement, dated as of October 21, 1997, among
Agents, Lenders and Borrower, consents to the terms contained therein, and
agrees that the Continuing Guaranty executed by each of the undersigned shall
remain in full force and effect as a continuing guaranty of the obligations of
Borrower owing to Agents and Lenders under the Agreement.
Although Agents have informed us of the matters set forth above, and we have
acknowledged same, we understand and agree that Agents have no duty under the
Agreement, the Guaranties or any other agreement between us to so notify us or
to seek an acknowledgment, and nothing contained herein is
10
<PAGE>
intended to or shall create such a duty as to any advances or transactions
hereafter.
IN WITNESS WHEREOF, each of the undersigned has caused this Consent of
Guarantors to be duly executed by their respective authorized officers as of
October 21, 1997.
CERTIFIED GROCERS OF CALIFORNIA,
LTD., a California corporation
By
----------------------------------
Title:
------------------------------
GROCERS GENERAL MERCHANDISE
COMPANY, a California corporation
By
----------------------------------
Title:
------------------------------
GROCERS SPECIALTY COMPANY, a
California corporation
By
----------------------------------
Title:
------------------------------
11
<PAGE>
APPENDIX 1
CERTIFIED GROCERS OF CALIFORNIA
SUMMARY OF ACCOMMODATIONS
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA
SUMMARY OF ACCOMMODATIONS
AS OF AUGUST 30, 1997
SCHEDULE 6.27 (a)
<TABLE>
<CAPTION>
EXPIR'N TOTAL BT COMMERCIAL CORP.
DATE PERMITTED BASKET
-----------------------------------------------------
<S> <C> <C> <C> <C>
CERTIFIED GROCERS OF CALIF., LTD.
GUARANTEES OF DEBT
SAV MAX FOODS, INC. 5/15/99 3,800,000 3,800,000
SUPER FOODS CENTERS 3,750,000 3,750,000
------------------------------------
TOTAL DEBT GUARANTEES 7,550,000 3,800,000 3,750,000
------------------------------------
LEASE GUARANTEES
PATRONS
STUMP'S MKT. 5/31/98 26,325* 26,325
6386 DEL CERRO BLVD.
SAN DIEGO, CA
GARY-WILLCO 4/30/02 62,487 62,487
17305 E. VALLEY BLVD.
LA PUENTE, CA
BELL MARKETS 2/28/09 196,211* 196,211
3950 24th STREET
SAN FRANCISCO, CA
BELL MARKETS 2/28/09 130,808* 130,808
1390 SILVER AVE
SAN FRANCISCO, CA
MAR VAL 12/31/08 120,960 120,960
55 HWY 26
VALLEY SPRINGS, CA
G & M CO. INC. 10/31/07 110,000* 110,000
11550 TELEGRAPH ROAD
SANTA FE SPRINGS, CA
FARM FRESH 11/09/01 186,912 186,912
1067 N. MT. VERNON AVE.
COLTON, CA
</TABLE>
<PAGE>
SCHEDULE 6.27 (a)
CERTIFIED GROCERS OF CALIFORNIA
SUMMARY OF ACCOMMODATIONS
AS OF AUGUST 30, 1997
<TABLE>
<CAPTION>
EXPIR'N BT COMMERCIAL CORP.
DATE TOTAL PERMITTED BASKET
-----------------------------------------------------
<S> <C> <C> <C> <C>
SAVMAX FOODS, INC. 6/30/12 485,782* 485,782
AUBURN BLVD.
SACRAMENTO, CA
SAVMAX FOODS, INC. 8/14/12 681,072* 681,072
865 BLOSSOM HILL
SAN JOSE, CA
SAVMAX FOODS, INC. 8/14/12 509,448* 509,448
699 LEWELLING
SAN LEANDRO, CA
SAVMAX FOODS, INC. 1/00/05 386,100* 386,100
1610 E. HATCH ROAD
CERES, CA
SAVMAX FOODS, INC. 1/00/07 375,004* 375,004
941 ALAMO DRIVE
VACAVILLE, CA
JOE NOTRICA, INC. 4/14/98 180,835* 180,835
AVALON CENTER
CARSON, CA
PW SUPERMARKETS 7/1/17 378,846 378,846
OAKLAND/MURPHY AVE.
SAN JOSE, CA
PW SUPERMARKETS (PETRINI) 6/3/05 479,306 479,306
4015 E. CASTRO VALLEY BLVD.
CASTRO VALLEY, CA
R RANCH MARKET, INC. 11/6/11
310 E. MANCHESTER AVE. THRU 12/31/97 220,716 220,716
LOS ANGELES, CA 1/1/98 - 11/6/11
</TABLE>
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA
SUMMARY OF ACCOMMODATIONS
AS OF AUGUST 30, 1997
<TABLE>
<CAPTION>
EXPIR'N TOTAL BT COMMERCIAL CORP.
DATE PERMITTED BASKET
-----------------------------------------------------
<S> <C> <C> <C> <C>
KV MART CO., INC. 2/1/04 353,976 353,976
6820 DESOTO AVE.
CANOGA PARK, CA
KV MART CO., INC. 11/1/11
8723 SEPULVEDA BLVD. THRU 7/1/98 212,664 212,774
LOS ANGELES, CA 7/1/98-10/31/01
10/31/01-10/31/06
10/31/06-10/31/11
10/31/11-11/30/16
KV MART CO., INC. 6/1/04 408,000 408,000
10721 ATLANTIC AVE.
LYNWOOD, CA
BERBERIAN ENTERPRISES 12/17/04 120,000 120,000
1421 E. WASHINGTON BLVD.
PASADENA, CA
MOLLIE STONE'S (PETRINI) 8/30/04 192,660 192,660
22 BAYHILL SHOPPING CENTER
SAN BRUNO, CA
------------------------------------
TOTAL LEASE GUARANTEES 5,818,112 4,002,950 1,815,162
------------------------------------
</TABLE>
Schedule 6.27 (a)
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA
SUMMARY OF ACCOMMODATIONS
AS OF AUGUST 30, 1991
SCHEDULE 6.27(a)
<TABLE>
<CAPTION>
EXPIR'N TOTAL BT COMMERCIAL CORP.
DATE PERMITTED BASKET
-----------------------------------------------------
<S> <C> <C> <C> <C>
SUBLEASES
HYONG J & AIJA YOON 12/23/98 33,000 33,000
156 E. BONITA AVE
SAN DIMAS, CA
VIEN DONG INC 9/30/02 112,500 112,500
6935 LINDA VISTA
SAN DIEGO, CA.
PW SUPER MKTS INC 9/30/02 65,600 65,600
2812 S. WHITE
SAN JOSE, CA
LEES PET CLUB INC 11/30/98 172,550 172,550
27451 HESPERIAN BLVD
HAYWARD, CA
HIRMEZ, ZUHAIR 3/31/11 16,155 16,155
4949 SANTA MONICA AVE
SAN DIEGO, CA
SANTA FE RANCH, INC. 4/30/01 27,500 27,500
3350 PALM AVE
SAN DIEGO, CA
EL TIGRE, INC. 12/31/00 44,000 44,000
2909 CORONADO
SAN DIEGO, CA
STUMP'S MKT. 2/28/02 80,538 80,538
9625 CARLTON HILLS BLVD
SANTEE, CA
HALUM MKTS INC 10/31/98
49-765 HARRISON ST. THRU 11/1/98 48,720 48,720
COACHELLA, CA 11/1/98-10/31/23
</TABLE>
<PAGE>
SCHEDULE 6.27 (a)
CERTIFIED GROCERS OF CALIFORNIA
SUMMARY OF ACCOMMODATIONS
AS OF AUGUST 30, 1997
<TABLE>
<CAPTION>
EXPIR'N TOTAL BT COMMERCIAL CORP.
DATE PERMITTED BASKET
-----------------------------------------------------
<S> <C> <C> <C> <C>
TONY'S CORP. 10/31/99
31840 ALVARADO BLVD. THRU 11/1/99 71,430 71,430
UNION CITY, CA 11/1/99-10/31/99
SCOLARIS OF CALIF. 9/30/02 124,630 124,630
5170 HOLLISTER DR.
SANTA BARBARA, CA
PW SUPERMARKETS INC. 4/30/99 141,000 141,000
3171 WALNUT AVE.
FREMONT, CA.
KOSHAN INC. 3/10/99 10,259 10,259
8025 VINELAND
SUN VALLEY, CA
STUMP'S MARKETS INC. 11/30/98 36,075 36,075
3770 VOLTAIRE ST.
POINT LOMA, CA
PW SUPERMARKETS INC. 12/31/02
2115 MORRILL AVE. THRU 1/1/98 57,073 57,073
SAN JOSE, CA 11/1/98-12/31/02
MAJOR MARKETS INC. 5/15/99 371,527 371,527
845 S. MAIN ST.
FALLBROOK, CA
MAJOR MARKETS INC. 10/31/10 388,331 388,331
1855 S. CENTER CITY
ESCONDIDO, CA
SAVMAX FOODS INC. 4/27/12 400,000 400,000
4211 NORWOOD
SACRAMENTO, CA
</TABLE>
<PAGE>
SCHEDULE 6.27 (a)
CERTIFIED GROCERS OF CALIFORNIA
SUMMARY OF ACCOMMODATIONS
AS OF AUGUST 30, 1997
<TABLE>
<CAPTION>
EXPIR'N TOTAL BT COMMERCIAL CORP.
DATE PERMITTED BASKET
-----------------------------------------------------
<S> <C> <C> <C> <C>
SAVMAX FOODS, INC. 7/31/05 413,984 413,984
3495 SONOMA BLVD.
VALLEJO, CA
JAX, APPLE MARKET #5 2012 212,814 212,814
4050 UNIVERSITY AVE.
RIVERSIDE, CA
PRO & FAMILY, INC. 6/30/16 168,088 168,088
600 BEAR MOUNTAIN BLVD.
ARVIN, CA
PROVO'S, INC. 6/30/17 183,334 183,334
820 MAIN ST.
DELANO, CA
APPLE MARKET #102 (PETRINI) 2/28/11 117,428 117,428
590 MORAGA RD.
MORAGA, CA
APPLE MARKET #103 (PETRINI) 7/1/10 144,000 144,000
155 SAN MARIN DR.
NOVATO, CA
APPLE MARKET #101 (PETRINI) 12/31/97 200,012 200,012
130 MARKETPLACE
SAN RAMON, CA
PAUL CHARON 2/27/23 104,997 104,997
111 E. CENTRAL VAL. HWY.
SHAFTER, CA
------------------------------------
TOTAL SUBLEASE YEARLY RENTS 3,745,545 2,662,328 1,083,217
------------------------------------
0
TOTAL ACCOMMODATIONS 17,113,657 10,465,278 6,648,379
</TABLE>
<PAGE>
COMPREHENSIVE AMENDMENT
-----------------------
TO
--
RETIREMENT PLAN FOR EMPLOYEES
-----------------------------
OF
--
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
<PAGE>
COMPREHENSIVE AMENDMENT
-----------------------
TO
--
RETIREMENT PLAN FOR EMPLOYEES
-----------------------------
OF
--
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE Page
- ------- ----
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . 1
I DEFINITIONS............................................. 1
Section 1.01 - Accrued Benefit...................... 1
Section 1.02 - Actuarial Equivalent................. 2
Section 1.03 - Affiliated Company................... 2
Section 1.04 - Benefit Commencement Date............ 2
Section 1.05 - Code................................. 3
Section 1.06 - Company.............................. 3
Section 1.07 - Conversion Date...................... 3
Section 1.08 - Early Retirement Age................. 3
Section 1.09 - Early Retirement Date................ 3
Section 1.10 - Effective Date....................... 3
Section 1.11 - Employee............................. 3
Section 1.12 - Family Member........................ 3
Section 1.13 - Gender............................... 3
Section 1.14 - Member............................... 4
Section 1.15 - Month of Service..................... 4
Section 1.16 - Normal Retirement Age................ 4
Section 1.17 - Normal Retirement Date............... 4
Section 1.18 - Plan................................. 4
Section 1.19 - Plan Administrator................... 4
Section 1.20 - Plan Year............................ 4
Section 1.21 - Restatement Date..................... 4
Section 1.22 - Retirement Date...................... 4
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1.23 - Service............................. 5
Section 1.24 - Social Security Covered Compensation 5
Section 1.25 - Social Security Retirement Age...... 5
Section 1.26 - Social Security Taxable Wage Base... 5
Section 1.27 - Spouse.............................. 5
II SERVICE................................................. 6
Section 2.01 - Hour of Service..................... 6
Section 2.02 - Benefit Accrual Service............. 6
</TABLE>
ii
<PAGE>
COMPREHENSIVE AMENDMENT
-----------------------
TO
--
RETIREMENT PLAN FOR EMPLOYEES
-----------------------------
OF
--
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE Page
- ------- ----
<S> <C>
(a) For Service Prior to the Restatement Date
(March 1, 1976)............................. 6
(b) For Service on and After the Restatement
Date (March 1, 1976) and Prior to Conversion
Date (March 1, 1983)........................ 7
(c) For Service on and After the Conversion
Date March 1, 1983)......................... 8
(d) Benefit Accrual Service for Certain Union
Employees................................... 8
Section 2.03 - Vesting Service 8
Section 2.04 - Break in Service 9
(a) One Year Break in Service................... 9
(b) Effect of a One Year Break in Service ...... 9
Section 2.05 - Eligibility Service............... 10
Section 2.06 - Years of Employment............... 10
III MEMBERSHIP............................................ 10
Section 3.01 - Eligibility to be a Member........ 10
Section 3.02 - Employees Not Eligible to be a
Member and Entry Date............. 11
Section 3.03 - Employment by Affiliates.......... 11
Section 3.04 - Acquisitions of Affiliates........ 11
Section 3.05 - Reemployment of Member............ 11
Section 3.06 - Reemployment of Member Following
Forfeiture........................ 12
</TABLE>
iii
<PAGE>
IV ELIGIBILITY FOR PLAN BENEFITS......................... 12
Section 4.01 - Normal Retirement Benefit......... 12
Section 4.02 - Deferred Retirement Benefit....... 12
Section 4.03 - Early Retirement Benefit.......... 12
Section 4.04 - Vested Deferred Benefit........... 12
Section 4.05 - Pre-Retirement Death Benefit...... 13
V RETIREMENT BENEFIT.................................... 13
iv
<PAGE>
COMPREHENSIVE AMENDMENT
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TO
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RETIREMENT PLAN FOR EMPLOYEES
-----------------------------
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--
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE Page
- ------- ----
<S> <C>
Section 5.01 - Normal Retirement Benefits.......... 13
Section 5.02 - Early Retirement Benefits........... 16
Section 5.03 - Deferred Retirement Benefits........ 18
Section 5.04 - Termination of Service before Early
or Normal Retirement Age............ 18
Section 5.05 - Pre-Retirement Death Benefit........ 19
Section 5.06 - Maximum Amount of Benefit........... 20
Section 5.07 - Small Benefit Payments.............. 23
Section 5.08 - When Benefits Begin................. 24
Section 5.09 - Suspension of Benefits Upon
Reemployment or After Normal
Retirement Date..................... 24
VI MANNER AND FORM OF PAYMENT.............................. 25
Section 6.01 - Form of Retirement Benefit.......... 25
Section 6.02 - Joint and Survivor Annuity for
Married Member...................... 25
Section 6.03 - Life Annuity for Unmarried Members.. 28
Section 6.04 - Joint and Survivor Annuity for Other
Members............................. 29
(a) 50% Joint and Survivor Life Annuity........... 29
(b) 100% Joint and Survivor Life Annuity.......... 29
Section 6.05 - Period Certain Life Annuity Benefit. 29
Section 6.06 - Optional Temporary Annuity.......... 29
Section 6.07 - Minimum Distribution of Benefits.... 30
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
Section 6.08 - Minimum Distribution Following
Death............................... 30
VII CONTRIBUTIONS AND FUNDING............................... 30
Section 7.01 - Funding of Plan..................... 30
Section 7.02 - Company Contributions............... 30
Section 7.03 - Contributions to Group Annuity
Contract............................ 30
</TABLE>
vi
<PAGE>
COMPREHENSIVE AMENDMENT
-----------------------
TO
--
RETIREMENT PLAN FOR EMPLOYEES
-----------------------------
OF
--
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE Page
- ------- ----
<S> <C>
Section 7.04 - No Return of Company Contributions;
Exceptions.......................... 31
VIII ADMINISTRATION.......................................... 31
Section 8.01 - Named Fiduciary..................... 31
Section 8.02 - Benefits Committee as Plan
Administrator....................... 31
Section 8.03 - Additional Duties of Benefits
Committee........................... 32
Section 8.04 - Authority of Benefits Committee..... 33
IX AMENDMENT AND TERMINATION OF THE PLAN................... 33
Section 9.01 - Amendment of the Plan............... 33
Section 9.02 - Termination of the Plan............. 34
Section 9.03 - Allocation of Assets Upon Plan
Termination......................... 34
Section 9.04 - Merger or Consolidation............. 35
X LIMITATION OF BENEFITS FOR HIGHLY PAID MEMBER........... 35
Section 10.01 - Limitation on Certain Distributions. 35
XI TOP HEAVY PROVISIONS 37
Section 11.01 - Top Heavy Definitions............... 37
Section 11.02 - Special Top Heavy Rules............. 38
Section 11.03 - Top Heavy Benefits and Vesting...... 39
</TABLE>
vii
<PAGE>
<TABLE>
<S> <C>
XII MISCELLANEOUS PROVISIONS.............................. 40
Section 12.01 - Evidence of Survival............. 40
Section 12.02 - Non-Alienation of Benefits....... 40
Section 12.03 - Payments to Incompetents......... 41
Section 12.04 - Misstated Information............ 41
Section 12.05 - Beneficiary...................... 41
Section 12.06 - Forfeiture Upon Failure to Locate 41
Section 12.07 - Direct Transfer of Benefits...... 42
</TABLE>
viii
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COMPREHENSIVE AMENDMENT
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RETIREMENT PLAN FOR EMPLOYEES
-----------------------------
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--
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-------------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE Page
- ------- ----
<S> <C>
Section 12.08 - Claims Procedure.................. 43
Section 12.09 - Applicable Law.................... 43
SIGNATURES................................................. 44
</TABLE>
ix
<PAGE>
COMPREHENSIVE AMENDMENT
-----------------------
TO
--
RETIREMENT PLAN FOR EMPLOYEES
-----------------------------
OF
--
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
THIS AGREEMENT, executed by Certified Grocers of California, Ltd., a
California corporation (hereinafter called the "Company"), evidences the terms
of a Comprehensive Amendment to the Retirement Plan for Employees of Certified
Grocers of California, Ltd. This agreement constitutes a Comprehensive
Amendment to those provisions of a pension plan originally adopted and made
effective on March 1, 1957, and subsequently amended from time to time
thereafter. The most recent Comprehensive Amendment prior to this Comprehensive
Amendment was executed on March 4, 1985 and the Plan was amended on June 9,
1987.
Unless otherwise indicated, this Comprehensive Amendment is effective
for the Plan Year beginning March 1, 1989. The Company operates a fiscal period
which ends on the Saturday nearest August 31 of each year and begins on the
Sunday following such Saturday.
Nothing contained in this Agreement shall be deemed to divest, or
accelerate the vesting of, the interest of any Member herein or to deprive any
Member of any rights which that Member had as of the execution date or the
effective date of this Agreement. The rights and benefits of all employees of
the Company after the effective date of this Agreement shall be as set forth
herein.
ARTICLE I
---------
DEFINITIONS
-----------
The following words and phrases when used throughout this Plan and any
subsequent amendment thereof shall have the meanings
1
<PAGE>
set forth below, whether or not capitalized, unless a different meaning is
clearly required by the context.
Section 1.01 - Accrued Benefit
- ------------ ---------------
The "Accrued Benefit" of a Member, as of his termination of service,
means the greater of (a) or (b):
(a) his normal retirement benefit determined under Section 5.01
calculated on the basis of his Years of Benefit Accrual as of his termination of
service; or
(b) the actuarial equivalent based on a single life annuity of the
benefit accrued on the Conversion Date under the terms of the Plan, including
the normal form of benefit, in effect immediately preceding the Conversion Date.
Section 1.02 - Actuarial Equivalent
- ------------ --------------------
"Actuarial Equivalent" or "Actuarially Equivalent" means an amount of
equivalent value when computed on the basis of the 1971 Towers, Perrin, Forster
and Crosby Forecast Mortality Table with an interest rate assumption of 8% per
annum.
Section 1.03 - Affiliated Company
- ------------ ------------------
"Affiliated Company" means:
(a) Any corporation which is included in a controlled group of
corporations, within the meaning of Section 414(b) of the Code, of which group
the Company is also a member,
(b) Any trade or business which is under common control with the
Company within the meaning of Section 414(c) of the Code,
(c) Any member of an affiliated service group, within the meaning of
Section 414(m) of the Code, that includes the Company, and
(d) Any other entity required to be aggregated with the Company
pursuant to regulations under Section 414(o) of the Code.
2
<PAGE>
Notwithstanding the foregoing, an entity shall be deemed to be an
Affiliated Company only with respect to periods during which the test under Code
Section 414(b), (c), (m), or (o), as applicable, is met.
Section 1.04 - Benefit Commencement Date
- ------------ -------------------------
"Benefit Commencement Date" means the date on which a Member's benefit
commences under the Plan. The Benefit Commencement Date for a Member who
continues employment after his Normal Retirement Date and who dies prior to
receiving benefits under the Plan shall be the first day of the month following
his date of death.
Section 1.05 - Code
- ------------ ----
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
Section 1.06 - Company
- ------------ -------
"Company" means Certified Grocers of California, Ltd., and any
Affiliated Company which has adopted the Plan.
Section 1.07 - Conversion Date
- ------------ ---------------
"Conversion Date" means March 1, 1983.
Section 1.08 - Early Retirement Age
- ------------ --------------------
"Early Retirement Age" means either (a) or (b) below:
(a) The date the Member has both attained his 55th birthday and
completed at least 5 Years of Vesting Service.
(b) For any Member who on or before March 1, 1983 has both attained
his 40th birthday and completed at least 20 years of service, the date such
Member has both attained his 45th birthday and completed at least 25 years of
service.
Section 1.09 - Early Retirement Date
- ------------ ---------------------
3
<PAGE>
"Early Retirement Date" means the first day of any month before his
Normal Retirement Age in which a Member elects to retire provided he has
attained his Early Retirement Age.
Section 1.10 - Effective Date
- ------------ --------------
"Effective Date" means March 1, 1957.
Section 1.11 - Employee
- ------------ --------
"Employee" means a person employed by the Company.
Section 1.12 - Family Member
- ------------ -------------
"Family Member" shall mean the spouse, lineal ascendants and descendants of
the Employee or former Employee and the spouse of such lineal ascendants or
descendants.
Section 1.13 - Gender
- ------------ ------
"Gender" means the masculine pronoun whenever used shall include the
feminine.
Section 1.14 - Member
- ------------ ------
"Member" means an Employee who satisfies the requirements for
membership pursuant to Article III, and whose membership shall not have
terminated pursuant to such Article.
Section 1.15 - Month of Service
- ------------ ----------------
"Month of Service" means the month, or a four or five week period,
regularly used by the Company for its payroll records during which a Member is
credited with an Hour of Service.
Section 1.16 - Normal Retirement Age
- ------------ ---------------------
"Normal Retirement Age" means the date a Member attains his 65th
birthday.
Section 1.17 - Normal Retirement Date
- ------------ ----------------------
4
<PAGE>
"Normal Retirement Date" means the first day of the month next
following a Member's Normal Retirement Age.
Section 1.18 - Plan
- ------------ ----
"Plan" means the provisions of the Retirement Plan for Employees of
Certified Grocers of California, Ltd., as set forth herein and as may be amended
from time to time.
Section 1.19 - Plan Administrator
- ------------ ------------------
"Plan Administrator" or "Plan Administration Committee" means the
person or persons named pursuant to Article VIII who exercise discretionary
authority and control with respect to the administration and management of the
Plan.
Section 1.20 - Plan Year
- ------------ ---------
"Plan Year" means each twelve month period beginning on March 1 and
ending on the last day of February.
Section 1.21 - Restatement Date
- ------------ ----------------
"Restatement Date" means March 1, 1976.
Section 1.22 - Retirement Date
- ------------ ---------------
"Retirement Date" means the Member's Normal Retirement Date or, if
applicable, Early Retirement Date.
Section 1.23 - Service
- ------------ -------
"Service" means an Employee's period of employment with the Company
credited in accordance with Article II.
Section 1.24 - Social Security Covered Compensation
- ------------ ------------------------------------
"Social Security Covered Compensation" means for any Plan Year, the
average (without indexing) of the Social Security Taxable Wage Base in effect
for each calendar year during the thirty-five (35) year period ending with the
last day of the calendar year in which the Member attains (or will attain)
Social Security Retirement Age. In determining a Member's Social Security
Covered
5
<PAGE>
Compensation for a Plan Year, the Social Security Taxable Wage Base for
the current Plan Year and any subsequent Plan Year shall be assumed to be the
same as in effect for the Plan Year for which the determination is being made.
A Member's Covered Compensation for any Plan Year after the thirty-five (35)
year period is the Member's Social Security Covered Compensation for the Plan
Year in which the Member attained Social Security Retirement Age.
Section 1.25 - Social Security Retirement Age
- ------------ ------------------------------
"Social Security Retirement Age" means:
(a) For a Member born prior to 1938, the first day of the calendar
month coincident with or next following his sixty-fifth birthday;
(b) For a Member born after 1937 and before 1955, the first day of the
calendar month coincident with or next following his sixty-sixth birthday; and
(c) For a Member born after 1954, the first day of the calendar month
coincident with or next following his sixty-seventh birthday.
Section 1.26 - Social Security Taxable Wage Base
- ------------ ---------------------------------
"Social Security Taxable Wage Base" means the contribution and benefit
limit in effect under Section 3121(a)(1) of the Code.
Section 1.27 - Spouse
- ------------ ------
"Spouse" means the person to whom a Member has been legally married
during the twelve month period immediately preceding the Member's date of death,
if such death is earlier than his Early, Normal or Deferred Retirement Date, or
the person to whom the Member is married commencing at his benefit commencement
date commencing at his Early, Normal or Deferred Retirement Date, if applicable.
ARTICLE II
----------
SERVICE
-------
6
<PAGE>
Section 2.01 - Hour of Service
- ------------ ---------------
An Employee shall receive credit for an Hour of Service for:
(a) Each hour for which he is directly or indirectly paid or entitled
to payment by the Company for the performance of duties during the applicable
Computation Period. These hours shall be credited to the Employee in the
Computation Period or periods in which the duties were performed; and
(b) Each hour not credited in (a) for which back pay has been either
awarded or agreed to by the Company. These hours shall be credited to the
Employee in the Computation Period or periods to which the award or agreement
pertains rather than the Computation Period in which the award, agreement, or
payment is made; and
(c) Each hour not credited in (a) or (b) for which an Employee is
directly or indirectly paid, or entitled to such payment by the Company for
reasons other than the performance of duties during an applicable Computation
Period. The completion of the non-work hours described in this paragraph shall
be computed in accordance with the provisions of Department of Labor Regulations
2530.200b-2. These hours shall be credited in the Computation Period in which
either payment is actually made or amounts payable to the Employee become due.
These hours shall be determined by dividing the payments received or due by the
Employee's most recent hourly rate of Compensation for the performance of
duties; and
(d) Each hour not credited in (a), (b) or (c) while an Employee is on
Authorized Leave of Absence. These hours shall be credited for purposes of
Sections 2.02 and 2.03; and
(e) Each hour not credited in (a), (b), (c) or (d) that is required to
be credited under federal law. The nature and extent of such credit shall be
determined under such law.
Section 2.02 - Benefit Accrual Service
- ------------ -----------------------
(a) For Service Prior to the Restatement Date (March 1, 1976)
---------------------------------------------------------
7
<PAGE>
A Member shall be credited with a Year of Benefit Accrual Service for
each full year of continuous service with the Company, except that an employee
of an Affiliated Company on the date of acquisition by Certified Grocers of
California, Ltd., shall be credited with a Year of Benefit Accrual Service for
each full year of membership in the Plan, as determined in accordance with the
provisions of the Plan as in effect prior to the Restatement Date. Service
under any other plan and not a predecessor of this Plan shall not be considered
service hereunder.
A Member shall also be credited with a fractional Year of Benefit
Accrual Service for the period measured from his last anniversary of employment
immediately preceding the Restatement Date to the Restatement Date, if such
period is less than twelve months. The applicable fraction shall be determined
by dividing the number of completed months of employment during such period, by
12.
For purposes of this subsection (a), an Authorized Leave of Absence as
described in 2.01(d) shall not be deemed to have interrupted the continuity of
employment.
(b) For Service on and After the Restatement Date (March 1, 1976) and
-----------------------------------------------------------------
Prior to Conversion Date (March 1, 1983)
----------------------------------------
- --
A Member who completes 1800 Hours of Service during an "Accrual
Computation Period" shall be credited with a Year of Benefit Accrual Service for
such "Accrual Computation Period".
A Member who completes at least 1000 Hours of Service but less than
1800 Hours of Service during an "Accrual Computation Period" shall be credited
with a fractional Year of Benefit Accrual Service for such "Accrual Computation
Period" by dividing the number of Hours of Service credited to him by 1800.
The "Accrual Computation Period" shall be the twelve month period
measured from March 1 commencing with the later of the Restatement Date and the
March 1 of (a) the Plan Year in which he is employed by the Company or (b) with
respect to an Employee of an Affiliated Company on the date of acquisition by
Certified Grocers of California, Ltd., the Plan Year in which he becomes a
Member of the Plan.
8
<PAGE>
Notwithstanding the above, if either (a) an Employee is employed by
the Company, (b) an Employee of an Affiliated Company becomes a Member of the
Plan or (c) an Employee terminates employment with the Company while a Member of
the Plan, on a date other than the first day of an Accrual Computation Period,
such Employee shall receive credit for a Year of Benefit Accrual Service or
fraction thereof during such Accrual Computation Period provided he completes
the "Minimum Hours of Service" requirement. The "Minimum Hours of Service"
requirement is the product of 1000 and a fraction, the numerator being the
number of months of employment with the Company during such Accrual Computation
Period and the denominator being 12.
A Member who completes the Minimum Hours of Service shall be credited
with a Year of Benefit Accrual Service, or fraction thereof, by dividing the
number of Hours of Service credited to him by 1800.
(c) For Service on and After the Conversion Date March 1, 1983)
-----------------------------------------------------------
- -
A Member shall be credited with 1/12th of a Year of Benefit Accrual
Service for each Month of Service credited on or after the Conversion Date;
provided, however, a Year of Benefit Accrual Service for a Member who is not
actively performing services for the Company as an Employee because of a
disability shall be determined under paragraph (b).
Years of Benefit Accrual Service shall be the sum of each year, and
fractional part thereof, of Benefit Accrual Service described in (a), (b) and
(c) above, not forfeited due to a Break in Service in accordance with Section
2.04. Service under any other plan and not a predecessor of this Plan shall not
be considered service hereunder.
(d) Benefit Accrual Service for Certain Union Employees
---------------------------------------------------
Notwithstanding any of the provisions contained herein to the
contrary, any Employee who is a Member prior to March 1, 1983 (and who was an
active employee of the Company on January 1, 1984), who became a Member between
March 1, 1976 and March 1, 1983 by no longer being excluded as a Member of the
Plan
9
<PAGE>
under Section 3.02(a), shall be deemed to have received credit for a Year
of Benefit Accrual Service calculated from the first date of continuous
employment with the Company to becoming a Member, provided that the amount of
the normal retirement benefit calculated pursuant to Section 5.01 for such
Member shall be reduced by the amount, if any, of the retirement benefit earned
by the Member under any other retirement plan while employed by the Company, but
during which such Member was excluded as a Member under Section 3.02(a), at any
time from employment with the Company between March 1, 1976 and March 1, 1983.
Section 2.03 - Vesting Service
- ------------ ---------------
An Employee who completes 1000 Hours of Service during a "Vesting
Computation Period" shall be credited with a Year of Vesting Service. The
"Vesting Computation Period" shall be the twelve consecutive month period
measured from the date of hire and each anniversary thereafter and including all
such similar periods of service with the Company or any Affiliated Company, but
not including any such periods with any Company prior to the time such Company
became a member of a controlled group with Certified Grocers of California, Ltd.
Years of Vesting Service shall be the sum of each Year of Vesting
Service with the exception of the following:
(a) Each Year of Vesting Service forfeited due to a Break in Service
in accordance with Section 2.04; and
(b) Each Year of Vesting Service before January 1, 1971 unless the
Employee has had at least three Years of Vesting Service after December 31,
1970.
Section 2.04 - Break in Service
- ------------ ----------------
(a) One Year Break in Service
-------------------------
On and after the Restatement Date and before the Conversion Date, an
Employee who completes less than 501 Hours of Service during a Vesting
Computation Period or an Eligibility Computation Period shall incur a One Year
Break in Service. On and after the Conversion Date, an Employee who completes
less than three Months of Service during an Accrual Computation Period shall
10
<PAGE>
incur a One Year Break in Service for purposes of determining Benefit Accrual
Service. For purposes of determining whether a Break in Service Year has
occurred for participation and vesting purposes, an individual who is absent
from work for maternity or paternity reasons shall receive credit for the Hours
of Service which would otherwise have been credited to such individual but for
such absence, or in any case in which such hours cannot be determined, eight
Hours of Service per day of such absence. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means an absence by reason
of the pregnancy of the individual, by reason of a birth of a child of the
individual, by reason of the placement of a child with the individual in
connection with the adoption of such child by such individual, or for purposes
of caring for such child for a period beginning immediately following such birth
or placement. The Hours of Service credited under this paragraph shall be
credited in the computation period in which the absence begins if the crediting
is necessary to prevent a Break in Service in that period, or in all other
cases, in the following computation period.
(b) Effect of a One Year Break in Service
-------------------------------------
If an Employee incurs a One Year Break in Service during a Vesting
Computation Period and before he is eligible for a Vested Deferred Benefit and
the number of consecutive One Year Breaks in Service equals or exceeds the
greater of five or his Years of Vesting Service prior to such Break in Service,
he shall forfeit his Years of Vesting Service credited prior to his Break in
Service.
If an Employee incurs a One Year Break in Service during an
Eligibility Computation Period and before he is eligible for a Vested Deferred
Benefit and the number of consecutive One Year Breaks in Service equals or
exceeds the greater of five or his Years of Eligibility Service credited prior
to such Break in Service, he shall forfeit the Years of Eligibility Service.
If an Employee incurs a One Year Break in Service during an Accrual
Computation Period and before he is eligible for a Vested Deferred Benefit and
the number of consecutive One Year Breaks in Service equals or exceeds the
greater of five , he shall forfeit his Years of Benefit Accrual Service
previously credited to him.
11
<PAGE>
Section 2.05 - Eligibility Service
- ------------ -------------------
An Employee who completes 1000 Hours of Service during an "Eligibility
Computation Period" shall be credited with a Year of Eligibility Service on the
last day of such Computation Period, whether or not he is an Employee as of such
date.
The "Eligibility Computation Period" shall be each twelve month period
measured from the first day the Employee is credited with an Hour of Service or,
if he fails to complete 1000 Hours of Service during such period, the twelve
month period shall then be measured from the first day of each Plan Year
following such date of employment.
Years of Eligibility Service shall be the sum of each Year of
Eligibility Service not forfeited due to a Break in Service in accordance with
Section 2.04.
Section 2.06 - Years of Employment
- ------------ -------------------
Years of Employment shall be the sum of each calendar year in which an
Employee completes at least one Hour of Service.
ARTICLE III
-----------
MEMBERSHIP
----------
Section 3.01 - Eligibility to be a Member
- ------------ --------------------------
Each Employee who is a Member of the Plan as of the Restatement Date
or thereafter shall continue to participate in accordance with the provisions of
the Plan in effect on and after the Restatement Date, unless excluded under the
terms of Section 3.02. Each other Employee, except any Employee who is not
eligible to become a Member as provided in Section 3.02, provided he has met the
minimum Hours of Service requirement under Section 2.05, shall become a Member
of the Plan on the later of:
(i) March 1, 1976; or
12
<PAGE>
(ii) The Entry Date which is March 1 occurring during the first
eligibility computation period during which the Employee is credited with a
year of eligibility service.
Section 3.02 - Employees Not Eligible to be a Member and Entry Date
- ------------ ----------------------------------------------------
The following persons shall not be eligible to be Members in the Plan:
(a) Any Employee who is included in a collective bargaining unit
covered by a collective bargaining agreement, which agreement does not provide
for coverage of such Employee, provided, that the matter of retirement benefits
was the subject of good faith bargaining between the Company and the collective
bargaining unit of which the Employee is a part;
(b) Directors, unless otherwise employed as Employees and otherwise
eligible; and
(c) Any Employee on a retainer or fee basis or as an independent
contractor, as determined by the Employer (except an Employee of an Affiliated
Company).
Section 3.03 - Employment by Affiliates
- ------------ ------------------------
The Employees of any Affiliated Company shall be entitled to
participate in the Plan subject to the approval of the Board of Directors;
provided further, that only those Employees of an affiliate who otherwise meet
the requirements for membership as set forth in the Plan shall be entitled to
participate in the Plan, subject to the requirements of Section 3.04.
Section 3.04 - Acquisitions of Affiliates
- ------------ --------------------------
Each Employee of an Affiliated Company who was employed by such
Affiliated Company on the date of its acquisition shall be entitled to become a
Member in the Plan on March 1 coinciding with or next following the date on
which he or she completes six calendar months measured from date of employment.
In no event shall an Employee who completes one year of service fail to qualify.
13
<PAGE>
Section 3.05 - Reemployment of Member
- ------------ ----------------------
In the event a Member who has previously terminated employment returns
to the employ of the Company as an Employee covered under the Plan, he shall
resume his membership in the Plan immediately unless, prior to his reemployment,
he forfeited his Years of Eligibility Service and Years of Benefit Accrual
Service due to a Break in Service in accordance with Section 2.04, in which case
the provisions of 3.06 shall apply.
Section 3.06 - Reemployment of Member Following Forfeiture
- ------------ -------------------------------------------
A Member of the Plan who forfeits his Years of Eligibility Service and
Years of Benefit Accrual Service due to a Break in Service in accordance with
Section 2.04 shall cease to be entitled to any benefits under the Plan with
respect to such Service. He may reenter the Plan as a new Member by again
satisfying the membership requirements in accordance with Section 3.02.
ARTICLE IV
----------
ELIGIBILITY FOR PLAN BENEFITS
-----------------------------
Section 4.01 - Normal Retirement Benefit
- ------------ -------------------------
Except as provided in Section 4.02, a Member shall be eligible for a
Normal Retirement Benefit if his employment is terminated on or after he attains
his Normal Retirement Age.
Section 4.02 - Deferred Retirement Benefit
- ------------ ---------------------------
A Member who continues employment after his Normal Retirement Date
shall be eligible for a Deferred Retirement Benefit when he terminates
employment.
Section 4.03 - Early Retirement Benefit
- ------------ ------------------------
A Member shall be eligible for an Early Retirement Benefit if his
employment is terminated before he attains his Normal Retirement Age but on or
after he attains his Early Retirement Age. A terminated Member who is entitled
to a Vested Deferred Benefit shall be eligible for an Early Retirement Benefit
on or after he attains his Early Retirement Age.
14
<PAGE>
Section 4.04 - Vested Deferred Benefit
- ------------ -----------------------
A Member who has completed at least five Years of Vesting Service
shall be eligible for a Vested Deferred Benefit if his employment with the
Company is terminated on or after March 1, 1987, for any reason other than death
and before he is eligible for a retirement benefit. If employment with the
Company is terminated for any reason other than death and before the Member's
retirement
(a) prior to March 1, 1987 but on or after March 1, 1976, then ten
Years of Vesting Service is required; and
(b) prior to March 1, 1976, then fifteen Years of Vesting Service is
required.
Section 4.05 - Pre-Retirement Death Benefit
- ------------ ----------------------------
If a Member dies after Early Retirement Age and while employed by the
Company, then the surviving Spouse of the Member shall be entitled to a
survivor's benefit as set forth in Section 5.05 of the Plan.
ARTICLE V
---------
RETIREMENT BENEFIT
------------------
Section 5.01 - Normal Retirement Benefits
- ------------ --------------------------
For the Plan Year commencing March 1, 1989, upon the termination of
service of any Member on his Normal Retirement Date, such Member shall be
entitled to receive a monthly annuity for life equal to the greater of either
his accrued benefit or the greater of (a) or (b) below plus (c) as follows:
(a) An amount equal to the sum of:
(i) .95% of his Average Monthly Earnings not in excess of his
Social Security Covered Compensation multiplied by his Years of Benefit
Accrual Service (up to 33-1/3 years); plus
15
<PAGE>
(ii) .0145% of his Average Monthly Earnings in excess of his Social
Security Covered Compensation multiplied by his Benefit Accrual Service (up
to 33-1/3 years).
(b) An amount equal to $22.50 multiplied by his Years of Benefit
Accrual Service subject to a maximum of $750.00.
(c) An amount equal to the Member's annualized gross base rate of pay
from the Company in effect on November 1, 1986, multiplied by the fraction
2/280, multiplied by a fraction (not greater than 1), the numerator of which is
the Member's Benefit Accrual Service in the Plan and the denominator of which is
10, or if greater, the Member's Benefit Accrual Service under the Plan if the
Member would have continued to participate in the Plan until the Member became
age 55; provided, however, for purposes of this subparagraph, any Member who is
an officer of the Company on November 1, 1986, shall be limited to annualized
gross base rate of pay from the Company of no greater than $50,000.00, and shall
use a fraction of 1/280 instead of 2/280 mentioned above.
(d) For purposes of this Plan, the following additional definitions
shall be as follows:
(i) "Earnings" before March 1, 1976, means gross compensation
received by the Company.
(ii) "Earnings" on and after March 1, 1976, means 1/12th of a
Member's annual gross compensation derived from employment by the Company,
plus such additional amounts as may be reduced from the Member's
compensation and contributed by the Company under the Certified Grocers of
California, Ltd. Employees' Sheltered Savings Plan and the Spending Account
Plan, but excluding any retiree unused sick leave payoff and severance pay;
provided, however, Earnings shall not include any amounts in excess of
$200,000 (and as adjusted by the Secretary of the Treasury in the same
manner and time as provided under Section 415(d) of the Code) for the Plan
Year commencing March 1, 1989 through the Plan Year ending February 28,
1994, and for Plan Years commencing on or after March 1, 1994, Earnings
shall not include amounts in excess of $150,000, as adjusted by the
Secretary of the Treasury for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Code. For a Member who completed less
16
<PAGE>
than 1800 Hours of Service during any calendar year, Earnings shall be such
Member's actual monthly earnings.
(iii) Effective January 1, 1980, "Average Monthly Earnings" means
the average of the Member's monthly "Earnings" during any three calendar
Years within the last ten calendar Years in which Earnings were highest.
If a Member has Earnings for a period of less than three calendar Years,
his "Average Monthly Earnings" shall be the average of his monthly
"Earnings" for the total period worked.
(e) Notwithstanding anything contained in this section to the
contrary, with respect to each Member, the monthly retirement Benefit shall be
the greater of either the amount of the retirement Benefit that accrued through
February 29, 1992, for all Employees (except Employees who are highly
compensated employees described in Section 414(q)(1)(A) or (B) of the Code
(hereinafter "Super Highly Compensated Employee") limited to the retirement
benefit that accrued through February 28, 1989), as determined under the
provisions (including the definition of Credited Service) in the Plan in effect
for the Plan Year ending February 28, 1989, or the amount determined hereunder.
A Member who is a Super Highly Compensated Employee for the Plan Years
commencing on or after March 1, 1990 (but not for the 1989 Plan Year), will be
limited to the greater of the retirement Benefit that accrued through February
28, 1989, as determined under the provisions (including the definition of
Credited Service) in the Plan in effect for the Plan Year ending February 28,
1989, or the amount determined hereunder.
(f) Effective March 1, 1989 through February 28, 1994, for purposes of
providing a transition for the implementation of the limitation on Earnings in
excess of $200,000 (as adjusted) as provided in paragraph (d)(ii) (hereinafter
the "$200,000 Compensation Limitation"), the Participant's Accrued Benefit shall
be the greater of (i) or (ii), but in no event greater than (iii), as follows:
(i) the Participant's Accrued Benefit as of November 30, 1989,
determined without regard to the Compensation Limitation, plus the
Participant's Accrued $200,000 Benefit accrued from December 1, 1989, with
regard to the $200,000 Compensation Limitation,
17
<PAGE>
(ii) the Participant's Accrued Benefit determined on the basis of
the total Years of Benefit Accrual Service and by applying the $200,000
Compensation Limitation to all such Years of Benefit Accrual Service,
(iii) the Participant's Accrued Benefit determined on the basis of
total Years of Benefit Accrual Service without regard to the $200,000
Compensation Limitation.
(g) Effective March 1, 1994, for purposes of providing a transition
for the implementation of the limitation on Earnings in excess of $150,000
(as adjusted) as provided in paragraph (d)(ii) (hereinafter "$150,000
Compensation Limitation"), the Participant's Accrued Benefit shall be the
greater of (i) or (ii), but in no event greater than (iii), as follows:
(i) the Participant's Accrued Benefit as of February 28, 1994, in
accordance with subsection (f), plus the Participant's Accrued Benefit
accrued from March 1, 1994, with regard to the $150,000 Compensation
Limitation,
(ii) the Participant's Accrued Benefit determined on the basis of
the total Years of Benefit Accrual Service and by applying the $150,000
Compensation Limitation to all such Years of Benefit Accrual Service,
(iii) the Participant's Accrued Benefit determined on the basis of
total Years of Benefit Accrual Service without regard to the $150,000
Compensation Limitation.
(h) For purposes of this section, an Employee who received the
compensation as an Employee from more than one of the Companies participating in
this Plan shall have his average monthly compensation from all Companies used to
determine his total credit hereunder, for each Year in which he was employed by
all such Companies. The retirement Benefits to be provided by each such Company
shall be determined by prorating such credit by the ratio of the average monthly
compensation received from such Company over the total average monthly
compensation received from all Companies.
(i) Monthly Benefits, if any, accrued to an Employee of such an
Affiliated Company under a Plan in effect prior to the date of acquisition of
such affiliate by Certified Grocers of
18
<PAGE>
California, Ltd., shall be in accordance with the terms of the prior Plan, if
any, of that affiliate which was in existence prior the date of acquisition and
shall be in addition to benefits provided under this Plan.
(j) In determining the Earnings of an Employee for purposes of the
Compensation limitation under paragraphs (f) or (g), as adjusted, the rules of
Section 414(q)(6) of the Code shall apply, except that in applying such rules,
the term "family" shall include only the spouse of the Employee and any lineal
descendants of the Employee who have not attained age 19 before the close of the
Plan Year. If the Compensation limitation under paragraphs (f) or (g), as
adjusted, applies to the combined Earnings of the Employee or one or more Family
Members, the benefit provisions of this Article will be applied by prorating the
Compensation limitation under paragraphs (f) or (g), as adjusted, among the
Employee and his Family Members in proportion that each such individual's
Compensation determined prior to the application of this limitation bears to the
total Earnings of all such individuals determined prior to the application of
this limitation.
(k) The number of years of Benefit Accrual Service taken into account
under paragraph a(i) for any Member will not exceed the Member's cumulative
permitted disparity limit. The Member's cumulative permitted disparity limit is
equal to 35 minus the number of years credited to the Member for purposes of the
benefit formula or the accrual method under the Plan under one or more qualified
plans or simplified employee pensions (whether or not terminated) ever
maintained by the Company, other than years for which a Member earned a year of
Service under the benefit formula in paragraph (a)(i). For purposes of
determining the Member's cumulative permitted disparity limit, all years ending
in the same calendar year are treated as the same year. If the Member's
cumulative permitted disparity limit is less than the period of years specified
in paragraph (a)(i), then for years after the Member reaches the cumulative
permitted disparity limit and through the end of the period specified in
paragraph (a)(i), the Member's benefit will be equal to the excess benefit
percentage.
Section 5.02 - Early Retirement Benefits
- ------------ -------------------------
(a) Except as provided in Section 5.02(c), a Member who elects to
retire at an Early Retirement Date shall receive a
19
<PAGE>
monthly benefit equal to the amount determined in Section 5.01(a) multiplied by
the appropriate percentage in accordance with the following schedule.
Schedule of Early Retirement Factors
------------------------------------
<TABLE>
<CAPTION>
Years Prior to Normal
Retirement Date Percentage
--------------------- ----------
<S> <C> <C>
0 100
1 95
2 90
3 85
4 80
5 75
6 70
7 65
8 60
9 55
10 or more 50
</TABLE>
Straight line interpolation of these percentages will be employed where
fractional completed years prior to Normal Retirement Date are involved.
(b) Notwithstanding the foregoing, a Member who on March 1, 1983 is
both age 40 or older and has 20 or more years of service, will be eligible to
retire at any time after reaching age 45 or older and having 25 or more years of
service, and will receive a monthly benefit equal to the amount determined in
Section 5.01(a) multiplied by the appropriate percentage in accordance with the
following schedule:
<TABLE>
<CAPTION>
Age at Early Benefit Reduction
Retirement Factor
------------ -----------------
<S> <C>
54 48%
53 46%
52 44%
51 42%
50 40%
49 38%
48 36%
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
47 34%
46 32%
45 30%
</TABLE>
(c) A Member who elects to retire at an Early Retirement Date shall
receive a monthly benefit equal to the amount determined in Section 5.01(c)
multiplied by the appropriate percentage in accordance with the following
schedule:
<TABLE>
<CAPTION>
Schedule of Early Retirement Factors
------------------------------------
Years Prior to Normal
Retirement Date Percentage
--------------------- ----------
<S> <C>
0 through 5 100
6 95
7 90
8 85
9 80
10 75
11 73
12 71
13 69
14 67
15 65
16 63
17 61
18 59
19 57
20 55
</TABLE>
Section 5.03 - Deferred Retirement Benefits
- ------------ ----------------------------
If a Member continues to be employed by the Company after his Normal
Retirement Date and after March 1, 1988, an additional retirement benefit will
accrue to the Member for Credited Service with the Company after his Normal
Retirement Date and for such subsequent service as provided in Section 5.01(a).
Upon retirement at a Deferred Retirement Date, the Member shall receive the
retirement benefit.
21
<PAGE>
Section 5.04 - Termination of Service before Early or Normal Retirement Age
- ------------ ------------------------------------------------------------
In the event of the termination of service of a Member on or after
March 1, 1987, for any reason other than death or disability prior to the
attainment of Early Retirement Date or Normal Retirement Date, a Member's vested
retirement benefit commencing at his Normal Retirement Date shall be equal to a
percentage of the amount determined in (a) or (b) below, in accordance with the
following schedule:
<TABLE>
<CAPTION>
Years of Vesting Service Percentage
------------------------ ----------
<S> <C>
0 - 4 0%
5 or more 100%
</TABLE>
On attainment of Normal Retirement Age, a Member's Normal
Retirement Benefit shall be non-forfeitable.
(a) The monthly amount payable on a single life annuity form shall be
equal to his accrued benefit at his date of termination of service.
(b) The monthly amount on a form other than the single life annuity
shall be the actuarial equivalent of the amount equal to his accrued benefit at
his date of termination of service.
If a Member elects to receive his Vested Deferred Benefit at an Early
Retirement Date, this benefit shall be equal to the amount determined in this
Section 5.04 multiplied by the appropriate percentages in accordance with the
"Schedule of Early Retirement Factors" in Section 5.02.
Section 5.05 - Pre-Retirement Death Benefit
- ------------ ----------------------------
(a) If a Member with a vested benefit dies while employed by the
Company, or if a Member with a vested benefit terminates employment with the
Company after his Early Retirement Age and dies prior to his Benefit
Commencement Date, then the surviving Spouse of such Member, shall be entitled
to a survivor's benefit, provided that such Member and surviving Spouse have
been married to each other throughout the one year period preceding such
Member's death.
22
<PAGE>
(b) For a Member who dies after attaining Early Retirement Age, the
survivor's benefit payable hereunder shall be in an amount equal to the monthly
benefit which such Spouse would have received under Section 5.04(a) of the Plan
had the Member retired immediately prior to his death and elected to receive
benefits under Section 5.04(a) of the Plan, provided that such Member and
surviving Spouse have been married to each other throughout the one year period
preceding such Member's death. Upon the death of the Spouse, no other benefit
shall be payable under the Plan. If the Member dies prior to his earliest
retirement age, the survivor's benefit hereunder shall be in a monthly payment
commencing on the first day of the calendar month following the month in which
the Member would have attained his earliest retirement age and ending with the
calendar month in which the spouse dies, equal to 50% of the monthly amount the
Member would have received if he retired electing a joint and survivor annuity
under Section 5.04(a), and if such Member had:
(i) a Separation from Service on or prior to the date of death,
(ii) survived to the earliest retirement age,
(iii) retired with an immediate qualified Joint and Survivor Annuity
at the earliest retirement age, and
(iv) died on the day after the day on which such Member would have
attained the earliest retirement age.
(c) The provisions of this Section shall apply only if:
(i) a Member has at least one Hour of Service with the Company on
or after August 23, 1984; or
(ii) a Member has at least one Hour of Service on or after January
1, 1976, and when such Member incurred a Separation from Service he had ten
(10) or more Years of Vesting Schedule Service; or
(iii) a Member who has one Hour of Service on or after September 2,
1974, was employed by the Company after the
23
<PAGE>
earliest date on which such Member was eligible for early retirement
benefits under the Plan; and
(iv) such Member dies after August 23, 1984, prior to reaching his
Annuity Starting Date.
Section 5.06 - Maximum Amount of Benefit
- ------------ -------------------------
(a) The amount of annual benefit payable to a Member shall not exceed
the lesser of:
(i) the defined benefit limitation in effect at the beginning of
each Plan Year (which, effective for the Plan Year commencing March 1,
1991, is $115,641, and for each Plan Year thereafter shall be adjusted
automatically as provided by the Secretary of the Treasury as provided by
Section 415(d) of the Code); or
(ii) 100% of the Member's average Compensation for the three
consecutive calendar years while a Member of the Plan in which his
Compensation was highest.
(b) If the annual benefit of the Member commences before the Member's
social security retirement age, but on or after age 62, the defined benefit
dollar limitation as reduced above, if necessary, shall be determined as
follows:
(i) If a Member's social security retirement age is 65, the
dollar limitation for benefits commencing on or after age 62 is determined
by reducing the defined benefit dollar limitation by 5/9 of one percent for
each month by which benefits commence before the month in which the Member
attains age 65.
(ii) If a Member's social security retirement age is greater than
65, the dollar limitation for benefits commencing on or after age 62 is
determined by reducing the defined benefit dollar limitation by 5/9 of one
percent for each of the first 36 months and 5/12 of one percent for each of
the additional months (up to 24 months) by which benefit commence before
the month of the Member's social security retirement age.
24
<PAGE>
If the annual benefit of a Member commences prior to age 62, the
defined benefit dollar limitation shall be the actuarial equivalent of an annual
benefit beginning at age 62, as determined above, reduced for each month by
which benefits commence before the month in which the Member attains age 62. To
determine actuarial equivalence, the interest rate assumption is the greater of
the rate specified in Section 1.02 of the plan or 5 percent. Any decrease in
the defined benefit dollar limitation determined in accordance with this
provision shall not reflect the mortality decrement to the extent that benefits
will not be forfeited upon the death of the Member.
If the annual benefit of a Member commences after the Member's social
security retirement age, the defined benefit dollar limitation as reduced in (a)
above, if necessary, shall be adjusted so that it is the actuarial equivalent of
an annual benefit of such dollar limitation beginning at the Member's social
security retirement age. To determine actuarial equivalence, the interest rate
assumption used is the lesser of the rate specified in Section 1.02 of the plan
or 5 percent.
(c) If the Member has less than 10 years of participation with the
Company, the defined benefit dollar limitation is reduced by one-tenth for each
year of participation (or part thereof) less than ten. If the Member has less
than ten years of service with the Company, the compensation limitation is
reduced by one-tenth for each year of service (or part thereof) less than ten.
The adjustments of this section (c) shall be applied in the denominator of the
defined benefit fraction based upon years of service. Years of service shall
include future years occurring before the Member's normal retirement age. Such
future years shall include the year which contains the date the Member reaches
normal retirement age, only if it can be reasonably anticipated that the Member
will receive a year of service for such year.
(d) If the Member's benefit payable under this Plan is payable in a
form other than a benefit payable on a Life Annuity or a Qualified Joint and
Survivor Life Annuity, the determination as to whether the limitations described
in this Section have been satisfied shall be made in accordance with Regulations
prescribed by the Secretary of the Treasury or his delegate by adjusting such
25
<PAGE>
benefit so that it is equivalent to a benefit in the form of a Life Annuity.
(e) If the Company maintains, or at any time maintained, another
defined benefit plan from which the Member is entitled to receive benefits, the
sum of any Member's benefits from all such plans may not exceed the maximum
benefit described in paragraph (a).
(f) In the case of any Employee who is a Member in this Plan and any
defined contribution plan of the Company, the sum of the defined benefit plan
fraction and the defined contribution plan fraction for any year shall not
exceed 1.0. In the event the sum of such fractions exceeds 1.0 the Committee
shall prescribe the manner in which the annual benefits to this Plan or the
annual addition under any of the other of the Company's defined contribution
plans shall be reduced in order that no plans shall be disqualified under
applicable sections of the Code.
(g) For purposes of applying the limitations of (b), the following
rules shall prevail:
(i) The term "defined benefit plan fraction" shall mean a
fraction the numerator of which is the projected annual benefit payable
under this Plan or any other defined benefit plan of the Company,
(determined as of the close of the year) and the denominator of which is
the lesser of (a) the product of 1.25 multiplied by the dollar limitation
in effect under Section 415(b)(l)(A) of the Code for such year, or (b) the
amount which may be taken into account under Section 415(b)(l)(B) of the
Code with respect to such Employee under the defined benefit plan for such
year multiplied by 1.4.
(ii) The term "defined contribution plan fraction" shall mean the
aggregate annual additions to all defined contribution plans of the
Company, if any, determined as of the close of the year without regard to
limitations on contributions over the sum of the lesser of the following
amounts determined for such year and for each prior Year of Service with
the Company: (a) the dollar limitation in effect under Section 415(c)(l)(a)
of the Code for such year (determined without regard to Section 415(c)(6)
of the Code) multiplied by 1.25, or (b) the amount which may be taken into
26
<PAGE>
account under Section 415(c)(l)(B) (or Section 415(c)(7) or (8), if
applicable) of the Code with respect to such Employee under such plan for
such year multiplied by 1.4.
(h) For purposes of (a) (ii), "Compensation" means a Member's earned
income, wages, salaries, and fees for professional services, and other amounts
received for personal services actually rendered in the course of employment
with the Company (including, but not limited to, commissions paid salesmen,
Compensation for services on the basis of a percentage of profits, commissions
on insurance premiums, tips and bonuses), and excluding the following:
(i) Company contributions to a plan of Deferred Compensation
which are not included in the Member's gross income for the taxable year in
which contributed or Company contributions under a simplified Employee
pension plan to the extent such contributions are deductible by the Member,
or any distributions from a plan of Deferred Compensation;
(ii) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the Member either
becomes freely transferable or is no longer subject to a substantial risk
of forfeiture;
(iii) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(iv) Other amounts which received special tax benefits, or
contributions made by the Company (whether or not under a salary reduction
agreement) towards the purchase of an annuity described in Section 403(b)
of the Code (whether or not the amounts are actually excludable from the
gross income of the Member).
Compensation for any limitation year is the Compensation actually paid
or includable in gross income during such year. The limitation year shall be
the Plan Year.
Section 5.07 - Small Benefit Payments
- ------------ ----------------------
27
<PAGE>
If the monthly payments to a Member are less than $25.00, a lump sum
cash payment shall be paid in lieu of such annuity, provided such vested lump
sum cash payment does not exceed $3,500.00 at the time of distribution (or any
prior distribution) or other such maximum amount which may hereinafter be
prescribed in future governmental regulations. The vested lump sum cash payment
shall be an amount equal to the Actuarial value of the vested monthly benefit
which would otherwise be payable at the Member's Normal Retirement Date on the
Single Life Annuity form. The Actuarial value for each dollar or monthly
benefit otherwise payable shall be determined on the mortality tables as
provided in Section 1.02 and interest rate basis which either would be used (as
of the first day of the plan year which contains the annuity starting date) by
the Pension Benefit Guaranty Corporation for a trusteed single-employer plan to
value a benefit upon termination of an insufficient plan, or as provided under
Section 1.02, which ever produces the larger benefit. If the actuarial value of
the Member's vested accrued benefit is zero, the member shall be deemed to have
received a distribution hereunder of such vested accrued benefit.
Notwithstanding the foregoing, a partial or total distribution may not be made
after the Benefit Commencement Date, regardless of the present value of the non-
forfeitable accrued benefit, without appropriate consent of the Member and the
Member's Spouse.
Section 5.08 - When Benefits Begin
- ------------ -------------------
Unless the Member elects otherwise, benefit payments must begin not
later than the sixtieth day after the close of the Plan Year in which the latest
of the following events occurs:
(a) The Member attains age 65 or earlier normal retirement age; or
(b) The tenth anniversary of the time when the Member commenced
participation in the Plan; or
(c) The Member terminates his service with the Company.
28
<PAGE>
Section 5.09 - Suspension of Benefits Upon Reemployment or After Normal
- ------------ --------------------------------------------------------
Retirement Date
---------------
(a) If any Member again becomes an Employee and completes at least
forty (40) Hours of Service in any month (hereinafter "Section 203(a)(3)(B)
Service") after his Early, Normal or Late Retirement Date, all Benefit payments
under this Article shall cease. Similarly, for a Member who continues to be
employed in Section 203(a)(3)(B) Service after his Normal Retirement Date, the
actuarial value of Benefits which commence later than Normal Retirement Date
will be computed without regard to the deferred commencement date and without
regard to amounts which would have been suspended under the preceding sentence
had the Member been receiving Benefits since his Normal Retirement Date.
(b) If Benefit payments have been suspended, payments shall resume no
later than the first day of the third calendar month after the calendar month in
which the Member ceases to be employed in Section 203(a)(3)(B) Service. The
initial payment upon resumption shall include the payment scheduled to occur in
the calendar month when payments resume. Such Member or his Beneficiary shall
be entitled to the Benefits provided under this Article, reduced by the
Actuarial Equivalent of Benefits or payments paid under this Article before such
re-employment.
(c) For a Member who has commenced receipt of benefit payments, no
Benefit payment shall be withheld by the Plan pursuant to this section unless
the Plan notifies the Employee by personal delivery or first class mail during
the first calendar month or payroll period in which the Plan withholds payments
that his Benefits are suspended. Such notifications shall contain a description
of the specific reasons why Benefit payments are being suspended, a general
description of the Plan provision relating to the suspension of payments, a copy
of such provisions, and a statement to the effect that applicable Department of
Labor regulations may be found in section 2530.203-3 of the Code of Federal
Regulations. In addition, the notice shall inform the Member of the Plan's
procedures for affording a review of the suspension of benefits in accordance
with the claims procedure under Section 12.06.
29
<PAGE>
ARTICLE VI
----------
MANNER AND FORM OF PAYMENT
--------------------------
Section 6.01 - Form of Retirement Benefit
- ------------ --------------------------
A Member's retirement benefit or Vested Deferred Benefit shall, except
as provided under Section 5.07, be payable as an annuity commencing on the first
day of the month next following the Member's Retirement Date. The annuity shall
be paid either as a single life annuity payable monthly during the lifetime of
the Member (hereinafter "Single Life Annuity"), or as one of the other forms
described in the following paragraphs of this Article. If the Member selects
the Single Life Annuity, no benefit shall be payable after the Member's death.
Section 6.02 - Joint and Survivor Annuity for Married Member
- ------------ ---------------------------------------------
(a) A Member's retirement benefit shall, except as provided under
Section 5.07, be payable as an annuity commencing on the Member's Retirement
Date or as of the first day of the month coinciding with or next following his
termination of employment, if later. The annuity shall be paid either as a
Single Life Annuity payable monthly during the lifetime of the Member, or as one
of the other forms described in the following paragraphs of this Article. If
the Member selects the Single Life Annuity, no benefit shall be payable after
the Member's death. All alternative forms of benefit described in Sections
6.03, 6.04, 6.05 and 6.06 shall be the Actuarial Equivalent of the Single Life
Annuity.
(b) The provisions of this section shall take precedence over any
conflicting provisions in the Plan and shall apply to any Member who is credited
with at least one Hour of Service with the Company on or after August 23, 1984,
and such other Members as are covered by subsection (e) of this section. Unless
an optional form of benefit is selected within the Applicable Election period
pursuant to a Qualified Election, a Member's benefit shall be paid as follows:
(i) In the form of a Qualified Joint and Survivor Annuity
providing for an annuity for the life of the Member and a survivor annuity
for the life of the Member's Spouse following the Member's death, at a rate
of 50% of the amount
30
<PAGE>
payable during the joint lives of the Member and the Member's Spouse, or
(ii) If the Member dies after the Earliest Retirement Age, in the
form of a 50% Qualified Pre-Retirement Survivor Annuity providing for an
immediate annuity for the life of the surviving Spouse at a rate at least
equal to the survivor annuity described in subsection (i).
(iii) If the Member dies on or before the Earliest Retirement Age,
in the form of a 50% Qualified Pre-Retirement Survivor Annuity providing
for a deferred annuity for the life of the Spouse at a rate equal to the
survivor annuity which would have been payable under subsection (i) if the
Member had separated from Service on his or her date of death, survived to
the Earliest Retirement Age, retired with an immediate 50% Qualified Joint
and Survivor Annuity at the Earliest Retirement Age, and died on the day
after the Earliest Retirement Age. The annuity payable under this
subsection shall begin at the Earliest Retirement Age unless the surviving
Spouse elects a later date, in which case the payments shall be actuarially
adjusted on a reasonable basis to reflect the delayed commencement of
payments.
(c) Whenever any of the following terms is used in the Plan it shall
have the meaning specified below unless the context clearly indicates to the
contrary.
(i) "Annuity Starting Date" means the first day of the first
period for which an amount is paid as an annuity or any other form.
(ii) "Applicable Election Period" shall mean with respect to the
Qualified Joint and Survivor Annuity described in subsection (b)(i), the
ninety day period ending on the date benefit payments are to commence; and,
with respect to the Qualified Pre-Retirement Survivor Annuities described
in subsections (b)(ii) and (b)(iii), the period which begins on the first
day of the Plan Year in which the Member attains age 35 or, if earlier, the
date of his or her Termination of Service and ends on the date of the
Member's death.
31
<PAGE>
(iii) "Earliest Retirement Age" means the earliest date on which,
under the Plan, the Member could elect to receive retirement benefits.
(iv) "Qualified Election" means a written election of a form of
benefit other than a Qualified Joint and Survivor Annuity or a Qualified
Pre-Retirement Survivor Annuity. An election shall be a Qualified Election
only if the Member's Spouse consents to the election in writing and his or
her consent is witnessed by a Plan representative or notary public. Any
waiver of a Qualified Joint and Survivor Annuity or a Qualified
Preretirement Survivor Annuity shall not be effective unless: (a) the
-
Member's spouse consents in writing to the election; (b) the election
-
designates a specific alternate beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be changed
without spousal consent (or the Spouse expressly permits designations by
the Member without any further spousal consent); (c) the spouse's consent
-
acknowledges the effect of the election; and (d) the spouse's consent is
-
witnessed by a plan representative or notary public. Additionally, a
Member's waiver of the qualified joint and survivor annuity will not be
effective unless the election designates a form of benefit payment which
may not be changed without spousal consent (or the spouse expressly permits
designations by the Member without any further spousal consent). If it is
established to the satisfaction of a Plan Administrator that such written
consent may not be obtained because there is no spouse or the spouse cannot
be located, a waiver will be deemed a Qualified Election.
Any consent by a spouse obtained under this provision (or
establishment that the consent of a spouse may not be obtained) shall be
effective only with respect to such spouse. A consent that permits
designations by the Member without any requirement of further consent by
such Spouse must acknowledge that the spouse has the right to limit consent
to a specific beneficiary, and a specific form of benefit where applicable,
and that the Spouse voluntarily elects to relinquish either or both of such
rights. A revocation of a prior waiver may be made by a Member without the
consent of the Spouse at any time prior to the commencement of benefits.
The number of revocations shall not be limited. No consent
32
<PAGE>
obtained under this provisions shall be valid unless the Member has
received a notice as provided in paragraph (d). Notwithstanding this
consent requirement, if the Member establishes to the satisfaction of the
Company that such written consent cannot be obtained because the Member has
no Spouse, or because the Spouse cannot be located, the election shall be
deemed a Qualified Election.
(v) "Spouse" means Spouse or surviving Spouse of the Member provided
that a former Spouse will be treated as the Spouse to the extent provided
under a qualified domestic relations order as described in Section 414(p)
of the Code, and with respect to benefits provided under subsection (b)
(ii) and (b)(iii) such Spouse and Member were married throughout the one
year period ending on the Member's death.
(d) Within no less than 30 days and no more than 90 days prior to the
Annuity Starting Date, the Company shall provide the Member with a written
explanation of the following:
(i) The terms and conditions of the Qualified Joint and Survivor
Annuity or a Qualified Pre-Retirement Survivor Annuity, as applicable;
(ii) The Member's right to elect a benefit other than a Qualified
Joint and Survivor Annuity or a Qualified Pre-Retirement Survivor Annuity,
as applicable, and the effect of such an election;
(iii) The rights of the Member's Spouse with respect to the
Qualified Joint and Survivor Annuity or a Qualified Pre-Retirement Survivor
Annuity, as applicable;
(iv) The right of the Member to revoke a previous election and the
effect of such revocation; and
(v) With respect to the Qualified Joint and Survivor Annuity, the
relative values of the various optional forms of benefit under the Plan.
(e) (i) If the present value of a Member's vested benefit exceeds
(or at the time of any prior distribution exceeded) $3,500, and the benefit is
immediately distributable, the Member
33
<PAGE>
and the Member's Spouse (or where either the Member or the Spouse has died, the
survivor) must consent to any distribution of such benefit. The consent of the
Member and the Member's Spouse shall be obtained in writing in accordance with
subsection (c)(ii).
(ii) Notwithstanding the foregoing, only the Member need consent to
the commencement of a distribution in the form of a qualified Joint and
Survivor Annuity while the benefit is immediately distributable. Neither
the consent of the Member nor the Member's Spouse shall be required to the
extent that a distribution is required to satisfy section 401(a)(9) or
section 415 of the Code.
(iii) A benefit is immediately distributable if any part of the
benefit could be distributed to the Member (or surviving Spouse) before the
participant attains (or would have attained if not deceased) the later of
Normal Retirement Age or age 62.
Section 6.03 - Life Annuity for Unmarried Members
- ------------ ----------------------------------
A Member who does not have an Eligible Spouse at his Benefit
Commencement Date shall have his benefit paid on the Single Life Annuity form
under Section 6.01 unless he elects to have his benefit paid in another form as
provided herein.
Section 6.04 - Joint and Survivor Annuity for Other Members
- ------------ --------------------------------------------
Benefits may be paid in one of the following forms:
(a) 50% Joint and Survivor Life Annuity
-----------------------------------
A monthly benefit payable during the lifetime of the Member and upon
his death 50% of such monthly benefit payable to his Eligible Spouse for the
Eligible Spouse's lifetime. No benefit shall be payable after the death of the
Member and his Eligible Spouse.
(b) 100% Joint and Survivor Life Annuity
------------------------------------
A monthly benefit payable during the lifetime of the Member and upon
his death 100% of such monthly benefit payable to his Eligible Spouse for
Eligible Spouse's lifetime. No benefit
34
<PAGE>
shall be payable after the death of the Member and his Eligible Spouse.
Section 6.05 - Period Certain Life Annuity Benefit
- ------------ -----------------------------------
This form of benefit provides for monthly payments continuing to the
first day of the month in which the Member's death occurs or the end of the
certain period of 120 months, whichever is later. If the Member dies before the
end of the certain period, payments in the same amount shall be continued to his
designated beneficiary to the end of such period.
Section 6.06 - Optional Temporary Annuity
- ------------ --------------------------
A Member whose retirement benefit or Vested Deferred Benefit commences
under the Plan before the earliest date on which his primary insurance benefit
begins under the Social Security Act may elect to receive an adjusted benefit
prior to the first date on which he becomes eligible to receive such primary
insurance benefit and a reduced benefit thereafter. The adjusted benefit shall
be calculated so that his retirement benefit or Vested Deferred Benefit payable
to the Member prior to the date on which he becomes eligible to receive his
primary insurance benefit shall be equal as nearly as possible to the sum of (a)
the reduced amount payable after such date and (b) the estimated primary
insurance benefit payable to the Member beginning on such date.
A Member may elect this Optional Temporary Annuity by filing a written
request with the Plan Administrator prior to his Retirement Date.
Section 6.07 - Minimum Distribution of Benefits
- ------------ --------------------------------
Notwithstanding any other provision contained herein to the contrary,
the entire interest of the Member will be distributed either:
(a) not later than April 1st of the year following the year in which
the Member attains age 70-1/2 or, in the case of an employee who is not a Key
Employee and who attained age 70 prior to 1988, in the taxable year in which
the Member retires, whichever is later; or
35
<PAGE>
(b) commencing not later than the taxable year described in paragraph
(a) and payable over the life of the Member or over the lives of the Member and
the Member's Spouse, or over a period not exceeding the life expectancy of the
Member or over the joint life expectancies of the Member and the Member's
Spouse.
Section 6.08 - Minimum Distribution Following Death
- ------------ ------------------------------------
If a Member dies after his Benefit Commencement Date and before his
entire interest has been distributed to him, then the remaining portion of such
interest, if any, will continue to be distributed at least as rapidly as
provided under the form of distributions in effect prior to death.
If a Member with a vested benefit dies prior to his Benefit
Commencement Date, the only benefit payable shall be as provided in Section
5.05.
ARTICLE VII
-----------
CONTRIBUTIONS AND FUNDING
-------------------------
Section 7.01 - Funding of Plan
- ------------ ---------------
The Plan shall be funded for the exclusive purpose of providing
benefits to Members and their beneficiaries and for defraying reasonable
expenses in administering the Plan.
Section 7.02 - Company Contributions
- ------------ ---------------------
The Company shall bear the total costs of the Plan. Such costs will
include the amounts necessary to provide benefit payments to Plan Members and
their beneficiaries and the payment of administrative expenses including the
payment of premiums for Plan termination insurance to the Pension Benefit
Guaranty Corporation.
Section 7.03 - Contributions to Group Annuity Contract
- ------------ ---------------------------------------
Contributions to the Plan and benefit payments from the Plan may be
made under one or more group annuity contracts issued by Equitable Life
Assurance Society of the United States, or any other insurance company, or may
be made under a trust established for that purpose.
36
<PAGE>
Section 7.04 - No Return of Company Contributions; Exceptions
- ------------ ----------------------------------------------
Contributions to the Plan may not be returned to the Company, except
in the following instances
(a) If the amount of a contribution is incorrect, such as an amount
based on an arithmetical error or a mistake in fact, the amount in excess of the
correct amount may be returned to the Company within one year after the payment
of the contribution.
(b) If the Plan fails to qualify under Section 401(a) of the Internal
Revenue Code, contributions made to the Plan may be returned to the Company
within one year after the date of denial of qualification of the Plan.
(c) If a contribution is disallowed as a federal tax deduction under
Section 404(a)(2) of the Internal Revenue Code, then to the extent the deduction
is disallowed the contribution may be returned to the Company within one year
after the disallowance of the contribution.
(d) If the Plan is terminated, contributions may be returned to the
Company as provided under the provisions of Article IX.
ARTICLE VIII
------------
ADMINISTRATION
--------------
Section 8.01 - Named Fiduciary
- ------------ ---------------
The Company has the overall responsibility and authority as the named
fiduciary to manage and control the operation and administration of the Plan and
may designate one or more persons or committees to carry out its fiduciary
responsibilities and authority under the Plan and its duties as the Plan
Administrator.
Section 8.02 - Benefits Committee as Plan Administrator
- ------------ ----------------------------------------
The Benefits Committee, whose membership is to be determined by the
Company, is the named fiduciary to act on behalf of the Company in the
management and control of the Plan assets and
37
<PAGE>
to establish and carry out a funding policy consistent with the Plan objectives
and with the requirements of any applicable law. The Benefits Committee shall
carry out the Company's responsibility and authority:
(a) To appoint one or more persons to serve as investment manager with
respect to all or part of the Plan assets, including assets maintained under
separate accounts of an insurance company;
(b) To allocate the responsibilities and authority being carried out
by the Benefits Committee among the Members of the Committee;
(c) To take any action appropriate to assure that the Plan assets are
invested for the exclusive purpose of providing benefits to Members and their
beneficiaries in accordance with the Plan and defraying reasonable expenses of
administering the Plan, subject to the requirements of any applicable law; and
(d) To employ one or more persons to render advice with respect to any
responsibility or authority being carried out by the Benefits Committee.
Section 8.03 - Additional Duties of Benefits Committee
- ------------ ---------------------------------------
The Company has also designated the Benefits Committee, whose
membership is to be determined by the Company, to carry out its fiduciary
responsibilities and authority under the Plan and its duties as the Plan
Administrator.
(a) To determine and advise the Company as to the amounts of Company
contributions to the Plan, based on appropriate information, and in a manner
consistent with the funding policy established by the Benefits Committee;
(b) To determine the amounts and time of payment of benefits and the
rights of Members and beneficiaries to Plan benefits, to take any actions
necessary to assure timely payment of benefits to any Member or beneficiary
eligible to receive benefits under this Plan, and to assure a full and fair
review for any person who is denied a claim to any benefit under the plan;
38
<PAGE>
(c) To maintain Plan records, to communicate appropriate information
to the Board of Directors, to communicate to Members and their beneficiaries,
and to submit required reports to appropriate authorities;
(d) To employ other persons to render advice with respect to any
responsibility or authority being carried out by the Benefits Committee,
including the employment of counsel, and to assist in the administration of the
Plan;
(e) To employ, on behalf of Plan Members, an enrolled actuary and an
independent qualified public accountant;
(f) To take any action necessary or appropriate to assure that the
Plan is administered for the exclusive purpose of providing benefits to Members
and their beneficiaries in accordance with the Plan and defraying reasonable
expenses of administering the Plan, subject to the requirements of any
applicable law; and
(g) Generally, to operate and administer the Plan in all matters other
than those for which the Benefits Committee has been designated.
Section 8.04 - Authority of Benefits Committee
- ------------ -------------------------------
The Benefits Committee shall have absolute discretion in carrying out
its responsibilities under Section 8.01 and 8.02, and any decision by the
Benefits Committee shall be final and binding on all Members and beneficiaries.
Without limiting the authority or responsibilities of the Benefits Committee
contained in this Article, the Benefits Committee shall have the discretionary
authority to determine eligibility for benefits and to construe the terms of the
Plan.
39
<PAGE>
ARTICLE IX
----------
AMENDMENT AND TERMINATION OF THE PLAN
-------------------------------------
Section 9.01 - Amendment of the Plan
- ------------ ---------------------
The Company reserves the right to modify or amend this Plan from time
to time and to any extent that it may deem advisable including any amendment
deemed necessary to insure the continued qualification of this Plan under the
provisions of the Internal Revenue Code. Any amendment shall be made pursuant
to a resolution duly adopted by the Company's Board of Directors. No amendment
shall have the effect of re-vesting in the Company the whole or any part of the
assets of this Plan or of diverting any part of the assets of this Plan to
purposes other than for the exclusive benefit of the Members and their
beneficiaries at any time prior to the satisfaction of all the liabilities under
this Plan with respect to such persons. If such amendment reduces the accrued
benefit of any Member, such amendment shall not be valid unless approved by the
Secretary of Labor or unless he fails to take action disapproving such amendment
within 90 days after receiving notice of it. No amendment shall adversely
affect the Vested Deferred Benefit of a Member.
A Plan amendment that changes the Plan's vesting schedule shall not be
effective with respect to any Member with three Years of Vesting Service who
makes an irrevocable election during the election period to have such benefit
determined without regard to such amendment.
For purposes of the preceding paragraph, the election period shall
begin on the date the Plan amendment is adopted and end on the latest of the
following dates:
(a) The date which is 60 days after the Plan amendment is adopted;
(b) The date which is 60 days after the Plan amendment is effective;
or
(c) The date which is 60 days after the day the Member is issued
written notice of the Plan amendment by the Plan Administrator.
40
<PAGE>
Section 9.02 - Termination of the Plan
- ------------ -----------------------
The Company reserves the right to terminate the Plan at any time.
Upon termination of the Plan by the Company or upon partial termination of the
Plan, the rights of all affected Members to their accrued benefits to the date
of termination or date of partial termination shall be non-forfeitable as of
such date except as provided under the provisions of Article X.
Section 9.03 - Allocation of Assets Upon Plan Termination
- ------------ ------------------------------------------
Upon termination of the Plan in accordance with the provisions of
Section 9.02 but subject to the provisions of Section 10.02, the Plan's assets
shall be allocated in accordance with the following order:
(a) Benefits payable as an annuity to
(i) Members and their beneficiaries who began receiving benefits
at least three years prior to the termination date of the Plan, and
(ii) Members and their beneficiaries who could have been receiving
benefits as of three years prior to the termination date of the Plan if
they had retired prior to the beginning of the three year period and if
their benefits had commenced (on the single life annuity form under this
Plan) as of the beginning of such period, based on the provisions of the
Plan (as in effect during the five year period ending on such termination
date) under which benefits would be least.
(b) All other benefits, which are insured by the Pension Benefit
Guaranty Corporation, determined without regard to Section 4022(b)(5) of the
Employee Retirement Income Security Act of 1974 or would have been so insured if
Section 4022(b)(6) of such Act did not apply.
(c) All other non-forfeitable benefits under the Plan
(d) All other benefits under the Plan.
If the assets of the Plan available for allocation under (a) or (b)
are insufficient to satisfy in full the benefits which
41
<PAGE>
are described, the assets shall be allocated pro rata among such individuals on
the basis of the present value (as of the Plan's date of termination) of their
respective benefits.
Any residual assets of the Plan remaining after the satisfaction of
all liabilities of the Plan shall be distributed to the Company.
Section 9.04 - Merger or Consolidation
- ------------ -----------------------
No merger or consolidation with, or transfer of assets or liabilities
to, any other Plan shall be made unless, in the event the Plan is terminated
immediately after such merger, consolidation or transfer, each Member in this
Plan would receive a benefit equal to or greater than the benefit he would have
been entitled to receive if this Plan terminated immediately before the merger,
consolidation or transfer.
42
<PAGE>
ARTICLE X
---------
LIMITATION OF BENEFITS FOR HIGHLY PAID MEMBER
---------------------------------------------
Section 10.01 - Limitation on Certain Distributions
- ------------- -----------------------------------
(a) For Plan Years beginning before March 1, 1994.
(i) Notwithstanding any other provision of the Plan, if within
ten (10) years of establishing the Plan, a Company terminates the Plan or
discontinues contributions or if the full current costs of the Plan have
not been met for its first ten (10) years of operation, or if at any time
after establishing the Plan full current costs of the Plan have not been
met (unless such costs have been met on said date or have been subsequently
funded for the first time), and if within the ten (10) year period
commencing with establishing the Plan there has been an amendment which
substantially increases the extent of possible discrimination under the
Plan, none of the twenty-five (25) highest paid Members of such Company on
termination of the Plan whose anticipated annual payments under the Normal
Retirement Benefit will total more than $1,500.00 shall be entitled to
Benefits, including any Benefits unrestricted by this Section theretofore
received, the cost of which is attributable to contributions of such
Company and exceeds the largest of:
a. The Companies' contributions (or funds attributable
-
thereto) which would have been applied to Benefits for such Member had
the Plan as in effect on December 31, 1975, been continued without
change.
b. $20,000.00 or
-
c. 20% of the first $50,000.00 of such Member's average
-
annual Compensation paid to him between the establishment of the Plan
(or the date of an amendment that substantially increases the extent
of possible discrimination) and the date of termination of the Plan or
discontinuance of contributions, or on which full current costs of the
Plan as to such Company have not been met, whichever is earlier,
multiplied by the number of full years between such dates; or
43
<PAGE>
d. An amount equal to the present value of the maximum
-
benefit for such Member described in Section 4022(b)(3)(B) of ERISA,
or in the case of a Member who is a substantial owner (as that term is
defined in Section 4022(b)5(a) of ERISA), an amount equal to the
present value of the maximum benefit guaranteed such Member under
Section 4022(b)(5) of ERISA, all determined on the date of Plan
termination or the date benefits commence, whichever is earlier.
provided, however, that this Section shall not restrict the full payment of
Benefits under the Plan to any Member or beneficiary while the Plan
continues in full effect and its full current costs continue to be met.
(ii) If and when the contributions of the Company are sufficient at
a later date to meet its full current costs, under the Plan, the excess of
the benefits, otherwise payable, over the actual benefits paid to a retired
Member during the period that such full current costs had not been met,
shall be paid in a lump sum to such Member or, if such Member has died in
the meantime, to such Member's spouse, if any, and otherwise to such
Member's estate.
(iii) Any funds becoming available by reason of the application of
this Section to the Members restricted hereby shall, in the event of
termination of the Plan or discontinuance of contributions, be applied to
increase proportionately the benefits of all other Members then in the
Plan. If funds so becoming available exceed the amount necessary to
provide full benefits accrued to the date in question for such other
Members, the excess shall be applied for the benefit of the Members
restricted hereunder.
(b) For Plan Years beginning on or after March 1, 1994, in the event
of Plan termination, the benefit of any highly compensated Member or highly
compensated former Member is limited to a benefit that is nondiscriminatory
under Section 401(a)(4) of the Code, as follows:
(i) Benefits distributed to any of the twenty-five (25) most
highly compensated Members and highly compensated
44
<PAGE>
former Members are restricted such that the annual payments are no greater
than the amount equal to the payment that would be made on behalf of the
Member under a single life annuity that is the Actuarial Equivalent of the
sum of the Member's Accrued Benefit and the Member's other benefits under
the Plan.
(ii) Paragraph (i) shall not apply if:
a. after payment of the benefit to a Member described in
-
paragraph (i), the value of Plan assets equals or exceeds 110% of the
value of current liabilities, as defined in Section 412(l)(7) of the
Code,
b. the value of the benefit for a Member described in
-
paragraph (i) is less than 1% of the value of current liabilities, or
(iii) for purposes of this Section, benefit includes any periodic
income, any withdrawal values payable to a living Member, and any death
benefits not provided for by insurance on the Member's life.
ARTICLE XI
----------
TOP HEAVY PROVISIONS
--------------------
Section 11.01 - Top Heavy Definitions
- ------------- ---------------------
Whenever any of the following terms is used in the Plan with the first
letter or letters capitalized, it shall have the meaning specified below unless
the context clearly indicates to the contrary.
(a) "Aggregation Group" means each Plan of the Company in which a Key
Employee is a Member and each other plan of the Company which enables the Plan
or Plans containing a Key Employee to meet the antidiscrimination requirements
of Sections 401(a)(4) or 410 of the internal Revenue Code. In addition, the
Administrator may include in the Aggregation Group any other Plan of the Company
that satisfies the requirements of Sections 401(a)(4) and 410 of the Code when
considered together with the other Plans in the Aggregation Group.
45
<PAGE>
(b) "Determination Date" means with respect to any Plan Year the last
day of the preceding Plan Year, or in the case of the first plan year of the
Plan, the last day of such plan year.
(c) "Key Employee" means a Member who, at any time during the Plan
Year or any of the four preceding Plan Years, is:
(i) An officer of the Company.
(ii) One of the ten Employees owning (or considering as owning
within the meaning of Section 318 of the Code) the largest interest in the
Company.
(iii) A five percent owner of the Company, or
(iv) A one percent owner of the Company having an annual
Compensation from the Company or more than $150,000.
For purposes of paragraph (i), no more than fifty Employees (or, if lesser,
the greater of three Employees or ten percent of the Employees) shall be
treated as officers. In addition, a "Non-Key Employee" means an Employee
who is not a Key Employee. The beneficiaries of an Employee acquire the
character of such Employee.
(d) "Top Heavy Group" means any Aggregation Group if the sum of the
Actuarial Equivalent of cumulative accrued benefits for Key Employees under all
defined benefit pension plans included in the Aggregation Group (using the
provisions of Section 1.02 as the actuarial assumptions for all such defined
benefit plans), and the sum of the accounts of Key Employees under all defined
contribution plans included in the Aggregation Group, exceeds 60% of such
amounts determined for all employees.
(e) "Top Heavy Plan" means each Plan of the Company or Companies
required to be included in an Aggregation Group, if the Aggregation Group is a
Top Heavy Group.
Section 11.02 - Special Top Heavy Rules
- ------------- -----------------------
For purposes of determining whether a Top Heavy Group exists, the
following special rules shall apply:
46
<PAGE>
(a) Benefits derived from voluntary or mandatory Member contributions
and Company contributions shall be taken into account.
(b) The Aggregate of distributions made to any Member from the Plan or
any plans in the Aggregation Group, during the five year period ending on the
Determination Date shall be taken into account in determining the Actuarial
Equivalent of cumulative accrued benefit of any Member or the account of any
Member under any such plan.
(c) If a Member who was a Key Employee ceases to be a Key Employee for
a Plan Year, the cumulative accrued benefit or account of such Member will not
be taken into account for determining whether a Top Heavy Group exists for such
Plan Year.
(d) Solely for the purpose of determining if the Plan, or any other
plan included in a Top Heavy Group of which this Plan is a part, is top heavy,
the accrued benefit of a Member other than a Key Employee shall be determined
under (i) the method, if any, that uniformly applies for accrual purposes under
all plans maintained by the Member or by other members of an Affiliated Company
of which the Company is a member and any other entity required to be aggregated
with the Company pursuant to regulations under Section 414 of the Code, or (ii)
if there is no such method, as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional accrual rate of Section
411(b)(1)(C) of the Code.
Section 11.03 - Top Heavy Benefits and Vesting
- ------------- ------------------------------
If the Plan is a Top Heavy Plan for any Plan Year beginning after
December 31, 1983, then with respect to such Plan Year the following provisions
shall apply:
(a) Each Member who has completed three or more Years of Service with
the Company shall be fully Vested in his or her accrued benefit derived from
Company contributions.
(b) Notwithstanding any other provision in this plan except subsection
(c) or (d) below, each Member who is not a Key Employee and has completed 1,000
hours of service will accrue a benefit (to be provided solely by employer
contributions and
47
<PAGE>
expressed as a life annuity commencing at Normal Retirement Age) of not less
than two percent of his or her highest average Compensation for the five
consecutive years for which the Member had the highest Compensation. The minimum
accrual is determined without regard to any Social Security contribution. The
minimum accrual applies even though under other plan provisions, the Member
would not otherwise be entitled to receive an accrual, or would have received a
lesser accrual for the year because
(i) the non-key employee fails to make mandatory contributions to
the Plan,
(ii) the non-key employee's Compensation is less than a stated
amount,
(iii) the non-key employee is not employed on the last day of the
accrual computation period, or
(iv) the plan is integrated with Social Security.
(c) No additional benefit accruals shall be provided pursuant to
subsection (b) above to the extent that the total accruals on behalf of the
Member attributable to employer contributions will provide a benefit expressed
as a life annuity commencing at Normal Retirement Age that equals or exceeds 20
percent of the Member's highest average Compensation for the five consecutive
years for which the Member had the highest Compensation.
(d) The provisions in (b) above shall not apply to any Member to the
extent that the Member is covered under any other plan or plans of the Company
and the Company has provided the minimum allocation or benefit requirement
applicable to this top-heavy plan in the other plan or plans.
(e) The limitation of 1.25 contained in Section 5.06(c) shall be
replaced by 1.0.
48
<PAGE>
ARTICLE XII
-----------
MISCELLANEOUS PROVISIONS
------------------------
Section 12.01 - Evidence of Survival
- ------------- --------------------
Where a benefit payment is contingent upon the survival of any person,
evidence of such person's survival must be furnished either by personal
endorsement of the check drawn for such payment or by other evidence
satisfactory to the Plan Administrator.
Section 12.02 - Non-Alienation of Benefits
- ------------- --------------------------
Neither the Company nor the Trustee shall recognize any transfer,
mortgage, pledge, hypothecation, order or assignment by any Member or
beneficiary of all or part of his interest hereunder, and such interest shall
not be subject in any manner to transfer by operation of law, and shall be
exempt from the claims of creditors or other claimants from all orders, decrees,
levies, garnishment and/or executions and other legal or equitable process or
proceedings against such Member or beneficiary to the fullest extent which may
be permitted by law. The preceding sentence shall apply to the creation,
assignment, or recognition of a right to any benefit payable with respect to a
Member pursuant to a domestic relations order, unless such order is determined
to be a qualified domestic relations order as defined in Section 414(p) of the
Code, or upon approval of the committee in its sole discretion any domestic
relations order entered before January 1, 1985. Notwithstanding any other
provisions contained in the Plan that limit the right of a Member to commence to
receive a distribution from the Plan, payment of benefits from the Plan to an
alternate payee under a qualified domestic relations order shall commence at
such time as provided in the qualified domestic relations order or as soon
thereafter as administratively feasible.
49
<PAGE>
Section 12.03 - Payments to Incompetents
- ------------- ------------------------
If the Company receives evidence satisfactory to it that (a) a payee
entitled to receive any payment under the Plan is physically or mentally
incompetent to receive such payment or is a minor, (b) another person or an
institution is then maintaining or has custody of such payee and (c) no
guardian, Committee or other representative of the estate of such payee has been
appointed, the Plan Administrator may direct that payments be made (in the case
of a minor at a rate not exceeding $50.00 a month) to such other person or
institution.
Section 12.04 - Misstated Information
- ------------- ---------------------
If any information has been misstated on which a benefit under the
Plan with respect to a person was based, such benefit shall not be invalidated
but the amount of the benefit shall be adjusted to the proper amount as
determined on the basis of the correct information. Overpayments, if any, with
interest as determined by the Plan Administrator shall be charged against any
payments accruing with respect to the person. The Plan Administrator reserves
the right to require proof of age of any person entitled to a benefit under this
Plan.
50
<PAGE>
Section 12.05 - Beneficiary
- ------------- -----------
Subject to the consent of the member's spouse as provided in Section
6.02, a Member shall designate, with the right to change such designation, a
beneficiary to receive any payment or payments to which a beneficiary may become
entitled under the Plan in the event retirement benefits are distributed in
accordance with Section 6.05. Any other person to whom periodic payments are
payable under this Plan may designate, with the right to change such
designation, a beneficiary to receive any remaining periodic payments becoming
due upon the death of such person, provided that no prior conflicting
designation by a Member is then in effect with respect thereto. If no
designated beneficiary is surviving when a payment is to be made to a
beneficiary, the commuted value of any remaining periodic payments shall be made
to the person or persons in the first surviving class of the following classes
of successive preference beneficiaries: (a) the Member's widow or widower, (b)
the Member's surviving children, or (c) the executors or administrators of the
person upon whose death the payments become due.
Section 12.06 - Forfeiture Upon Failure to Locate
- ------------- ---------------------------------
The Committee shall declare a forfeiture of any Account of any Member
or beneficiary under the Plan who cannot be found within one year after the
benefit would have otherwise been payable under the Plan. Neither the Company,
the Committee or the Trustee shall be obligated to search for the whereabouts of
any person. Any amounts forfeited shall be used to reduce Company
contributions. In the event such Member or beneficiary is thereafter located,
such previously forfeited benefit shall be restored.
Section 12.07 - Direct Transfer of Benefits
- ------------- ---------------------------
(a) This paragraph applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this paragraph, a Distributee may
elect, at the time and in the manner prescribed by the Administrator, to have
any portion of an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct Rollover.
51
<PAGE>
(b) The following definitions apply to paragraph (a):
(i) An Eligible Rollover Distribution is any distribution of all
or any portion of the balance to the credit of the Distributee, except that
an Eligible Rollover Distribution does not include: any distribution that
is one of a series of substantially equal periodic payments (not less
frequently than annually), made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and the
portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized appreciation
with respect to employer securities).
(ii) An Eligible Retirement Plan is an individual retirement account
described in Section 408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in Section
401(a) of the Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution to
the surviving spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
(iii) A Distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are Distributees with regard to the interest of
the spouse or former spouse.
(iv) A Direct Rollover is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
Section 12.08 - Claims Procedure
- ------------- ----------------
All claims for benefits under the Plan shall be directed to the
attention of the Benefits Committee. If the Committee
52
<PAGE>
determines that any individual who has claimed a right to receive benefits under
the Plan is not entitled to receive all or any of the benefits claimed, the
claimant shall be informed in writing of the reasons for the denial, with
specific reference to pertinent Plan provisions and with a description of the
review procedures set forth below.
The claimant may within 60 days thereafter submit to the Committee by
certified or registered mail such further information as will, in the claimant's
opinion, establish his rights to such benefits. If upon receipt of this further
information, the Committee determines that the claimant is not entitled to the
benefits claimed, it shall afford the claimant or his representative reasonable
opportunity to submit issues and comments in writing and to review pertinent
documents. The Committee shall render its final decision with the specific
reasons therefor in writing and shall transmit it to the claimant by certified
mail within 60 days of any such review.
Section 12.09 - Applicable Law
- ------------- --------------
The law of the State of California shall be the controlling state law
in all matters relating to the Plan and shall apply to the extent it is not
preempted by the laws of the United States of America.
53
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument on the ___
day of _________________, 1995.
CERTIFIED GROCERS OF CALIFORNIA, LTD.
By -------------------------------------------
, President
By --------------------------------------------
, Secretary
(SEAL)
APPROVED BY:
FARMER & RIDLEY
By___________________________________
Attorneys for Company,
Certified Grocers of California, Ltd.
54
<PAGE>
EXHIBIT 10.3
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEES' SHELTERED SAVINGS PLAN
---------------------------------
FARMER & RIDLEY
444 South Flower Street
Suite 2300
Los Angeles, California 90071
(213) 626-0291
<PAGE>
TABLE OF CONTENTS
-----------------
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEES' SHELTERED SAVINGS PLAN
---------------------------------
<TABLE>
<CAPTION>
ARTICLE Page
- ------- ----
<S> <C>
I NAME AND PURPOSE..................................................... 1
Section 1.1: Name................................................ 1
Section 1.2: Purpose............................................. 1
II DEFINITIONS.......................................................... 1
Section 2.1: Definitions......................................... 1
(a) "Account"................................................ 1
(b) "Anniversary Date"....................................... 2
(c) "Board" or "Board of Directors".......................... 2
(d) "Break in Service Year".................................. 2
(e) "Code"................................................... 2
(f) "Committee".............................................. 2
(g) "Company"................................................ 2
(h) "Compensation"........................................... 2
(i) "Date of Employment"..................................... 3
(j) "Disability"............................................. 3
(k) "Eligible Employee"...................................... 3
(l) "Employee"............................................... 3
(m) "Entry Date"............................................. 3
(n) "ERISA".................................................. 3
(o) "Family Member".......................................... 3
(p) "Fund", "Trust", or "Trust Fund"......................... 4
(q) "Hour of Service"........................................ 4
(r) "Normal Retirement Date"................................. 4
(s) "Participant"............................................ 4
(t) "Plan"................................................... 4
(u) "Plan Year".............................................. 4
(v) "Rollover Account"....................................... 5
(w) "Trustee" or "Trustees".................................. 5
(x) "Valuation Date"......................................... 5
(y) "Year of Service"........................................ 5
III BENEFITS COMMITTEE................................................... 5
Section 3.1: Concerning the Committee............................ 5
Section 3.2: Indemnification..................................... 6
Section 3.3: Use of Company's Facilities by
Committee........................................... 7
IV EMPLOYEES ENTITLED TO PARTICIPATE.................................... 7
</TABLE>
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TABLE OF CONTENTS
-----------------
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEES' SHELTERED SAVINGS PLAN
---------------------------------
<TABLE>
<CAPTION>
ARTICLE Page
- ------- ----
<S> <C>
Section 4.1: Eligibility......................................... 7
Section 4.2: Application to Participate.......................... 8
Section 4.3: Participation on Reemployment....................... 8
V CONTRIBUTIONS BY THE COMPANY......................................... 9
Section 5.1: Company Contributions............................... 9
Section 5.2: Company Contributions Account....................... 9
Section 5.3: Non-Forfeitable Company Contributions
Account............................................. 9
Section 5.4: Time and Manner of Making Company's
Contributions....................................... 9
Section 5.5: No Guarantee by the Company......................... 10
VI CONTRIBUTIONS BY PARTICIPANTS; ROLLOVERS............................. 10
Section 6.1: Employee Contributions.............................. 10
Section 6.2: Participant Contributions Account................... 10
Section 6.3: Non-Forfeitable Participant
Contributions Account............................... 10
Section 6.4: Distribution of Voluntary
Contributions....................................... 10
Section 6.5: Rollovers........................................... 11
Section 6.6: Rollover Account.................................... 11
Section 6.7: Non-Forfeitable Rollover Account.................... 11
Section 6.8: Distribution of Participant Rollover
Account............................................. 11
VII CONTRIBUTIONS BY COMPANY OF PARTICIPANT'S DEFERRED
COMPENSATION......................................................... 11
Section 7.1: Contributions of Deferred
Compensation....................................... 11
Section 7.2: Participant Deferred Compensation
Account............................................ 12
Section 7.3: Non-Forfeitable Participant Deferred
Compensation Account............................... 12
Section 7.4: Distribution of Deferred Compensation
Account............................................ 12
Section 7.5: Actual Deferral Percentage Limits.................. 13
Section 7.6: Correction of Excess Elective
Deferrals.......................................... 17
</TABLE>
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COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEES' SHELTERED SAVINGS PLAN
---------------------------------
<TABLE>
<CAPTION>
ARTICLE Page
- ------- ----
<S> <C>
Section 7.7: Actual Contribution Percentage
Limits.............................................. 18
Section 7.8: Correction of Excess Aggregate
Contributions....................................... 19
Section 7.9: Correction of Excess Deferral
Amounts............................................. 20
Section 7.10: Limitation on the Multiple Use of the
Alternative Limitation.............................. 21
Section 7.11: Correction of Excess Use of the
Multiple Use of the Alternative
Limitation.......................................... 21
VIII ALLOCATION OF COMPANY'S CONTRIBUTIONS................................ 22
Section 8.1: Method of Allocation................................ 22
Section 8.2: Limitations on Allocation........................... 22
Section 8.3: Limitations for Participants In a
Combination of Plans................................ 23
Section 8.4: Definitions......................................... 24
IX ADMINISTRATION OF FUND............................................... 25
Section 9.1: Valuation of Fund................................... 25
Section 9.2: Maintenance of Records by Committee................. 26
Section 9.3: Segregation and Disbursement........................ 26
X RETIREMENT........................................................... 27
Section 10.1: Normal Retirement................................... 27
Section 10.2: Later Retirement.................................... 27
Section 10.3: Retirement Benefits................................. 27
Section 10.4: Option for Payment in Installments of
Less Than One Hundred Twenty (120)
Months.............................................. 28
Section 10.5: Option for Annuity.................................. 28
Section 10.6: Death After Retirement.............................. 28
Section 10.7: Commencement of Benefit Payment..................... 28
XI DEATH OF A PARTICIPANT............................................... 29
Section 11.1: Death of a Participant Before
Retirement or Termination of Service................ 29
Section 11.2: Beneficiary......................................... 29
</TABLE>
iii
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TABLE OF CONTENTS
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COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEES' SHELTERED SAVINGS PLAN
---------------------------------
<TABLE>
<CAPTION>
ARTICLE Page
<S> <C>
Section 11.3: Limit on Form of Death Benefit
Payment............................................. 30
XII DISABILITY OF A PARTICIPANT.......................................... 30
Section 12.1: Disability.......................................... 30
Section 12.2: Death After Termination for
Disability.......................................... 31
XIII OTHER TERMINATIONS OF SERVICE........................................ 31
Section 13.1: Determination of Benefits........................... 31
Section 13.2: Manner of Distribution of Benefits.................. 31
Section 13.3: Death Prior to Payment.............................. 32
XIV HARDSHIP OF A PARTICIPANT............................................ 32
Section 14.1: Hardship Distribution............................... 32
Section 14.2: Determination by Committee.......................... 33
XV AMENDMENT OR DISCONTINUANCE OF PLAN.................................. 33
Section 15.1: Right to Amend...................................... 33
Section 15.2: Termination of Plan................................. 34
Section 15.3: Distribution on Termination or
Discontinuance...................................... 34
XVI TOP HEAVY PROVISIONS................................................. 34
Section 16.1: Top Heavy Definitions............................... 34
(a) "Aggregation Group"...................................... 34
(b) "Determination Date"..................................... 34
(c) "Key Employee"........................................... 34
(d) "Top Heavy Group"........................................ 35
(e) "Top Heavy Plan"......................................... 35
Section 16.2: Special Top Heavy Rules............................. 35
Section 16.3: Top Heavy Benefits and Restrictions................. 36
XVII RESTRICTION ON ASSIGNMENT............................................ 37
Section 17.1: Effect of Assignment in General..................... 37
Section 17.2: Loans to Participants............................... 37
XVIII MISCELLANEOUS PROVISIONS............................................. 39
Section 18.1: Joint and Survivor Annuity.......................... 39
</TABLE>
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COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEES' SHELTERED SAVINGS PLAN
---------------------------------
<TABLE>
<CAPTION>
ARTICLE Page
- ------- ----
<S> <C>
(a) Form of Benefit Payments..................................39
(b) Definitions...............................................39
(c) Notice Requirements.......................................40
(d) Transitional Rules Applicable to Joint and
Survivor Annuities........................................41
(e) Notice For Fully Subsidized Benefit.......................42
Section 18.2: Limitation on Participant's Rights...................42
Section 18.3: Receipt..............................................42
Section 18.4: Unenforceable Provisions.............................43
Section 18.5: Governing Law........................................43
Section 18.6: Agreement Binding on Successors......................43
Section 18.7: Masculine Gender Includes Feminine
and Neuter, and Singular Number the
Plural...............................................43
Section 18.8: Headings, Etc. No Part of Agreement..................43
Section 18.9: Merger of Plans......................................43
Section 18.10: Claims Procedures....................................43
Section 18.11: Funding Policy and Method............................44
Section 18.12: Commencement of Benefits.............................44
Section 18.13: Forfeiture Upon Failure to Locate....................44
Section 18.14: Direct Transfer of Benefits..........................44
XIX INVESTMENT OPPORTUNITIES..............................................45
Section 19.1: Investment Funds.....................................45
Section 19.2: Election of Investment Options.......................45
Section 19.3: Change in Investment Options.........................46
Section 19.4: Expenses Charged to Participant's
Account..............................................46
SIGNATURES...................................................................46
</TABLE>
v
<PAGE>
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEES' SHELTERED SAVINGS PLAN
---------------------------------
THIS AGREEMENT, executed by CERTIFIED GROCERS OF CALIFORNIA, LTD., a
California Corporation, hereinafter called "Company," evidences the terms of the
Comprehensive Amendment to Certified Grocers of California, Ltd. Employees'
Sheltered Savings Plan. The Plan was originally entered into on March 17, 1983
and has been subsequently amended from time to time thereafter. The terms of
the Plan provide a cash or deferred arrangement for the benefit of certain
employees of the Company, and are effective for the Plan Year beginning as of
September 3, 1989, unless the terms of the Plan indicate otherwise.
The terms of the Plan are as follows:
ARTICLE I
----------
NAME AND PURPOSE
----------------
Section 1.1: Name. The Plan amended and restated in accordance with the
- ----------- ----
terms hereof shall be known as CERTIFIED GROCERS OF CALIFORNIA, LTD. EMPLOYEES'
SHELTERED SAVINGS PLAN.
Section 1.2: Purpose. This Plan is created for the purpose of enabling
- ----------- -------
employees of the Company to secure retirement and other benefits by deferring
compensation and by sharing in the profits of the Company's business. The Plan
is hereby designated as constituting a plan intended to qualify under Sections
401(a) and 401(k) of the Code. In no event shall any part of the principal or
income of the Trust be paid to or revest in the Company, or be used for any
purpose whatsoever other than for the exclusive benefit of the employees of the
Company and their beneficiaries.
ARTICLE II
-----------
DEFINITIONS
-----------
Section 2.1: Definitions. When used herein the following terms shall have
- ----------- -----------
the following meanings:
(a) "Account" shall mean either the Company Contributions Account of a
Participant, the Participant Contributions Account, and the Participant Deferred
Compensation Account, and shall reflect amounts contributed by the Company and
shall include contributions, earnings, losses and forfeitures, if any, in
accordance with the terms hereof.
1
<PAGE>
(b) "Anniversary Date" shall mean the last day of the Plan Year.
(c) "Board" or "Board of Directors" shall mean the board of directors
of Certified Grocers of California, Ltd.
(d) "Break in Service Year" shall mean a Plan Year during which a
Participant fails to complete more than 500 hours of service.
For purposes of determining whether a break in service year has
occurred for participation and vesting purposes, an individual who is absent
from work for maternity or paternity reasons shall receive credit for the hours
of service which would otherwise have been credited to such individual but for
such absence, or in any case in which such hours cannot be determined, eight
hours of service per day of such absence. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means an absence by reason
of the pregnancy of the individual, by reason of a birth of a child of the
individual, by reason of the placement of a child with the individual in
connection with the adoption of such child by such individual, or for purposes
of caring for such child for a period beginning immediately following such birth
or placement. The hours of service credited under this paragraph shall be
credited in the computation period in which the absence begins if the crediting
is necessary to prevent a break in service in that period, or in all other
cases, in the following computation period.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended,
or as it may be amended from time to time.
(f) "Committee" shall mean the Administrative Committee described in
Article III hereof.
(g) "Company" shall mean Certified Grocers of California, Ltd. and
any successors thereto, and any other entity that adopts the Plan.
(h) "Compensation" shall mean:
(i) For an employee, total regular base compensation paid to a
Participant while a Participant by the Company, excluding bonuses,
---------
overtime, and shift, weekend or other specialized pay premiums, but
including commissions, vacation pay, sick pay, Company contributions under
---------
Article VII of this Plan, and reductions of the Participant's Compensation
contributed to the Company's Section 125 plan, but before deductions
authorized by the Participant or required by law to be withheld from the
employee by the Company.
2
<PAGE>
Provided, however, the term "net compensation" shall mean compensation
as defined herein, but excluding Company contributions under Article VII of this
Plan and reductions of the Participant's Compensation contributed to the
Company's Section 125 plan. Effective for the Plan Year commencing in 1989, the
Compensation of each Participant for each Plan Year shall not exceed $200,000,
as adjusted by the Secretary of the Treasury at the same time and in the same
manner as under Section 415(d) of the Code, and effective for the Plan Year
commencing in 1994, the Compensation of each Participant shall not exceed
$150,000, as adjusted, as provided in Section 401(a)(17) of the Code. In
determining the Compensation of an Employee for purposes of the foregoing
limitation, as adjusted, the rules of Section 414(q)(6) of the Code shall apply,
except that in applying such rules, the term "family" shall include only the
spouse of the Employee and any lineal descendants of the Employee who have not
attained age 19 before the close of the Plan Year. If the foregoing
Compensation limitation, as adjusted, applies to the combined Compensation of
the Employee or one or more Family Members, the contribution and allocation
provisions of the Plan will be applied by prorating the foregoing limitation, as
adjusted, among the Employee and his Family Members in proportion that each such
individual's Compensation determined prior to the application of this limitation
bears to the total Compensation of all such individuals determined prior to the
application of this limitation.
(i) "Date of Employment" shall mean the first day on which an
employee completes an hour of service for the Company.
(j) "Disability" shall mean a Participant's inability to perform his
normal occupation or any other occupation which would give the Participant a
wage similar to that of his normal occupation and which, based upon competent
medical evidence, is expected to be of permanent or indefinite duration, or
result in death.
(k) "Eligible Employee" shall mean any Employee who satisfies the
eligibility requirements of Sec. 4.1.
(l) "Employee" shall mean any person employed by the Company.
(m) "Entry Date" shall mean the first day of each payroll period of
each month.
(n) "ERISA" shall mean the Employee Retirement Income Security Act of
1974.
(o) "Family Member" shall mean the spouse, lineal ascendants and
descendants of the Employee or former employee and the spouses of such lineal
ascendants and descendants.
3
<PAGE>
(p) "Fund", "Trust", or "Trust Fund" shall mean the sum of the
contributions (adjusted for income and losses, payments and reasonable expenses)
made by the Company and Employee hereunder and held in accordance with the terms
of the Trust created by the Declaration of Trust executed between the Company
and the Trustee for the purpose of carrying out the terms hereof. Said
Declaration of Trust is hereby incorporated herein by reference as if fully set
forth herein.
(q) "Hour of Service" shall mean:
(i) Each hour for which an employee is directly or indirectly
paid or entitled to payment by the Company in connection with his
employment by the Company. In addition, hour of service shall include any
hour for which back pay, irrespective of mitigation of damages, is either
awarded or agreed to by the Company. The same hour of service shall in no
event be credited twice under this section.
(ii) Each hour for which an employee is directly or indirectly
paid or entitled to payment by the Company for reasons other than the
performance of duties during a period of service with the Company such as
vacation, holiday, sickness, disability, layoff, jury duty, military duty
or compensated leave of absence and similar paid periods.
(iii) As used in subsections (i) and (ii), Company shall include
all members of an affiliated service group, a controlled group of
corporations (under Section 414(b) of the Code), or a group of trades or
businesses under common control (under Section 414(c) of the Code), of
which the Company is a part.
(iv) The provisions of the Department of Labor Regulations
appearing at 29 C.F.R. 2530.200b-2(b) and (c) are incorporated herein by
reference as if fully set forth herein.
(r) "Normal Retirement Date" shall mean the sixty-fifth (65th)
anniversary of the Participant's date of birth.
(s) "Participant" shall mean an employee who has become an active
Participant, but shall also include any former Participant until such time as
such former Participant's total interest herein has been distributed to him.
(t) "Plan" shall mean the Certified Grocers of California, Ltd.
Employees' Sheltered Savings Plan as set forth herein, or any amendments hereto.
(u) "Plan Year" shall mean the period beginning on the Sunday
following the Saturday nearest August 31st and ending on the
4
<PAGE>
Saturday nearest August 31st of the following year. The Plan Year shall be the
limitation year for purposes of Section 415 of the Code.
(v) "Rollover Account" shall mean the account maintained for a
Participant which reflects that portion of his interest in the Plan attributable
to transfers or rollovers described in Section 6.5 (as adjusted pursuant to
Article IX).
(w) "Trustee" or "Trustees" shall mean the Trustee or Trustees
designated in the Trust Agreement.
(x) "Valuation Date" shall mean the date the Trustee shall value the
Trust Fund in accordance with Section 9.1.
(y) "Year of Service" shall mean any Plan Year during which an
Employee is employed by the Company and during which the Employee has one Hour
of Service. In order for a year to constitute a year of service, the Employee
need not be employed by the Company on the last day of such Plan Year.
ARTICLE III
------------
BENEFITS COMMITTEE
------------------
Section 3.1: Concerning the Committee. There shall be created a benefits
- ----------- ------------------------
committee, hereinafter referred to as "Committee," consisting of three (3) or
more members, who shall be from time to time selected by the Board of Directors
of the Company, and shall serve at its discretion. If the Company does not
appoint a Committee, then the Company shall act as the Committee. The Committee
shall be the named fiduciary of this Plan and of the Trust and the Administrator
hereof. Any conflict between the terms hereof particularly with reference to
the provisions hereof which delineate the responsibilities of the various
parties, and the provisions of the Trust shall be resolved by reference to the
Trust. It is the intention of the parties that the provisions of the Trust
Agreement shall control to resolve any such conflict. The Company shall certify
to the Trustee the names of the members of the Committee, and, as changes take
place in the membership of the Committee, shall certify to the Trustee the fact
and the nature of such changes. A secretary appointed by the Committee may, if
requested to do so, keep a record of its proceedings. The Committee may
designate one of its members or any other person to transmit its decisions,
instructions, consents, or directions, all of which shall be in writing, to the
Trustee or to other interested parties, or to perform ministerial acts. The
Committee may make rules and regulations for the administration of the Plan not
inconsistent with this Agreement. The Trustee may rely on the latest
certification of the membership of the Committee and of the member or person
designated by the Committee for the purpose of transmitting such decisions,
instructions, consents or directions.
5
<PAGE>
A majority of the members of the Committee shall constitute a quorum, and any
action by the majority present at a meeting at which a quorum is present, or by
a majority or more members in writing without a meeting, shall constitute the
action of the Committee. Any action taken in good faith by the Committee in the
exercise of authority conferred upon it by this Agreement shall be conclusive
and binding upon Participants and their beneficiaries. All discretions conferred
upon the Committee shall be absolute, but no discretionary power conferred upon
the Committee or the Trustee, or retained by the Company, shall be exercised in
such manner as to cause or create discrimination in favor of employees or
persons whose principal duties consist in supervising the work of other
employees, or highly compensated employees.
The Committee may employ, and obligate the Plan to pay for, such
counsel and agents and such clerical and other services as it may require in
carrying out the provisions of the Plan. The Committee shall have the duty and
authority to interpret and construe the provisions of the Plan, to decide any
disputes which may arise with regard to the rights of employees, Participants
and their legal representatives or beneficiaries under the terms of the Plan,
and, in general, to direct the administration of the Trust Agreement and to
direct the Trustee with regard to Trust assets. Any or all of the powers of the
Committee may be delegated to one or more investment managers as set forth in
the Trust Agreement and subject to the specific provisions thereof regarding
such delegation and the allocation of responsibilities among various parties to
or interested in the Trust and this Plan. The Committee may, but is not
obligated to, maintain full and complete written records of its deliberations
and decisions. The minutes, if any, of its proceedings shall be proof of the
facts and the operations of the Plan. Their records, if any, shall contain all
relevant data pertaining to individual Participants and their rights under the
Plan and in the Trust Fund. The Committee has the duty to carry into effect all
such rights and benefits provided hereunder.
Without limiting the authority or responsibilities of the Committee
contained herein, the Committee shall have the discretionary authority to
determine eligibility for benefits and to construe the terms of the Plan.
Section 3.2: Indemnification. Each present and future member of the
- ----------- ---------------
Committee, whether or not then in office, shall be indemnified by the Company
against all costs and expenses, including attorneys' fees, reasonably incurred
by or imposed upon him in connection with or arising out of any claim, demand,
action, suit, or proceeding in which he may be involved or to which he may be
made a party by reason of his being or having been a member of the Committee
(said expenses to include the cost of reasonable settlements made with a view to
curtailment of costs, expenses, or results of litigation). The foregoing right
of indemnification shall not be exclusive of other rights to which such member
may be entitled as a matter of
6
<PAGE>
law. Such indemnification shall not be made with respect to any liabilities,
claims, demands, costs or expenses as may result from the gross negligence or
willful misconduct of a Committee member. In lieu of the foregoing, the Company
may satisfy its obligations under this paragraph through the purchase of a
policy of insurance providing equivalent protection.
Notwithstanding any of the foregoing, in the event the Company is
advised by counsel that any proposed indemnification may only be made subject to
the provisions of Section 317 of the California Corporations Code, such payment
shall be made only to the extent permitted by said Code section and in
compliance with all of the applicable provisions thereof.
Section 3.3: Use of Company's Facilities by Committee. The Committee shall
- ----------- ----------------------------------------
have the right to use the Company's facilities in maintaining accounts and
records and discharging its duties and obligations hereunder, but the Committee
is authorized to incur reasonable expenses in and about the performance of its
duties hereunder, and it shall be reimbursed by the Company for all usual and
ordinary expenses so incurred.
ARTICLE IV
-----------
EMPLOYEES ENTITLED TO PARTICIPATE
---------------------------------
Section 4.1: Eligibility. All eligible employees of the Company employed by
- ----------- -----------
the Company as of the date of execution of this agreement shall continue to be
Participants under the Plan so long as they are employed by the Company, are not
in an ineligible class of employees, or so long as they do not incur a break in
service. All other present and future employees shall become Participants on the
entry date coinciding with or immediately following the one year anniversary of
the first day on which they perform an hour of service on behalf of the Company,
provided that they are in the employ of the Company on such one year
anniversary.
Classes of Employees who shall not be eligible are:
(i) Any employee who is a member of a collective bargaining unit and
who is covered by a collective bargaining agreement, which agreement does
not provide for coverage of such employee under this Plan, provided, that
the matter of retirement benefits was at any time the subject of good faith
bargaining between the Company and the collective bargaining unit of which
the employee is a member; and
(ii) Any employee who is a nonresident alien and who receives no
earned income within the meaning of Section 911(b) of the Code from the
Company which constitutes income from sources within the United States
within the meaning of Section 861(a)(3) of the Code.
7
<PAGE>
In the event that a Participant becomes an ineligible employee, he
shall remain a Participant as to amounts already contributed and allocated for
his benefit subject to all of the terms of the Plan.
Except for a separation from service because of an involuntary layoff
or as specified to the contrary in Sections 10.3, 11.1, and 12.1, in order to
participate in contributions by the Company for any Plan Year under Section
5.1(a), a Participant must be, on the last day of each such Plan Year, in the
service of the Company and must have received Compensation from the Company
during such Plan Year, as Compensation is defined in Sec. 2.1(h).
All questions of eligibility of Employees to become Participants
and/or to participate in the benefits of the Plan shall be determined by the
Committee in its sole discretion, and its decision shall be binding upon all
Employees and other persons interested in or affected by the terms of the Plan
and the Trust. In the event that any Participant is dissatisfied with any
decision of the Committee, such Participant may make a claim or request a review
of such decision in accordance with the provisions of Section 18.10 hereof.
Section 4.2: Application to Participate. Each eligible Employee shall make
- ----------- --------------------------
written application for participation on forms provided by the Committee. Such
forms shall in substance provide that the applicant agrees to and consents to be
bound by all the terms of this Agreement, and provide for the naming by said
Participant, in a form satisfactory to the Committee, of a beneficiary or
beneficiaries to receive any benefit to which his beneficiaries may be entitled
under the terms of the Plan. The applicant, after becoming a Participant and
prior to the time that any payment shall become payable hereunder to any
beneficiary or beneficiaries already designated by such applicant, may change
any beneficiary or beneficiaries by notice in writing to the Committee subject
to the provisions of this paragraph. Each eligible Employee shall furnish such
information regarding his age, family status, and other relevant matters as the
Committee may require, and, if such employee designates a beneficiary other than
his spouse to receive any benefit under this Plan, he shall likewise furnish the
Committee, if the Committee so requests, with the written consent of his spouse,
if any, to such designation. Failure of an eligible Employee to make
application as specified above shall not prevent such employee from
participating in the Plan, the application as contemplated herein being a mere
administrative step.
Section 4.3: Participation on Reemployment. In the event an Employee who was
- ----------- -----------------------------
a Participant hereunder is reemployed, such Employee shall become a Participant
hereunder on the date of reemployment, provided the employee satisfies the
eligibility provisions of Section 4.1.
8
<PAGE>
ARTICLE V
----------
CONTRIBUTIONS BY THE COMPANY
----------------------------
Section 5.1: Company Contributions. The Company agrees that out of its
- ----------- ---------------------
accumulated and net profits it will contribute to the Trustee each year, so long
as the Plan is in effect, as a contribution to the Company Contributions Account
of each Participant the following:
(a) Two percent (2%) of each Participant's Compensation for such
Plan Year; plus
(b) One hundred percent (100%) of the amount contributed by the
Company under Article VII in excess of 0%, but not greater than 4% of such
Participant's compensation; plus
(c) A percentage amount to be determined each year by the Committee
in its sole discretion from zero percent (0%) to fifty percent (50%) of the
amount contributed by the Company under Article VII in excess of 4%, but not to
exceed 8%, of such Participant's compensation.
Section 5.2: Company Contributions Account. The Committee shall open and
- ----------- -----------------------------
maintain a separate Company Contributions Account for each Participant, which
account shall reflect his share of the Fund resulting from Company contributions
under Section 5.1 hereof to the Trust Fund and the earnings, charges and
expenses of, and increases and decreases in the value of the Fund with respect
thereto. Neither the Company, the Trustee, nor any member of the Committee in
any manner or to any extent whatsoever, warrants, guarantees, or represents that
the total value of any Participant's Company Contributions Account shall at any
time equal or exceed the aggregate amount theretofore contributed thereto by the
Company under Section 5.1 hereof.
Section 5.3: Non-Forfeitable Company Contributions Account. A Participant
- ----------- ---------------------------------------------
shall be vested in the value of his Company Matching Contributions Account as
determined under Section 13.1.
Section 5.4: Time and Manner of Making Company's Contributions. The Company
- ----------- -------------------------------------------------
may make payment to the Trustee of its share of the contributions to the Company
Contributions Account for any Plan Year on any date or dates it elects. The
actual contributions made hereunder may, at the Company's discretion, be made
during or following the close of the Plan Year to which the contributions
relate; provided, that in no event shall any contribution be made after the time
prescribed by law for filing the federal income tax return of the Company
(including extensions thereof) with respect to such fiscal year. The
calculation of the Company's contribution to the Plan shall be determined by the
Company, the Trustee shall
9
<PAGE>
not be required to determine the correctness of nor be responsible for the
collection of any contributions to the Plan.
Section 5.5: No Guarantee by the Company. It should be understood that there
- ----------- ---------------------------
is not, and there cannot be, any guarantee by the Company, the Trustee, or the
Committee as to the continuation of the Trust.
ARTICLE VI
-----------
CONTRIBUTIONS BY PARTICIPANTS; ROLLOVERS
----------------------------------------
Section 6.1: Employee Contributions. Beginning at such time and continuing
- ----------- ----------------------
for such time as the Committee in its sole discretion may determine, each
Participant who so desires may, but need not, contribute each year to the Trust
Fund for his benefit up to a maximum of ten percent (10%) (or such other
percentage as may be determined from time to time by the Committee) of his net
compensation paid or accrued to him, as net compensation is defined in Section
2.1(h). Such contributions must be made at the time the Participant receives
his compensation from the Company, and upon direction of the Participant, shall
be withheld by the Company and deposited with the Trustee for the Participant
Contributions Account of such Participant. A Participant may eliminate or
change the amount to be contributed by him in any Plan Year as may be determined
from time to time by the Committee. Provided, however, that the ability of a
Participant to contribute on an annual basis, shall be restricted to the extent
that any contribution would violate the provisions of Section 8.2 hereof.
Section 6.2: Participant Contributions Account. The Committee shall open and
- ----------- ---------------------------------
maintain a separate Participant Contributions Account for each Participant who
has made contributions, which account shall reflect his share of the Fund
resulting from his own contributions to the Trust Fund and the earnings, charges
and expenses of, and increases and decreases in the value of the Fund with
respect thereto. Neither the Company, the Trustee, nor any member of the
Committee in any manner or to any extent whatsoever, warrants, guarantees, or
represents that the total value of any Participant's Participant Contributions
Account shall at any time equal or exceed the aggregate amount theretofore
contributed thereto by the Participant.
Section 6.3: Non-Forfeitable Participant Contributions Account. A Participant
- ----------- -------------------------------------------------
shall be 100% vested in the value of his Participant Contributions Account at
all times.
Section 6.4: Distribution of Voluntary Contributions. All voluntary
- ----------- ---------------------------------------
contributions made hereunder, together with any earnings thereon, shall be
distributed at such times distribution becomes appropriate under the relevant
sections hereof. All or any portion of a Participant's voluntary contributions
may be withdrawn at the
10
<PAGE>
request of the Participant who made such contributions at intervals of no less
than six (6) months, or at such other times as may be allowed by the Trustees,
except that such withdrawal shall not include earnings on such contributions,
but may reflect losses thereon. Nevertheless, a portion of any such withdrawal
will be included as taxable income to the Participant. In the event the total
amount of the Participant's Account (including Company and employee
contributions) is in excess of $3,500.00, no withdrawal may be made by a
Participant who is married unless the Participant's spouse consents in writing.
Section 6.5: Rollovers. The Committee may, in its sole discretion, authorize
- ----------- ---------
any Participant to transfer amounts directly from other qualified plans or to
make contributions under the Plan which qualify as rollover amounts under
Section 402(c), 403(a)(4), or 408(d)(3)(A)(ii) of the Code; provided no amounts
attributable to accumulated deductible employee contributions as described in
Section 72(o)(5) of the Code shall be allowed as a direct transfer or rollover
contribution hereunder. The Committee shall establish such administrative
provisions as it deems necessary to implement this Section 6.5 and shall
exercise its discretion hereunder in a non-discriminatory manner.
Section 6.6: Rollover Account. The Committee shall open and maintain a
- ----------- ----------------
separate Rollover Account for each participant consisting of rollovers or
transfers made in accordance with Section 6.5, as adjusted hereunder.
Section 6.7: Non-Forfeitable Rollover Account. The Participant shall be 100%
- ----------- --------------------------------
vested in the value of his Rollover Account at all times.
Section 6.8: Distribution of Participant Rollover Account. The Rollover
- ----------- --------------------------------------------
Account, together with any earnings thereon, shall be distributed at such times
distribution becomes appropriate under the relevant sections hereof.
ARTICLE VII
------------
CONTRIBUTIONS BY COMPANY OF
---------------------------
PARTICIPANT'S DEFERRED COMPENSATION
-----------------------------------
Section 7.1: Contributions of Deferred Compensation.
- ----------- --------------------------------------
(a) Each Participant who so desires may, but need not, authorize the
Company to reduce his compensation and contribute a percentage of a whole
integer up to a maximum of 16% of his compensation or such other maximum as may
be determined by the Committee from time to time; provided, however, for Plan
Years beginning in 1986, no Participant's elective deferrals under this Plan and
all other plans, contracts and arrangements of the Company
11
<PAGE>
will not exceed $7,000 for the calendar year (or such amount as may be permitted
under regulations issued in connection with Section 402(g) of the Code in effect
for each such taxable year). Such reduction in compensation must be made at the
time the Participant would normally receive his compensation from the Company.
Upon direction of the Participant, such amount shall be deducted from his
compensation and transferred to the Trustee to be deposited in the Participant
Deferred Compensation Account.
(b) A Participant may change the amount to be deferred from his
compensation, but not more often than once during the 30 days preceding the
anniversary date of each Plan Year, or at such other times or under such other
conditions as may be approved by the Committee from time to time. A Participant
may suspend contributions of deferred compensation during the plan year but such
suspension will make the Participant ineligible to authorize the contribution of
any deferred compensation until the beginning of the following Plan Year, or
such other time as the Committee may in its sole discretion determine. The
Company shall transfer to the Trustee contributions of deferred compensation
made during the plan year no later than 12 months after the end of the Plan Year
to which the contributions relate.
Section 7.2: Participant Deferred Compensation Account. The Committee shall
- ----------- -----------------------------------------
open and maintain a separate Participant Deferred Compensation Account for each
Participant who, subject to Section 402(g) of the Code, has authorized the
reduction of his compensation as provided herein. Such Account shall reflect his
share of the Fund resulting from amounts reduced from his compensation and
contributed by the Company to the Trust Fund, and the earnings, charges and
expenses of, and increases and decreases in the value of the Fund with respect
thereto. Neither the Company, the Trustee, nor any member of the Committee in
any manner or to any extent whatsoever, warrants, guarantees or represents that
the total value of any Participant Deferred Compensation Account shall at any
time equal or exceed the aggregate amount deposited thereto.
Section 7.3: Non-Forfeitable Participant Deferred Compensation Account. A
- ----------- ---------------------------------------------------------
Participant shall be 100% vested in the value of his Participant Deferred
Compensation Account at all times.
Section 7.4: Distribution of Deferred Compensation Account. No amounts held
- ----------- ---------------------------------------------
in the Participant Deferred Compensation Account shall be distributed to a
Participant or beneficiary thereof, except in the event of retirement as
described in Article X, in the event of death as described in Article XI, in the
event of disability as described in Article XII, in the event of termination of
service as described in Article XIII, or in the event of hardship as described
in Article XIV.
12
<PAGE>
Section 7.5: Actual Deferral Percentage Limits. The Actual Deferral
- ----------- ---------------------------------
Percentage shall be modified as provided in Section 7.6(a) if the requirements
of paragraph (a) are not satisfied.
(a) The average of the Actual Deferral Percentage for all Eligible
Employees who are Highly Compensated Employees, when compared to the average of
the Actual Deferral Percentages for all Eligible Employees who are Non-Highly
Compensated Employees must meet one of the following requirements for each Plan
Year:
(i) the High Deferral Average is no greater than the Low Deferral
Average times one hundred and twenty-five percent; or
(ii) the excess of the High Deferral Average over the Low Deferral
Average is not greater than two percentage points and the High Deferral
Average is no greater than the Low Deferral Average times two.
(b) For purposes of paragraph (a), the Actual Deferral Percentage for
any Eligible Employee who is a Highly Compensated Employee for the Plan Year and
who is eligible to have amounts of his or her Compensation deferred and
allocated to his or her account under two or more plans or arrangements
described in Section 401(k) of the Code that are maintained by the Company shall
be determined as if all such amounts deferred were made under a single
arrangement. If two or more plans are permissively aggregated for purposes of
Section 401(k) of the Code, the aggregated plans must also satisfy Section
401(a) and 410(b) of the Code as though the aggregated plans were a single plan.
(c) For purposes of determining the Actual Deferral Percentage of an
Eligible Employee who is a Highly Compensated Employee, the amounts deferred
under Section 7.1 and Compensation of such Eligible Employee shall include the
amounts deferred under Section 7.1 and Compensation of Family Members, and such
Family Members shall be disregarded in determining the Actual Deferral
Percentage for an Eligible Employee who is a Non-Highly Compensated Employee.
(d) Whenever any of the following items is used with the first letter
or letters capitalized, it shall have the meaning specified below unless the
context clearly indicates to the contrary.
(i) "Actual Contribution Percentage" means the ratio (expressed as
a percentage) of the sum of Employee Contributions and Matching
Contributions under the Plan on behalf of the Eligible Employee for the
Plan Year to the Eligible Employee's W-2 compensation plus any amounts
excluded as bonuses, overtime, and shift, weekend or other
13
<PAGE>
specialized pay, but excluding any severance or sick leave payoff, for the
Plan Year.
(ii) "Actual Deferral Percentage" means the ratio (expressed as a
percentage) of Elective Deferrals on behalf of an Eligible Employee for the
Plan Year to the Eligible Employees' W-2 compensation plus any amounts
excluded as bonuses, overtime, and shift, weekend or other specialized pay,
but excluding any severance or sick leave payoff, for the Plan Year.
(iii) "Aggregate Limit" means the greater of:
a. The sum of 125% times the greater of the Low Deferral
-
Average or the Low Contribution Average, and two percentage points
plus the lesser of the Low Deferral Average or the Low Contribution
Average. In no event, however, shall this amount exceed twice the
lesser of the Low Deferral Average or the Low Contribution Average; or
b. The sum of 125% times the lesser of the Low Deferral
-
Average or the Low Contribution Average, and two percentage points
plus the greater of the Low Deferral Average or the Low Contribution
Average. In no event, however, shall this amount exceed twice the
greater of the Low Deferral Average or the Low Contribution Average.
(iv) "Elective Deferrals" means contributions paid by the
Company under Section 7.1 during the Plan Year by the Company. An Elective
Deferral is considered allocated as of a date within a Plan Year if the
allocation is not contingent on participation or performance of service
after such date and the elective deferral is actually paid to the trust no
later than 12 months after the Plan Year to which the contributions
relates. An Elective Deferral can only be taken into account for a Plan
Year if it relates to Compensation that would have been received by a
Participant in the Plan Year but for the deferral.
(v) "Employee Contributions" means contributions made by a
Participant under Section 6.1 during the Plan Year.
(vi) "Excess Aggregate Contributions" means the amount described
in Section 401(m)(6)(B) of the Code.
(vii) "Excess Elective Deferrals" means the amount described in
Section 401(k)(8)(B) of the Code.
(viii) "Family Member" means an individual described in Section
2.1(n).
14
<PAGE>
(ix) "High Contribution Average" means the average (expressed as
a percentage) of the Actual Contribution Percentage of each Highly
Compensated Employee.
(x) "High Deferral Average" means the average (expressed as a
percentage) of the Actual Deferral Percentage of each Highly Compensated
Employee.
(xi) "Highly Compensated Employee" means a highly compensated
active Employee and a highly compensated former Employee.
A highly compensated active Employee includes any Employee who
performs service for the Company during the determination year and who,
during the look-back year: (i) received Compensation from the Company in
excess of $75,000 (as adjusted pursuant to Section 415(d) of the Code; (ii)
received Compensation from the Company in excess of $50,000 (as adjusted
pursuant to Section 415(d) of the Code) and was a member of the top-paid
group for such year; or (iii) was an officer of the Company or an
affiliated Company and received Compensation during such year that is
greater than 50 percent of the dollar limitation in effect under Section
4154(b)(1)(A) of the Code. The term highly compensated active Employee
also includes: (i) Employees who are both described in the preceding
sentence if the term "determination year" is substituted for the term
"look-back year" and the Employee is one of the 100 Employees who received
the most Compensation from the Company or affiliated Company during the
determination year; and (ii) Employees who are 5 percent owners at any time
during the lookback year or determination year.
If no officer has satisfied the Compensation requirement of (iii)
above during either a determination year or look-back year, the highest
paid officer for such year shall be treated as a highly compensated
Employee.
For this purpose, the determination year shall be the Plan Year.
The look-back year shall be the 12-month period immediately preceding the
determination year (or, in the case of a determination year that is shorter
than 12 months, the calendar year ending with or within the 12-month period
ending with the end of the applicable determination year), or, if elected,
the calendar year immediately preceding the calendar year determination
year.
A highly compensated former Employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Company during the
determination year, and was a highly compensated active Employee for either
the
15
<PAGE>
separation year or any determination year ending on or after the employee's
55th birthday.
If an Employee is, during a determination year or look-back year,
a Family Member of either a 5 percent owner who is an active or former
Employee or a highly compensated Employee who is one of the 10 most highly
compensated Employees ranked on the basis of compensation paid by the
Company or affiliated Company during such year, then the Family Member and
the 5 percent owner or top-ten highly compensated employee shall be
aggregated. In such case, the Family Member and 5 percent owner or top-ten
highly compensated Employee shall be treated as a single Employee receiving
compensation and plan contributions or benefits, as applicable, equal to
the sum of such compensation and contributions or benefits, as applicable,
of the Family Member and 5 percent owner or top-ten highly compensated
employee.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of Employees in the
top-paid group, the top 100 employees, the number of Employees treated as
officers, and the compensation that is considered, will be made in
accordance with Section 414(q) of the Code and the regulations thereunder.
(xii) "Low Contribution Average" means the average (expressed as
a percentage) of the Actual Contribution Percentage of each Non-Highly
Compensated Employee.
(xiii) "Low Deferral Average" means the average (expressed as a
percentage) of the Actual Deferral Percentage of each Non-Highly
Compensated Employee.
(xiv) "Matching Contribution" means any contribution to the Plan
by the Company for the Plan Year and allocated to the Participant's Account
by reason of the Participant's Employee Contributions or Elective
Deferrals.
(xv) "Non-Highly Compensated Employee" means an Employee of the
Company who is neither a Highly Compensated Employee nor a Family Member.
(e) The amount of Excess Elective Deferrals to be distributed or
recharacterized shall be reduced by Excess Deferral Amounts previously
distributed for the Participant's taxable year ending in the same Plan Year, and
Excess Deferral Amounts to be distributed for a taxable year will be reduced by
Excess Elective Deferrals previously distributed or recharacterized for the Plan
beginning in such taxable year.
16
<PAGE>
Section 7.6: Correction of Excess Elective Deferrals.
- ----------- ---------------------------------------
(a) If the requirements of Section 7.5(a) are not or will not be met
in a Plan Year, the Administrator shall distribute such Excess Elective
Deferrals, together with income applicable thereto, before the end of the Plan
Year following such Plan Year by reducing the Actual Deferral Percentage of all
Participants who are Highly Compensated Employees. The reduction shall occur in
order of the Actual Deferral Percentages beginning with the highest of such
percentages, at such time and in such manner as may be determined in the sole
discretion of the Administrator, and shall continue until the Actual Deferral
Percentage meets the requirements of Section 7.5(a). The Excess Elective
Deferrals shall be returned to the applicable Participant as cash compensation
and shall be subject to all federal taxes and other taxes and deductions which
would otherwise apply to the Participant's Compensation; or a Participant may
treat his or her Excess Elective Deferrals as an amount distributed to the
Participant and then contributed by the Participant to the plan. Recharacterized
amounts will remain nonforfeitable and subject to the same distribution
requirements as Elective Deferrals. Amounts may not be recharacterized by a
Highly Compensated Employee to the extent that such amount in combination with
other Employee Contributions made by that Employee would exceed any stated limit
under the plan on Employee Contributions. Recharacterization must occur no
later than two and one-half months after the last day of the Plan Year in which
such Excess Contributions arose and is deemed to occur no earlier than the date
the last Highly Compensated Employee is informed in writing of the amount
recharacterized and the consequences thereof. Recharacterized amounts will be
taxable to the Participant for the Participant's tax year in which the
Participant would have received them in cash.
(b) The income allocable to the Excess Elective Deferrals shall be
determined up to the date of distribution at the discretion of the Committee by
either multiplying income allocable to the Participant's Elective Deferrals for
the Plan Year by a fraction, the numerator of which is the Excess Elective
Deferrals on behalf of the Participant for the preceding Plan Year and the
denominator of which is the amount of the Participant's Account attributable to
Elective Deferrals on the last day of the preceding Plan Year, or by any other
reasonable method, provided that such method is used consistently for all
Participants for that Plan Year.
(c) The Excess Elective Deferrals which would otherwise be distributed
to the Participant shall be adjusted for income; shall be reduced, in accordance
with regulations, by the amount of Excess Elective Deferrals distributed to the
Participant; and shall, if there is a loss allocable to the Excess Elective
Deferrals, in no event be less than the lesser of the Participant's
17
<PAGE>
Account under the Plan or the Participant's Elective Deferrals for the Plan
Year.
(d) Notwithstanding any other provision of this Plan, Excess Elective
Deferrals, plus any income and minus any loss allocable thereto, shall be
distributed no later than the last day of each Plan Year to Participants to
whose accounts such Excess Elective Deferrals were allocated for the preceding
Plan Year. Such distributions shall be made to Highly Compensated Employees on
the basis of the respective portions of the Excess Contributions attributable to
each of such employees. Excess Contributions of Participants who are subject to
the Family Member aggregation rules shall be allocated among the Family Members
in proportion to the Elective Deferrals (and amounts treated as Elective
Deferrals) of each Family Member that is combined to determine the combined
Actual Deferral Percentage.
Section 7.7: Actual Contribution Percentage Limits. The Actual Contribution
- ----------- -------------------------------------
Percentage under Section 7.1 shall be modified as provided in Section 7.8(a) if
the requirements of paragraph (a) are not satisfied.
(a) The average of the Actual Contribution Percentage for all Eligible
Employees who are Highly Compensated Employees, when compared to the average of
the Actual Contribution Percentage for all Eligible Employees who are Non-Highly
Compensated Employees, must meet one of the following requirements for each Plan
Year:
(i) the High Contribution Average is no greater than the Low
Contribution Average times one hundred and twenty-five percent.
(ii) the excess of the High Contribution Average over the Low
Contribution Average is not greater than two percentage points and the High
Contribution Average is no greater than Low Contribution Average times two.
(b) For purposes of paragraph (a) the Contribution Percentage for any
Eligible Employee who is a Highly Compensated Employee for the Plan Year and who
is eligible to make Employee Contributions under Section 6.1, or to receive
Matching Contributions or Elective Deferrals allocated to his account under two
or more plans described in Section 401(a) of the Code or arrangements described
in Section 401(k) of the Code that are maintained by the Company or a member of
the Controlled Group shall be determined as if all such contributions and
Elective Deferrals were made under a single plan.
(c) In the event that this Plan satisfies the requirements of Section
410(b) of the Code only if aggregated with one or more other plans, or if one or
more other plans satisfy the
18
<PAGE>
requirements of Section 410(b) of the Code only if aggregated with this Plan,
then this Section shall be applied by determining the Actual Contribution
Percentage of Eligible Employees as if all such plans were a single plan.
(d) For purposes of determining the Actual Contribution Percentage of
an Eligible Employee who is a Highly Compensated Employee, the Employee
Contributions (including any Excess Elective Deferrals that are recharacterized
as Employee Contributions), Matching Contributions and Compensation of such
Eligible Employee shall include the Employee Contributions (including any Excess
Elective Deferrals that are recharacterized as Employee Contributions), Matching
Contributions and Compensation of Family Members, and such Family Members shall
be disregarded in determining the Actual Contribution Percentage for Eligible
Employees who are Non-Highly Compensated Employees.
(e) For purposes of paragraph (a), an Eligible Employee is any
employee who is directly or indirectly eligible to receive an allocation of
Matching Contributions or to make Employee Contributions and includes: an
Employee who would be a Plan Participant but for the failure to make required
contributions; an Employee whose right to make Employee Contributions or receive
Matching Contributions has been suspended because of an election (other than
certain one-time elections) not to participate; and an Employee who is unable to
make an Employee Contribution or receive a Matching Contribution because his or
her Compensation is less than a stated dollar amount. In the case of an
Eligible Employee who makes no Employee Contributions and who receives no
Matching Contributions, the contribution ratio that is to be included in
determining the Actual Contribution Percentage is zero.
(f) Since the Highly Compensated Employee's Actual Contribution
Percentage includes the contributions and Compensation of Family Members, then
the Actual Contribution Percentage is reduced in accordance with the "leveling"
method described in section 1.401(m)-1(e)(2) of the regulations and the Excess
Aggregate Contributions for the family unit are allocated among the Family
Members in proportion to the contributions of each Family Member that have been
combined.
Section 7.8: Correction of Excess Aggregate Contributions.
- ----------- --------------------------------------------
(a) If the requirements of Section 7.7(a) are not or will not be met
in a Plan Year, the Administrator shall treat as a forfeiture the Excess
Aggregate Contributions, together with income applicable thereto, if otherwise
forfeitable under the terms of the Plan; or if not forfeitable, the
Administrator shall distribute the Excess Aggregate Contributions, together with
income applicable thereto, before the end of the Plan Year following such Plan
Year. The amount of Excess Aggregate Contributions for a Highly Compensated
Employee under a plan subject to the requirements of
19
<PAGE>
Section 401(m) of the Code will be determined in the following manner. First,
the Actual Contribution Percentage of the Highly Compensated Employee with the
highest Actual Contribution Percentage is reduced to the extent necessary to
satisfy the High Contribution Average or cause such ratio to equal the Actual
Contribution Percentage of the Highly Compensated Employee with the next higher
ratio. Second, this process is repeated until the average of the High
Contribution Percentage satisfies the requirements of Section 7.7(a).
(b) The income allocable to Excess Aggregate Contributions shall
include the income for the Plan Year for which the Excess Aggregate
Contributions were made (but not the income for the period between the end of
the Plan Year and the date of distribution (or forfeiture)), and shall be
determined at the discretion of the Administrator by either multiplying the
income allocable to the Participant's Employee Contributions and Matching
Contributions for the Plan Year by a fraction, the numerator of which is the
Excess Aggregate Contributions on behalf of the Participant for the preceding
Plan Year and the denominator of which is the amount of the Participant's
Account attributable to Employee Contributions and Matching Contributions on the
last day of the preceding Plan Year, or by any other reasonable method, provided
that such method is used consistently for all Participants for that Plan Year.
(c) The Excess Aggregate Contributions to be distributed to a
Participant shall be adjusted for income, and if there is a loss allocable to
the Excess Aggregate Contributions, the amount to be distributed shall in no
event be less than the lesser of the Participant's Account under the Plan or the
Participant's Employee Contributions and Matching Contributions for the Plan
Year.
(d) The Excess Aggregate Contributions attributable to Employee
Contributions shall be distributed from the Participant's Account, and the
Excess Aggregate Contributions attributable to Matching Contributions shall be
forfeited, in proportion to the Participant's Employee Contributions and
Matching Contributions for the Plan Year.
(e) Amounts forfeited by Highly Compensated Employees under paragraph
(d) shall be used to reduce Company contributions, but in no event shall be
allocated to the Account of any Highly Compensated Employee.
Section 7.9: Correction of Excess Deferral Amounts.
- ----------- -------------------------------------
(a) Notwithstanding any other provision of the Plan, Excess Deferral
Amounts and income allocable thereto shall be distributed no later than April
15, 1991, and each April 15
20
<PAGE>
thereafter to Participants who claim such Excess Deferral Amounts for the
preceding calendar year.
(b) For purposes of this Section, "Excess Deferral Amount" means the
amount of Elective Deferrals for a calendar year that the Participant allocates
to this Plan pursuant to the claims procedure set forth in paragraph (c).
(c) The Participant's claim shall be in writing, and shall be
submitted to the Committee no later than March 1 following the Plan Year to
which the claim relates; shall specify the Participant's Excess Deferral Amount
for the preceding calendar year; and shall be accompanied by the Participant's
written statement that if such amounts are not distributed, such Excess Deferral
Amount, when added to amounts deferred under other plans or arrangements
described in Sections 401(k), 408(k) or 403(b) of the Code, exceeds the limit
imposed on the Participant by Section 402(g) of the Code for the calendar year
in which the Excess Deferral Amount occurred.
(d) The Excess Deferral Amount distributed to a Participant with
respect to a calendar year shall be adjusted for income, and if there is a loss
allocable to the Excess Deferral, the Excess Deferral Amount shall in no event
be less than the lesser of the Participant's Account under the Plan or the
Participant's Elective Deferrals for the calendar year.
Section 7.10: Limitation on the Multiple Use of the Alternative Limitation.
- ------------ ------------------------------------------------------------
(a) If multiple use of the alternative limitation occurs as provided
in paragraph (b), then such multiple use shall be corrected as provided in
Section 7.11.
(b) Multiple use of the alternative limitation occurs if:
(i) One or more Highly Compensated Employees of the Company or a
member of the Controlled Group are eligible under the Plan for benefits
subject to Section 401(k) and 401(m) of the Code;
(ii) The Aggregate Limit is exceeded;
(iii) The High Deferral Average exceeds 125% times the Low Deferral
Average; and
(iv) The High Contribution Average exceeds 125% times the Low
Contribution Average.
Section 7.11: Correction of Excess Use of the Multiple Use of the Alternative
- ------------ ---------------------------------------------------------------
Limitation. If the requirements of Section 7.10 are
- ----------
21
<PAGE>
not or will not be satisfied in a Plan Year, the Administrator may correct
either Excess Elective Deferrals in accordance with Section 7.6 or Excess
Aggregate Contributions in accordance with Section 7.8, or both, and the
Administrator may in its discretion make such corrections for either all Highly
Compensated Employees under the Plan or for only those Highly Compensated
Employees who are participating in benefits subject to Section 401(k) or 401(m)
of the Code.
ARTICLE VIII
-------------
ALLOCATION OF COMPANY'S CONTRIBUTIONS
-------------------------------------
Section 8.1: Method of Allocation. The Company's contribution under Article
- ----------- --------------------
V shall be allocated to the Company Contributions Account and the Company
Matching Contributions Account, and the Company's contributions under Article
VII shall be allocated to the Participant Deferral Compensation Account, of each
Participant in amounts equal to the Company contributions for such Participant
pursuant to Article V and Article VII, respectively.
Section 8.2: Limitations on Allocation. Notwithstanding anything to the
- ----------- -------------------------
contrary, contained herein, effective for the Plan year beginning September 3,
1987, the total annual addition to a Participant's account for any fiscal year
shall not exceed the lesser of 25% of the Participant's taxable net compensation
for the year from the Company, or $30,000.00 (or if greater, 1/4th of the
defined benefit dollar limitation set forth in Section 415(b)(i) of the Code as
in effect for the calendar year that begins within the Plan Year.
For purposes of this Section 8.2, the term "annual addition" shall
mean for any year the aggregate of amounts credited to a Participant's accounts
from: (i) Company contributions; (ii) forfeitures; (iii) the Participant's own
after-tax contributions; (iv) amounts allocated, after March 31, 1984, to an
individual medical account, as defined in section 415(1)(2) of the Code, which
is part of a pension or annuity plan maintained by the employer are treated as
annual additions to a defined contribution plan. Also amounts derived from
contributions paid or accrued after December 31, 1985, in taxable years ending
after such date, which are attributable to post-retirement medical benefits,
allocated to the separate account of a key employee, as defined in section
419A(d)(3) of the Code, under a welfare benefit fund, as defined in section
419(e) of the Code, maintained by the employer are treated as annual additions
to a defined contribution plan; and (v) allocations under a simplified employee
pension.
If the Company is contributing to another defined contribution plan,
as that term is defined in Section 414(i) of the Code, for its employees, some
or all of whom may be Participants in this Plan, then any such Participant's
annual addition in such
22
<PAGE>
other plan shall be aggregated with such Participant's annual addition derived
from this Plan for purposes of the limitations expressed in this Section 8.2.
If the annual addition to the Participant's account exceeds the
limitations described herein, the aggregate of the annual addition to this Plan
and the annual addition to any other defined contribution plan as described
above shall be reduced until the applicable limitation is satisfied, by reducing
the aggregate amount in the following order and priority:
(a) Refund of any voluntary contributions made by the Participant to
this Plan to the extent that such contributions are included in the annual
addition hereunder.
(b) Refund of any contributions made by the Participant to any other
defined contribution plan to the extent that such contributions would be
aggregated with the annual addition to this Plan pursuant to provisions hereof.
(c) Reduce the Participant's allocation under this Plan for the fiscal
year in which the excess occurs. Such reduction shall be treated as a
forfeiture and shall be added to the contribution of the Company for such year
and shall be allocated to the accounts of Participants who are not affected by
the limitation of this Section 8.2 in accordance with Section 8.1; provided,
however, with respect to the one time correction occurring in the Plan Year
ending in 1992, under a Closing Agreement on Final Determination Covering
Specific matters with the Internal Revenue Service, any such reduction shall be
held in suspense by the Trustee and used to reduce any future Company
contributions made under the Plan.
(d) In the event that after the above refunds and reductions are made
amounts are still available which may not be allocated hereunder, such amounts
shall be treated as a forfeiture and shall be held in a suspense account.
Provided, however, that except as provided in paragraph (c), such amounts held
in a suspense account will be allocated to the accounts of Participants at the
first possible time when such allocation would not violate the provisions of
Section 415 of the Internal Revenue Code or other applicable law. Such
allocation of forfeitures held in suspense accounts shall take place prior to
the allocation of any amounts arising from any other source, including
forfeitures in a subsequent year, or employer contributions together with
earnings thereon.
Section 8.3: Limitations for Participants In a Combination of Plans. In the
- ----------- ------------------------------------------------------
case of any employee who is a Participant in this Plan and the defined benefit
plan of the Company, if any, the sum of the defined benefit plan fraction and
the defined contribution plan fraction for any year shall not exceed 1.0. In
the event the
23
<PAGE>
sum of such fractions exceeds 1.0 the Committee shall prescribe the manner in
which the annual addition to this Plan or the annual benefits under the
Company's defined benefit plan shall be reduced in order that neither Plan shall
be disqualified under applicable sections of the Internal Revenue Code.
Section 8.4: Definitions. For purposes of applying the limitations of
- ----------- -----------
Section 8.3, the following rules shall prevail:
(a) The term "defined benefit plan fraction" shall mean a fraction the
numerator of which is the projected annual benefit payable under the Company's
defined benefit plan, if any, (determined as of the close of the year) and the
denominator of which is the lesser of (i) the product of 1.25 multiplied by the
dollar limitation in effect under Section 415(b)(1)(A) of the Code for such
year, or (ii) the amount which may be taken into account under Section
415(b)(1)(B) of the Code with respect to such employee under the defined benefit
plan for such year multiplied by 1.4.
(b) The term "defined contribution plan fraction" shall mean the
aggregate annual additions to this Plan, (and any other defined contribution
plan of the Company, if any) determined as of the close of the year without
regard to Section 8.2 hereof (relating to limitations on contributions) over the
sum of the lesser of the following amounts determined for such year and for each
prior year of service with the Company: (i) the dollar limitation in effect
under Section 415(c)(1)(A) of the Code for such year (determined without regard
to Section 415(c)(6) of the Code) multiplied by 1.25, or (ii) the amount which
may be taken into account under Section 415(c)(1)(B) (or Section 415(c)(7) or
(8), if applicable) of the Code with respect to such employee under such plan
for such year multiplied by 1.4.
(c) The term "Compensation" shall include a Participant's wages,
salaries, fees for professional service and other amounts received for personal
services actually rendered in the course of employment with the Company
(including, but not limited to, commissions paid salesmen, Compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses) and shall exclude:
(i) Contributions made by the Company to a Plan of deferred
Compensation to the extent that, before the application of the limitations
of Section 415 of the Code to that Plan, the contributions are not
includable in the gross income of the Employee for the taxable Year in
which contributed. In addition, Company contributions made on behalf of an
Employee to a simplified Employee pension Plan described in Section 408(k)
of the Code are not considered as Compensation for the taxable Year in
which contributed to the extent such contributions are deductible by the
Employee
24
<PAGE>
under Section 219(b)(7) of the Code. Additionally, any distributions from a
Plan of deferred Compensation are not considered as Compensation regardless
of whether such amounts are includable in the gross income of the Employee
when distributed. However, any amounts received by an Employee pursuant to
an unfunded non-qualified Plan may be considered as Compensation in the
Year such amounts are includable in the gross income of the Employee.
(ii) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by an Employee either
becomes freely transferable or is no longer subject to a substantial risk
or forfeiture.
(iii) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option.
(iv) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent that the
premiums are not includable in the gross income of the Employee), or
contributions made by the Company (whether or not under a salary reduction
agreement) towards the purchase of an annuity contract described in Section
403(b) of the Code (whether or not the contributions are excludable from
the gross income of the Employee).
ARTICLE IX
-----------
ADMINISTRATION OF FUND
----------------------
Section 9.1: Valuation of Fund. Within thirty (30) days after the last day
- ----------- -----------------
of each calendar month that this Agreement is in effect, the Trustee shall
report to the Committee, in writing, the value of the Fund as of such month end.
Such valuation shall be made upon the basis of the fair market value of the
assets in the Fund, and upon the approval by the Committee shall be binding upon
the Company, the Participants, and all other persons interested in the Plan.
The failure of the Committee to approve or disapprove of the said valuation
within thirty (30) days after receiving it shall constitute the Committee's
approval thereof. Earnings and losses of the Fund shall be allocated for any
given month pro rata to the Accounts of Participants as such Accounts stood as
of the first day of such month.
In the event the Trustee provides a valuation of the Fund more
frequently than monthly, or in the event of a substantial change in the fair
market value of the assets in the Fund after any monthly Valuation Date and
prior to the next succeeding monthly Valuation Date, the Committee may request
the Trustee to revalue
25
<PAGE>
the Fund, and the Trustee shall make such valuation as of the date of such
change upon the basis of the then fair market value of the assets in the Fund,
not including the value of the contributions by the Company or Participants for
the current fiscal Year, when such contributions have not been received by the
Trustees on or before such interim Valuation Date. Such valuation shall be known
as an "interim valuation". In such event, this interim valuation shall be
substituted for the valuation of the preceding monthly Valuation Date, or for
any more recent interim valuation in determining the amounts in Participants'
Accounts for all purposes of the Plan, including the amounts in the Accounts of
Participants with respect to the terms of the Plan, but with respect to which
distribution has not yet commenced. Whenever reference is made in the Plan to
the Account of a Participant as of an Anniversary Date, or as of a Valuation
Date or any specific date, there shall be used those valuations determined by
the most recent valuation whether or not as of an Anniversary Date or any
specific date. Any such valuations as hereinabove provided, upon the approval of
the Company shall be binding upon the Company, the Participants, and all other
persons interested in the Plan herein set forth.
Section 9.2: Maintenance of Records by Committee. The Committee shall open
- ----------- -----------------------------------
and maintain records which shall reflect the value of the Participant's
Accounts, showing the respective Participant's Accounts, as adjusted.
Section 9.3: Segregation and Disbursement. The Trustee shall hold and
- ----------- ----------------------------
administer the entire Trust Estate, subject to the written direction of the
Committee, and the Trustee shall be bound by, and may act in reliance upon the
written instructions of the Committee. When so directed, in writing, by the
Committee, the Trustee shall segregate the Trust Fund, set up special accounts,
and disburse the Trust Fund when disbursement becomes proper under the terms of
the Plan. If the amount to be distributed to a Participant is to be paid to him
in installments, the Committee shall direct the Trustee to, and the Trustee
shall, segregate such amount from the Fund and invest all such amounts so
segregated in interest-bearing savings accounts (which may be an account with
the Trustee's banking department) or a money market fund; provided, however,
that a Participant may request of the Committee, in writing, that the amount to
be distributed to him in installments be maintained as a part of the Fund,
subject to increases or decreases of income or in the value of the Fund, but not
to share in allocations of the Company's contributions, and upon such request
such amount shall be so maintained. However, any amounts estimated to be
distributable within twelve (12) months of the time such investment otherwise
would be made need not be invested. In addition, any such amounts which are
estimated to be distributable within any ensuing twelve (12) months may be
liquidated or withdrawn or held uninvested. Any earnings and increases or
decreases of value in which such segregated amounts share, whether as a part of
the Fund or in interest-bearing savings accounts, shall be reflected in the
amount
26
<PAGE>
of any installment or installments distributed to the Participants or
beneficiaries entitled thereto in such manner as is determined by the Committee.
The Trustee shall hold and administer the entire Trust Estate, subject
to the written direction of the Committee, and the Trustee shall be bound by,
and may act in reliance upon the written instructions of the Committee. When so
directed in writing by the Committee, the Trustee shall segregate the Trust
Fund, set up special interest bearing savings accounts, and disburse the Trust
Fund when disbursement becomes proper under the terms of the Plan.
ARTICLE X
----------
RETIREMENT
----------
Section 10.1: Normal Retirement. Prior to and upon attainment of the normal
- ------------ -----------------
retirement date a Participant shall be 100% vested in his Accounts hereunder.
Section 10.2: Later Retirement. If the Participant's retirement is deferred
- ------------ ----------------
beyond his normal retirement date, the Participant shall continue as a
Participant in such Plan and no distributions shall be made to him under the
terms of this Article until his actual retirement date. An employee who becomes
eligible as, and becomes a, Participant at or after the date which would
otherwise be his normal retirement date, shall be treated in all respects as a
Participant whose retirement was deferred beyond his normal retirement date as
provided in Section 10.3. The Participant shall be entitled to participate in
the allocation of the Company's contributions under Article V for the year in
which his normal or later retirement date occurs, and such contributions shall
be distributed as provided herein.
Section 10.3: Retirement Benefits. Upon the termination of service of any
- ------------ -------------------
Participant on or after his normal retirement date, such Participant shall be
entitled to receive one hundred percent (100%) of the amounts standing to his
credit in his accounts, as such accounts stand as of the anniversary date of the
Plan coinciding with or next preceding the date of such termination of service,
plus any contributions by him to his Participant Contributions Account between
such anniversary date and the commencement of distributions hereunder, which
amount the Trustee, upon Committee direction, shall distribute to such
Participant in substantially equal installments over a period of one hundred
twenty (120) months, but at least annually. The Trustee shall segregate said
amount from the Fund and set it aside in a special account and shall, insofar as
possible, pay to such Participant the first installment within sixty (60) days
after his retirement. In addition, the Participant shall be entitled to
participate in the allocation of the Company's contribution for the year in
which his normal retirement date occurs. In the case of the retirement of a
27
<PAGE>
Participant who is married on the annuity starting date, any method of
distribution set forth in this Article shall be subject to the provisions of
Section 18.1 hereof.
Section 10.4: Option for Payment in Installments of Less Than One Hundred
- ------------ -----------------------------------------------------------
Twenty (120) Months. A Participant shall have the right to request the
- -------------------
Committee to direct the Trustee to make the payments described in Section 10.3
over a lesser period or in a lump sum and the Committee shall, direct the
Trustee to, and upon its direction the Trustee shall, distribute the amount in
such Participant's accounts in a lump sum or over a period of time less than the
life expectancy of the Participant. In the event the total amount of the
Participant's entitlement represented by his Account is in excess of $3,500 or
was ever in excess of $3,500 at the time of any prior distribution, no
distribution may be made to the Participant prior to his Normal Retirement Date,
except with his consent; and if married, with the written consent of his spouse.
In the event payments to a retired Participant are to be made in installments,
the provisions of Section 9.3 shall apply to such installments.
Section 10.5: Option for Annuity. A Participant shall have the right to
- ------------ ------------------
request the Committee, in lieu of the benefits provided herein, to direct the
Trustees to purchase a nontransferable annuity, the cost of which shall be equal
to the benefits to which such Participant is entitled, and the term of which
shall not extend beyond the life expectancy of the Participant, or the joint
life expectancies of the Participant or his Spouse if the joint form is elected,
and the Committee may, in its discretion, direct the Trustees to, and the
Trustees shall, purchase such an annuity.
Section 10.6: Death After Retirement. In the event of the death of a
- ------------ ----------------------
Participant after retirement and prior to payment to him of the full amount to
which he is entitled under the provisions of this Article, the Trustee, upon the
direction of the Committee, shall distribute within 90 days following the
Valuation Date next following the Participant's death, or as soon as
administratively feasible thereafter, the then undistributed amount to which
such Participant is entitled to the beneficiary or beneficiaries of the
Participant as determined under the provisions of Section 11.1.
Section 10.7: Commencement of Benefit Payment.
- ------------ -------------------------------
(a) Notwithstanding any other provision contained herein to the
contrary, the entire interest of the Participant will be distributed in
accordance with either of the following:
(i) not later than April 1 of the calendar year following the
calendar year in which the Participant attains age 70-1/2;or
(ii) commencing no later than the taxable year described in
paragraph (i) and payable over the life of the
28
<PAGE>
Participant or over the lives of the Participant and the Participant's
designated beneficiary, or over a period not exceeding the life expectancy
of the Participant or over the joint life expectancies of the Participant
and the Participant's designated beneficiary.
(b) If the balance of the Account of a Participant exceeds $3,500,
then the Participant (and if the Participant is married, the Participant's
spouse) must consent in writing to a distribution that commences prior to the
Participant's Normal Retirement Date.
ARTICLE XI
-----------
DEATH OF A PARTICIPANT
----------------------
Section 11.1: Death of a Participant Before Retirement or Termination of
- ------------ ----------------------------------------------------------
Service. Upon the death of a Participant before retirement or termination of
- -------
service, the Trustee shall, upon direction of the Committee, pay to the
beneficiary or beneficiaries last legally designated in writing by the
Participant, in a manner as provided by the Plan and as selected by the
Beneficiary, the amount standing to the credit of the Participant in his
accounts as of the valuation date coinciding with or next preceding the date of
commencement of distribution following such death, plus any contributions by him
or the Company to his accounts between such valuation date and the commencement
of distributions hereunder. In addition to the foregoing, such deceased
Participant shall be entitled to participate in the allocation of the Company's
contributions under Article V for the year in which such death occurs, and such
contributions shall be distributed as provided herein.
Section 11.2: Beneficiary. Every Participant shall designate in writing, a
- ------------ -----------
beneficiary or beneficiaries, and successor beneficiary or beneficiaries, to
receive any death benefits provided herein, and a beneficiary or beneficiaries
for any benefits surviving his death. Such designation or designations may be
changed from time to time by the Participant before his retirement by filing a
new designation of beneficiary or option on a form supplied by the Company.
However, if a Participant wishes to designate an individual other than his or
her spouse as a Beneficiary, such designation shall be effective only as to 100%
of the Participant's Accounts as of the Participant's date of death, unless his
or her spouse consents to the designation in writing and the consent is
witnessed by a Plan representative or Notary Public. In the event that at any
time there is not a beneficiary designated in writing by the Participant to
receive death benefits, the Trustee upon written direction by the Committee
shall designate the beneficiary of said benefits to be the surviving spouse of
the Participant, and if there is no surviving spouse, then to the executor or
administrator of the estate of the Participant.
29
<PAGE>
Section 11.3: Limit on Form of Death Benefit Payment. If a Participant dies
- ------------ --------------------------------------
before his entire interest has been distributed to him, his entire interest (or
the remaining part thereof) shall be distributed to his designated beneficiary
or beneficiaries in a lump sum as soon as administratively feasible, but in no
event later than within five years after his death (or the death of his
surviving spouse). The preceding shall not apply if the distribution of the
interest of the Participant has commenced and such distribution is for a term
certain over a period permitted under Sec. 10.7, and in such event, the
remaining interest will be distributed at least as rapidly as under the method
being used as of the date of the Participant's death.
ARTICLE XII
------------
DISABILITY OF A PARTICIPANT
---------------------------
Section 12.1: Disability. Upon the disability of a Participant, the
- ------------ ----------
Participant shall be entitled to receive one hundred percent (100%) of the
amount standing to his credit in his Accounts as of the valuation date
coinciding with or next preceding the date of commencement of distribution
following such termination of service, plus any contributions by him to his
Participant Contributions Account between such Anniversary Date and the
commencement of distributions hereunder. Upon the direction of the Company, the
Trustees shall distribute such amount to such Participant in substantially equal
installments over a period of one hundred twenty (120) months. A Participant
shall have the right to request the Committee to direct the Trustees to make
such payments over a lesser period or in a lump sum and the Committee may, in
its discretion, direct the Trustees to, and upon its direction the Trustees
shall, distribute the amount in such Participant's Accounts in a lump sum or
over a period of time less than the life expectancy of the Participant. In the
event the total amount of the Participant's entitlement represented by the
Participant's Account is in excess of $3,500.00, no lump sum distribution may be
made to the Participant except with his consent, and if married with the consent
of his Spouse. The commencement of distribution may be made at any time
following six months after the disability and while the Participant is employed
by the Company; provided, however, that in the event of such a distribution, the
Participant receiving the distribution may not contribute under Article VI any
amounts from the date of commencement of distribution until the later of six
months or the next following election period authorized by the Committee.
Insofar as possible, the commencement of distribution shall be made by the
Trustees within sixty (60) days following the termination of service of such
Participant, and the Trustees, upon direction of the Committee, shall segregate
said amount from the Fund and set it aside in a special account and pay to such
Participant the first installment within sixty (60) days following the date on
which such termination of service occurs.
30
<PAGE>
In the event payments to a disabled Participant are to be made in
installments, the provisions of Sec. 9.3 shall apply to such installments.
Section 12.2: Death After Termination for Disability. In the event of the
- ------------ --------------------------------------
death of the Participant after termination of service by reason of disability
and prior to payment to him of the full amount to which he is entitled under the
provisions of this Article XII, the Committee shall direct the Trustee to
distribute immediately, or as soon as the same is determined, the then
undistributed amount to which such Participant is entitled to the beneficiary or
beneficiaries of the Participant, as provided in Section 11.2 determined under
the provisions of Article XI.
ARTICLE XIII
-------------
OTHER TERMINATIONS OF SERVICE
-----------------------------
Section 13.1: Determination of Benefits. In the event a Participant incurs a
- ------------ -------------------------
separation from service for any reasons, such Participant shall be entitled to
have distributed one hundred percent (100%) of the amount in his Company
Contributions Account as such account stood as of the Valuation Date preceding
the distribution.
Any amendment hereto which changes the above vesting schedule, or
which results from any automatic change to or from the top heavy vesting
schedule set forth in Section 16.3(a), shall not be effective as to any
Participant who has at least three (3) years of service with the Company if such
Participant elects, within a reasonable time after the adoption of such
amendment, to have his vested interest computed without regard to such
amendment. In the event of any such amendment, the Committee shall notify each
Participant who has at least five years of service of his right to remain under
the prior vesting schedule. Such election shall be deemed to be made within a
reasonable time if it is communicated to the Company by the Participant by the
latest of a date which sixty (60) days after (a) the date the Plan amendment is
adopted, or (b) the effective date of the Plan amendment, or (c) the date the
Participant is issued written notice of the amendment by the Company.
Section 13.2: Manner of Distribution of Benefits. After a separation from
- ------------ ----------------------------------
service with the Company, the Committee shall direct the Trustee to commence to
distribute the Participant's vested Account, within 90 days following the later
of the date on which the separation from service occurred or as soon as
administratively feasible following such separation and receipt of any required
fully executed election forms. A Participant may not receive a partial
distribution of his vested account. In the event the value of a Participant's
Account (including employee contributions, if any) exceeds $3,500, or was ever
in excess of
31
<PAGE>
$3,500 at the time of any prior distribution, written consent of the Participant
is required before the distribution of any portion of his Account may be
commenced prior to the time the Participant attains age 65. The consent of the
Participant shall be obtained in writing within the 90-day period ending on the
annuity starting date, which is the first day of the first period for which an
amount is paid in any form. The Committee shall notify the Participant of the
right to defer any distribution until the Participant's account balance is no
longer immediately distributable. Such notification shall include a general
description of the material features, and an explanation of the relative values
of, the optional forms of benefit available under the Plan, and shall be
provided no less than 30 days and no more than 90 days prior to the annuity
starting date. The distribution may commence less than 30 days after the
required notice is given, provided that:
(i) The Committee clearly informs the Participant that the
Participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and
(ii) The Participant, after receiving the notice, affirmatively elects
a distribution.
Notwithstanding the foregoing, if the value of the Participant's Account
(including employee contributions, if any) does not exceed $3,500, or was ever
in excess of $3,500 at the time of any prior distribution, distribution of the
Participant's vested Account shall be distributed in a lump sum as soon as
administratively feasible following the Participant's separation from service.
Section 13.3: Death Prior to Payment. In the event of the death of the
- ------------ ----------------------
Participant prior to the payment to him of the full amount to which he is
entitled, the Committee shall direct the Trustee to distribute immediately the
then undistributed amount to which such Participant is entitled to the
beneficiary or beneficiaries of the Participant, as determined under the
provisions of Section 11.2. In the event payments to a terminated Participant
are to be made in installments, the provisions of Sec. 9.3 shall apply to such
installments.
ARTICLE XIV
------------
HARDSHIP OF A PARTICIPANT
-------------------------
Section 14.1: Hardship Distribution. In the event a Participant incurs a
- ------------ ---------------------
hardship, he may request a distribution from his Participant Deferred
Compensation Account in an amount necessary to meet the hardship. In no event
may the requested distribution exceed the amount necessary to satisfy the
immediate financial need
32
<PAGE>
created by the hardship including amounts necessary to pay any federal, state or
local income taxes or penalties reasonably anticipated to result from the
distribution. For purposes of this section, a distribution on account of
hardship shall mean a distribution necessary in light of immediate and heavy
financial needs of the Participant, and shall not exceed the amount required to
meet the immediate financial need created by the hardship that is not reasonably
available from other resources of the Participant.
Section 14.2: Determination by Committee. In order to receive a hardship
- ------------ --------------------------
distribution, a Participant must file a written request with the Committee
detailing the facts necessary to satisfy the requirements of Section 14.1 after
having borrowed the maximum amount of non-taxable loans available under Section
17.2 of the Plan. Any amount distributed as a hardship distribution shall be in
a lump sum paid by the Trustee, in accordance with the direction of the
Committee, as soon as practicable after receipt by the Committee of such a
request. The Committee shall determine whether a financial hardship exists and
the amount required to be distributed to meet the need created by the hardship
in a uniform and nondiscriminatory manner.
ARTICLE XV
-----------
AMENDMENT OR DISCONTINUANCE OF PLAN
-----------------------------------
Section 15.1: Right to Amend. The Company reserves the right at any time,
- ------------ --------------
without the approval of any Participants, former Participants, beneficiaries, or
its employees, to terminate the Plan (with or without terminating the Trust), or
to change, modify or amend the Plan and Trust in any particular or particulars
whatsoever, including but not by way of limitation, the right to increase,
diminish, or eliminate contributions to be made by it hereunder, to change or
modify the method of allocation of such contributions, to change any provision
relating to the administration of the Plan and to change any provision relating
to the distribution or payment, or both, of any of the assets of the Trust. All
such changes, modifications or amendments may be retroactive to any date to and
including the effective date of the Plan unless other provision is specifically
made. However, no such amendment shall authorize or permit any part of the
Trust Fund (other than such part as is required to pay taxes or administrative
expenses) to be used for or diverted to purposes other than for the exclusive
benefit of Participants, their beneficiaries or estates. No such change,
modification or amendment (unless such change, modification or amendment is
necessary in order to meet the requirements of the Code) shall eliminate an
optional form of benefit, cause any reduction in the amount credited to any
Participant's account to which he would otherwise become entitled if he
terminated service with the Company as of the date of adoption of such change,
modification or amendment pursuant to
33
<PAGE>
Article XIII, or cause or permit any part or portion of the Trust Fund to revert
to or become the property of the Company.
Section 15.2: Termination of Plan. The Company reserves the right to
- ------------ -------------------
terminate the Plan at any time, as to itself, without approval of its employees.
Section 15.3: Distribution on Termination or Discontinuance. In the event of
- ------------ ---------------------------------------------
the termination or partial termination of the Plan by the Company as to itself,
or in the event of the complete discontinuance of contributions to the Plan by
the Company, the Trustee shall set up separate accounts for the respective
Participants in proportion to the value of their respective shares, whether or
not vested, all as determined and directed by the Committee. The interests of
such affected Participants shall become wholly vested as of the date of such
termination or partial termination of the Plan or complete discontinuance of
contributions. Upon the direction of the Committee, the Trustee shall
distribute to such Participant the amount in his accounts in the same manner
distribution would have been made to such Participant under the applicable
provisions of Article X as if the Plan had not been terminated or discontinued
by the Company.
ARTICLE XVI
------------
TOP HEAVY PROVISIONS
--------------------
Section 16.1: Top Heavy Definitions. Whenever any of the following terms is
- ------------ ---------------------
used in the Plan with the first letter or letters capitalized, it shall have the
meaning specified below unless the context clearly indicates to the contrary.
(a) "Aggregation Group" means each Plan of the Company in which a Key
Employee is a Participant, and each other Plan of the Company which enable the
Plan or Plans containing a Key Employee to meet the antidiscrimination
requirements of Sections 401(a)(4) or 410 of the Code. In addition, the
Committee may include in the Aggregation Group any other Plan of the Company
that satisfies the requirements of Sections 401(a)(4) and 410 of the Code when
considered together with the other Plans in the Aggregation Group.
(b) "Determination Date" means with respect to any Plan Year the last
day of the preceding Plan Year, or in the case of the first plan year of the
Plan, the last day of such plan year.
(c) "Key Employee" means an Employee or former Employee who, at any
time during the Plan Year which contains the determination date, or any of the
four preceding Plan Years, is:
(i) one of the ten Employees of a Company having annual
compensation from such Company of more than the
34
<PAGE>
limitation in effect under Section 415(c)(1)(A) of the Code and owning (or
considered as owning within the meaning of Section 318 of the Code) the
largest interest in such Company (if two Employees have the same interest
the Employee having the greater annual compensation from the Company shall
be treated as having a larger interest);
(ii) A 5% owner of the Company;
(iii) A 1% owner of the Company who has an annual compensation
above $150,000 as defined in Section 415(c) of the Code; or
(iv) An officer of the Company having an annual compensation
greater than 50% of the amount in effect under Section 415(b)(1)(A) of the
Code for any such Plan Year (however, no more than the lesser of 50
employees or the greater of three employees or 10% of the Company's
employees shall be treated as officers).
"Non-Key Employee" means an Employee who is not a Key Employee. The
beneficiaries of an Employee acquire the character of such Employee. For
purposes of this paragraph, compensation shall have the same meaning as defined
in Section 415(c)(3) of the Code.
(d) "Top Heavy Group" means any Aggregation Group if the sum of the
present value of cumulative accrued benefits for Key Employees under all defined
benefit pension plans included in the Aggregation Group, and the sum of the
accounts of Key Employees under all defined contribution plans included in the
Aggregation Group, exceeds 60% of such amounts determined for all employees,
calculated as of the determination date, using the most recent valuation date
within the twelve (12) month period ending on the determination date.
(e) "Top Heavy Plan" means each Plan of the Company or Companies
required to be included in an Aggregation Group, if the Aggregation Group is a
Top Heavy Group.
Section 16.2: Special Top Heavy Rules. For purposes of determining whether a
- ------------ -----------------------
Top Heavy Group exists, the following special rules shall apply:
(a) Benefits derived from voluntary or mandatory Participant
contributions and Company contributions shall be taken into account.
(b) The aggregate of distributions made to any Participant from the
Plan or any plans in the Aggregation Group, during the five year period ending
on the Determination Date shall be taken into account in determining the present
value of
35
<PAGE>
cumulative accrued benefits of any Participant or the account of any Participant
under any such plan.
(c) If a Participant who was a Key Employee ceases to be a Key
Employee for a Plan Year, the cumulative accrued benefit or account of such
Participant will not be taken into account for determining whether a Top Heavy
Group exists for such Plan Year.
(d) Except as provided by regulation, any rollover contributions (or
similar transfer) initiated by an Employee and will not be taken into account in
determining if this Plan is a Top-Heavy Plan.
(e) For Plan Years beginning after December 31, 1984, the account
balances of a Participant who has not performed any services for the employer
maintaining the Plan during the five year period ending on the determination
date will be disregarded.
Section 16.3: Top Heavy Benefits and Restrictions. If the Plan is a Top Heavy
- ------------ -----------------------------------
Plan for any Plan Year, then with respect to such Plan Year the following
provisions shall apply:
(a) Each Participant shall be 100% Vested in his or her Account, as
of such Plan Year and for each Plan Year thereafter.
(b) Each Participant who is not a Key Employee shall receive an
allocation of Company contributions of the lesser of 3% of such Participant's
net Compensation or the highest percentage of net Compensation at which
contributions are allocated or required to be allocated under the Plan for any
Key Employee. Non-Key Employees who have become Participants and who are
employed by the Company on the last day of the Plan Year, even though such Non-
Key Employees fail to complete 1,000 hours of service for a Plan Year must
receive the minimum benefit, regardless of the Non-Key Employee's level of
Compensation. A non-Key Employee may not fail to receive the minimum benefit
because of a failure to authorize a deduction from Compensation under Article
VII. In determining the percentage of Company contributions made on behalf of a
Key Employee, amounts contributed as a result of salary reduction under Article
VII must be included.
(c) If the sum of the cumulative accrued benefits and the aggregate
of the accounts held by Key Employees under a Top Heavy Group does not exceed
90% of such amounts for all Employees, then the percentage of 3% described in
paragraph (b) above shall be replaced by 4%.
(d) If the sum of the cumulative accrued benefits and the aggregate
of the accounts held by Key Employees under a Top Heavy Group does exceed 90% of
such amounts for all Employees, then the limitation of 1.25 contained in Section
8.4 shall be replaced by 1.0.
36
<PAGE>
(e) If the Company maintains this plan and a defined benefit plan;
the minimum Company contribution during a Plan Year for a Participant who is not
a Key Employee shall equal 5% of the Participant's net Compensation, provided
that the minimum Company contribution required by Section 416 of the Code is not
made under the defined benefit plan.
(f) If the provisions of paragraph (d) apply, then the amount of 17
1/2% will be substituted for 5% in paragraph (e).
(g) For purposes of determining the minimum contribution required
under paragraphs (b), (c), (e) or (f), as applicable, a Participant's net
compensation shall mean his W-2 compensation including contributions made under
a cash or deferred arrangement, but in no event in excess of the limitations
provided by Section 401(a)(17) of the Code.
ARTICLE XVII
-------------
RESTRICTION ON ASSIGNMENT
-------------------------
Section 17.1: Effect of Assignment in General. Neither the Company nor the
- ------------ -------------------------------
Trustee shall recognize any transfer, mortgage, pledge, hypothecation, order or
assignment by any Participant or beneficiary of all or part of his interest
hereunder, and such interest shall not be subject in any manner to transfer by
operation of law, and shall be exempt from the claims of creditors or other
claimants from all orders, decrees, levies, garnishment and/or executions and
other legal or equitable process or proceedings against such Participant or
beneficiary to the fullest extent which may be permitted by law. The preceding
sentence shall apply to the creation, assignment, or recognition of a right to
any benefit payable with respect to a Participant pursuant to a domestic
relations order, unless such order is determined to be a qualified domestic
relations order as defined in Section 414(p) of the Code, or upon approval of
the committee in its sole discretion any domestic relations order entered before
January 1, 1985. Notwithstanding any other provisions contained in the Plan that
limit the right of a Participant to commence to receive a distribution from the
Plan, payment of benefits from the Plan to an alternate payee under a qualified
domestic relations order shall commence at such time as provided in the
qualified domestic relations order or as soon thereafter as administratively
feasible.
Section 17.2: Loans to Participants. The Committee may, at its sole
- ------------ ---------------------
discretion and upon written application of a Participant, make a loan or loans
(not to exceed two loans, either two personal loans or one personal and one home
loan, outstanding at any one time) to such Participant in a total amount when
aggregated with any other loans from any other qualified plan maintained by the
Company not in excess of the lesser of $50,000 (reduced by the highest
outstanding loan balance during the preceding twelve month period)
37
<PAGE>
or fifty percent (50%) of the value of the vested amount credited to his or her
Accounts plus earnings or losses, provided that such loans (i) are available to
all Participants on a reasonably equivalent basis, and in the same percentage of
their vested Account balances; (ii) are adequately secured, which security can
be accomplished by an assignment of not more than 50% of the Participant's
vested interest in his or her Account(s) or other good and valuable security;
(iii) are evidenced by the borrowing Participant's promissory note for a fixed
term, not to exceed five (5) years (except for a loan used to acquire any
dwelling unit which within a reasonable time will be used as the principal
residence of the Participant, not to exceed twenty (20) years), bearing interest
at a rate equal to the prime rate of interest of Union Bank on the first day of
the quarter in which the loan is approved, and requiring regular periodic (at
least quarterly) repayment of principal and interest by payroll deductions or
otherwise; (iv) are made in a uniform and non-discriminatory manner and (v) are
made only with the written consent of the Participant's spouse, if any, and the
spouse's consent is witnessed by a Plan representative or notary public and such
election is made during the 90-day period ending on the date on which any such
loan is secured, if the value of the vested Account of the Participant used as
security exceeds $3,500.00.
Each Participant loan is treated as a direct investment of the
borrowing Participant, and as such all interest paid or other expenses
associated with the loan shall be credited to or chargeable to the borrowing
Participant's Account. The amount of any loan in excess of the above limit
shall be considered as taxable income to such Participant making such loan in
the calendar year in which such excess occurs.
In the event of default, any expenses incurred by the Plan in
connection with collection of the loan (including attorney's fees) shall be
charged to the Participant's Account.
In the event the Participant separates from service with the Company,
or fails to pay principal or interest when due, the entire outstanding balance
of principal and interest may be immediately due and payable without notice or
demand at the discretion of the Committee. In the event the loan is in default,
the Participant's Account Balance may be reduced or may be deemed distributed at
the time of the default, or if any loan has not been repaid at the time of a
distribution to a Participant or his beneficiary, then the outstanding amount of
principal and interest shall be deducted from the amount of any such
distribution.
Amounts collected or deemed distributed from the Participant's Account
to repay any outstanding principal or interest on a Participant loan shall be
treated as a distribution to the Participant or beneficiary as the case may be,
and to the extent taxable shall be reported to the Internal Revenue Service.
38
<PAGE>
ARTICLE XVIII
--------------
MISCELLANEOUS PROVISIONS
------------------------
Section 18.1: Joint and Survivor Annuity.
- ------------ --------------------------
(a) Form of Benefit Payments. The provisions of this section shall
------------------------
take precedence over any conflicting provisions in the Plan and shall apply to
any Participant who is credited with at least one hour of service with the
Company on or after August 23, 1984, and such other Participants as are covered
by Section 6.5. Unless an optional form of benefit is selected within the
Applicable Election Period pursuant to a Qualified Election, a Participant's
benefit shall be paid as follows:
(i) In the form of a Qualified Joint and Survivor Annuity
providing for an annuity for the life of a Participant and a survivor
annuity for the life of the Participant's spouse following the
Participant's death at a rate of not less than 50% and not more than 100%
of the amount payable during the joint lives of the Participant and the
Participant's spouse, or
(ii) If a Participant dies before the Annuity Starting Date, in the
form of a Qualified Pre-Retirement Survivor Annuity commencing at the
direction of the Spouse immediately upon the death of the Participant and
providing for an annuity for the life of the surviving spouse which is the
actuarial equivalent of at least 50% of the amount in the Participant's
Accounts as of the Participant's date of death.
(b) Definitions. Whenever any of the following terms is used in the
-----------
Plan it shall have the meaning specified below unless the context clearly
indicates to the contrary.
(i) "Annuity Starting Date" shall mean the first day of the first
period for which an amount is payable as an annuity; or for all other
benefits not payable as an annuity, the first day on which all events have
occurred which entitle the Participant to such benefit.
(ii) "Applicable Election Period" shall mean with respect to the
Qualified Joint and Survivor Annuity described in subsection (a)(i), the
ninety day period ending on the date benefit payments are to commence; and,
with respect to the Qualified Pre-Retirement Survivor Annuity described in
subsection (a)(ii), the period which begins on the first day of the Plan
Year in which the Participant attains age 35 or, if earlier, the date of
his or her termination of service, and ends on the date of the
Participant's death.
39
<PAGE>
(iii) "Qualified Election" means a written election of a form of
benefit other than a Qualified Joint and Survivor Annuity or a Qualified
Pre-Retirement Survivor Annuity. A Participant who has elected to waive
the Qualified Pre-Retirement Survivor Annuity with spousal consent may
revoke the election at any time and any number of times during the period
between the first day of the Plan Year in which the Participant attains age
35 and the date of the Participant's Death. An election shall be a
Qualified Election only if the Participant's spouse consents to the
election in writing and his or her consent is witnessed by a Plan
representative or Notary Public. Notwithstanding this consent requirement,
if the Participant establishes to the satisfaction of the Company that such
written consent cannot be obtained because the Participant has no spouse,
or because the spouse cannot be located, the election shall be deemed a
Qualified Election. Any spouse who so consents may revoke the consent at
any time and any number of times prior to the Annuity Starting Date.
(iv) "Spouse" means spouse or surviving spouse of the Participant
provided that a former spouse will be treated as the spouse to the extent
provided under a qualified domestic relations order as described in Section
414(p) of the Code.
(c) Notice Requirements. Within a reasonable period of time before
-------------------
the Annuity Starting Date the Company shall provide the Participant with a
written explanation of the following:
(i) The terms and conditions of the Qualified Joint and Survivor
Annuity or Qualified Pre-Retirement Survivor Annuity, as applicable;
(ii) The Participant's right to elect a benefit other than a Qualified
Joint and Survivor Annuity or Qualified Pre-Retirement Survivor Annuity and
the effect of such an election;
(iii) The rights of the Participant's spouse with respect to the
Qualified Joint and Survivor Annuity or Qualified Pre-Retirement Survivor
Annuity; and
(iv) The right of the Participant to revoke previous election and the
effect of such revocation.
In the case of a Qualified Pre-Retirement Survivor Annuity, such
written explanation shall be given by the end of the three year period beginning
with the first day of the Plan year in which the Participant attains age 32, or
in the case of a Participant who terminates service prior to age 32 within one
year of his separation, or in the case of a Participant who becomes a
40
<PAGE>
Participant after age 32, within the three year period beginning with the first
day of the Plan year in which he becomes a Participant.
Notwithstanding the other requirements of this subsection, the
respective notices prescribed by this Section need not be given to a Participant
if this Plan "fully subsidizes" the costs of a Qualified Joint and Survivor
Annuity and the Participant does not elect another form of benefit. For
purposes of this subsection, a Plan fully subsidizes the costs of a benefit if
under the Plan the failure to waive such benefit by a Participant would not
result in a decrease in any Plan benefits with respect to such Participant and
would not result in increased contributions from the Participant.
(d) Transitional Rules Applicable to Joint and Survivor Annuities.
-------------------------------------------------------------
Any living Participant not receiving benefits on August 23, 1984 who is credited
with at least one Hour of Service under the Plan or under a predecessor Plan on
or after September 2, 1974 shall be afforded the opportunity to elect to have
his or her benefits paid as follows:
(i) If such Participant had at least ten (10) Years of vesting
service upon termination of service, he or she may elect to have his
or her benefits paid in accordance with Sec. 18.1; and
(ii) If such Participant had less than ten (10) Years of vesting
service upon termination of service or, if such Participant does not
elect to have his or her benefits paid in accordance with Sec. 18.1,
and if such Participant is entitled to benefits in the form of a life
annuity, he or she may elect to have his or her benefits paid as
follows:
a. If the benefits commence on or after normal or early
-
retirement age, if the Participant dies after normal retirement
age while still employed by the Company or after termination of
service on or after normal or early retirement age before the
Annuity Starting Date, in the form of a Qualified Joint and
Survivor Annuity. Any such election must be in writing and may
be made and changed by the Participant at any time during the
period beginning at least six (6) months before the earliest date
on which the Participant may become eligible for early retirement
benefits under the Plan and ending not more than 90 days before
commencement of benefits.
b. If the Participant is employed after the earliest date
-
on which he or she may
41
<PAGE>
become eligible for early retirement benefits, in the form of a
Qualified Pre-Retirement Survivor Annuity. Any such election must
be in writing and may be made and changed at any time during the
period beginning on the later of the ninetieth day before the
Participant reaches the Earliest Retirement Age and the date on
which participation begins, and ends on the Participant's
termination of service.
(e) Notice For Fully Subsidized Benefit. Notwithstanding the other
-----------------------------------
requirements of paragraph (c), the respective notices prescribed by this section
need not be given to a Participant if his plan "fully subsidizes" the costs of a
qualified joint and survivor annuity or qualified preretirement survivor
annuity. For purposes of this paragraph (d) a plan fully subsidizes the costs
of a benefit if under the plan the failure to waive such benefit by a
Participant would not result in a decrease in any plan benefit with respect to
such Participant and would not result in increased contributions from the
Participant.
(f) This paragraph applies to the Plan if the following two conditions
are met: (1) the Participant cannot or does not elect payment in the form of a
life annuity, and (2) on the death of the Participant, the Participant's vested
account balance will be paid to the Participant's surviving spouse, but if there
is no surviving spouse, or, if the surviving spouse has already consented in a
manner conforming to a Qualified Election, then to the Participant's designated
beneficiary. However, this shall not be operative with respect to the
Participant if it is determined that this Plan is a direct or indirect
transferee of a defined benefit plan, money purchase pension plan (including a
target benefit plan), stock bonus, or profit-sharing plan which would otherwise
provide for a life annuity form of payment to the Participant. If this
paragraph is operative the other provisions of this Sec. 18.01 shall be
inoperative.
Section 18.2: Limitation on Participant's Rights. Participation in the Plan
- ------------ ----------------------------------
shall not give any Participant the right to be retained in the service of the
Company or any rights in or to any part of the Fund or to any benefits
whatsoever, except to the extent specifically set forth under the terms of this
instrument.
Section 18.3: Receipt. On final payment or distribution to any Participant of
- ------------ -------
his legal representatives, or beneficiaries, in accordance with the provisions
of this instrument, the Trustee shall be entitled to demand a receipt in full
satisfaction of all claims against the Trust, the Trustee, the Committee and the
Company.
42
<PAGE>
Section 18.4: Unenforceable Provisions. If any provision of this Agreement
- ------------ ------------------------
shall be for any reason invalid or unenforceable, the remaining provisions
shall, nevertheless be carried into effect.
Section 18.5: Governing Law. This Agreement has been finally executed and
- ------------ -------------
delivered in the State of California, and all matters affecting its validity and
construction shall be determined by the laws of that state, except to the extent
that the laws of that state are preempted by any applicable federal statute.
Section 18.6: Agreement Binding on Successors. This Agreement shall be
- ------------ -------------------------------
binding upon the successors and assigns of the Company and upon any successor of
the Trustee, whether by consolidation, merger, transfer of trust business,
resignation, or otherwise, and such successor Trustee shall have all the
authority and powers conferred hereby upon the Trustee.
Section 18.7: Masculine Gender Includes Feminine and Neuter, and Singular
- ------------ -----------------------------------------------------------
Number the Plural. The use of the masculine pronoun and the singular number
- -----------------
shall include the feminine and neuter genders and the plural number, and
conversely, whenever appropriate.
Section 18.8: Headings, Etc. No Part of Agreement. Headings of Articles and
- ------------ -----------------------------------
sections of this instrument are inserted for convenience and reference. They
constitute no part of the Agreement.
Section 18.9: Merger of Plans. In the event that this Plan and the Trust
- ------------ ---------------
merges or consolidates with, or transfers its assets or liabilities to, any
other qualified plan of deferred compensation, no Participant herein shall,
solely on account of such merger, consolidation or transfer, be entitled to a
benefit on the day following such event which is less than the benefit to which
he was entitled on the day preceding such event. For the purpose of this
section, the benefit to which a Participant is entitled shall be calculated
based upon the assumption that a Plan termination and distribution of assets
occurred on the day as of which the amount of the Participant's entitlement is
being determined.
Section 18.10: Claims Procedures. Pursuant to procedures established by the
- ------------- -----------------
Committee, adequate notice in writing shall be provided to any Participant or
beneficiary whose claim for benefits under the Plan has been denied. Such
notice shall set forth the specific reason for such denial, written in a manner
calculated to be understood by the claimant, and provided review is requested
within 60 days after receipt by the claimant of written notification of denial
of his claim, shall afford a reasonable opportunity to any claimant whose claim
for benefits has been denied to a full and fair review of decision denying the
claim.
43
<PAGE>
Section 18.11: Funding Policy and Method. The Committee shall establish and
- ------------- -------------------------
communicate to the Trustee at reasonable times a funding policy and method with
respect to this Plan in order to carry out the purposes hereof.
Section 18.12: Commencement of Benefits. Anything contained herein to the
- ------------- ------------------------
contrary notwithstanding, the payment of benefits hereunder to any Participant
will begin not later than the sixtieth (60th) day after the latest of the close
of the Plan year in which:
(a) the date on which the Participant attains the earlier of age 65
or the normal retirement age specified herein;
(b) occurs the tenth anniversary of the year in which the Participant
commenced participation in the Plan; or
(c) the Participant terminates service with the Company.
Section 18.13: Forfeiture Upon Failure to Locate. The Committee shall
- ------------- ---------------------------------
declare a forfeiture of any Account of any Participant or beneficiary under the
Plan who cannot be found within one year after the Account would have otherwise
been payable under the Plan. Neither the Company, the Committee or the Trustee
shall be obligated to search for the whereabouts of any person. Any amounts
forfeited shall be used to reduce Company contributions. In the event such
participant or Beneficiary is thereafter located, such previously forfeited
Account shall be restored.
Section 18.14: Direct Transfer of Benefits.
- ------------- ---------------------------
(a) This paragraph applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this paragraph, a Distributee may
elect, at the time and in the manner prescribed by the Administrator, to have
any portion of an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct Rollover.
(b) The following definitions apply to paragraph (a):
(i) An Eligible Rollover Distribution is any distribution of all
or any portion of the balance to the credit of the Distributee, except that
an Eligible Rollover Distribution does not include: any distribution that
is one of a series of substantially equal periodic payments (not less
frequently than annually), made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code;
44
<PAGE>
and the portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized appreciation
with respect to employer securities).
(ii) An Eligible Retirement Plan is an individual retirement account
described in Section 408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in Section
401(a) of the Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution to
the surviving spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
(iii) A Distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are Distributees with regard to the interest of
the spouse or former spouse.
(iv) A Direct Rollover is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
ARTICLE XIX
------------
INVESTMENT OPPORTUNITIES
------------------------
Section 19.1: Investment Funds. At such time and in such manner as the
- ------------ ----------------
Committee in its sole discretion shall determine, the Trustee shall maintain,
subject to the written direction of the Committee, one or more separate Funds.
Each such Fund shall be included in the Trust Fund.
Section 19.2: Election of Investment Options. Following such time as separate
- ------------ ------------------------------
investment funds are available under Sec. 19.1, or at such other time as the
Committee shall in its sole discretion determine, each Participant may make an
election, in writing, with respect to the investment of the amounts contributed
to his Account for succeeding Contributions, by directing the Committee that
such amounts are to be invested in such percentage increments as the Participant
shall determine in any combination between the various investment Funds. At
such time as the Committee shall determine, a Participant may elect to change
his investment election with respect to his choice of investments hereunder for
future Employee and Company contributions as allowed herein by listing and/or
giving written, telephone or such other notice as may be required by the
Committee from time to time. Any election by a Participant shall remain in
effect until changed. In the event no election by
45
<PAGE>
a Participant is received by the Committee, the Participant shall be deemed to
have elected the investment of one hundred percent (100%) of the amounts
eligible for election hereunder in the Fund that is the equivalent of a money
market fund. Any and all elections granted hereunder shall always be with
respect to future additions to the Participant's Account and not to accumulated
amounts therein, except at such time and in such manner as the Committee shall
determine, a Participant may change any existing investments to any other
investment options that are made available under the Plan.
Section 19.3: Change in Investment Options. The Committee, at its sole
- ------------ ----------------------------
discretion and from time to time, may provide additional investment options,
amend the investment options provided herein, or change the election
alternatives available to Participants hereunder, or amend any other provisions
contained herein with respect to investments.
Section 19.4: Expenses Charged to Participant's Account. The Committee may in
- ------------ -----------------------------------------
its sole discretion assess the Participant's Account with any expense incurred
either as a result of any investment, change in investment made by a Participant
with respect to any Fund, or as a result of any loan, withdrawal or distribution
of benefits from the Participant's Account.
IN WITNESS WHEREOF, the undersigned has executed this instrument the
____ day of __________, 1995.
CERTIFIED GROCERS OF CALIFORNIA, LTD.
By /s/ ALFRED A. PLAMANN
, President
----------------------------------------
By /s/ D.A. WOODWARD
, Secretary
----------------------------------------
APPROVED:
FARMER & RIDLEY
/s/ PERRY E. MAGUIRE
By ______________________
Attorneys for Company
46
<PAGE>
EXHIBIT 10.7
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEES' EXCESS BENEFIT PLAN
------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE Page
- ------- ----
<C> <S> <C>
I INTRODUCTION.................................................. 1
Section 1.1 Name............................................ 1
Section 1.2 Purposes........................................ 1
II DEFINITIONS................................................... 1
Section 2.1 Definitions..................................... 1
III ELIGIBILITY................................................... 2
Section 3.1 Eligibility..................................... 2
IV BENEFITS...................................................... 2
Section 4.1 Amounts of Benefits............................. 2
Section 4.2 Form and Timing of Benefit Payments............. 3
Section 4.3 Benefits Unfunded............................... 3
Section 4.4 Payment to Beneficiary.......................... 3
V ADMINISTRATION................................................ 3
Section 5.1 Duties of Administrator......................... 3
Section 5.2 Claims Procedure................................ 4
VI AMENDMENT AND TERMINATION..................................... 4
Section 6.1 Amendment and Termination....................... 4
Section 6.2 Contractual Obligation.......................... 4
VII MISCELLANEOUS................................................. 4
Section 7.1 No Employment Rights............................ 4
Section 7.2 Assignment...................................... 5
Section 7.3 Law Applicable.................................. 5
SIGNATURES.............................................................. 5
</TABLE>
i
<PAGE>
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEES' EXCESS BENEFIT PLAN
------------------------------
This agreement executed by CERTIFIED GROCERS OF CALIFORNIA, LTD., a
corporation organized under the laws of the State of California, evidences the
terms of a Comprehensive Amendment to Certified Grocers of California, Ltd.
Employees' Excess Benefit Plan ("Plan") that was originally effective January 1,
1986 and amended from time to time thereafter.
This Comprehensive Amendment is effective September 3, 1989 and the
terms of the Plan shall be as follows:
ARTICLE I
INTRODUCTION
Section 1.1 Name. The Plan evidenced by the terms hereof shall be
----
known as the "Certified Grocers of California Ltd. Employees' Excess Benefit
Plan."
Section 1.2 Purposes. The Plan is designed to provide retirement
--------
and other benefits to each eligible Employee and the beneficiaries of such
Employee. The Plan is intended to be an excess benefit plan within the meaning
of Section 3(36) of the Employee Retirement Income Security Act of 1974
("ERISA").
ARTICLE II
DEFINITIONS
Section 2.1 Definitions. When used herein the following terms
-----------
shall have the following meanings unless a different meaning is clearly required
by the context of the Plan.
(a) The "Administrator" shall mean the plan administrator of the
Certified Grocers of California, Ltd. Employees' Sheltered Savings Plan.
(b) The "Beneficiary" shall mean the person or persons or trust
designated in writing on forms supplied by the Administrator that are
delivered prior to death to the Administrator by the Participant to receive
benefits under the Plan in the event of death of the Participant as
provided herein; or if no effective designation is made, then Beneficiary
means the Participant's spouse, but if the Participant has no spouse at his
death, then Beneficiary means his estate.
1
<PAGE>
(c) The "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(d) The "Company" shall mean Certified Grocers of California, Ltd.,
any corporation which subsequently adopts the Plan as a whole or as to one
or more of its divisions, and any successor corporation which continues the
Plan.
(e) "Employee" shall mean any person who renders services to the
Company in the status of an employee as that term is defined in Section
3121(d) of the Code.
(f) "Participant" shall mean any Employee entitled to receive benefits
under the Plan.
(g) "Plan" shall mean Certified Grocers of California, Ltd. Employees'
Excess Benefit Plan.
(h) "Separation from Service" shall mean the date that a Participant
ceases to be an Employee because of a voluntary or involuntary quit, layoff
or termination, or in the event of death.
(i) The "Sheltered Savings Plan" shall mean the Certified Grocers of
California, Ltd. Employees' Sheltered Savings Plan.
ARTICLE III
ELIGIBILITY
Section 3.1 Eligibility. All Employees and beneficiaries of
-----------
Employees eligible to receive benefits from the Sheltered Savings Plan shall be
eligible to be a Participant and to receive benefits under this Plan in
accordance with Section 4.1 of this Plan.
ARTICLE IV
BENEFITS
Section 4.1 Amounts of Benefits. The amount of benefits payable
-------------------
under the Plan, if any, shall be equal to the benefit which would have been
allocable to, or made on behalf of, a Participant under the Sheltered Savings
Plan as a result of Company contributions to the Plan which were not made
because of the limitation contained in Section 415 of the Code as described in
Section 8.2 of the Sheltered Savings Plan (or its successor section).
2
<PAGE>
For the purposes of determining such benefit, but subject to the
provisions of Section 4.4, the amount of the foregone Company contributions
described in this Section shall be credited with earnings (or losses as the case
might be) at a rate equal to the rate which is actually earned by the Company on
funds specifically reserved by the Company to be used to pay such benefits in
the future. Each Participant, subject to the approval of the Administrator, may
designate the type of investment in which the foregone Company contributions
shall be invested.
Section 4.2 Form and Timing of Benefit Payments. The benefit
-----------------------------------
payable to, or on behalf of, a Participant as determined under Section 4.1(a)
shall be paid as follows:
(a) if the benefit is less than $100,000, then the benefit will be
paid in a lump sum;
(b) if the benefit is $100,000 or more, but less than $200,000, then
the benefit will be paid in two annual installments; or
(c) if the benefit is $200,000 or more, then the benefit will be paid
in three annual installments.
Benefit payments hereunder will commence as soon as administratively feasible
following the Participant's Separation from Service.
Section 4.3 Benefits Unfunded. The benefits payable under the Plan
-----------------
shall be paid by the Company out of its general assets and shall not be
otherwise specifically funded in any manner. Nothing herein contained shall
preclude the creation of a bookkeeping or other reserve for benefits payable
hereunder.
Section 4.4 Payment to Beneficiary. In the event of the death of a
----------------------
Participant, either before or after payments or distributions to the Participant
have begun, the amount remaining to be paid shall be paid to the Participant's
Beneficiary computed in the same manner, and payable at the same time, as if the
Participant were still living.
ARTICLE V
ADMINISTRATION
Section 5.1 Duties of Administrator. The Plan shall be
-----------------------
administered by the Administrator in accordance with its terms and purposes.
The Administrator shall determine the amount and manner of payment of the
benefits due to or on behalf of each Employee from the Plan and shall attempt to
cause them to be paid by the Company accordingly.
3
<PAGE>
Section 5.2 Claims Procedure. In case the claim of any Participant
----------------
or Beneficiary for benefits under the Plan is denied, the Administrator shall
provide adequate notice in writing to such claimant, setting forth the specific
reasons for such denial. The notice shall be written in a manner calculated to
be understood by the claimant. The Administrator shall afford a Participant or
Beneficiary, whose claim for benefits has been denied, 60 days from the date
notice of such denial is delivered or mailed in which to appeal the decision in
writing to the Administrator. If the Participant or Beneficiary appeals the
decision in writing within 60 days, the Administrator shall review the written
comments and any submissions of the Participant or Beneficiary and render its
decision regarding the appeal, all within 60 days of such appeal.
Section 5.3 Finality of Decisions. The decisions made by and the
---------------------
actions taken by the Administrator in the administration of the Plan shall be
final and conclusive as to all persons, and the Administrator shall not be
subject to individual liability with respect to the Plan. Without limiting the
generality of this Section 5.2, the Administrator shall have the discretionary
authority to determine eligibility for benefits and to construe the terms of the
Plan.
ARTICLE VI
AMENDMENT AND TERMINATION
Section 6.1 Amendment and Termination. While the Company intends
-------------------------
to maintain the Plan in conjunction with the Sheltered Savings Plan for as long
as necessary, the Company reserves the right to amend and/or fully or partially
terminate the Plan at any time for whatever reasons the Company may deem
appropriate.
Section 6.2 Contractual Obligation. Notwithstanding Section 6.1,
----------------------
the Company hereby makes a contractual commitment to pay the benefits accrued
under the Plan to the extent it is financially capable of meeting such
obligations.
ARTICLE VII
MISCELLANEOUS
Section 7.1 No Employment Rights. Nothing contained in the Plan
--------------------
shall be construed as a contract of employment between the Company and an
Employee, or as a right of any Employee to be continued in the employment of the
Company, or as a limitation of the right of the Company to discharge any of its
Employees, with or without cause.
4
<PAGE>
Section 7.2 Assignment. The benefits payable under this Plan to
----------
any Participant or Beneficiary are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance and are not subject
to any claim, attachment, garnishment or levy by any creditor.
Section 7.3 Law Applicable. This Plan shall be governed by the
--------------
laws of the State of California, except to the extent pre-empted by federal law.
Executed at Los Angeles, California, this 5 day of December, 1995.
CERTIFIED GROCERS OF CALIFORNIA, LTD.
By: /s/ PAUL ROHDE
----------------------------------
By: /s/ D.A. WOODWARD
----------------------------------
5
<PAGE>
EXHIBIT 10.8
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEES' SUPPLEMENTAL DEFERRED COMPENSATION PLAN
--------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE Page
- ------- ----
<S> <C> <C>
I INTRODUCTION...................................... 1
------------
Section 1.1 Name.............................. 1
Section 1.2 Purposes.......................... 1
II DEFINITIONS....................................... 1
Section 2.1 Definitions....................... 1
III ELIGIBILITY....................................... 2
Section 3.1 Eligibility....................... 2
IV BENEFITS.......................................... 3
Section 4.1 Amounts of Benefits............... 3
Section 4.2 Form and Timing of Benefit
Payments.......................... 4
Section 4.3 Benefits Unfunded................. 4
Section 4.4 Payment to Beneficiary............ 4
V ADMINISTRATION.................................... 5
Section 5.1 Duties of Administrator............ 5
Section 5.2 Claims Procedure................... 5
Section 5.3 Finality of Decisions.............. 5
VI AMENDMENT AND TERMINATION......................... 5
Section 6.1 Amendment and Termination.......... 5
Section 6.2 Contractual Obligation............. 5
VII MISCELLANEOUS..................................... 6
Section 7.1 No Employment Rights............... 6
Section 7.2 Assignment......................... 6
Section 7.3 Law Applicable..................... 6
SIGNATURES..........................................................6
</TABLE>
i
<PAGE>
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEES' SUPPLEMENTAL DEFERRED COMPENSATION PLAN
--------------------------------------------------
This agreement executed by CERTIFIED GROCERS OF CALIFORNIA, LTD., a
corporation organized under the laws of the State of California, evidences the
terms of a Comprehensive Amendment to Certified Grocers of California, Ltd.
Employees' Supplemental Deferred Compensation Plan, that was originally
effective January 1, 1987 and amended from time to time thereafter.
This Comprehensive Amendment is effective September 3, 1989 and the
terms of the Plan shall be as follows:
ARTICLE I
INTRODUCTION
------------
Section 1.1 Name. The Plan evidenced by the terms hereof shall be
----
known as the "Certified Grocers of California Ltd. Employees' Supplemental
Deferred Compensation Plan."
Section 1.2 Purposes. The Plan is designed to provide supplemental
--------
retirement and other benefits to the Employee and the beneficiaries of such
Employee. The Plan is intended to be a top hat plan by providing deferred
compensation for particular employees who are members of a select group of
management or highly compensated employees.
ARTICLE II
DEFINITIONS
-----------
Section 2.1 Definitions. When used herein the following terms
-----------
shall have the following meanings unless a different meaning is clearly required
by the context of the Plan.
(a) The "Administrator" shall mean the plan administrator of the
Certified Grocers of California, Ltd. Employees' Sheltered Savings Plan.
(b) The "Beneficiary" shall mean the person or persons or trust
designated in writing on forms supplied by the Administrator that are
delivered prior to death to the Administrator by the Participant to receive
benefits under the Plan in the event of death of the
1
<PAGE>
Participant as provided herein; or if no effective designation is made,
then Beneficiary means the Participant's spouse, but if the Participant has
no spouse at his death, then Beneficiary means his estate.
(c) The "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(d) The "Company" shall mean Certified Grocers of California, Ltd.,
any corporation which subsequently adopts the Plan as a whole or as to one
or more of its divisions, and any successor corporation which continues the
Plan.
(e) "Employee" shall mean any person who renders services to the
Company in the status of an employee as that term is defined in Section
3121(d) of the Code.
(f) "Participant" shall mean any Employee entitled to receive
benefits under the Plan.
(g) "Plan" shall mean Certified Grocers of California, Ltd.
Employees' Supplemental Deferred Compensation Plan.
(h) The "Retirement Plan" shall mean the Retirement Plan for
Employees of Certified Grocers of California, Ltd.
(i) "Separation from Service" shall mean the date that a
Participant ceases to be an Employee because of a voluntary or involuntary
quit, layoff or termination, or in the event of death.
(j) The "Sheltered Savings Plan" shall mean the Certified Grocers
of California, Ltd. Employees' Sheltered Savings Plan.
ARTICLE III
ELIGIBILITY
-----------
Section 3.1 Eligibility. All Employees and beneficiaries of
-----------
Employees eligible to receive benefits from the Sheltered Savings Plan and the
Retirement Plan shall be eligible to receive benefits under this Plan in
accordance with Section 4.1 of this Plan.
2
<PAGE>
ARTICLE IV
BENEFITS
--------
Section 4.1 Amounts of Benefits. The amount of benefits payable
-------------------
under the Plan, if any, shall be equal to:
(a) To the extent a Participant defers receipt of compensation from
the Company under this Plan, the benefit which would have been allocable
to, or on behalf of, an Employee under the Sheltered Savings Plan as a
result of contributions of deferred compensation under Section 7.1 of the
Sheltered Savings Plan and Company matching contributions under Sections
5.1(b) or (c) of the Sheltered Savings Plan or its successor sections which
were not made because Section 402(g) of the Code limits contributions of
deferred compensation under Section 7.1 of the Sheltered Savings Plan to
$7,000 (or such greater amount as may be allowed by law) for each calendar
year commencing January 1, 1987;
(b) For the plan year beginning September 3, 1989, to the extent a
Participant defers receipt of compensation from the Company under this
Plan, the benefit which would have been allocable to, or on behalf of, a
Participant under the Sheltered Savings Plan for compensation of a
Participant paid by the Company in excess of $200,000 (or such greater
amount that may be allowed by law), and for the plan year beginning
September 4, 1994, Compensation of a Participant paid by the Company in
excess of $150,000 (or such greater amount that may be allowed by law) that
was not taken into account under the Sheltered Savings Plan because of
Section 401(a)(17) of the Code; and
(c) The lump sum equivalent of the benefit that would have been
payable to, or on behalf of, a Participant under the Retirement Plan which
would have been accrued but for the fact that the Participant elected to
defer a portion of his or her compensation under Section 4.1(a) of this
Plan thereby reducing the amount of the Participant's compensation for
purposes of calculating the Retirement Plan benefit. Since in no event can
the Retirement Plan in accruing a benefit take into account compensation in
excess of the limits provided by Section 401(a)(17) of the Code, then the
benefit provided by this paragraph is limited in the same way.
3
<PAGE>
For the purposes of determining such benefit, but subject to the
provisions of Section 4.4, the amount of the foregone Company contributions
under paragraphs (a) and (b) shall be credited with earnings (or losses as the
case might be) at a rate equal to the rate which is actually earned by the
Company on funds specifically reserved by the Company to be used to pay such
benefits in the future. Each Employee, subject to the approval of the
Administrator, may designate the type of investment in which the foregone
Company contributions shall be invested. For purposes of determining the lump
sum equivalent under paragraph (c), the same assumptions used in determining the
actuarial equivalence in the Retirement Plan shall be used.
Section 4.2 Form and Timing of Benefit Payments. The benefit
-----------------------------------
payable to, or on behalf of, a Participant as determined under Section 4.1(a)
shall be paid as follows:
(a) if the benefit is less than $100,000, then the benefit will be
paid in a lump sum;
(b) if the benefit is $100,000 or more, but less than $200,000,
then the benefit will be paid in two annual installments; or
(c) if the benefit is $200,000 or more, then the benefit will be
paid in three annual installments.
Benefit payments hereunder will commence as soon as administratively feasible
following the Participant's Separation from Service.
Section 4.3 Benefits Unfunded. The benefits payable under the Plan
-----------------
shall be paid by the Company out of its general assets and shall not be
otherwise specifically funded in any manner. Nothing herein contained shall
preclude the creation of a bookkeeping or other reserve for benefits payable
hereunder.
Section 4.4 Payment to Beneficiary. In the event of the death of a
----------------------
Participant, either before or after payments or distributions to the Participant
have begun, the amount remaining to be paid shall be paid to the Participant's
Beneficiary computed in the same manner, and payable at the same time, as if the
Participant were still living.
4
<PAGE>
ARTICLE V
ADMINISTRATION
Section 5.1 Duties of Administrator. The Plan shall be
-----------------------
administered by the Administrator in accordance with its terms and purposes.
The Administrator shall determine the amount and manner of payment of the
benefits due to or on behalf of each Employee from the Plan and shall attempt to
cause them to be paid by the Company accordingly.
Section 5.2 Claims Procedure. In case the claim of any Participant
----------------
or Beneficiary for benefits under the Plan is denied, the Administrator shall
provide adequate notice in writing to such claimant, setting forth the specific
reasons for such denial. The notice shall be written in a manner calculated to
be understood by the claimant. The Administrator shall afford a Participant or
Beneficiary, whose claim for benefits has been denied, 60 days from the date
notice of such denial is delivered or mailed in which to appeal the decision in
writing to the Administrator. If the Participant or Beneficiary appeals the
decision in writing within 60 days, the Administrator shall review the written
comments and any submissions of the Participant or Beneficiary and render its
decision regarding the appeal, all within 60 days of such appeal.
Section 5.3 Finality of Decisions. The decisions made by and the
---------------------
actions taken by the Administrator in the administration of the Plan shall be
final and conclusive as to all persons, and the Administrator shall not be
subject to individual liability with respect to the Plan. Without limiting the
generality of this Section 5.2, the Administrator shall have the discretionary
authority to determine eligibility for benefits and to construe the terms of the
Plan.
ARTICLE VI
AMENDMENT AND TERMINATION
-------------------------
Section 6.1 Amendment and Termination. While the Company intends
-------------------------
to maintain the Plan in conjunction with the Sheltered Savings Plan and the
Retirement Plan for as long as necessary, the Company reserves the right to
amend and/or fully or partially terminate the Plan at any time for whatever
reasons the Company may deem appropriate.
Section 6.2 Contractual Obligation. Notwithstand ing Section 6.1,
----------------------
the Company hereby makes a contractual commitment to pay the benefits accrued
under the Plan to the extent it is financially capable of meeting such
obligations.
5
<PAGE>
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.1 No Employment Rights. Nothing contained in the Plan
--------------------
shall be construed as a contract of employment between the Company and an
Employee, or as a right of any Employee to be continued in the employment of the
Company, or as a limitation of the right of the Company to discharge any of its
Employees, with or without cause.
Section 7.2 Assignment. The benefits payable under this Plan to
----------
any Participant or Beneficiary are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance and are not subject
to any claim, attachment, garnishment or levy by any creditor.
Section 7.3 Law Applicable. This Plan shall be governed by the
--------------
laws of the State of California, except to the extent pre-empted by federal law.
Executed at Los Angeles, California, this 5 day of December, 1995.
--- --------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
By: /s/ PAUL ROHDE
_________________________________
By: /s/ D.A. WOODWARD
________________________________
6
<PAGE>
EXHIBIT 10.9
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
FARMER & RIDLEY
444 South Flower Street
Suite 2300
Los Angeles, California 90071
(213) 626-0291
<PAGE>
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
I NAME AND PURPOSE.............................................. 1
Section 1.1: Name............................................ 1
Section 1.2: Purpose......................................... 1
II DEFINITIONS................................................... 1
Section 2.1: Definitions..................................... 1
(a) "Account"............................................ 1
(b) "Anniversary Date"................................... 2
(c) "Board" or "Board of Directors"...................... 2
(d) "Break in Service"................................... 2
(e) "Code"............................................... 2
(f) "Committee".......................................... 2
(g) "Company"............................................ 2
(h) "Compensation"....................................... 2
(i) "Date of Employment"................................. 3
(j) "Disability"......................................... 3
(k) "Employee"........................................... 3
(l) "Entry Date"......................................... 3
(m) "ERISA".............................................. 4
(n) "Family Member"...................................... 4
(o) "Fund", "Trust", or "Trust Fund"..................... 4
(p) "Hour of Service".................................... 4
(q) "Net Profits"........................................ 4
(r) "Normal Retirement Date"............................. 5
(s) "Participant"........................................ 5
(t) "Plan"............................................... 5
(u) "Plan Year".......................................... 5
(v) "Total Sales"........................................ 5
(w) "Trustee" or "Trustees".............................. 5
(x) "Valuation Date"..................................... 5
(y) "Year of Service".................................... 5
III BENEFITS COMMITTEE.............................................. 5
Section 3.1: Concerning the Committee......................... 5
Section 3.2: Indemnification.................................. 7
Section 3.3: Use of Company's Facilities by Committee......... 7
IV EMPLOYEES ENTITLED TO PARTICIPATE............................... 7
Section 4.1: Eligibility...................................... 7
</TABLE>
i
<PAGE>
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
Section 4.2: Application to Participate...................... 8
Section 4.3: Participation on Reemployment................... 9
V CONTRIBUTIONS BY THE COMPANY................................... 9
Section 5.1: Company's Contributions......................... 9
Section 5.2: Company Contributions Account................... 10
Section 5.3: Non-Forfeitable Company Contributions Account... 10
Section 5.4: Time and Manner of Making Company's
Contributions.................................. 11
Section 5.5: No Guarantee by the Company..................... 11
VI CONTRIBUTIONS BY PARTICIPANTS.................................. 11
Section 6.1: Employee Contributions.......................... 11
Section 6.2: Participant Contributions Account............... 11
Section 6.3: Non-Forfeitable Participant Contributions
Account........................................ 12
Section 6.4: Distribution to Participants of
Voluntary Contributions........................ 12
Section 6.6: Correction of Excess Employee Contributions..... 15
VII ALLOCATION OF COMPANY'S CONTRIBUTIONS.......................... 16
Section 7.1: Method of Allocation............................ 16
Section 7.2: Limitation on Allocation........................ 17
Section 7.3: Limitations for Participants In a
Combination of Plans........................... 18
Section 7.4: Definitions..................................... 18
VIII INVESTMENT OPPORTUNITIES....................................... 20
Section 8.1: Investment Funds................................ 20
Section 8.2: Election of Investment Options.................. 20
Section 8.3: Change in Investment Options.................... 20
Section 8.4: Expenses Charged to Participant's Account....... 20
IX RETIREMENT..................................................... 21
Section 9.1: Normal Retirement............................... 21
Section 9.2: Later Retirement................................ 21
Section 9.3: Retirement Benefits............................. 21
</TABLE>
ii
<PAGE>
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
Section 9.4: Optional for Payment in Installments of Less
Than One Hundred Twenty (120) Months............ 21
Section 9.5: Option for Annuity............................... 22
Section 9.6: Death After Retirement........................... 22
Section 9.7: Commencement of Benefit Payment.................. 22
X DEATH OF A PARTICIPANT.......................................... 23
Section 10.1: Death of a Participant Before Retirement or
Termination of Service.......................... 23
Section 10.2: Beneficiary...................................... 23
Section 10.3: Limit on Form of Death Benefit Payment........... 23
XI DISABILITY OF A PARTICIPANT..................................... 24
Section 11.1: Disability....................................... 24
Section 11.2: Death After Termination for Disability........... 25
XII OTHER TERMINATIONS OF SERVICE................................... 25
Section 12.1: Determination of Benefits........................ 25
Section 12.2: Manner of Distribution of Benefits............... 25
Section 12.3: Death Prior to Completion of Payment............. 26
XIII VALUATION OF THE FUND........................................... 26
Section 13.1: Valuation of Fund................................ 26
Section 13.2: Maintenance of Records by Committee.............. 27
Section 13.3: Segregation and Disbursement..................... 27
XIV HARDSHIP OF A PARTICIPANT....................................... 28
Section 14.1: Hardship Distribution............................ 28
Section 14.2: Determination by Committee....................... 28
XV AMENDMENT OR DISCONTINUANCE OF PLAN............................. 28
Section 15.1: Right to Amend................................... 28
Section 15.2: Termination of Plan.............................. 29
Section 15.3: Distribution on Termination or Discontinuance.... 29
</TABLE>
iii
<PAGE>
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
XVI TOP HEAVY PROVISIONS............................................ 29
Section 16.1: Top Heavy Definitions............................ 29
Section 16.2: Special Top Heavy Rules.......................... 30
Section 16.3: Top Heavy Benefits and Restrictions.............. 31
XVII RESTRICTION ON ASSIGNMENT....................................... 32
Section 17.1: Effect of Assignment in General.................. 32
Section 17.2: Loans to Participants............................ 32
XVIII MISCELLANEOUS PROVISIONS....................................... 34
Section 18.1: Joint and Survivor Annuity....................... 34
(a) Form of Benefit Payments................................... 34
(b) Definitions................................................ 34
(i) "Applicable Election Period"......................... 34
(ii) "Qualified Election"................................. 35
(iii) "Spouse"............................................. 35
(c) Notice Requirements........................................ 35
(d) Transitional Rules Applicable to Joint and Survivor
Annuities................................................. 36
Section 18.2: Limitation on Participant"s Rights............... 37
Section 18.3: Receipt.......................................... 37
Section 18.4: Unenforceable Provisions......................... 37
Section 18.5: Governing Law.................................... 37
Section 18.6: Agreement Binding on Successors.................. 37
Section 18.7: Masculine Gender Includes Feminine and
Neuter, and Singular Number the Plural.......... 38
Section 18.8: Headings, etc. No Part of Agreement.............. 38
Section 18.9: Merger of Plans.................................. 38
Section 18.10: Claims Procedures................................ 38
Section 18.11: Funding Policy and Method........................ 38
Section 18.12: Commencement of Benefits......................... 38
Section 18.13: Forfeiture Upon Failure to Locate................ 39
Section 18.14: Direct Transfer of Benefits...................... 39
SIGNATURES........................................................... 40
</TABLE>
iv
<PAGE>
COMPREHENSIVE AMENDMENT TO
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
-------------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
THIS AGREEMENT executed by CERTIFIED GROCERS OF CALIFORNIA, LTD., a
California corporation, hereinafter called the "Company", evidences the terms of
a Comprehensive Amendment to the Certified Grocers of California, Ltd. Employee
Savings Plan originally executed by the Company on November 30, 1944, and
subsequently amended from time to time. The terms of the Plan provide for a
profit sharing plan for the benefit of certain employees of the Company, and are
effective for the Plan year beginning September 3, 1989.
The terms of the Plan are as follows:
ARTICLE I
----------
NAME AND PURPOSE
----------------
Section 1.1: Name. The Plan created in accordance with the terms hereof
----------- ----
shall be known as "CERTIFIED GROCERS OF CALIFORNIA, LTD. EMPLOYEE SAVINGS PLAN".
Section 1.2: Purpose. This Plan is created and maintained for the purpose
----------- -------
of enabling employees of the Company to secure retirement and other benefits by
sharing in the profits of the Company's business. The Plan is hereby designated
as constituting a plan intended to qualify under Section 401(a) of the Internal
Revenue Code. In no event shall any part of the principal or income of the
Trust be paid to or revest in the Company, or be used for any purpose whatsoever
other than for the exclusive benefit of the employees of the Company, their
beneficiaries and their families.
ARTICLE II
-----------
DEFINITIONS
-----------
Section 2.1: Definitions. When used herein the following terms shall have
----------- -----------
the following meanings:
(a) "Account" shall mean either the Company Contributions Account
of a Participant or the Participant Contributions Account, and shall reflect
amounts contributed either by the Company or the Participant, including
earnings, losses and forfeitures in accordance with the terms hereof.
1
<PAGE>
(b) "Anniversary Date" shall mean the last day of the Plan Year.
(c) "Board" or "Board of Directors" shall mean the Board of
Directors of Certified Grocers of California, Ltd.
(d) "Break in Service" shall mean a Plan Year during which a
Participant fails to complete more than 500 hours of service.
For purposes of determining whether a Break in Service Year has
occurred for participation and vesting purposes, an individual who is absent
from work for maternity or paternity reasons shall receive credit for the hours
of service which would otherwise have been credited to such individual but for
such absence, or in any case in which such hours cannot be determined, eight
hours of service per day of such absence. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means an absence by reason
of a birth of a child of the individual, by reason of the placement of a child
with the individual in connection with the adoption of such child by such
individual, or for purposes of caring for such child for a period beginning
immediately following such birth or placement. The hours of service credited
under this paragraph shall be credited in the computation period in which the
absence begins if the crediting is necessary to prevent a Break in Service in
that period, or in all other cases, in the following computation period.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended, or as it may be amended from time to time.
(f) "Committee" shall mean the Benefits Committee described in
Article III hereof.
(g) "Company" shall mean Certified Grocers of California, Ltd. and any
successors thereto, and any other entity that adopts the Plan.
(h) "Compensation" shall mean:
(i) For the purpose of determining the amount of the Company's
contribution hereto, Compensation shall be calculated on a weekly basis as
the lesser of:
a. (1.10) (straight time hourly rate actually paid for the
-
week) (40) plus any vacation pay included in the week's gross pay; or
b. A Participant's actual gross pay for the week.
-
2
<PAGE>
(ii) For purposes of determining the allowable Employee
contributions hereto, Compensation shall be limited to the actual gross pay
of the Employee.
(iii) Effective for the Plan Year commencing in 1989, the
Compensation of each Participant for each Plan Year shall not exceed
$200,000, as adjusted by the Secretary of the Treasury at the same time and
in the same manner as under Section 415(d) of the Code, and effective for
the Plan Year commencing in 1994, the Compensation of each Participant
shall not exceed $150,000, as adjusted, as provided in Section 401(a)(17)
of the Code. In determining the Compensation of an Employee for purposes
of the foregoing limitation, as adjusted, the rules of Section 414(q)(6) of
the Code shall apply, except that in applying such rules, the term "family"
shall include only the spouse of the Employee and any lineal descendants of
the Employee who have not attained age 19 before the close of the Plan
Year. If the foregoing Compensation limitation, as adjusted, applies to
the combined Compensation of the Employee or one or more Family Members,
the contribution and allocation provisions of the Plan will be applied by
prorating the foregoing limitation, as adjusted, among the Employee and his
Family Members in proportion that each such individual's Compensation
determined prior to the application of this limitation bears to the total
Compensation of all such individuals determined prior to the application of
this limitation.
(i) "Date of Employment" shall mean the first day on which an
Employee completes an Hour of Service for the Company.
(j) "Disability" shall mean a Participant's inability to perform his
normal occupation or any other occupation which would give the Participant a
wage similar to that of his normal occupation and which, based upon competent
medical evidence, is expected to be of permanent or indefinite duration, or
result in death.
(k) "Employee" shall mean any person employed by the Company on an
hourly basis.
(l) "Entry Date" shall mean:
(i) For Employees hired prior to March 1, 1991, the first day of
each Plan Year; and
(ii) For Employees hired on or after March 1, 1991, the first
day of the month coinciding with or next following satisfaction of the
eligibility requirement under Section 4.1.
(m) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974.
3
<PAGE>
(n) "Family Member" shall mean the spouse, lineal ascendants and
descendants of the Employee or former employee and the spouses of such lineal
ascendants and descendants.
(o) "Fund", "Trust", or "Trust Fund" shall mean the sum of the
contributions (adjusted for income and losses, payments and reasonable expenses)
made by the Company and the Participants hereunder and held in accordance with
the terms of the Trust created by the Declaration of Trust executed between the
Company and the Trustee for the purpose of carrying out the terms hereof, and
any amendments thereto. Said Declaration of Trust is hereby incorporated herein
by reference as if fully set forth herein.
(p) "Hour of Service" shall mean:
(i) Each hour for which an Employee is directly or indirectly paid
or entitled to payment by the Company in connection with his employment by
the Company. In addition, Hour of Service shall include any hour for which
back pay, irrespective of mitigation of damages is either awarded or agreed
to by the Company. The same Hour of Service shall in no event be credited
twice under this section.
(ii) Each hour for which an Employee is directly or indirectly paid
or entitled to payment by the Company for reasons other than the
performance of duties during a period of service with the Company such as
vacation, holiday, sickness, disability, layoff, jury duty, military duty
or compensated leave of absence and similar paid periods.
(iii) As used in subsections (i) and (ii), Company shall include
all members of an affiliated service group, a controlled group of
corporations (under Section 414(b) of the Code), or a group of trades or
businesses under common control (under Section 414(c) of the Code), of
which the Company is a part.
(iv) The provisions of the Department of Labor Regulations
appearing at 29 C.F.R. 2530.200b-2(b) and (c) are incorporated herein by
reference as if fully set forth herein.
(q) "Net Profits" shall mean the current net earnings of the Company
before deduction of its Patronage Dividends and Incentive Compensation Plan
determination fort the Year for which the contribution is being determined as
certified by the Company Treasurer for its report to members.
(r) "Normal Retirement Date" shall mean the first day of the sixty-
fifth (65th) anniversary of the Participant's date of birth.
4
<PAGE>
(s) "Participant" shall mean an Employee who has become an active
Participant, but shall also include any former Participant until such time as
such former Participant's total interest herein has been distributed to him.
(t) "Plan" shall mean the Certified Grocers of California, Ltd.
Employee Savings Plan as set forth herein, or any amendments hereto.
(u) "Plan Year" shall mean the period beginning on the Sunday
following the Saturday nearest August 31st and ending on the Saturday nearest
August 31st of the following year. The Plan Year shall be the limitation year
for purposes of Section 415 of the Code.
(v) "Total Sales" shall mean the Company's Total Sales for the Year
for which the contribution is being determined as certified by the Company
Treasurer for its report to members.
(w) "Trustee" or "Trustees" shall mean the Trustee or Trustees
designated in the Trust Agreement.
(x) "Valuation Date" shall mean the date the Trustee shall value
the Trust Fund in accordance with Section 13.1.
(y) "Year of Service" shall mean any Plan Year during which an
Employee is employed by the Company and during which the Employee has one Hour
of Service. In order for a year to constitute a year of service, the Employee
need not be employed by the Company on the last day of the Plan Year.
ARTICLE III
------------
BENEFITS COMMITTEE
------------------
Section 3.1: Concerning the Committee. There shall be created a Benefits
----------- ------------------------
Committee, hereinafter referred to as "Committee," consisting of three (3) or
more members, who shall be from time to time selected by the Board, and shall
serve at its discretion. The Committee shall be named fiduciary of this Plan
and of the Trust and the Administrator hereof. Any conflict between the terms
hereof particularly with reference to the provisions hereof which delineate the
responsibilities of the various parties, and the provisions of the Trust shall
be resolved by reference to the Trust. It is the intention of the parties that
the provisions of the Trust Agreement shall control to resolve any such
conflict. The Company shall certify to the Trustee the names of the members of
the Committee, and, as changes take place in the membership of the Committee,
shall certify to the Trustee the fact and the nature of such changes. A
secretary appointed by the Committee may designate one of its members or any
other person to
5
<PAGE>
transmit its decisions, instructions, consents, or directions, all of which
shall be in writing, to the Trustee or to other interested parties or to perform
ministerial acts. The Committee may make rules and regulations for the
administration of the Plan not inconsistent with this Agreement. The Trustee may
rely on the latest certification of the membership of the Committee and of the
member or person designated by the Committee for the purpose of transmitting
such decisions, instructions, consents or directions. A majority of the members
of the Committee shall constitute a quorum, and any action by the majority
present at a meeting at which a quorum is present, or by a majority or more
members in writing without a meeting, shall constitute the action of the
Committee. Any action taken in good faith by the Committee in the exercise of
authority conferred upon it by this Agreement shall be conclusive and binding
upon Participants and their beneficiaries. All discretions conferred upon the
Committee shall be absolute, but no discretionary power conferred upon the
Committee or the Trustee, or retained by the Company shall be exercised in such
manner as to cause or create discrimination in favor of Employees or persons
whose principal duties consist in supervising the work of other Employees, or
highly compensated Employees.
The Committee may employ, and obligate the Plan to pay for, such
counsel and agents and such clerical and other services as it may require in
carrying out the provisions of the Plan. The Committee shall have the duty and
authority to interpret and construe the provisions of the Plan, to decide any
disputes which may arise with regard to the rights of Employees, Participants
and their legal representatives or beneficiaries under the terms of the Plan,
and, in general, to direct the administration of the Trust Agreement and to
direct the Trustee with regard to Trust assets. Any or all of the powers of the
Committee may be delegated to one or more investment managers as set forth in
the Trust Agreement and subject to the specific provisions thereof regarding
such delegation and the allocation of responsibilities among various parties to
or interested in the Trust and this Plan. The Committee shall maintain full and
complete written records of its deliberations and decisions. The minutes of its
proceedings shall be proof of the facts and the operations of the Plan. Their
records shall contain all relevant data pertaining to individual Participants
and their rights under the Plan and in the Trust Fund. The Committee has the
duty to carry into effect all such rights and benefits provided hereunder.
Without limiting the powers of the Committee contained herein, the
Committee shall have the discretionary authority to determine eligibility for
benefits and to construe the terms of the Plan.
Section 3.2: Indemnification. Each present and future member of the
----------- ---------------
Committee, whether or not then in office, shall be indemnified by the Company
against all costs and expenses,
6
<PAGE>
including attorneys' fees, reasonably incurred by or imposed upon him in
connection with or arising out of any claim, demand, action, suit, or proceeding
in which he may be involved or to which he may be made a party by reason of his
being or having been a member of the Committee (said expenses to include the
cost of reasonable settlements made with a view to curtailment of costs,
expenses, or results of litigation). The foregoing right of indemnification
shall not be exclusive of other rights to which such member may be entitled as a
matter of law. Such indemnification shall not be made with respect to any
liabilities, claims, demands, costs or expenses as may result from the gross
negligence or willful misconduct of a Committee member. In lieu of the
foregoing, the Company may satisfy its obligations under this paragraph through
the purchase of a policy of insurance providing equivalent protection.
Notwithstanding any of the foregoing, in the event the Company is
advised by counsel that any proposed indemnification may only be made subject to
the provisions of Section 317 of the California Corporations Code, such payment
shall be made only to the extent permitted by said Code section and in
compliance with all of the applicable provisions thereof.
Section 3.3: Use of Company's Facilities by Committee. The Committee
----------- ----------------------------------------
shall have the right to use the Company's facilities in maintaining accounts and
records and discharging its duties and obligations hereunder, but the Committee
is authorized to incur reasonable expenses in and about the performance of its
duties hereunder, and it shall be reimbursed by the Company for all usual and
ordinary expenses so incurred.
ARTICLE IV
-----------
EMPLOYEES ENTITLED TO PARTICIPATE
---------------------------------
Section 4.1: Eligibility. Prior to March 1, 1991, all eligible Employees
----------- -----------
of the Company were eligible to become Participants under the Plan on the Entry
Date coinciding with or next following the six month anniversary of the first
day on which they perform an Hour of Service on behalf of the Company. Employees
hired on or after March 1, 1991, shall be eligible to become Participants on the
Entry Date coinciding with or next following the one year anniversary of the
first day on which they perform an Hour of Service on behalf of the Company,
provided they are in the employ of the Company on such one year anniversary.
Effective February 27, 1983 any Employee who is a Participant in, or
who is eligible to become a Participant in, the Certified Grocers of California,
Ltd. Employees' Sheltered Savings Plan ("SSP") shall be an ineligible Employee
hereunder with respect to Company contributions, and effective on or about July
1, 1992, all Accounts of any such Employee shall be transferred to SSP.
7
<PAGE>
Classes of Employees who shall not be eligible are:
(i) Any employee who is a member of a collective bargaining unit and
who is covered by a collective bargaining agreement, which agreement does
not provide for coverage of such employee under this Plan, provided, that
the matter of retirement benefits was at any time the subject of good faith
bargaining between the Company and the collective bargaining unit of which
the employee is a member; and
(ii) Any employee who is a nonresident alien and who receives no
earned income within the meaning of Section 911(b) of the Code from the
Company which constitutes income from sources within the United States
within the meaning of Section 861(a)(3) of the Code.
In the event that a Participant becomes an ineligible employee, he
shall remain a Participant as to amounts already contributed and allocated for
his benefit subject to all of the terms of the Plan.
Except as specified to the contrary in Sections 9.3, 10.1 and 11.1, in
order to participate in contributions by the Company for any Plan Year, a
Participant must be, on the last day of such fiscal Year, in the service of the
Company and must have received Compensation from the Company during such Plan
Year, as Compensation is defined in Section 2.1 (h).
All questions of eligibility of Employees to become Participants
and/or to participate in the benefits of the Plan, shall be determined by the
Committee in its sole discretion, and its decision shall be binding upon all
Employees and other persons interested in or affected by the terms of the Plan
and the Trust. In the event that any Participant is dissatisfied with any
decision of the Committee, such Participant may make a claim or request a review
of such decision in accordance with the provisions of Section 18.10 hereof.
Section 4.2: Application to Participate. Each eligible Employee may be
----------- --------------------------
required, at the Committee's sole discretion, to make written application for
participation on forms provided by the Committee. Such forms shall in substance
provide that the applicant agrees to and consents to be bound by all the terms
of this Agreement, and provide for the naming by said Participant, in a form
satisfactory to Committee, of a beneficiary or beneficiaries to receive any
benefit to which his beneficiaries may be entitled
8
<PAGE>
under the terms of the Plan. The applicant, after becoming a Participant and
prior to the time that any payment shall become payable hereunder to any
beneficiary or beneficiaries already designated by such applicant, may change
any beneficiary or beneficiaries by notice in writing to the Committee subject
to the provisions of this paragraph. Each eligible Employee shall furnish such
information regarding his age, family status, and other relevant matters as the
Committee may require, and, if such Employee designates a beneficiary other than
his spouse to receive any benefit under this Plan, he shall likewise furnish the
Committee, if the Committee so requests, with the written consent of his spouse,
if any, to such designation. Failure of an eligible Employee to make application
as specified above shall not prevent such Employee from participating in the
Plan, the application as contemplated herein being a mere administrative step.
Section 4.3: Participation on Reemployment. In the event an Employee who
----------- -----------------------------
was a Participant hereunder is reemployed prior to five consecutive Break in
Service Years, such Employee shall become a Participant hereunder on the date of
reemployment, provided the employee satisfies the eligibility provisions of
Section 4.1. In the event an Employee who was a Participant hereunder is
reemployed after five consecutive Break in Service Years, then such Employee
shall be treated as a new Employee and become a Participant hereunder upon
satisfying the requirements of Section 4.1.
ARTICLE V
----------
CONTRIBUTIONS BY THE COMPANY
----------------------------
Section 5.1: Company's Contributions. The Company agrees that, out of its
----------- -----------------------
current net earnings, it will contribute to the Trustee for each fiscal Year of
the Company, commencing with its fiscal Year ending September 3, 1977, as a
contribution to the Fund, an amount determined in accordance with the following
formula:
(a) In the event net earnings are less than 1.50% of Total Sales,
the Company will make no contribution hereunder.
(b) In the event net earnings equal or exceed 1.50% but are less than
1.55% of Total Sales, the Company will contribute in the amount equal to 1.00%
of the total Compensation of all Participants participating in the Plan.
(c) In the event net earnings equal or exceed 1.55% but are less than
1.60% of Total Sales, the Company will contribute in the amount equal to 1.45%
of the total Compensation of all Participants participating in the Plan.
(d) In the event net earnings equal or exceed 1.60% but are less than
1.65% of Total Sales, the Company will contribute
9
<PAGE>
in the amount equal to 1.90% of the total Compensation of all Participants
participating in the Plan.
(e) In the event net earnings equal or exceed 1.65% but are less than
1.70% of Total Sales, the Company will contribute in the amount equal to 2.35%
of the total Compensation of all Participants participating in the Plan.
(f) In the event net earnings equal or exceed 1.70% but are less than
1.75% of Total Sales, the Company will contribute in the amount equal to 2.80%
of the total Compensation of all Participants participating in the Plan.
(g) In the event net earnings equal or exceed 1.75% but are less than
1.80% of Total Sales, the Company will contribute in the amount equal to 3.40%
of the total Compensation of all Participants participating in the Plan.
(h) In the event net earnings equal or exceed 1.80% but are less than
1.85% of Total Sales, the Company will contribute in the amount equal to 4.20%
of the total Compensation of all Participants participating in the Plan.
(i) In the event net earnings equal or exceed 1.85% of Total Sales,
the Company will contribute in the amount equal to 5.00% of the total
Compensation of all Participants participating in the Plan.
The total amount of the Company contribution to this Plan is limited
to 2-1/2% of total net earnings of Certified Grocers of California, Ltd.
(excluding subsidiaries) prior to payment of patronage dividends and prior to
payment under the Company's Incentive Compensation Plan. In addition, the Board
of Directors may determine and affect other adjustments which would have the
impact of either raising or lowering the total net earnings of the Company for
the purpose expressed herein.
Section 5.2: Company Contributions Account. The Committee shall open and
----------- -----------------------------
maintain a separate Company Contributions Account for each Participant, which
Account shall reflect the Participant's proportionate share of Company
contributions under Section 5.1 hereof and earnings, charges and expenses of,
and increases and decreases in the value of the Fund with respect thereto.
Neither the Company nor the Trustees nor any member of the Committee in any
manner or to any extent whatsoever, warrants, guarantees, or represents that the
total value of any Participant's Account shall at any time equal or exceed the
aggregate amount theretofore contributed thereto by the Company.
Section 5.3: Non-Forfeitable Company Contributions Account. A Participant
----------- ---------------------------------------------
shall be vested in the value of his Company Matching Contributions Account as
determined under Section 12.1.
10
<PAGE>
Section 5.4: Time and Manner of Making Company's Contributions. The
----------- -------------------------------------------------
Company may make payment to the Trustees of its share of the contribution for
any fiscal Year on any date or dates it elects. The actual contributions made
hereunder shall be made no later than a reasonable time following the close of
the fiscal Year to which the contributions relate; provided, that in no event
shall any contributions be made after the time prescribed by law for filing the
federal income tax return of the Company (including extensions thereof) with
respect to such fiscal Year. The calculation of the Company's contribution to
the Plan shall be determined by the Company, and the Trustees shall not be
required to determine the correctness of nor be responsible for the collection
of any contributions to the Plan.
Section 5.5: No Guarantee by the Company. It should be understood that
----------- ---------------------------
there is not, and there cannot be, any guarantee by the Company, the Trustee, or
the Committee as to the continuation of the Trust.
ARTICLE VI
-----------
CONTRIBUTIONS BY PARTICIPANTS
-----------------------------
Section 6.1: Employee Contributions. Each Participant who so desires may,
----------- ----------------------
but need not, contribute, in integral percentages, each Year to the Trust Fund
for his benefit up to a maximum of ten percent (10%) (or such other percentage
as may be determined from time to time by the Committee) of his Compensation
paid for or accrued to him, as Compensation is defined in Section 2.1(h)(i) Such
contributions may be made at the time the Participant receives his Compensation
from the Company, and upon direction of the Participant, shall be withheld by
the Company and deposited with the Trustees for the Participant Contributions
Account of such Participant. A Participant may eliminate or change the amount
to be contributed by him in any Plan Year as may be determined from time to time
by the Committee. Provided, however, that the ability of a Participant to
contribute on an annual basis, shall be restricted to the extent that any
contribution would violate the provisions of Section 7.2 hereof.
Section 6.2: Participant Contributions Account. The Committee shall open
----------- ---------------------------------
and maintain a separate Participant Contributions Account for each Participant
who has made contributions, which Account shall reflect his share of the Fund
resulting from his own contributions to the Trust Fund and the earnings, charges
and expenses of, and increases and decreases in the value of the Fund with
respect thereto. Neither the Company, the Trustees, nor any member of the
Committee in any manner or to any extent whatsoever, warrants, guarantees, or
represents that the total value of any Participant's Participant Contributions
11
<PAGE>
Account shall at any time equal or exceed the aggregate amount theretofore
contributed thereto by the Participant.
Section 6.3: Non-Forfeitable Participant Contributions Account. A
----------- -------------------------------------------------
Participant shall be 100% vested in the value of his Participant Contributions
Account at all times.
Section 6.4: Distribution to Participants of Voluntary Contributions. All
----------- -------------------------------------------------------
voluntary contributions made hereunder, together with any earnings thereon,
shall be distributed at such times that a distribution becomes appropriate under
the relevant sections hereof. All or any portion of a Participant's voluntary
contributions may be withdrawn at the request of the Participant who made such
contributions at intervals of no less than twenty-four (24) months or such other
interval as the Committee in its sole discretion may determine, except that such
withdrawal shall not include earnings on such contributions, but may reflect
losses thereon. An administration fee may be imposed by the Committee from time
to time in such an amount as may be determined in the Committee's sole
discretion. In the event the total amount of the Participant's Account
(including Company and employee contributions) is in excess of $3,500.00, no
withdrawal may be made by a Participant who is married unless the Participant's
spouse consents in writing.
Section 6.5: Actual Contribution Percentage Limits. The Actual
- ----------- -------------------------------------
Contribution Percentage under Section 6.1 shall be modified as provided in
Section 6.6(a) if the requirements of paragraph (a) are not satisfied.
(a) The average of the Actual Contribution Percentage for all Eligible
Employees who are Highly Compensated Employees, when compared to the average of
the Actual Contribution Percentage for all Eligible Employees who are Non-Highly
Compensated Employees, must meet one of the following requirements for each Plan
Year:
(i) the High Contribution Average is no greater than the Low
Contribution Average times one hundred and twenty-five percent.
(ii) the excess of the High Contribution Average over the Low
Contribution Average is not greater than two percentage points and the High
Contribution Average is no greater than Low Contribution Average times two.
(b) For purposes of paragraph (a) the Contribution Percentage for any
Eligible Employee who is a Highly Compensated Employee for the Plan Year and who
is eligible to make Employee Contributions under Section 6.1, or to receive
Matching Contributions allocated to his account under two or more plans
described in Section 401(a) of the Code that are maintained by the Company or a
member of the Controlled Group shall be determined as if all such contributions
were made under a single plan.
(c) In the event that this Plan satisfies the requirements of Section
410(b) of the Code only if aggregated with one or more other plans, or if one or
more other plans satisfy the requirements of Section 410(b) of the Code only if
aggregated with this Plan, then this Section shall be applied by determining the
Actual Contribution Percentage of Eligible Employees as if all such plans were a
single plan.
(d) For purposes of determining the Actual Contribution Percentage of
an Eligible Employee who is a Highly Compensated Employee, the Employee
Contributions (including any Excess Elective Deferrals that are recharacterized
as Employee Contributions), Matching Contributions and Compensation of such
Eligible Employee shall include the Employee Contributions and Compensation of
Family Members, and such Family Members shall be disregarded in determining the
Actual Contribution Percentage for Eligible Employees who are Non-Highly
Compensated Employees.
(e) For purposes of paragraph (a), an Eligible Employee is any
employee who is directly or indirectly eligible to make Employee Contributions
and includes: an Employee who would be a Plan Participant but for the failure to
make required contributions; an Employee whose right to make Employee
Contributions has been suspended because of an election (other than certain one-
time elections) not to participate; and an Employee who is unable to make an
Employee Contribution because his or her Compensation is less than a stated
dollar amount. In the case of an Eligible Employee who makes no Employee
Contributions, the contribution ratio that is to be included in determining the
Actual Contribution Percentage is zero.
(f) Since the Highly Compensated Employee's Actual Contribution
Percentage includes the contributions and Compensation of Family Members, then
the Actual Contribution Percentage is reduced in accordance with the "leveling"
method described in section 1.401(m)-1(e)(2) of the regulations and the Excess
Aggregate Contributions for the family unit are allocated among the Family
Members in proportion to the contributions of each Family Member that have been
combined.
(g) Whenever any of the following items is used with the first letter
or letters capitalized, it shall have the meaning specified below unless the
context clearly indicates to the contrary.
(i) "Actual Contribution Percentage" means the ratio (expressed as a
percentage) of the sum of Employee Contributions under the Plan on behalf
of the Eligible Employee for the Plan Year to the Eligible Employee's
Compensation.
(ii) "Employee Contributions" means contributions made by a
Participant under Section 6.1 during the Plan Year.
(iii) "Family Member" means an individual described in Section 2.1(n).
(iv) "High Contribution Average" means the average (expressed as a
percentage) of the Actual Contribution Percentage of each Highly
Compensated Employee.
(v) "Highly Compensated Employee" means a highly compensated active
Employee and a highly compensated former Employee.
A highly compensated active Employee includes any Employee who
performs service for the Company during the determination year and who,
during the look-back year: (i) received Compensation from the Company in
excess of $75,000 (as adjusted pursuant to Section 415(d) of the Code; (ii)
received Compensation from the Company in excess of $50,000 (as adjusted
pursuant to Section 415(d) of the Code) and was a member of the top-paid
group for such year; or (iii) was an officer of the Company or an
affiliated Company and received Compensation during such year that is
greater than 50 percent of the dollar limitation in effect under Section
4154(b)(1)(A) of the Code. The term highly compensated active Employee
also includes: (i) Employees who are both described in the preceding
sentence if the term "determination year" is substituted for the term
"look-back year" and the Employee is one of the 100 Employees who received
the most Compensation from the Company or affiliated Company during the
determination year; and (ii) Employees who are 5 percent owners at any time
during the lookback year or determination year.
If no officer has satisfied the Compensation requirement of (iii)
above during either a determination year or look-back year, the highest
paid officer for such year shall be treated as a highly compensated
Employee.
For this purpose, the determination year shall be the Plan Year.
The look-back year shall be the 12-month period immediately preceding the
determination year (or, in the case of a determination year that is shorter
than 12 months, the calendar year ending with or within the 12-month period
ending with the end of the applicable determination year), or, if elected,
the calendar year immediately preceding the calendar year determination
year.
A highly compensated former Employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Company during the
determination year, and was a highly compensated active Employee for either
the separation year or any determination year ending on or after the
employee's 55th birthday.
If an Employee is, during a determination year or look-back year,
a Family Member of either a 5 percent owner who is an active or former
Employee or a highly compensated Employee who is one of the 10 most highly
compensated Employees ranked on the basis of compensation paid by the
Company or affiliated Company during such year, then the Family Member and
the 5 percent owner or top-ten highly compensated employee shall be
aggregated. In such case, the Family Member and 5 percent owner or top-ten
highly compensated Employee shall be treated as a single Employee receiving
compensation and plan contributions or benefits, as applicable, equal to
the sum of such compensation and contributions or benefits, as applicable,
of the Family Member and 5 percent owner or top-ten highly compensated
employee.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of Employees in the
top-paid group, the top 100 employees, the number of Employees treated as
officers, and the compensation that is considered, will be made in
accordance with Section 414(q) of the Code and the regulations thereunder.
(vi) "Low Contribution Average" means the average (expressed as a
percentage) of the Actual Contribution Percentage of each Non-Highly
Compensated Employee.
(vii) "Non-Highly Compensated Employee" means an Employee of the
Company who is neither a Highly Compensated Employee nor a Family Member.
Section 6.6: Correction of Excess Employee Contributions.
----------- -------------------------------------------
(a) If the requirements of Section 6.5(a) are not or will not be met
in a Plan Year, the Administrator shall treat as a forfeiture the Excess
Employee Contributions, together with income applicable thereto, if otherwise
forfeitable under the terms of the Plan; or if not forfeitable, the
Administrator shall distribute the Excess Employee Contributions, together with
income applicable thereto, before the end of the Plan Year following such Plan
Year. The amount of Excess Employee Contributions for a Highly Compensated
Employee under a plan subject to the requirements of Section 401(m) of the Code
will be determined in the following manner. First, the Actual Contribution
Percentage of the Highly Compensated Employee with the highest Actual
Contribution Percentage is reduced to the extent necessary to satisfy the High
Contribution Average or cause such ratio to equal the Actual Contribution
Percentage of the Highly Compensated Employee with the next higher ratio.
Second, this process is repeated until the average of the High Contribution
Percentage satisfies the requirements of Section 6.5(a).
(b) The income allocable to Excess Employee Contributions shall
include the income for the Plan Year for which the Excess Employee Contributions
were made (but not the income for the period between the end of the Plan Year
and the date of distribution (or forfeiture)), and shall be determined at the
discretion of the Administrator by either multiplying the income allocable to
the Participant's Employee Contributions for the Plan Year by a fraction, the
numerator of which is the Excess Employee Contributions on behalf of the
Participant for the preceding Plan Year and the denominator of which is the
amount of the Participant's Account attributable to Employee Contributions on
the last day of the preceding Plan Year, or by any other reasonable method,
provided that such method is used consistently for all Participants for that
Plan Year.
(c) The Excess Employee Contributions to be distributed to a
Participant shall be adjusted for income, and if there is a loss allocable to
the Excess Employee Contributions, the amount to be distributed shall in no
event be less than the lesser of the Participant's Account under the Plan or the
Participant's Employee Contributions for the Plan Year.
(d) The Excess Employee Contributions attributable to Employee
Contributions shall be distributed from the Participant's Account, in proportion
to the Participant's Employee Contributions for the Plan Year.
ARTICLE VII
------------
ALLOCATION OF COMPANY'S CONTRIBUTIONS
-------------------------------------
Section 7.1: Method of Allocation. As the Company makes a contribution
----------- --------------------
for a fiscal Year, the Committee shall as of the last day of such fiscal Year
allocate such contributions to the Company Contributions Account of the
Participants who are entitled to participate in the contributions of the Company
for such Years in the proportion that the total Compensation paid or accrued to
each Participant by the Company for such Year bears to the total Compensation
paid or accrued to all Participants by the Company for such Year, as
Compensation is defined in Section 2.1(h). The fact that allocations shall be
made and credited to the Account of a Participant shall not vest any right,
title or interest in the Trust Fund in a Participant except at the time or times
a distribution is to be made and then only upon the terms and conditions herein
provided.
Section 7.2: Limitation on Allocation. Notwithstanding anything to the
----------- ------------------------
contrary contained herein, effective for the Plan Year beginning September 3,
1987, the total annual addition to a Participant's Account for any Plan Year
shall not exceed the lesser of 25% of the Participant's taxable wages for the
Year from the Company, or $30,000.00 (or, if greater, 1/4th of the defined
benefit dollar limitation set forth in Section 415(b)(i) of the
12
<PAGE>
Code as in effect for the calendar year that begins within the Plan Year.
For purposes of this Section 7.2, the term "annual addition" shall
mean for any year the aggregate of amounts credited to a Participant's accounts
from Company contributions and forfeitures, plus the Participant's own after-tax
contributions.
If the Company is contributing to another defined contribution plan,
as that term is defined in Section 414(i) of the Code, for its employees, some
or all of whom may be Participants in this Plan, then any such Participant's
annual addition in such other plan shall be aggregated with such Participant's
annual addition derived from this Plan for purposes of the limitations expressed
in this Section 7.2.
If the annual addition to the Participant's account exceeds the
limitations described herein, the aggregate of the annual addition to this Plan
and the annual addition to any other defined contribution plan as described
above shall be reduced until the applicable limitation is satisfied, by reducing
the aggregate amount in the following order and priority:
(a) Refund of any voluntary contributions made by the Participant to
this Plan to the extent that such contributions are included in the annual
addition hereunder.
(b) Refund of any contributions made by the Participant to any other
defined contribution plan to the extent that such contributions would be
aggregated with the annual addi tion to this Plan pursuant to provisions
hereof.
(c) Reduce the Participant's allocation under this Plan for the fiscal
year in which the excess occurs. Such reduction shall be treated as a
forfeiture and shall be added to the contribution of the Company for such year
and shall be allocated to the accounts of Participants who are not affected by
the limitation of this Section 7.2 in accordance with Section 7.1; provided,
however, with respect to the one time correction occurring in the Plan Year
ending in 1992, under a Closing Agreement on Final Determination Covering
Specific matters with the Internal Revenue Service, any such reduction shall be
held in suspense by the Trustee and used to reduce any future Company
contributions made under the Plan.
(d) In the event that after the above refunds and reductions are made
amounts are still available which may not be allocated hereunder, such amounts
shall be treated as a forfeiture and shall be held in a suspense account.
Provided, however, that except as provided in paragraph (c), such amounts held
in a suspense account will be allocated to the accounts of Participants at the
first possible time when such allocation would not violate
13
<PAGE>
the provisions of Section 415 of the Internal Revenue Code or other applicable
law. Such allocation of forfeitures held in suspense accounts shall take place
prior to the allocation of any amounts arising from any other source, including
forfeitures in a subsequent year, or employer contributions together with
earnings thereon.
Section 7.3: Limitations for Participants In a Combination of Plans. In
----------- ------------------------------------------------------
the case of any Employee who is a Participant in this Plan and the defined
benefit Plan of the Company, if any, the sum of the defined benefit Plan
fraction and the defined contribution Plan fraction for any Year shall not
exceed 1.0. In the event the sum of such fraction exceeds 1.0 the Trustees
shall prescribe the manner in which the annual addition to this Plan or the
annual benefits under the Company's defined benefit Plan shall be reduced in
order that neither Plan shall be disqualified under applicable sections of the
Internal Revenue Code.
Section 7.4: Definitions. For purposes of applying the limitations of
----------- -----------
Section 7.3, the following rules shall prevail:
(a) The term "defined benefit Plan fraction" shall mean a fraction the
numerator of which is the projected annual benefit payable under the Company's
defined benefit Plan, if any (determined as of the close of the Year) and the
denominator of which is the lesser of (i) the product of 1.25 multiplied by the
dollar limitation in effect under Section 415(b)(1)(A) of the Code for such
Year, or (ii) the amount which may be taken into Account under Section
415(b)(1)(B) of the Code with respect to such Employee under the defined benefit
Plan for such Year multiplied by 1.4.
(b) The term "defined contribution Plan fraction" shall mean the
aggregate annual additions to this Plan (and any other defined contribution Plan
of the Company, if any) determined as of the close of the Year without regard to
Section 7.2 hereof (relating to limitations on contributions) over the sum of
the lesser of the following amounts determined for such Year and for each prior
Year of Service with the Company: (i) the dollar limitation in effect under
Section 415(c)(1)(A) of the Code for such Year (determined without regard to
Section 415(c)(6) of the Code) multiplied by 1.25, or (ii) the amount which may
be taken into account under Section 415(c)(1)(B) (or Section 415(c)(7) or (8),
if applicable) of the Code with respect to such employee under such plan for
such year multiplied by 1.4.
(c) The term "Compensation" shall include a Participant's wages,
salaries, fees for professional service and other amounts received for personal
services actually rendered in the course of employment with the Company
(including, but not limited to, commissions paid salesmen, Compensation for
services
14
<PAGE>
on the basis of a percentage of profits, commissions on insurance premiums, tips
and bonuses) and shall exclude:
(i) Contributions made by the Company to a Plan of deferred
Compensation to the extent that, before the application of the limitations
of Section 415 of the Code to that Plan, the contributions are not
includable in the gross income of the Employee for the taxable Year in
which contributed. In addition, Company contributions made on behalf of an
Employee to a simplified Employee pension Plan described in Section 408(k)
of the Code are not considered as Compensation for the taxable Year in
which contributed to the extent such contributions are deductible by the
Employee under Section 219(b)(7) of the Code. Additionally, any
distributions from a Plan of deferred Compensation are not considered as
Compensation regardless of whether such amounts are includable in the gross
income of the Employee when distributed. However, any amounts received by
an Employee pursuant to an unfunded non-qualified Plan may be considered as
Compensation in the Year such amounts are includable in the gross income of
the Employee.
(ii) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by an Employee either
becomes freely transferable or is no longer subject to a substantial risk
or forfeiture.
(iii) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option.
(iv) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent that the
premiums are not includable in the gross income of the Employee), or
contributions made by the Company (whether or not under a salary reduction
agreement) towards the purchase of an annuity contract described in Section
403(b) of the Code (whether or not the contributions are excludable from
the gross income of the Employee).
ARTICLE VIII
-------------
INVESTMENT OPPORTUNITIES
------------------------
Section 8.1: Investment Funds. At such time and in such manner as the
----------- ----------------
Committee in its sole discretion shall determine, the Trustee shall maintain,
subject to the written direction of the Committee, one or more separate Funds.
Each such Fund shall be included in the Trust Fund.
15
<PAGE>
Section 8.2: Election of Investment Options. Following such time as
----------- ------------------------------
separate investment funds are available under Section 8.1, or at such other time
as the Committee shall in its sole discretion determine, each Participant may
make an election, in writing, with respect to the investment of the amounts
contributed to his Account for succeeding Contributions, by directing the
Committee that such amounts are to be invested in such percentage increments as
the Participant shall determine in any combination between the various
investment Funds. At such time as the Committee shall determine, a Participant
may elect to change his investment election with respect to his choice of
investments hereunder for future Employee and Company contributions as allowed
herein by listing and/or giving written, telephone or such other notice as may
be required by the Committee from time to time. Any election by a Participant
shall remain in effect until changed. In the event no election by a Participant
is received by the Committee, the Participant shall be deemed to have elected
the investment of one hundred percent (100%) of the amounts eligible for
election hereunder in the Fund that is the equivalent of a money market fund.
Any and all elections granted hereunder shall always be with respect to future
additions to the Participant's Account and not to accumulated amounts therein,
at such time and in such manner as the Committee shall determine, except a
Participant may change any existing investment to any other investment options
that are made available under the Plan.
Section 8.3: Change in Investment Options. The Committee, at its sole
----------- ----------------------------
discretion and from time to time, may provide additional investment options,
amend the investment options provided herein, or change the election
alternatives available to Participants hereunder, or amend any other provisions
contained herein with respect to investments.
Section 8.4: Expenses Charged to Participant's Account. The Committee may
----------- -----------------------------------------
in its sole discretion assess the Participant's Account with any expense
incurred either as a result of any investment, change in investment made by a
Participant with respect to any Fund, or as a result of any loan, withdrawal or
distribution of benefits from the Participant's Account.
ARTICLE IX
-----------
RETIREMENT
----------
Section 9.1: Normal Retirement. Prior to and upon attainment of the
----------- -----------------
normal retirement date, a Participant shall be 100% vested in his Accounts
hereunder.
Section 9.2: Later Retirement. If the Participant's retirement is
----------- ----------------
deferred beyond his normal retirement date, the Participant shall continue as a
Participant in such Plan and no distributions shall be made to him under the
terms of this Article
16
<PAGE>
until his actual retirement date. An employee who becomes eligible as, and
becomes a, Participant at or after the date which would otherwise be his normal
retirement date, shall be treated in all respects as a Participant whose
retirement was deferred beyond his normal retirement date as provided in Section
9.3. The Participant shall be entitled to participate in the allocation of the
Company's contributions under Article V for the year in which his normal or
later retirement date occurs, and such contributions shall be distributed as
provided herein.
Section 9.3: Retirement Benefits. Upon the termination of service of any
----------- -------------------
Participant on or after his normal retirement date, such Participant shall be
entitled to receive one hundred percent (100%) of the amounts standing to his
credit in his accounts, as such accounts stand as of the anniversary date of the
Plan coinciding with or next preceding the date of such termination of service,
plus any contributions by him to his Participant Contributions Account between
such anniversary date and the commencement of distributions hereunder, which
amount the Trustee, upon Committee direction, shall distribute to such
Participant in substantially equal installments over a period of one hundred
twenty (120) months, but at least annually. The Trustee shall segregate said
amount from the Fund and set it aside in a special account and shall, insofar as
possible, pay to such Participant the first installment within sixty (60) days
after his retirement. In addition, the Participant shall be entitled to
participate in the allocation of the Company's contribution for the year in
which his normal retirement date occurs. In the case of the retirement of a
Participant who is married on the annuity starting date, any method of
distribution set forth in this Article shall be subject to the provisions of
Section 18.1 hereof.
Section 9.4: Optional for Payment in Installments of Less Than One Hundred
----------- -------------------------------------------------------------
Twenty (120) Months. A Participant shall have the right to request the
- -------------------
Committee to direct the Trustee to make the payments described in Section 9.3
over a lesser period or in a lump sum and the Committee shall, direct the
Trustee to, and upon its direction the Trustee shall, distribute the amount in
such Participant's accounts in a lump sum or over a period of time less than the
life expectancy of the Participant. In the event the total amount of the
Participant's entitlement represented by his Account is in excess of $3,500.00
no distribution may be made to the Participant prior to his Normal Retirement
Date, except with his consent; and if married, with the written consent of his
spouse. In the event payments to a retired Participant are to be made in
installments, the provisions of Section 13.3 shall apply to such installments.
Section 9.5: Option for Annuity. A Participant shall have the right to
----------- ------------------
request the Committee, in lieu of the benefits provided herein, to direct the
Trustees to purchase a nontransferable annuity, the cost of which shall be equal
to the
17
<PAGE>
benefits to which such Participant is entitled, and the term of which shall not
extend beyond the life expectancy of the Participant, or the joint life
expectancies of the Participant or his Spouse if the joint form is elected, and
the Committee may, in its discretion, direct the Trustees to, and the Trustees
shall, purchase such an annuity.
Section 9.6: Death After Retirement. In the event of the death of a
----------- ----------------------
Participant after retirement and prior to payment to him of the full amount to
which he is entitled under the provisions of this Article, the Trustee, upon the
direction of the Committee, shall distribute within 90 days following the
Valuation Date next following the Participant's death, or as soon as
administratively feasible thereafter, the then undistributed amount to which
such Participant is entitled to the beneficiary or beneficiaries of the
Participant as determined under the provisions of Section 10.1.
Section 9.7: Commencement of Benefit Payment.
----------- -------------------------------
(a) Notwithstanding any other provision contained herein to the
contrary, the entire interest of the Participant will be distributed in
accordance with either of the following:
(i) not later than April 1 of the calendar year following the
calendar year in which the Participant attains age 70-1/2; or
(ii) commencing no later than the taxable year described in
paragraph (i) and payable over the life of the Participant or over the
lives of the Participant and the Participant's designated beneficiary, or
over a period not exceeding the life expectancy of the Participant or over
the joint life expectancies of the Participant and the Participant's
designated beneficiary. Notwithstanding the foregoing, if the
Participant's spouse is not the designated Beneficiary, then the method of
distribution selected must assure that at least 50% of the present value of
the amount available for distribution is paid within the life expectancy of
the Participant.
(b) If the balance of the Account of a Participant exceeds $3,500,
then the Participant (and if the Participant is married, the Participant's
spouse) must consent in writing to a distribution that commences prior to the
Participant's Normal Retirement Date.
ARTICLE X
----------
DEATH OF A PARTICIPANT
----------------------
Section 10.1: Death of a Participant Before Retirement or Termination of
------------ ----------------------------------------------------------
Service. Upon the death of a Participant before retirement or termination of
- -------
service, the Trustee shall, upon direction of the Committee, pay to the
beneficiary or beneficiaries last legally designated in writing by the
Participant, in a manner as provided by the Plan and selected by the
Beneficiary, the amount
18
<PAGE>
standing to the credit of the Participant in his Accounts as of the valuation
date coinciding with or next preceding the date of commencement of distribution
following such death, plus any contributions by him to his Participant
Contributions Account or made by the Company to his Company Contribution Account
between such valuation date and the commencement of distributions hereunder. In
addition to the foregoing, such deceased Participant shall be entitled to
participate in the allocation of the Company's contributions under Article V for
the Year in which such death occurs, and such contributions shall be distributed
as provided herein.
Section 10.2: Beneficiary. Every Participant shall designate in writing, a
------------ -----------
beneficiary or beneficiaries, and successor beneficiary or beneficiaries, to
receive any death benefits provided herein, and a beneficiary or beneficiaries
for any benefits surviving his death. Such designation or designations may be
changed from time to time by the Participant before his retirement by filing a
new designation of beneficiary or option on a form supplied by the Company.
However, if a Participant wishes to designate an individual other than his or
her spouse as a Beneficiary, such designation shall be effective only as to 100%
of the Participant's Accounts as of the Participant's date of death, unless his
or her spouse consents to the designation in writing and the consent is
witnessed by a Plan representative or Notary Public. In the event that at any
time there is not a beneficiary designated in writing by the Participant to
receive death benefits, the Trustee upon written direction by the Committee
shall designate the beneficiary of said benefits to be the surviving spouse of
the Participant, and if there is no surviving spouse, then to the executor or
administrator of the estate of the Participant.
Section 10.3: Limit on Form of Death Benefit Payment. If a Participant
------------ --------------------------------------
dies before his entire interest has been distributed to him, or if a
distribution has been commenced in accordance with Section 10.1 to his surviving
Spouse and such surviving Spouse dies before his entire interest has been
distributed to such surviving Spouse, then his entire interest (or the remaining
part thereof) shall be distributed within five Years after his death (or the
death of his surviving Spouse). The preceding shall not apply if the
distribution of the interest of the Participant has commenced and such
distribution is for a term certain over a period permitted under Section 9.7,
and in such event, the remaining interest will be distributed at least as
rapidly as under the method being used as of the date of the Participant's
death.
ARTICLE XI
-----------
DISABILITY OF A PARTICIPANT
---------------------------
Section 11.1: Disability. Upon the disability of a Participant, the
------------ ----------
Participant shall be entitled to receive one
19
<PAGE>
hundred percent (100%) of the amount standing to his credit in his Accounts as
of the valuation date coinciding with or next preceding the date of commencement
of distribution following such termination of service, plus any contributions by
him to his Participant Contributions Account between such Anniversary Date and
the commencement of distributions hereunder. Upon the direction of the Company,
the Trustees shall distribute such amount to such Participant in substantially
equal installments over a period of one hundred twenty (120) months. A
Participant shall have the right to request the Committee to direct the Trustees
to make such payments over a lesser period or in a lump sum and the Committee
may, in its discretion, direct the Trustees to, and upon its direction the
Trustees shall, distribute the amount in such Participant's Accounts in a lump
sum or over a period of time less than the life expectancy of the Participant.
In the event the total amount of the Participant's entitlement represented by
the Participant's Account is in excess of $3,500.00, no lump sum distribution
may be made to the Participant except with his consent, and if married with the
consent of his Spouse. The commencement of distribution may be made at any time
following six months after the disability and while the Participant is employed
by the Company; provided, however, that in the event of such a distribution, the
Participant receiving the distribution may not contribute under Article VI any
amounts from the date of commencement of distribution until the later of six
months or the next following election period authorized by the Committee.
Insofar as possible, the commencement of distribution shall be made by the
Trustees within sixty (60) days following the termination of service of such
Participant, and the Trustees, upon direction of the Committee, shall segregate
said amount from the Fund and set it aside in a special account and pay to such
Participant the first installment within sixty (60) days following the date on
which such termination of service occurs.
In the event payments to a disabled Participant are to be made in
installments, the provisions of Section 13.3 shall apply to such installments.
Section 11.2: Death After Termination for Disability. In the event of the
------------- --------------------------------------
death of the Participant after termination of service by reason of disability
and prior to payment to him of the full amount to which he is entitled under the
provisions of this Article XI, the Trustees, upon direction of the Committee,
shall distribute immediately, or as soon as the same is determined, the then
undistributed amount to which such Participant is entitled to the beneficiary or
beneficiaries of the Participant as provided in Section 10.2.
20
<PAGE>
ARTICLE XII
------------
OTHER TERMINATIONS OF SERVICE
-----------------------------
Section 12.1: Determination of Benefits. In the event a Participant
------------ -------------------------
terminates service for any reason on or after March 1, 1987, such Participant
shall be entitled to have distributed to him one hundred percent (100%) of the
amount in his Participant Contributions Account and his Company Contributions
Account as of the Valuation Date preceding the distribution.
Any amendment hereto which changes the above vesting schedule, or
which results from an automatic change to or from the top heavy vesting schedule
set forth in Section 16.3(b) shall not be effective as to any Participant who
has at least three (3) Years of service with the Company if such Participant
elects, within a reasonable time after the adoption of such amendment, to have
his vested interest computed without regard to such amendment. In the event of
any such amendment, the Trustees shall notify each Participant who has at least
five Years of Service of his right to remain under the prior vesting schedule.
Such election shall be deemed to be made within a reasonable time if it is
communicated to the Company by the Participant by the latest of a date which
sixty (60) days after (a) the date the Plan Amendment is adopted, or (b) the
effective date of the Plan Amendment, or (c) the date the Participant is issued
written notice of the amendment by the Company.
Section 12.2: Manner of Distribution of Benefits. After separation from
------------ ----------------------------------
service with the Company, the Committee shall direct the Trustee to commence to
distribute the Participant's vested Account, within 90 days following the later
of the date on which the separation from service occurred or as soon as
administratively feasible following such separation and receipt of any required
fully executed election forms. A Participant may not receive a partial
distribution of his vested account. In the event the value of a Participant's
Account (including employee contributions, if any) exceeds $3,500, written
consent of the Participant is required before the distribution of any portion of
his Account may be commenced prior to the time the Participant attains age 65.
The Participant may elect, with written spousal consent, to receive distribution
of his vested Account in any form as provided in Article IX. Notwithstanding
the foregoing, if the value of the Participant's Account (including employee
contributions, if any) does not exceed $3,500, distribution of the Participant's
vested Account shall be distributed in a lump sum as soon as administratively
feasible following the Participant's separation from service.
Section 12.3: Death Prior to Completion of Payment. In the event of the
------------ ------------------------------------
death of the Participant prior to the payment to him of the full amount to which
he is entitled, the Trustees upon
21
<PAGE>
direction of the Committee, shall distribute, in a manner to be determined by
the Committee, the then undistributed amount to which such Participant is
entitled to the beneficiary or beneficiaries of the Participant, as determined
under the provisions of Section 10.3. In the event payments to a terminated
Participant are to be made in installments, the provisions of Section 13.3 shall
apply to such installments.
ARTICLE XIII
-------------
VALUATION OF THE FUND
---------------------
Section 13.1: Valuation of Fund. Within thirty (30) days after the last
------------ -----------------
day of each calendar month that this Agreement is in effect, the Trustee shall
report to the Committee, in writing, the value of the Fund as of such month end.
Such valuation shall be made upon the basis of the fair market value of the
assets in the Fund, and upon the approval by the Committee shall be binding upon
the Company, the Participants, and all other persons interested in the Plan.
The failure of the Committee to approve or disapprove of the said valuation
within thirty (30) days after receiving it shall constitute the Committee's
approval thereof. Earnings and losses of the Fund shall be allocated for any
given month pro rata to the Accounts of Participants as such Accounts stood as
of the first day of such month.
In the event the Trustee provides a valuation of the Fund more
frequently than monthly, or in the event of a substantial change in the fair
market value of the assets in the Fund after any monthly Valuation Date and
prior to the next succeeding monthly Valuation Date, the Committee may request
the Trustee to revalue the Fund, and the Trustee shall make such valuation as of
the date of such change upon the basis of the then fair market value of the
assets in the Fund, not including the value of the contributions by the Company
or Participants for the current fiscal Year, when such contributions have not
been received by the Trustees on or before such interim Valuation Date. Such
valuation shall be known as an "interim valuation". In such event, this interim
valuation shall be substituted for the valuation of the preceding monthly
Valuation Date, or for any more recent interim valuation in determining the
amounts in Participants' Accounts for all purposes of the Plan, including the
amounts in the Accounts of Participants with respect to the terms of the Plan,
but with respect to which distribution has not yet commenced. Whenever
reference is made in the Plan to the Account of a Participant as of an
Anniversary Date, or as of a Valuation Date or any specific date, there shall be
used those valuations determined by the most recent valuation whether or not as
of an Anniversary Date or any specific date. Any such valuations as hereinabove
provided, upon the approval of the Company shall be binding upon the Company,
the Participants, and all other persons interested in the Plan herein set forth.
22
<PAGE>
Section 13.2: Maintenance of Records by Committee. The Committee shall
------------ -----------------------------------
open and maintain records which shall reflect the value of the Participant's
Accounts, showing the respective Participant's Accounts, as adjusted.
Section 13.3: Segregation and Disbursement. The Trustee shall hold and
------------ ----------------------------
administer the entire Trust Estate, subject to the written direction of the
Committee, and the Trustee shall be bound by, and may act in reliance upon the
written instructions of the Committee. When so directed, in writing, by the
Committee, the Trustee shall segregate the Trust Fund, set up special accounts,
and disburse the Trust Fund when disbursement becomes proper under the terms of
the Plan. If the amount to be distributed to a Participant is to be paid to him
in installments, the Committee shall direct the Trustee to, and the Trustee
shall, segregate such amount from the Fund and invest all such amounts so
segregated in interest-bearing savings accounts (which may be an account with
the Trustee's banking department) or a money market fund; provided, however,
that a Participant may request of the Committee, in writing, that the amount to
be distributed to him in installments be maintained as a part of the Fund,
subject to increases or decreases of income or in the value of the Fund, but not
to share in allocations of the Company's contributions, and upon such request
such amount shall be so maintained. However, any amounts estimated to be
distributable within twelve (12) months of the time such investment otherwise
would be made need not be invested. In addition, any such amounts which are
estimated to be distributable within any ensuing twelve (12) months may be
liquidated or withdrawn or held uninvested. Any earnings and increases or
decreases of value in which such segregated amounts share, whether as a part of
the Fund or in interest-bearing savings accounts, shall be reflected in the
amount of any installment or installments distributed to the Participants or
beneficiaries entitled thereto in such manner as is determined by the Committee.
The Trustee shall hold and administer the entire Trust Estate, subject
to the written direction of the Committee, and the Trustee shall be bound by,
and may act in reliance upon the written instructions of the Committee. When so
directed in writing by the Committee, the Trustee shall segregate the Trust
Fund, set up special interest bearing savings accounts, and disburse the Trust
Fund when disbursement becomes proper under the terms of the Plan.
ARTICLE XIV
------------
HARDSHIP OF A PARTICIPANT
-------------------------
Section 14.1: Hardship Distribution. In the event a Participant incurs a
------------ ---------------------
hardship, he may request a distribution from his Participant's Accounts in an
amount necessary to meet the hardship. In no event may the requested
distribution exceed the amount necessary to satisfy the immediate financial need
created
23
<PAGE>
by the hardship. For purposes of this section, a distribution on account of
hardship shall mean a distribution necessary in light of immediate and heavy
financial needs of the Participant, and shall not exceed the amount required to
meet the immediate financial need created by the hardship that is not reasonably
available from other resources of the Participant.
Section 14.2: Determination by Committee. In order to receive a hardship
------------ --------------------------
distribution, a Participant must file a written request with the Committee
detailing the facts necessary to satisfy the requirements of Section 14.1. Any
amount distributed as a hardship distribution shall be in a lump sum paid by the
Trustee, in accordance with the direction of the Committee, as soon as
practicable after receipt by the Committee of such a request. The Committee
shall determine whether a financial hardship exists and the amount required to
be distributed to meet the need created by the hardship in a uniform and
nondiscriminatory manner.
ARTICLE XV
-----------
AMENDMENT OR DISCONTINUANCE OF PLAN
-----------------------------------
Section 15.1: Right to Amend. The Company reserves the right at any time,
------------ --------------
without the approval of any Participants, former Participants, beneficiaries, or
its Employees, to terminate the Plan (with or without terminating the Trust), or
to change, modify or amend the Plan and Trust in any particular or particulars
whatsoever, including, but not by way of limitation, the right to increase,
diminish, or eliminate contributions to be made by it hereunder, to change or
modify the method of allocation of such contributions, to change any provision
relating to the administration of the Plan and to change any provision relating
to the distribution or payment, or both, of any of the assets of the Trust. All
such changes, modifications or amendments may be retroactive to any date to and
including the effective date of the Plan and shall be retroactive to the
effective date of the Plan unless other provision is specifically made.
However, no such amendment shall authorize or permit any part of the Trust Fund
(other than such part as is required to pay taxes or administrative expenses) to
be used for or diverted to purposes other than for the exclusive benefit of
Participants, their beneficiaries or estates. No such change, modification or
amendment (unless such change, modification or amendment is necessary in order
to meet the requirements of the Code) shall eliminate an optional form of
benefit, cause any reduction in the amount credited to any Participant's Account
to which he would otherwise become entitled if he terminated service with the
Company as of the date of adoption of such change, modification or amendment
pursuant to Article XII, or cause or permit any part or portion of the Trust
Fund to revert to or become the property of the Company.
24
<PAGE>
Section 15.2: Termination of Plan. The Company reserves the right to
------------ -------------------
terminate the Plan at any time, as to itself, without approval of any parties
interested therein.
Section 15.3: Distribution on Termination or Discontinuance. In the event
------------ ---------------------------------------------
of the termination or partial termination of the Plan by the Company as to
itself, or in the event of the complete discontinuance of contributions to the
Plan by the Company, the Trustee shall set up separate accounts for the
respective Participants in proportion to the value of their respective shares,
whether or not vested, all as determined and directed by the Committee. The
interests of such affected Participants shall become wholly vested as of the
date of such termination or partial termination of the Plan or complete
discontinuance of contributions. Upon the direction of the Committee, the
Trustee shall distribute to such Participant the amount in his accounts in the
same manner distribution would have been made to such Participant under the
applicable provisions of Article IX, as if the Plan had not been terminated or
discontinued by the Company.
ARTICLE XVI
------------
TOP HEAVY PROVISIONS
--------------------
Section 16.1: Top Heavy Definitions. Whenever any of the following terms
------------ ---------------------
is used in the Plan with the first letter or letters capitalized, it shall have
the meaning specified below unless the context clearly indicates to the
contrary.
(a) "Aggregation Group" means each Plan of the Company in which a Key
Employee is a Participant, and each other Plan of the Company which enable the
Plan or Plans containing a Key Employee to meet the antidiscrimination
requirements of Sections 401(a)(4) or 410 of the Code. In addition, the
Administrator may include in the Aggregation Group any other Plan of the Company
that satisfies the requirements of Sections 401(a)(4) and 410 of the Code when
considered together with the other Plans in the Aggregation Group.
(b) "Determination Date" means with respect to any Plan Year the last
day of the preceding Plan Year, or in the case of the first Plan Year of the
Plan, the last day of such Plan Year.
(c) "Key Employee" means an Employee or former Employee who, at any
time during the Plan Year which contains the determination date, or any of the
four preceding Plan Years, is:
(i) One of the ten Employees of a Company having annual Compensation
from such Company of more than the limitation in effect under Section
415(c)(1)(A) of the Code and owning (or considered as owning within the
meaning of Section 318 of the Code) the largest interest in such
25
<PAGE>
Company (if two Employees have the same interest the Employee having the
greater annual Compensation from the Company shall be treated as having a
larger interest);
(ii) A 5% owner of a Company;
(iii) A 1% owner of a Company who has an annual Compensation above
$150,000 as defined in Section 415(c) of the Code; or
(iv) An officer of a Company having an annual Compensation greater
than 150% of the amount in effect under Section 415(c)(1)(A) of the Code
for any such Plan Year (however, no more than the lesser of 50 Employees or
the greater of three Employees or 10% of the Company's Employees shall be
treated as officers).
"Non-Key Employee" means an Employee who is not a Key Employee. The
beneficiaries of an Employee acquire the character of such Employee. For
purposes of this paragraph, compensation shall have the same meaning as defined
in Section 415(c)(3) of the Code.
(d) "Top Heavy Group" means any Aggregation Group if the sum of the
present value of cumulative accrued benefits for Key Employees under all defined
benefit pension Plans included in the Aggregation Group, and the sum of the
Accounts of Key Employees under all defined contribution Plans included in the
Aggregation Group, exceeds 60% of such amounts determined for all Employees,
calculated as of the determination date, using the most recent Valuation Date
within the twelve (12) month period ending on the determination date.
(e) "Top Heavy Plan" means each Plan of the Company or Companies
required to be included in an Aggregation Group, if the Aggregation Group is a
Top Heavy Group.
Section 16.2: Special Top Heavy Rules. For purposes of determining whether
------------ -----------------------
a Top Heavy Group exists, the following special rules shall apply:
(a) Benefits derived from voluntary or mandatory Participant
contributions and Company contributions shall be taken into account.
(b) The aggregate of distributions made to any Participant from the
Plan or any Plans in the Aggregation Group, during the five year period ending
on the Determination Date shall be taken into account in determining the present
value of cumulative accrued benefits of any Participant or the Account of any
Participant under any such Plan.
26
<PAGE>
(c) If a Participant who was a Key Employee ceases to be a Key
Employee for a Plan Year, the cumulative accrued benefit or Account of such
Participant will not be taken into account for determining whether a Top Heavy
Group exists for such Plan Year.
(d) Rollover contributions initiated by an Employee and made to the
Plan after December 31, 1983 shall not be taken into account.
(e) For Plan Years beginning after December 31, 1984, the Account
balances of a Participant who has not received Compensation from the employer
maintaining the Plan during the five Year period ending on the determination
date will be disregarded.
Section 16.3: Top Heavy Benefits and Restrictions. If the Plan is a Top
------------ -----------------------------------
Heavy Plan for any Plan Year, then with respect to such Plan Year, the following
provisions shall apply:
(a) Each Participant shall be 100% vested in his or her account, as
of such Plan Year and for each Plan Year thereafter.
(b) Each Participant who is not a Key Employee shall receive a minimum
allocation of Company contributions equal to the lesser of 3% of such
Participant"s Compensation or the highest percentage of Compensation at which
contributions are allocated or required to be allocated under the Plan for any
Key Employee. The minimum allocation shall be made even though the Participant
may not otherwise be eligible to receive an allocation because of failure to
compete 1000 hours of service or because the Participant was excluded from the
Plan because his Compensation is below the integration level.
(c) If the sum of the cumulative accrued benefits and the aggregate of
the accounts held by Key Employees under a Top Heavy Group does not exceed 90%
of such amounts for all Employees, then the percentage of 3% described in
paragraph (b) above shall be replaced by 4%.
(d) If the sum of the cumulative accrued benefits and the aggregate of
the accounts held by Key Employees under a Top Heavy Group does exceed 90% of
such amounts for all Employees, then the limitation of 1.25 contained in Section
8.04 shall be replaced by 1.0.
(e) If the Company maintains this plan and a defined benefit plan; the
minimum Company contribution during a Plan Year for a Participant who is not a
Key Employee shall equal 5% of the Participant"s net Compensation, provided that
the minimum Company contribution required by Section 416 of the Code is not made
under the defined benefit plan.
27
<PAGE>
(f) If the provisions of paragraph (d) apply, then the amount of 7%
will be substituted for 5% in paragraph (e).
ARTICLE XVII
-------------
RESTRICTION ON ASSIGNMENT
-------------------------
Section 17.1: Effect of Assignment in General. Neither the Company nor the
------------- -------------------------------
Trustee shall recognize any transfer, mortgage, pledge, hypothecation, order or
assignment by any Participant or beneficiary of all or part of his interest
hereunder, and such interest shall not be subject in any manner to transfer by
operation of law, and shall be exempt from the claims of creditors or other
claimants from all orders, decrees, levies, garnishment and/or executions and
other legal or equitable process or proceedings against such Participant or
beneficiary to the fullest extent which may be permitted by law. The preceding
sentence shall apply to the creation, assignment, or recognition of a right to
any benefit payable with respect to a Participant pursuant to a domestic
relations order, unless such order is determined to be a qualified domestic
relations order as defined in Section 414(p) of the Code, or any domestic
relations order entered before January 1, 1985. Notwithstanding any other
provisions contained in the Plan that limit the right of a Participant to
commence to receive a distribution from the Plan, payment of benefits form the
Plan to an alternative payee under a qualified domestic relations order shall
commence at such time as provided in the qualified domestic relations order or
as soon thereafter as administratively feasible.
Section 17.2: Loans to Participants. The Committee may, at its sole
------------- ---------------------
discretion and upon written application of a Participant, make a personal loan
(but two loans may not be outstanding at any one time) to such Participant in a
total amount of the lesser of $10,000, or when aggregated with any other loans
from any other qualified plan maintained by the Company not in excess of the
lesser of $50,000 (reduced by the highest outstanding loan balance during the
preceding twelve month period) or fifty percent (50%) of the value of the vested
amount credited to his or her Accounts plus earnings or losses, provided that
such loans (i) are available to all Participants on a reasonably equivalent
basis, and in the same percentage of their vested Account balances; (ii) are
adequately secured, which security can be accomplished by an assignment of not
more than 50% of the Participant"s vested interest in his or her Account(s) or
other good and valuable security; (iii) are evidenced by the borrowing
Participant"s promissory note for a fixed term, not to exceed five (5) years,
bearing interest at a rate equal to the prime rate of interest of Union Bank on
the first day of the quarter in which the loan is approved, and requiring
regular periodic (at least quarterly) repayment of principal and interest by
payroll deductions or otherwise; (iv) are made in a uniform and non-
discriminatory manner
28
<PAGE>
and (v) are made only with the written consent of the Participant"s spouse, if
any, and the spouse"s consent is witnessed by a Plan representative or notary
public and such election is made during the 90-day period ending on the date on
which any such loan is secured, if the value of the vested Account of the
Participant used as security exceeds $3,500.00.
Each Participant loan is treated as a direct investment of the
borrowing Participant, and as such all interest paid or other expenses
associated with the loan shall be credited to or chargeable to the borrowing
Participant"s Account. The amount of any loan in excess of the above limit
shall be considered as taxable income to such Participant making such loan in
the calendar year in which such excess occurs.
In the event of default, any expenses incurred by the Plan in
connection with collection of the loan (including attorney"s fees) shall be
charged to the Participant"s Account.
In the event the Participant separates from service with the Company,
or fails to pay principal or interest when due, the entire outstanding balance
of principal and interest may be immediately due and payable without notice or
demand at the discretion of the Committee. In the event the loan is in default,
the Participant"s Account Balance may be reduced or may be deemed distributed at
the time of the default, or if any loan has not been repaid at the time of a
distribution to a Participant or his beneficiary, then the outstanding amount of
principal and interest shall be deducted from the amount of any such
distribution.
Amounts collected or deemed distributed from the Participant"s Account
to repay any outstanding principal or interest on a Participant loan shall be
treated as a distribution to the Participant or beneficiary as the case may be,
and to the extent taxable shall be reported to the Internal Revenue Service.
ARTICLE XVIII
--------------
MISCELLANEOUS PROVISIONS
------------------------
Section 18.1: Joint and Survivor Annuity.
------------ --------------------------
(a) Form of Benefit Payments. The provisions of this section shall
------------------------
take precedence over any conflicting provisions in the Plan and shall apply to
any Participant who is credited with at least one Hour of Service with the
Company on or after August 23, 1984, and such other Participants as are covered
by subparagraph (d). Unless an optional form of benefit is selected within the
Applicable Election Period pursuant to a Qualified Election, or unless the value
of the Participant"s benefit is less than $3,500.00, a
29
<PAGE>
Participant"s benefit is less than $3,500.00, a Participant"s benefit derived
from Company Contributions and non-deductible Participant contributions shall be
paid as follows:
(i) If the Participant is married, in the form of a Qualified Joint
and Survivor Annuity providing for an annuity for the life of a Participant
and a survivor annuity for the life of a Participant"s Spouse following the
Participant"s death at a rate of not less than 50% and not more than 100%
of the amount payable during the joint lives of the Participant and the
Participant"s Spouse, and if the Participant is not married in the form of
a single life annuity, or
(ii) If a Participant dies before the payment of benefits has
commenced, in the form of a Qualified Pre-Retirement Survivor Annuity
providing for an annuity for the life of the surviving Spouse which is the
actuarial equivalent of at least 50% of the amount in the Participant"s
Accounts as of the Participant"s date of death. The surviving Spouse may
elect to have payment of the Qualified Pre-Retirement Survivor Annuity
commence within a reasonable time after the Participant"s death. A partial
or total cash-out may be made after the annuity starting date, where the
present value of the Qualified Joint and Survivor Annuity and the Qualified
Pre-Retirement Survivor Annuity does not exceed $3,500.00, unless the cash-
out is consented to in writing by the Participant and the Participant"s
Spouse, if any, or, by the surviving Spouse where the Participant is dead.
(b) Definitions. Wherever any of the following terms is used in the
-----------
Plan it shall have the meaning specified below unless the context clearly
indicates to the contrary.
(i) "Applicable Election Period" shall mean with respect to the
Qualified Joint and Survivor Annuity described in subsection (a)(1), the
ninety day period ending on the date benefit payments are to commence; and,
with respect to the Qualified Pre-Retirement Survivor Annuity described in
subsection (a)(ii), the period which begins on the first day of the Plan
Year in which the Participant attains age 35 or, if earlier, the date of
his or her termination of service, and ends on the date of the
Participant"s death.
(ii) "Qualified Election" means a written election of a form of
benefit other than a Qualified Joint and Survivor Annuity or a Qualified
Pre-Retirement Survivor Annuity. An election shall be a Qualified Election
only if the Participant"s Spouse consents to the election in writing and
his or her consent is witnessed by a Plan representative or Notary Public.
Notwithstanding this consent requirement,
30
<PAGE>
if the Participant establishes to the satisfaction of the Company that such
written consent cannot be obtained because the Participant has no Spouse,
or because the Spouse cannot be located, the election shall be deemed a
Qualified Election. A Participant may revoke a Qualified Election or choose
to take a Qualified Joint and Survivor Annuity and Qualified Pre-Retirement
Survivor Annuity at any time and any number of times within the Applicable
Election Period. Any new waiver or change of beneficiary will require a new
spousal consent.
(iii) "Spouse" means Spouse or surviving Spouse of the Participant
provided that a former Spouse will be treated as the Spouse to the extent
provided under a qualified domestic relations order as described in Section
414(p) of the Code.
(c) Notice Requirements. Within a reasonable period of time before
-------------------
the Applicable Election Period, the Company shall provide the Participant with a
written explanation of the following:
(i) The terms and conditions of the Qualified Joint and Survivor
Annuity or Qualified Pre-Retirement Survivor Annuity, as applicable;
(ii) The Participant"s right to elect a benefit other than a
Qualified Joint and Survivor Annuity or Qualified Pre-Retirement Survivor
Annuity and the effect of such an election;
(iii) The rights of the Participant"s Spouse with respect to the
Qualified Joint and Survivor Annuity or Qualified Pre-Retirement Survivor
Annuity; and
(iv) The right of the Participant to revoke a previous election and
the effect of such revocation.
In the case of a Qualified Pre-Retirement Survivor Annuity the Company
shall provide each Participant within a period beginning on the first day of the
Plan Year in which the Participant attains age 32 and ending with the close of
the Plan Year preceding the Plan Year in which the Participant attains age 35, a
written explanation of the Qualified Pre-Retirement Survivor Annuity in such
terms and in such manner as would be comparable to the explanation required by
subsection (c)(i).
If a Participant enters the Plan after the first day of the Plan Year
in which the Participant attained age 32, the Company shall provide notice no
later than the close of the third Plan Year succeeding the entry of the
Participant in the Plan. If a Participant separates from service before age 32,
the Company
31
<PAGE>
shall provide notice no later than one Year following such separation.
Notwithstanding the other requirements of this subsection, the
respective notices prescribed by this Section need not be given to a Participant
if this Plan "fully subsidizes" the costs of a Qualified Joint and Survivor
Annuity and the Participant does not elect another form of benefit. For
purposes of this subsection, a Plan fully subsidizes the costs of a benefit if
under the Plan the failure to waive such benefit by a Participant would not
result in a decrease in any Plan benefits with respect to such Participant and
would not result in increased contributions from the Participant.
(d) Transitional Rules Applicable to Joint and Survivor Annuities.
-------------------------------------------------------------
Any living Participant not receiving benefits on August 23, 1984 who is credited
with at least one Hour of Service under the Plan or under a predecessor Plan on
or after September 2, 1974 shall be afforded the opportunity to elect to have
his or her benefits paid as follows:
(i) If such Participant had at least ten (10) Years of vesting
service upon termination of service, he or she may elect to have his or her
benefits paid in accordance with Section 18.1; and
(ii) If such Participant had less than ten (10) Years of vesting
service upon termination of service or, if such Participant does not elect
to have his or her benefits paid in accordance with Section 18.1, and if
such Participant is entitled to benefits in the form of a life annuity, he
or she may elect to have his or her benefits paid as follows:
a. If the benefits commence on or after normal or early
-
retirement age, if the Participant dies after normal retirement age
while still employed by the Company or after termination of service on
or after normal or early retirement age before commencement of
benefits, in the form of a Qualified Joint and Survivor Annuity. Any
such election must be in writing and may be made and changed by the
Participant at any time during the period beginning at least six (6)
months before the earliest date on which the Participant may become
eligible for early retirement benefits under the Plan and ending not
more than 90 days before commencement of benefits.
b. If the Participant is employed after the earliest date on
-
which he or she may become eligible for early retirement benefits, in
the form of a Qualified Pre-Retirement Survivor Annuity. Any such
32
<PAGE>
election must be in writing and may be made and changed at any time
during the period beginning on the later of the ninetieth day before
the Participant reaches the Earliest Retirement Age and the date on
which participation begins, and ends on the Participant"s termination
of service.
Section 18.2: Limitation on Participant"s Rights. Participation in the Plan
------------ ----------------------------------
shall not give any Participant the right to be retained in the service of the
Company or any rights in or to any part of the Fund or to any benefits
whatsoever, except to the extent specifically set forth under the terms of this
instrument.
Section 18.3: Receipt. On final payment or distribution to any Participant
------------ -------
or his legal representatives, or beneficiaries, in accordance with the
provisions of this instrument, the Trustees shall be entitled to demand a
receipt in full satisfaction of all claims against the Trust, the Trustees, the
Committee and the Company.
Section 18.4: Unenforceable Provisions. If any provisions of this
------------ ------------------------
Agreement shall be for any reason invalid or unenforceable, the remaining
provisions shall, nevertheless be carried into effect.
Section 18.5: Governing Law. This Agreement has been finally executed and
------------ -------------
delivered in the State of California, and all matters affecting its validity and
construction shall be determined by the laws of that state, except to the extent
that the laws of that state are preempted by any applicable federal statute.
Section 18.6: Agreement Binding on Successors. This Agreement shall be
------------ -------------------------------
binding upon the successors and assigns of the Company and upon any successor of
the Trustees whether by consolidation, merger, transfer of trust business,
resignation, or otherwise, and such successor Transferee shall have all the
authority and powers conferred hereby upon the Trustees.
Section 18.7: Masculine Gender Includes Feminine and Neuter, and Singular
------------ -----------------------------------------------------------
Number the Plural. The use of the masculine pronoun and the singular number
- -----------------
shall include the feminine and neuter genders and the plural number, and
conversely, whenever appropriate.
Section 18.8: Headings, etc. No Part of Agreement. Headings of Articles
------------ -----------------------------------
and sections of this instrument are inserted for convenience and reference.
They constitute no part of the Agreement.
Section 18.9: Merger of Plans. In the event that this Plan and the Trust
------------ ---------------
merges or consolidates with, or transfers its assets
33
<PAGE>
or liabilities to, any other qualified Plan of deferred Compensation, no
Participant herein shall, solely on account of such merger, consolidation or
transfer, be entitled to a benefit on the day following such event which is less
than the benefit to which he was entitled on the day preceding such event. For
the purpose of this section, the benefit to which a Participant is entitled
shall be calculated based upon the assumption that a Plan termination and
distribution of assets occurred on the date as of which the amount of the
Participant"s entitlement is being determined.
Section 18.10: Claims Procedures. Pursuant to procedures established by the
------------- -----------------
Trustees, adequate notice in writing shall be provided to any Participant or
beneficiary whose claim for benefits under the Plan has been denied. Such
notice shall set forth the specific reason for such denial, written in a manner
calculated to be understood by the claimant, and provided review is requested
within 60 days after receipt by the claimant of a written notification of denial
of his claim, shall afford a reasonable opportunity to any claimant whose claim
for benefits has been denied to a full and fair review of decision denying the
claim.
Section 18.11: Funding Policy and Method. The Committee shall establish and
------------- -------------------------
communicate to the Trustees at reasonable times a funding policy and method with
respect to this Plan in order to carry out the purposes hereof.
Section 18.12: Commencement of Benefits. Anything contained herein to the
------------- ------------------------
contrary notwithstanding, the payment of benefits hereunder to any Participant
will begin not later than the sixtieth (60th) day after the latest of the close
of the Plan Year in which:
(a) The date on which the Participant attains the earlier of age 65
or the normal retirement age specified herein;
(b) Occurs the tenth anniversary of the Year in which the
Participant commenced participation in the Plan; or
(c) The Participant terminates service with the Company.
Section 18.13: Forfeiture Upon Failure to Locate. The Committee shall
------------- ---------------------------------
declare a forfeiture of any Account of any Participant or beneficiary under the
Plan who cannot be found within one year after the Account would have otherwise
been payable under the Plan. Neither the Company, the Committee or the Trustee
shall be obligated to search for the whereabouts of any person. Any amounts
forfeited shall be used to reduce Company contributions. In the event such
participant or Beneficiary is thereafter located, such previously forfeited
Account shall be restored.
34
<PAGE>
Section 18.14: Direct Transfer of Benefits.
------------- ---------------------------
(a) This paragraph applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee"s election under this paragraph, a Distributee may
elect, at the time and in the manner prescribed by the Administrator, to have
any portion of an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct Rollover.
(b) The following definitions apply to paragraph (a):
(i) An Eligible Rollover Distribution is any distribution of all or
any portion of the balance to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include: any distribution that is
one of a series of substantially equal periodic payments (not less
frequently than annually), made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee"s designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and the
portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized appreciation
with respect to employer securities).
(ii) An Eligible Retirement Plan is an individual retirement account
described in Section 408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in Section
401(a) of the Code, that accepts the Distributee"s Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution to
the surviving spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
(iii) A Distributee includes an Employee or former Employee. In
addition, the Employee"s or former Employee"s surviving spouse and the
employee"s or former employee"s spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are Distributees with regard to the interest of
the spouse or former spouse.
(iv) A Direct Rollover is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
35
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument
this _____ day of ______________, 199___.
CERTIFIED GROCERS OF CALIFORNIA, LTD.
By /s/ Everett A. Dingwell
------------------------------------
President
And /s/ D.A. Woodward
-----------------------------------
Secretary
APPROVED:
FARMER & RIDLEY
By /s/ Rene Maguire
-------------------------
Attorneys for Company
36
<PAGE>
EXHIBIT 10.10.1
AGREEMENT REGARDING TERMINATION AND DISSOLUTION OF JOINT VENTURE
This Agreement Regarding Termination and Dissolution of Joint Venture (the
"Agreement") is effective as of August 15, 1997 (the "Effective Date") and is
entered into by and among GOLDEN ALLIANCE DISTRIBUTION, a California general
partnership (the "Joint Venture"), CERTIFIED GROCERS OF CALIFORNIA, LTD., a
California corporation ("Certified"), RALPHS GROCERY COMPANY, a Delaware
corporation ("Ralphs"), GROCERS GENERAL MERCHANDISE COMPANY, a California
corporation ("GGMC") and FOOD 4 LESS GM, INC., a California corporation
("F4LGM"), who agree as follows:
1. Recitals. This Agreement is made with reference to the following facts and
--------
circumstances:
(a) GGMC and F4LGM are parties to that certain Joint Venture Agreement
(the "Joint Venture Agreement") effective as of April 8, 1992
whereunder, among other things, they formed the Joint Venture.
(b) GGMC and F4LGM, together, constitute all of the partners of the Joint
Venture. Certified directly owns all of the outstanding shares of
stock of GGMC and Ralphs indirectly owns all of the outstanding stock
of F4LGM.
(c) GGMC and F4LGM desire that the Joint Venture be terminated and
dissolved and that its business be liquidated and wound up as provided
in this Agreement, and Certified and Ralphs are agreeable to such
termination, dissolution and winding up.
2. Termination and Dissolution. GGMC and F4LGM agree that the Joint Venture
---------------------------
is hereby terminated and dissolved pursuant to Section 12.1(i) of the Joint
Venture Agreement effective on and as of the Effective Date, and agree that the
Joint Venture shall be wound up and liquidated. Notwithstanding anything in the
Joint Venture Agreement to the contrary, such winding up and liquidation shall
be as provided in this Agreement, and in the event of any conflict between the
terms and provisions of the Joint Venture Agreement and this Agreement, the
terms and provisions of this Agreement shall in all cases govern and be
controlling.
3. Appointment of Liquidating Partner. GGMC shall be the liquidating partner
----------------------------------
(the "Liquidating Partner") and shall have
<PAGE>
the exclusive authority, right and responsibility to wind up the business of the
Joint Venture. From and after the Effective Date, F4LGM shall have no power or
authority whatever to act on behalf of or bind the Joint Venture or to
participate in its management or control for purposes of winding up its business
or otherwise.
4. Winding Up and Liquidation. The Liquidating Partner shall have the
--------------------------
following powers and duties in the winding up and liquidation of the business of
the Joint Venture:
4.1 Powers of Liquidating Partner. The Liquidating Partner shall have
-----------------------------
full power and authority to:
4.1.1 Disposal of Assets. Sell, transfer, hypothecate, pledge, or
------------------
otherwise encumber or dispose of all the assets of the Joint
Venture, in whole or piecemeal, for cash or a cash equivalent at
a price and on terms which the Liquidating Partner shall in its
sole discretion determine to be necessary or appropriate to
accomplish an orderly and timely liquidation of the Joint
Venture.
4.1.2 Representation of Joint Venture. Represent and act on behalf of
-------------------------------
the Joint Venture in all matters affecting it during the winding
up period.
4.1.3 Filings, Recordings, Etc. Prepare, execute, file, record and
------------------------
publish on behalf of the Joint Venture any agreements, documents
or instruments connected with the dissolution and winding up of
the business and affairs of the Joint Venture.
4.1.4 Payment of Debts. Pay or otherwise settle or discharge all of
----------------
the debts, liabilities and other obligations of the Joint
Venture.
4.1.5 Other Actions. Take all other action necessary, appropriate or
-------------
incidental to the foregoing powers or to the performance of the
duties of the Liquidating Partner under this Agreement.
4.2 Duties of Liquidating Partner. The Liquidating Partner shall have the
-----------------------------
duty to:
4.2.1 Time. Devote such time as the Liquidating Partner deems
----
necessary to liquidate the Joint Venture in the manner provided
herein.
-2-
<PAGE>
4.2.2 Consultation. Consult with F4LGM at any reasonable time upon
------------
request by F4LGM respecting the actions taken toward the
liquidation and winding up of the business of the Joint Venture.
4.2.3 Notices. Notify each of the known creditors of the Joint
-------
Venture of the dissolution of the Joint Venture and the lack of
authority of F4LGM.
4.2.4 Filings, Recordings, Etc. Prepare, file, publish and record in
------------------------
a timely manner all appropriate agreements, documents and
instruments, including federal and state tax returns, to reflect
the dissolution and termination of the Joint Venture and the
cessation of the use of its name; obtain any necessary or
desirable permits or other authorizations; to the extent
required by law, cancel any existing authorizations, licenses or
permits; and, resolve or dispose of other matters related to the
dissolution in a manner required by law or consistent with the
purposes of this Agreement.
5. Completion of Liquidation. The Liquidating Partner shall use its
-------------------------
reasonable best efforts to promptly complete the liquidation and winding up of
the business of the Joint Venture.
6. Contributions. If the assets of the Joint Venture are insufficient to
-------------
satisfy its liabilities and obligations (including, without limitation, all
known and unknown claims against the Joint Venture), GGMC shall be responsible
for such insufficiency; provided, that the foregoing shall not be deemed nor
--------
construed as in any way limiting or eliminating any right or remedy available to
GGMC, or any liability or obligation of F4LGM, for the breach by F4LGM of its
representations and warranties set forth in Section 9 of this Agreement.
7. Expenses; Distributions. Responsibility for the expenses incurred by the
-----------------------
Liquidating Partner in liquidating and winding up the business of the Joint
Venture, and rights to distribution of the proceeds thereof shall be as follows:
7.1 Expenses. All expenses incurred by the Liquidating Partner in
--------
liquidating and winding up the business of the Joint Venture,
including expenses of legal, accounting and other advisors, and
filing, recording and publication fees, shall be paid by GGMC.
-3-
<PAGE>
7.2 Distributions. Proceeds from the disposition of the assets of the
-------------
Joint Venture shall be applied first to the satisfaction of it debts
and liabilities. Proceeds and assets, if any, remaining after such
application shall exclusively belong and be distributed to GGMC and
neither F4LGM nor Ralphs shall have any right or interest therein.
8. Termination Payment. F4LGM and Ralphs, jointly and severally, agree to pay
-------------------
to GGMC the sum of Four Million Five Hundred Thousand Dollars ($4,500,000) (the
"Termination Payment") subject to and in accordance with the following:
8.1 Allocation. The Termination Payment is comprised of (a) a payment of
----------
One Million Two Hundred Thousand Dollars ($1,200,000) in full and
final payment of F4LGM's share of all outstanding operating costs
payable by it under the Joint Venture Agreement as of the Effective
Date, excluding outstanding purchases of merchandise from the Joint
Venture by Ralphs or any of it Affiliates (as hereinafter defined) and
(b) a payment of Three Million Three Hundred Thousand Dollars
($3,300,000) in consideration of the termination and dissolution of
the Joint Venture.
8.1.1 Affiliate. The term "Affiliate" means, with respect to a
---------
specified person or entity, any other person or entity that
controls, is controlled by, or is under common control with,
such specified person or entity, and with respect to Ralphs
includes, without limitation, Cala Co. and Bay Area Warehouse
Stores, Inc.
8.2 Method of Payment. The Termination Payment shall be payable in no
-----------------
more than five (5) installments. The first such installment shall be
payable on the Effective Date of this Agreement and shall be equal in
amount to the aggregate Redemption Price (as hereinafter defined) paid
in cash or applied in accordance with Section 8.4 by Certified on
December 5, 1996 with respect to the Specified Excess Class B Shares
(as hereinafter defined) redeemed by Certified on such date, which
aggregate Redemption Price is hereby agreed to be Six Hundred Fifty-
Seven Thousand Nine Hundred Eighty-Eight Dollars and Ninety-Two Cents
($657,988.92). Subject to Section 8.6, the remaining installments
shall be payable on each of the next four (4) succeeding Redemption
Dates (as hereinafter defined) until the Termination Payment has been
paid in full. Each remaining installment shall be equal to and
payable from the applicable aggregate Redemption Price
-4-
<PAGE>
paid in cash or applied in accordance with Section 8.4 on the
applicable Redemption Date with respect to the Specified Excess Class
B Shares redeemed on such applicable Redemption Date. In addition to
the foregoing, on the Effective Date of this Agreement, the following
amounts shall be paid and applied by Certified in reduction of the
Termination Payment: (a) Two Hundred Forty-Eight Thousand Eight
Hundred Eighty-Seven Dollars ($248,887.00), which amount is hereby
agreed to be the aggregate amount of all principal and accrued
interest to be applied in accordance with Section 8.4 with respect to
the Certificates (as hereinafter defined) owned by Ralphs and its
Affiliates, and (b) the amount of Nine Thousand Nine Hundred One
Dollars and Thirty-Two Cents ($9,901.32), which amount is hereby
agreed to be the final amount payable by Certified pursuant to (and
with respect to certain "Specified Excess Class B Shares" as defined
in) that certain Agreement Regarding Share Redemption Proceeds, dated
April 10, 1992, between GGMC, Alpha Beta Company, F4LGM and the Joint
Venture.
8.2.1 Certificates. The term "Certificates" means the Subordinated
------------
Patronage Dividend Certificates Due December 15, 2000, December
15, 2001 and December 15, 2002 heretofore issued by Certified to
certain of its patrons.
8.2.2 Redemption Date. The term "Redemption Date" means the date in
---------------
each year on which Certified pays the Redemption Price.
8.2.3 Redemption Price. Subject to Section 8.3, the term "Redemption
----------------
Price" means the price per share payable by Certified on an
applicable Redemption Date with respect to the Specified
Excess Class B Shares redeemed on such applicable Redemption
Date, as computed in accordance with Article SIXTH, Section
(c)(2) of the Articles of Incorporation of Certified.
Certified hereby agrees that the full Redemption Price
payable on each Redemption Date shall be payable in cash or
applied in accordance with Section 8.4.
8.2.4 Specified Excess Class B Shares. The term "Specified Excess
-------------------------------
Class B Shares" means the Class B Shares of Certified listed on
Exhibit "A" attached hereto, together with any Class B Shares of
Certified hereafter tendered for redemption by Cala Co. or Bay
Area Warehouse Stores, Inc.
-5-
<PAGE>
8.3 Minimum Redemption Price. For the purpose of computing the applicable
------------------------
aggregate Redemption Price payable on each applicable Redemption Date
(other than the first Redemption Date) under Section 8.2, the
applicable aggregate Redemption Price with respect to all Specified
Excess Class B Shares shall be deemed to be the greater of (a) the
aggregate Redemption Price on such applicable Redemption Date and (b)
One Hundred Sixty-Seven Dollars and Ninety-Four Cents (167.94) times
the number of Specified Excess Class B Shares redeemed on such
Redemption Date (the "Minimum Redemption Price"). Certified hereby
agrees that the aggregate Redemption Price paid on each Redemption
Date shall be made without set off or other deduction by Certified on
account of indebtedness or any other obligation owing by Ralphs or any
of its Affiliates to Certified or any of its Affiliates; provided,
--------
that the foregoing shall not otherwise limit or in any way affect the
rights of Certified and its Affiliates with respect to the separate
enforcement or collection of any such indebtedness or obligations.
8.4 Assigned Redemption Price; Set Off of Certificates.
--------------------------------------------------
8.4.1 Assignment of Redemption Price. Ralphs hereby consents to the
------------------------------
payment of the aggregate Redemption Price for the Specified
Excess Class B Shares to GGMC for application to the
installments of the Termination Payment under Section 8.2; and
Ralphs hereby absolutely and irrevocably assigns all of its
right, title and interest in and to such aggregate Redemption
Price, up to a maximum amount of Four Million Five Hundred
Thousand Dollars ($4,500,000) (such assigned Redemption Price,
the "Assigned Redemption Price"), to GGMC and irrevocably
directs Certified to pay the Assigned Redemption Price to GGMC.
Certified hereby acknowledges and consents to the assignment by
Ralphs to GGMC of the Assigned Redemption Price, and further
agrees that, to the extent the actual Redemption Price paid for
the Specified Excess Class B Shares is in excess of the Assigned
Redemption Price, such excess shall be paid to Ralphs in
accordance with the terms of Section 8.3; however, it is
understood and agreed that Certified makes no representation or
warranty of any kind or nature whatsoever that the actual
Redemption Price paid for the Specified Excess Class B Shares
will exceed the Assigned Redemption Price.
-6-
<PAGE>
8.4.2 Set Off of Certificates. Ralphs acknowledges that the
-----------------------
application to the Termination Payment of the principal and
accrued interest on the Certificates (as provided in Section
8.2) will be accomplished by means of the exercise by Certified
of its set off rights with respect to the Certificates. Ralphs
hereby irrevocably consents and agrees to the exercise of such
set off rights by Certified, and agrees that it will deliver, or
cause to be delivered, to Certified on the Effective Date the
Certificates identified on Exhibit "B" attached hereto.
8.5 Insufficient Shares. If following the redemption of Specified Excess
-------------------
Class B Shares on any applicable Redemption Date there are no
Specified Excess Class B Shares which remain for redemption but there
remains an unpaid balance of the Termination Payment, F4LGM and
Ralphs, jointly and severally, shall be obligated to pay to GGMC, on
such applicable Redemption Date or December 31, 2000, whichever is
later, an amount in cash equal to the balance of the Termination
Payment remaining unpaid; provided, that if for any reason the
--------
Redemption Price per share paid for any Specified Excess Class B
Shares which are redeemed (including, without limitation, Specified
Excess Class B Shares redeemed pursuant to Section 8.7) is less than
the Minimum Redemption Price per share (such shares, the "Underpaid
Shares"), then the amount of the Termination Payment and the amount
required to be paid by F4LGM and Ralphs pursuant to this Section 8.5
shall be reduced by the difference between the Minimum Redemption
Price and the Redemption Price paid for all Underpaid Shares.
8.6 Inability to Redeem Shares. If on any Redemption Date, Certified is
--------------------------
unable to redeem any Specified Excess Class B Shares due to any one or
more of the restrictions on redemption set forth in Article I, Section
12, Paragraph 1 of its Bylaws, the installment of the Termination
Payment remaining unpaid on such Redemption Date shall be postponed
until the Redemption Date on which Certified is again able to redeem
the Specified Excess Class B Shares free of such restrictions.
8.7 Redemption of Balance of Shares. If the Termination Payment has not
-------------------------------
been paid in full by the Redemption Date on which the fifth
installment thereof is payable, Certified agrees that (subject to
Section 8.6) it will redeem the lesser of (a) all of the remaining
Specified Excess Class B Shares outstanding on such Redemption Date or
(b) that number of such outstanding Specified
-7-
<PAGE>
Excess Class B Shares having an aggregate Redemption Price on such
Redemption Date necessary to retire the remaining balance of the
Termination Payment. If the Redemption Date for all or any portion of
the Specified Excess Class B Shares to be redeemed pursuant to this
Section 8.7 is delayed as a result of the provisions of Section 8.6,
then the obligation of Ralphs and F4LGM to make the final installment
of the Termination Payment pursuant to Sections 8.4 and 8.5 shall be
delayed until all such Specified Excess Class B Shares are redeemed by
Certified.
8.8 Reorganization, Etc. If there shall occur any reorganization or
-------------------
reclassification of the capital stock of Certified by which its Class
B Shares are divided or combined into a lesser or greater number of
shares, then the Minimum Redemption Price shall be adjusted
proportionately.
8.9 Withdrawal of Tender. Ralphs agrees that it will not, nor will it
--------------------
permit any Affiliate to, withdraw its tender for redemption of any of
the Specified Excess Class B Shares.
8.10 Rights Unaffected. F4LGM and Ralphs acknowledge and agree that this
-----------------
Agreement shall in no way affect or alter any terms, conditions,
covenants, limitations, obligations or requirements to which
Certified's Class B Shares and/or to which member-patrons of Certified
are subject, including, without limitation, future determinations by
Certified regarding the minimum number of Class B Shares a member-
patron shall hold. GGMC and Certified acknowledge and agree that,
except to the extent specifically provided in this Agreement, Ralphs
and its Affiliates shall be entitled to exercise all of the rights and
privileges to which all other holders of the Class B Shares are
entitled in accordance with Certified's Articles of Incorporation and
Bylaws. The Specified Excess Class B Shares shall not be included in
determining whether Ralphs or any of its Affiliates holds the minimum
number of Class B Shares required to be held pursuant to Article I,
Section 8 of Certified's Bylaws.
8.11 Transfer of Shares Held by Cala. Certified hereby agrees that, if
-------------------------------
Ralphs so elects, any Specified Excess Class B Shares held by Cala Co.
or any direct or indirect subsidiary of Cala Co. may be transferred to
Ralphs or F4LGM at any time and from time to time.
-8-
<PAGE>
9. Representations and Warranties. The parties hereto make the following
------------------------------
representations and warranties, which representations and warranties shall
survive the termination, liquidation and winding up of the Joint Venture:
9.1 Representations and Warranties of the Parties. Each of the parties
----------------------------------------------
hereto represents and warrants to each of the other parties hereto as
follows:
9.1.1 Organization. That it is duly organized, validly existing and
------------
in good standing under the laws of its state of organization,
and it is duly qualified to do business in all states where
necessary in light of the nature of its business or properties.
9.1.2 Authority. That it has all necessary power and authority to
---------
execute, deliver and perform its obligations under this
Agreement, and the execution, delivery and performance by it of
this Agreement have been duly authorized by all necessary
action.
9.1.3 Enforceability. That this Agreement has been duly and validly
--------------
executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance
with its terms, except as the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization or
moratorium or other similar laws relating to the rights of
creditors generally.
9.1.4 No Conflicts. That the execution, delivery and performance by
------------
it of this Agreement does not and will not (a) conflict with or
violate any provision of its Articles of Incorporation, Bylaws
or other organizational documents, (b) conflict with or violate
any provision of, or constitute a material default under, any
material agreement or instrument to which it is a party or by
which it or its assets are bound, or (c) contravene, or
constitute a material default under, any law, rule or regulation
applicable to it.
9.1.5 Accuracy. That its representations and warranties contained in
--------
this Agreement do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading or
incomplete.
-9-
<PAGE>
9.2 Representations and Warranties of GGMC and F4LGM. GGMC and F4LGM each
------------------------------------------------
represent and warrant to the other that:
9.2.1 Liabilities. It has not incurred any obligation or liability on
-----------
behalf of or as apparent agent of the Joint Venture or of the
other, or for which it or the other may be charged, or for which
it intends to claim refund or reimbursement from the Joint
Venture.
9.2.2 Property. It has not received, discharged or transferred any
--------
credit, moneys, property or other assets of the Joint Venture.
9.3 Survival of Certain Representation and Warranties. The parties hereby
-------------------------------------------------
acknowledge that, notwithstanding the termination of the Joint Venture
Agreement, the representation and warranties contained in Article XIII
of the Joint Venture Agreement shall survive to the extent provided in
Section 13.5 of the Joint Venture Agreement. GGMC hereby confirms
that the representations and warranties set forth in Section 2.1 of
that certain Environmental Agreement (the "Environmental Agreement")
by and among Certified, GGMC, F4LGM and the Joint Venture, effective
as of February 28, 1992, continue to be true and correct.
9.4 No Breach or Default. The parties hereby confirm that they are not
--------------------
aware of any breach or default under the Environmental Agreement or
any of the agreements to be terminated pursuant to the provisions of
Section 10 of this Agreement.
10. Termination of Certain Agreements. The parties hereby agree that,
---------------------------------
effective as of the Effective Date, the following agreements are terminated and
the respective parties to such agreements are released from all liabilities and
obligations under such agreements, except (i) as provided in this Agreement and
(ii) for such as have accrued prior to the Effective Date and such which by the
express terms of such agreements survive their termination and/or the
termination of the Joint Venture: (a) those certain agreements entitled
"Consignment Agreement," "GGMC Supply Agreement," and "Transportation
Agreement", each by and between GGMC and the Joint Venture and effective as of
April 10, 1992; (b) that certain agreement entitled "F4LGM Supply Agreement" by
and between F4LGM and the Joint Venture and effective as of April 10, 1992; (c)
those certain agreements entitled "Premises Sublease," "Equipment Sublease I,"
"Equipment Sublease II," and "Equipment Sublease III", each by and between
Certified and the Joint Venture and effective as of April 10, 1992; (d) that
certain agreement entitled "Agreement Regarding
-10-
<PAGE>
Assignment of Leases" by and between Certified and F4LGM and effective as of
April 10, 1992; (e) that certain agreement entitled "Agreement Regarding Share
Redemption Proceeds" by and between GGMC, Alpha Beta Company (predecessor in
interest to Ralphs), F4LGM, and the Joint Venture and effective as of April 10,
1992; and (f) the Joint Venture Agreement.
11. Survival of Certain Provisions. The parties agree that, notwithstanding
------------------------------
anything to the contrary in this Agreement, the provisions of paragraph 18 of
the Premises Sublease and the provisions of Paragraph 15 of Equipment Lease I,
Equipment Lease II and Equipment Lease III shall survive the termination of the
Premises Sublease, Equipment Sublease I, Equipment Sublease II and Equipment
Sublease III.
12. Release and Indemnification.
---------------------------
12.1 Release. Certified, GGMC and the Joint Venture (collectively, the
-------
"Releasors") hereby release Ralphs, F4LGM and each of their Affiliates
and each of their respective officers, directors, agents,
representatives, successors and assigns (collectively, the
"Releasees") from any all liabilities, obligations, losses, damages,
and claims of any kind or nature whatsoever which Releasors may have
against Releasees in any way relating to the business of the Joint
Venture and/or any agreements in any way related to the Joint Venture;
provided, that the foregoing release does not extend to, and Releasors
--------
do not release Releasees from, any liabilities or obligations of
Releasees under this Agreement or any liabilities, obligations,
losses, damages or claims of any kind or nature in any way relating to
any breach or default by Releasees under this Agreement, including,
without limitation, any breach by F4LGM of any of its representations
and warranties set forth in Section 9 of this Agreement.
12.2 Indemnification. GGMC and Certified agree to indemnify, defend and
---------------
hold Ralphs, F4LGM, each of their respective Affiliates and each of
their respective officers, directors, agents, representatives,
successors and assigns (collectively, the "Indemnified Parties")
harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against any Indemnified Party in any way
relating to the business of the Joint Venture and/or any of the
agreements in any way related to the Joint Venture; provided, that the
--------
foregoing indemnification does not extend to, and
-11-
<PAGE>
GGMC and Certified do not indemnify the Indemnified Parties with
respect to, any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or
asserted against any Indemnified Party as a result of its breach or
default under this Agreement or in any way relating to any breach or
default by any Indemnified Party under this Agreement, including,
without limitation, any breach by F4LGM of any of its representations
and warranties set forth in Section 9 of this Agreement.
13. Other Agreements. The parties hereto agree to the following additional
----------------
matters:
13.1 Waiver of Partition. The parties hereto waive any rights they might
-------------------
have at law or in equity to obtain an accounting or a court-supervised
winding up, to maintain an action in partition of property, or to
otherwise interfere in any way with the process of winding up and
termination contemplated by this Agreement.
13.2 Amendments and Waivers. No term or provision of this Agreement may be
----------------------
amended or waived orally or by a course of conduct, but only by and
instrument in writing signed by a duly authorized officer or
representative of the party against which enforcement of such
amendment or waiver is sought. Any amendment or waiver shall be for
such period and subject to such conditions as shall be specified in
the written instrument effecting the same. Any waiver shall be
effective only in the specific instance and for the purpose for which
given.
13.3 Entire Agreement. This Agreement and the exhibits attached hereto
----------------
constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede all prior or contemporaneous
agreements (whether written or oral) with respect to the subject
matter hereof.
13.4 Severability. Any provision of this Agreement that is held by a court
------------
of competent jurisdiction to be invalid, illegal or unenforceable
shall be ineffective to the extent of such invalidity, illegality or
unenforceability without invalidating, diminishing or rendering
unenforceable the rights and obligations of the parties under the
remaining provisions of this Agreement.
-12-
<PAGE>
13.5 Interpretation. The cover page, table of contents and the titles to
--------------
the Sections and Subsections of this Agreement are for convenience of
reference only and are not a part of this Agreement and shall have no
effect upon the construction or interpretation of any part of this
Agreement. All exhibits attached to this Agreement are, however, a
part of this Agreement. Whenever appropriate from the context, the
use of any gender shall include any other or all genders, and the
singular shall include the plural and the plural shall include the
singular. This Agreement was freely and voluntarily negotiated
between the parties and none of the parties shall have any term or
provision construed against it solely by reason of its having drafted
the same. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California, without
regard to any otherwise governing principles of conflicts of law.
13.6 Notices. Except as otherwise expressly provided in this Agreement,
-------
all notices and other communications which any party is required or
desires to give to any other party shall be in writing addressed to
the recipient party's Notice Address set forth after its signature to
this Agreement and shall be deemed to have been duly given (a) if
delivered personally (including by commercial courier or delivery
service) to the party's Notice Address, then as of the date delivered
(or if delivery is refused, upon presentation), (b) if mailed by
certified mail to the party's Notice Address, postage prepaid and
return receipt requested, then at the time received at the party's
Notice Address as evidenced by the return receipt, or (c) if mailed by
first class mail to the party's Notice Address, postage prepaid, then
at the time received at the party's Notice Address. A party may only
change its Notice Address by a notice given in the foregoing form and
manner.
13.7 Assignment; Successors. Neither this Agreement nor the rights and
----------------------
duties of a party hereunder may be assigned or transferred by a party
without the prior written consent of every other party hereto. Except
as expressly provided for in this Agreement, neither the Specified
Class B Shares nor any interest therein may be assigned or
transferred, except as such assignment or transfer may be consented to
by Certified in accordance with Article I, Section 9 of its Bylaws.
Subject to the foregoing, this Agreement shall inure to the benefit of
and be binding on the parties and their respective successors and
assigns.
-13-
<PAGE>
13.8 Further Actions. Each party hereto shall execute and deliver such
---------------
other certificates, agreements and documents, and shall take such
other actions, as may reasonably be necessary in connection with the
liquidation, winding up and termination of the Joint Venture and the
carrying out of the provisions of this Agreement.
13.9 Costs and Expenses. Each party to this Agreement shall bear its
------------------
respective costs and expenses of whatever kind incurred by it in
connection with the preparation, negotiation, execution and delivery
of this Agreement.
13.10 Counterpart Execution. This Agreement may be executed
---------------------
in several counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective duly authorized officers or representatives as
of August 15, 1997.
CERTIFIED GROCERS OF CALIFORNIA, RALPHS GROCERY COMPANY,
LTD., A CALIFORNIA CORPORATION A DELAWARE CORPORATION
By_________________________ By___________________________
___________________________ _____________________________
(Print Name) (Print Name)
___________________________ _____________________________
(Print Title) (Print Title)
NOTICE ADDRESS: NOTICE ADDRESS:
2601 South Eastern Avenue 1100 West Artesia Boulevard
Los Angeles, California 90040 Compton, California 90220
Attn.: Corporate Secretary Attn.: John Standley, CFO
GROCERS GENERAL MERCHANDISE FOOD 4 LESS GM, INC., A
COMPANY, A CALIFORNIA CORPORATION CALIFORNIA CORPORATION
By_________________________ By___________________________
-14-
<PAGE>
___________________________ _____________________________
(Print Name) (Print Name)
___________________________ _____________________________
(Print Title) (Print Title)
NOTICE ADDRESS: NOTICE ADDRESS:
2601 South Eastern Avenue 1100 West Artesia Boulevard
Los Angeles, California 90040 Compton, California 90220
Attn.: Corporate Secretary Attn.: John Standley, CFO
GOLDEN ALLIANCE DISTRIBUTION,
A CALIFORNIA GENERAL PARTNERSHIP
By: Food 4 Less GM, Inc.,
a California corporation
Its Partner
By____________________________
______________________________
(Print Name)
______________________________
(Print Title)
By: Grocers General Merchandise
Company, a California corporation
Its Partner
By____________________________
______________________________
(Print Name)
______________________________
(Print Title)
NOTICE ADDRESS:
2601 South Eastern Avenue
Los Angeles, California 90040
Attn.: Corporate Secretary
-15-
<PAGE>
With copy to:
1100 West Artesia Boulevard
Compton, California 90220
Attn.: John Standley, CFO
-16-
<PAGE>
ACKNOWLEDGMENT AND AGREEMENT OF
CALA CO. AND
BAY AREA WAREHOUSE STORES, INC.
Cala Co. and Bay Area Warehouse Stores, Inc. each hereby acknowledges the
terms and provisions of the foregoing Agreement and the obligations of Ralphs
and F4LGM thereunder, and each hereby absolutely and irrevocably consents and
agrees to the payment and application of the Redemption Price of any Specified
Excess Class B Shares now or hereafter owned by it and the set off by Certified
of all Certificates owned by it in accordance with the terms and provisions of
the Agreement, including, without limitation, Section 8.4 of the Agreement; and
each hereby agrees that if any Class B Shares owned by it are tendered for
redemption and thus become Specified Excess Class B Shares as defined in Section
8.2.4 of the Agreement, it will not (and it hereby absolutely and irrevocably
waives its right to) withdraw its tender for redemption of any of such Specified
Excess Class B Shares now or hereafter owned by it; and each hereby agrees to
deliver to Certified on the Effective Date of the foregoing Agreement the
Certificates owned by it and identified on Exhibit "B" to the Agreement.
IN WITNESS WHEREOF, Cala Co. and Bay Area Warehouse Stores, Inc. have
caused this Acknowledgment and Agreement to be duly executed by their respective
duly authorized officers or representatives as of the Effective Date.
CALA CO., BAY AREA WAREHOUSE STORES, INC.,
A CALIFORNIA CORPORATION A CALIFORNIA CORPORATION
By__________________________ By___________________________
____________________________ _____________________________
(Print Name) (Print Name)
____________________________ _____________________________
(Print Title) (Print Title)
-17-
<PAGE>
EXHIBIT "A"
SPECIFIED EXCESS CLASS B SHARES
SHARES REDEEMED 12/5/96:
- ------------------------
<TABLE>
<CAPTION>
Certificate Number Number of Shares Number Redeemed
------------------ ---------------- ---------------
<S> <C> <C> <C>
13439 2,766 453(a)
13447 5,964 2,714(b)
15097 748 748
11029 2 2
11130 1 1
Total: -----
3,918
</TABLE>
REMAINING SHARES:
- ----------------
<TABLE>
<CAPTION>
Certificate Number Number of Shares
------------------ ----------------
<S> <C> <C>
10122 172
10123 26
15611 2,313
13440 3,919
13441 2,914
13442 4,321
15643 3,250
11031 1
11032 15
------
Total: 16,931
</TABLE>
(a) Certificate No. 15611 issued for balance of unredeemed shares.
(b) Certificate No. 15643 issued for balance of unredeemed shares
-18-
<PAGE>
EXHIBIT "B"
LIST OF CERTIFICATES BEING SET OFF
<TABLE>
<CAPTION>
Certificate No. Maturity Owner
- ------------------ -------- ------------------
<S> <C> <C> <C>
17 12/15/00 Alpha Beta Company
49 12/15/00 Cala Co.
41 12/15/01 Cala Co.
43 12/15/02 Cala Co.
106 12/15/00 Bay Area Warehouse
84 12/15/01 Bay Area Warehouse
93 12/15/02 Bay Area Warehouse
</TABLE>
-19-
<PAGE>
EXHIBIT 10.14.1
FORBEARANCE AND DEBT RESTRUCTURE AGREEMENT
------------------------------------------
THIS FORBEARANCE AND DEBT RESTRUCTURE AGREEMENT (this "Agreement"),
dated as of May 15, 1997, is entered into by and among SAV MAX FOODS, INC., a
California corporation ("Sav Max"), MICHAEL A. WEBB, an individual ("Webb"),
CERTIFIED GROCERS OF CALIFORNIA, LTD., a California corporation ("Certified"),
and GROCERS CAPITAL COMPANY, a California corporation ("GCC"), with reference to
the following facts:
RECITALS
--------
A. Sav Max is the operator of eight warehouse-style grocery stores in the
State of California.
B. Webb is the majority shareholder of Sav Max and its President and Chief
Executive Officer.
C. Certified supplies food products to Sav Max and is owed money with
respect to inventory sold to Sav Max.
D. GCC, a wholly-owned subsidiary of Certified, holds certain Common
Stock, Series A and Preferred Stock, Series B ("Preferred B Shares") of Sav Max
and has provided Sav Max with certain secured term loan financing.
E. Wells Fargo Bank, National Association ("Wells Fargo") provides to Sav
Max a line of credit and a term loan pursuant to the terms of the certain Credit
Agreement, dated as of February 5, 1996, by and between Sav Max and Wells Fargo
(as amended through the date hereof, the "Wells Fargo Credit Agreement").
F. Sav Max (i) is currently delinquent on certain of its inventory
payables to Certified, (ii) has failed to make payment to GCC of certain
quarterly dividends and mandatory redemptions respecting the Preferred B Shares,
and (iii) was unable to
-1-
<PAGE>
repay or extend its loan obligations to Wells Fargo on their maturity date of
March 15, 1997 under the Wells Fargo Credit Agreement without the promise of
credit support from Certified.
G. Sav Max has requested that (i) Certified continue to provide food
products to Sav Max notwithstanding Sav Max's delinquent trade payables to
Certified; (ii) GCC waive certain default rights and remedies in consequence of
Sav Max's failure to make dividend and mandatory redemption payments to GCC in
connection with the Preferred B Shares; (iii) Certified convert that portion of
Sav Max's trade payables which have been outstanding for longer than 18 days
from date of statement into a promissory note maturing in 4-1/2 years; and (iv)
Certified agree to purchase Sav Max's loans from Wells Fargo upon either Sav
Max's default with respect to such loans or upon Sav Max's failure to pay such
loans on their maturity date.
H. Certified and GCC are willing to provide Sav Max with the foregoing
requested credit accommodations and other agreements set forth herein on the
terms and conditions set forth below.
NOW, THEREFORE in consideration of the above premises, and for other good
and valuable consideration, the parties hereby agree as follows:
1. Conversion of Inventory Payables to Promissory Note. Certified hereby
---------------------------------------------------
agrees to convert at the Closing that portion of Sav Max's inventory payable
obligations that have been outstanding for longer than eighteen (18) days after
the date of Certified's statement (one of which is issued every Friday) to Sav
Max into a promissory note obligation. Such promissory note payable shall be
evidenced by and payable in accordance with the terms of that certain Secured
Inventory Payable Promissory Note to the order of Certified (the "Certified
Inventory Note"), in the form attached to this Agreement as Exhibit "A". The
Certified Inventory Note and all other indebtedness owed by Sav Max to Certified
or GCC shall be secured by the collateral described in the Security Agreement in
the form attached to this Agreement as Exhibit B. The Certified Inventory Note
shall also be secured by a pledge of the stock in Sav Max owned by Webb pursuant
to a Stock Pledge Agreement attached hereto as Exhibit C.
2. Waiver of Dividend and Redemption Defaults Respecting the
----------------------------------------------------------
-2-
<PAGE>
Preferred B Shares. Under subparagraph (b) of Paragraph (4) of Article THREE of
- ------------------
Sav Max's Restated Articles of Incorporation (the "Articles"), Three Thousand
Two Hundred Fifty (3,250) Preferred B Shares were scheduled for mandatory
redemption on June 30, 1995 (the "1995 Shares") and Three Thousand Two Hundred
Fifty (3,250) shares of Preferred B Shares were scheduled for mandatory
redemption on June 30, 1996 (the "1996 Shares") at a redemption price of One
Hundred Dollars ($100.00) per share. As of the date hereof, the 1995 Shares and
the 1996 Shares have not been redeemed as required under the Articles. The 1995
Shares, the 1996 Shares and shares of Preferred B Shares required to be redeemed
during the period the waiver provided for herein is in effect are referred to
collectively hereinafter as the "Redemption Shares."
In addition, under subparagraph (a) of Paragraph (1) of Article THREE
of the Articles, Preferred B Share dividends are payable quarterly in cash on
the last day of the months of March, June, September and December at a rate of
Eight Dollars and Fifty Cents ($8.50) per share per annum (the "Regular
Dividends"). The Regular Dividends due March 31, 1996, June 30, 1996, September
30, 1996, December 31, 1996 and March 31, 1997 are in arrears.
Subject to the provisions of subparagraph (b) of Paragraph (3) of
Article THREE of the Articles, failure to redeem the Redemption Shares or have
two (2) or more Regular Dividends in arrears for more than thirty (30) days will
permit GCC to elect the smallest number of directors constituting a majority of
the authorized number of directors of Sav Max. In addition, GCC contends that
it has certain other rights in the event of a failure to redeem the Redemption
Shares.
So long as (i) Sav Max may not pay Regular Dividends and/or redeem
Redemption Shares by operation of law or credit agreements with lenders and
amounts remain outstanding with respect to the Certified Inventory Note Payable
or the Wells Fargo Credit Agreement and (ii) there occurs no Event of Default
under either this Forbearance Agreement or the Wells Fargo Credit Agreement,
then GCC effective on the Closing hereby agrees to waive its rights and remedies
under Paragraph (3) of Article THREE with respect to the existing or prospective
failure by Sav Max to redeem the Redemption Shares in accordance with
subparagraph (b) of Paragraph (4) of Article THREE of the Articles and the
existing or prospective failure to pay in full two (2) or more Regular Dividend
payments in accordance with subparagraph (a) of
-3-
<PAGE>
Paragraph (1) of Article THREE of the Articles as well as any other rights which
it may have pursuant to the Articles or otherwise as a result of such failure.
Upon the occurrence of any Event of Default as defined under this Agreement, the
foregoing waiver shall immediately cease to be effective and GCC shall be
entitled to all rights and remedies which it may have under Paragraph (3) of
Article THREE of the Articles or otherwise (including without limitation such
rights which GCC could have exercised with respect to any failure to redeem the
Redemption Shares or make Regular Dividend payments but for the waiver set forth
herein) or at law or in equity or otherwise.
Notwithstanding the waiver by GCC set forth herein, the payments
required to be made by Sav Max to GCC with respect to the redemption of the
Redemption Shares and the Regular Dividends shall continue to accrue during the
period that the waiver provided for herein is in effect. Sav Max shall cause
such dividends and mandatory redemptions to be paid to the full extent permitted
by law.
3. Conditional Obligations to Purchase Wells Fargo Loans. Certified
-----------------------------------------------------
hereby agrees that in consideration of the execution and delivery of Amendment
No. 5 to the Wells Fargo Credit Agreement ("Wells Fargo Amendment") in the form
of Exhibit D hereto, at the Closing Certified will execute and deliver that
certain Loan Purchase Agreement by and between Certified and Wells Fargo (the
"Loan Purchase Agreement"), in the form attached to this Agreement as Exhibit E.
4. Agreements With Respect to Conduct of Business.
----------------------------------------------
4.1 Supply Agreement. At the Closing, Sav Max and Certified will
----------------
execute a new Supply Agreement in the form attached hereto as Exhibit F.
Pursuant to the Supply Agreement, Sav Max shall be obligated to maintain payment
terms for inventory within 18 days of date of statement. Failure to maintain
such payment schedule (except with respect to payables as to which a bona fide
dispute exists in the ordinary course of business with respect to pricing,
delivery or order terms) shall constitute a default under the Certified
Inventory Note Payable.
4.2 Webb Employment Agreement. At the Closing, Sav Max and Webb will
-------------------------
terminate the existing employment agreement between them and execute and deliver
that certain Employment Agreement in the form attached hereto as
-4-
<PAGE>
Exhibit G.
4.3 Consulting Agreement. Sav Max and Drew Webb ("Consultant") will
--------------------
have executed and delivered a Consulting Agreement in the form of Exhibit H
hereto pursuant to which Consultant will be engaged to provide oversight
controls, improved reporting, internal control system refinement and cash
management.
4.4 JDM Vending Agreement. JDM Companies and Sav Max will enter into
---------------------
an amendment to their existing Vending Agreement with respect to use of vending
space in Sav Max in the form attached to this Agreement as Exhibit I.
5. Covenants of Sav Max.
--------------------
5.1 Financial Covenants. So long as the Certified Inventory Note
-------------------
Payable remains outstanding, Sav Max hereby agrees to comply with each of the
following financial covenants in accordance with generally accepted accounting
principles consistently applied and consistent with Sav Max's prior practices,
except to the extent modified by the following definitions:
(a) Current Ratio of not less than the correlative amounts
indicated below as of the end of the fiscal quarters of Sav Max set forth
below, with "Current Ratio" defined as total current assets divided by
total current liabilities, provided that for the purpose of determining Sav
--------
Max's compliance with this covenant, current liabilities shall not include
Sav Max's indebtedness to Certified evidenced by the Certified Inventory
Note Payable or Sav Max's note payable obligations to Wells Fargo under the
Wells Fargo Credit Agreement:
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Fiscal Quarter Minimum Current Ratio
-------------- ---------------------
-------------------------------------------------------------------------
<S> <C>
Second fiscal quarter of 1997 1.00 to 1.00
-------------------------------------------------------------------------
Third fiscal quarter of 1997 1.00 to 1:00
-------------------------------------------------------------------------
Fourth fiscal quarter of 1997 1.00 to 1.00
-------------------------------------------------------------------------
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Fiscal Quarter Minimum Current Ratio
-------------- ---------------------
-------------------------------------------------------------------------
<S> <C>
All quarters ending in 1998 .95 to 1.00
-------------------------------------------------------------------------
All quarters ending in 1999 1.00 to 1.00
-------------------------------------------------------------------------
All quarters in 2000 and thereafter 1.10 to 1
-------------------------------------------------------------------------
</TABLE>
(b) Total indebtedness for borrowed money and Sav Max's
indebtedness to Certified evidenced by the Certified Inventory Note Payable
aggregating not more than $7,000,000 outstanding at any time, exclusive of
Sav Max's existing indebtedness (but not any refinancing thereof) to each
of IBM, G.E. Capital, USL Capital, GCC, and Sav Max's term loan
indebtedness to Wells Fargo.
(c) Cash Flow Coverage Ratio (defined as the aggregate of net
income after taxes plus depreciation, amortization, interest expense, and
operating equipment and store lease expense, divided by the aggregate of
the current portion of long-term debt, interest expense, dividends, stock
redemption, and operating equipment and store lease expense) of not less
than the correlative amounts indicated below as of the end of Sav Max's
fiscal quarters set forth below, measured on a cumulative year-to-date
basis for Sav Max's 1997 fiscal year, and thereafter measured on a rolling
four-quarters basis:
<TABLE>
<CAPTION>
Fiscal Quarter Minimum Cash Flow Coverage Ratio (To 1.00)
-------------- ------------------------------------------
1997 1998 1999 2000 and thereafter
---- ---- ---- -------------------
<S> <C> <C> <C> <C>
First fiscal quarter -- .87 1.04 1.12
Second fiscal quarter .65 .92 1.06 1.13
Third fiscal quarter .78 .96 1.08 1.14
Fourth fiscal quarter .82 1.01 1.10 1.15
</TABLE>
-6-
<PAGE>
(d) Make any additional investment in fixed assets (other than
(i) purchase at lease termination of any equipment presently leased under
existing leases and (ii) office remodel expenses at Sav Max's Modesto store
not to exceed $200,000) in any fiscal year in excess of an aggregate of
$500,000.00; provided that to the extent investments in fixed assets in any
fiscal year do not equal $500,000, 50% of the unutilized authorization may
be carried over to the succeeding fiscal year.
(e) Agreement with respect to the foregoing financial covenants
was reached based, in part, upon a review of Sav Max's operating plan for
the years 1997 through 2000. That plan does not contemplate the
disposition of Sav Max's San Jose store. If Sav Max is successful in
disposing of its San Jose store on a basis agreed to by Certified, the
parties agree that the covenants will be adjusted to accommodate (i) the
continued operation of the Company without the San Jose Store, and (ii) any
one-time charges required to Sav Max's financial statements as a result of
that disposition.
5.2 Related Party Transactions. Sav Max will not, and Webb will
--------------------------
cause Sav Max not to, make any payment or distribution to Webb, any officer,
director or shareholder of Sav Max, any family member of, associate of, or
entity affiliated with any such person except as is expressly permitted by this
Agreement or the agreements referred to herein and except for a continuation of
the presently existing arrangements described on Schedule 5.2 hereto.
5.3 Compliance Reports. Sav Max shall deliver to Certified and GCC
------------------
quarterly, within forty-five (45) days of the end of each quarter, compliance
certificates as of the last day of each quarter signed by the Chief Financial
Officer and Chief Executive Officer of Sav Max (a) setting forth computations
showing, in detail satisfactory to Certified, whether Sav Max is in compliance
with its obligations pursuant to Section 5.1; (b) stating that a review of the
activities of Sav Max during such Fiscal Quarter has been made under the
supervision of the certifying officers with a view to determining whether during
such Fiscal Quarter Sav Max performed and observed all its obligations and
covenants pursuant to this Agreement and the agreements referred to herein, and
either (i) stating that, to the best knowledge of the certifying officers,
during such Fiscal Quarter, Sav Max performed and observed each covenant of this
Agreement and the agreements referred to herein applicable to them,
-7-
<PAGE>
and that no Default or Event of Default has occurred and is continuing or (ii)
if Sav Max has not performed and observed such covenants, or if a Default or
Event of Default exists and is then continuing, specifying all such Defaults and
their nature and status and the actions Sav Max is taking or proposes to take
with respect thereto.
5.4 Governance. So long as amounts remain outstanding on the
----------
Certified Inventory Note Payable or the Company remains in arrears with respect
to dividend or redemption obligations of the Series B Shares, (i) Sav Max shall
provide GCC at least five days' prior written notice of any regular or special
meeting of Sav Max's Board of Directors or any committee thereof, (ii) GCC shall
be entitled to designate a representative of GCC to attend any such meeting as
an observer, and (iii) the Board of Directors of Sav Max, any committee of the
Board, or the shareholders of Sav Max will not propose to take any action or
take any action by written consent without a meeting unless GCC provides its
prior written consent thereto.
5.5 Other Agreements. Certified and/or GCC and Sav Max are parties
----------------
to the following agreements which remain in full force and effect except to
extent expressly waived herein and Sav Max shall be obligated to comply with the
covenants contained therein in accordance with their terms except to the extent
expressly waived herein:
Note of Sav Max Foods, Inc. dated October 2, 1995, in the original principal
amount of $750,000 payable to Grocers Capital Company;
Note of Sav Max Foods, Inc. dated October 2, 1995, in the original principal
amount of $750,000 payable to Grocers Capital Company;
Security Agreement dated October 2, 1995 between Grocers Capital Company and Sav
Max Foods, Inc.
Preferred Stock Purchase Agreement by and between Sav Max Foods, Inc. and
Grocers Capital Company dated as of December 17, 1993 ("Preferred Stock Purchase
Agreement");
Agreement Regarding Common Stock by and between Grocers Capital Company,
-8-
<PAGE>
Michael A. Webb and Sav Max Foods, Inc. dated as of December 17, 1993;
Guaranty Indemnity Agreement executed by Certified Grocers of California, Ltd.
dated 4/27/94 and Reimbursement and Indemnification Agreement executed by Sav
Max Foods, Inc. dated 4/27/94 with respect to Store 102
Guaranty Indemnity Agreement executed by Certified Grocers of California, Ltd.
dated 3/31/94 and Reimbursement and Indemnification Agreement executed by Sav
Max Foods, Inc. dated 3/31/94 with respect to Store 103
Guaranty of Sublease executed by Certified Grocers of California, Ltd. dated
5/7/92 with respect to Sublease by Sav Max Foods, Inc. of Store 104
Guaranty of Lease executed by Certified Grocers of California, Ltd. dated Dec.
1991 and Reimbursement and Indemnification Agreement executed by Sav Max Foods,
Inc. dated 1/13/92 with respect to Store 105
Guaranty of Lease executed by Certified Grocers of California, Ltd. dated
1/31/92 and Reimbursement and Indemnification Agreement executed by Sav Max
Foods, Inc. dated 1/13/92 with respect to Store 106
Sublease by Certified Grocers of California, Ltd. to Sav Max Foods, Inc. dated
July 30, 1993 with respect to Store 107
Sublease by Certified Grocers of California, Ltd. to Sav Max Foods, Inc. dated
July 24, 1995 and Guaranty of Michael Webb in favor of Certified Grocers of
California, Ltd. dated 7/24/95 with respect to Store 108
So long as the waiver set forth in Section 2 remains in effect, Sav
Max shall be relieved of the requirement to comply with the financial covenants
contained in the Preferred Stock Purchase Agreement (SS) 6.1(j) and (SS)
6.2(a)).
6. Neutral Sale. Upon the occurrence of a "Designated Event of Default"
------------
under this Agreement, Sav Max and Webb agree, subject to the terms hereof, at
the request of Certified, to take all necessary action to cause a sale of the
business of Sav Max to a third party (the "Neutral Sale"). The Neutral Sale
shall be effected as
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follows:
(a) Certified and Sav Max shall select an independent and neutral
third party to act as trustee with respect to the Neutral Sale (the
"Trustee"). In the event Certified and Sav Max are unable to agree upon
the designation of the Trustee, the Trustee shall be selected by the
independent auditors of Sav Max. The duties of the Trustee shall include
(i) the selection and engagement of an investment banker or financial
advisor to assist in effectuating the Neutral Sale, (ii) preparation of a
confidential memorandum describing the business and operations of Sav Max
(the "Memorandum"), (iii) distribution of the Memorandum in a manner
designed to effect the Neutral Sale in a commercially reasonable manner,
(iv) establishment of procedures for bids by interested parties based on a
standard purchase agreement form, (v) obtaining the assistance of the
investment banker or financial advisor engaged in connection with the
Neutral Sale to evaluate bids and advise the Board of Directors of Sav Max
and its shareholders with respect thereto, and (vi) obtaining a fairness
opinion from the investment banker or financial advisor engaged in
connection with the Neutral Sale with respect to the prevailing bid. The
goal of the Neutral Sale process is to realize "Going Concern" value in the
Neutral Sale. During the period specified in subsection 6(f) below and
provided Webb has given notice of election to pursue a sale pursuant to
subsection 6(f), the Trustee shall not distribute the Memorandum other than
to Certified and members of Certified, and shall not receive bids pursuant
to subparagraph (iv) above or evaluate such bids pursuant to subparagraph
(v) above, except as bids may be received from Certified or a member of
Certified.
(b) The Neutral Sale may take the form of a merger, a sale of
substantially all of the assets, or a sale of the stock of Sav Max. Any
such sale shall allocate sale consideration based on the relative seniority
of the debt and equity interests in Sav Max. Webb shall deliver at Closing
an Irrevocable Proxy consenting to such sale recommended by the Trustee and
on which a fairness opinion has been received from the investment banker
selected by the Trustee. The terms of such sale shall be as are customary
for sales of this type provided that liability for Sav Max shareholders
shall be in proportion to funds received as a result of the sale and no
shareholder of Sav Max shall be obligated to indemnify the buyer in the
Neutral Sale for breaches of representations and
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<PAGE>
warranties to the extent such indemnification obligations would exceed 100%
of the sale proceeds received by such shareholder. In such sale, provided
that the purchaser agreed to use its best efforts to obtain the release of
Certified and its affiliates, from any lease obligation or guaranty of
lease, Certified or its affiliate, as applicable, would agree to remain
secondarily liable with respect to such lease obligation or guaranty as to
which a release could not be obtained upon receipt at closing of
indemnification from a financially responsible party reasonably acceptable
to Certified with respect to all such obligations.
(c) Any shareholder of Sav Max may bid in connection with the
Neutral Sale. Each shareholder of Sav Max agrees to indemnify the Trustee
from liabilities in connection with acting as such, except as may result
from the Trustee's gross negligence or willful misconduct.
(d) By signing this Agreement, each shareholder of Sav Max other
than the parties hereto consents to this Section 6 and to the sale process
and agrees to cooperate with the sale process.
(e) Certified agrees that in the event it purchases the Wells
Fargo Bank loans to Sav Max pursuant to the Loan Purchase Agreement, it
will not pursue the personal guaranty given by Webb to Wells Fargo except
with respect to the Stock of Sav Max pledged as Collateral for such
guaranty so long as and to the extent that Webb cooperates with and does
not attempt to interfere with the Neutral Sale process. Webb hereby agrees
(and agrees not to assert any defense to the contrary) that any purchase by
Certified of Wells Fargo's loans to Sav Max (whether pursuant to the
exercise of Certified's purchase option or on a mandatory basis) shall not
reduce or otherwise affect Webb's liability under his continuing guaranty
in favor of Wells Fargo or under the Stock Pledge Agreement between Webb
and Wells Fargo which secures the full amount of such guaranty, whether
based upon any claimed right of contribution against Certified, any claimed
rights of co-sureties or principles of co-suretyship, or any other reason,
except to the extent set forth in the immediately preceding sentence.
(f) Notwithstanding the commencement of the Neutral Sale process
or the exercise of other default rights and remedies, upon the occurrence
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<PAGE>
of a Designated Event of Default and notice to Sav Max of such default,
Webb will have 120 days from the date of the notice of the Designated Event
of Default in which to arrange and consummate a sale of Sav Max to a third
party who would purchase the equity investment of GCC (with respect to
Preferred Stock - at liquidation value plus accrued dividends; with respect
to Common Stock - at GCC's cost of such Common Stock) for cash and pay off
all indebtedness owing to Certified and its affiliates (without premium or
prepayment penalty) and in such a sale Certified and GCC would agree: (i)
to terminate the Supply Agreement as of the closing date, and (ii) provided
that the purchaser agreed to use its best efforts to obtain the release of
Certified and its affiliates from any lease obligation or guaranty of
lease, to remain secondarily liable with respect to such release
obligations or lease guaranty as to which a release could not be obtained
upon receipt at closing of indemnification from a financially responsible
party reasonably acceptable to Certified with respect to all such
obligations. This 120 day period will be available only if Webb gives
Certified notice of intent to pursue arranging such a sale within 15 days
of the date of the notice of designated event of default. Within such 120
day period, no sale shall be consummated pursuant to the Neutral Sale
process or pursuant to the Stock Pledge Agreement referred to in Subsection
10(e). The 120 day period referred to in this subsection shall be extended
for the time necessary to allow passage of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or
state governmental antitrust consent, if applicable, provided that within
such 120 day period a binding agreement of purchase has been executed and
delivered, a filing has been made under the HSR Act, and the only
contingency remaining to be satisfied on the 120th day is compliance with
the HSR Act or the receipt of such state governmental antitrust consent, if
applicable. In no event shall the 120 days be extended to a period greater
than 180 days.
7. Purchase Rights. For a period of two years from the date hereof and
---------------
provided that no Event of Default has occurred and is continuing, Webb and/or
Sav Max (to the extent then legally permissible) shall have the right to acquire
the equity and indebtedness position of Certified and its affiliates on the
terms set forth in Subsection 6(f).
8. Refinance. In the event that Sav Max obtains replacement refinancing
---------
-12-
<PAGE>
with which it: (i) repays or refinances the entire amount owed under the Wells
Fargo Credit Agreement on terms which release Certified from all obligations
under its Loan Purchase Agreement, (ii) repays all amounts owing to Certified
under the Certified Inventory Note and all amounts owing to GCC on the October
2, 1995 Notes, and (iii) causes the obligations under the Preferred B Shares to
legally be brought current with respect to dividends and mandatory redemption
obligations, then Certified shall:
(a) release Certified's security interest in the collateral
described in the Security Agreement and cancel the Security Agreement;
(b) release the pledge of stock in Sav Max owned by Webb pursuant
to the Stock Pledge Agreement and cancel the Stock Pledge Agreement; and
(c) Terminate the obligations of Sav Max and Webb pursuant to
Section 5.1, 5.2, 5.3, 6 and the inclusion of any breach of such provisions
as an Event of Default under Section 11.
No other refinancing or sale of the Sav Max indebtedness owing to Wells Fargo
Bank or Certified shall be made nor shall any commitment be made with respect
thereto without the prior written consent of Certified.
9. Closing. The Closing pursuant to this Agreement shall take place on
-------
May 15, 1997 at 10:00 a.m., in the offices of Sheppard, Mullin, Richter &
Hampton LLP, 333 South Hope Street, Los Angeles, California, or at such other
time and place as the parties shall mutually agree. If the Closing shall not
have taken place or prior to May 15, 1997, this Agreement shall terminate and be
of no further force and effect and no party shall have any obligation with
respect thereto.
10. Conditions Precedent to Closing. The Closing of this Agreement is
-------------------------------
subject to the prior satisfaction of each of the following conditions:
(a) Amendment to Wells Fargo Credit Agreement. Wells Fargo and
-----------------------------------------
Sav Max shall have executed and delivered the Wells Fargo Amendment and the
documents contemplated thereby;
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<PAGE>
(b) Execution and Delivery of Loan Purchase Agreement. Certified
-------------------------------------------------
and Wells Fargo shall have entered into the Loan Purchase Agreement;
(c) Execution and Delivery of Certified Inventory Note Payable.
----------------------------------------------------------
Certified shall have received the original Certified Inventory Note
(Exhibit A) Payable, duly executed by Sav Max;
(d) Execution and Delivery of Security Agreement. Certified and
--------------------------------------------
GCC shall have received an original of a Security Agreement (Exhibit B),
duly entered into between Sav Max, Certified and GCC;
(e) Execution and Delivery of Stock Pledge Agreement. Certified
------------------------------------------------
shall have received an original Stock Pledge Agreement (Exhibit C) duly
entered into between Webb and Certified with respect to Webb's common
shares of Sav Max;
(f) Execution and Delivery of Supply Agreement. Certified shall
------------------------------------------
have received an original of the Supply Agreement (Exhibit F), duly
executed by Sav Max;
(g) Execution and Delivery of Employment Agreement. Certified
----------------------------------------------
shall have received an original of the Employment Agreement (Exhibit G),
duly executed by Webb and Sav Max;
(h) Execution and Delivery of Consulting Agreement. Certified
----------------------------------------------
shall have received an original of the Consulting Agreement (Exhibit H),
duly executed by Sav Max and Consultant;
(i) JDM Rent Agreement. Sav Max and JDM shall have entered into
------------------
the Amendment to the Vending Agreement (Exhibit I);
(j) Execution and Delivery of Mutual Release of Claims. The
--------------------------------------------------
parties shall have received a mutual general release duly executed by and
among Certified, Sav Max, Webb and the Sav Max shareholders, in the form of
Exhibit "J" hereto (the "Release").
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<PAGE>
(k) Execution and Delivery of Perfection Documents. Certified
----------------------------------------------
and GCC shall have received such California UCC-1 Financing Statements
(including, without limitation, those which may be filed as "fixture
filings") and deposit account security interest notification letters as
Certified and GCC may require to perfect their security interests in the
assets of Sav Max granted pursuant to the Security Agreement required by
Section 8(d) above. In addition, Certified shall have received a control
agreement duly executed by Wells Fargo and Webb, relating to the Stock
Pledge Agreement required by Section 8 (e) above, in the form of Exhibit
"K" hereto;
(l) Opinion of Counsel to Sav Max. Certified and GCC shall have
-----------------------------
received an opinion of counsel to Sav Max, addressed to and issued in favor
of Certified and GCC, in the form of Exhibit "L" hereto;
(m) Due Diligence Materials. Certified shall have received such
-----------------------
UCC, state and federal tax lien, litigation, judgments and other due
diligence investigative search reports as Certified and its counsel may
require; and
(n) Additional Matters. All other documents and legal matters in
------------------
connection with the transactions contemplated by this Agreement shall have
been delivered or executed and shall be in form and substance acceptable to
Certified and its counsel.
11. Events of Default. The occurrence of any of the following Events
-----------------
shall constitute an "Event of Default" for the purposes of this Agreement:
(a) Sav Max fails to make any payment of principal or interest to
Certified or GCC pursuant to the Certified Inventory Note Payable or the
GCC Notes listed in Section 5.5, within 5 days of its due date;
(b) Sav Max fails to make any payment due to Certified pursuant
to the Supply Agreement (except with respect to payables as to which a bona
fide dispute exists in the ordinary cause of business with respect to
pricing, delivery or order terms) within 5 days of its due date;
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<PAGE>
(c) Any failure to enforce the terms of the Agreements referred
to in Sections 4.2, 4.3 and 4.4 hereof;
(d) Any breach of the financial covenant set forth in
Section 5.1;
(e) Any breach of the Compliance Reports covenant set forth in
Section 5.3 or in the financial reporting covenants contained in Section
7.1 and 7.2 of the Preferred Stock Purchase Agreement, in each case which
remains uncured for 15 days;
(f) Any breach of the covenants contained in Sections 5.2 or 5.4;
(g) Breaches of Wells Fargo Credit Agreement. The occurrence of
----------------------------------------
any Event of Default under and as defined in the Wells Fargo Credit
Agreement, as amended by the Fifth Amendment thereto, which causes Wells
Fargo to give notice of election to require purchase pursuant to the Loan
Purchase Agreement;
(h) Sav Max or Webb institutes or consents to any proceeding
under any debtor relief law, or is unable or admits in writing its
inability to pay its debts as they mature, or makes an assignment for the
benefit of creditors, or applies to or consents to the appointment of a
receiver, trustee, trustee, custodian, conservator or similar officer for
it or for all or any part of its property;
(i) Sav Max or Webb fail to perform or observe any other covenant
or agreement contained in this Agreement or any agreement with Certified or
GCC referred to herein within 10 days of the date of notice given by
Certified or GCC of such default provided that period shall be extended to
60 days so long as Sav Max and Webb shall have commenced appropriate action
to remedy such failure within 10 days of the date of such notice, shall
diligently pursue such action and shall provide to Certified reports within
such 10 day period of the steps being taken to cure such default within a
sixty day period.
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<PAGE>
(j) Breach of Release. The institution by Sav Max or Webb of any
-----------------
action or proceeding involving a claim released under the Release.
An Event of Default described in subparagraphs (a) through (g) and (i) shall be
deemed a "Designated Event of Default."
12. Default Remedies. Upon the occurrence of an Event of Default,
----------------
Certified and GCC may, at their option and in their sole discretion, acting
together or either acting alone and in addition to all of its other rights and
remedies under applicable law, exercise any and all of the following default
remedies:
(a) Exercise of Remedies under the Security Agreement. Exercise
-------------------------------------------------
any and all of its available rights and remedies under the Security
Agreement but only if the event is a Designated Event of Default;
(b) Exercise of Rights and Remedies Under the Stock Pledge
------------------------------------------------------
Agreement. Exercise any and all of its available rights and remedies under
---------
the Stock Pledge Agreement but only if the event is a Designated Event of
Default;
(c) Exercise of Rights and Remedies with respect to the Preferred
-------------------------------------------------------------
B Shares. Exercise any of its default rights and remedies with respect to
--------
the Preferred B Shares; and
(d) Initiate Neutral Sale. Initiate a Neutral Sale process
---------------------
pursuant to Section 6 of this Agreement but only if the Event of Default is
a Designated Event of Default.
13. Miscellaneous.
-------------
(a) Successors and Assigns. This Agreement shall be binding on
----------------------
and inure to the benefit of Sav Max, Webb, Certified and GCC and their
respective heirs, representatives, successors and assigns.
(b) Severability. If any provision of this Agreement shall be
------------
prohibited or invalid under applicable law, such provision shall be in
effect if only to such extent, without invalidating the remainder of this
Agreement.
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<PAGE>
(c) Amendments. This Agreement may not be modified, altered or
----------
amended, except by an agreement in writing signed by each of the parties
hereto
(d) Integration. This Agreement reflects the entire
-----------
understanding of the parties with respect to the transactions contemplated
hereby.
(e) Choice of law. The validity of this agreement, its
-------------
construction, interpretation and enforcement, and the rights of the parties
hereunder shall be determined under, governed by, and construed in
accordance with the internal laws (as opposed to the conflict of laws
principles) of the State of California.
(f) Attorneys' Fees. In the event any action or proceeding is
---------------
commenced to enforce the terms and provisions of this Agreement, the
prevailing party in such action or proceeding shall be entitled to recover
from the losing party therein, such prevailing party's reasonable
attorneys' fees and court costs.
(g) Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which, taken together shall constitute one and same
instrument.
(h) Mutual waiver of right to jury trial. The parties hereby
------------------------------------
waive their respective rights to a jury trial of any claim or cause of
action based upon or arising out of this agreement or any other agreement
entered into in connection herewith or any of the transactions contemplated
herein, including contract claims, tort claims, breach of duty claims and
all other common law or statutory claims. The parties represent that they
have reviewed this waiver and knowingly and voluntarily waive their
respective jury trial rights following consultation with legal counsel. In
the event of litigation, a copy of this agreement may be filed as a written
consent to a trial by the court.
(i) Exhibits and Schedules. All exhibits and schedules
----------------------
-18-
<PAGE>
described herein are incorporated herein by this reference.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
-19-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SAV MAX FOODS, INC.,
a California corporation
By: ___________________________________
MICHAEL A. WEBB, an individual
_______________________________________
CERTIFIED GROCERS OF CALIFORNIA, LTD.,
a California corporation
By: ___________________________________
GROCERS CAPITAL COMPANY, a California
corporation
By: ___________________________________
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<PAGE>
The shareholders of Sav Max named below hereby consent to the provisions of
Section 4 above and agree to be bound by the terms thereof.
Date: ________________________________
Date: ________________________________
Date: ________________________________
Date: ________________________________
Date: ________________________________
-21-
<PAGE>
FORBEARANCE AND DEBT RESTRUCTURE AGREEMENT
Exhibit Index
-------------
Exhibit A - Certified Inventory Note
Exhibit B - Security Agreement
Exhibit C - Stock Pledge Agreement
Exhibit D - Amendment No. 5 to the Wells Fargo Credit
Agreement
Exhibit E - Loan Purchase Agreement
Exhibit F - Supply Agreement
Exhibit G - Webb Employment Agreement
Exhibit H - Consulting Agreement
Exhibit I - Amendment to Vending Agreement
Exhibit J - General Release
Exhibit K - Control Agreement re Pledge Stock
Exhibit L - Opinion of Counsel
Schedule 5.2 - Schedule of Related Party Transactions
-22-
<PAGE>
EXHIBIT 10.20
SEVERANCE AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the 2nd day of
April 1997, by and between Certified Grocers of California, Ltd., a California
corporation (the "Company" or "Certified") and Daniel T. Bane (the "Executive").
WHEREAS, the Company considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of the Company and its shareholders; and
WHEREAS, the Executive has been determined to be a vital member of the senior
management team of the Company; and
WHEREAS, the Company recognizes that the possibility of termination due to
Change of Control or without cause may arise and the uncertainty it may raise
among management of the Company may result in the departure or distraction of
management personnel, in each case to the detriment of the Company and its
shareholders.
NOW, THEREFORE, in consideration of the promises and of the mutual covenants
herein contained, it is agreed as follows:
This Agreement sets forth the severance benefits which the Company agrees will
be provided to the Executive in the event the Executive's employment with the
Company is terminated without cause under the circumstances described below.
1. RIGHT TO TERMINATE. Certified or the Executive may terminate the
------------------
Executive's employment at any time, subject to Certified's providing the
benefits hereinafter specified in accordance with the terms thereof.
2. TERM OF AGREEMENT. This Agreement shall commence on April 2, 1997;
------------------
and shall continue in effect until the earlier of April 3, 2000, or
termination of the Executive's employment; provided, however, that
commencing on April 3, 2000 the term of this Agreement shall be extended
for one additional year unless at least 90 days prior to such date,
Certified or the Executive shall have given written notice per Section 9
herein that this Agreement shall not be extended; and provided, further,
that notwithstanding the delivery of any such notice, the term of this
Agreement shall automatically extend for an additional period of twelve
(12) months after a Change of Control of the Company. For the purposes
of this Agreement, "Change of Control" shall mean (i) The acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d)
of the Securities and Exchange Act of 1934, of beneficial ownership of
fifty-one percent (51%) or more of the outstanding Class A Shares of
Certified Grocers of California, Ltd.; or (ii) if the individuals who
presently serve on the Certified Board of Directors no longer constitute
a majority of the members of the Certified Board of Directors; provided,
however, any person who becomes a director subsequent to the
commencement date of this Employment Agreement, who
1
<PAGE>
was elected to fill a vacancy by a majority of Certified's members shall
be considered as if a member prior to the commencement date of this
Agreement; or (iii) A liquidation or dissolution of Certified or the
sale of all or substantially all of the assets of Certified.
3. TERMINATION. The Executive shall be entitled to the benefits provided in
-----------
Section 4 hereof upon the termination of the Executive's employment with
Certified during this Agreement period, unless such termination is (i)
because of the Executive's death, Disability, or Retirement, (ii) by
Certified for Cause, or (iii) by the Executive other than for Good
Reason (as all such capitalized terms are hereinafter defined).
(a) Disability. Termination by Certified of the Executive's
----------
employment based on "Disability" shall mean the Executive's incapacity
due to physical or mental illness to substantially perform his duties
on a full-time basis for six (6) consecutive months and, within thirty
(30) days after a notice of termination is thereafter given by the
Company, the Executive shall not have returned to the full-time
performance of the Executive's duties; provided, however, if the
Executive shall not agree with a determination to terminate him
because of Disability, the question of the Executive's disability
shall be subject to the certification of a qualified medical doctor
agreed to by the Company and the Executive or the Executive's legal
representative, in the event of the Executive's incapacity to
designate a doctor. In the absence of agreement between the Company
and the Executive, each party shall nominate a qualified medical
doctor and the two doctors shall select a third doctor, who shall make
the determination as to Disability.
(b) Retirement. Termination by the Executive or by Certified of
----------
the Executive's employment based on "Retirement" shall mean
termination on or after the Executive's attainment of age sixty-five
(65) or an earlier age mutually agreed to by the Executive and
Certified.
(c) Cause. Termination by Certified of the Executive's employment
-----
for "Cause" shall mean termination upon:
(i) the willful and continued failure by the Executive to
substantially perform his duties (other than any such failure
resulting from the Executive's incapacity due to physical or
mental illness), after demand for substantial performance is
delivered in writing by the Company to the Executive that
specifically identifies the manner in which the Company
believes the Executive has not substantially performed his
duties, or
2
<PAGE>
(ii) the willful engaging by the Executive in illegal or
fraudulent misconduct which is materially injurious to the
Company, or
(iii) the willful material breach of the Confidentiality
and Nonsolicitation Agreement set forth in Section 6.
No act, or failure to act, on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was in the
best interest of the Company.
(d) Good Reason. Termination by the Executive of the Executive's
-----------
employment for "Good Reason" shall mean termination based on (i) an
adverse change in the Executive's status or position(s), in effect
immediately prior to the date of this Agreement, (ii) a reduction in
the Executive's base salary as in effect immediately prior to the date
of this Agreement, (iii) a Change in Control, or (iv) the requirement
by the Company that the Executive be based at an office greater than
35 miles from where the Executive's office is located on the date of
the Change of Control.
(e) Notice of Termination. Any purported termination by
---------------------
Certified or by the Executive shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied
upon.
(f) Date of Termination. "Date of Termination" shall be the date
-------------------
set forth by written Notice of Termination or, if none, then by mutual
written agreement of the parties or by the arbitrator in a proceeding
as provided in Section 11 hereof. During the pendency of any such
dispute, Certified will continue to pay the Executive the Executive's
full compensation in effect just prior to the time the Notice of
Termination is given and until the dispute is resolved in accordance
with Section 11.
4. COMPENSATION UPON TERMINATION.
-----------------------------
(a) Subject to Section 8 hereof, if, the Executive's employment
with Certified shall be terminated (i) by Certified other than for
Cause, Disability, Death or Retirement or (ii) by the Executive for
Good Reason, then within five business days of the Date of
Termination, Certified shall pay the Executive an amount equal to the
Executive's highest annual base salary during the three year period
immediately prior to the Date of Termination, plus an amount equal to
the average annual incentive bonus paid during the three years prior
to the Date of Termination.
3
<PAGE>
(b) Certified shall maintain all benefits for the Executive and
his dependents in substantially the same form as those benefits in
place immediately prior to the Executive's termination for a period
terminating on the earliest of (i) twelve (12) months from the Date of
Termination, (ii) the commencement of similar benefits from a new
employer (but only to the extent that equivalent benefits are offered
by said employer), or (iii) attainment of age 65.
(c) All payments and benefits provided for yet unpaid in this
Section 4 shall be forfeited if the Executive violates any material
provision of this Agreement including, without limitation, the
Confidentiality and Nonsoliciation Agreement specified in Section 6
herein.
(d) In the event of termination of the Executive by the Company
for Cause, death, Disability, Retirement, or by the Executive for
other than Good Reason, no payment shall be provided under this
Agreement. This Agreement does not, and is not intended to, limit any
rights or benefits of the Executive pursuant to any other plan, policy
or written agreement.
5. NO OBLIGATION TO MITIGATE
-------------------------
The Executive is under no obligation to mitigate damages in the amount
of any payment provided for hereunder by seeking other employment or
otherwise.
Subject to paragraph 4(b), the amount of any payment provided for in
this Agreement shall not be reduced, offset or subject to recovery by
Certified by reason of any compensation earned by the Executive as the
result of employment by another employer after the Date of
Termination, or otherwise.
6. CONFIDENTIALITY AND NONSOLICITATION AGREEMENT.
---------------------------------------------
(a) The Executive acknowledges that in the course of his
employment by the Company, he will have access to and become informed
of confidential and secret information which is a competitive asset of
the Company ("Confidential Information"), including (i) the terms of
any agreement between the Company and any employee, customer or
supplier, (ii) pricing strategy, (iii) product development strategies,
(iv) personnel training and development programs, (v) financial
results, (vi) strategic plans and demographic analyses, (vii)
proprietary computer and systems software, and (viii) any confidential
non-public information received from the Company concerning the
Company, its employees, suppliers and customers. The Executive agrees
that he will keep all Confidential Information in strict confidence
during the term of his employment by the Company and thereafter and
will never make known, divulge, reveal,
4
<PAGE>
furnish, make available, or use any Confidential Information (except
in the course of his regular authorized duties on behalf of the
Company). The Executive agrees that the obligations of confidentiality
hereunder shall survive termination of his employment at the Company
regardless of any actual or alleged breach by the Company of this
Agreement and shall continue for one year following such termination
provided that such obligation shall terminate earlier (i) as to
specific information that shall have become known through no fault of
the Executive or (ii) as to Confidential Information which the
Executive is required by law to disclose (after giving the Company
notice and an opportunity to contest such requirement). The
Executive's obligations under this Section 6 are in addition to, and
not in limitation or preemption of, all other obligation of
confidentiality which the Executive may have to the Company under
general legal or equitable principles.
(b) Except in the ordinary course of the Company's business, the
Executive has not made, nor shall at any time following the date of
this Agreement, make or cause to be made, any copies, pictures,
duplicates, facsimiles, or other reproductions or recordings or any
abstracts or summaries including or reflecting Confidential
Information. All such documents and other property furnished to the
Executive by the Company or otherwise acquired or developed by the
Company shall at all times be the property of the Company. Upon
termination of the Executive's employment by the Company, the
Executive will return to the Company any such documents or other
property of the Company which are in the possession, custody or
control of the Executive.
(c) In the event of the Executive's termination of employment at
the Company, the Executive agrees that he will not in any capacity, on
his own behalf or on behalf of any other firm, person, or entity, for
a period of one year, solicit, or assist in the solicitation of, any
employee of the Company to terminate his or her employment with the
Company.
(d) The Executive acknowledges and agrees that a violation of the
foregoing provisions of this Section 6 (referred to collectively as
the Confidentiality and Nonsolicitation Agreement) that results in
material detriment to the Company would cause irreparable harm to the
Company, and that the Company's remedy at law for any such violation
would be inadequate. In recognition of the foregoing, the Executive
agrees that, in addition to any other relief afforded by law or this
Agreement, including damages sustained by a breach of this Agreement
and forfeiture of any and all compensation or benefit otherwise
provided under Section 4, and without any necessity or proof of actual
damages, the Company shall have the right to enforce this Agreement by
specific remedies, which shall include, among other things, temporary
and permanent injunctions, it being the understanding of the
undersigned parties hereto that damages, the
5
<PAGE>
forfeitures described above and injunctions shall all be proper modes
of relief and are not to be considered as alternative remedies.
7. SUCCESSORS; BINDING AGREEMENT.
-----------------------------
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or
otherwise) by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required
to perform if no such succession had taken place.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees,
and legatees. If the Executive should die while any amount would still
be payable to the Executive hereunder if he had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee, or if there be no such designee,
to the Executive's estate.
(c) This Agreement, and all of the provisions hereof, shall be
binding upon Certified and all of its affiliates, successors,
transferees, or surviving or continuing entity.
8. TAXES.
-----
(a) All payments to be made to the Executive under this Agreement
will be subject to required withholding of federal, state, and local
income and employment taxes.
(b) Notwithstanding anything in the foregoing to the contrary, if
any of the payments provided for in this Agreement, together with any
other payments which the Executive have the right to receive from
Certified, would constitute a "parachute payment" (as defined in
Section 280G(b)(2) of the Code), the payments pursuant to this
Agreement shall be reduced to the largest amount as will result in no
portion of such payments being subject to the excise tax imposed by
Section 4999 of the code; provided, however, that the determination as
to whether any reduction in the payments under this Agreement pursuant
to this provison is necessary shall be made by the Executive in good
faith, and such determination shall be conclusive and binding on
Certified with respect to its treatment of the payment for tax
reporting purposes.
9. NOTICE. For purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered by United
States registered or certified mail, return receipt requested, postage
prepaid and addressed, in the case of
6
<PAGE>
Certified, to the address set forth on the first page of this
Agreement or, in the case of the undersigned employee, to the address
set forth below his signature, provided that all notices to Certified
shall be directed to the attention of the Chief Executive Officer of
the Certified, with a copy to the Secretary of Certified, or to such
other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
10. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and
effect.
11. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be settled exclusively by an
arbitrator selected under the rules of the American Arbitration
Association and the arbitration shall be conducted under the rules of
said association. Any claim must be filed within thirty (30) days of
the Notice of Termination unless extended by mutual written agreement
by both parties. Each party shall be entitled to present evidence and
argument to the arbitrator. The arbitrator shall have the right only
to interpret and apply the provisions of this Agreement and may not
change any of its provisions. The arbitrator shall permit reasonable
pre-hearing discovery of facts, to the extent necessary to establish a
claim or a defense to a claim, subject to supervision by the
arbitrator. The hearing shall begin within thirty (30) days of the
filing of the claim, unless extended by mutual written agreement by
both parties, and the arbitrator's decision shall be rendered within
thirty (30) days of the completion of the hearing unless extended by
mutual written agreement by both parties. The determination of the
arbitrator shall be conclusive and binding upon the parties and
judgment upon the same may be entered in any court having
jurisdiction. The Company shall bear all direct costs of the
arbitration proceedings pursuant to this Section 11 (arbitration fees,
transcript expenses, etc.) and pay reasonable legal fees of the
Executive.
12. SURVIVAL OF PROVISIONS. Notwithstanding any other provision of this
----------------------
Agreement, the parties' respective rights and obligations under
Sections 4, 5, 6, and 7, 11 of this Agreement shall survive
termination of this Agreement.
13. MISCELLANEOUS. No provision of this Agreement may be modified, waived
-------------
or discharged unless such waiver, modifications or discharge is agreed
to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party
hereto or compliance with any condition or provision of this Agreement
to be performed by such other party will be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or
subsequent time. Unless otherwise noted, references to "Sections" are
to sections of this Agreement. The captions used
7
<PAGE>
in this Agreement are designed for convenient reference only are not
to be used for the purpose of interpreting any provision of this
Agreement.
14. ENFORCEABILITY. Notwithstanding any other provision of this
--------------
Agreement, to the extent that any payment to be made pursuant to this
Agreement is prohibited by applicable federal or state law or
regulation, or by any action of any federal or state regulatory
agencies, unless Certified has obtained prior approval for such
otherwise prohibited payment from the appropriate regulatory
authority, Certified shall not be obligated to make such payments
under this Agreement.
15. GOVERNING LAW. The validity, interpretation, construction and
-------------
performance of this Agreement will be governed by and construed in
accordance with the substantive laws of the State of California,
without giving effect to the principles of conflict of laws of such
State.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly
executed as of the date set forth below.
CERTIFIED GROCERS OF CALIFORNIA, LTD.
By: _____________________________________
Name:
Title:
Agreed to this ______ day
of _______________, 1997.
________________________________________
Daniel T. Bane
303 Palmetto Drive
Pasadena, California 91105
8
<PAGE>
EXHIBIT 10.21
SEVERANCE AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the 2nd day of
April 1997, by and between Certified Grocers of California, Ltd., a California
corporation (the "Company" or "Certified") and Charles J. Pilliter (the
"Executive").
WHEREAS, the Company considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of the Company and its shareholders; and
WHEREAS, the Executive has been determined to be a vital member of the senior
management team of the Company; and
WHEREAS, the Company recognizes that the possibility of termination due to
Change of Control or without cause may arise and the uncertainty it may raise
among management of the Company may result in the departure or distraction of
management personnel, in each case to the detriment of the Company and its
shareholders.
NOW, THEREFORE, in consideration of the promises and of the mutual covenants
herein contained, it is agreed as follows:
This Agreement sets forth the severance benefits which the Company agrees will
be provided to the Executive in the event the Executive's employment with the
Company is terminated without cause under the circumstances described below.
1. RIGHT TO TERMINATE. Certified or the Executive may terminate the
------------------
Executive's employment at any time, subject to Certified's providing the
benefits hereinafter specified in accordance with the terms thereof.
2. TERM OF AGREEMENT. This Agreement shall commence on April 2, 1997;
------------------
and shall continue in effect until the earlier of April 3, 2000, or
termination of the Executive's employment; provided, however, that
commencing on April 3, 2000 the term of this Agreement shall be extended
for one additional year unless at least 90 days prior to such date,
Certified or the Executive shall have given written notice per Section 9
herein that this Agreement shall not be extended; and provided, further,
that notwithstanding the delivery of any such notice, the term of this
Agreement shall automatically extend for an additional period of twelve
(12) months after a Change of Control of the Company. For the purposes
of this Agreement, "Change of Control" shall mean (i) The acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d)
of the Securities and Exchange Act of 1934, of beneficial ownership of
fifty-one percent (51%) or more of the outstanding Class A Shares of
Certified Grocers of California, Ltd.; or (ii) if the individuals who
presently serve on the Certified Board of Directors no longer constitute
a majority of the members of the Certified Board of Directors; provided,
however, any person who becomes a director subsequent to the
commencement date of this Employment Agreement, who
1
<PAGE>
was elected to fill a vacancy by a majority of Certified's members shall
be considered as if a member prior to the commencement date of this
Agreement; or (iii) A liquidation or dissolution of Certified or the
sale of all or substantially all of the assets of Certified.
3. TERMINATION. The Executive shall be entitled to the benefits provided in
-----------
Section 4 hereof upon the termination of the Executive's employment with
Certified during this Agreement period, unless such termination is (i)
because of the Executive's death, Disability, or Retirement, (ii) by
Certified for Cause, or (iii) by the Executive other than for Good
Reason (as all such capitalized terms are hereinafter defined).
(a) Disability. Termination by Certified of the Executive's
----------
employment based on "Disability" shall mean the Executive's incapacity
due to physical or mental illness to substantially perform his duties
on a full-time basis for six (6) consecutive months and, within thirty
(30) days after a notice of termination is thereafter given by the
Company, the Executive shall not have returned to the full-time
performance of the Executive's duties; provided, however, if the
Executive shall not agree with a determination to terminate him
because of Disability, the question of the Executive's disability
shall be subject to the certification of a qualified medical doctor
agreed to by the Company and the Executive or the Executive's legal
representative, in the event of the Executive's incapacity to
designate a doctor. In the absence of agreement between the Company
and the Executive, each party shall nominate a qualified medical
doctor and the two doctors shall select a third doctor, who shall make
the determination as to Disability.
(b) Retirement. Termination by the Executive or by Certified of
----------
the Executive's employment based on "Retirement" shall mean
termination on or after the Executive's attainment of age sixty-five
(65) or an earlier age mutually agreed to by the Executive and
Certified.
(c) Cause. Termination by Certified of the Executive's
-----
employment for "Cause" shall mean termination upon:
(i) the willful and continued failure by the Executive to
substantially perform his duties (other than any such failure
resulting from the Executive's incapacity due to physical or
mental illness), after demand for substantial performance is
delivered in writing by the Company to the Executive that
specifically identifies the manner in which the Company
believes the Executive has not substantially performed his
duties, or
2
<PAGE>
(ii) the willful engaging by the Executive in illegal or
fraudulent misconduct which is materially injurious to the
Company, or
(iii) the willful material breach of the Confidentiality and
Nonsolicitation Agreement set forth in Section 6.
No act, or failure to act, on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was in the
best interest of the Company.
(d) Good Reason. Termination by the Executive of the Executive's
-----------
employment for "Good Reason" shall mean termination based on (i) an
adverse change in the Executive's status or position(s), in effect
immediately prior to the date of this Agreement, (ii) a reduction in
the Executive's base salary as in effect immediately prior to the date
of this Agreement, (iii) a Change in Control, or (iv) the requirement
by the Company that the Executive be based at an office greater than
35 miles from where the Executive's office is located on the date of
the Change of Control.
(e) Notice of Termination. Any purported termination by
---------------------
Certified or by the Executive shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied
upon.
(f) Date of Termination. "Date of Termination" shall be the date
-------------------
set forth by written Notice of Termination or, if none, then by mutual
written agreement of the parties or by the arbitrator in a proceeding
as provided in Section 11 hereof. During the pendency of any such
dispute, Certified will continue to pay the Executive the Executive's
full compensation in effect just prior to the time the Notice of
Termination is given and until the dispute is resolved in accordance
with Section 11.
4. COMPENSATION UPON TERMINATION.
-----------------------------
(a) Subject to Section 8 hereof, if, the Executive's employment
with Certified shall be terminated (i) by Certified other than for
Cause, Disability, Death or Retirement or (ii) by the Executive for
Good Reason, then within five business days of the Date of
Termination, Certified shall pay the Executive an amount equal to the
Executive's highest annual base salary during the three year period
immediately prior to the Date of Termination, plus an amount equal to
the average annual incentive bonus paid during the three years prior
to the Date of Termination.
3
<PAGE>
(b) Certified shall maintain all benefits for the Executive and
his dependents in substantially the same form as those benefits in
place immediately prior to the Executive's termination for a period
terminating on the earliest of (i) twelve (12) months from the Date of
Termination, (ii) the commencement of similar benefits from a new
employer (but only to the extent that equivalent benefits are offered
by said employer), or (iii) attainment of age 65.
(c) All payments and benefits provided for yet unpaid in this
Section 4 shall be forfeited if the Executive violates any material
provision of this Agreement including, without limitation, the
Confidentiality and Nonsoliciation Agreement specified in Section 6
herein.
(d) In the event of termination of the Executive by the Company
for Cause, death, Disability, Retirement, or by the Executive for
other than Good Reason, no payment shall be provided under this
Agreement. This Agreement does not, and is not intended to, limit any
rights or benefits of the Executive pursuant to any other plan, policy
or written agreement.
5. NO OBLIGATION TO MITIGATE
-------------------------
The Executive is under no obligation to mitigate damages in the amount
of any payment provided for hereunder by seeking other employment or
otherwise.
Subject to paragraph 4(b), the amount of any payment provided for in
this Agreement shall not be reduced, offset or subject to recovery by
Certified by reason of any compensation earned by the Executive as the
result of employment by another employer after the Date of
Termination, or otherwise.
6. CONFIDENTIALITY AND NONSOLICITATION AGREEMENT.
---------------------------------------------
(a) The Executive acknowledges that in the course of his
employment by the Company, he will have access to and become informed
of confidential and secret information which is a competitive asset of
the Company ("Confidential Information"), including (i) the terms of
any agreement between the Company and any employee, customer or
supplier, (ii) pricing strategy, (iii) product development strategies,
(iv) personnel training and development programs, (v) financial
results, (vi) strategic plans and demographic analyses, (vii)
proprietary computer and systems software, and (viii) any confidential
non-public information received from the Company concerning the
Company, its employees, suppliers and customers. The Executive agrees
that he will keep all Confidential Information in strict confidence
during the term of his employment by the Company and thereafter and
will never make known, divulge, reveal,
4
<PAGE>
furnish, make available, or use any Confidential Information (except
in the course of his regular authorized duties on behalf of the
Company). The Executive agrees that the obligations of confidentiality
hereunder shall survive termination of his employment at the Company
regardless of any actual or alleged breach by the Company of this
Agreement and shall continue for one year following such termination
provided that such obligation shall terminate earlier (i) as to
specific information that shall have become known through no fault of
the Executive or (ii) as to Confidential Information which the
Executive is required by law to disclose (after giving the Company
notice and an opportunity to contest such requirement). The
Executive's obligations under this Section 6 are in addition to, and
not in limitation or preemption of, all other obligation of
confidentiality which the Executive may have to the Company under
general legal or equitable principles.
(b) Except in the ordinary course of the Company's business, the
Executive has not made, nor shall at any time following the date of
this Agreement, make or cause to be made, any copies, pictures,
duplicates, facsimiles, or other reproductions or recordings or any
abstracts or summaries including or reflecting Confidential
Information. All such documents and other property furnished to the
Executive by the Company or otherwise acquired or developed by the
Company shall at all times be the property of the Company. Upon
termination of the Executive's employment by the Company, the
Executive will return to the Company any such documents or other
property of the Company which are in the possession, custody or
control of the Executive.
(c) In the event of the Executive's termination of employment at
the Company, the Executive agrees that he will not in any capacity, on
his own behalf or on behalf of any other firm, person, or entity, for
a period of one year, solicit, or assist in the solicitation of, any
employee of the Company to terminate his or her employment with the
Company.
(d) The Executive acknowledges and agrees that a violation of the
foregoing provisions of this Section 6 (referred to collectively as
the Confidentiality and Nonsolicitation Agreement) that results in
material detriment to the Company would cause irreparable harm to the
Company, and that the Company's remedy at law for any such violation
would be inadequate. In recognition of the foregoing, the Executive
agrees that, in addition to any other relief afforded by law or this
Agreement, including damages sustained by a breach of this Agreement
and forfeiture of any and all compensation or benefit otherwise
provided under Section 4, and without any necessity or proof of actual
damages, the Company shall have the right to enforce this Agreement by
specific remedies, which shall include, among other things, temporary
and permanent injunctions, it being the understanding of the
undersigned parties hereto that damages, the
5
<PAGE>
forfeitures described above and injunctions shall all be proper modes
of relief and are not to be considered as alternative remedies.
7. SUCCESSORS; BINDING AGREEMENT.
-----------------------------
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or
otherwise) by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required
to perform if no such succession had taken place.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees,
and legatees. If the Executive should die while any amount would still
be payable to the Executive hereunder if he had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee, or if there be no such designee,
to the Executive's estate.
(c) This Agreement, and all of the provisions hereof, shall be
binding upon Certified and all of its affiliates, successors,
transferees, or surviving or continuing entity.
8. TAXES.
-----
(a) All payments to be made to the Executive under this Agreement
will be subject to required withholding of federal, state, and local
income and employment taxes.
(b) Notwithstanding anything in the foregoing to the contrary, if
any of the payments provided for in this Agreement, together with any
other payments which the Executive have the right to receive from
Certified, would constitute a "parachute payment" (as defined in
Section 280G(b)(2) of the Code), the payments pursuant to this
Agreement shall be reduced to the largest amount as will result in no
portion of such payments being subject to the excise tax imposed by
Section 4999 of the code; provided, however, that the determination as
to whether any reduction in the payments under this Agreement pursuant
to this provison is necessary shall be made by the Executive in good
faith, and such determination shall be conclusive and binding on
Certified with respect to its treatment of the payment for tax
reporting purposes.
9. NOTICE. For purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered by United
States registered or certified mail, return receipt requested, postage
prepaid and addressed, in the case of
6
<PAGE>
Certified, to the address set forth on the first page of this
Agreement or, in the case of the undersigned employee, to the address
set forth below his signature, provided that all notices to Certified
shall be directed to the attention of the Chief Executive Officer of
the Certified, with a copy to the Secretary of Certified, or to such
other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
10. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and
effect.
11. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be settled exclusively by an
arbitrator selected under the rules of the American Arbitration
Association and the arbitration shall be conducted under the rules of
said association. Any claim must be filed within thirty (30) days of
the Notice of Termination unless extended by mutual written agreement
by both parties. Each party shall be entitled to present evidence and
argument to the arbitrator. The arbitrator shall have the right only
to interpret and apply the provisions of this Agreement and may not
change any of its provisions. The arbitrator shall permit reasonable
pre-hearing discovery of facts, to the extent necessary to establish a
claim or a defense to a claim, subject to supervision by the
arbitrator. The hearing shall begin within thirty (30) days of the
filing of the claim, unless extended by mutual written agreement by
both parties, and the arbitrator's decision shall be rendered within
thirty (30) days of the completion of the hearing unless extended by
mutual written agreement by both parties. The determination of the
arbitrator shall be conclusive and binding upon the parties and
judgment upon the same may be entered in any court having
jurisdiction. The Company shall bear all direct costs of the
arbitration proceedings pursuant to this Section 11 (arbitration fees,
transcript expenses, etc.) and pay reasonable legal fees of the
Executive.
12. SURVIVAL OF PROVISIONS. Notwithstanding any other provision of this
----------------------
Agreement, the parties' respective rights and obligations under
Sections 4, 5, 6, and 7, 11 of this Agreement shall survive
termination of this Agreement.
13. MISCELLANEOUS. No provision of this Agreement may be modified, waived
-------------
or discharged unless such waiver, modifications or discharge is agreed
to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party
hereto or compliance with any condition or provision of this Agreement
to be performed by such other party will be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or
subsequent time. Unless otherwise noted, references to "Sections" are
to sections of this Agreement. The captions used
7
<PAGE>
in this Agreement are designed for convenient reference only are not
to be used for the purpose of interpreting any provision of this
Agreement.
14. ENFORCEABILITY. Notwithstanding any other provision of this
--------------
Agreement, to the extent that any payment to be made pursuant to this
Agreement is prohibited by applicable federal or state law or
regulation, or by any action of any federal or state regulatory
agencies, unless Certified has obtained prior approval for such
otherwise prohibited payment from the appropriate regulatory
authority, Certified shall not be obligated to make such payments
under this Agreement.
15. GOVERNING LAW. The validity, interpretation, construction and
-------------
performance of this Agreement will be governed by and construed in
accordance with the substantive laws of the State of California,
without giving effect to the principles of conflict of laws of such
State.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly
executed as of the date set forth below.
CERTIFIED GROCERS OF CALIFORNIA, LTD.
By: _____________________________________
Name:
Title:
Agreed to this ______ day
of _______________, 1997.
________________________________________
Charles J. Pilliter
1490 Boulder Creek Court
Manteca, California 95336
8
<PAGE>
Exhibit 10.23
The Compensation Committee will conduct an annual evaluation of the CEO's
performance, in terms of individual and Company results. The results of this
review are measured against specified criteria established at the beginning of
each year to determine the annual bonus payment for the CEO.
At the beginning of each performance period, the Compensation Committee will set
the performance expectation for each criterion.
. Company Performance - determined using the weighted average of the
objective measurement of specific criteria. The target award is paid
when the expected performance is achieved. A maximum payment equal to
120% of the target award is paid for exceptional performance (defined
as expected performance plus 20%).
. CEO Performance - determined by the subjective measurement of
performance criteria identified annually. The measurement scale
ranges from 1 to 10 with 10 equaling 120% of the target bonus and 1
equaling no payment. A score of 5 equates to 55% of the target bonus.
Linear interpolation is used to determine the award levels of scores
between whole numbers.
Target Incentive Level
- ----------------------
The recommended targeted incentive level for the CEO is 40% of salary. No
incentive is paid if performance falls below 80% of the targeted level. Maximum
payment of 120% of the targeted bonus (48% of salary) is awarded for actual
performance as specified by each performance criteria.
Performance Criteria
- --------------------
The specific criteria and weightings to be used in the evaluation are:
Company Performance (60% of total incentive opportunity)
Pre Patronage Dividend Income
Capital Adequacy
Asset Utilization
CEO and Senior Management Team Performance (40% of total incentive opportunity)
CEO Leadership with the Board
CEO Leadership with Senior Management
CEO External Impact (industry, community)
Performance of senior management as a team
<PAGE>
EXHIBIT 10.24
CERTIFIED GROCERS OF CALIFORNIA, LTD. SENIOR MANAGEMENT TEAM INCENTIVE PLAN
Members of the Senior Management Team at Certified Grocers of California, LTD.
participate in an annual incentive plan designed to reward for the overall
financial performance of the Cooperative. The performance criteria are
established annually by the Chief Executive Officer of the Cooperative and
approved by the Compensation Committee.
The target incentive amount is expressed as a percentage of salary, varying by
the individual's position in the Cooperative as indicated below:
- Senior Vice Presidents 25% of base salary
- Vice Presidents & General Managers 20% of base salary
The participants have the opportunity to earn up to two times the targeted
incentive through superior performance of the cooperative. For 1997, the
performance criteria included pre patronage dividends and revenue growth. A
matrix was established which rewarded participants with target incentive levels
for achieving the planned pre patronage dividend and a specified revenue growth.
The targeted payment increases with performance above the specified levels, and
decreases with performance below those levels. If the cooperative performance is
below 80% of expected levels, no incentive is earned.
The Chief Executive Officer has the discretionary anthority to raise or lower
the award dependent upon individual contributions to the overall performance of
the Cooperative to a maximum of 25% of the earned incentive.
<PAGE>
EXHIBIT 10.25
AGREEMENT TO SELL AND PURCHASE REAL PROPERTY
AND ESCROW INSTRUCTIONS
THIS AGREEMENT TO SELL AND PURCHASE REAL PROPERTY AND ESCROW
INSTRUCTIONS ("Agreement'), dated as of the date specified below in the List of
Particulars, by and between Seller and Buyer is entered into with reference to
the recitals set forth below and constitutes (i) a contract of purchase and sale
between the parties, and (ii) escrow instructions to Escrow Holder. The
following terms shall have the meanings specified, when used in this Agreement.
LIST OF PARTICULARS
-------------------
Date of Agreement: September 12, 1997
Seller: CERTIFIED GROCERS OF CALIFORNIA, LTD.
a California corporation
2601 South Eastern Avenue
Los Angeles, CA 90040
Attention: Mr. Daniel T. Bane
Phone: (213) 723-7476, ext.4281
Facsimile: (213) 888-2915
Buyer: SMART & FINAL STORES CORPORATION,
a California corporation
4700 South Boyle Avenue
Los Angeles, CA 90058
Attention: Mr. Robert J. Wess
Phone: (213) 586-8563
Facsimile: (213) 581-4756
Taxpayer Identification
of Buyer: 95-4297897
Trustee: State Street Bank & Trust Co.
-1-
<PAGE>
Property: That certain irregularly shaped parcel comprising
approximately 23.73 acres at the southwestern corner of
Eastern Avenue and Sheila Street, in the City of
Commerce, as more particularly described in Exhibit "A"
attached to this Agreement and incorporated by reference,
and as depicted in the site plan attached to this
Agreement as Exhibit "B" and incorporated by reference.
Purchase Price: Ten Million Five Hundred Thousand Dollars ($10,500,000),
as may be adjusted pursuant to Article 2 herein, payable
as provided in this Agreement.
Initial Deposit: Five Hundred Thousand Dollars ($500,000)
Escrow Holder: Commerce Escrow Company
1545 Wilshire Boulevard, Suite 600
Los Angeles, CA 90017
Attention: Ms. Tina Debow
Phone: (213) 484-0855
Facsimile: (213) 484-0417
Title Company: Old Republic Title Company
101 E. Glenoaks Boulevard
Glendale, CA 91209-9003
Attention: Mr. Michael Slinger
Phone: (800) 228-4853
Facsimile: (818) 549-4328
Brokers: Investment Development Services, Inc.
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<PAGE>
CB Commercial Real Estate Group, Inc.
Cushman & Wakefield of California, Inc.
Closing Date: July 1, 1998, unless advanced or extended as provided in
this Agreement.
Outside Closing Date: December 31, 1998 unless extended as provided in this
Agreement
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE
-----------------
1.1 Purchase and Sale. Subject to the terms and conditions of this
-----------------
Agreement, including the foregoing List of Particulars, Seller agrees to sell to
Buyer, and Buyer agrees to purchase from Seller, all of Seller's right, title
and interest in and to the Property, together with any and all of the rights,
benefits, easements and appurtenances, and all right, title and interest of
Seller in the land east of the property line to be created pursuant to the Lot
Line Adjustment (as defined below) lying in all streets, highways and rights-of-
way abutting the Property. Buyer may at any time prior to the Closing Date,
transfer its rights to acquire the Property to a special-purpose real estate
leasing facility in the form of a trust, established for Buyer by a group of
banks. For purposes of this Agreement the term "Buyer" shall be deemed to apply
to Smart & Final Stores Corporation, a California corporation, notwithstanding
the fact that title to the Property may ultimately be held in the name of
Trustee. The sale pursuant to this Agreement excludes (i) the land and
improvements (the "Western Property") west of the property line to be created
pursuant to the Lot Line Adjustment, (ii) all development rights, easements and
other rights appurtenant to the Western Property, and (iii) any credits or other
rights (collectively, the "Credits") with the SCAQMD and/or Los Angeles County
Sanitation District with respect to an emissions and sewer discharges existing
with respect to ownership and operation of the Property
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<PAGE>
and/or the Western Property prior to the Closing. At Closing, Buyer shall
execute such documents as Seller may reasonably request confirming that the
Credits are being retained by Seller. Seller's retention of the Credits shall be
limited to the extent that Seller's retention would prevent Buyer from obtaining
a sewer connection for discharge for the Property improved with a high-
flexibility, non-mechanized warehouse of approximately 517,000 square feet with
approximately 60,000 square feet of internal warehouse offices (the
"Improvements"). Without limiting Section 5.7.2, Buyer acknowledges that all
sewer connection and operating discharge fees for the Property and the
Improvements shall be at the sole cost and expense of Buyer.
ARTICLE 2
PURCHASE PRICE
--------------
2.1 Purchase Price. The Purchase Price for the Property shall be paid
--------------
by Buyer to Seller through Escrow as follows:
2.2 Initial Deposit. Buyer shall deposit with Escrow Holder the
---------------
Initial Deposit in immediately available funds within two (2) business days of
Buyer's execution of this Agreement, but in no event later than September 19,
1997. The Initial Deposit is to be invested by Escrow Holder in an interest
bearing Federally insured account, at a financial institution acceptable to
Buyer and Seller, which designates Buyer as the account holder. Any interest
which is earned on the Initial Deposit will be held by Escrow Holder and applied
to the Purchase Price. At Buyer's option, the Initial Deposit may be divided
among mutually acceptable Federally insured financial institutions, such that no
institution is holding more than One Hundred Thousand Dollars ($100,000.00). The
Initial Deposit shall be released to Seller by Escrow Holder upon the receipt by
Escrow Holder and Seller of Buyer's approval of Buyer's Studies as set forth in
Section 3.1.2 below without further instructions to Escrow Holder.
2.3 Payment for Vacation of Warehouse Buildings. Within three (3)
-------------------------------------------
business days following delivery of notice by Seller to Buyer of Seller's
complete vacation of all of the warehouse and other buildings located on the
Property excluding (i) the 3-story office building (the "Office Building") and
---------
(ii) an area around the Office
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<PAGE>
Building shown on Exhibit "E" as Seller's Construction Zone (the "Construction
Zone"), and provided that such date is at least three (3) business days prior to
the Closing Date, Buyer will pay to Seller the additional sum of Seven Hundred
Fifty Thousand Dollars ($750,000) outside of Escrow. This amount received by
Seller will be credited against the Purchase Price at the Close of Escrow. As
used in this Agreement, "complete vacation" and "vacate" mean as to a specified
portion of the Property that Seller shall have permanently ceased business
operations and removed or abandoned in place its moveable personal property.
Seller shall be considered to have performed a "complete vacation" of an area
even if the utility lines shown on Exhibit "E" continue to be used to serve the
areas not vacated and the vacated areas are used for access to the areas not
vacated; provided that nothing in this Section 2.3 shall create any easement for
the benefit of Seller to maintain utilities on the Property for the benefit of
the Western Property after the Closing.
2.4 Payment for Vacation of Entire Property. Within three (3)
---------------------------------------
business days following delivery of notice by Seller to Buyer of Seller's
complete vacation of the entire Property excluding (i) the Data Center (as
---------
defined below), (ii) the portions of the Office Building serving the Data
Center, and (iii) the Construction Zone (such excluded portions being sometimes
referred to herein collectively as the "Reserved Areas"), and provided that such
date is at least three (3) business days prior to the Closing Date, Buyer will
pay to Seller the additional sum of Seven Hundred Fifty Thousand Dollars
($750,000) outside of Escrow. This amount received by Seller will be credited
against the Purchase Price at the Close of Escrow. As used herein, the term
"Data Center" means the portion of the Building described on Exhibit "F,"
together with all utilities shown on Exhibit "E" necessary for the operation of
Seller's business within that portion of the Building and rights of ingress and
egress through the Building and Property between that portion of the Building
and public streets and sidewalks.
2.5 Vacancy Incentive Price Increases. Upon performance by Seller,
---------------------------------
Buyer will make certain incentive price increases (the "Incentive Price
Increases") at the Close of Escrow as an incentive to Seller to vacate the
Property as soon as possible. The Incentive Price Increases shall be earned by
Seller for each day prior to the Closing Date that Seller has accomplished the
complete vacation of the Property and otherwise satisfied the conditions
described in clauses (i), (iii), (iv) and (v) of Section 5.9.1, as evidenced by
delivery to Buyer of Seller's notice of vacancy as follows:
-5-
<PAGE>
<TABLE>
<CAPTION>
# of Days prior Maximum Incentive
to July 1, 1998 $/Day Price Increases
- ----------------------------------------------------------
<S> <C> <C>
1-30 $ 5,000 $150,000
31-62 $ 7,500 $232,500
63-92 $10,000 $300,000
--------
Total Possible Incentive Price Increases $682,500
</TABLE>
2.6 Late Delivery Penalty. So long as Buyer shall have performed
---------------------
all of its obligations under this Agreement, shall have satisfied the conditions
described in clauses (i) and (ii) of Section 5.9.2, and is otherwise ready,
willing and able to proceed with the Closing on the Closing Date, there shall be
a reduction in the Purchase Price of the sum of Ten Thousand Dollars
($10,000.00) for each such day the Closing is delayed after the Closing Date
solely by reason of Seller's inability to accomplish the complete vacation of
the Property and otherwise satisfy the conditions described in clauses (i),
(iii), (iv) and (v) of Section 5.9.1. The reduction in the Purchase Price under
this Section 2.6 shall be limited to a maximum of Five Hundred Thousand Dollars
($500,000.00).
2.7 Cash at Closing. The balance of the Purchase Price, subject to
---------------
adjustment pursuant to Section 5.6 hereof, shall be deposited with Escrow Holder
in immediately available funds, on or before the Close of Escrow.
ARTICLE 3
APPROVALS AND CONDITIONS
------------------------
3.1 Conditions. The obligations of Buyer under this Agreement shall
----------
be subject to and contingent upon satisfaction of the following conditions
within the time periods specified below:
3.1.1 Approval of Title. Buyer shall have approved, been deemed
-----------------
to have approved or have waived objections to the condition of title pursuant to
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<PAGE>
Article 4 below within the time periods provided for therein.
3.1.2 Inspection of Property. Buyer may, at Buyer's sole cost and
----------------------
risk, inspect the physical condition and operations of the Property on or before
close of business on September 15, 1997 (the "Contingency Period"). During the
Contingency Period Buyer and its agents, employees, contractors and consultants
(collectively "Buyer's Representatives") shall, at their sole cost and expense,
conduct and approve such environmental, geological, feasibility, engineering and
other tests, surveys, title, appraisals and all other inspections and
investigations they deem necessary in their sole and complete discretion
(collectively "Buyer's Studies"). Buyer hereby gives notice to Seller of Buyer's
approval of Buyer's Studies. If Escrow has been opened by such date, Buyer shall
also provide Escrow Holder with notice of any approvals together with
irrevocable written instructions to release the Initial Deposit to Seller. If
Escrow has not been opened by the expiration of the Contingency Period, then
Buyer's approval of Buyer's Studies shall be accompanied by (and shall not be
effective unless and until Seller receives) payment of the Initial Deposit in
immediately available funds. Buyer's failure to disapprove of Buyer's Studies
shall be deemed an approval thereof. If Buyer disapproves Buyer's Studies the
Escrow shall terminate and Buyer shall receive a return of the Initial Deposit
and any other funds paid on account of the Purchase Price, in which event
neither party will have any further obligation or liability regarding the
acquisition of the Property. The Closing Date and the Outside Closing Date shall
be further extended for the period of any delay in Seller's performance of the
Lot Line Adjustment (as defined below) due to Buyer's entry onto the Property
pursuant to this Section 3.1.2.
-----
3.1.3 Lot Line Adjustment. Seller shall have until the Close of
-------------------
Escrow to cause a lot line adjustment (the "Lot Line Adjustment") to be recorded
in the Official Records of Los Angeles County, which adjustment is necessary in
order for the Property to be conveyed to Buyer in accordance with all applicable
subdivision laws and regulations.
3.1.4 Delivery of Property. Seller shall have delivered the
--------------------
property with the Site Work (as defined in Section 5.8) completed.
3.2 Delivery of Property No Later Than the Outside Closing Date. In
-----------------------------------------------------------
the event that Seller is unable to deliver the Property with the Site Work
completed and
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<PAGE>
close Escrow by the Outside Closing Date, Buyer shall elect either to (i)
terminate Escrow and receive a return of the Initial Deposit and any other funds
paid on account of the Purchase Price, in which event neither party will have
any further obligation or liability regarding the acquisition of the Property,
or (ii) waive any condition (other than the Lot Line Adjustment) related to
delivery or condition of the Property and proceed with the purchase of the
Property. In the event Buyer chooses to waive such conditions, Seller shall not
be required to proceed with any uncompleted Site Work; however, the Purchase
Price shall be adjusted as provided in Section 2.6 above. If Buyer fails to
give Escrow Holder and Seller notice of termination of the Escrow or waiver of
any condition related to delivery or condition of the Property within five (5)
days after the Outside Closing Date, Buyer shall be deemed to have elected to
terminate Escrow and receive a return of the Initial Deposit and any other funds
paid as provided in clause (i) of the first sentence of this Section 3.2
3.3 Consequences of Termination or Non-Termination of This Agreement.
----------------------------------------------------------------
3.3.1 If this Agreement is terminated by Buyer pursuant to Section
3.1 or Section 3.2 above, the following shall occur: (i) the Initial Deposit,
and any other payment made by Buyer to Escrow Holder or Seller towards the
Purchase Price, together with interest accrued thereon, deposited by Buyer with
Escrow Holder pursuant to Section 2.2, shall be refunded to Buyer; (ii) any
documents deposited with Escrow Holder by either party shall be returned to the
party depositing the same; (iii) Buyer shall return to Seller all documents
delivered by Seller to Buyer pursuant to this Agreement, and (iv) Buyer shall
pay any applicable Escrow and title cancellation charges. Upon completion of
all of the foregoing, this Agreement shall be deemed terminated and neither
party shall have any further rights against or obligations to the other
hereunder, except those obligations and indemnifications which are expressly
stated to survive the termination of this Agreement.
3.3.2 If this Agreement is not terminated by Buyer at the end of
the Contingency Period pursuant to Section 3.1 above, the Initial Deposit shall
be released by Escrow Holder to Seller and thereafter the Initial Deposit and
the amounts paid by Buyer pursuant to Sections 2.3 and 2.4 shall be
nonrefundable to Buyer for any reason whatsoever, unless the Closing does not
occur due to a failure of Seller to satisfy any of the conditions described in
clauses (i), (iii), (iv) and (v) of Section 5.9.1.
-8-
<PAGE>
ARTICLE 4
CONDITION OF TITLE
------------------
4.1 Permitted Exceptions. Buyer agrees to accept title to the
--------------------
Property subject only to the following matters (collectively the "Permitted
Exceptions"):
4.1.1 Liens for current real property taxes and any general or
special assessments or bonds that are not delinquent as of the Closing.
4.1.2 Those matters of record which Buyer approves, is deemed to
approve, or waives its objections as to, pursuant to Section 4.2, below.
4.1.3 Those matters shown on any survey which Buyer elects to
obtain, that are not reflected in the Title Report (as defined in Section 4.2
below).
4.1.4 The Title Company's standard printed exceptions.
4.1.5 Matters arising out of the Lot Line Adjustment.
4.1.6 Those matters affecting the title to the Property created by
or with the consent of Buyer.
4.2 Approval of Title. Buyer acknowledges receipt of a preliminary
-----------------
title report together with copies of all documents shown as exceptions therein
(the "Title Report") disclosing the condition of title to the Property. By
notice delivered to Seller on September 16, 1997, Buyer approved and disapproved
certain items in the Title Report. Seller will have 10 days after receipt of
Buyer's notification of any disapproved exceptions or other objections to title
in which to advise Buyer that:
(i) Seller will cause the disapproved exceptions or other
objections to title to be removed or remedied or obtain appropriate
endorsements to the Title Policy on or before the Closing Date; or
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<PAGE>
(ii) Seller will not cause the disapproved exceptions or other
objections to title to be removed or remedied or cause appropriate
endorsements to the Title Policy to be issued.
(iii) If Seller does not notify Buyer of its election within the
10 day period, Seller will be deemed to have elected to not cause the
disapproved exceptions to be removed.
If Seller elects to not cause the disapproved exceptions or other
objections to title to be removed or remedied or cause appropriate endorsement
to the Title Policy to be issued, Buyer will have two (2) business days to
elect, as its sole remedy, to:
(i) proceed with the purchase and acquire the Property
subject to the disapproved exceptions and other objections to title
without reduction in the Purchase Price; or
(ii) cancel the Escrow and this Agreement by written notice
to Seller and Escrow Holder, in which case the Deposit and any
interest accrued thereon will be returned to Buyer and the
cancellation costs, if any, will be equally borne by Seller and by
Buyer.
If Buyer does not give Seller notice of its election within two (2)
business days, Buyer will be deemed to have elected to proceed with this
transaction.
4.3 Title Policy. As a condition to the Closing, Title Company shall be
------------
prepared to issue a CLTA Owner's Title Insurance Policy (the "Title Policy") to
Buyer (or Trustee as applicable) on the Closing Date. Such policy shall be a
CLTA Owner's Title Insurance policy unless Buyer elects, by appropriate escrow
instructions to Escrow Holder, to cause Title Company to issue an ALTA Owner's
Title Insurance Policy in place of the CLTA Title Policy. If Buyer elects to
have an ALTA policy issued, Buyer shall pay to Escrow Holder all costs which are
in excess of the costs and premium that would have been incurred for a CLTA
policy. Buyer shall obtain, at its sole cost, any survey or survey update
required in connection with the Title Policy and shall bear all costs associated
with the issuance by the Title Company of an ALTA
-10-
<PAGE>
extended coverage lender's policy of title insurance insuring its lender or
lenders in the amount of any financing secured by the Property. The Title
Policy shall be in the amount of the Purchase Price, for the protection of Buyer
(or Trustee as applicable) as a fee owner of the Property, subject only to the
Permitted Exceptions. Buyer's election to obtain an extended coverage policy
will not delay the Closing or the expiration of the Contingency Period and
Buyer's inability to obtain an extended coverage policy or any such endorsements
will not be deemed to be a failure of any condition to Closing.
ARTICLE 5
CLOSING
-------
5.1 Closing Through Escrow. The purchase of the Property shall be
----------------------
consummated by means of an escrow established with Escrow Holder. The date on
which Escrow Holder receives Buyer's Initial Deposit shall be referred to as the
"Opening of Escrow." The parties shall close the Escrow on or before the Outside
Closing Date. Although the parties have agreed and are bound to the Outside
Closing Date, the terms "Closing" and "Close of Escrow" as used herein shall
mean that date when a grant deed conveying the Property to Buyer is recorded in
the Official Records of Los Angeles County, California (the "Official Records").
This Agreement shall be deposited with Escrow Holder and shall constitute escrow
instructions to Escrow Holder from Buyer and Seller, together with such
instructions and general provisions and conditions consistent with the terms of
this Agreement which Escrow Holder may reasonably request. Buyer and Seller
agree to execute promptly any such supplemental escrow instructions requested by
Escrow Holder. In the event of any conflict or inconsistency between such
general provisions and conditions of such supplemental escrow instructions and
the provisions of this Agreement, the provisions of this Agreement shall
control.
5.2 Duties of Escrow Holder. The duties of the Escrow Holder shall
-----------------------
be as follows: (i) retain and safely keep all funds, documents and instruments
deposited with it pursuant to this Agreement; (ii) disburse the Initial Deposit;
(iii) upon the Closing, deliver to the parties entitled thereto all funds,
documents and instruments to be delivered through the Escrow Holder pursuant to
this Agreement; and (iv) upon the Closing, cause the recordation of the
documents required for this transaction in the
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<PAGE>
Official Records. Escrow Holder is instructed to (v) request that the amount of
the documentary transfer tax due be shown on a separate paper and affixed to the
Grant Deed by the County Recorder after the permanent record thereof is made;
(vi) comply with the terms of this Agreement which specifically apply to the
Escrow Holder and comply with the terms of any additional instructions jointly
executed by Buyer and Seller; (vii) deposit all monies held by Escrow Holder in
an interest bearing account according to further written instructions signed by
Buyer and not in conflict with the terms of this Agreement; and (viii) upon the
Closing, cause the Title Company to issue to Buyer the Title Policy in the
amount of the Purchase Price insuring Buyer (or Trustee as applicable) as the
fee owner of the Property and, if applicable, the lender's policy of title
insurance referred to in Section 4.3 above.
5.3 Reporting. To the extent the transaction contemplated hereby
---------
involves a real estate transaction within the purview of Section 6045 of the
Internal Revenue Code of 1986, as amended, the Escrow Holder shall have sole
responsibility to comply with the requirements of Section 6045 of the Internal
Revenue Code (and any similar requirements imposed by state or local law), which
in part requires the Escrow Holder to report real estate transactions closing
after December 31, 1986 by, among other things, preparing and causing to be
filed Internal Revenue Service Form 1099-B and any applicable additional
statements in connection therewith. Seller's U.S. employer identification number
is 95-0615250. Escrow Holder shall hold Buyer, Seller and their counsel free and
harmless from and against any and all liability, claims, demands, damages and
costs, including reasonable attorneys' fees and other litigation expenses,
arising or resulting from the failure or refusal of the Escrow Holder to comply
with such reporting requirements.
5.4 Seller's Obligations at Closing. Prior to the Closing, Seller
-------------------------------
shall deliver to Escrow Holder the following documents (all duly executed and
acknowledged by Seller, where required):
5.4.1 Grant Deed. A Grant Deed, executed and acknowledged
----------
by Seller and conveying the Property to Buyer or Trustee as applicable, in the
form of Exhibit "C" hereto.
5.4.2 Foreign Person. An affidavit of Seller certifying
--------------
that Seller is not a "foreign person," as defined in the federal Foreign
Investment in Real Property
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<PAGE>
Tax Act of 1980, and the 1984 Tax Reform Act, as amended, and a properly
executed Form 590 or other evidence sufficient to establish that Buyer is not
required to withhold any portion of the Purchase Price under the California
Revenue and Taxation Code.
5.4.3 Evidence of Authority. A copy of the duty adopted
---------------------
resolution of the governing body of Seller, certified as true and complete as of
Closing, authorizing the execution, delivery and performance by Seller of this
Agreement and the documents required hereby, and designating one or more persons
to execute such documents such entity's name in connection with this Agreement,
together with an incumbency certificate for each person executing documents on
behalf of Seller with specimen signatures for such persons.
5.5 Buyer's Obligations at Closing. Prior to the Closing, Buyer
------------------------------
shall deliver to Escrow Holder the following (all duly executed and acknowledged
by Buyer, where required):
5.5.1 Purchase Price. The balance of the Purchase Price
--------------
(subject to adjustment pursuant to Sections 2.5 and 5.6 of this Agreement) in
immediately available funds, due credit being given for the Initial Deposit and
other payments or credits made in favor of Buyer, including interest earned
thereon for funds held by Escrow Holder.
5.5.2 Evidence of Authority. A copy of the duly adopted
---------------------
resolution of the governing body of Buyer, certified as true and complete as of
Closing, authorizing the execution, delivery and performance by Buyer and any
permitted assignee of Buyer hereunder, of this Agreement and the documents
required hereby, and designating one or more persons to execute such documents
in each such entity's name in connection with this Agreement, together with an
incumbency certificate for each person executing documents on behalf of Buyer
with specimen signatures for such persons.
5.6 Closing Costs. Seller shall pay the following closing costs:
-------------
all of Seller's attorneys' fees and costs; one-half (1/2) of the fees and costs
due to Escrow Holder for services rendered as escrow agent; any county transfer
taxes and recording fees payable upon recordation of the Grant Deed; one-half of
any city transfer taxes
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<PAGE>
payable upon recordation of the Grant Deed and all premiums and charges relating
to the issuance of the Title Policy. Buyer shall pay the following closing
costs: all of Buyer's attorneys' fees and costs; one-half (1/2) of the fees and
costs due to Escrow Holder for services rendered as escrow agent; one-half of
any city transfer taxes payable upon recordation of the Grant Deed any
additional premium for an ALTA Owner's Policy of Title Insurance if Buyer elects
to receive same, including the cost of any survey or survey update and the cost
of any title endorsements to the Title Policy; and premium for an ALTA Leader's
Policy of Title Insurance in connection with Buyer's financing; and any
recording fees payable upon recordation of any financing documents.
5.7 Proration. Real estate and personal property taxes and other
---------
assessments with respect to the Property (other than with respect to the
transfer thereof) for the year in which the Closing occurs, shall be prorated to
the Closing, as set forth below. The provisions of this Section 5.7 shall
survive the Closing.
5.7.1 Taxes. If the Closing shall occur before the tax rate
-----
or the assessed valuation of the Property are fixed for the then-current year,
then the apportionment of taxes shall be upon the basis of the tax rate for the
Property for the preceding year applied to the latest assessed valuation of the
Property. Subsequent to the Closing, when the tax rate and the assessed
valuation of the Property are fixed for the year in which the Closing occurs,
the parties agree to adjust the proration of taxes outside of Escrow and, if
necessary, to refund or repay such sums as shall be necessary to effect such
adjustment. If the Property is not assessed as a separate parcel for tax or
assessment purposes, then such taxes and assessments attributable to the
Property shall be determined by Seller with notice to and subject to Buyer's
approval (which approval shall not be unreasonably withheld) at least five (5)
business days prior to the Closing Date. If, as of the Closing, the Property is
not being treated as a separate tax parcel, then within thirty (30) days after
the Closing, Buyer shall, at its sole cost and expense, have the Property
assessed separately for tax and assessment purposes,
5.7.2 Utilities. No provision has been made for the
---------
proration of water charges, fuel charges or utility charges (including, without
limitation, telephone, gas and electricity) as Seller shall terminate its
account with the providers of all such services, and Buyer shall, prior to the
Closing, make application to the providers of such services for the continuation
of such services in the name of Buyer, or its
-14-
<PAGE>
designee, including the provision of any deposits that might be required. It is
anticipated that in connection with all services referred to in the preceding
sentence, the meters will be read on or about the Closing, and Seller shall be
responsible for paying the bills for such services accruing prior to the Closing
and shall be entitled to a refund of its deposits, if any, and Buyer shall be
responsible for the payment of all such accounts accruing on or after the
Closing. If at Seller's option any such accounts are not handled in this
manner, then they shall be prorated as of the Closing.
5.7.3 Post-Closing Reconciliation. If any of the prorations
---------------------------
stated above cannot be definitely calculated on the Closing, then they shall be
estimated at the Closing and definitely calculated as soon after the Closing as
feasible.
5.8 Delivery of Possession. Upon the satisfaction or waiver (if
----------------------
applicable) of any and all other conditions precedent to this Agreement, the
purchase and sale transaction contemplated in this Agreement shall be finally
consummated and Seller shall deliver possession of the Property to Buyer upon
the Close of Escrow. Seller will (i) perform demolition of existing buildings,
removal of all other on-site improvements, and preparation to a rough grade,
with existing utilities in the adjacent street, (ii) cause to be removed all
asbestos-containing materials within the improvements being demolished and
removed, (iii) cause to be removed from the Property all other hazardous
materials on or under the Property to the extent such removal is required by
applicable laws, statutes, ordinances or regulations as a condition to new
construction on the Property, and (iv) provide copies to Buyer of any
certificates, closure letters or other documentation customarily issued by
governmental authorities having jurisdiction over the removal of such asbestos
and hazardous materials in connection with that removal by Seller (collectively,
the "Site Work").
5.9 Conditions Precedent to Closing.
-------------------------------
5.9.1 Conditions Precedent to Buyer's Obligations. Buyer's
-------------------------------------------
obligations with respect to this transaction are subject to: (i) Seller's
delivery to Escrow Holder on or before the Closing of the items described in
Section 5.4, (ii) Title Company's willingness to deliver the Title Policy
subject only to the Permitted Exceptions, (iii) all of Seller's representations
and warranties as set forth in Section 10.1 being true and correct in all
material respects as of the Closing, (iv) Seller delivering the Property with
the Site Work completed, and (v) the Lot Line Adjustment
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having been completed.
5.9.2 Conditions Precedent to Seller's Obligations. Seller's
--------------------------------------------
obligations with respect to this transaction are subject to: (i) Buyers delivery
to Escrow Holder on or before the Closing of the items described in Section 5.5,
(ii) Buyer's representations and warranties as set forth in Section 10.2 being
true and correct in all material respects as of the Closing, and (iii) the Lot
Line Adjustment having been completed.
5.9.3 Simultaneous Delivery; Conditions Concurrent. All
--------------------------------------------
documents and other items to be delivered on the Closing shall be deemed to have
been delivered simultaneously, and no individual delivery shall be effective
until all such items have been delivered.
5.9.4 Pre-Closing Covenants of Seller. Seller covenants that
-------------------------------
until the Closing it will cause the Property to be insured under policies of
liability insurance customary for properties such as the Property, and that it
will not enter into any material contract with respect to the Property which
would be binding on Buyer after the Closing without Buyer's consent, which shall
not be unreasonably withheld.
ARTICLE 6
RISK OF LOSS
------------
6.1 Casualty. Since Buyer is acquiring the Property in any
--------
unimproved condition, damage to or injury occurring to the Property by fire,
storm, accident or any other casualty or cause shall not affect the obligations
of the parties under this Agreement.
6.2 Condemnation. Buyer shall determine the risk of potential
------------
condemnation of the Property. If any condemnation occurs prior to the Closing
this transaction shall be consummated as provided in this Agreement and Seller
shall be entitled to retain all awards made by the condemning authority in
respect of such condemnation except that Seller shall assign to Buyer at the
Closing the amount of the award attributable solely to the Property as
unimproved land. Any award for any
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improvements on the Property or for relocation expenses or otherwise with regard
to other than the Property as unimproved land shall be the sole property of
Seller.
ARTICLE 7
DESIGN AND CONSTRUCTION OF IMPROVEMENTS
---------------------------------------
7.1 Warehouse Design and Construction. As soon as is practicable
---------------------------------
following the Close of Escrow, Buyer intends to construct a high-flexibility,
non-mechanized warehouse of approximately 517,000 square feet with integral
warehouse offices (the "Improvements"), in a design to be determined. Seller
will have the right to approve the final design plan prior to the Closing, which
approval will not be unreasonably withheld. A general contractor will be
selected who is mutually acceptable to both parties. Investment Development
Services (IDS) will act as a development and construction manager for the
Improvements, in a compensated role to be defined in a separate agreement
between IDS and Buyer, which shall be diligently negotiated by IDS and Buyer.
Seller acknowledges that IDS has, through its past activities with Seller,
information and knowledge regarding Seller and the Property which is of a
confidential nature. Seller hereby consents to the disclosure of such
confidential information to Buyer by IDS; provided that Buyer holds such
information in confidence.
7.2 Acquisition of Adjacent Parcels. Buyer has informed Seller that
-------------------------------
Buyer is considering the acquisition of those parcels adjacent to north of the
Property on Sheila Street from Eastern Avenue to Fitzgerald Avenue, and north to
Washington Boulevard, as set forth in Exhibit "D" attached to this Agreement.
Buyer's obligations to close Escrow are not contingent upon the acquisition of
any of the adjacent parcels. If, at any time after the Close of Escrow, Buyer
applies with applicable governmental authorities for the vacation of the alley
running parallel and north of Sheila Street, between Fitzgerald Avenue and
Eastern Avenue, Seller agrees not to object to such application, and further
agrees to provide Buyer will all necessary and reasonable cooperation in making
such application at no cost or expense to Seller; provided Seller shall not be
required to limit or restrict the development or operation of any other
properties or businesses owned by Seller.
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ARTICLE 8
POST-CLOSING MATTERS
--------------------
8.1 Ownership and Financing of Property.
-----------------------------------
8.1.1 Lease Agreement. Buyer has informed Seller that in
---------------
the event that Buyer transfers its rights to acquire the Property to a trust for
purposes of furthering its financing arrangements as set forth in Section 1.1
above, such trust will become the lessor ("Lessor") of the Property and the
Improvements and Buyer shall be the Lessee pursuant to a Lease Agreement with a
maximum term of thirty-five (35) years (the "Lease Term") from the Close of
Escrow. Pursuant to such Lease Agreement, Buyer may at any point during the
Lease Term freely exercise options to renew and continue the Lease Agreement as
provided by its terms and conditions, or substitute another financing structure
of similar type, so long as the final maturity date of the financing does not
exceed the thirty-five (35) year period. In the alternative, Buyer may, pursuant
to the Lease Agreement, purchase the Property from Lessor for the "Termination
Value" as defined below, and if desired, enter into another type of financing so
long as the final maturity date of any such financing does not exceed the
overall thirty-five (35) year period. Buyer shall provide Seller with quarterly
certificates as to the status of the Lease Agreement and related financing
documents (and any replacement thereof or substitute therefor) confirming that
Buyer is not in default thereunder and the status of construction of the Project
(as defined below) and the amount of Project Expenses (as defined below), in
form and content reasonably satisfactory to Seller. As used in this Article 8,
the following terms shall have the following meanings:
"Project" means an approximately 517,000 square foot warehouse on
the Property constructed with standard materials and containing mezzanine
offices not to exceed 85,000 square feet, together with on-site parking to
accommodate approximately 134 truck trailers and code required automobile
parking, and site improvements to the Property for utilities, ingress and
egress, safety and security.
"Project Expenses" means the costs incurred by Buyer for the
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following with respect to the initial construction of the Project: (a) the
acquisition of the Property, (b) demolition, remediation and site
preparation, (c) construction of the Project, (d) Buyer's lender and
appraiser fees and expenses, (e) developer and builder fees and expenses,
(f) permit and governmental fees, (g) architectural and engineering fees
and expenses, and (h) interest on funds borrowed to pay Project Expenses.
Project Expenses exclude costs of interior furniture and fixtures,
warehouse racking, warehouse equipment, and any costs incurred after a
certificate of occupancy or comparable evidence of the completion of the
initial construction of the Project is issued.
"Default Costs" means interest and expenses which by the terms of
Buyer's financing documents are added to the cost Buyer must pay to
repurchase or otherwise redeem the Property from Buyer's lenders.
"Termination Value" means the sum of Project Expenses and Default
Costs.
8.1.2 Right of First Refusal. In the event that Buyer
----------------------
wishes to sublease 50,000 or more square feet (the "First Refusal Space") of the
Property to an unaffiliated entity, Seller shall have a right of first refusal
to sublease such First Refusal Space as provided herein. Prior to commencing
negotiations for a lease of the First Refusal Space with an unaffiliated entity,
Buyer shall give Seller written notice that it intends to commence those
negotiations (the "Negotiation Notice"). Prior to entering into a binding
agreement for the lease of the First Refusal Space on the Property to an
unaffiliated entity, Buyer shall deliver to Seller a copy of the term sheet or
letter of intent which has been signed by the proposed subtenant and Buyer
("Signed Proposal") setting forth the basic terms for the proposed sublease
transaction. If Seller wishes to enter into a sublease on the terms and
conditions set forth in the Signed Proposal, Seller shall deliver to Buyer by
5:00 p.m. Los Angeles time on the date (the "Response Deadline") that is the
later of (a) twenty (20) business days after Seller's receipt of the Negotiation
Notice, and (b) five (5) business days after Buyer's delivery of the Signed
Proposal, written notice to Buyer confirming that it wishes to lease such space
on the terms specified. If Seller fails to respond by the Response Deadline,
Buyer may proceed to finalize its sublease transaction with the unaffiliated
entity within six (6) months after delivery of the Signed Proposal to Seller,
and Seller shall
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have no further right to sublease such space on the Property unless (i) no lease
transaction is entered into with the specified unaffiliated entity, or the term
of the sublease to the unaffiliated entity expires or is otherwise terminated or
(ii) the terms of the proposed sublease transaction are modified, as referenced
below. If the terms of the proposed sublease are modified such that the net
present value (using a 10% interest rate) of the economic terms benefitting
Buyer are reduced by more than 2% from the terms presented to Seller in the
Signed Proposal, Buyer shall once again submit a Signed Proposal to Seller and
Seller must respond by the Response Deadline as noted above if it wishes to
sublease the space on the terms set forth in the new signed proposal. It is
understood and agreed that if Seller wishes to sublease space identified in a
term sheet submitted by Buyer, it must lease the entire amount of the space
identified in such letter, on terms and conditions identical to those specified
in such letter or term sheet, including, without limitation, approval of such
sublease by Buyer's lender.
8.1.3 Option to Repurchase. Upon the Close of Escrow,
--------------------
Buyer shall convey to Seller a one-time option whereby Seller will have the
right, but not the obligation, to (a) be the assignee of Buyer's option to
acquire the Property (including improvements thereupon), pursuant to the Lease
Agreement, for a price equal to the Termination Value, or (b) if the Lease
Agreement is no longer in effect, to acquire the Property (including all
improvements thereupon) from Buyer for a price (the "Option Price") equal to the
Project Expenses, on the terms and conditions contained in this Section 8.1.3.
Upon the occurrence of an Option Trigger Date (as defined below) Buyer shall
give Seller a notice ("Option Notice") that an Option Trigger Date has occurred.
Within ten (10) business days after receiving an Option Notice, Seller have the
right, but not the obligation, to elect to acquire the Property (including
improvements thereupon) as follows:
(i) If the Option Notice is given after an Option Trigger Date
described in clause (iii) below, Seller may instruct Buyer to purchase
---
the Property for the Termination Value on its behalf pursuant to the
Lease Agreement by depositing into an escrow account a sum equal to
the Termination Value. Any amounts in excess of the Termination Value
required to purchase the Property (including all improvements
thereupon) pursuant to the Lease Agreement shall be paid by Buyer.
Any funds deposited in that escrow by Seller shall remain Seller's
funds,
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<PAGE>
and under Seller's control, until the closing of the purchase pursuant
to the Lease Agreement.
(ii) If the Option Notice is given after an Option Trigger Date
other than that described in clause (iii) below, Seller may purchase
---
the Property (including all improvements thereupon) for a price equal
to the Option Price.
As used herein, the term "Option Trigger Date" means:
(iii) So long as the Lease Agreement is in effect, the date that
is one hundred eighty (180) days prior to the date upon which Buyer
intends to terminate the Lease Agreement, if Buyer then no longer
occupies, or as of the termination of the Lease Agreement will cease
to occupy, the Property.
(iv) If the Lease Agreement is not in effect, and no prior
Option Notice has been given, the date that is one hundred eighty
(180) days prior to the date upon which Buyer intends to cease to
occupy the Property.
(v) If the Lease Agreement is not in effect, and no prior
Option Notice has been given, the date upon which Buyer ceases to
occupy the Property.
(vi) If no prior Option Notice has been given, the date that is
thirty-five (35) years after the Closing.
In the event that Seller wishes to transfer such option to a third party, Buyer
will have the right of first refusal to acquire such option, upon the terms and
conditions agreed upon between Seller and the third party. Upon any exercise of
the option provided for in this Section 8.1.3, Buyer shall be obligated to
convey title to Seller in the same condition that it existed on the Closing,
subject to no (a) monetary liens or encumbrances, or (b) leases including
without limitation the Lease Agreement. Seller's option rights shall be
contained in an option agreement to be recorded at Closing. If any Option
Trigger Date shall occur and Buyer fails to give an Option Notice, Seller
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may at any time after the Option Trigger Date give Buyer an Option Notice, which
will have the same effect as if that Option Notice were given by Buyer to
Seller. The closing of Seller's acquisition of the Property shall take place
through escrow and shall close within one hundred eighty (180) days after the
Option Notice unless a different closing date is required pursuant to the Lease
Agreement.
ARTICLE 9
DEFAULT AND REMEDIES
--------------------
9.1 Default by Buyer.
----------------
9.1.1 Buyer's Breach. In the event (a) Buyer fails to make
--------------
timely payment of any of the amounts described in Sections 2.2, 2.3 or 2.4, (b)
Buyer notifies Seller that Buyer does not intend to proceed with the Closing or
(c) provided that Seller has performed all of its obligations under this
Agreement, the Close of Escrow and the consummation of the transactions herein
contemplated do not occur by reason of any default by Buyer (each of (a), (b)
and (c) being referred to in this Article 9 as a "Buyer's Breach"), Seller shall
be entitled, subject to the conditions enumerated below, to recover from Buyer
its Actual Damages (as defined below) attributable to Buyer's Breach of its
obligations under this Agreement.
9.1.2 Actual Damages. Actual Damages is defined as the sum of
--------------
the amounts described in clauses (i), (ii) and (iii) below, plus Seller's
reasonable attorneys' fees and costs in connection with or arising out of
Buyer's Breach.
(i) An amount representing the excess of the sum of $10,500,000
over the value of the Property on the date of Buyer's breach, such
value to be determined by an appraisal as described below;
(ii) An additional sum which represents Seller's actual cost of
demolition on the Property; and
(iii) An additional sum which represents the costs of relocation
incurred by Seller. This additional sum is understood to include
without
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<PAGE>
limitation additional facilities costs for their minimum period of
commitment by Seller. Relocation costs shall be reduced by the
economic value of betterments in equipment (including software) and
related improvements, attributable to the relocation activity. As
used herein, the term "betterment" means an increase in capacity or
utility of an item over that existing prior to its relocation that
does not arise merely because the relocated item is replaced with a
new item or has a different location. For example, a software upgrade
would be a betterment. The replacement of a piece of furniture that
serves the same function in the relocated space as in the existing
space would not be a betterment so long as it is comparable in
utility.
Actual Damages are agreed by the parties not to include any
---
claim by Seller for punitive damages or like elements. If the appraised value of
the Property as established by the appraisal as described herein exceeds
$10,500,000, the excess amount will further reduce Actual Damages as calculated
under this Section.
9.1.3 Appraisal. The appraisal for purposes of Section 9.1.2(i)
---------
above shall be prepared by an MAI certified appraiser with demonstrated
experience in industrial land appraisals within Los Angeles County, and as
agreed upon by Seller and Buyer. The appraiser shall determine the value of the
Property in a condition assuming all of the Site Work had been completed
(whether or not the case) and that the Property can be used for a use consistent
with the Improvements, and shall be determined as of the date of Buyer's Breach.
9.1.4 Certain Conditions to Recovery. The following conditions
------------------------------
precedent shall each have been satisfied prior to any recovery by Seller of
Actual Damages:
(i) Seller shall have delivered a written notice to both Buyer
and to Escrow Holder that Seller has performed each of its obligations
under this Agreement, including, but not limited to, those obligations
of Seller set forth in Articles 3 and 5 of this Agreement required to
be performed by Seller as of the time of Buyer's Breach. Seller's
notice shall further state that Seller wishes to have its claim of
Buyer's breach and its claim for damages associated with that breach
submitted to and
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adjudicated by an arbitrator under the rules and auspices of the
American Arbitration Association ("AAA").
9.1.5 Arbitration of Buyer's Breach and Actual Damages.
------------------------------------------------
(i) Within five (5) business days of the date of Seller's
notice, each party shall propose a list of no less than two (2) and no
more than five (5) arbitrators each of whom is an approved panel
member of AAA familiar with handling commercial real property
disputes. The first name listed on both lists shall be chosen as the
arbitrator to hear Seller's claim. Each list shall also designate the
name of one (1) arbitrator who, if the parties' lists do not contain
any common names, shall appoint one (1) arbitrator from its list who
together, within five (5) business days of notification by Seller will
propose the name of a third arbitrator who shall be qualified under
the same criteria. The chosen arbitrator shall hear Seller's claim
within sixty (60) days after completion of the appraisal described in
Section 9.1.3 above or as soon as practicable in the discretion of
arbitrator. The decision of the arbitrator shall be binding upon both
Seller and Buyer and may be entered in any court of competent
jurisdiction.
(ii) The determination of the arbitrator shall be limited to the
sole issues of Seller's claim for Actual Damages caused by Buyer's
Breach and any dispute as to the existence of Buyer's Breach.
(iii) The arbitrator shall prepare and provide to the parties a
written decision on all matters subject to the arbitration, including
factual findings and the reasons that form the basis of the
arbitrator's decision. The arbitrator shall not have the power to
commit errors of law or legal reasoning, and the award of the
arbitrator shall be subject to vacation or correction for any such
error or any other grounds specified in Code of Civil Procedure
Section 1286.2 or Section 1286.6. The award of the arbitrator shall
be mailed to the parties no later than thirty (30) days after the
close of the arbitration hearing or as soon as practicable in the
discretion of arbitrator. The arbitration proceeding shall be
reported by a certified shorthand court reporter. Written transcripts
of the proceedings
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<PAGE>
shall be prepared and made available to the parties.
(iv) The provisions of the California Evidence Code shall apply
to the arbitration hearing.
(v) The costs of arbitration and the appraisal shall be borne
by the non-prevailing party unless the arbitrator determines
otherwise. Any Deposit which shall have been nonrefundable at the time
of the alleged breach shall be applicable to any Actual Damages to be
paid by Buyer to Seller under this Section 9.1.
(vi) NOTICE: BY INITIALING IN THE SPACE BELOW, EACH PARTY IS
AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN
THIS SECTION 9.1 DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW AND IS GIVING UP ANY RIGHTS IT MIGHT POSSESS TO HAVE
THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE
SPACE BELOW, EACH PARTY IS GIVING UP ITS JUDICIAL RIGHTS TO DISCOVERY
AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THIS
SECTION 9.1. IF EITHER PARTY REFUSES TO SUBMIT TO ARBITRATION AFTER
AGREEING TO THIS SECTION 9.1, IT MAY BE COMPELLED TO ARBITRATE UNDER
THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. THE PARTIES'
AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTOOD THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THIS SECTION 9.1 TO NEUTRAL AND BINDING ARBITRATION.
__________________________ ________________________
Buyer's Initials Seller's Initials
9.2 Default by Seller. SUBJECT TO PARAGRAPH 3.2, IN THE EVENT
-----------------
THE CLOSE OF ESCROW AND THE CONSUMMATION OF THE
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<PAGE>
TRANSACTIONS HEREIN CONTEMPLATED DO NOT OCCUR BY REASON OF ANY DEFAULT BY
SELLER, BUYER SHALL BE ENTITLED TO EITHER (i) TERMINATE THIS AGREEMENT AND THE
ESCROW AND RECOVER FROM SELLER THE DEPOSIT AND ITS OUT-OF-POCKET COSTS FOR
BUYER'S STUDIES IN AN AMOUNT NOT TO EXCEED $100,000.00, OR (ii) SEEK THE
SPECIFIC PERFORMANCE HEREOF.
9.3 Waiver of Right to Record Lis Pendens. AS PARTIAL CONSIDERATION
-------------------------------------
FOR SELLER ENTERING INTO THIS AGREEMENT, BUYER EXPRESSLY WAIVES ANY RIGHT (AT
COMMON LAW OR OTHERWISE) TO RECORD OR FILE A LIS PENDENS OR A NOTICE OF PENDENCY
OF ACTION OR SIMILAR NOTICE AGAINST ALL OR ANY PORTION OF THE PROPERTY IN
CONNECTION WITH ANY ALLEGED DEFAULT BY SELLER HEREUNDER. UNLESS IT SATISFIES THE
FOLLOWING CONDITIONS PRECEDENT, (1) THE OUTSIDE CLOSING DATE SHALL HAVE
OCCURRED, AND (2) WITHIN SIXTY (60) DAYS AFTER THE OUTSIDE CLOSING DATE, BUYER
SHALL (A) NOTIFY THE ESCROW HOLDER AND SELLER IN WRITING OF ITS ELECTION TO SEEK
SPECIFIC PERFORMANCE AND (B) DEPOSIT WITH ESCROW HOLDER THE PURCHASE PRICE IN
IMMEDIATELY AVAILABLE FUNDS WITHOUT ANY ADJUSTMENTS EXCEPT FOR PRORATIONS. SUCH
ELECTION NOTICE SHALL: (i) REPRESENT TO ESCROW HOLDER AND SELLER THAT BUYER IS
READY, WILLING AND ABLE TO PERFORM ALL OF BUYER'S OTHER OBLIGATIONS THAT WERE
PERFORMABLE ON THE OUTSIDE CLOSING DATE; AND (ii) IRREVOCABLY INSTRUCT ESCROW
HOLDER TO DELIVER THE PURCHASE PRICE TO SELLER IMMEDIATELY UPON SELLER'S DEPOSIT
OF THE EXECUTED GRANT DEED AND FIRPTA CERTIFICATE WITH ESCROW HOLDER.
______________________ ______________________
Buyer's Initials Seller's Initials
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
------------------------------
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<PAGE>
10.1 Representations and Warranties of Seller. Seller represents
----------------------------------------
and warrants to Buyer all of the following, as of the date hereof and as of the
Closing:
10.1.1 Authority. Seller has the full power and authority
---------
to enter into and comply with the terms of this Agreement. The execution,
delivery and performance of this Agreement by Seller have been duly authorized
and approved by all requisite action, and no other authorizations or approvals
(other than the Lot Line Adjustment), whether of governmental bodies or
otherwise, will be necessary in order to enable Seller to enter into or to
comply with the terms of this Agreement.
10.1.2 Binding Effect of Documents. This Agreement and all
---------------------------
other documents and certificates executed and delivered by Seller in connection
with the transactions contemplated by this Agreement constitute legal, valid and
binding obligations of Seller, enforceable against Seller in accordance with
their respective terms. Neither this Agreement nor anything provided to be done
under this Agreement violates or shall violate any contract, document,
understanding, agreement or instrument to which Seller is a party or by which it
is bound.
10.1.3 Absence of Litigation. Except as disclosed to Buyer,
---------------------
to Seller's knowledge, Seller has not been served with, or received a copy of, a
complaint in litigation which will affect the Property.
10.1.4 Absence of Material Change. Except as disclosed to
--------------------------
Buyer, to Seller's knowledge, Seller has not received any written notice from a
governmental agency of (i) any pending widening, modification or realignment of
the streets abutting the Property, or (ii) any proposed eminent domain action;
or (iii) any uncured violation of any law, ordinance or regulation (including
but not limited to zoning, building, fire, health and safety) with respect to
portions of the Property other than improvements.
10.1.5 Absence of Hazardous Materials. To Seller's knowledge,
------------------------------
and except as otherwise disclosed to Buyer in writing (including without
limitation the reports described in Schedule 12.2): (i) there are no Hazardous
Materials installed or stored in or otherwise existing at, on, in or under the
Property which are in violation of any Environmental Laws or which are or have
been at any time in amounts or
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<PAGE>
concentrations sufficient to require the reporting of such materials to any
governmental authority, and (ii) no Hazardous Materials were previously
installed, stored or existed at the Property in violation of any Environmental
Laws.
As used herein, the term "Hazardous Materials" shall mean any
hazardous or toxic materials, substances or wastes, pollutants or contaminants
defined, listed or regulated by the Environmental Laws (defined below) or any
other federal, state, county, or local law, regulation, order or common law
decision, including but not limited to (i) any petroleum products and/or by-
products (including any fraction thereof), flammable substances, explosives,
radioactive materials, hazardous or toxic wastes, substances or materials, known
carcinogens or any other materials, contaminants or pollutants which pose a
hazard to the Property or to persons on or about the Property or cause the
Property to be in violation of any Environmental Laws, (ii) asbestos in any form
which is friable, (iii) urea formaldehyde in form insulation or any other form,
(iv) transformers or other equipment which contain dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty (50) parts per million or
any other more restrictive standard then prevailing, (v) medical wastes and
biohazards, (vi) radon gas, and (vii) any other chemical, material or substance
exposure to which is prohibited, limited or regulated by any governmental
authority or may or could pose a hazard to the health and safety of the
occupants of the Property or the owners and/or occupants of property adjacent to
or surrounding the Property.
As used herein, the term "Environmental Laws" means and includes any
law, ordinance, regulation or requirement now or hereinafter in effect relating
to land use, soil, surface water, groundwater (including the protection,
cleanup, removal, remediation or damage thereof), human health and safety or any
other environmental matter, including, without limitation, the following laws as
the same may be amended from time to time: the Comprehensive Environmental
Response Compensation and Liability Conservation and Recovery Act (42 U.S.C.
(S)(S) 9601, et seq.), the Solid Waste Disposal Act, as amended by the Resource
-------
Conservation and Recovery Act (42 U.S.C. (S)(S) 6901 et seq.), the Emergency
-------
Planning and Community Right to Know Act (42 U.S.C. (S)(S) 11001 et seq.), the
-------
Clean Air Act (42 U.S.C. (S)(S) 7401 et seq.), the Clean Water Act (33 U.S.C.
-------
(S)(S) 1251 et seq.), the Toxic Substances Control Act (15 U.S.C. (S)(S) 2601 et
------- --
seq.), the Hazardous Materials Transportation Act (49 U.S.C. (S)(S) 1801 et
- ---- --
seq.), the Occupational Safety and Health Act (29 U.S.C. (S)(S) 651 et seq.),
- ---- -------
the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C. (S)(S) 136 et
--
seq.), and the Safe
- ----
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<PAGE>
Drinking water Act (42 U.S.C. (S)(S) 300f et seq.), as any of the same may be
-------
amended from time to time, and any state or local law dealing with environmental
matters, and any regulations, orders, rules, procedures, guidelines and the like
promulgated in connection therewith, regardless of whether the same are in
existence on the date of this Agreement.
10.1.6 Limitations on Seller's Warranties.
----------------------------------
(i) As used in this Agreement, the words "Seller's knowledge"
or words of similar import shall be deemed to mean, and shall be
limited to, the actual (as distinguished from implied, imputed or
constructive) knowledge of Daniel Bane, David Woodward or Robert Ling
without any duty of inquiry or investigation.
(ii) If at or prior to the Closing, (A) Buyer shall become aware
(whether through its own efforts, by notice from Seller or otherwise)
that any of the representations or warranties made herein by Seller,
are untrue, inaccurate or incorrect and shall give Seller notice
thereof at or prior to the Closing, or (B) Seller shall notify Buyer
that a representation or warranty made herein by Seller, is untrue,
inaccurate or incorrect, then Seller may, in its sole discretion,
elect by notice to Buyer to adjourn the Closing one or more times for
up to thirty (30) days in the aggregate in order to cure or correct
such untrue, inaccurate or incorrect representation or warranty. If
any such representation or warranty is either (1) immaterial or (2)
material but not materially untrue, inaccurate or incorrect, and is
not cured or corrected by Seller, on or before the Outside Closing
Date (whether or not the Closing is adjourned as provided above),
Buyer shall nevertheless be deemed to, and shall, waive such
misrepresentation or breach of warranty and shall consummate the
transactions contemplated hereby without any reduction of or credit
against the Purchase Price. If any such representation or warranty is
both (1) material and (2) materially untrue, inaccurate or incorrect,
and is not cured or corrected by Seller, on or before the Closing Date
(whether or not the Closing is adjourned as provided above), then
Buyer, as its sole remedy for any and all such materially untrue,
inaccurate or incorrect material representations or warranties, shall
elect either (x) to waive such
-29-
<PAGE>
misrepresentations or breaches of warranties and consummate the
transactions contemplated hereby without any reduction of or credit
against the Purchase Price, or (y) to terminate this Agreement by
notice given to Seller on the Outside Closing Date, in which event,
this Agreement shall be terminated and neither party shall have any
further rights, obligations or liabilities hereunder, except for the
Surviving Obligations, and except that Buyer shall be entitled to a
return of the Deposit provided Buyer is not otherwise in default
hereunder. Buyer acknowledges and agrees that (x) at or prior to the
Closing, Buyer's rights and remedies in the event any of Seller's
representations or warranties made in this Agreement are untrue,
inaccurate or incorrect shall be only as provided in this Section
10.1.6(ii), and (y) if the Closing does not occur, Buyer hereby
expressly waives, relinquishes and releases all other rights or
remedies available to it at law, in equity or otherwise (including,
without limitation, the right to seek damages from Seller) as a result
of any of Seller's representations or warranties made in this
Agreement being untrue, inaccurate or incorrect.
(iii) In the event the Closing occurs, notwithstanding anything
contained in Section 10.1.6(ii) or elsewhere in this Agreement to the
contrary, Buyer hereby expressly waives, relinquishes and releases any
right or remedy available to it at law, in equity or under this
Agreement to make a claim against Seller for damages that Buyer may
incur, or to rescind this Agreement and the transactions contemplated
hereby, as the result of any of Seller's representations or warranties
being untrue, inaccurate or incorrect if Buyer knew, should have known
or is deemed to have known that such representation or warranty was
untrue, inaccurate or incorrect at the time of the Closing and Buyer
nevertheless closes title hereunder. For example, Purchaser shall be
"deemed to have known" that a representation or warranty was untrue,
inaccurate or incorrect at the time of the Closing to the extent that
the Property information furnished or made available to or otherwise
obtained by Buyer contains information which is inconsistent with such
representation or warranty. The provisions of this Section
10.1.6(iii) shall survive the Closing.
-30-
<PAGE>
10.2 Representations and Warranties of Buyer. Buyer represents and
---------------------------------------
warrants to Seller all of the following, as of the date hereof and as of the
Closing:
10.2.1 Authority. Buyer is a duly qualified and registered
---------
corporation in the State of California, and has the full power and authority to
enter into and comply with the terms of this Agreement. The execution, delivery
and performance of this Agreement by Buyer have been duly authorized and
approved by all requisite action, and no other authorizations or approvals,
whether of governmental bodies or otherwise, will be necessary in order to
enable Buyer to enter into or to comply with the terms of this Agreement.
10.2.2 Binding Effect of Documents. This Agreement and all
---------------------------
other documents and certificates executed and delivered by Buyer in connection
with the transactions contemplated by this Agreement constitute legal, valid and
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Neither this Agreement nor anything provided to be done under
this Agreement violates or shall violate any contract, document, understanding,
agreement or instrument to which Buyer is a party or by which it is bound.
10.3 Breach of Representations and Warranties. If Seller or Buyer
----------------------------------------
believes that the other party is in breach of the representations and warranties
set forth in Sections 10.1 or 10.2 above, then such party shall provide express
written notice of any claim of breach or default to the alleged breaching or
defaulting party, and such alleged breaching or defaulting party shall have five
(5) business days in which to cure such alleged default; provided, however, that
no such cure period may extend beyond the Closing.
10.4 Accuracy and Survival of Representations and Warranties. Each
-------------------------------------------------------
of the representations and warranties of Seller and Buyer contained in this
Agreement and in any document or certificate delivered in connection herewith is
at the date hereof and as of the Closing shall be true and correct in all
material respects. The representations and warranties set forth in or made
pursuant to Sections 10.1 and 10.2 shall remain operative and shall survive the
Closing for a period of six (6) months.
ARTICLE 11
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<PAGE>
BROKERS' COMMISSIONS
--------------------
11.1 Brokers' Commissions. Seller and Buyer each represent and
--------------------
warrant to the other that neither has employed, retained or consulted any
broker, agent or other finder with respect to the Property except as provided in
the List of Particulars, and Seller and Buyer shall each indemnify, defend and
hold the other harmless from and against any and all claims, demands, causes of
action, debts, liabilities, judgments and damages, including, without
limitation, costs and reasonable attorneys' fees incurred in connection with the
foregoing, which may be asserted or recovered against the other on account of
any brokerage fee, commission of other compensation arising in breach of this
representation and warranty. Seller shall pay Brokers a commission for such
services pursuant to separate agreements delivered to and approved by Seller in
writing prior to the date hereof. Buyer has no obligation to pay Brokers.
Seller shall have no obligation to pay Brokers a commission or any other
compensation for their services if Buyer does not consummate its purchase of the
Property and pay the Purchase Price, except to the extent the Brokers are
entitled to compensation under their separate agreements in the event the
Closing does not occur due to a Seller Default under this Agreement. Neither
Seller nor Buyer shall have any obligation to pay any commission or fee to any
agent or broker other than Brokers who may have introduced Brokers to Buyer or
have provided any other assistance to Brokers or Buyer. The agreements of
Seller and Buyer set forth in this Article 11 shall survive the Closing and any
termination of this Agreement.
ARTICLE 12
ACCESS
------
12.1 Access to Property. From the date hereof until the Closing,
------------------
after reasonable prior notice from Buyer to Seller or IDS, Seller shall provide
Buyer and Buyer's agents with access to the Property. Buyer's inspection of the
Property shall not unreasonably disrupt the business operations or quiet
enjoyment of any tenants of the Property. Buyer shall be liable for any damage
or injury to any person or property occasioned by the acts of Buyer, Buyers
employees, agents or representatives during any such inspection, and Buyer
shall, and does hereby, indemnify, defend and hold harmless Seller and its
officers, directors, agents and employees from any and all liens,
-32-
<PAGE>
claims, demands or liability resulting therefrom. Prior to entry onto the
Property by Buyer or any of Buyer's employees, agents or representatives, Buyer
shall deliver to Seller evidence reasonably satisfactory to Seller that Buyer
maintains: (i) comprehensive general liability insurance covering Buyer's
operations in the minimum amount of Two Million Dollars ($2,000,000) per
occurrence, and (ii) workers' compensation insurance covering Buyers employees.
The indemnification by Buyer contained in this Section shall survive the Closing
and any termination of this Agreement, as the case may be.
12.2 Access to Operating Information. Upon the opening of Escrow,
-------------------------------
Seller shall provide Buyer and Buyer's agents with copies of the engineering and
environmental studies, surveys, title reports, permits and books and records
covering and relating to the operation of the Property, to the extent that these
documents are available or under Seller's control and relate directly to the
demolition of the existing improvements on the Property, the environmental
condition of the Property and other construction issues, except appraisals and
information which is privileged, confidential or proprietary. Buyer expressly
agrees that Seller shall furnish copies of such documents and information to
Buyer for informational purposes only and without representation or warranty as
to the accuracy or completeness of the contents of such materials. Buyer
covenants and agrees that Buyer will not rely on such documents and information
and will conduct its own due diligence on the matters contained in such
documents and information. All books and records provided to Buyer in connection
with Buyer's inspection of the Property will be held by Buyer in strict
confidence and solely for the purpose of enabling Buyer to evaluate Buyer's
purchase of the Property pursuant to this Agreement. Buyer acknowledges receipt
of the due diligence materials described on Schedule 12.2.
ARTICLE 13
MISCELLANEOUS MATTERS
---------------------
13.1 Notices. All notices, demands or requests required or
-------
permitted to be given pursuant to this Agreement shall be in writing. If not
otherwise provided hereunder, all notices, demands or requests to be sent to any
party hereto shall be deemed to have been properly given or served by delivering
the same personally to
-33-
<PAGE>
each party, by sending the same through a nationally recognized, overnight
courier service, by depositing the same in the United States mail, addressed to
such party, postage prepaid, and registered or certified with return receipt
requested, or by telecopy with an original to follow by United States mail at
the addresses for such parties indicated on the List of Particulars. All
notices, demands and requests shall be effective when personally delivered to
the addressee, a hard copy electronically-generated confirmation of facsimile
transmission is received by the sender or received by overnight courier, or upon
the third day after being deposited in the United States mail in accordance with
the foregoing.
13.2 Time. Time is of the essence in this Agreement and each and
----
every provision of this Agreement.
13.3 Binding Effect. This Agreement shall bind and inure to the
--------------
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
13.4 Merger of Agreement. Unless otherwise specified in this
-------------------
Agreement, all the terms and conditions of this Agreement shall not survive the
Closing and shall be merged into the Grant Deed and Bill of Sale from Seller to
Buyer.
13.5 Severability. If all or any portion of any of the provisions
------------
of this Agreement shall be declared invalid, illegal or unenforceable bylaws
applicable thereto, then such invalidity, illegality or unenforceability shall
not affect any other provision of this Agreement,
13.6 Captions. The titles or captions of the provisions of this
--------
Agreement are merely for convenience of reference and are not representations of
matters included or excluded from such provisions.
13.7 Entire Agreement. The parties hereto expressly acknowledge and
----------------
agree that, with regard to the subject matter of this Agreement and the
transactions contemplated herein, there are no oral agreements between the
parties hereto and this Agreement, including the defined terms and all exhibits
and addenda, if any, attached hereto, embodies the final and complete agreement
between the parties, supersedes all prior and contemporaneous negotiations,
offers, proposals, agreements, commitments,
-34-
<PAGE>
promises, acts, conduct, course of dealing, representations, statements,
assurances and understandings, whether oral or written, and may not be varied or
contradicted by evidence of any such prior or contemporaneous matter or by
evidence of any subsequent oral agreement of the parties hereto.
13.8 No Modifications Except in Writing. No modification hereof
----------------------------------
shall be binding unless so forth in writing and signed by the party or patties
to be bound by the modification.
13.9 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California.
13.10 Interpretation. The doctrine that any ambiguity contained
--------------
in a contract shall be construed against the party whose counsel has drafted the
contract is expressly waived by each of the parties hereto with respect to this
Agreement.
13.11 Further Assurances. In addition to the acts and deeds recited
------------------
herein and contemplated to be performed, executed and/or delivered by either
Seller or Buyer, Seller and Buyer shall perform, execute and/or deliver or cause
to be performed, executed and/or delivered on the Closing, or if necessary,
after the Closing, any and all further acts, deeds and assurances as may, from
time to time, be reasonably required to consummate the transactions contemplated
in this Agreement.
13.12 Agreement Not to Be Recorded; Confidentiality. Seller and Buyer
---------------------------------------------
acknowledge and agree that neither this Agreement nor any memorandum or summary
hereof shall be recorded or filed in any public records or files and any such
recording or filing by any person, whether or not a party to this Agreement,
shall be a violation of this Agreement and shall be considered null and void.
Seller and Buyer further acknowledge and agree that, prior to the Closing,
neither Seller nor Buyer shall disclose any material term of this Agreement to
any party not affiliated with or advising Seller or Buyer, without the prior
written consent of the other party hereto. Seller and Buyer further acknowledge
that either party may enforce any breach of such confidentiality by seeking
injunctive relief, or by suit for damages, or both, or by any other legal means.
This provision shall survive the Closing or the termination of this Agreement.
-35-
<PAGE>
13.13 Attorney's Fees and Expenses. If either party to this
----------------------------
Agreement brings suit to enforce this Agreement, then the prevailing party shall
be entitled to recover from the other party reasonable attorneys' fees and costs
incurred by the prevailing party and to receive an award therefor from a court
of competent jurisdiction.
13.14 Assignment. Buyer shall not assign this Agreement
----------
without obtaining Seller's prior written consent, which consent shall not be
unreasonably withheld; provided further, however, that Buyer may assign this
Agreement at Closing without Seller's prior written consent to the Trustee or
another trustee acting in a similar capacity to Trustee for purposes of Buyer's
financing arrangements. No such assignment shall release Buyer from any
obligations under this Agreement.
13.15 Days. Except where specified as "business" days, the
----
term "days" means calendar days. The term "business days" means calendar days
other than Saturday or Sunday when national banks are open for business in Los
Angeles, California.
ARTICLE 14
PROPERTY "AS-IS"
----------------
14.1 No Side Agreements or Representations; As-is Purchase. Buyer
-----------------------------------------------------
represents, warrants and covenants to Seller that Buyer will, during the
Contingency Period, independently and personally inspect the Property and
Improvements, if any, and that Buyer has entered into this Agreement based upon
its rights and intentions to make such personal examination and inspection.
Buyer agrees that Buyer will accept the Property, in its then condition AS-IS
AND WITH ALL ITS FAULTS, including without limitation, any faults and conditions
specifically referenced in this Agreement. No person acting on behalf of Seller
is authorized to make, and by execution hereof, Buyer acknowledges and agrees
that, except as specifically provided in Section 10.1 of this Agreement, Seller
has not made, does not make and specifically negates and disclaims any
representations, warranties, promises, covenants, agreements or guaranties of
any kind or character whatsoever, whether express or implied, oral or written,
past, present or future, of, as to, concerning or with respect to the Property.
-36-
<PAGE>
Buyer further acknowledges and agrees that having been given the
opportunity to inspect the Property and review information and documentation
affecting the Property, Buyer is relying solely on its own investigation of the
Property and review of such information and documentation, and not on any
information provided or to be provided by Seller. Buyer further acknowledges
and agrees that any information made available to Buyer or provided or to be
provided by or on behalf of Seller with respect to the Property was obtained
from a variety of sources and that Seller has not made any independent
investigation or verification of such information and makes no representations
as to the accuracy or completeness of such information except as may otherwise
be provided herein. Buyer agrees to fully and irrevocably release all such
sources of information and preparers of information and documentation to the
extent such sources or preparers are Seller or Seller's employees, officers,
directors, representatives, agents, servants, attorneys, affiliates, parent
companies, subsidiaries, successors or assigns from any and all claims that they
may now have or hereafter acquire against such sources and preparers of
information for any costs, loss, liability, damage, expense, demand, action or
cause of action arising from such information or documentation. Seller is not
liable or bound in any manner by any oral or written statements, representations
or information pertaining to the Property, or the operation thereof, furnished
by any of the foregoing entities and individuals or any other individual or
entity. Buyer further acknowledges and agrees that to the maximum extent
permitted by law, the sale of the Property as provided for herein is made on an
"AS-IS" condition and basis with all faults, and that Seller has no obligations
-----
to make repairs, replacements or improvements except for the Site Work.
14.2 Release. Except as expressly provided in this Agreement,
-------
including with respect to Seller's obligation to perform the Site Work, Buyer
and anyone claiming by, through or under Buyer hereby fully and irrevocably
releases Seller and each of its employees, officers, directors, representatives,
agents, servants, attorneys, affiliates, parent companies, subsidiaries,
successors and assigns, and all persons, firms, corporations and organizations
acting on their behalf, from any and all claims that it may now have or
hereafter acquire against Seller or any of its employees, officers, directors,
representatives, agents, servants, attorneys, affiliates, parent companies,
subsidiaries, successors and assigns, and all persons, firms, corporations and
organizations acting on their behalf for any costs, loss, liability, damage,
expenses, demand, action or cause of action arising from or related to any
construction defects, errors, omissions or other conditions, latent or
otherwise, geotechnical and seismic,
-37-
<PAGE>
affecting the Property or any portion thereof including, without limitation, (1)
environmental matters (other than those matters included within the Site Work)
which were:
(i) Described or referred to in any environmental audit
obtained by Buyer; or
(ii) Reasonably discoverable by prudent investigation during the
Contingency Period; or
(iii) Otherwise disclosed by Seller to Buyer or discovered by
Buyer at any time prior to the Closing;
And (2) the items described in Section 14.1 above.
This release includes claims of which Buyer is presently unaware or
which Buyer does not presently suspect to exist which, if known by Buyer, would
materially affect Buyer's release to Seller. Buyer specifically waives the
provision of California Civil Code Section 1542, which provides as follows:
"A general release does not extend to claims which the creditor does
not know or expect to exist in his favor at the time of executing the
release, which if known to him must have materially affected the
settlement with the debtor."
It is understood and agreed that the Purchase Price has been adjusted
by prior negotiations to reflect that all of the Property is sold by Seller and
purchased by Buyer subject to the foregoing. It is not contemplated that the
Purchase Price will be increased if costs to Buyer associated with the Property
prove to be less than expected nor will the Purchase Price be reduced if the
Buyer's plan for the Property leads to higher cost projections. The sole remedy
of the Buyer will be to terminate this agreement as provided herein prior to the
end of the Contingency Period.
________________________ ______________________
Buyer's initials Seller's initials
-38-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Purchase and
Sale Agreement and Joint Escrow Instructions to become effective as of the date
first written above.
SELLER:
CERTIFIED GROCERS OF CALIFORNIA, LTD.
a California corporation
By:__________________________________
Name:________________________________
Title:_______________________________
BUYER:
SMART & FINAL STORES CORPORATION,
a California corporation
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
-39-
<PAGE>
The undersigned, a duly authorized representative of Escrow Holder, hereby
accepts this Agreement and agrees to act as Escrow Holder in accordance
herewith.
COMMERCE ESCROW COMPANY
By:________________________
Name:______________________
Title:_____________________
-40-
<PAGE>
EXHIBIT "A"
Legal Description of Property
(See Attached)
-41-
<PAGE>
EXHIBIT "B"
Site Plan
(See Attached)
-42-
<PAGE>
EXHIBIT C
---------
FORM OF DEED
------------
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
______________________________
______________________________
______________________________
Attention: ___________________
MAIL TAX STATEMENTS TO:
Same as above
- --------------------------------------------------------------------------------
(Above Space For Recorder's Use Only)
CORPORATION GRANT DEED
----------------------
In accordance with Section 11932 of the California Revenue and
Taxation Code, Grantor has declared the amount of transfer tax which is due by a
separate statement which is not being recorded with this Grant Deed.
FOR A VALUABLE CONSIDERATION, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED,
Certified Grocers of California, Ltd., a California corporation, hereby grants
to _______________ the real property in Los Angeles County, State of California,
and described in Exhibit A attached hereto and made a part hereof.
This conveyance is subject to non-delinquent taxes and assessments,
and all matters of record and off-record affecting the Property, including
without limitation matters which could be ascertained by an inspection or survey
of the Property. Grantor disclaims any and all express or implied warranties
regarding the Property other than the implied warranty stated in subparagraph 1
of Section 1113 of the California Civil Code.
-43-
<PAGE>
DATED: _______________, 199__
CERTIFIED GROCERS OF CALIFORNIA, LTD.,
a California corporation
By:___________________________________
Title:________________________________
By:___________________________________
Title:________________________________
-44-
<PAGE>
EXHIBIT D
---------
BUYER'S ADJACENT PARCELS
------------------------
(See Attached)
-45-
<PAGE>
EXHIBIT E
---------
CONSTRUCTION ZONE AND CERTAIN UTILITIES
---------------------------------------
(See Attached)
-46-
<PAGE>
EXHIBIT F
---------
DATA CENTER
-----------
(See Attached)
-47-
<PAGE>
SCHEDULE 12.2
-------------
<TABLE>
<CAPTION>
DOCUMENT SENT TO: DATE SENT:
- ---------------------------------------------------------------------------------
<S> <C> <C>
. Phase II Environmental Assessment by
Harding Lawson (first copy) Robert Wess July 1, 1997
. Phase II Environmental Assessment
(second copy) Robert Wess August 1, 1997
. 1992 ALTA Survey of entire site Robert Wess August 20, 1997
. Drawing of Proposed Lot Line Adjustment
by DANJON Engineering [same document
will be used to record Lot Line Adjustment] Robert Wess August 20, 1997
. Preliminary Title Report provided by
Old Republic Title Robert Wess August 20, 1997
. Phase I Environmental Assessment dated
January 15, 1992 and prepared by ATC
Environmental Inc. Robert Wess September 12, 1997
. Phase I Environmental Assessment Report
dated March 10, 1994, prepared by ATC
Environmental Inc. Robert Wess September 12, 1997
. Phase II Site Assessment dated
September 22, 1994, prepared by
Groundwater Technology, Inc. Robert Wess September 12, 1997
</TABLE>
-48-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
As of August 30, 1997, the Company's subsidiaries, all wholly-owned and
incorporated in California (except where noted otherwise) are:
Grocers Equipment Co.
Grocers and Merchants Insurance Service, Inc.
(1) Grocers Capital Company
Springfield Insurance Company Limited (incorporated in Bermuda)
Grocers Specialty Company
(2) Grocers Development Center, Inc.
Grocers and Merchants Management Company
Preferred Public Storage Company
Crown Grocers, Inc.
Grocers General Merchandise Company
(3) Springfield Insurance Company
(4) Banner Marketing, Inc.
(5) Cerp Acquisition Corp.
Morga No.12 Acquisition Corp.
Walnut Creek No.7 Acquisition Corp.
Lauresm Corporation
- --------------------------------
(1) Outstanding capital shares are owned by Grocers Equipment Co. (67.63%)
and the Registrant (32.37%)
(2) Outstanding capital shares are owned by Grocers Equipment Co.
(3) Outstanding capital shares are owned by Grocers and Merchants Insurance
Services, Inc.
(4) Outstanding capital shares are owned by Grocers Equipment Co.
(5) Outstanding capital shares are owned by Grocers Capital Company
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-30-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-30-1997
<CASH> 7,900
<SECURITIES> 36,714
<RECEIVABLES> 99,373
<ALLOWANCES> (4,880)
<INVENTORY> 135,272
<CURRENT-ASSETS> 245,999
<PP&E> 165,443
<DEPRECIATION> (89,308)
<TOTAL-ASSETS> 394,002
<CURRENT-LIABILITIES> 186,973
<BONDS> 92,217
0
0
<COMMON> 62,710
<OTHER-SE> 13,317
<TOTAL-LIABILITY-AND-EQUITY> 394,002
<SALES> 1,927,092
<TOTAL-REVENUES> 1,927,092
<CGS> 1,752,899
<TOTAL-COSTS> 1,895,543
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,020
<INCOME-PRETAX> 3,410
<INCOME-TAX> 1,103
<INCOME-CONTINUING> 2,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,307
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
