<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended April 1, 2000
------------------------------------------
AND
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the Transition Period from August 29, 1999 to October 2, 1999
Commission file number 0-10815
- --------------------------------------------------------------------------------
Unified Western Grocers, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-0615250
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
5200 Sheila Street, Commerce, CA 90040
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (323) 264-5200
-----------------------------
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Outstanding Shares as of
April 1, 2000:
Class A Shares 63,852
Class B Shares 381,872
Class C Shares 24
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
UNIFIED WESTERN GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
(Audited) (Unaudited) (Unaudited)
August 28, October 2, April 1,
1999 1999 2000
--------------------------------------
<S> <C> <C> <C>
ASSETS
Current:
Cash and cash equivalents $ 8,027 $ 17,057 $ 13,886
Accounts and notes receivable 108,786 189,379 185,125
Inventories 150,800 228,997 224,555
Other current assets 5,544 11,352 8,140
Deferred taxes 4,286 7,005 7,005
--------------------------------------
Total current assets 277,443 453,790 438,711
Properties, net 79,231 119,574 122,359
Investments 35,017 40,479 43,136
Notes receivable 13,914 45,426 46,223
Goodwill, net 25,126 54,297 54,877
Other assets 20,404 38,337 39,626
--------------------------------------
TOTAL ASSETS $451,135 $751,903 $744,932
======================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current:
Accounts payable $102,172 $170,711 $189,968
Accrued liabilities 54,536 82,881 73,740
Notes payable 6,623 7,605 10,011
Patrons' excess deposits and estimated patronage dividends 16,091 13,026 13,386
--------------------------------------
Total current liabilities 179,422 274,223 287,105
Notes payable, due after one year 143,727 291,261 268,636
Long-term liabilities, other 29,393 53,336 55,658
Patrons' deposits and certificates:
Patrons' required deposits 12,450 22,325 31,507
Subordinated patronage dividend certificates 5,986 5,986 5,986
Shareholders' equity:
Class A Shares 5,669 10,398 10,361
Class B Shares 57,833 70,591 67,239
Additional paid in capital 18,095 18,095
Retained earnings 17,160 6,247 790
Accumulated other comprehensive losses (505) (559) (445)
--------------------------------------
Total shareholders' equity 80,157 104,772 96,040
--------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $451,135 $751,903 $744,932
======================================
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
UNIFIED WESTERN GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF LOSSES/EARNINGS AND COMPREHENSIVE
LOSSES/EARNINGS
(UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
5 Weeks Ended 13 Weeks Ended 26 Weeks Ended
October 2, February 27, April 1, February 27, April 1,
1999 1999 2000 1999 2000
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $211,633 $456,787 $742,287 $918,928 $1,561,702
Costs and expenses:
Cost of sales 192,323 410,124 660,279 830,698 1,395,928
Distribution, selling and administrative 20,459 39,339 74,127 73,994 151,738
----------------------------------------------------------------------
Operating (loss) income (1,149) 7,324 7,881 14,236 14,036
Interest expense 1,495 2,981 7,303 5,837 14,508
Other expense 7,218
----------------------------------------------------------------------
(Loss) Earnings before estimated (9,862) 4,343 578 8,399 (472)
patronage dividends and (benefit) provision
for income taxes
Estimated patronage dividends 0 (3,808) (3,830) (7,071) (6,558)
----------------------------------------------------------------------
(Loss ) earnings before income tax (9,862) 535 (3,252) 1,328 (7,030)
(benefit) provision
(Benefit) provision for income taxes (2,593) 162 (1,068) 412 (2,016)
----------------------------------------------------------------------
Net (loss) earnings $ (7,269) $ 373 $ (2,184) $ 916 $ (5,014)
----------------------------------------------------------------------
Other comprehensive (losses) earnings,
net of income tax:
Unrealized holding (losses) gains (54) 101 (55) 297 (114)
----------------------------------------------------------------------
Comprehensive (loss) earnings $ (7,323) $ 474 $ (2,239) $ 1,213 $ (5,128)
======================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
UNIFIED WESTERN GROCERS, INC. AND SUBISIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE FIVE WEEKS ENDED OCTOBER 2, 1999 AND
TWENTY-SIX WEEKS ENDED FEBRUARY 27, 1999 AND APRIL 1, 2000
(UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
FIVE WEEKS TWENTY-SIX WEEKS ENDED
ENDED
-----------------------------------------------
October 2, February 27, April 1,
1999 1999 2000
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net (losses) earnings $ (7,269) $ 916 $ (5,014)
-------------------------------------------
Adjustments to reconcile net (losses) earnings to net
cash (utilized) provided by operating activities:
Depreciation and amortization 2,478 8,040 14,608
Deferred taxes (424)
(Gain) loss on disposal of properties (32) (28) (2)
Changes in operating assets and liabilities:
Accounts and notes receivable (17,173) (1,027) 11,730
Inventories (5,804) (12,541) 4,442
Other current assets 1,554 (2) 3,212
Notes receivable (700) 1,384 (3,308)
Accounts payable 8,517 730 19,257
Accrued liabilities 9,155 8,695 (10,017)
Patrons' excess deposits and estimated
patronage dividends (3,065) 4,417 360
Long-term liabilities, other 6,458 3,125 2,322
-------------------------------------------
Net cash (utilized) provided by operating activities (5,881) 13,285 37,590
-------------------------------------------
Cash flows from investing activities:
Purchase of properties (1,141) (8,997) (13,306)
Proceeds from sales of properties 81 43 894
Increase in other assets (4,473) (25,397) (5,972)
Investment in securities, net 200 4,446 (2,543)
Acquisition of net assets from United Grocers, Inc. (see 7,134
Note 7)
Proceeds from sale of notes receivable 2,652 2,511
-------------------------------------------
Net cash provided (utilized) by investing activities 1,801 (27,253) (18,416)
-------------------------------------------
Cash flows from financing activities:
Additions to long-term notes payable 114,000 19,593 476
Reduction of long-term notes payable (86,098) (18,871)
Additions to short-term notes payable 109 3,931 106
Reduction of short-term notes payable (3,010) (365) (4,924)
Increase (decrease) in patrons' required deposits 1,230 (693) 1,348
Redemption of patronage dividend certificates (172)
Repurchase of shares from members (13,177) (3,909) (701)
Issuance of shares to members 56 420 221
-------------------------------------------
Net cash provided (utilized) by financing activities 13,110 18,805 (22,345)
-------------------------------------------
Net increase (decrease) in cash and cash equivalents 9,030 4,837 (3,171)
Cash and cash equivalents at beginning of year 8,027 4,105 17,057
===========================================
Cash and cash equivalents at end of period $ 17,057 $ 8,942 $ 13,886
===========================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $2,426 $6,212 $12,932
Income taxes $ 763
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
UNIFIED WESTERN GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The consolidated condensed financial statements include the accounts of
Unified Western Grocers, Inc. and all of its subsidiaries (the "Company").
Intercompany transactions and accounts with subsidiaries have been eliminated.
The interim financial statements included herein have been prepared by the
Company without audit, pursuant to the rules and regulations promulgated by the
Securities and Exchange Commission (the "Commission"). Certain information and
footnote disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to Commission rules and regulations; nevertheless, management believes
that the disclosures are adequate to make the information presented not
misleading. These condensed financial statements should be read in conjunction
with the audited financial statements and notes thereto included in the
Company's latest annual report filed on Form 10-K. The results of operations
for the interim periods are not necessarily indicative of the results for the
full year.
The accompanying consolidated condensed financial statements reflect all
adjustments which are, in the opinion of management, both of a normal recurring
nature and necessary for a fair statement of the results of the interim periods
presented. Certain reclassifications have been made to prior period financial
statements to present them on a basis comparable with the current period's
presentation.
2. On September 27, 1999, the shareholders of Unified Western Grocers, Inc.
(formerly Certified Grocers of California, Ltd.) and United Grocers, Inc.
("United") (a grocery cooperative headquartered in Portland, Oregon) approved a
merger agreement in which United merged with a wholly owned subsidiary of
Certified (the "Acquisition Subsidiary"). The merger became effective on
September 29, 1999. In connection with the merger, Certified Grocers of
California, Ltd. changed its name to Unified Western Grocers, Inc. (the
"Company" or "Unified"). The Acquisition Subsidiary was merged into Unified
effective February 11, 2000. United's financial information is contained herein
for the period September 30, 1999 through October 2, 1999 and for the twenty-six
week period ended April 1, 2000.
Effective September 27, 1999, the Company changed its fiscal year end from
the Saturday nearest August 31 to the Saturday nearest September 30. The
financial statements for the twenty-six weeks ended February 27, 1999 are most
nearly comparable to the twenty-six weeks ended April 1, 2000 of the Company's
newly adopted fiscal year. The Company has elected not to recast data for the
twenty-six weeks ended February 27, 1999 since it is not practicable and since
the comparability of information or trends reflected is not deemed impaired.
As a result of the merger, Unified now serves a broader geographic region.
The Company serves independent supermarket operators in California, Oregon,
western Washington, western Idaho, Nevada, Arizona, Hawaii, and various
countries in the South Pacific and elsewhere as a wholesale grocery cooperative.
In addition to offering a complete line of food and general merchandise
products, Unified also provides finance, insurance, store design and real estate
services to its patrons.
5
<PAGE>
The merger of Unified and United was accounted for as a purchase pursuant
to Accounting Principles Board Opinion No. 16, "Business Combinations."
Accordingly, the consideration was allocated to the assets acquired and
liabilities assumed based on their relative estimated fair values. The excess
of the purchase price over the fair value of the net assets acquired was $30.5
million and was recorded as goodwill. Goodwill is being amortized over forty
years. The following summarizes the preliminary estimated fair value of assets
acquired and liabilities assumed based on United's balance sheet as of September
29, 1999.
<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
Current assets $151,305
Equipment and leasehold improvements, net 39,577
Other 45,457
--------
Total assets 236,339
--------
Accounts payable 58,546
Other liabilities 36,825
Notes payable 123,050
--------
Total liabilities 218,421
--------
Net 17,918
Total investment common and preferred stock 48,433
--------
Goodwill $ 30,515
--------
</TABLE>
3. On December 31, 1998, the Company purchased the additional shares of common
and preferred stock it did not already own which gave the Company a 100%
ownership of SavMax Foods, Inc. ("SavMax"), a member-patron with seven retail
grocery stores in northern California. Sales on an annual basis are
approximately $118 million for the stores acquired on December 31, 1998. The
acquisition was accounted for as a purchase pursuant to APB Opinion No. 16,
"Business Combinations." Consideration was allocated to the assets acquired and
liabilities assumed based on their relative fair values. The excess of the
purchase price over the fair value of the net assets acquired was $23.4 million
and was recorded as goodwill. Goodwill is being amortized over forty years. The
results of the acquired business have been included in the consolidated
financial statements from December 31, 1998. Although SavMax has been
consolidated, the Company continues to intend to sell its investment in SavMax.
4. The accompanying consolidated statements of earnings do not include any
revenues or expenses related to United prior to September 30, 1999 and SavMax
prior to December 31, 1998. The following unaudited consolidated pro forma
information utilizes the unaudited information for the Company, United, and
SavMax for the twenty-six week period ended February 27, 1999. The pro forma
information below presents the Company's operating results assuming the
acquisitions had taken place as of the beginning of fiscal 1999.
<TABLE>
<CAPTION>
For the twenty-six weeks ended
February 27, 1999
-------------------------------
(dollars in thousands)
<S> <C>
Sales $1,461,614
Loss before patronage dividends and
provision for income taxes $ (1,335)
Net loss $ (6,726)
</TABLE>
These unaudited pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which would have actually resulted had the acquisitions been in effect as of
August 30, 1998, or of future results of operations.
5. In May, 1999, Unified entered into an agreement with Albertson's, Inc.
("Albertson's agreement") to purchase certain assets related to 32 stores being
sold as a result of a required divestiture of stores associated with
Albertson's, Inc's. merger with American Stores, Inc. The acquisition of the
retail stores was completed in October, 1999. Unified sold or otherwise
permitted the direct transfer of a total of 26 of the stores to Unified members
coincident with the closing of the
6
<PAGE>
transaction. Unified was required to retain and operate the remaining six stores
until it locates a buyer(s) for the stores. If no suitable buyers are available,
any under-performing stores will be closed after meeting certain conditions of
sale. Unified has provided some members with financing support in connection
with this transaction. Financing support is provided on a member by member
basis. In addition, Unified has provided credit enhancement with respect to
certain of the leases involved in the transaction in the form of guarantees or
as a sublessor/sublessee.
6. Based on information monitored by the Company's operating decision makers to
manage the business, the Company has identified one reportable segment.
Wholesale distribution includes the results of operations from the sale of food
and general merchandise items to independent supermarket operators, both members
and non-members, and sales to company-owned retail stores. The "all other"
category includes the aggregation of retail sales, finance, insurance and other
services provided to a common customer base, none of which individually meets
the quantitative thresholds of a reportable segment.
Information about the Company's operations by segment is as follows:
<TABLE>
<CAPTION>
5 Weeks
Ended 13 Weeks Ended 26 Weeks Ended
October 2, February 27, April 1, February 27, April 1,
1999 1999 2000 1999 2000
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales
Wholesale distribution $208,279 $442,630 $717,434 $898,772 $1,502,952
All other 12,969 27,061 54,781 36,159 124,437
Intersegment elimination (9,615) (12,904) (29,928) (16,003) (65,687)
----------------------------------------------------------------------------------
Total net sales $211,633 $456,787 $742,287 $918,928 $1,561,702
----------------------------------------------------------------------------------
Operating (loss) income
Wholesale distribution $ (499) $ 6,897 $ 11,209 $ 13,227 $ 21,561
All other (650) 427 (3,328) 1,009 (7,525)
----------------------------------------------------------------------------------
Total operating (loss) income (1,149) 7,324 7,881 14,236 14,036
Interest expense 1,495 2,981 7,303 5,837 14,508
Other expense 7,218
Estimated patronage dividends 3,808 3,830 7,071 6,558
----------------------------------------------------------------------------------
(Loss) earnings before income tax
(benefit) provision (9,862) 535 (3,252) 1,328 (7,030)
----------------------------------------------------------------------------------
Depreciation and amortization
Wholesale distribution $ 2,328 $ 3,816 $ 6,565 $ 7,600 $ 13,426
All other 150 360 585 440 1,182
----------------------------------------------------------------------------------
Total depreciation and amortization $ 2,478 $ 4,176 $ 7,150 $ 8,040 $ 14,608
----------------------------------------------------------------------------------
Capital expenditures
Wholesale distribution $ 40,561 $ 1,562 $ 3,040 $ 4,043 $ 6,262
All other 1,289 4,665 1,624 4,954 7,044
----------------------------------------------------------------------------------
Total capital expenditures $ 41,850 $ 6,227 $ 4,664 $ 8,997 $ 13,306
----------------------------------------------------------------------------------
Identifiable assets
Wholesale distribution $616,701 $305,109 $596,687 $305,109 $ 596,687
All other 135,202 122,134 148,245 122,134 148,245
----------------------------------------------------------------------------------
Total identifiable assets $751,903 $427,243 $744,932 $427,243 $ 744,932
----------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
7. Supplemental disclosure of cash flow information:
<TABLE>
<CAPTION>
September 29, 1999
Acquisition of net assets of United Grocers, Inc.
- ---------------------------------------------------------------------------------------------------
(dollars in
thousands)
<S> <C>
Working capital, other than cash $(62,814)
Property, plant, and equipment (40,709)
Notes receivable and other long-term assets (45,457)
Goodwill (29,233)
Long-term notes payable 119,429
Long-term liabilities, other 17,485
------------------
$(41,299)
Total equity investment in United Grocers, Inc. 48,433
Net cash effect due to acquisition of net assets of United Grocers, Inc. ------------------
$ 7,134
==================
</TABLE>
8. The Jerome Lemelson Foundation (the "Foundation"), which asserts ownership
of certain patents relating to bar code technology, issued a demand that the
Company enter into a license agreement with respect to certain patented
technology which the Company is claimed to use and which allegedly infringes
upon patents issued to Jerome Lemelson, which patents, upon the death of Jerome
Lemelson, were assigned to the Foundation. The Company has been advised that
the Foundation has filed an action against the Company and others asserting
patent infringement and seeking damages in unexpected amounts. The Foundation
continues to seek a negotiated settlement of its claim. The Company has not yet
been served with the Complaint. Due to the early stage of the proceeding, the
Company is unable to assess the merits of the lawsuit or to determine its
potential liability, if any. The Company intends to vigorously defend the
action.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
Liquidity and Capital Resources
The Company relies upon cash flow from operations, patron deposits,
shareholdings, and borrowings under the Company's credit lines, to finance
operations. Net cash provided by operating activities totaled $37.6 million for
the first twenty-six weeks of fiscal 2000 (the "2000 period"), as compared to
$13.3 million for the first twenty-six weeks of fiscal 1999 (the "1999 period").
Net cash provided for the 2000 period is primarily due to increased accounts
payable and decreased accounts receivable and inventories in the distribution
operations. At April 1, 2000, working capital was $151.6 million, as compared
to $98.0 million at August 28, 1999, and the Company's current ratio was 1.5 to
1 at April 1, 2000 and at August 28, 1999. Working capital varies primarily as
a result of seasonal inventory requirements.
Capital expenditures totaled $13.3 million in the first twenty-six weeks of
fiscal 2000. The fiscal 2000 expenditures include purchases of computer
equipment, leasehold improvements and warehouse equipment.
The Company refinanced its existing institutional and bank indebtedness in
connection with the acquisition of United Grocers, Inc. The Company entered
into a five-year $200 million revolving credit facility secured by accounts
receivable and inventories. Borrowings bear interest at either LIBOR plus an
applicable margin based on a funded debt to operating cash flow ratio or the
higher of the lender's base rate or 0.50% above the lender's federal funds
borrowing rate. The new revolving credit facility permits advances up to 85% of
eligible accounts receivable and 65% of eligible inventories. The security
interest would be released if Unified achieves designated investment grade
ratings for a period of not less than one year.
Pursuant to new term credit agreements with existing lenders, Unified
collateralized its existing $80 million of 7.22% senior unsecured notes due 2008
with buildings and equipment and issued $40 million of new ten-year senior
secured notes. The interest rate on the existing $80 million senior notes
increased by 0.50% and the senior mortgage notes bear interest at 8.71%. The
interest rate increase on the existing $80 million senior notes and the
securitization of both notes could be eliminated if Unified achieves designated
investment grade ratings for a period of not less than one year.
The new credit agreements contain customary representations, warranties,
covenants and default provisions for financing of this type.
The merger with United was effective September 29, 1999. United's final
audited results for its fiscal year ended September 29, 1999 reported a net loss
of $17.6 million. The loss was in part due to substantially reduced margins
realized in the fourth quarter of fiscal 1999, which lower margins carried over
into the first and second quarters of fiscal 2000. The Company believes margins
will return to anticipated levels in the third quarter. The losses were also
attributable in part to United subsidiary operations, including retail, which
are expected to continue to reflect losses until issues relating to operations
at the retail locations are resolved.
At April 1, 2000, the Company had $10.1 million in deferred tax assets
related to net operating loss carryforwards that expire in various years through
2019. For financial reporting purposes, a valuation allowance of $5.5 million
is offset against the net operating loss carryforward asset since the entire
asset is not expected to be realized before expiration. The valuation allowance
is primarily related to retail store losses which losses include the stores the
Company has retained as a result of the Albertson's agreement. The total
valuation allowance is $6.4 million. The remaining balance of the net deferred
tax asset should be realized through future operating results, the reversal of
taxable temporary differences, and tax planning strategies.
Unified distributes at least 20% of the patronage dividends in cash and
distributes Class B Shares as a portion of the patronage dividends distributed
to its member-patrons. Dairy patronage dividends were paid in cash in the
periods required. Patrons are generally required to maintain cash
9
<PAGE>
subordinated deposits with Unified and member-patrons may purchase (or acquire
as patronage dividends) Class B Shares to apply against this requirement. In the
merger, former United members were provided the opportunity to build the minimum
subordinated deposit over time, provided that they agree to assign 80% of
patronage dividends received for this purpose and maintain a supply agreement
with Unified until the minimum deposit condition is satisfied. Upon termination
of patron status, the withdrawing patron will be entitled to recover deposits in
excess of its obligations to Unified 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. With certain exceptions, Unified's current
redemption policy limits the Class B Shares that Unified 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. For fiscal 2000, this limitation has been
exceeded by purchases in connection with the merger described below. In
connection with the merger, Unified redeemed 71,310 Class B Shares of
discontinued members for a total consideration before set-offs of $13.4 million.
As described in the Form 10-K, Unified is not obligated to repurchase Class B
Shares of terminated members until after September 27, 2002. Other limitations
on repurchase are described in the most recent Form 10-K.
The Company's ability to redeem or repurchase shares (or to make payment on
notes issued to redeem or repurchase shares) is dependent in part upon the
existence of retained earnings in excess of the repurchase obligation
immediately prior to any repurchase. The reduction of retained earnings due to
losses recorded in the former United wholesale operations, merger related losses
in the transition period, and operating losses in the combined Company's
subsidiary operations will negatively impact the Company's ability to repurchase
or redeem shares and to make payments on notes issued to redeem or repurchase
shares. The Company's ability to repurchase or redeem shares and to make such
note payments in the future will be dependent on its ability to realize and
maintain levels of retained earnings which permit purchases of shares and note
payments from time to time as contemplated by the Bylaws. Credit agreements
also restrict repurchase of shares and all purchases will be subject to
limitations of existing credit agreements, the Articles and Bylaws and
applicable laws.
Year 2000
The Company experienced no significant difficulties with its software
applications or hardware systems during the calendar change to the year 2000.
The Company was not impacted by any significant product supply or customer
delivery delays associated with the year 2000 calendar change.
Results of Operations
The following table sets forth selected financial data of the Company
expressed as a percentage of sales for the periods indicated below:
<TABLE>
<CAPTION>
For the Five Thirteen Week Twenty-six Week
Weeks Ended Period Period
October 2, 1999 2000 1999 2000
1999
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales 100% 100% 100% 100% 100%
Cost of sales 90.9 89.8 88.9 90.4 89.4
Distribution, selling and 9.6 8.6 10.0 8.1 9.7
administrative
Operating (loss) income (0.5) 1.6 1.1 1.5 0.9
Interest expense 0.7 0.7 1.0 0.7 0.9
Other expense 3.4 0.0 0.0 0.0 0.0
Estimated patronage dividends 0.0 0.8 0.5 0.7 0.4
(Losses) earnings before income tax (4.6) 0.1 (0.4) 0.1 (0.4)
(Benefit) provision
(Benefit) provision for income taxes (1.2) 0.0 (0.1) 0.0 (0.1)
Net (loss) earnings (3.4) 0.1 (0.3) 0.1 (0.3)
</TABLE>
10
<PAGE>
Thirteen Week Period
Net sales
Net sales totaled $742.3 million for the 2000 period as compared to $456.8
million in the 1999 period. The sales increase of $285.5 million represents a
62.5% increase over the 1999 period. The increase in sales is primarily related
to the merger with United ($222.6 million), additional wholesale supply volume
to stores which certain member retailers acquired as a result of a required
divestiture of stores associated with the Albertson's, Inc. merger with American
Stores, Inc. ($17.5 million), retail volume from stores the Company acquired as
a result of the Albertson's divestiture ($10.8 million) and wholesale volume
from the purchase of the operating assets of Gourmet Specialties, a northern
California specialty foods distributor ($10.7 million).
Cost of sales
In the 2000 period cost of sales were $660.3 million (88.9% of net sales)
compared to $410.1 million (89.8% of net sales) in the 1999 period. The overall
gross margin as a percentage of net sales is 0.9% higher compared to the
comparable period in 1999. The increase in gross margin is due to higher retail
sales, which have higher gross margins than distribution activities. The higher
margins were partially offset by lower margins contributed by the former United
wholesale distribution operations.
Distribution, selling and administrative
Distribution, selling and administrative expenses were $74.1 million (10.0%
of net sales) in the 2000 period, as compared to $39.3 million (8.6% of net
sales) in the 1999 period. The increase is due to higher operating costs for
Unified's expanding retail operations (1.1%) and higher warehousing and
distribution costs ($1.3 million) related to the accelerated transition process
to combine the operations of the former United Grocers and Certified Grocers in
northern California. The consolidation of the northern California warehouses has
been completed; accordingly, these transition costs are not expected to continue
in future periods.
Interest
Interest expense was $7.3 million (1.0% of net sales) in the 2000 period as
compared to $3.0 million (0.7% of net sales) in the 1999 period. Borrowings
under the Company's credit agreements were higher during the 2000 period as
compared to the 1999 period as a result of the financing required by the merger
with United ($128.6 million). Borrowings related to inventory purchases
decreased as a result of the accelerated consolidation of the northern
California facilities ($14.2 million). The Company has also experienced higher
interest rates in the 2000 period compared to the 1999 period (1.2%).
Estimated patronage dividends
Estimated patronage dividends totaled $3.8 million for the 2000 and the
1999 periods. The estimated patronage earnings for fiscal 2000 are comprised of
interim patronage earnings from the Company's two patronage pools: the
cooperative and dairy divisions. For the 2000 period, the Company had interim
patronage income of $1.1 million in the cooperative division and patronage
earnings of $2.7 million from the dairy division. For the 1999 period, the
Company had $1.3 million of patronage income from the Company's non-dairy
activities and $2.5 million of patronage income from the dairy division.
Net (loss) earnings
Net loss for the 2000 period was $2.2 million compared to net earnings of
$373,000 for the 1999 period. The losses resulted primarily from the Company
owned Albertson's divestiture store operations in Southern California and losses
from the former United retail operations ($2.0 million). Net earnings/losses are
generated by the Company's subsidiaries and nonpatronage activities, which do
not distribute patronage dividends. The Company is in the process of selling or
closing selected retail operations.
11
<PAGE>
Twenty-six Week Period
Net sales
Net sales totaled $1.6 billion for the 2000 period as compared to $918.9
million for the 1999 period. The sales increase of $642.8 million represents a
69.9% increase over the 1999 period. The increase in sales is primarily related
to the merger with United ($485.7 million), additional wholesale supply volume
to stores which certain member retailers acquired as a result of the required
divestiture of stores associated with the Albertson's, Inc. merger with American
Stores, Inc. ($39.4 million), retail volume from the consolidation of SavMax
($36.7 million), retail volume from stores the Company acquired as a result of
the Albertson's divestiture ($25.8 million), and wholesale volume from the
purchase of the operating assets of Gourmet Specialties, a northern California
specialty foods distributor ($24.5 million).
Cost of sales
In the 2000 period, cost of sales were $1.4 billion (89.4% of net sales)
compared to $830.7 million (90.4% of net sales) in the 1999 period. The overall
gross margin as a percentage of net sales is 1.0% higher compared to the
comparable period in 1999. The increase in gross margin is due primarily to an
increase in retail sales, which have higher gross margins than distribution
activities. The higher margins were partially offset by lower margins
contributed by the former United wholesale distribution operations.
Distribution, selling and administrative
Distribution, selling and administrative expenses were $151.7 million (9.7%
of net sales) in the 2000 period, as compared to $74.0 million (8.1% of net
sales) in the 1999 period. The increase is due to higher operating costs for
Unified's expanding retail operations (1.2%) and higher warehousing and
distribution costs related to the accelerated transition process to combine the
operations of the former United Grocers and Certified Grocers in northern
California ($1.5 million). The consolidation of the northern California
warehouses has been completed; accordingly, these transition costs are not
expected to continue in future periods.
Interest
Interest expense was $14.5 million (0.9% of net sales) in the 2000 period
as compared to $5.8 million (0.7% of net sales) in the 1999 period. Borrowings
under the Company's credit agreements were higher during the 2000 period as
compared to the 1999 period as a result of the refinancing required by the
merger with United ($128.6 million). Borrowings related to inventory purchases
decreased $14.2 million as a result of the accelerated consolidation of the
northern California facilities during the second quarter. The Company has also
experienced higher interest rates in the 2000 period compared to the 1999 period
(1.1%).
Estimated patronage dividends
Estimated patronage dividends totaled $6.6 million for the 2000 period as
compared to $7.1 million for the 1999 period. The estimated patronage earnings
for fiscal 2000 are comprised of interim patronage earnings from the Company's
two patronage pools: the cooperative and dairy divisions. For the 2000 period,
the Company had interim patronage earnings of $858,000 for the cooperative
division and patronage earnings of $5.7 million from the dairy division. For the
1999 period, the Company had $2.1 million of patronage income from the Company's
non-dairy activities and $5.0 million of patronage income from the dairy
division.
Net (loss) earnings
Net loss for the 2000 period was $5.0 million compared to net earnings of
$916,000 for the 1999 period. The losses were due to start-up costs and
operating losses from the Company owned Albertson's divestiture store operations
in Southern California and losses of the former United retail operations ($4.7
million). Net earnings/losses are generated by the Company's subsidiaries and
nonpatronage activities, which do not distribute patronage dividends. The
Company is in the process of selling or closing selected retail operations.
12
<PAGE>
Five Week Transition Period Ended October 2, 1999
The five week transition period resulting from the change in the Company's
fiscal year-end includes the operating activities of Unified for the five week
period ended October 2, 1999 and the operating activities of United for the
three day period between the effective date of the merger, September 29, 1999
and October 2, 1999. The operating results for the five week transition period
reflected a pretax loss of $9.9 million. Transition activities accounted for
$8.2 million of the loss. The primary components of the transition activities
included: an early retirement plan for employees of Unified totaling $6.3
million (included in other expense), the write-off of United's deferred
financing costs of $0.7 million, and integration consulting costs of $0.3
million. The combined operations of the merged company experienced a pretax loss
of $1.7 million during the five week period.
13
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
- -------------------------------------------------------------------
Unified has only limited involvement with derivative financial instruments and
does not use them for trading purposes. They are used to manage well-defined
interest rate risks. Unified entered into a five-year interest rate collar
agreement in February 1999 in relation to certain borrowings on its variable
rate revolving credit. The collar agreement was put in place without incurring a
fee with respect to the collar transaction. The hedge agreement is structured
such that Unified pays a variable rate of interest between 6% (cap rate) and
4.94% (floor rate) based on a notional amount of $50,000,000. The weighted
average interest rate, prior to lender's margin, on borrowings on the revolving
credit was 6.04% at April 1, 2000.
14
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote of the Security Holders.
- --------------------------------------------------------------
(a) Date of Meeting: February 15, 2000 (Annual Meeting)
(b) Matters Voted Upon:
Election of Directors:
<TABLE>
<CAPTION>
Withheld
Class A Directors For Authority
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bill Andronico 41,400 2,000
---------------------------------------------------------------------------------------------------------
Gaylon G. Baese 41,200 2,200
---------------------------------------------------------------------------------------------------------
David M. Bennett 41,300 2,100
---------------------------------------------------------------------------------------------------------
John Berberian 41,400 2,000
---------------------------------------------------------------------------------------------------------
Edmund Kevin Davis 41,400 2,000
---------------------------------------------------------------------------------------------------------
Kenneth W. Findley 41,400 2,000
---------------------------------------------------------------------------------------------------------
James F. Glassel 41,500 1,900
---------------------------------------------------------------------------------------------------------
David M. Goodwin 41,400 2,000
---------------------------------------------------------------------------------------------------------
Mark H. Kidd 41,500 1,900
---------------------------------------------------------------------------------------------------------
Jay McCormack 41,500 1,900
---------------------------------------------------------------------------------------------------------
Mary J. McDonald 41,500 1,900
---------------------------------------------------------------------------------------------------------
Morrie Notrica 41,200 2,200
---------------------------------------------------------------------------------------------------------
Peter J. O'Neal 41,300 2,100
---------------------------------------------------------------------------------------------------------
Michael Provenzano 41,100 2,300
---------------------------------------------------------------------------------------------------------
Edward J. Quijada 41,300 2,100
---------------------------------------------------------------------------------------------------------
Gordon E. Smith 41,300 2,100
---------------------------------------------------------------------------------------------------------
James R. Stump 41,000 2,400
---------------------------------------------------------------------------------------------------------
Kenneth Ray Tucker 41,300 2,100
---------------------------------------------------------------------------------------------------------
Floyd F. West 41,400 2,000
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Class B Directors
---------------------------------------------------------------------------------------------------------
Louis A. Amen 277,756 16,673
---------------------------------------------------------------------------------------------------------
Darioush Khaledi 280,300 14,129
---------------------------------------------------------------------------------------------------------
Mimi R. Song 280,689 13,740
---------------------------------------------------------------------------------------------------------
Robert E. Stiles 288,836 5,593
---------------------------------------------------------------------------------------------------------
Richard L. Wright 281,960 12,469
---------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
- -----------------------------------------
(a) Exhibits
4.1 Copy of Application and Agreement for Service Affiliation as a
Member-Patron/Affiliate with Unified Western Grocers, Inc. and Pledge
and Security Agreement
4.2 Copy of Application and Agreement for Service Affiliation as an
Associate-Patron with Unified Western Grocers, Inc. and Pledge and
Security Agreement
4.3 Copy of Member Patron/Affiliate Subordination Agreement
(Subordination of Required Deposit)
4.4 Copy of Associate-Patron Subordination Agreement (Subordination of
Required Deposit)
27 Financial Data Schedules
(b) Reports on Form 8-K
None
16
<PAGE>
Pursuant to the requirements 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.
Dated: May 19, 2000
Unified Western Grocers, Inc.
-----------------------------
(Registrant)
By /s/ Alfred A. Plamann
-------------------------
Alfred A. Plamann
President and
Chief Executive Officer
By /s/ Richard J. Martin
---------------------------
Richard J. Martin
Executive Vice President,
Finance & Administration
and Chief Financial Officer
By /s/ William O. Cote
----------------------------
William O. Cote
Vice President, Controller
17
<PAGE>
EXHIBIT INDEX
4.1 Copy of Application and Agreement for Service Affiliation as a
Member-Patron/Affiliate with Unified Western Grocers, Inc. and
Pledge and Security Agreement
4.2 Copy of Application and Agreement for Service Affiliation as an
Associate-Patron with Unified Western Grocers, Inc. and Pledge
and Security Agreement
4.3 Copy of Member Patron/Affiliate Subordination Agreement
(Subordination of Required Deposit)
4.4 Copy of Associate-Patron Subordination Agreement (Subordination
of Required Deposit)
27 Financial Data Schedules
18
<PAGE>
EXHIBIT 4.1
APPLICATION AND AGREEMENT FOR
SERVICE AFFILIATION AS A MEMBER-PATRON WITH
UNIFIED WESTERN GROCERS, INC.
AND
PLEDGE AND SECURITY AGREEMENT
The undersigned applies for affiliation as a member-patron ("Member-Patron"
or "Member") with Unified Western Grocers, Inc. ("Unified Western") in
accordance with the following to which the undersigned agrees:
1. To qualify for and retain such affiliation as a Member-Patron
("Membership"), the undersigned must:
(a) Be of good and approved financial standing engaged in selling
groceries and related merchandise at retail or wholesale.
(b) Patronize Unified Western in such amounts and manner as may be
prescribed from time to time by its Bylaws or its rules and
regulations or policies for the servicing of Member accounts (the
"Service Rules").
(c) Purchase and hold one hundred shares of Unified Western's Class A
Shares and such amount of its Class B Shares as may be specified by
requirements regarding the holding of Class B Shares as may from time
to time be established by Unified Western's Board of Directors.
(d) Execute such further agreements as may from time to time be required
of Member-Patrons, including but not limited to an agreement
subordinating deposits.
(e) Comply with the conditions and agreements contained in this
Application and Agreement ("this Agreement"), with each other
agreement which the undersigned may enter into with Unified Western or
any of its subsidiaries, with Unified Western's Articles of
Incorporation and Bylaws and with the Service Rules.
2. Acceptance of this application for Membership is subject to approval by
the Board of Directors of Unified Western.
1
<PAGE>
3. Subject to the obligations of the undersigned under any supply contract,
the undersigned may terminate membership at any time by written resignation. The
undersigned's membership may be terminated by Unified Western at any time upon
the undersigned's failure to meet any requirement of Membership hereunder or
otherwise now or hereafter in effect or upon the occurrence of any event now or
hereafter set forth in the Bylaws as a ground for termination of Membership.
Termination, however, shall neither release nor discharge any obligations
incurred by the undersigned, or any of them, to Unified Western or any of its
subsidiaries. Membership does not obligate Unified Western to make any sale of
merchandise or services or any extension of credit. Membership is not
transferable either voluntarily or by operation of law.
4. The undersigned agrees to comply with Unified Western's Bylaws and the
Service Rules, including without limitation, rules prescribing service fees,
late payment charges, amounts and manner of purchases, required deposits,
subordination of deposits, guarantees, credit requirements and other terms of
service, purchases and payment of accounts.
5. The undersigned will maintain such deposits with Unified Western as may
be prescribed by its Bylaws or the Service Rules. In the event Membership is
terminated, Unified Western, with respect to such deposits, shall only be
obligated to return an amount which is equal to the amount of such deposits less
all amounts that may be owing Unified Western or any of its subsidiaries.
6. All Class A Shares and Class B Shares of Unified Western at any time
held by the undersigned shall be governed by Division 8 of the California
Uniform Commercial Code, the California Corporations Code, by Unified Western's
Articles of Incorporation, its Bylaws and by this Agreement. Such shares are
subject to restrictions on transfer and subject to redemption or repurchase by
Unified Western on termination of the undersigned's membership and on other
events, all as provided in Unified Western's Articles of Incorporation or
Bylaws.
7. Unified Western or its nominee shall have an exclusive right to purchase
said Class A Shares and Class B Shares upon or at any time after termination of
my membership at a purchase price equal to the redemption or repurchase price
for such shares as may be set forth in Unified Western's Articles of
Incorporation or its Bylaws.
8. All Class A Shares and Class B Shares at any time held by the
undersigned are pledged to, and the certificates for said shares shall be held
by, Unified Western to secure the prohibition against their transfer, to secure
Unified Western's rights to purchase or redeem or repurchase said shares and as
security for the payment of any and all obligations of the undersigned to
Unified Western or any of its subsidiaries.
2
<PAGE>
9. I authorize the Secretary of Unified Western, or any of his successors,
without notice to me, to receive on my behalf notice of purchase or of
redemption or repurchase of said Class A and/or Class B Shares, to surrender
such shares for purchase or for redemption or repurchase and to receive the
proceeds therefrom, and to such purposes I irrevocably appoint said Secretary
and his successors and each of them with full powers of substitution, as my
attorney in fact.
10. In consideration of financial accommodation given, to be given, or
continued to be given by Unified Western, or any of its subsidiaries, the
undersigned grants to Unified Western a security interest in and assigns and
pledges to Unified Western all Class A Shares and Class B Shares at any time
held by the undersigned, the proceeds from their sale or redemption, all deposit
accounts and all other accounts now or hereafter deposited with or held by
Unified Western or any of its subsidiaries, and all property, money and funds of
mine of every description now or hereafter held by Unified Western as a pledge
or for safekeeping or otherwise (collectively "Collateral"), as security for the
full and prompt payment and performance of any and all contracts, agreements
obligations or liabilities of the undersigned, or any of them, to Unified
Western, or any of its subsidiaries, existing at any time (collectively
"Obligations"). At the option of Unified Western and without necessity of demand
or notice, all or any part of the Obligations shall immediately become due and
payable irrespective of any agreed maturity, upon the happening of any of the
following events: (1) termination of membership, (2) default in any requirement
of membership, (3) failure to pay or perform any of the Obligations or any part
thereof when due, (4) the levy of any attachment, execution, or other process
against the undersigned, or any of them, or any of the Collateral, (5) the
death, insolvency or failure in business of the undersigned, or any of them, (6)
the commission of an act of bankruptcy or the making of an assignment for the
benefit of creditors by the undersigned, or any of them, or (7) the filing by or
against the undersigned, or any of them, of any petition or action for relief
under any bankruptcy, arrangement, reorganization, insolvency, or moratorium
law, or any other law for the relief of or relating to debtors. Upon the
happening of any of the foregoing specified events, any agreement for further
financial accommodation by Unified Western or any of its subsidiaries shall
terminate at its option.
I irrevocably appoint Unified Western's Secretary and his successors,
with powers of substitution, as the undersigned's attorney in fact, in the
undersigned's name, to give such notices and file such financing or other
statements as Unified Western may choose, with respect to any security whether
granted hereby or otherwise.
11. In the event that it is necessary for Unified Western to employ an
attorney for the collection of any amounts owing it, the undersigned agrees to
pay all costs involved including reasonable attorneys' fees.
3
<PAGE>
12. Any forbearance, failure, or delay by Unified Western in exercising any
right, power, or remedy hereunder or otherwise shall not be deemed to be a
waiver of such right, power, or remedy, and any single or partial exercise of
any right, power, or remedy hereunder or otherwise shall not preclude the
further exercise thereof; and every right, power, and remedy of Unified Western
shall continue in full force and effect until such right, power, or remedy is
specifically waived by an instrument in writing executed by Unified Western.
13. If this Agreement is executed by more than one person, each of the
agreements contained herein shall be joint and several obligations of the
undersigned. As used in this Agreement, the terms "I," "me" and "my" refer to
the undersigned, and each of them.
14. The undersigned acknowledges receipt of a copy of Article VIII of the
Bylaws of Unified Western and hereby consents that the amount of any
distributions with respect to the undersigned's patronage, which are made in
written notices of allocation (as defined in 26 United States Code Section 1388)
and which are received by the undersigned from Unified Western, will be taken
into account by the undersigned at their stated dollar amounts in the manner
provided in 26 United States Code Section 1385(a) in the taxable year in which
such written notices of allocation are received by the undersigned. This consent
shall remain in effect until revoked in the manner provided in 26 United States
Code Section 1388.
15. The validity, construction and performance of this Agreement shall be
governed by the laws, without regard to the laws as to choice or conflict of
laws, of the State of California.
16. Any notice, demand or other communication which Unified Western is
required or desires to give to the undersigned, or any of them, may be either
served personally at or sent by prepaid, first-class mail to the address set
forth below. Any such notice, demand or communication shall be deemed given to
the undersigned, and each of them, upon delivery to said address, if personally
served, and within 48 hours from the time of deposit in the United States mail,
if served by mail. The address of the undersigned may be changed only by giving
written notice to Unified Western at its principal office, but such change shall
not be deemed effective until actually received. Any other notice which the
undersigned may desire to give shall be given to Unified Western at its
principal office but shall not be deemed given until actually received.
17. If any term or provision of this Agreement or the application thereof
to any person or circumstances shall to any extent be invalid, illegal or
unenforceable, the remainder of this Agreement or the application of such term
or provision to any person or circumstances other than those as to which it is
invalid, illegal or enforceable shall not be
4
<PAGE>
affected thereby and each term and provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by law.
_______________________________________________
Name of Applicant (print or type)
Dated: _____, 2000 By: ___________________________________________
Signature: ___________________________________________
Its: ___________________________________________
By: ___________________________________________
Signature: ___________________________________________
Its: ___________________________________________
Mailing Address
(print or type)
_________________________________________________
Number and Street
_________________________________________________
City State Zip
_________________________________________________
Telephone Number
Applicant is:[_] a sole proprietorship; [_] a partnership; [_]a
corporation; [_] a limited liability company; [_] other.
Applicant is an affiliate of
The following existing
Member-Patron: _________________________________
Print Name
The basis of affiliation is: ___________________
_________________________________________________
Federal Taxpayer Identification No.: ___________
5
<PAGE>
APPLICATION ACKNOWLEDGMENT
1. We hereby acknowledge receipt of payment for the following:
Application Fee $
One hundred shares Class A Shares or 10%
down payment to be applied toward the purchase
of one hundred Class A Shares* $
To be placed in Deposit Fund Account $
TOTAL PAYMENT* $
2. We hereby acknowledge that Applicant is an affiliate [_]
of the existing member-patron described above and
waive the requirement that Applicant purchase
Class A Shares.
3. The Applicant is accepted with the effective date set forth below.
4. Unified Western Grocers, Inc. agrees that it will distribute its net
earnings from business transacted by it with its member-patrons and
associate-patrons in accordance with the provisions of Article VII of its
Bylaws which provisions are subject to revision or deletion at any time
from time to time by Unified Western, provided however any such revision or
deletion shall be effective prospectively only.
UNIFIED WESTERN GROCERS, INC.
By: _______________________________
Effective date: _______________,
Account No.: ________________________
Account Name (Print): ______________________
_________________
* Based on prior fiscal year-end book value; estimated if not determined on
the date of this agreement and subject to adjustment to actual when prior
year-end book value is determined.
6
<PAGE>
Exhibit 4.2
APPLICATION AND AGREEMENT FOR
SERVICE AFFILIATION AS AN ASSOCIATE-PATRON WITH
UNIFIED WESTERN GROCERS, INC.
AND
PLEDGE AND SECURITY AGREEMENT
The undersigned applies for service as an Associate-Patron with Unified
Western Grocers, Inc. ("Unified Western") in accordance with the following to
which the undersigned agrees:
1. To qualify for service as an Associate-Patron, the undersigned must:
(a) Patronize Unified Western in such amounts and manner as may be
prescribed by it from time to time in its rules and regulations
or policies for the servicing of Associate-Patron accounts (the
"Service Rules");
(b) Execute such further agreements as may from time to time be
required of Associate-Patrons, including but not limited to an
agreement subordinating deposits.
(c) Comply with the conditions and agreements contained in this
Application and Agreement ("this Agreement"), with each other
agreement which the undersigned may enter into with Unified
Western or any of its subsidiaries, and with the Service Rules.
2. Acceptance of this application for service is subject to approval by
the Board of Directors of Unified Western.
3. Subject to the obligations of the undersigned under any supply
contract, the undersigned may terminate as an Associate-Patron of Unified
Western at any time on written notice to Unified Western. Unified Western may at
any time, with or without cause, terminate the undersigned as an Associate-
Patron. Termination, however, shall neither release nor discharge any
obligations incurred by the undersigned, or any of them, to Unified Western or
any of its subsidiaries. Nothing in this Agreement or otherwise shall be
construed to obligate Unified Western to make any sale of merchandise or
services or any extension of credit.
4. The undersigned agrees to comply with the Service Rules, including
without limitation, rules prescribing service fees, late payment charges,
amounts and manner of purchases, required deposits, subordination of deposits,
guarantees, credit requirements and other terms of service, purchases and
payment of accounts.
1
<PAGE>
5. The undersigned will maintain such deposits with Unified Western as may
be prescribed by the Service Rules. In the event the undersigned terminates or
is terminated as an Associate-Patron, Unified Western, with respect to such
deposits, shall only be obligated to return an amount which is equal to the
amount of such deposits less all amounts that may be owing Unified Western or
any of its subsidiaries.
6. In consideration of financial accommodation given, to be given, or
continued to be given by Unified Western, or any of its subsidiaries, the
undersigned grants to Unified Western a security interest in and assigns and
pledges to Unified Western, all deposit accounts and all other accounts now or
hereafter deposited with or held by Unified Western or any of its subsidiaries,
and all of the undersigned's property, money and funds of every description now
or hereafter held by Unified Western as a pledge or for safekeeping or otherwise
(collectively "Collateral"), as security for the full and prompt payment and
performance of any and all contracts, agreements obligations or liabilities of
the undersigned, or any of them, to Unified Western, or any of its subsidiaries,
existing at any time (collectively "Obligations"). At the option of Unified
Western and without necessity of demand or notice, all or any part of the
Obligations shall immediately become due and payable irrespective of any agreed
maturity, upon the happening of any of the following events: (1) termination of
the undersigned as an Associate-Patron, (2) default in any requirement of the
Service Rules, (3) failure to pay or perform any of the Obligations or any part
thereof when due, (4) the levy of any attachment, execution, or other process
against the undersigned, or any of them, or any of the Collateral, (5) the
death, insolvency or failure in business of the undersigned, or any of them, (6)
the commission of an act of bankruptcy or the making of an assignment for the
benefit of creditors by the undersigned, or any of them, or (7) the filing by or
against the undersigned, or any of them, of any petition or action for relief
under any bankruptcy, arrangement, reorganization, insolvency, or moratorium
law, or any other law for the relief of or relating to debtors. Upon the
happening of any of the foregoing specified events, any agreement for further
financial accommodation by Unified Western or any of its subsidiaries shall
terminate at its option. I irrevocably appoint Unified Western's Secretary and
his successors, with powers of substitution, as the undersigned's attorney in
fact, in the undersigned's name, to give such notices and file such financing or
other statements as Unified Western may choose, with respect to any security
whether granted hereby or otherwise.
7. In the event that it is necessary for Unified Western to employ an
attorney for the collection of any amounts owing it, the undersigned agrees to
pay all costs involved including reasonable attorneys' fees.
2
<PAGE>
8. Any forbearance, failure, or delay by Unified Western in exercising
any right, power, or remedy hereunder or otherwise shall not be deemed to be a
waiver of such right, power, or remedy, and any single or partial exercise of
any right, power, or remedy hereunder or otherwise shall not preclude the
further exercise thereof; and every right, power, and remedy of Unified Western
shall continue in full force and effect until such right, power, or remedy is
specifically waived by an instrument in writing executed by Unified Western.
9. If this Agreement is executed by more than one person, each of the
agreements contained herein shall be joint and several obligations of the
undersigned. As used in this Agreement, the terms "I," "me" and "my" refer to
the undersigned, and each of them.
10. The validity, construction and performance of this Agreement shall be
governed by the laws, without regard to the laws as to choice or conflict of
laws, of the State of California.
11. Any notice, demand or other communication which Unified Western is
required or desires to give to the undersigned, or any of them, may be either
served personally at or sent by prepaid, first-class mail to the address set
forth below. Any such notice, demand or communication shall be deemed given to
the undersigned, and each of them, upon delivery to said address, if personally
served, and within 48 hours from the time of deposit in the United States mail,
if served by mail. The address of the undersigned may be changed only by giving
written notice to Unified Western at its principal office, but such change shall
not be deemed effective until actually received. Any other notice which the
undersigned may desire to give shall be given to Unified Western at its
principal office but shall not be deemed given until actually received.
12. If any term or provision of this Agreement or the application thereof
to any person or circumstances shall to any extent be invalid, illegal or
unenforceable, the remainder of this Agreement or the application of such term
or provision to any person or circumstances other than those as to which it is
invalid, illegal or enforceable shall not be affected thereby and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
13. The undersigned acknowledges receipt of a copy of Article VII of
Unified Western's Bylaws and hereby consents that the amount of any
distributions with respect to the undersigned's patronage which are made in
written notices of allocation (as defined in 26 United States Code Section 1388)
and which are received by the undersigned from Unified Western, will be taken
into account by the undersigned at their stated dollar amounts in the manner
provided in 26 United States Code Section 1385(a) in the taxable year in which
such written notices of allocation are received by the
3
<PAGE>
undersigned. This consent shall remain in effect until revoked in the manner
provided in 26 United States Code Section 1388.
____________________________________________
Name of Applicant (print or type)
Dated: _____, 2000 By: ________________________________________
Signature: ________________________________________
Its ________________________________________
Mailing Address
(print or type)
____________________________________________
Number and Street
____________________________________________
City State Zip
____________________________________________
Telephone Number
Applicant is:[_] a sole proprietorship;[_] a partnership;[_]
a corporation;[_] a limited liability company;[_] other.
Federal Taxpayer Identification No.: __________________
4
<PAGE>
APPLICATION ACKNOWLEDGMENT
1. We hereby acknowledge receipt of payment for the following:
<TABLE>
<CAPTION>
<S> <C>
Application Fee.........................................$ ____________
To be placed in Deposit Fund Account....................$ ____________
TOTAL PAYMENT $ ____________
</TABLE>
2. The Application is accepted with the effective date set forth below.
3. Unified Western Grocers, Inc. agrees that it will distribute its net
earnings from business transacted by it with its member-patrons and
associate-patrons in accordance with the provisions of Article VII of its
Bylaws which provisions are subject to revision or deletion at any time
from time to time by Unified Western, provided however any such revision or
deletion shall be effective prospectively only.
UNIFIED WESTERN GROCERS, INC.
By___________________________
Effective Date:________________
Account No.: _________________
Account Name (Print): ___________________
5
<PAGE>
Exhibit 4.3
Member-Patron/Affiliate
Subordination Agreement
(Subordination of Required Deposit)
The undersigned Member-Patron of Unified Western Grocers, Inc. ("Unified
Western") acknowledges that pursuant to the APPLICATION AND AGREEMENT FOR
SERVICE AFFILIATION AS A MEMBER-PATRON WITH UNIFIED WESTERN GROCERS, INC. AND
PLEDGE AND SECURTY AGREEMENT ("Membership Agreement") executed by the
undersigned and pursuant to Unified Western's Bylaws and its rules, regulations
and policies for the servicing of accounts, the undersigned is required to
maintain a deposit account or deposit accounts with Unified Western in at least
such amount (the "Required Deposit") as may from time to time be established by
Unified Western.
In consideration of financial accommodation given, to be given or continued
to be given to the undersigned by Unified Western and in consideration of
Unified Western's servicing of the undersigned's account and in compliance with
rules and regulations for the servicing of accounts as established by Unified
Western, the undersigned agrees:
(A) that any and all deposit accounts which the undersigned now has or
may in the future have with Unified Western are and shall be partially
subordinated deposit account(s) ("Deposit Account" or "Deposit Accounts")
which shall in all respects except as modified by this Subordination
Agreement continue to be governed by and subject to the Membership
Agreement and all provisions thereof regarding deposits and deposit
accounts; and
(B) that all Deposit Accounts of the undersigned are non-transferable
without the consent of Unified Western, which will normally be withheld,
and may be withheld in Unified Western's absolute discretion, and have been
and are hereby assigned and pledged to Unified Western as security for the
full and prompt payment and performance of any and all contracts,
agreements, obligations or liabilities of the undersigned, or any of them,
to Unified Western, or any of its subsidiaries, existing at any time,
including but not limited to full and prompt compliance by the undersigned,
and each of them, with any and all requirements and obligations regarding
the use, care and return of equipment and other property of Unified
Western, or any of its subsidiaries, now or hereafter in the possession or
under the control of the undersigned, or any of them.
Further, in consideration of financial accommodation given, to be given or
continued to be given to the undersigned by Unified Western, and in
consideration of Unified Western's servicing of the undersigned's account, and
in consideration of the providing of financing to Unified Western by the holders
of Senior Indebtedness as hereinafter defined, and in order to induce such
financing, the undersigned agrees that that portion of each Deposit Account
which consists of the Required Deposit shall be subordinate and subject in right
of payment, to the extent and in the manner hereinafter set forth, to the prior
payment in full of all Senior Indebtedness. "Senior Indebtedness" means all
indebtedness, liabilities or obligations of Unified Western, contingent or
otherwise, whether existing on the date of execution of this Subordination
Agreement or thereafter incurred, (A) in respect of borrowed money; (B)
evidenced by bonds, notes, debentures or other instruments of indebtedness; (C)
evidenced by letters of credit, bankers'
1
<PAGE>
acceptances or similar credit instruments; (D) in respect of Capitalized Lease
Obligations; (E) in respect of the deferred purchase price of property or assets
(whether real, personal, tangible or intangible) or in respect of any mortgage,
security agreement, title retention agreement or conditional sale contract; (F)
in respect of any interest rate swap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to provide interests rate
protection; (G) in respect of all indebtedness, liabilities or obligations of
others of any of the types referred to in clauses (A) through (F) for which
Unified Western is responsible or liable as obligor, guarantor or otherwise or
in respect of which recourse may be had against any of the property or assets
(whether real, personal, tangible or intangible) of Unified Western; and (H) in
respect of all modifications, renewals, extensions, replacements and refundings
of any indebtedness, liabilities or obligations of any of the types described in
clauses (A) through (G); provided, however, that the term "Senior Indebtedness"
shall not mean any indebtedness, liabilities or obligations of Unified Western,
contingent or otherwise, whether existing on the date of execution of this
Subordination Agreement or thereafter incurred, (i) to trade creditors arising
or incurred in the ordinary course of Unified Western's business, (ii) in
respect of any redemption, repurchase or other payments on capital stock, (iii)
in respect of Patrons' Deposits, or (iv) in respect of Patronage Dividend
Certificates.
For purposes of the foregoing definition, "Capitalized Lease Obligations"
means the discounted present value of the rental obligations of any person or
entity under any lease of any property which, in accordance with generally
accepted accounting principles, has been recorded on the balance sheet of such
person or entity as a capitalized lease; "Patrons' Deposits" means the deposits
from time to time required to be made or maintained with Unified Western by its
patrons or customers in accordance with the Bylaws of Unified Western in effect
from time to time or in accordance with the policies for the servicing of
accounts of patrons or customers established from time to time by Unified
Western, and any deposits from time to time made or maintained with Unified
Western by its patrons or customers in excess of such required deposits; and
"Patronage Dividend Certificates" means any notes, revolving fund certificates,
retain certificates, certificates of indebtedness, patronage dividend
certificates or any other written evidences of indebtedness of Unified Western
at any time outstanding which evidence the indebtedness of Unified Western
respecting the distribution by Unified Western of patronage dividends.
That portion of each Deposit Account which consists of the Required Deposit
shall be subordinate and junior in right of payment to all Senior Indebtedness
in the following respects:
(1) In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization, arrangement or other similar
proceedings in connection therewith, relative to Unified Western or to its
creditors, as such, or to its property or assets (whether real, personal,
tangible or intangible), or in the event of any proceedings for voluntary
liquidation, dissolution or other winding up of Unified Western, whether or
not involving insolvency or bankruptcy, then the holders of Senior
Indebtedness shall be entitled to receive payment in full of all Senior
Indebtedness (whether accrued prior or subsequent to the commencement of
such case or proceedings) before the undersigned is entitled to receive any
payment with respect to that portion of any Deposit Account which consists
of the Required Deposit, and to that end (but subject to the power of a
court of competent jurisdiction to make other equitable provision
reflecting the rights conferred herein upon the Senior Indebtedness and the
holders thereof with respect to that portion of any Deposit Account which
consists of the Required
2
<PAGE>
Deposit and the undersigned by a lawful plan of reorganization under
applicable bankruptcy law) the holders of Senior Indebtedness shall be
entitled to receive for application in payment thereof any payment or
distribution of any kind or character, whether in cash or property or
securities, or by set off or otherwise, which may be payable or deliverable
in any such proceedings in respect of that portion of any Deposit Account
which consists of the Required Deposit (other than securities which are
subordinate and junior in right of payment, at least to the extent provided
herein with respect to the Required Deposit, to the payment of all Senior
Indebtedness then outstanding) and the undersigned irrevocably authorizes
and empowers such holders of Senior Indebtedness to demand, sue for,
collect and receive any such payment or distribution and to receipt
therefor, and to file all such claims and take all such action, in the name
of the undersigned or otherwise, as such holders of Senior Indebtedness may
determine to be necessary or appropriate for the enforcement of these
subordination provisions, and the undersigned will also execute and deliver
such instruments confirming such authorizations and such powers of
attorney, proofs of claim, assignments of claim and other instruments as
may be requested by such holders of Senior Indebtedness in order to enable
such holders to enforce any and all claims upon or in respect of that
portion of any Deposit Account which consists of the Required Deposit; and
upon any such insolvency or bankruptcy proceedings, receivership,
liquidation, reorganization, arrangement or other similar proceedings, or
voluntary liquidation, dissolution or other winding up, any payment or
distribution of assets of Unified Western of any kind or character, whether
in cash, property or securities or by set off or otherwise (other than
securities which are subordinate and junior in right of payment, at least
to the extent provided herein with respect to the Required Deposit, to the
payment of all Senior Indebtedness then outstanding) to which the
undersigned would be entitled, except for the provisions hereof, shall be
paid by Unified Western or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or
distribution directly to the holders of Senior Indebtedness (pro rata to
each such holder on the basis of the respective amounts of Senior
Indebtedness held by such holder) or their representatives, to the extent
necessary to pay all Senior Indebtedness in full, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness;
(2) In the event that any default shall occur and be continuing with
respect to the payment of Senior Indebtedness, unless payment in full shall
have first been made on all Senior Indebtedness or such default with
respect to such Senior Indebtedness shall have been cured or waived in
accordance with the terms of such Senior Indebtedness, no payment shall be
made with respect to that portion of any Deposit Account which consists of
the Required Deposit (including any such payment which would cause such
default and including any payment in connection with the acquisition by
Unified Western of the Required Deposit for cash or property other than
capital stock of Unified Western); and
(3) In the event that any default (other than those referred to in
paragraph (2) above shall occur and be continuing with respect to any
Senior Indebtedness permitting the holders of such Senior Indebtedness to
accelerate the maturity thereof,
3
<PAGE>
unless payment in full shall have first been made on all Senior
Indebtedness or such default with respect to such Senior Indebtedness shall
have been cured or waived in accordance with the terms of such Senior
Indebtedness, all payments with respect to that portion of any Deposit
Account which consists of the Required Deposit (including any such payment
which would cause such default and including any payment in connection with
the acquisition by Unified Western of the Required Deposit for cash or
property other than capital stock of Unified Western) shall be suspended
during any period:
(a) of 180 days after the giving of written notice of such
default by the holders of Senior Indebtedness to Unified Western;
provided, that only one such notice shall be given pursuant to this
clause (3)(a) in any 12 consecutive months; or
(b) in which judicial proceedings shall be pending in respect of
such default, a notice of acceleration of the maturity of such Senior
Indebtedness shall have been transmitted to Unified Western in respect
of such default and such judicial proceedings shall be diligently
pursued in good faith.
In the event that any payment or other distribution is made to or received
by the undersigned in contravention of the provisions of paragraphs (1), (2)
and/or (3) above, then such payment or other distribution shall be held by the
undersigned for the benefit of, and shall be paid over and delivered to, the
holders of Senior Indebtedness (pro rata as their interests shall appear) or to
their representative or the trustee under the indenture or other agreement (if
any) pursuant to which Senior Indebtedness may have been issued, for application
to the payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness then due and payable in accordance with
its terms, after giving effect to any concurrent payment or distribution to or
for the holders of Senior Indebtedness.
The undersigned Member-Patron has duly executed this Subordination
Agreement this date and by such execution agrees that each and all of the
covenants, terms and provisions of this Subordination Agreement shall be
effective and binding on the undersigned Member-Patron from and after this date.
Dated:________________
_____________________________________
Member-Patron
By: ________________________________
________________________________
4
<PAGE>
Exhibit 4.4
Associate-Patron
Subordination Agreement
(Subordination of Required Deposit)
The undersigned Associate-Patron of Unified Western Grocers, Inc. ("Unified
Western") acknowledges that pursuant to the APPLICATION AND AGREEMENT FOR
SERVICE AFFILIATION AS AN ASSOCIATE-PATRON WITH UNIFIED WESTERN GROCERS, INC.
AND PLEDGE AND SECURITY AGREEMENT ("Membership Agreement") executed by the
undersigned and pursuant to Unified Western's Bylaws and its rules, regulations
and policies for the servicing of accounts, the undersigned is required to
maintain a deposit account or deposit accounts with Unified Western in at least
such amount (the "Required Deposit") as may from time to time be established by
Unified Western.
In consideration of financial accommodation given, to be given or continued
to be given to the undersigned by Unified Western and in consideration of
Unified Western's servicing of the undersigned's account and in compliance with
rules and regulations for the servicing of accounts as established by Unified
Western, the undersigned agrees:
(A) that any and all deposit accounts which the undersigned now has or
may in the future have with Unified Western are and shall be partially
subordinated deposit account(s) ("Deposit Account" or "Deposit Accounts")
which shall in all respects except as modified by this Subordination
Agreement continue to be governed by and subject to the Membership
Agreement and all provisions thereof regarding deposits and deposit
accounts; and
(B) that all Deposit Accounts of the undersigned are non-transferable
without the consent of Unified Western, which will normally be withheld,
and may be withheld in Unified Western's absolute discretion, and have been
and are hereby assigned and pledged to Unified Western as security for the
full and prompt payment and performance of any and all contracts,
agreements, obligations or liabilities of the undersigned, or any of them,
to Unified Western, or any of its subsidiaries, existing at any time,
including but not limited to full and prompt compliance by the undersigned,
and each of them, with any and all requirements and obligations regarding
the use, care and return of equipment and other property of Unified
Western, or any of its subsidiaries, now or hereafter in the possession or
under the control of the undersigned, or any of them.
Further, in consideration of financial accommodation given, to be given or
continued to be given to the undersigned by Unified Western, and in
consideration of Unified Western's servicing of the undersigned's account, and
in consideration of the providing of financing to Unified Western by the holders
of Senior Indebtedness as hereinafter defined, and in order to induce such
financing, the undersigned agrees that that portion of each Deposit Account
which consists of the Required Deposit shall be subordinate and subject in right
of payment, to the extent and in the manner hereinafter set forth, to the prior
payment in full of all Senior Indebtedness. "Senior Indebtedness" means all
indebtedness, liabilities or obligations of
1
<PAGE>
Unified Western, contingent or otherwise, whether existing on the date of
execution of this Subordination Agreement or thereafter incurred, (A) in respect
of borrowed money; (B) evidenced by bonds, notes, debentures or other
instruments of indebtedness; (C) evidenced by letters of credit, bankers'
acceptances or similar credit instruments; (D) in respect of Capitalized Lease
Obligations; (E) in respect of the deferred purchase price of property or assets
(whether real, personal, tangible or intangible) or in respect of any mortgage,
security agreement, title retention agreement or conditional sale contract; (F)
in respect of any interest rate swap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to provide interests rate
protection; (G) in respect of all indebtedness, liabilities or obligations of
others of any of the types referred to in clauses (A) through (F) for which
Unified Western is responsible or liable as obligor, guarantor or otherwise or
in respect of which recourse may be had against any of the property or assets
(whether real, personal, tangible or intangible) of Unified Western; and (H) in
respect of all modifications, renewals, extensions, replacements and refundings
of any indebtedness, liabilities or obligations of any of the types described in
clauses (A) through (G); provided, however, that the term "Senior Indebtedness"
shall not mean any indebtedness, liabilities or obligations of Unified Western,
contingent or otherwise, whether existing on the date of execution of this
Subordination Agreement or thereafter incurred, (i) to trade creditors arising
or incurred in the ordinary course of Unified Western's business, (ii) in
respect of any redemption, repurchase or other payments on capital stock, (iii)
in respect of Patrons' Deposits, or (iv) in respect of Patronage Dividend
Certificates.
For purposes of the foregoing definition, "Capitalized Lease Obligations"
means the discounted present value of the rental obligations of any person or
entity under any lease of any property which, in accordance with generally
accepted accounting principles, has been recorded on the balance sheet of such
person or entity as a capitalized lease; "Patrons' Deposits" means the deposits
from time to time required to be made or maintained with Unified Western by its
patrons or customers in accordance with the Bylaws of Unified Western in effect
from time to time or in accordance with the policies for the servicing of
accounts of patrons or customers established from time to time by Unified
Western, and any deposits from time to time made or maintained with Unified
Western by its patrons or customers in excess of such required deposits; and
"Patronage Dividend Certificates" means any notes, revolving fund certificates,
retain certificates, certificates of indebtedness, patronage dividend
certificates or any other written evidences of indebtedness of Unified Western
at any time outstanding which evidence the indebtedness of Unified Western
respecting the distribution by Unified Western of patronage dividends.
That portion of each Deposit Account which consists of the Required Deposit
shall be subordinate and junior in right of payment to all Senior Indebtedness
in the following respects:
(1) In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization, arrangement or other similar
proceedings in connection therewith, relative to Unified Western or to its
creditors, as such, or to its property or assets (whether real, personal,
tangible or intangible), or in the event of any proceedings for voluntary
liquidation, dissolution or other winding up of Unified Western, whether or
not involving insolvency or bankruptcy, then the holders of
2
<PAGE>
Senior Indebtedness shall be entitled to receive payment in full of all
Senior Indebtedness (whether accrued prior or subsequent to the
commencement of such case or proceedings) before the undersigned is
entitled to receive any payment with respect to that portion of any Deposit
Account which consists of the Required Deposit, and to that end (but
subject to the power of a court of competent jurisdiction to make other
equitable provision reflecting the rights conferred herein upon the Senior
Indebtedness and the holders thereof with respect to that portion of any
Deposit Account which consists of the Required Deposit and the undersigned
by a lawful plan of reorganization under applicable bankruptcy law) the
holders of Senior Indebtedness shall be entitled to receive for application
in payment thereof any payment or distribution of any kind or character,
whether in cash or property or securities, or by set off or otherwise,
which may be payable or deliverable in any such proceedings in respect of
that portion of any Deposit Account which consists of the Required Deposit
(other than securities which are subordinate and junior in right of
payment, at least to the extent provided herein with respect to the
Required Deposit, to the payment of all Senior Indebtedness then
outstanding) and the undersigned irrevocably authorizes and empowers such
holders of Senior Indebtedness to demand, sue for, collect and receive any
such payment or distribution and to receipt therefor, and to file all such
claims and take all such action, in the name of the undersigned or
otherwise, as such holders of Senior Indebtedness may determine to be
necessary or appropriate for the enforcement of these subordination
provisions, and the undersigned will also execute and deliver such
instruments confirming such authorizations and such powers of attorney,
proofs of claim, assignments of claim and other instruments as may be
requested by such holders of Senior Indebtedness in order to enable such
holders to enforce any and all claims upon or in respect of that portion of
any Deposit Account which consists of the Required Deposit; and upon any
such insolvency or bankruptcy proceedings, receivership, liquidation,
reorganization, arrangement or other similar proceedings, or voluntary
liquidation, dissolution or other winding up, any payment or distribution
of assets of Unified Western of any kind or character, whether in cash,
property or securities or by set off or otherwise (other than securities
which are subordinate and junior in right of payment, at least to the
extent provided herein with respect to the Required Deposit, to the payment
of all Senior Indebtedness then outstanding) to which the undersigned would
be entitled, except for the provisions hereof, shall be paid by Unified
Western or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution directly to the
holders of Senior Indebtedness (pro rata to each such holder on the basis
of the respective amounts of Senior Indebtedness held by such holder) or
their representatives, to the extent necessary to pay all Senior
Indebtedness in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness;
(2) In the event that any default shall occur and be continuing with
respect to the payment of Senior Indebtedness, unless payment in full shall
have first been made on all Senior Indebtedness or such default with
respect to such Senior Indebtedness shall have been cured or waived in
accordance with the terms of such Senior Indebtedness, no payment shall be
made with respect to that portion of any Deposit
3
<PAGE>
Account which consists of the Required Deposit (including any such payment
which would cause such default and including any payment in connection with
the acquisition by Unified Western of the Required Deposit for cash or
property other than capital stock of Unified Western); and
(3) In the event that any default (other than those referred to in
paragraph (2) above shall occur and be continuing with respect to any
Senior Indebtedness permitting the holders of such Senior Indebtedness to
accelerate the maturity thereof, unless payment in full shall have first
been made on all Senior Indebtedness or such default with respect to such
Senior Indebtedness shall have been cured or waived in accordance with the
terms of such Senior Indebtedness, all payments with respect to that
portion of any Deposit Account which consists of the Required Deposit
(including any such payment which would cause such default and including
any payment in connection with the acquisition by Unified Western of the
Required Deposit for cash or property other than capital stock of Unified
Western) shall be suspended during any period:
(a) of 180 days after the giving of written notice of such
default by the holders of Senior Indebtedness to Unified Western;
provided, that only one such notice shall be given pursuant to this
clause (3)(a) in any 12 consecutive months; or
(b) in which judicial proceedings shall be pending in respect of
such default, a notice of acceleration of the maturity of such Senior
Indebtedness shall have been transmitted to Unified Western in respect
of such default and such judicial proceedings shall be diligently
pursued in good faith.
In the event that any payment or other distribution is made to or received
by the undersigned in contravention of the provisions of paragraphs (1), (2)
and/or (3) above, then such payment or other distribution shall be held by the
undersigned for the benefit of, and shall be paid over and delivered to, the
holders of Senior Indebtedness (pro rata as their interests shall appear) or to
their representative or the trustee under the indenture or other agreement (if
any) pursuant to which Senior Indebtedness may have been issued, for application
to the payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness then due and payable in accordance with
its terms, after giving effect to any concurrent payment or distribution to or
for the holders of Senior Indebtedness.
4
<PAGE>
The undersigned Associate-Patron has duly executed this Subordination
Agreement this date and by such execution agrees that each and all of the
covenants, terms and provisions of this Subordination Agreement shall be
effective and binding on the undersigned Associate-Patron from and after this
date.
Dated:________________
_____________________________________
Associate-Patron
By: _________________________________
Its: ____________________________
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-03-2000
<PERIOD-END> APR-01-2000
<CASH> 12,311
<SECURITIES> 44,711
<RECEIVABLES> 242,760
<ALLOWANCES> 11,412
<INVENTORY> 224,555
<CURRENT-ASSETS> 438,711
<PP&E> 263,207
<DEPRECIATION> 140,848
<TOTAL-ASSETS> 744,932
<CURRENT-LIABILITIES> 287,105
<BONDS> 268,636
0
0
<COMMON> 77,600
<OTHER-SE> 18,440
<TOTAL-LIABILITY-AND-EQUITY> 744,932
<SALES> 1,561,702
<TOTAL-REVENUES> 1,561,702
<CGS> 1,395,928
<TOTAL-COSTS> 1,547,666
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,508
<INCOME-PRETAX> (7,030)
<INCOME-TAX> (2,016)
<INCOME-CONTINUING> (5,014)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,014)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
