<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-Q
QUARTERLY REPORT
UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
_______________
<TABLE>
<S> <C>
For Quarter Ended Commission File Number
July 16, 1995 33-31152
</TABLE>
RALPHS GROCERY COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 95-4356030
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification Number)
1100 West Artesia Boulevard
Compton, California 90220
(Address of principal executive offices) (Zip code)
</TABLE>
(310) 884-9000
(Registrant's telephone number, including area code)
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 _____.
---
At August 31, 1995, there were 1,513,938 shares of Common Stock
outstanding. As of such date, all of the outstanding shares of Common Stock
were held by Food 4 Less Holdings, Inc., and there was no public market for the
Common Stock.
================================================================================
<PAGE> 2
RALPHS GROCERY COMPANY
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated balance sheets as of
July 16, 1995 and January 29, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated statements of operations for the 12 weeks ended
July 16, 1995 and June 25, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated statements of operations for the 24 weeks ended
July 16, 1995 and June 25, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated statements of cash flows for the 24 weeks ended
July 16, 1995 and June 25, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Consolidated statements of stockholder's equity as of
July 16, 1995 and January 29, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PART II. OTHER INFORMATION
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Index to Exhibits
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
1
<PAGE> 4
RALPHS GROCERY COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
July 16, January 29,
ASSETS 1995 1995
---------- ----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 51,379 $ 19,560
Trade receivables, net 59,273 23,377
Notes and other receivables 5,778 3,985
Inventories 477,209 224,686
Patronage receivables from suppliers 2,405 5,173
Prepaid expenses and other 29,254 13,051
---------- ----------
Total current assets 625,298 289,832
INVESTMENTS IN AND NOTES RECEIVABLE FROM
SUPPLIER COOPERATIVES:
A. W. G. 7,288 6,718
Certified and Others 5,651 5,686
PROPERTY AND EQUIPMENT:
Land 185,872 23,488
Buildings 215,217 24,172
Leasehold improvements 221,534 110,020
Fixtures and Equipment 409,033 190,016
Construction in progress 22,834 8,042
Leased property under capital leases 167,764 82,526
Leasehold interests 118,948 96,556
---------- ----------
1,341,202 534,820
Less: Accumulated depreciation and amortization 175,625 154,382
---------- ----------
Net property and equipment 1,165,577 380,438
OTHER ASSETS:
Deferred financing costs, less accumulated amortization
of $2,010 and $20,496 at July 16, 1995 and
January 29, 1995, respectively 86,263 25,469
Goodwill, less accumulated amortization of $45,072
and $38,560 at July 16, 1995 and
January 29, 1995, respectively 1,114,463 263,112
Other, net 37,074 29,440
---------- ----------
$3,041,614 $1,000,695
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
2
<PAGE> 5
RALPHS GROCERY COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
July 16, January 29,
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1995
---------- ----------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 311,226 $ 190,455
Accrued payroll and related liabilities 92,880 42,007
Accrued interest 17,644 10,730
Other accrued liabilities 149,010 65,279
Income taxes payable 1,491 293
Current portion of self-insurance liabilities 57,169 28,616
Current portion of long-term debt 13,438 22,263
Current portion of obligations under capital leases 18,499 4,965
---------- ----------
Total current liabilities 661,357 364,608
LONG-TERM SENIOR DEBT 1,160,580 320,901
OBLIGATIONS UNDER CAPITAL LEASES 122,613 40,675
SENIOR SUBORDINATED DEBT 672,318 145,000
DEFERRED INCOME TAXES 19,567 17,534
SELF-INSURANCE LIABILITIES 89,881 41,872
LEASE VALUATION RESERVE 25,493 --
OTHER NON CURRENT LIABILITIES 75,285 12,302
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDER'S EQUITY:
Cumulative convertible preferred stock, $.01 par value,
200,000 shares authorized: 50,000 shares outstanding at
January 29, 1995 (aggregate liquidation value of
$67.9 million) and no shares at July 16, 1995 -- 65,136
Common stock, $.01 par value, 5,000,000 shares
authorized; 1,513,938 shares and 1,519,632 shares outstanding
at July 16, 1995 and January 29, 1995, respectively 15 15
Additional paid-in capital 466,783 107,650
Notes receivable from stockholders of parent (675) (702)
Retained deficit (251,603) (112,225)
---------- ----------
214,520 59,874
Treasury stock: 12,345 shares of common stock at
January 29, 1995 -- (2,071)
---------- ----------
Total stockholder's equity 214,520 57,803
---------- ----------
$3,041,614 $1,000,695
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
3
<PAGE> 6
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
12 Weeks 12 Weeks
Ended Ended
July 16, June 25,
1995 1994
---------- ----------
<S> <C> <C>
SALES $ 857,344 $ 581,076
---------- ----------
COST OF SALES (including purchases from related parties for
12 weeks ended July 16, 1995 and June 25, 1994 of $37,664
and $29,646, respectively) 695,727 482,671
---------- ----------
GROSS PROFIT 161,617 98,405
SELLING, GENERAL, ADMINISTRATIVE AND OTHER, NET 163,654 76,778
AMORTIZATION OF EXCESS COSTS OVER NET ASSETS ACQUIRED 4,683 1,787
RESTRUCTURING CHARGE 63,587 --
---------- ----------
OPERATING INCOME (LOSS) (70,307) 19,840
INTEREST EXPENSE:
Interest expense, excluding amortization
of deferred financing costs 30,446 14,212
Amortization of deferred financing costs 1,600 1,262
---------- ----------
32,046 15,474
LOSS (GAIN) ON DISPOSAL OF ASSETS (19) 118
---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY CHARGE
AND PROVISION FOR INCOME TAXES (102,334) 4,248
PROVISION FOR INCOME TAXES 200 1,600
---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY CHARGE (102,534) 2,648
EXTRAORDINARY CHARGE 23,128 --
---------- ----------
NET INCOME (LOSS) $ (125,662) $ 2,648
========== ==========
PREFERRED STOCK ACCRETION 1,584 2,023
INCOME (LOSS) APPLICABLE TO COMMON SHARES $ (127,246) $ 625
EARNINGS PER COMMON SHARE: ========== ==========
Earnings (Loss) before extraordinary charges $ (68.96) $ 0.42
Extraordinary charges (15.32) --
---------- ----------
Net Earnings (Loss) $ (84.28) $ 0.42
========== ==========
Average Number of Common Shares Outstanding 1,509,821 1,503,042
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE> 7
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
24 Weeks 24 Weeks
Ended Ended
July 16, June 25,
1995 1994
---------- --------
<S> <C> <C>
SALES $1,480,942 $1,168,947
COST OF SALES (including purchases from related parties for the
24 weeks ended July 16, 1995 and June 25, 1994 of $79,434
and $69,869, respectively) 1,212,157 961,853
---------- ----------
GROSS PROFIT 268,785 207,094
SELLING, GENERAL, ADMINISTRATIVE AND OTHER, NET 255,006 167,226
AMORTIZATION OF EXCESS COSTS OVER NET ASSETS ACQUIRED 6,512 3,559
RESTRUCTURING CHARGE 63,587 --
---------- ----------
OPERATING INCOME (LOSS) (56,320) 36,309
INTEREST EXPENSE:
Interest expense, excluding amortization
of deferred financing costs 45,968 28,864
Amortization of deferred financing costs 2,994 2,524
---------- ----------
48,962 31,388
LOSS (GAIN) ON DISPOSAL OF ASSETS (436) 96
PROVISION FOR EARTHQUAKE LOSSES -- 4,504
---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY CHARGE AND
PROVISION FOR INCOME TAXES (104,846) 321
PROVISION FOR INCOME TAXES 500 2,000
---------- ----------
LOSS BEFORE EXTRAORDINARY CHARGE (105,346) (1,679)
EXTRAORDINARY CHARGE 23,128 --
---------- ----------
NET LOSS $ (128,474) $ (1,679)
========== ==========
PREFERRED STOCK ACCRETION 3,960 4,046
LOSS APPLICABLE TO COMMON SHARES $ (132,434) $ (5,725)
========== ==========
LOSS PER COMMON SHARE:
Loss before extraordinary charges $ (72.46) $ (3.81)
Extraordinary charges (15.33) --
---------- ----------
Net Loss $ (87.79) $ (3.81)
========== ==========
Average Number of Common Shares Outstanding 1,508,554 1,503,342
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 8
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
24 Weeks 24 Weeks
Ended Ended
July 16, June 25,
1995 1994
-------- --------
<S> <C> <C>
CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Cash received from customers $ 1,480,754 $ 1,168,947
Cash paid to suppliers and employees (1,459,333) (1,083,621)
Interest paid (39,054) (27,584)
Income taxes received (paid) 100 (1,899)
Interest received 228 417
Other, net (46) (2,753)
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (17,351) 53,507
CASH USED BY INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 5,471 92
Payment for purchase of property and equipment (30,427) (33,656)
Payment of acquisition costs, net of cash acquired (340,620) (11,050)
Other, net (639) 752
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (366,215) (43,862)
CASH PROVIDED (USED) BY FINANCING ACTIVITIES:
Proceeds from the issuance of long-term debt 963,084 --
Payments of long-term debt (552,296) (3,829)
Payments of capital lease obligation (3,294) (2,128)
Net change in Revolving Loan 2,700 --
Capital contribution from parent 12,108 --
Dividends (6,944) --
Purchase of treasury stock, net -- (466)
Other, net 27 (18)
----------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 415,385 (6,441)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 31,819 3,204
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 19,560 29,792
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 51,379 $ 32,996
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
6
<PAGE> 9
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
24 Weeks 24 Weeks
Ended Ended
July 16, June 25,
1995 1994
-------- --------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES:
Net loss $ (128,474) $ (1,679)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Restructuring Charge 63,587 --
Extraordinary charge 23,128 --
Depreciation and amortization 42,233 29,234
Gain on sale of assets (436) (22)
Change in assets and liabilities:
Accounts and notes receivable 4,765 2,491
Inventories 23,590 (1,019)
Prepaid expenses and other 5,520 (58)
Accounts payable and accrued liabilities (51,036) 31,550
Self-insurance liabilities (828) (7,091)
Income taxes payable 600 101
----------- -----------
Total adjustments 111,123 55,186
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ (17,351) $ 53,507
============ ==========
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Acquisition of stores:
Fair value of assets acquired, less cash acquired
of $34,380 in 1995 $2,053,528 $ 11,187
Net cash paid in acquisition (340,620) (6,570)
Capital contribution from parent (280,000) --
---------- ----------
Liabilities assumed $1,432,908 $ 4,617
========== ==========
Accretion of preferred stock $ 3,960 $ 4,046
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
7
<PAGE> 10
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Treasury Stock
-------------------- ------------------- --------------------
Number Number Number
of of of
Shares Amount Shares Amount Shares Amount
------- -------- --------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 29, 1995 50,000 $ 65,136 1,519,632 $15 (12,345) $(2,071)
Cancellation of Food 4 Less Supermarkets, Inc.'s
Common Stock held as Treasury Stock (unaudited) -- -- (5,694) -- 5,694 955
Cancellation of Food 4 Less Holdings, Inc.'s
Common Stock held as Treasury Stock (unaudited) -- -- -- -- 6,651 1,116
Preferred Stock Accretion (unaudited) -- 3,960 -- -- -- --
Cancellation of Preferred Stock (unaudited) (50,000) (69,096) -- -- -- --
Dividend paid to Food 4 Less Holdings, Inc.
(unaudited) -- -- -- -- -- --
Payment on Stockholder Notes (unaudited) -- -- -- -- -- --
Capital Contribution by Food 4 Less Holdings, Inc.
(unaudited) -- -- -- -- -- --
Issuance of Stock Options (unaudited) -- -- -- -- -- --
Net loss (unaudited) -- -- -- -- -- --
------- -------- --------- --- ------- -------
BALANCES AT JULY 16, 1995 (unaudited) -- $ -- 1,513,938 $15 -- $ --
======= ======== ========= === ======= =======
<CAPTION>
Stock- Add'l Total
holders' Paid-In Retained Stockholder's
Notes Capital Deficit Equity
-------- ------- ---------- ------------
<S> <C> <C> <C> <C>
BALANCES AT JANUARY 29, 1995 $(702) $107,650 $(112,225) $ 57,803
Cancellation of Food 4 Less Supermarkets, Inc.'s
Common Stock held as Treasury Stock (unaudited) -- (955) -- --
Cancellation of Food 4 Less Holdings, Inc.'s
Common Stock held as Treasury Stock (unaudited) -- (1,116) -- --
Preferred Stock Accretion (unaudited) -- -- (3,960) --
Cancellation of Preferred Stock (unaudited) -- 69,096 -- --
Dividend paid to Food 4 Less Holdings, Inc.
(unaudited) -- -- (6,944) (6,944)
Payment on Stockholder Notes (unaudited) 27 -- -- 27
Capital Contribution by Food 4 Less Holdings, Inc.
(unaudited) -- 282,108 -- 282,108
Issuance of Stock Options (unaudited) -- 10,000 -- 10,000
Net loss (unaudited) -- -- (128,474) (128,474)
----- -------- --------- ---------
BALANCES AT JULY 16, 1995 (unaudited) $(675) $466,783 $(251,603) $ 214,520
===== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
8
<PAGE> 11
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated balance sheet and statement of stockholder's
equity of Ralphs Grocery Company (the "Company"), formerly known as
Food 4 Less Supermarkets, Inc. ("F4L Supermarkets") as of July 16,
1995 and the consolidated statements of operations and cash flows for
the interim periods ended July 16, 1995 and June 25, 1994 are
unaudited, but include all adjustments (consisting of only normal
recurring accruals) which the Company considers necessary for a fair
presentation of its consolidated financial position, results of
operations and cash flows for these periods. These interim financial
statements do not include all disclosures required by generally
accepted accounting principles, and, therefore, should be read in
conjunction with the Company's financial statements and notes thereto
included in the Company's latest annual report filed under the name of
Food 4 Less Supermarkets, Inc. on Form 10-K for the fiscal year ended
January 29, 1995. Results of operations for interim periods are not
necessarily indicative of the results for a full fiscal year.
2. ORGANIZATION AND ACQUISITION
The Company, a wholly owned subsidiary of Food 4 Less
Holdings, Inc. ("Holdings"), is a retail supermarket company with 441
stores located in Southern California, Northern California and certain
areas of the Midwest. The Company's Southern California division
includes manufacturing facilities, with bakery and creamery
operations, and full-line warehouse and distribution facilities.
ACQUISITION
On June 14, 1995, F4L Supermarkets acquired all of the common
stock of Ralphs Supermarkets, Inc. ("RSI") in a transaction accounted
for as a purchase by F4L Supermarkets. The consideration for the
acquisition consisted of $375 million in cash, $131.5 million
principal amount of 13.625% Senior Subordinated Pay-In-Kind Debentures
due 2007 of Holdings (the "Seller Debentures") and $18.5 million
initial accreted value of 13.625% Senior Discount Debentures due 2005
of Holdings (the "New Discount Debentures"). F4L Supermarkets, RSI
and RSI's wholly owned subsidiary Ralphs Grocery Company ("RGC")
combined through mergers (the "Merger") in which RSI remained as the
surviving entity and changed its name to Ralphs Grocery Company. The
financial statements reflect the preliminary allocation of the
purchase price as certain appraisals and other information needed to
complete the purchase price allocation have not been completed. The
allocation of the purchase price will be finalized in fiscal 1996.
The following unaudited pro forma information presents the
results of the Company's operations, adjusted to reflect interest
expense and depreciation and amortization, as though the Merger had
been consummated at the beginning of each period.
<TABLE>
<CAPTION>
24 Weeks 24 Weeks
Ended Ended
July 16, 1995 June 25, 1994
------------- -------------
(dollars in thousands, except share amounts)
<S> <C> <C>
Sales $2,506,633 $2,409,892
Loss before extraordinary charge (107,088) (95,639)
Net loss (132,016) (126,182)
Loss per share:
Loss before extraordinary charge $ (71.05) $ (63.60)
Net loss $ (87.58) $ (83.92)
</TABLE>
The unaudited pro forma results of operations are not
necessarily indicative of the actual results of operations that would
have occurred had the purchase actually been made at the beginning of
each period, or of the results which may occur in the future.
9
<PAGE> 12
3. SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories, which consist primarily of grocery products, are
stated at the lower of cost or market. Cost has been principally
determined using the last-in, first-out ("LIFO") method. If
inventories had been valued using the first-in, first-out ("FIFO")
method, inventories would have been higher by $18,525,000 and
$16,531,000 at July 16, 1995 and January 29, 1995, respectively, and
gross profit and operating income would have been greater by $959,000
and $1,994,000 for the 12 and 24 weeks ended July 16, 1995,
respectively, and less by $2,256,000 and $1,521,000 for the 12 and 24
weeks ended June 25, 1994, respectively.
Reclassifications
Certain prior period amounts in the consolidated financial
statements have been reclassified to conform to the July 16, 1995
presentation.
4. RESTRUCTURING CHARGE
The Company has recorded a $63.6 million one-time
charge associated with the closing of 39 stores and one
warehouse facility. Pursuant to the settlement agreement with
the State of California, 24 Food 4 Less stores (as well as 3
Ralphs stores) must be divested by December 31, 1995.
Although not required by such settlement agreement, an
additional 15 under-performing stores are scheduled to be
closed by June 30, 1996. The restructuring charge consists of
write-downs of property, plant and equipment ($40.6 million)
less estimated proceeds ($16.0 million); reserve for closed
stores and warehouse facility ($16.1 million); write-off of
the Alpha Beta trademark ($8.3 million); write-off of other
assets ($8.0 million); lease termination expenses ($4.0
million); and miscellaneous expenses ($2.6 million). The
expected cash payments to be made in connection with the
restructuring charge total $7.2 million. It is expected that
cash payments will be made by June 30, 1996. The increase in
the restructuring charge over previous estimates is due
primarily to the addition of the $16.1 million reserve for the
closure of the warehouse and stores. The remaining increase
results from the identification of additional assets to be
written-off. During the 12 weeks ended July 16, 1995, the
Company utilized $44.7 million of the reserve for
restructuring costs. The charges consisted of write-downs of
property, plant and equipment ($31.3 million); write- off of
the Alpha Beta trademark ($8.3 million); and write-off of
other assets ($5.1 million). No additional expenses are
expected to be incurred in future periods in connection with
these closings. The Company has determined that there is no
impairment of existing goodwill related to the store closures
based on its projections of future undiscounted cash flows.
5. EXTRAORDINARY CHARGE
The extraordinary charge of $23.1 million relates to
the refinancing of F4L Supermarkets' old credit facility,
10.45% Senior Notes due 2000 (the "Old F4L Senior Notes"), the
13.75% Senior Subordinated Notes due 2001 (the "Old F4L Senior
Subordinated Notes") and Holdings' 15.25% Senior Discount
Notes due 2004 in connection with the Merger and the write-off
of their related debt issuance costs.
10
<PAGE> 13
6. LONG-TERM SENIOR DEBT AND SENIOR SUBORDINATED DEBT
The Company's long-term senior debt is summarized as
follows:
<TABLE>
<CAPTION>
July 16, January 29,
1995 1995
-------------- -------------
<S> <C> <C>
New Term Loans, principal due quarterly through
2003, with interest payable quarterly in arrears $ 600,000,000 $ --
Old Bank Term Loan, principal due quarterly through
January 1999, with interest payable monthly in -- 125,732,000
arrears
10.45 percent Senior Notes principal due 2004 with
interest payable semi-annually in arrears 520,326,000 --
10.45 percent Senior Notes principal due 2000 with
interest payable semi-annually in arrears 4,674,000 175,000,000
Revolving Loan 30,000,000 27,300,000
Notes payable in varying monthly installments
including interest ranging from 11.5 percent to
18.96 percent. Final payments due through November
1996. Secured by equipment with a net book value of
$25.6 million 4,676,000 --
10.0 percent secured promissory note, collateralized
by the stock of Bell, due June 1996, interest
payable quarterly through June 1996 8,000,000 8,000,000
10.625 percent first real estate mortgage due 1998,
$12,000 of principal plus interest payable monthly
secured by land and building with a net book value
of $2.1 million 1,477,000 1,498,000
10.8 percent notes payable, collateralized
equipment, due September 1995, $72,000 of principal
plus interest payable monthly, plus balloon payment
of $1,004,000 1,057,000 1,420,000
Other long-term debt 3,808,000 4,214,000
-------------- -------------
1,174,018,000 343,164,000
Less--current portion 13,438,000 22,263,000
-------------- -------------
$1,160,580,000 $ 320,901,000
============== =============
</TABLE>
Long Term Senior Debt
As part of the Merger financing, the Company entered into a new
credit agreement (the "New Credit Facility") with certain banks,
comprised of a $600 million term loan facility (the "New Term Loans")
and a revolving credit facility of $325 million (the "Revolving Credit
Facility") less amounts outstanding under a $150 million standby
letter of credit facility (the "Letter of Credit Facility").
At July 16, 1995, $600 million was outstanding under the New
Term Loans, $30 million was outstanding under the Revolving Credit
Facility, and $93.6 million of standby letters of credit had been
issued on behalf of the Company. A commitment fee of 1/2 of 1 percent
is charged on the average daily unused portion of the Revolving Credit
Facility; such commitment fees are due quarterly in arrears. Interest
on borrowings under the New Term Loans is at the bank's Base Rate (as
defined) plus a margin ranging from 1.50 percent to 2.75 percent or the
adjusted Eurodollar Rate (as defined) plus a margin ranging from 2.75
percent to 4.00 percent. At July 16, 1995, the weighted average
interest rate on the New Term Loans was 9.12 percent. Interest on
borrowings under the Revolving Credit Facility is
11
<PAGE> 14
at the bank's Base Rate (as defined) plus a margin of 1.50 percent
or the Adjusted Eurodollar Rate (as defined) plus a margin of 2.75
percent. At July 16, 1995, the interest rate on the Revolving Credit
Facility was 10.25 percent.
Quarterly principal installments on the New Term Loans continue
to December 2003, with amounts payable in each year as follows: $1.6
million in fiscal 1995, $19.7 million in fiscal 1996, $47.2 million in
fiscal 1997, $60.1 million in fiscal 1998, $63.7 million in fiscal
1999, $67.4 in fiscal 2000, $86.6 in fiscal 2001, $102.9 in fiscal
2002 and $150.6 in fiscal 2003. The principal installments can be
accelerated from time to time by certain mandatory prepayments which
are required under the New Credit Facility. To the extent that
borrowings under the Revolving Credit Facility are not paid earlier,
they are due in December 2003. The common stock of the Company and
certain of its direct and indirect subsidiaries has been pledged as
security under the New Credit Facility.
The Company issued $350,000,000 of new 10.45% Senior Notes due
2004 (the "New F4L Senior Notes") and exchanged $170,326,000 principal
amount of the Old F4L Senior Notes (together with the New F4L Senior
Notes, the "Senior Notes"), for an equal amount of the New F4L Senior
Notes, leaving an outstanding balance of $4,674,000 on the Old F4L
Senior Notes. The New Senior Notes are due on June 15, 2004 and the
Old F4L Senior Notes are due in two equal sinking fund payments on
April 15, 1999 and 2000. The Senior Notes are senior unsecured
obligations of the Company and rank "pari passu" in right of payment
with other senior unsecured indebtedness of the Company. However, the
Senior Notes are effectively subordinated to all secured indebtedness
of the Company and its subsidiaries, including indebtedness under the
New Credit Facility. Interest on the New F4L Senior Notes is payable
semiannually in arrears on each June 15 and December 15, commencing on
December 15, 1995. Interest on the Old F4L Senior Notes is payable
semiannually in arrears on each April 15 and October 15.
The New F4L Senior Notes may be redeemed, at the option of the
Company, in whole at any time or in part from time to time, beginning
in fiscal 2000, at a redemption price of 105.225 percent. The
redemption price declines ratably to 100 percent in fiscal 2003. In
addition, on or prior to June 15, 1998, the Company may, at its
option, use the net cash proceeds of one or more public equity
offerings to redeem up to an aggregate of 35 percent of the principal
amount of the New F4L Senior Notes originally issued, at a redemption
price equal to 110.450 percent, 108.957 percent, and 107.464 percent
of the principal amount thereof if redeemed during the 12 months
commencing on June 15, 1995, June 15, 1996, and June 15, 1997,
respectively, in each case plus accrued and unpaid interest, if any,
to the redemption date. The Old F4L Senior Notes may be redeemed
beginning in fiscal year 1996 at 104.48 percent, declining ratably to
100 percent in fiscal 1999.
Scheduled maturities of principal of long-term senior debt at
July 16, 1995 are as follows:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1995 $ 3,269,000
1996 29,690,000
1997 47,448,000
1998 60,322,000
1999 65,225,000
Later years 968,064,000
--------------
$1,174,018,000
==============
</TABLE>
Senior Subordinated Debt
The Company issued $100,000,000 of new 11% Senior Subordinated
Notes due 2005 (the "New RGC Notes") and exchanged (i) $149,722,000
principal amount of the RGC 9% Senior Subordinated Notes due 2003
(the "Old RGC 9% Notes") and (ii) $296,964,000 principal amount of the
RGC 10.25% Senior Subordinated Notes due 2002 (the "Old RGC 10.25%
Notes," and together with the Old RGC 9% Notes, the "Old RGC Notes")
for an equal amount of New RGC Notes, leaving an outstanding balance
of $278,000 on the Old RGC 9% Notes and an outstanding balance of
$3,036,000 on the Old RGC 10.25% Notes. These outstanding balances are
subject to a change of control provision in which each holder of the
Old RGC Notes has the right to require the Company to repurchase such
holder's Old RGC Notes at 101 percent of the principal amount thereof,
together with accrued and unpaid interest to the date of redemption.
Each holder of the Old RGC Notes is required to elect whether or not
the Company shall repurchase the Old RGC Notes on August 31, 1995.
The New RGC Notes are senior subordinated unsecured obligations of the
Company and are subordinated in right of payment to all senior
indebtedness including the Company's obligations under the New Credit
Facility and the Senior Notes. Interest on the New RGC Notes is
payable semiannually in arrears on each June 15 and December 15,
commencing on December 15, 1995.
The New RGC Notes may be redeemed at the option of the Company,
in whole at any time or in part from time to time, beginning in fiscal
year 2000, at an initial redemption price of 105.5 percent. The
redemption price declines ratably to 100 percent in fiscal 2003. In
addition, on or prior to June 15, 1998, the Company may, at its
option, use the net cash proceeds of one or more public
12
<PAGE> 15
equity offerings to redeem up to an aggregate of 35 percent of the
principal amount of the New RGC Notes originally issued, at a
redemption price equal to 111 percent, 109.429 percent, and 107.857
percent of the principal amount thereof if redeemed during the 12
months commencing on June 15, 1995, June 15, 1996, and June 15, 1997,
respectively, in each case plus accrued and unpaid interest, if any,
to the redemption date.
The Company exchanged $140,184,000 Old F4L Senior Subordinated
Notes for an equal amount of new 13.75% Senior Subordinated Notes due
2005 (the "New F4L Senior Subordinated Notes," and together with the
Old F4L Senior Subordinated Notes, the "13.75% Senior Subordinated
Notes") of the Company, leaving an outstanding balance of $4,816,000
on the Old F4L Senior Subordinated Notes. The 13.75% Senior
Subordinated Notes are senior unsecured obligations of the Company and
are subordinated in right of payment to all senior indebtedness
including the Company's obligations under the New Credit Facility and
the Senior Notes. Interest on the 13.75% Senior Subordinated Notes is
payable semiannually in arrears on each June 15 and December 15
commencing on December 15, 1995. The 13.75% Senior Subordinated Notes
may be redeemed beginning in fiscal year 1996 at a redemption price of
106.111 percent. The redemption price declines ratably to 100 percent
in fiscal 2000.
The New Credit Facility, among other things, requires the
Company to maintain minimum levels of net worth (as defined), to
maintain minimum levels of earnings, to maintain a hedge agreement to
provide interest rate protection, and to comply with certain ratios
related to fixed charges and indebtedness. In addition, the New
Credit Facility and the indentures governing the New F4L Notes, the
New RGC Notes and the New F4L Senior Subordinated Notes limit, among
other things, additional borrowings, dividends on, and redemption of,
capital stock and the acquisition and the disposition of assets. At
July 16, 1995, the Company was in compliance with the financial
covenants of its debt agreements. At July 16, 1995, dividends and
certain other payments are restricted based on terms in the debt
agreements.
The proceeds of the New Credit Facility and the new debt
issuances (as described above) were used as sources of financing for
the Merger (see footnote 2 - "Organization and Acquisition").
7. CAPITAL CONTRIBUTIONS
Holdings made capital contributions to the Company of $282.1
million in the form of (i) RSI stock acquired through the issuance of
$131.5 million aggregate principal amount of the Seller Debentures and
$18.5 million initial accreted value of the New Discount Debentures,
(ii) RSI stock acquired with $100 million of cash proceeds from the
$140 million new equity financing at Holdings (the "New Equity
Investment") and (iii) $12.1 million in cash proceeds from the New
Equity Investment and the satisfaction by Holdings, through the
issuance of the New Discount Debentures, of $20 million in fees
otherwise payable by the Company in connection with the Merger and the
Financing.
8. DIVIDENDS
In connection with the Merger, the Company paid dividends to
Holdings of $6.9 million. The Company paid dividends to Holdings of
$3.4 million for the purchase, by Holdings, of shares of Holdings
common stock from stockholders who exercised statutory dissenters'
rights in connection with the merger of Holdings and its majority
stockholder Food 4 Less, Inc. There are no other shares subject to
statutory dissenters' rights. Up to $10 million of the Seller
Debentures were subject to an agreement (the "Put Agreement") between
The Yucaipa Companies ("Yucaipa") and the selling stockholder of RSI
common stock (the "Selling Stockholder") in which Yucaipa was required
to purchase up to $10 million of the Seller Debentures back from the
Selling Stockholder upon a put by the Selling Stockholder. On June
14, 1995, the Selling Stockholder put $10 million of the Seller
Debentures ("Put Debentures") to Yucaipa. Yucaipa then sold the Put
Debentures to Bankers Trust Company at a price of $6.5 million. As
part of the Put Agreement, Holdings was obligated to reimburse
Yucaipa for any losses or expenses incurred in connection with a put
by the Selling Stockholder. As such, the Company paid dividends to
Holdings of $3.5 million for the loss which Yucaipa incurred as a
result of the put by the Selling Stockholder. Holdings subsequently
recorded a $3.5 million discount to the Seller Debentures.
13
<PAGE> 16
9. STOCK OPTIONS
The Company's parent, Holdings, established the Food 4 Less
Holdings, Inc. 1995 Stock Option Plan (the "Plan") to grant
officers and other key employees of the Company the opportunity to
acquire Holdings common stock and to create an incentive for such
persons to remain in the employ of the Company. The Plan is
administered by a committee (the "Committee") which consists of
selected members of the Holdings' Board of Directors. The Committee
may grant both incentive and non-qualified stock options and each
such option shall be evidenced by a written Stock Option Agreement
between the option holder and Holdings. Each individual Stock Option
Agreement may differ from person to person, but must comply with the
terms and conditions of the Plan.
The cumulative aggregate number of shares of common stock to be
issued under the Plan may not exceed 3,000,000 plus any shares
acquired by Holdings by repurchase of shares of common stock
previously issued to certain officers and other key employees under a
prior stock incentive program of Holdings.
The exercise price of each incentive stock option shall be
determined by the Committee, but, in the case of each incentive stock
option, shall not be less than 100% of the fair market value of the
common stock on the date of grant. The exercise price of each
non-qualified stock option is determined by the Committee in its
discretion.
The Committee determines the date that a particular option
shall become exercisable provided, however, that each option shall
become exercisable in full no later than five years after such option
is granted, and each option shall become exercisable as to at least
20% of the shares of common stock covered thereby on each anniversary
of the date such option is granted. The options are exercisable in
whole or in part and the expiration date which is determined on an
option-by-option basis by the Committee cannot exceed 10 years from
the date of issuance of such option.
Prior to the Merger, RSI had 1,500,000 Equity Appreciation
Rights ("EARs") outstanding that were granted under the 1988 Equity
Appreciation Rights Plan, as amended, to certain officers and key
employees of RGC. In connection with the Merger, a portion of the EAR
payment in the amount of $10 million was canceled in exchange for the
issuance of certain non-qualified stock options (collectively, the
"Reinvestment Options"). In addition to the Reinvestment Options,
Holdings granted stock options to certain management employees of the
Company and to one senior executive officer of Holdings. Compensation
expense was not recorded as the cancellation of the EAR liabilities in
consideration of the Reinvestment Options was deemed by management to
reflect fair and equal value. Each of the options granted in
connection with the Merger will expire on June 14, 2005. All of the
Reinvestment Options were fully exercisable upon the date of issuance.
At July 16, 1995, stock options covering 2,415,000 shares of
Holdings common stock, all of which were granted in connection with
the Merger, were the only options issued under the Plan and none of
these options had been exercised or canceled. Each of such stock
options has an exercise price of $10, which has been adjusted with
respect to each option holder to reflect the cancellation of the EAR
payments.
14
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
On June 14, 1995, Food 4 Less Supermarkets, Inc. ("F4L Supermarkets")
completed its acquisition of Ralphs Supermarkets, Inc. ("RSI") and its wholly
owned subsidiary, Ralphs Grocery Company ("RGC"). The acquisition was effected
through the merger of F4L Supermarkets with and into RSI (the "RSI Merger"),
followed by the merger of RGC with and into RSI (the "RGC Merger" and, together
with the RSI Merger, the "Merger"). The surviving corporation in the Merger
was renamed Ralphs Grocery Company (the "Company"). Concurrently with the
consummation of the Merger, the Company received a significant equity
investment from its parent, Food 4 Less Holdings, Inc. ("Holdings") and
refinanced a substantial portion of the existing indebtedness of F4L
Supermarkets and RGC. See "Liquidity and Capital Resources."
The Company's results of operations for 12 weeks ended July 16, 1995
include seven weeks of the operations of F4L Supermarkets prior to the Merger
and five weeks of operations of the combined Company. Management believes that
the Company's results of operations for periods ending after the consummation
of the Merger are not directly comparable to its results of operations for
periods ending prior to such date. This lack of comparability is attributable
to several factors, including the size of the combined Company (since the
Merger is expected to approximately double F4L Supermarkets' annual sales
volume), the addition of 174 conventional stores to the Company's overall store
mix and the material changes in the Company's capital structure.
The Merger will be accounted for as a purchase of RGC by the Company.
As a result, all financial statements for periods subsequent to June 14, 1995,
the date the Merger was consummated, will reflect RGC's assets and liabilities
at their estimated fair market values as of June 14, 1995. The purchase price
in excess of the fair market value of the Company's assets will be recorded as
goodwill and amortized over a 40-year period. The purchase price allocation
reflected in the Company's unaudited balance sheet at July 16, 1995 is based on
management's preliminary estimates. The actual purchase accounting
adjustments, including adjustments to loss contingency accruals, will be
determined within one year following the Merger and may vary from the
preliminary estimates at July 16, 1995.
At July 16, 1995, the Company operated 326 conventional supermarkets
and 53 Food 4 Less warehouse stores in Southern California. It also operated
62 additional stores in Northern California and certain areas of the Midwest.
Following the Merger, the Company commenced the process of converting the
Company's Alpha Beta, Boys and Viva stores to the Ralphs format and also began
converting selected Ralphs stores to the Food 4 Less warehouse format. As of
August 27, 1995, 81 of 154 former Alpha Beta, Boys or Viva stores had been
converted to the Ralphs format.
At July 16, 1995, the Company's bakery, creamery and deli manufacturing
operations and the management of major corporate departments had been
consolidated. The full integration of the Company's administrative departments
is expected to be completed by the end of fiscal 1995. The consolidation of
the Company's warehousing and distribution facilities into three primary
facilities located in Compton, the Atwater District of Los Angeles, and La
Habra, California is proceeding on schedule and all distribution functions are
expected to be managed centrally from the Company facility in the third quarter
of 1995.
15
<PAGE> 18
RESULTS OF OPERATIONS (UNAUDITED)
The following table sets forth the selected unaudited operating
results of the Company for the 12 and 24 weeks ended July 16, 1995 and
June 25, 1994:
<TABLE>
<CAPTION>
12 WEEKS ENDED 24 WEEKS ENDED
-------------- --------------
JULY 16, 1995 JUNE 25, 1994 JULY 16, 1995 JUNE 25, 1994
------------------- ----------------- ----------------- -----------------
(DOLLARS IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $ 857.3 100.0% $581.1 100.0% $1,480.9 100.0% $1,168.9 100.0%
Gross profit 161.6 18.8 98.4 16.9 268.8 18.2 207.1 17.7
Selling, general, administrative
and other, net 163.7 19.1 76.8 13.2 255.0 17.2 167.2 14.3
Amortization of excess costs over
net assets acquired 4.7 0.5 1.8 0.3 6.5 0.4 3.6 0.3
Restructuring charge 63.6 7.4 -- -- 63.6 4.3 -- --
Operating income (loss) (70.3) -8.2 19.8 3.4 (56.3) -3.8 36.3 3.1
Interest expense 32.0 3.7 15.5 2.7 49.0 3.3 31.4 2.7
Loss (gain) on disposal of assets -- -- 0.1 -- (0.4) -- 0.1 --
Provision for earthquake losses -- -- -- -- -- -- 4.5 0.4
Provision for income taxes 0.2 -- 1.6 0.3 0.5 -- 2.0 0.2
Income (loss) before extraordinary charge (102.5) -12.0 2.6 0.4 (105.3) -7.1 (1.7) -0.1
Extraordinary charge 23.1 2.7 -- -- 23.1 1.6 -- --
Net income (loss) $(125.7) -14.7 $ 2.6 0.4 $ (128.5) -8.7 $ (1.7) -0.1
</TABLE>
Sales. Sales per week increased $23.0 million, or 47.5%, from $48.4
million in the 12 weeks ended June 25, 1994 to $71.4 million in the 12 weeks
ended July 16, 1995 and increased $13.0 million, or 26.7%, from $48.7 million
in the 24 weeks ended June 25, 1994 to $61.7 million in the 24 weeks ended July
16, 1995. The increase in sales for the 12 and 24 weeks ended July 16, 1995,
was primarily attributable to the addition of 174 conventional supermarkets
acquired through the Merger. The sales increase was partially offset by a
comparable store sales decline of 3.6% and 2.5% for the 12 and 24 weeks ended
July 16, 1995, respectively. Management believes that the decline in
comparable store sales is primarily attributable to the continuing weak economy
and additional competitive store openings and remodels in Southern California.
Notwithstanding these factors, comparable store sales in fiscal 1995 are
improving relative to recent years.
Gross Profit. Gross profit increased as a percentage of sales from
16.9% in the 12 weeks ended June 25, 1994 to 18.8% in the 12 weeks ended July
16, 1995 and increased from 17.7% in the 24 weeks ended June 25, 1994 to 18.2%
in the 24 weeks ended July 16, 1995. The increase in gross profit margin was
primarily attributable to the addition of 174 conventional supermarkets which
diluted the effect of the Company's warehouse stores (which have lower gross
margins than the Company's conventional supermarkets) on its overall gross
margin for the period. Gross profit during the 12 and 24 weeks ended July 16,
1995 was also impacted by certain one-time costs associated with the
integration of the Company's operations. See "Operating Income (Loss)."
Selling, General, Administrative and Other, Net. Selling, general,
administrative and other expenses ("SG&A") were $76.8 million and $163.7
million for the 12 weeks and $167.2 million and $255.0 million for the 24 weeks
ended June 25, 1994 and July 16, 1995, respectively. SG&A increased as a
percentage of sales from 13.2% to 19.1% and from 14.3% to 17.2% for the same
periods. The increase in SG&A as a percentage of sales was due primarily to
the addition of 174 conventional supermarkets acquired through the Merger. The
additional conventional supermarkets diluted the effect of the Company's
warehouse stores (which have lower SG&A than the Company's conventional
supermarkets) on its SG&A margin for the period. SG&A during the 12 and 24
weeks ended July 16, 1995 was also impacted by certain one-time costs
associated with the integration of the Company's operations. See "Operating
Income (Loss)."
Restructuring Charge. The Company has recorded a $63.6 million
one-time charge associated with the closing of 39 stores and one warehouse
facility. Pursuant to the settlement agreement with the State of California,
24 Food 4 Less stores (as well as 3 Ralphs stores) must be divested by
December 31, 1995. Although not required by such settlement agreement, an
additional 15 under-performing stores are scheduled to be closed by June 30,
1996. The restructuring charge consists of write-downs of property, plant and
equipment ($40.6 million) less estimated proceeds ($16.0 million); reserve for
closed stores and warehouse facility ($16.1 million); write-off of the Alpha
Beta trademark ($8.3 million); write-off of other assets ($8.0 million); lease
termination expenses ($4.0 million); and miscellaneous expenses ($2.6 million).
The expected cash payments to be made in connection with the restructuring
charge total $7.2 million. It is expected that cash payments will be made by
June 30, 1996. The increase in the restructuring charge over previous
estimates is due primarily to the addition of the $16.1 million reserve for the
closure of the warehouse and stores. The remaining increase results from the
identification of additional assets to be written-off. During the 12 weeks
ended July 16, 1995, the Company utilized $44.7 million of the reserve for
restructuring costs. The charges consisted of write-downs of
16
<PAGE> 19
property, plant and equipment ($31.3 million); write-off of the Alpha Beta
trademark ($8.3 million); and write-off of other assets ($5.1 million). No
additional expenses are expected to be incurred in future periods in connection
with these closings. The Company has determined that there is no impairment of
existing goodwill related to the store closures based on its projections of
future undiscounted cash flows.
Operating Income (Loss). In addition to the factors discussed above,
operating income for the 12 and 24 weeks ended July 16, 1995 was impacted by
approximately $30 million of one-time costs associated with the conversion of
stores and integration of the Company's operations. Management anticipates
these costs to continue during fiscal 1995 until the integration plan is
completed. During the 12 and 24 week periods, these costs related primarily
to (i) markdowns on clearance inventory at the Company's Alpha Beta, Boys and
Viva stores being converted to the Ralphs format, (ii) the stepped-up
advertising campaign promoting the store conversion program and (iii)
incremental labor costs associated with the training of Company personnel
following store conversions.
Interest Expense. Interest expense (including amortization of
deferred financing costs) was $15.5 million and $32.0 million for the 12 weeks
and $31.4 million and $49.0 million for the 24 weeks ended June 25, 1994 and
July 16, 1995, respectively. The increase in interest expense was primarily
due to the increased indebtedness incurred in conjunction with the Merger, see
"Liquidity and Capital Resources".
Provision for Earthquake Losses. On January 17, 1994, Southern
California experienced a major earthquake which resulted in the temporary
closure of 31 of the Company's stores. The closures were caused primarily by
loss of electricity, water, inventory, or structural damage. All but one of
the closed stores reopened within a week of the earthquake. The final closed
store reopened on March 24, 1994. The Company is insured against earthquake
losses (including business interruption). The pre-tax financial impact, net of
insurance recoveries, was $4.5 million. The Company reserved for this charge
during the 24 weeks ended June 25, 1994.
Income (Loss) Before Extraordinary Charge. Primarily as a result of
the factors discussed above, the Company's income before extraordinary charge
decreased from $2.6 million in the 12 weeks ended June 25, 1994 to a loss
before extraordinary charge of $102.5 million in the 12 weeks ended July 16,
1995, and loss before extraordinary charge increased from $1.7 million in the
24 weeks ended June 25, 1994 to $105.3 million in the 24 weeks ended July 16,
1995.
Extraordinary Charge. The extraordinary charge of $23.1 million
relates to the refinancing of the F4L Supermarkets Old Credit Facility, 10.45%
Senior Notes due 2000, and the 13.75% Senior Subordinated Notes due 2001 and
the Food 4 Less Holdings, Inc. 15.25% Senior Discount Notes due 2004 in
connection with the Merger and the write-off of related debt issuance costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company and Holdings utilized total new financing proceeds of
approximately $525 million to consummate the Merger, which included the
issuance of preferred stock by Holdings to a group of investors led by Apollo
Advisors, L.P. for cash proceeds of approximately $140 million (the "New Equity
Investment"). In addition, the Company entered into a new credit facility (the
"New Credit Facility") pursuant to which, upon the closing of the Merger, it
incurred $600 million under the term loan portion of the New Credit Facility
(the "New Term Loans") and approximately $91.6 million under the standby letter
of credit facility (the "Letter of Credit Facility"). The Company also issued
$350 million aggregate principal amount of new 10.45% Senior Notes due 2004
(the "New F4L Senior Notes") and $100 million aggregate principal amount of new
11% Senior Subordinated Notes due 2005 (the "New RGC Notes") pursuant to public
offerings (the "Public Offerings").
The proceeds from the New Credit Facility, Public Offerings and the
New Equity Investment and the issuance by Holdings of $59.0 million initial
accreted value of 13.625% Senior Discount Debentures due 2005 (the "New
Discount Debentures") for cash, $41.0 million in initial accreted value of
additional New Discount Debentures as Merger consideration and $131.5 million
aggregate principal amount of 13.625% Senior Subordinated Pay-In-Kind
Debentures due 2007 (the "Seller Debentures"), provided the sources of
financing required to consummate the Merger and to repay outstanding bank debt
of approximately $176.5 million at F4L Supermarkets and $228.9 million at
RGC, to repay existing mortgage debt of $174.0 million (excluding prepayment
fees) at RGC and to pay $84.4 million to the holders of the Senior Discount
Notes due 2004 of Holdings (the "Discount Notes") (excluding related fees).
Proceeds from the New Credit Facility and the Public Offerings were used to pay
the cash portions of F4L Supermarkets' exchange offers and consent
solicitations with respect to (i) the 10.25% Senior Subordinated Notes due 2002
of RGC (the "Old RGC 10.25% Notes,") and the 9% Senior Subordinated Notes due
2003 of RGC (the "Old RGC 9% Notes," and together with the RGC 10.25% Notes,
the "Old RGC Notes") (collectively, the "RGC Exchange Offers"), and (ii) the
10.45% Senior Notes due 2000 of F4L Supermarkets (the "Old F4L Senior Notes")
and the 13.75% Senior Subordinated Notes due 2001 of F4L Supermarkets (the "Old
F4L Senior Subordinated Notes") (collectively, the F4L Exchange Offers," and
together with the RGC Exchange Offers, the "Exchange Offers"), as well as the
Change of Control Offer (as defined below) and accrued interest on all
exchanged debt securities in the amount of $27.8 million, to pay $17.8 million
to the holders of the RGC Equity Appreciation Rights and to loan $5.0 million
to an affiliate for the benefit of such holders, to pay approximately $137.1
million of fees and expenses of the Merger and the related financing and to pay
$3.4 million to purchase shares of common stock of Holdings from certain
dissenting shareholders. The Company assumed certain existing indebtedness of
F4L Supermarkets and RGC in connection with the Exchange Offers, pursuant to
which (i) holders of the Old RGC Notes exchanged approximately $424.0 million
aggregate principal amount of Old RGC Notes for an equal principal amount of
New RGC Notes, (ii) holders of the Old F4L Senior Notes exchanged approximately
$170.3 million aggregate principal amount of Old F4L Senior Notes for an equal
principal amount of New F4L Senior
17
<PAGE> 20
Notes, and (iii) holders of the Old F4L Senior Subordinated Notes exchanged
approximately $140.2 million aggregate principal amount of Old F4L Senior
Subordinated Notes for an equal principal amount of new 13.75% Senior
Subordinated Notes due 2005. In addition, pursuant to the terms of the
indentures governing the Old RGC Notes, the consummation of the Merger required
the Company to make an offer to purchase all of the outstanding Old RGC Notes
that were not exchanged in the RGC Offers (the "Change of Control Offer"). The
Change of Control Offer expires on August 31, 1995, at which time the Company
will be obligated to purchase up to $3.3 million of outstanding Old RGC Notes
that may be tendered in the Change of Control Offer.
The New Credit Facility provides for a revolving credit facility of
$325 million (the "Revolving Credit Facility") less amounts outstanding under a
$150 million standby Letter of Credit Facility. At August 31, 1995, there were
$10.6 million in borrowings outstanding on the Revolving Credit Facility and
$92.6 million of standby letters of credit had been issued under the Letter of
Credit Facility. Under the terms of the New Credit Facility, the Company is
required to repay $1.6 million of the New Term Loans in fiscal 1995.
Cash flow from operations, amounts available under the Revolving
Credit Facility and lease financing are the Company's principal sources of
liquidity. The Company believes that these sources will be adequate to meet
its anticipated capital expenditures, working capital needs and debt service
requirements during fiscal 1995. However, there can be no assurance that the
Company will continue to generate cash flow from operations at historical
levels or that it will be able to make future borrowings under the Revolving
Credit Facility.
During the 24 week period ended July 16, 1995, the Company used
approximately $17.4 million of cash for its operating activities compared to
cash provided by operating activities of $53.5 million for the 24 weeks ended
June 25, 1994. The decrease in cash from operating activities is due primarily
to changes in operating assets and liabilities for the 24 weeks ended July 16,
1995, combined with a decrease in operating income due primarily to the impact
of certain one-time costs associated with the integration of the Company's
operations subsequent to the Merger. The Company's principal use of cash in
its operating activities is inventory purchases. The Company's high inventory
turnover allows it to finance a substantial portion of its inventory through
trade payables, thereby reducing its short-term borrowing needs. At July 16,
1995, this resulted in a working capital deficit of $36.1 million.
Cash used for investing activities was $366.2 million for the 24 weeks
ended July 16, 1995. Investing activities consisted primarily of $340.6
million of acquisition costs associated with the Merger and capital
expenditures of $30.4 million, partially offset by $4.1 million of
sale/leaseback transactions. The capital expenditures, net of the proceeds
from sale/leaseback transactions, were financed primarily from cash provided by
financing activities.
The capital expenditures discussed above were made to build 10 new
stores (4 of which had been completed at July 16, 1995), to remodel 7 stores
(all of which had been completed at July 16, 1995) and convert 122 conventional
format stores to the Ralphs banner in conjunction with the Merger (29 of which
had been completed at July 16, 1995). The Company currently anticipates that
its aggregate capital expenditures for fiscal 1995 will be approximately $141.5
million. The remaining portion of the fiscal 1995 capital expenditure budget
(approximately $110 million) will be used to (i) complete construction of the 6
new stores in process at July 16, 1995 and begin construction on an additional
12 stores scheduled to open during the first half of fiscal 1996, (ii) convert
the remaining 93 conventional supermarkets to the Ralphs banner, (iii) convert
15 supermarkets from the Ralphs format to Food 4 Less warehouse stores and (iv)
complete the transition of the La Habra based data center to the date center
located in the main office in Compton. Consistent with past practices, the
Company intends to finance these capital expenditures primarily with cash
provided by operations and through leasing transactions. At July 16, 1995, the
Company had approximately $15.5 million of unused equipment leasing facilities.
No assurance can be given that sources of financing for capital expenditures
will be available or sufficient. However, the capital expenditure program has
substantial flexibility and is subject to revision based on various factors,
including changes in business conditions and cash flow requirements.
Management believes that if the Company were to substantially reduce or
postpone these programs, there would be no substantial impact on short-term
operating profitability. However, management also believes that the
construction of new stores is an important component of its operating strategy.
In the long term, if these programs were substantially reduced, management
believes its operating businesses, and ultimately its cash flow, would be
adversely affected.
The capital expenditures discussed above do not include potential
acquisitions which the Company could make to expand within its existing markets
or to enter other markets. The Company has grown through acquisition in the
past and from time to time engages in discussions with potential sellers of
individual stores, groups of stores or other retail supermarket chains.
Currently the Company is focusing on the integration of its operations
following the Merger.
Cash provided by financing activities was $415.4 million for the 24
weeks ended July 16, 1995. Financing activities consisted primarily of the
following; (i) proceeds from issuance of new debt in the amount of $963.1
million including proceeds of $600 million under the New Credit Facility,
proceeds of $350 million from the issuance of New F4L Senior Notes and proceeds
of $100 million from the issuance of New RGC Notes net of issuance costs of
$86.9 million and (ii) proceeds from cash capital contributions by Holdings of
$12.1 million. These sources were partially offset by principal payments on
long-term debt of $552.3 million including: $125.7 million under the old credit
agreement, $228.9 million under the old RGC term loan; and $174.0 million in
real estate loans.
18
<PAGE> 21
The Company is a wholly-owned subsidiary of Holdings. Holdings has
$100 million initial accreted value of the New Discount Debentures and $131.5
million principal amount of the Seller Debentures outstanding. Holdings is a
holding company which has no assets other than the capital stock of the
Company. Holdings will be required to commence semi-annual cash payments of
interest on the New Discount Debentures and the Seller Debentures commencing
five years from their date of issuance in the amount of approximately $61
million per annum. Subject to the limitations contained in its debt
instruments, the Company intends to make dividend payments to Holdings in
amounts which are sufficient to permit Holdings to service its cash interest
requirements. The Company may pay other dividends to Holdings in connection
with certain employee stock repurchases and for routine administrative
expenses.
The Company is highly leveraged. At July 16, 1995, the Company's
total long-term indebtedness (including current maturities) and stockholder's
equity were $2.0 billion and $214.5 million, respectively. Based upon current
levels of operations and anticipated cost savings and future growth, the
Company believes that its cash flow from operations, together with available
borrowings under the Revolving Credit Facility and its other sources of
liquidity (including lease financing), will be adequate to meet its anticipated
requirements for working capital, capital expenditures, integration costs and
interest payments. There can be no assurance, however, that the Company's
business will continue to generate cash flow at or above current levels or that
future cost savings and growth can be achieved.
EFFECTS OF INFLATION AND COMPETITION
The Company's primary costs, inventory and labor, are affected by a
number of factors that are beyond its control, including availability and price
of merchandise, the competitive climate and general and regional economic
conditions. As is typical of the supermarket industry, the Company has
generally been able to maintain margins by adjusting its retail prices, but
competitive conditions may from time to time render it unable to do so while
maintaining its market share.
The supermarket industry is highly competitive and characterized by
narrow profit margins. The Company's competitors in each of its operating
divisions include national and regional supermarket chains, independent and
specialty grocers, drug and convenience stores, and the newer "alternative
format" food stores, including warehouse club stores, deep discount drug stores
and "super centers". Supermarket chains generally compete on the basis of
location, quality of products, service, price, product variety and store
condition. The Company regularly monitors its competitors' prices and adjusts
its prices and marketing strategy as management deems appropriate.
19
<PAGE> 22
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In connection with the Exchange Offers, F4L Supermarkets solicitated
consents from the holders of the Old F4L Senior Notes, the Old F4L Senior
Subordinated Notes and the Old RGC Notes (collectively, the "Notes") to certain
amendments (collectively, the "Amendments") to each of the indentures
(collectively, the "Old Indentures") governing the Notes. The Amendments took
effect on May 30, 1995. The Amendments eliminated covenants from the Old
Indentures pertaining to (a) limitations on restricted payments, (b)
maintenance of net worth, (c) transactions with affiliates, (d) the
incurrence of indebtedness, (e) dividend and payment restrictions affecting
subsidiaries or restrictions on preferred stock of subsidiaries, (f)
limitations on liens, (g) limitations on change of control, (h) limitations on
disposition of assets, (i) guarantees of indebtedness, and (j) mergers or
consolidations.
20
<PAGE> 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
For the exhibits incorporated by reference and for the exhibits
filed as part of this Quarterly Report on Form 10-Q see the Index
to Exhibits.
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K dated June 14,
1995 with respect to the acquisition by Food 4 Less Holdings,
Inc. of Ralphs Supermarkets, Inc. pursuant to a merger of Food 4
Less Supermarkets, Inc. with and into Ralphs Supermarkets, Inc.
21
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the County of Los Angeles, State
of California.
Dated: August 31, 1995
RALPHS GROCERY COMPANY
/s/ Alan J. Reed
--------------------------------------
Alan J. Reed
Senior Vice President and
Chief Financial Officer
/s/ Jan Charles Gray
--------------------------------------
Jan Charles Gray
Senior Vice President, General Counsel
and Secretary
/s/ Robert W. Gossman
--------------------------------------
Robert W. Gossman
Group Vice President and
Controller
22
<PAGE> 25
INDEX TO EXIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
-------- -----------------------
<S> <C>
3.1 Restated Certificate of Incorporation, as amended, of Ralphs
Grocery Company
4.1 Credit Agreement dated as of June 14, 1995 by and among
Food 4 Less Holdings, Inc., Food 4 Less Supermarkets, Inc.,
the Lenders, Co-Agents, and Co-Arrangers named therein and
Bankers Trust Company (incorporated herein by reference to
Exhibit 4.1 of Food 4 Less Holdings, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended July 16, 1995).
4.2.1 Indenture for the 10.45% Senior Notes due 2004, dated as of
June 1, 1995, by and among Food 4 Less Supermarkets, Inc., the
subsidiary guarantors identified therein and Norwest Bank
Minnesota, National Association, as trustee (incorporated herein
by reference to Exhibit 4.4.1 of Food 4 Less Holdings, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended
July 16, 1995)
4.2.2 First Supplemental Indenture for the 10.45% Senior Notes due
2004, dated as of June 14, 1995, by and among Ralphs Grocery
Company (as successor by merger to Food 4 Less Supermarkets,
Inc.), the subsidiary guarantors identified therein, Crawford
Stores, Inc. and Norwest Bank Minnesota, National Association,
trustee (incorporated herein by reference to Exhibit 4.4.2 of
Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended July 16, 1995).
4.3.1 Indenture for the 13.75% Senior Subordinated Notes due 2005,
dated as of June 1, 1995, by and among Food 4 Less
Supermarkets, Inc., the subsidiary guarantors identified herein
and United States Trust Company of New York, as trustee
(incorporated herein by reference to Exhibit 4.5.1 of Food 4 Less
Holdings, Inc.'s
</TABLE>
E-1
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>
Quarterly Report on Form 10-Q for the quarter ended July 16,
1995).
4.3.2 First Supplemental Indenture for the 13.75% Senior Subordinated
Notes due 2005, dated as of June 14, 1995, by and among Ralphs
Grocery Company (as successor by merger to Food 4 Less
Supermarkets, Inc.), the subsidiary guarantors identified
therein, Crawford Stores, Inc. and United States Trust Company
of New York, as trustee (incorporated herein by reference to
Exhibit 4.5.2 of Food 4 Less Holdings, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended July 16, 1995).
4.4.1 Indenture for the 11% Senior Subordinated Notes due 2005,
dated as of June 1, 1995, by and among Food 4 Less Supermarkets,
Inc., the subsidiary guarantors identified therein and United
States Trust Company of New York, as trustee (incorporated herein
by reference to Exhibit 4.6.1 of Food 4 Less Holdings, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended July 16,
1995).
4.4.2 First Supplemental Indenture for the 11% Senior Subordinated
Notes due 2005, dated as of June 14, 1995, by and among Ralphs
Grocery Company (as successor by merger to Food 4 Less
Supermarkets, Inc.), the subsidiary guarantors identified
therein, Crawford Stores, Inc. and United States Trust Company
of New York, as trustee (incorporated herein by reference to
Exhibit 4.6.2 of Food 4 Less Holdings, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended July 16, 1995).
4.5.1 Indenture for the 10 1/4% Senior Subordinated Notes due 2002,
dated as of July 29, 1992, by and between Ralphs Grocery Company
and United States Trust Company of New York, as trustee
(incorporated herein by reference to Exhibit 4.3 of Ralphs
Grocery Company's Quarterly Report on Form 10-Q for the quarter
ended July 19, 1992).
4.5.2 First Supplemental Indenture for the 10 1/4% Senior
Subordinated Notes due 2002, dated as of May 30, 1995, by and
between Ralphs Grocery Company and United
</TABLE>
E-2
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
-------- -----------------------
<S> <C>
States Trust Company of New York, as trustee (incorporated
herein by reference to Exhibit 4.1 of Ralphs Grocery Company's
Quarterly Report on Form 10-Q for the quarter ended April 23,
1995).
4.5.3 Second Supplemental Indenture for the 10-1/4 Senior Subordinated
Notes due 2002, dated as of June 14, 1995, by and between
Ralphs Grocery Company (as successor) and United States Trust
Company of New York, as Trustee (incorporated herein by reference
to Exhibit 4.7.2 of Food 4 Less Holdings, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended July 16, 1995).
4.6.1 Indenture for the 9% Senior Subordinated Notes due 2003, dated
as of March 30, 1993, by and between Ralphs Grocery Company and
United States Trust Company of New York, as trustee (incorporated
herein by reference to Exhibit 4.1 of Ralphs Grocery Company's
Registration Statement on Form S-4, No. 33-61812).
4.6.2 First Supplemental Indenture for the 9% Senior Subordinated Notes
due 2003, dated as of June 23, 1993, by and between Ralphs
Grocery Company and United States Trust Company of New York, as
trustee (incorporated herein by reference to Exhibit 4.2 of
Ralphs Grocery Company's Registration Statement on Form S-4,
No. 33-61812).
4.6.3 Second Supplemental Indenture for the 9% Senior Subordinated
Notes due 2003, dated as of May 30, 1995, by and between Ralphs
Grocery Company and United States Trust Company of New York, as
trustee (incorporated herein by reference to Exhibit 4.2 of
Ralphs Grocery Company's Quarterly Report on Form 10-Q, for the
quarter ended April 23, 1995).
4.6.3 Third Supplemental Indenture for the 9% Senior Subordinated Notes
due 2003, dated as of June 14, 1995, by and between Ralphs
Grocery Company (as successor) and United States Trust Company
of New York, as trustee (incorporated herein by reference to
Exhibit 4.7.3
</TABLE>
E-3
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
-------- -----------------------
<S> <C>
of Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended July 16, 1995).
4.7.1 Senior Note Indenture, dated as of April 15, 1992, by and among
Food 4 Less Supermarkets, Inc., the subsidiary guarantors
identified therein and Norwest Bank Minnesota, National
Association, as trustee (incorporated herein by reference to
Exhibit 4.1 to Food 4 Less Supermarkets, Inc.'s Registration
Statement on Form S-1, No. 33-46750).
4.7.2 First Supplemental Indenture, dated as of July 24, 1992, by and
among Food 4 Less Supermarkets, Inc., the subsidiary guarantors
identified therein and Norwest Bank Minnesota, National
Association, as trustee (incorporated herein by reference to
Exhibit 4.1.1 to Food 4 Less Supermarkets, Inc.'s Annual Report on
Form 10-K for the fiscal year ended June 27, 1992).
4.7.3 Second Supplemental Indenture for the 10.45% Senior Notes due
2000, dated as of June 14, 1995, by and among Food 4 Less
Supermarkets, Inc., the subsidiary guarantors identified therein
and Norwest Bank Minnesota, National Association, as trustee
(incorporated herein by reference to Exhibit 4.8.1 of Food 4
Less Holdings, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended July 16, 1995).
4.7.4 Third Supplemental Indenture for the 10.45% Senior Notes due
2000, dated as of June 14, 1995, by and among Ralphs Grocery
Company (as successor by merger to Food 4 Less Supermarkets,
Inc.), the subsidiary guarantors identified therein and Norwest
Bank Minnesota, National Association, as trustee (incorporated
herein by reference to Exhibit 4.8.2 of Food 4 Less Holdings,
Inc.'s Quarterly Report on Form 10-Q for the quarter year ended
July 16, 1995).
4.8.1 Senior Subordinated Note Indenture dated as of June 15, 1991 by
and among Food 4 Less Supermarkets, Inc., the subsidiary
guarantors identified therein and United States Trust Company of
New York, as trustee (incorporated herein by reference to
Exhibit 4.1 to Food 4 Less
</TABLE>
E-4
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>
Supermarkets, Inc.'s Annual Report on Form 10-K for the
fiscal year ended June 29, 1991).
4.8.2 First Supplemental Indenture dated as of April 8, 1992 by and
among Food 4 Less Supermarkets, Inc., the subsidiary guarantors
identified therein and United States Trust Company of New York,
as trustee (incorporated herein by reference to Exhibit 4.2.1 to
Food 4 Less Supermarkets, Inc.'s Annual Report on Form 10-K for
the fiscal year ended June 27, 1992).
4.8.3 Second Supplemental Indenture, dated as of May 18, 1992 by and
among Food 4 Less Supermarkets, Inc., the subsidiary guarantors
identified therein and United States Trust Company of New York,
as trustee (incorporated herein by reference to Exhibit 4.2.2 to
Food 4 Less Supermarkets, Inc.'s Annual Report on Form 10-K for
the fiscal year ended June 27, 1992).
4.8.4 Third Supplemental Indenture, dated as of July 24, 1992 by and
among Food 4 Less Supermarkets, Inc., the subsidiary guarantors
identified therein and United States Trust Company of New York,
as trustee (incorporated herein by reference to Exhibit 4.2.3 to
Food 4 Less Supermarkets, Inc.'s Annual Report on Form 10-K for
the fiscal year ended June 27, 1992).
4.8.5 Fourth Supplemental Indenture for the 13.75% Senior Subordinated
Notes due 2001, dated as of May 30, 1995, by and among Food 4
Less Supermarkets, Inc., the subsidiary guarantors identified
therein and United States Trust Company of New York, as trustee
(incorporated herein by reference to Exhibit 4.9.1 of Food 4
Less Holdings, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended July 16, 1995).
4.8.6 Fifth Supplemental Indenture for the 13.75% Senior Subordinated
Notes due 2001, dated as of June 14, 1995, by and among Ralphs
Grocery Company (as successor by merger to Food 4 Less
Supermarkets, Inc.), the subsidiary guarantors identified therein
and United States Trust Company of New York as trustee
(incorporated herein by reference to Exhibit 4.9.2 of Food 4 Less
</TABLE>
E-5
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
-------- -----------------------
<S> <C>
Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended July 16, 1995).
10.1 Second Amended and Restated Tax Sharing Agreement dated as of
June 14, 1995 by and among Food 4 Less Holdings, Inc., Ralphs
Grocery Company and the subsidiaries of Ralphs Grocery Company
(incorporated herein by reference to Exhibit 10.1 of Food 4 Less
Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended July 16, 1995).
10.2 Stockholders Agreement of Food 4 Less Holdings, Inc. dated as of
June 14, 1995 by and among Food 4 Less Holdings, Inc., Ralphs
Grocery Company and the investors listed on the signature pages
thereto (incorporated herein by reference to Exhibit 10.2 of Food
for Less Holdings, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended July 16, 1995).
10.3 Consulting Agreement dated as of June 14, 1995 by and among The
Yucaipa Companies, Food 4 Less Holdings, Inc. and Ralphs Grocery
Company (incorporated herein by reference to Exhibit 10.4 of
Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended July 16, 1995).
10.4 Stock Purchase and Exchange Agreement dated as of June 14, 1995
by and among Food 4 Less Holdings, Inc., Food 4 Less
Supermarkets, Inc., CLH Supermarkets Corp. and the Purchasers
listed on Schedule 1 hereto (incorporated herein by reference to
Exhibit 10.4 of Food 4 Less Holdings, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended July 16, 1995).
10.5 Registration Rights Agreement dated as of June 14, 1995 by and
among Food 4 Less Holdings, Inc., Food 4 Less Supermarkets, Inc.
and the Holders of the 13-5/8% Senior Discount Debentures due
2005 of Food 4 Less Holdings, Inc. (incorporated herein by
reference to Exhibit 10.9 of Food 4 Less Holdings, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended July 16,
1995).
</TABLE>
E-6
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
-------- -----------------------
<S> <C>
10.6 Registration Rights Agreement dated as of June 14, 1995 by and
among Food 4 Less Holdings, Inc., Food 4 Less Supermarkets, Inc.
and the Holders of the 13 5/8% Senior Subordinated Pay-in-kind
Debentures due 2007 of Food 4 Less Holdings, Inc. (incorporated
herein by reference to Exhibit 10.10 of Food 4 Less Holdings,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
July 16, 1995).
10.7* Employment Agreement dated as of June 14, 1995 between Food
Less Holdings, Inc., Ralphs Grocery Company and George G.
Golleher (incorpoated herein by reference to Exhibit 10.11 of
Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended July 16, 1995).
10.8* Employment Agreement dated as of June 14, 1995 between Ralphs
Grocery Company and Byron E. Allumbaugh.
10.9* Employment Agreement dated as of June 14, 1995 between Ralphs
Grocery Company and Alfred A. Marasca.
10.10* Employment Agreement dated as of June 14, 1995 between Ralphs
Grocery Company and Greg Mays.
10.11* Employment Agreement dated as of June 14, 1995 between Ralphs
Grocery Company and Terry Peets.
10.12* Employment Agreement dated as of June 14, 1995 between Ralphs
Grocery Company and Jan Charles Gray.
10.13* Employment Agreement dated as of June 14, 1995 between Ralphs
Grocery Company and Alan Reed.
10.14* Management Stockholders Ageement dated as of June 14, 1995
between Food 4 Less Holdings, Inc. and the management employers
listed on the signature pages thereto (incorporated herein by
reference to Exhibit 10.12 of Food 4 Less Holdings, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended July 16,
1995).
</TABLE>
E-7
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
-------- -----------------------
<S> <C>
27 Financial Data Schedule.
</TABLE>
E-8
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF CORRECTION
TO THE
CERTIFICATE OF OWNERSHIP AND MERGER
OF
RALPHS SUPERMARKETS, INC.
(A DELAWARE CORPORATION)
AND
RALPHS GROCERY COMPANY
(A DELAWARE CORPORATION)
It is hereby certified that:
1. Ralphs Supermarkets, Inc. (the
"Corporation"), is a corporation organized and existing under the
laws of the State of Delaware.
2. A Certificate of Ownership and Merger merging
Ralphs Grocery Company into the Corporation and changing the name
of the Corporation to Ralphs Grocery Company was filed with the
Secretary of State of Delaware on June 14, 1995, and said
Certificate of Ownership and Merger requires correction as
permitted by Section (f) of Section 103 of the General
Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said Certificate
of Ownership and Merger to be corrected is that certain
paragraphs were inadvertently omitted from the copy of the
Certificate of Ownership and Merger which was filed with the
Secretary of State. A copy of said paragraphs are attached
hereto as Exhibit A.
4. The Certificate of Ownership and Merger
merging Ralphs Grocery Company into the Corporation and changing
the name of the Corporation to Ralphs Grocery Company is
corrected to read in its entirety as set forth in Exhibit B
hereto.
<PAGE> 2
Signed on August 18, 1995
RALPHS GROCERY COMPANY
By /s/ Jan Charles Gray
------------------------------
Jan Charles Gray
Senior Vice President, General
Counsel and Secretary
<PAGE> 3
EXHIBIT A
RESOLVED FURTHER, that by virtue of the
Merger and without any action on the part of
the holder thereof, each then outstanding
share of capital stock of the Corporation
shall remain unchanged and continue to remain
outstanding as one share of capital stock of
the Surviving Corporation;
RESOLVED FURTHER, that, by virtue of the
Merger and without any action on the part of
the holder thereof, each then outstanding
share of capital stock of Ralphs shall be
cancelled and no consideration shall be
issued in respect thereof;
<PAGE> 4
EXHIBIT B
CERTIFICATE OF OWNERSHIP AND MERGER
OF
RALPHS SUPERMARKETS, INC.
(A DELAWARE CORPORATION)
AND
RALPHS GROCERY COMPANY
(A DELAWARE CORPORATION)
It is hereby certified that:
1. Ralphs Supermarkets, Inc. (the "Corporation") is a
corporation organized under the laws of the State of Delaware.
2. The Corporation owns 100 percent of the
outstanding shares of common stock of Ralphs Grocery Company, a
Delaware corporation ("Ralphs"), which is a corporation organized
under the laws of the State of Delaware. The common stock of
Ralphs is its only class of stock outstanding.
3. The Board of Directors of the Corporation has
determined to merge Ralphs into the Corporation. Following are
the resolutions adopted by unanimous written consent of the Board
of Directors of the Corporation on June 14, 1995 with respect to
the merger of Ralphs with and into the Corporation (the
"Merger"):
RESOLVED, that Ralphs be merged with and into the
Corporation pursuant to Section 253 of the Delaware
General Corporation Law, so that the separate existence
of Ralphs shall cease as soon as the Merger shall
become effective (the "Effective Date"), and the
Corporation shall assume all of the liabilities of
Ralphs and thereafter shall continue as the surviving
corporation (the "Surviving Corporation"), governed by
the laws of the State of Delaware, and existing under
the name "Ralphs Grocery Company";
RESOLVED FURTHER, that by virtue of the Merger and
without any action on the part of the holder thereof,
each then outstanding share of capital stock of the
Corporation shall remain unchanged and continue to
remain outstanding as one share of capital stock of the
Surviving Corporation;
<PAGE> 5
RESOLVED FURTHER, that, by virtue of the Merger
and without any action on the part of the holder
thereof, each then outstanding share of capital stock
of Ralphs shall be cancelled and no consideration shall
be issued in respect thereof;
RESOLVED FURTHER, that on the Effective Date the
Restated Certificate of Incorporation and Bylaws of the
Corporation in effect immediately prior to the
Effective Date will be the Restated Certificate of
Incorporation and Bylaws of the Surviving Corporation,
until thereafter amended; except that upon the
Effective Date, Section 1 of the Restated Certificate
of Incorporation of the Surviving Corporation shall be
amended to read as follows:
"1. The name of the corporation (the
"Corporation") is Ralphs Grocery Company."
RESOLVED FURTHER, that the directors of the
Corporation immediately prior to the Effective Date
will continue to be the directors of the Surviving
Corporation, and the officers of the Corporation
immediately prior to the Effective Date will continue
to be the officers of the Surviving Corporation, in
each case until their successors are elected and
qualified; and
RESOLVED FURTHER, that such Merger is pursuant to
a plan of complete liquidation of Ralphs under Section
332 of the Internal Revenue Code of 1986, as amended.
4. The foregoing resolutions of Merger were approved
by unanimous written consent of the Board of Directors of the
Corporation in accordance with Section 141(f) of the Delaware
General Corporation Law.
5
<PAGE> 6
Signed on June 14, 1995
RALPHS SUPERMARKETS, INC.
By /s/ Jan Charles Gray
---------------------------------
Jan Charles Gray
Senior Vice President, General
Counsel and Secretary
6
<PAGE> 7
CERTIFICATE OF OWNERSHIP AND MERGER
OF
RALPHS SUPERMARKETS, INC.
(A DELAWARE CORPORATION)
AND
RALPHS GROCERY COMPANY
(A DELAWARE CORPORATION)
It is hereby certified that:
1. Ralphs Supermarkets, Inc. (the "Corporation") is a
corporation organized under the laws of the State of Delaware.
2. The Corporation owns 100 percent of the outstanding
shares of common stock of Ralphs Grocery Company, a Delaware corporation
("Ralphs"), which is a corporation organized under the laws of the State of
Delaware. The common stock of Ralphs is its only class of stock outstanding.
3. The Board of Directors of the Corporation has
determined to merge Ralphs into the Corporation. Following are the resolutions
adopted by unanimous written consent of the Board of Directors of the
Corporation on June 14, 1995 with respect to the merger of Ralphs with and into
the Corporation (the "Merger"):
RESOLVED, that Ralphs be merged with and into the Corporation
pursuant to Section 253 of the Delaware General Corporation Law, so
that the separate existence of Ralphs shall cease as soon as the
Merger shall become effective (the Effective Date"), and the
Corporation shall assume all of the liabilities of Ralphs and
thereafter shall continue as the surviving corporation (the Surviving
Corporation"), governed by the laws of the State of Delaware, and
existing under the name "Ralphs Grocery Company";
RESOLVED FURTHER, that on the Effective Date the Restated
Certificate of Incorporation and Bylaws of the Corporation in effect
immediately prior to the Effective Date will be the Restated
Certificate of Incorporation and Bylaws of the Surviving Corporation,
until thereafter amended; except that upon the Effective Date, Section
1 of the Restated Certificate of Incorporation of the Surviving
Corporation shall be amended to read as follows:
<PAGE> 8
"1. The name of the corporation (the
"Corporation") is Ralphs Grocery Company."
RESOLVED FURTHER, that the directors of the Corporation
immediately prior to the Effective Date will continue to be the
directors of the Surviving Corporation, and the officers of the
Corporation immediately prior to the Effective Date will continue to
be the officers of the Surviving Corporation, in each case until their
successors are elected and qualified; and
RESOLVED FURTHER, that such Merger is pursuant to a plan of
complete liquidation of Ralphs under Section 332 of the Internal
Revenue Code of 1986, as amended.
4. The foregoing resolutions of Merger were approved by
unanimous written consent of the Board of Directors of the Corporation in
accordance with Section 141(f) of the Delaware General Corporation Law.
2
<PAGE> 9
Signed on June 12, 1995
RALPHS SUPERMARKETS, INC.
By /s/ Jan Charles Gray
-------------------------------------
Jan Charles Gray
Senior Vice President, General Counsel
and Secretary
3
<PAGE> 10
CERTIFICATE OF MERGER
OF
FOOD 4 LESS SUPERMARKETS, INC.
WITH AND INTO
RALPHS SUPERMARKETS, INC.
It is hereby certified that:
1. The name and state of incorporation of each of the
constituent corporations is as follows:
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
---- ----------------------
<S> <C>
Ralphs Supermarkets, Inc. ("Ralphs") Delaware
Food 4 Less Supermarkets, Inc. ("Food 4 Less") Delaware
</TABLE>
2. The Boards of Directors of Food 4 Less and Ralphs
have approved an Agreement and Plan of Merger (the "Agreement of Merger") dated
as of September 14, 1994, as amended, by and among Food 4 Less, Inc., Food 4
Less Holdings, Inc., Food 4 Less, Ralphs, and the stockholders of Ralphs,
whereby Food 4 Less will merge with and into Ralphs pursuant to Section 251 of
the Delaware General Corporation Law, so that the separate existence of Food 4
Less will cease as soon as such merger (the "Merger") becomes effective (the
"Effective Date"), and Ralphs will assume all of the liabilities of Food 4 Less
and thereafter shall continue as the surviving corporation (the "Surviving
Corporation"), governed by the laws of the State of Delaware, and existing
under the corporate name it possesses immediately prior to the Effective Date.
3. The Agreement of Merger was approved by the holder of
all of the outstanding shares of Food 4 Less entitled to vote thereon, and by
the holders of all of the outstanding shares of Ralphs entitled to vote
thereon, in each case by written consent without a meeting in accordance with
Section 228 of the Delaware General Corporation Law, and with the notice
required by said Section 228 having been sent to each holder who has not so
consented in writing.
4. Food 4 Less and Ralphs have approved, adopted,
certified, executed and acknowledged the Agreement of Merger in accordance with
Section 251 of the Delaware General Corporation Law.
5. The name of the corporation surviving the Merger is
Ralphs Supermarkets, Inc. (the "Surviving Corporation").
<PAGE> 11
6. On the Effective Date, and after giving effect to the
cancellation and conversion of securities pursuant to the Agreement of Merger,
the Restated Certificate of Incorporation and Bylaws of Ralphs in effect
immediately prior to the Effective Date will be the Restated Certificate of
Incorporation and Bylaws of the Surviving Corporation, except that the Restated
Certificate of Incorporation of the Surviving Corporation shall be amended,
pursuant to Section 251(e) of the Delaware General Corporation Law, as follows:
(a) Section 4 of the Restated Certificate of
Incorporation of the Surviving Corporation is amended to read in its entirety
as follows:
"4. The total number of shares of stock which the
Corporation shall have authority to issue is Five Million
(5,000,000), all of which shall be Common Stock; and the par
value of each share shall be one cent ($.01)."
(b) Section 5 of the Restated Certificate of
Incorporation of the Surviving Corporation is amended to read in its entirety
as follows:
"5. The number of directors of the Corporation shall be
fixed by or in the manner provided in the By-laws of the
Corporation. Each director shall hold office until the annual
meeting of stockholders of the Corporation at which his or her
term expires and his or her successor is duly elected and
qualified, or until his or her earlier death, resignation or
removal in the manner provided for in the By-laws."
(c) Sections 6 and 7 of the Restated Certificate
of Incorporation of the Surviving Corporation are hereby deleted in their
entirety, and the remaining Sections are renumbered consecutively.
7. The executed Agreement of Merger is on file at the
principal place of business of the Surviving Corporation at the following
address:
c/o Ralphs Grocery Company
1100 West Artesia Boulevard
Compton, California 90220
Attention: Corporate Secretary
A copy of the Agreement of Merger will be furnished by the Surviving
Corporation, on request and without cost, to any stockholder of Food 4 Less,
Ralphs or the Surviving Corporation.
2
<PAGE> 12
Signed on June 12, 1995
RALPHS SUPERMARKETS, INC.
By: /s/ Jan Charles Gray
----------------------------------
Jan Charles Gray
Senior Vice President, General Counsel
and Secretary
3
<PAGE> 13
RESTATED
CERTIFICATE OF INCORPORATION
OF
RALPHS HOLDING COMPANY
Ralphs Holding Company (the "Corporation"), a corporation
organized and existing under and by virtue of the laws of the State of
Delaware, DOES HEREBY CERTIFY that:
1. The name of the Corporation is Ralphs Holding Company.
2. The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware
under the name of Ralphs Holding Company on January 29, 1992.
3. The Board of Directors of the Corporation, at a
meeting duly called and held in accordance with Section 141 of the General
Corporation Law of the State of Delaware, adopted resolutions declaring the
adoption of the Restated Certificate of Incorporation advisable and directing
that such Restated Certificate of Incorporation be submitted to the
stockholders of the Corporation for consideration.
4. The Restated Certificate of Incorporation was duly
adopted at a meeting of the stockholders of the Corporation in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
5. This Restated Certificate of Incorporation has been
duly adopted in accordance with Sections 242 and 245 of the General Corporation
Law of the State of Delaware.
6. The text of the Restated Certificate of Incorporation
reads as follows:
<PAGE> 14
RESTATED
CERTIFICATE OF INCORPORATION
OF
RALPHS SUPERMARKETS, INC.
* * * * * * * *
1. The name of the corporation (the "Corporation") is:
Ralphs Supermarkets, Inc.
2. The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
3. The nature of the business or purposes to be
conducted or promoted by the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
4. The total number of shares of stock which the
Corporation shall have authority to issue is 55,000,000 shares, consisting of
50,000,000 shares of common stock, par value $.01 per share ("Common Stock"),
and 5,000,000 shares of preferred stock, par value $.01 per share ("Preferred
Stock"). The Preferred Stock may be issued from time to time, in one or more
series with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as may be designated by the Board of Directors prior to
the issuance of such series, and the Board of Directors is hereby expressly
authorized to fix by resolution or resolutions prior to such issuance such
designations, preferences and relative, participating, optional or other
special rights, or qualifications, limitations or restrictions, including,
without limiting the generality of the foregoing, the following:
(i) the designation of such series or
class;
(ii) the dividend rate of such series or
class, the conditions and dates upon
which such dividends will be
payable, the relation which such
dividends will bear to the dividends
payable on any other class or
classes of stock or any other series
of any class of stock of the
Corporation, and whether such
dividends will be cumulative or
non-cumulative;
(iii) the redemption provisions and times,
prices and other terms and
conditions of such redemption, if
any, for such series or class;
(iv) the terms and amount of any sinking
fund provided for the purchase or
redemption of the shares of such
series or class;
<PAGE> 15
(v) the terms and conditions, if any, on
which shares of such series or class
shall be convertible into, or
exchangeable for, shares of stock or
any other securities, including the
price or prices, or the rates of
exchange thereof;
(vi) the voting rights, if any;
(vii) the restrictions, if any, on the
issue or reissue of any additional
Preferred Stock; and
(viii) the rights of the holders of such
series or class upon the
liquidation, dissolution, or
distribution of assets of the
Corporation.
The designations, preferences and relative, participating, optional or other
special rights, or qualifications, limitations or restrictions thereof, of each
additional series, if any, may differ from those of any or all other series
already outstanding.
5. The number of directors of the Corporation shall be
fixed by or in the manner provided in the By-laws of the Corporation. The
directors of the Corporation shall be divided into three classes, designated
Class A, Class B and Class C, respectively. The term of office of the Class A
directors shall expire at the 1992 annual meeting of stockholders of the
Corporation, the term of office of the Class B directors shall expire at the
1993 annual meeting of stockholders of the Corporation and the term of office
of the Class C directors shall expire at the 1994 annual meeting of
stockholders of the Corporation. At each annual meeting of stockholders
following the initial classification and election of directors, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
of the Corporation after their election. Each director shall hold office until
the annual meeting of stockholders of the Corporation at which his terms
expires and his successor is duly elected and qualified, or until his earlier
death, resignation or removal in the manner provided for herein or in the
By-laws. Directors shall be allocated as evenly as possible among the three
classes of directors and, to the extent that an equal allocation is not
possible, a director shall first be added to Class C and then to Class A. This
paragraph 5 may not be amended or repealed except with the affirmative vote of
the holders of 75% of the issued and outstanding voting stock of the
Corporation.
6. Special meetings of the stockholders of the
Corporation for any purpose or purposes may only be called by the Board of
Directors, the Executive Committee of the Board of Directors, the Chairman of
the Board of Directors, the President or a stockholder or stockholders owning
of record at least 25% of the issued and outstanding voting stock of the
Corporation entitled to vote thereat. Special meetings may be held at such
place and at such time as shall be designated in the notice of such meeting
delivered pursuant to the By-laws of the Corporation. At a special meeting no
business shall be transacted and no corporate action shall be taken other than
that stated in the notice of the meeting. This
2
<PAGE> 16
paragraph 6 may not be amended or repealed except with the affirmative vote of
the holders of 75% of the issued and outstanding voting stock of the
Corporation.
7. Directors of the Corporation shall be elected by a
majority of the votes of the shares present in person or represented by proxy
at a meeting called for the election of directors and entitled to vote on the
election of directors.
8. In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized and empowered to make, alter, amend or repeal the By-laws
of the Corporation.
9. Unless and to the extent required by the By-laws of
the Corporation, elections of directors of the Corporation need not be by
written ballot.
10. The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, in accordance with the laws of the State of
Delaware, and to the full extent permitted by said laws except as the By-laws
of the Corporation may otherwise provide. Such indemnification shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any By-law of the Corporation, agreement, vote of
stockholders or disinterested directors or otherwise, including insurance
purchased and maintained by the Corporation, both as to action in his official
capacity and as to action in action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
11. No director shall be personally liable to the
Corporation or any stockholder for monetary damages for breach of fiduciary
duty as a director, except for any matter in respect of which such director (a)
shall be liable under Section 174 of the General Corporation Law of the State
of Delaware or any amendment thereto or successor provision thereto, or (b)
shall be liable by reason that, in addition to any and all other requirements
for liability, he:
(i) shall have breached his duty of
loyalty to the Corporation or its
stockholders;
(ii) shall not have acted in good faith
or, in failing to act, shall not
have acted in good faith;
3
<PAGE> 17
(iii) shall have acted in a manner
involving intentional misconduct or
a knowing violation of law or, in
failing to act, shall have acted in
a manner involving intentional
misconduct or a knowing violation of
law; or
(iv) shall have derived an improper
personal benefit.
If the General Corporation Law of the State of Delaware is amended after July
1, 1990 to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed and attested by its duly authorized
officers on this 29th day of April, 1992.
/s/ Jan Charles Gray
-------------------------------
Jan Charles Gray
Senior Vice President, General
Counsel and Secretary
ATTEST:
/s/ R. Alexander Detrick
------------------------------
Senior Vice President
4
<PAGE> 1
Exhibit 10.8
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), made and entered into as of
the Commencement Date (as defined below), between RALPHS GROCERY COMPANY, a
Delaware corporation, having its executive offices and a principal place of
business in the City of Compton, California (the "Employer"), and Byron
Allumbaugh (the "Employee").
RECITALS
A. It is the desire of the Employer to assure itself of
the management services of the Employee by directly engaging the Employee as
the Chief Executive Officer of the Employer.
B. The Employee desires to commit himself to serve the
Employer on the terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements set forth below the parties hereto agree as
follows:
ARTICLE I
POSITION AND TERM
1.1 Position. The Employer agrees to and does employ the
Employee and the Employee shall enter the employ of the Employer to perform his
duties as Chief Executive Officer or such other or additional duties as
determined by the Board of Directors of the Employer (the "Board").
1.2 Period of Contract Employment. The term "Period of
Contract Employment," as used herein, means the period beginning on the date
(the "Commencement
<PAGE> 2
Date") of consummation of the Merger (as defined in that certain Agreement and
Plan of Merger, dated as of September 14, 1994, by and among Food 4 Less Inc.,
Food 4 Less Holdings Inc., Food 4 Less Supermarkets, Inc., Ralphs Supermarkets,
Inc., the Edward J. DeBartolo Corporation, and the other stockholders of
Ralphs Supermarkets, Inc.), and ending on the earlier of the third anniversary
thereof or at the time of the Termination of Contract Employment (as defined in
Article III below).
1.3 Extension of Period of Contract Employment. The
Period of Contract Employment may be extended by a written agreement of the
parties. Notwithstanding the foregoing, neither the Employer nor the Employee
shall have any obligation to extend the Period of Contract Employment. If the
Employee remains in the employ of the Employer following the Period of Contract
Employment and any extension thereof in accordance with this Section 1.3, such
employment shall be at will unless different terms of employment are
established in writing.
1.4 Suspension of Services.
(a) Except in the case of a Termination of
Contract Employment under Article III, in the event that the Employee is
advised by the Employer in writing that his services will no longer be required
during the remainder of the Period of Contract Employment, this shall be
treated as a suspension of services and, except for the purposes set forth in
Section 2.4, and except as prohibited by applicable laws and regulations, the
Employee shall continue to be treated as an employee of the Employer for all
purposes, including eligibility for those fringe benefits provided for in
Section 2.2, and shall continue to be compensated by the Employer (subject to
the possible offset set forth in subsection (b) below) during the remainder of
the Period of Contract Employment at the rate of "Total
2
<PAGE> 3
Compensation" to which the Employee was entitled at time of suspension of
services. The portion of the Period of Contract Employment prior to the
suspension of service is referred to herein as the "Period of Active
Employment." For purposes of this Agreement, the term "Total Compensation"
shall mean the Base Salary set forth in Section 2.1, any increases to such Base
Salary granted by the Employer in accordance with Section 2.1 and any Bonus
Compensation earned by the Employee pursuant to Section 2.3 during the portion
of the year of suspension of services of the Employee which falls within the
Period of Active Employment.
(b) In the event of suspension of services in
accordance with subsection (a) above, the Employee shall be free to become
engaged with another business in any capacity but in such event, fifty percent
(50%) of the compensation of any kind (including deferred compensation and
compensation assigned to an entity or individual other than the Employee)
received from or earned with respect to such other business (except from
businesses or investments owned by the Employee before the date of suspension
of services for which there will be no deduction) and one hundred percent
(100%) of the compensation of any kind (including deferred compensation and
compensation assigned to an entity or individual other than the Employee)
received from or earned with respect to a "Competing Business" (as defined in
Section 4.5 below), in each case attributable to the Period of Contract
Employment, shall be subtracted from any amounts otherwise due the Employee
from the Employer. The Employee shall not take any actions to prevent
compensation received from or earned with respect to such other business from
being applied pursuant to this Section 1.4(b) to reduce amounts otherwise due
the Employee from the Employer.
3
<PAGE> 4
ARTICLE II
COMPENSATION
2.1 Annual Base Salary.
(a) During the Period of Contract Employment the
Employer agrees to pay the Employee a base salary for his service to the
Employer and all affiliates of the Employer in the annual amount of (i) One
Million Dollars ($1,000,000.00) during the period from the Commencement Date
until, but not including, the first anniversary of the Commencement Date; and
(ii) subject to subsection (b) below, One Million, Two Hundred Fifty Thousand
Dollars ($1,250,000.00) during the period from the first anniversary of the
Commencement Date until, but not including, the third anniversary of the
Commencement Date (the "Base Salary"); provided, however, that the agreement as
to said amount shall not preclude or in any way affect the grant by the
Employer or the receipt by the Employee of increases in the Base Salary, or of
Bonus Compensation or other forms of additional compensation (including
insurance and other employee plan benefits), such increases, contingent or
otherwise, to be determined solely in the discretion of the Board or a
committee of the Board to which such authority is delegated by the Board, and
such Bonus Compensation and additional compensation, contingent or otherwise,
to be determined in accordance with Sections 2.2 and 2.3, respectively. The
Base Salary shall be payable as current salary, in monthly installments subject
to all applicable withholding and deductions, and at the same monthly rate as
adjusted for any fraction of a month unexpired at the Termination of Contract
Employment.
(b) If the Board anticipates that an "Initial
Public Offering" (as defined below) is likely to occur prior to the second
anniversary of the Commencement Date,
4
<PAGE> 5
the Employee will remain as Chief Executive Officer of the Employer for one
year after the date of the Initial Public Offering and, as the Chief Executive
Officer of the Employer, the Employee shall be entitled to a Base Salary in an
annual amount of Two Million Dollars ($2,000,000) during the period from the
second anniversary of the Commencement Date until, but not including, the third
anniversary of the Commencement Date. If the Board anticipates that an Initial
Public Offering is likely to occur on or after the second anniversary of the
Commencement Date, the Employee will step down as Chief Executive Officer of
the Employer six months prior to the intended date of the Initial Public
Offering, but shall remain employed with the Employer throughout the Period of
Contract Employment, at the Base Salary provided pursuant to subsection (a)(ii)
above. For purposes of this Agreement: (i) "Initial Public Offering" shall
mean the initial Public Offering of common stock of the Employer or Food 4 Less
Holdings, Inc., a Delaware corporation, (the "Employer Securities"); and (ii)
"Public Offering" shall mean any bona fide underwritten public distribution of
Employer Securities pursuant to an effective registration statement (other than
pursuant to a registration statement on Form S-8 or otherwise relating to
equity securities issuable exclusively under any employee benefit plan of the
Employer) under the Securities Act of 1933, as amended (the "Securities Act"),
or a merger of the Employer pursuant to a registration statement on Form S-4
under the Securities Act, the results in either case in shares of Employer
Securities being listed for trading or quotation on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ National Market.
2.2 Benefits. During the Period of Contract Employment,
the Employee shall be entitled to participate in or receive benefits under any
employee benefit plan or other arrangement including, but not limited to, any
medical, dental, retirement, disability, life
5
<PAGE> 6
insurance, sick leave and vacation plans or arrangements generally made
available by the Employer to its executive officers, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
or arrangements; provided, however, that such plans and arrangements are made
available at the discretion of the Employer and nothing in this Agreement
establishes any right of the Employee to the availability or continuance of any
such plan or arrangement, including pursuant to Section 1.4(a).
2.3 Bonus Compensation. In each year of employment under
this Agreement, the Employee will be eligible to receive an annual bonus in an
amount equal to his Base Salary in such year. The benchmarks for earning any
portion of such bonus shall be prescribed in the reasonable discretion of the
Board.
2.4 Expenses and Office Space. The Employer agrees that
during the Period of Active Employment the Employee shall be allowed reasonable
documented traveling expenses directly related to the Employer's business and
shall be furnished office space, assistance and accommodations within the
Employer's place of business suitable to the character of his position with the
Employer and adequate for the performance of his duties hereunder.
ARTICLE III
TERMINATION OF CONTRACT EMPLOYMENT
3.1 Automatic Termination. The Agreement and the
Employee's employment hereunder shall automatically terminate upon the first to
occur of the following circumstances (any such termination and any termination
pursuant to Section 3.2 is referred to herein as a "Termination of Contract
Employment"):
6
<PAGE> 7
(a) Expiration. The failure of the parties prior
to the third anniversary of the Commencement Date to extend the Period of
Contract Employment pursuant to Section 1.3 or the expiration of any extension
of the Period of Contract Employment; or
(b) Death. The Employee's death.
3.2 Permissive Termination. The Agreement and the
Employee's employment hereunder may be terminated by the Employer or the
Employee, as applicable, under the following circumstances:
(a) Disability. Upon the failure of the
Employee, during the Period of Contract Employment, to render services to the
Employer for a continuous period of six (6) months, because of the Employee's
physical or mental disability during said period, the Employer, acting through
the Board or a committee of the Board to which such authority is delegated by
the Board, may end the Employee's Period of Contract Employment. If there
should be any dispute between the parties as to the Employee's physical or
mental disability at any time, such question shall be settled by the opinion of
an impartial reputable physician agreed upon for the purpose by the parties or
their representatives, or failing agreement within ten (10) days of a written
request therefor by either party to the other, then one designated by the
then-president of the Los Angeles Medical Society. The certificate of such
physician as to the matter in dispute shall be final and binding on the
parties; or
(b) Upon Change of Control. The Employee, at the
time and in the manner provided in Section 5.1 hereof, may exercise the option
granted to the Employee pursuant to such Section 5.1; or
7
<PAGE> 8
(c) Resignation or Retirement. The Employee may
voluntarily resign or retire upon written notice; or
(d) Cause. The Employer may terminate the
Employee's employment based upon (i) the Employee's gross misconduct; (ii) any
felony conviction of the Employee (other than a traffic or moving violation,
such as driving under the influence, except that if the Employee incurs a
driving under the influence violation after incurring two previous driving
under the influence violations during the Period of Contract Employment, the
third such violation will be a felony conviction for purposes of this
subsection (d)(ii)); (iii) any act of fraud or dishonesty by the Employee
materially detrimental to the business or reputation of the Employer as
determined by the Board; (iv) any serious breach of Employer policy by the
Employee as determined by the Board; or (v) any other material breach of the
Agreement by the Employee.
ARTICLE IV
COVENANTS
4.1 Full-Time Employee. The Employee hereby covenants
and agrees that during the Period of Contract Employment he will faithfully and
in conformity with the directions of the Board perform the duties of his
employment hereunder, and that he shall be a full-time employee of the Employer
and that he shall devote to the performance of said duties all such time and
attention as they shall reasonably require, taking, however, from time to time
(as the Employer agrees that he may) reasonable vacations. Notwithstanding the
foregoing, the Employee shall have the right to (i) serve on the Boards of
Directors of one or more companies which the Board, in its absolute discretion,
determines is not in competition
8
<PAGE> 9
with the Employer or any of its affiliates and (ii) engage in charitable
activities; provided that such activities shall not detract from the
performance of his duties under this Agreement.
4.2 No Detraction From Performance. The Employee hereby
consents and agrees that during the Period of Contract Employment he will not,
without the express consent of the Board or a committee of the Board to which
such authority is delegated by the Board, become actively associated with or
engaged in any business other than that of the Employer, or a division, or
subsidiary of the Employer that would detract from the performance of his
duties to the Employer, and he will do nothing inconsistent with such duties.
4.3 Confidential Information. It is recognized by the
Employee and the Employer that the Employee's duties during the Period of
Contract Employment will entail the receipt of confidential information
concerning not only the Employer's current operations and procedures but also
its short-range and long-range plans. The Employee hereby covenants and agrees
that during the Period of Contract Employment and at any time thereafter, he
will not disclose to anyone outside of the Employer, or use in any activity or
business (other than the Employer's business), Confidential Information (as
defined below) relating to the Employer's business, in any way obtained by him
while employed by the Employer, unless authorized by the Employer in writing.
It is understood that violation of this provision would cause irreparable harm
to the Employer and that the Employer may seek to enjoin any such violation or
to take any other applicable action.
For purposes of this Agreement, the term "Confidential
Information" shall include all information of any nature and in any form which
is owned by the Employer and which is not publicly available or generally known
to persons engaged in businesses similar
9
<PAGE> 10
to that of the Employer, including, but not limited to, research techniques;
patents and patent applications; inventions and improvements, whether
patentable or not; development projects; computer software and related
documentation and materials; designs, practices, processes, methods, know-how
and other facts relating to the business of the Employer; practices, processes,
methods, know-how and other facts related to sales, advertising, promotions,
financial matters, customers, customer lists or customers' purchases of goods
or services from the Employer; industry contracts; and all other secrets and
information of a confidential and proprietary nature.
4.4 Conflict of Interest and Business Ethics Statement.
The Employee hereby covenants and agrees that during the Period of Contract
Employment he will not knowingly engage in any activity which would violate the
Conflict of Interest or Business Ethics Statement signed from time to time by
the Employee.
4.5 Competing Business. The Employee hereby covenants
and agrees that, during the Period of Contract Employment, the Employee will
not have any investment in a Competing Business (as defined below) other than
an equity interest of less than five percent (5%) of any company whose
securities are listed on The New York Stock Exchange, The American Stock
Exchange or NASDAQ and will not render personal services to any Competing
Business in any manner, including, without limitation, as owner, partner,
director, trustee, officer, employee, consultant or advisor thereof.
For purposes of this Agreement, "Competing Business" shall
mean any business which (i) is engaged in the retail supermarket business in
any area where the Employer or any of its subsidiaries presently does business
or, at any time during the Period
10
<PAGE> 11
of Contract Employment, did business; or (ii) is a supplier, directly or
indirectly, to any such retail grocery business.
If the Employee shall breach the agreement contained in this
Section 4.5, such breach may render the Employee liable to the Employer for
damages therefor and entitle the Employer to enjoin the Employee from making
such investment or from rendering such personal services. In addition, the
Employer shall have the right in such event to enjoin the Employee from
disclosing any Confidential Information concerning the Employer to any
competing business, to enjoin any competing business from receiving from the
Employee or using any such Confidential Information and/or to enjoin any
competing business from retaining or seeking to retain any other employees of
the Employer.
4.6 No Solicitation. The Employee hereby covenants and
agrees that during the Period of Contract Employment, he will not, for himself
or any third party, directly or indirectly, (i) divert or attempt to divert
from the Employer any business of any kind in which the Employer is engaged,
including, without limitation, the solicitation of its customers or
interference with any of its suppliers or customers; or (ii) employ or solicit
for employment any person employed by the Employer during the period of such
person's employment.
4.7 Remedies. The Employee and the Employer agree that
the Employer will be irreparably harmed by any violation or threatened
violation of any of the foregoing provisions of this Article 4 if such
provisions are not specifically enforced and therefore that the Employer shall
be entitled to an injunction restraining any violation of such provisions by
the Employee, or any other appropriate decree of specific performance. Such
remedies shall
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not be exclusive and shall be in addition to any other remedy to which the
Employer may be entitled under this Agreement or at law.
ARTICLE V
MISCELLANEOUS
5.1 Successors. This Agreement shall inure to the
benefit of the Employer and its successors and assigns, as applicable. If the
Employer shall merge or consolidate with or into, or transfer substantially all
of its assets, including goodwill, to another corporation or other form of
business organization, this Agreement shall bind and run to the benefit of the
successor of the Employer resulting from such merger, consolidation, or
transfer; provided, however, that if any such merger, consolidation, or
transfer shall be with, into, or to any corporation or other form of business
organization other than a subsidiary of the Employer or a corporation having
substantially the same common stockholders as the Employer, the Employee at any
time within the period ending one hundred eighty (180) days thereafter shall
have the right, at his option, on not less than thirty (30) days' written
notice to the Employer or its successors, to terminate the Period of Contract
Employment. The Employee shall not assign, pledge, or encumber his interest in
this Agreement, or any part thereof, without the prior written consent of the
Employer, and any such attempt to assign, pledge or encumber any interest in
this Agreement shall be null and void and shall have no effect whatsoever.
5.2 Leave of Absence. The Employer agrees that in the
event of war or a national emergency, the Employee will, at his request, be
granted a leave of absence for military or governmental service, and during
said period of leave of absence shall be paid
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such compensation as may be fixed by, or with the authority of, the Board. To
the extent permitted by applicable laws and regulations, during any such leave
of absence, the Employee shall, except in respect to his rights to the
compensation herein provided and his obligation to perform active duties of the
Employer be deemed, for the purposes of this Agreement, to be an employee of
the Employer.
5.3 Governing Law. This Agreement is being made and
executed in and is intended to be performed in the State of California and
shall be governed, construed, interpreted and enforced in accordance with the
substantive laws of the State of California, without regard to the conflict of
laws principles thereof.
5.4 Entire Agreement. This Agreement comprises the
entire agreement between the parties hereto relating to the subject matter
hereof and as of the Commencement Date, supersedes, cancels and annuls all
previous employment agreements between the Employer (and/or its predecessors)
and the Employee, as the same may have been amended or modified, and any right
of the Employee thereunder other than for compensation accrued thereunder as of
the date hereof, and supersedes, cancels and annuls all other prior written and
oral agreements between the Employee and the Employer or any predecessor to the
Employer. The terms of this Agreement are intended by the parties to be the
final expression of their agreement with respect to the employment of the
Employee by the Employer and may not be contradicted by evidence of any prior
or contemporaneous agreement.
5.5 Gender. Words in the masculine herein may be
interpreted as feminine or neuter, and words in the singular as plural, and
vice versa, where the sense requires.
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<PAGE> 14
5.6 Disputes.
(a) Any dispute or controversy arising under, out
of, in connection with or in relation to this Agreement shall be finally
determined and settled by arbitration in Los Angeles, California, in accordance
with the rules and procedures of the American Arbitration Association, and
judgment upon the award may be entered in any court having jurisdiction
thereof.
(b) If any arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief that may be granted.
5.7 Severability; Enforceability. If any provision of
this Agreement, or the application thereof to any person, place, or
circumstance, shall be held to be invalid, unenforceable, or void by the final
determination of a court of competent jurisdiction in any jurisdiction and all
appeals therefrom shall have failed or the time for such appeals shall have
expired, as to that jurisdiction and subject to this Section 5.7, such clause
or provision shall be deemed eliminated from this Agreement but the remaining
provisions shall nevertheless be given full force and effect. In the event
this Agreement or any portion hereof is more restrictive than permitted by the
law of the jurisdiction in which enforcement is sought, this Agreement or such
portion shall be limited in that jurisdiction only, and shall be enforced in
that jurisdiction as so limited to the maximum extent permitted by the law of
that jurisdiction.
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<PAGE> 15
5.8 Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
5.9 Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be effective upon
receipt (or refusal of receipt) and shall be in writing and delivered
personally or sent by telex, telecopy, or certified or registered mail, postage
prepaid, as follows:
(a) If to the Employer, addressed to its
principal offices to the attention of the CEO and the General Counsel.
(b) If to the Employee, to him at the address set
forth below under his signature; or at any other address as any party shall
have specified by notice in writing to the other parties.
5.10 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.
5.11 Amendments; Waivers. This Agreement may not be
modified, amended, or terminated except by an instrument in writing, approved
by the Board and signed by the Employee and the Employer. By an instrument in
writing similarly executed, the Employee or the Employer may waive compliance
by the other party or parties with any provision of this Agreement that such
other party was or is obligated to comply with or perform; provided, however,
that such waiver shall not operate as a waiver of, or estoppel with respect to,
any other or subsequent failure. No failure to exercise and no delay in
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exercising any right, remedy or power hereunder shall preclude any other or
further exercise of any other right, remedy or power provided herein or by law
or in equity.
5.12 No Inconsistent Actions. The parties hereto shall
not voluntarily undertake or fail to undertake any action or course of action
inconsistent with, or to avoid or evade, the provisions or essential intent of
this Agreement. Furthermore, it is the intent of the parties hereto to act in
a fair and reasonable manner with respect to the interpretation and application
of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
RALPHS GROCERY COMPANY
By: /s/ Ronald Burkle
-----------------------------
/s/ Byron Allumbaugh
--------------------------------
Byron Allumbaugh
Title:
--------------------------
Address:
------------------------
------------------------
16
<PAGE> 1
Exhibit 10.9
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), made and entered into as of
the Commencement Date (as defined below), between RALPHS GROCERY COMPANY, a
Delaware corporation, having its executive offices and a principal place of
business in the City of Compton, California (the "Employer"), and Alfred A.
Marasca (the "Employee").
RECITALS
A. It is the desire of the Employer to assure itself of the
management services of the Employee by directly engaging the Employee as the
President and Chief Operating Officer of the Employer.
B. The Employee desires to commit himself to serve the
Employer on the terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements set forth below the parties hereto agree as
follows:
ARTICLE I
POSITION AND TERM
1.1 Position. The Employer agrees to and does employ the
Employee and the Employee shall enter the employ of the Employer to perform his
duties as President and Chief Operating Officer or such other or additional
duties as determined by the Board of Directors of the Employer (the "Board") or
the Chief Executive Officer of the Employer (the "CEO").
<PAGE> 2
1.2 Period of Contract Employment. The term "Period of
Contract Employment," as used herein, means the period beginning on the date
(the "Commencement Date") of consummation of the Merger (as defined in that
certain Agreement and Plan of Merger, dated as of September 14, 1994, by and
among Food 4 Less Inc., Food 4 Less Holdings Inc., Food 4 Less Supermarkets,
Inc., Ralphs Supermarkets, Inc., the Edward J. DeBartolo Corporation, and the
other stockholders of Ralphs Supermarkets, Inc.), and ending on the earlier of
the third anniversary thereof or at the time of the Termination of Contract
Employment (as defined in Article III below).
1.3 Extension of Period of Contract Employment. The
Period of Contract Employment may be extended by a written agreement of the
parties. Notwithstanding the foregoing, neither the Employer nor the Employee
shall have any obligation to extend the Period of Contract Employment. If the
Employee remains in the employ of the Employer following the Period of Contract
Employment and any extension thereof in accordance with this Section 1.3, such
employment shall be at will unless different terms of employment are
established in writing.
1.4 Suspension of Services.
(a) Except in the case of a Termination of Contract
Employment under Article III, in the event that the Employee is advised by the
Employer in writing that his services will no longer be required during the
remainder of the Period of Contract Employment, this shall be treated as a
suspension of services and, except for the purposes set forth in Section 2.4,
and except as prohibited by applicable laws and regulations, the Employee shall
continue to be treated as an employee of the Employer for all purposes
including eligibility for those fringe benefits provided for in Section 2.2,
and shall continue to be compensated by the Employer (subject to the possible
offset set forth in subsection (b)
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<PAGE> 3
below) during the remainder of the Period of Contract Employment at the rate of
"Total Compensation" to which the Employee was entitled at time of suspension
of services. The portion of the Period of Contract Employment prior to the
suspension of service is referred to herein as the "Period of Active
Employment." For purposes of this Agreement, the term "Total Compensation"
shall mean the Base Salary set forth in Section 2.1, any increases to such Base
Salary granted by the Employer in accordance with Section 2.1 and any Bonus
Compensation earned by the Employee pursuant to Section 2.3 during the portion
of the year of suspension of services of the Employee which falls within the
Period of Active Employment.
(b) In the event of suspension of services in accordance
with subsection (a) above, the Employee shall be free to become engaged with
another business in any capacity but in such event, fifty percent (50%) of the
compensation of any kind (including deferred compensation and compensation
assigned to an entity or individual other than the Employee) received from or
earned with respect to such other business (except from businesses or
investments owned by the Employee before the date of suspension of services for
which there will be no deduction) and one hundred percent (100%) of the
compensation of any kind (including deferred compensation and compensation
assigned to an entity or individual other than the Employee) received from or
earned with respect to a "Competing Business" (as defined in Section 4.5
below), in each case attributable to the Period of Contract Employment, shall
be subtracted from any amounts otherwise due the Employee from the Employer.
The Employee shall not take any actions to prevent compensation received from
or earned with respect to such other business from being applied pursuant to
this Section 1.4(b) to reduce amounts otherwise due the Employee from the
Employer.
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<PAGE> 4
ARTICLE II
COMPENSATION
2.1 Annual Base Salary. During the Period of Contract
Employment the Employer agrees to pay the Employee a base salary in the annual
amount of Five Hundred Thousand Dollars ($500,000.00) (the "Base Salary");
provided, however, that the agreement as to said amount shall not preclude or
in any way affect the grant by the Employer or the receipt by the Employee of
increases in the Base Salary, or of Bonus Compensation or other forms of
additional compensation (including insurance and other employee plan benefits),
such increases, contingent or otherwise, to be determined solely in the
discretion of the Board or a committee of the Board to which such authority is
delegated by the Board, and such Bonus Compensation and additional
compensation, contingent or otherwise, to be determined in accordance with
Sections 2.2 and 2.3, respectively. The Base Salary shall be payable as
current salary, in monthly installments subject to all applicable withholding
and deductions, and at the same monthly rate as adjusted for any fraction of a
month unexpired at the Termination of Contract Employment.
2.2 Benefits. During the Period of Contract Employment,
the Employee shall be entitled to participate in or receive benefits under any
employee benefit plan or other arrangement including, but not limited to, any
medical, dental, retirement, disability, life insurance, sick leave and
vacation plans or arrangements generally made available by the Employer to its
executive officers, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans or arrangements; provided,
however, that such plans and arrangements are made available at the discretion
of the Employer and nothing in this Agreement establishes any right of the
Employee to the availability or continuance of any such plan or arrangement,
including pursuant to Section 1.4(a).
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<PAGE> 5
2.3 Bonus Compensation. In each year of employment under
this Agreement, the Employee will be eligible to receive an annual bonus in an
amount equal to his Base Salary in such year. The benchmarks for earning any
portion of such bonus shall be prescribed in the reasonable discretion of the
Board.
2.4 Expenses and Office Space. The Employer agrees that
during the Period of Active Employment the Employee shall be allowed reasonable
documented traveling expenses directly related to the Employer's business and
shall be furnished office space, assistance and accommodations within the
Employer's place of business suitable to the character of his position with the
Employer and adequate for the performance of his duties hereunder.
ARTICLE III
TERMINATION OF CONTRACT EMPLOYMENT
3.1 Automatic Termination. The Agreement and the
Employee's employment hereunder shall automatically terminate upon the first to
occur of the following circumstances (any such termination and any termination
pursuant to Section 3.2 is referred to herein as a "Termination of Contract
Employment"):
(a) Expiration. The failure of the parties prior
to the third anniversary of the Commencement Date to extend the Period of
Contract Employment pursuant to Section 1.3 or the expiration of any extension
of the Period of Contract Employment; or
(b) Death. The Employee's death.
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<PAGE> 6
3.2 Permissive Termination. The Agreement and the
Employee's employment hereunder may be terminated by the Employer or the
Employee, as applicable, under the following circumstances:
(a) Disability. Upon the failure of the
Employee, during the Period of Contract Employment, to render services to the
Employer for a continuous period of six (6) months, because of the Employee's
physical or mental disability during said period, the Employer, acting through
the Board or a committee of the Board to which such authority is delegated by
the Board, may end the Employee's Period of Contract Employment. If there
should be any dispute between the parties as to the Employee's physical or
mental disability at any time, such question shall be settled by the opinion of
an impartial reputable physician agreed upon for the purpose by the parties or
their representatives, or failing agreement within ten (10) days of a written
request therefor by either party to the other, then one designated by the then
president of the Los Angeles Medical Society. The certificate of such
physician as to the matter in dispute shall be final and binding on the
parties; or
(b) Upon Change of Control. The Employee, at the
time and in the manner provided in Section 5.1 hereof, may exercise the option
granted to the Employee pursuant to such Section 5.1; or
(c) Resignation or Retirement. The Employee may
voluntarily resign or retire upon written notice; or
(d) Cause. The Employer may terminate the
Employee's employment based upon (i) the Employee's gross misconduct; (ii) any
felony conviction of the Employee (other than a traffic or moving violation,
such as driving under the influence, except that if the Employee incurs a
driving under the influence violation after incurring two previous driving
under the influence violations during the Period of Contract Employment,
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<PAGE> 7
the third such violation will be a felony conviction for purposes of this
subsection (d)(ii)); (iii) any act of fraud or dishonesty by the Employee
materially detrimental to the business or reputation of the Employer as
determined by the Board; (iv) any serious breach of Employer policy by the
Employee as determined by the Board; or (v) any other material breach of the
Agreement by the Employee.
ARTICLE IV
COVENANTS
4.1 Full-Time Employee. The Employee hereby covenants
and agrees that during the Period of Contract Employment he will faithfully and
in conformity with the directions of the Board, or of an officer of the
Employer duly authorized by the Board, perform the duties of his employment
hereunder, and that he shall be a full-time employee of the Employer and that
he shall devote to the performance of said duties all such time and attention
as they shall reasonably require, taking, however, from time to time (as the
Employer agrees that he may) reasonable vacations.
4.2 No Detraction From Performance. The Employee hereby
consents and agrees that during the Period of Contract Employment he will not,
without the express consent of the Board or a committee of the Board to which
such authority is delegated by the Board or the Chief Executive Officer of the
Company, become actively associated with or engaged in any business other than
that of the Employer, or a division, or subsidiary of the Employer that would
detract from the performance of his duties to the Employer, and he will do
nothing inconsistent with such duties.
4.3 Confidential Information. It is recognized by the
Employee and the Employer that the Employee's duties during the Period of
Contract Employment will entail
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<PAGE> 8
the receipt of confidential information concerning not only the Employer's
current operations and procedures but also its short-range and long-range
plans. The Employee hereby covenants and agrees that during the Period of
Contract Employment and at any time thereafter, he will not disclose to anyone
outside of the Employer, or use in any activity or business (other than the
Employer's business), Confidential Information (as defined below) relating to
the Employer's business, in any way obtained by him while employed by the
Employer, unless authorized by the Employer in writing. It is understood that
violation of this provision would cause irreparable harm to the Employer and
that the Employer may seek to enjoin any such violation or to take any other
applicable action.
For purposes of this Agreement, the term "Confidential
Information" shall include all information of any nature and in any form which
is owned by the Employer and which is not publicly available or generally known
to persons engaged in businesses similar to that of the Employer, including,
but not limited to, research techniques; patents and patent applications;
inventions and improvements, whether patentable or not; development projects;
computer software and related documentation and materials; designs, practices,
processes, methods, know-how and other facts relating to the business of the
Employer; practices, processes, methods, know-how and other facts related to
sales, advertising, promotions, financial matters, customers, customer lists or
customers' purchases of goods or services from the Employer; industry
contracts; and all other secrets and information of a confidential and
proprietary nature.
4.4 Conflict of Interest and Business Ethics Statement.
The Employee hereby covenants and agrees that during the Period of Contract
Employment he will not knowingly engage in any activity which would violate the
Conflict of Interest or Business Ethics Statement signed from time to time by
the Employee.
8
<PAGE> 9
4.5 Competing Business. The Employee hereby covenants
and agrees that, during the Period of Contract Employment, the Employee will
not have any investment in a Competing Business (as defined below) other than
an equity interest of less than five percent (5%) of any company whose
securities are listed on The New York Stock Exchange, The American Stock
Exchange or NASDAQ and will not render personal services to any Competing
Business in any manner, including, without limitation, as owner, partner,
director, trustee, officer, employee, consultant or advisor thereof.
For purposes of this Agreement, "Competing Business" shall
mean any business which (i) is engaged in the retail supermarket business in
any area where the Employer or any of its subsidiaries presently does business
or, at any time during the Period of Contract Employment, did business; or (ii)
is a supplier, directly or indirectly, to any such retail grocery business.
If the Employee shall breach the agreement contained in this
Section 4.5, such breach may render the Employee liable to the Employer for
damages therefor and entitle the Employer to enjoin the Employee from making
such investment or from rendering such personal services. In addition, the
Employer shall have the right in such event to enjoin the Employee from
disclosing any Confidential Information concerning the Employer to any
competing business, to enjoin any competing business from receiving from the
Employee or using any such Confidential Information and/or to enjoin any
competing business from retaining or seeking to retain any other employees of
the Employer.
4.6 No Solicitation. The Employee hereby covenants and
agrees that during the Period of Contract Employment, he will not, for himself
or any third party, directly or indirectly, (i) divert or attempt to divert
from the Employer any business of any kind in which the Employer is engaged,
including, without limitation, the solicitation of its
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<PAGE> 10
customers or interference with any of its suppliers or customers; or (ii)
employ or solicit for employment any person employed by the Employer during the
period of such person's employment.
4.7 Remedies. The Employee and the Employer agree that
the Employer will be irreparably harmed by any violation or threatened
violation of any of the foregoing provisions of this Article 4 if such
provisions are not specifically enforced and therefore that the Employer shall
be entitled to an injunction restraining any violation of such provisions by
the Employee, or any other appropriate decree of specific performance. Such
remedies shall not be exclusive and shall be in addition to any other remedy to
which the Employer may be entitled under this Agreement or at law.
ARTICLE V
MISCELLANEOUS
5.1 Successors. This Agreement shall inure to the
benefit of the Employer and its successors and assigns, as applicable. If the
Employer shall merge or consolidate with or into, or transfer substantially all
of its assets, including goodwill, to another corporation or other form of
business organization, this Agreement shall bind and run to the benefit of the
successor of the Employer resulting from such merger, consolidation, or
transfer; provided, however, that if any such merger, consolidation, or
transfer shall be with, into, or to any corporation or other form of business
organization other than a subsidiary of the Employer or a corporation having
substantially the same common stockholders as the Employer, the Employee at any
time within the period ending one hundred eighty (180) days thereafter shall
have the right, at his option, on not less than thirty (30) days' written
notice to the Employer or its successors, to terminate the Period of Contract
Employment. The Employee shall not assign, pledge, or encumber his interest in
this Agreement, or any part
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<PAGE> 11
thereof, without the prior written consent of the Employer, and any such
attempt to assign, pledge or encumber any interest in this Agreement shall be
null and void and shall have no effect whatsoever.
5.2 Leave of Absence. The Employer agrees that in the
event of war or a national emergency, the Employee will, at his request, be
granted a leave of absence for military or governmental service, and during
said period of leave of absence shall be paid such compensation as may be fixed
by, or with the authority of, the Board. To the extent permitted by applicable
laws and regulations, during any such leave of absence, the Employee shall,
except in respect to his rights to the compensation herein provided and his
obligation to perform active duties of the Employer be deemed, for the purposes
of this Agreement, to be an employee of the Employer.
5.3 Governing Law. This Agreement is being made and
executed in and is intended to be performed in the State of California and
shall be governed, construed, interpreted and enforced in accordance with the
substantive laws of the State of California, without regard to the conflict of
laws principles thereof.
5.4 Entire Agreement. This Agreement comprises the
entire agreement between the parties hereto relating to the subject matter
hereof and as of the Commencement Date, supersedes, cancels and annuls all
previous employment agreements between the Employer (and/or its predecessors)
and the Employee, as the same may have been amended or modified, and any right
of the Employee thereunder other than for compensation accrued thereunder as of
the date hereof, and supersedes, cancels and annuls all other prior written and
oral agreements between the Employee and the Employer or any predecessor to the
Employer. The terms of this Agreement are intended by the parties to be the
final expression of their agreement with respect to the employment of the
Employee by the
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Employer and may not be contradicted by evidence of any prior or
contemporaneous agreement.
5.5 Gender. Words in the masculine herein may be
interpreted as feminine or neuter, and words in the singular as plural, and
vice versa, where the sense requires.
5.6 Disputes.
(a) Any dispute or controversy arising under, out of, in
connection with or in relation to this Agreement shall be finally determined
and settled by arbitration in Los Angeles, California, in accordance with the
rules and procedures of the American Arbitration Association, and judgment upon
the award may be entered in any court having jurisdiction thereof.
(b) If any arbitration or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief that may be granted.
5.7 Severability; Enforceability. If any provision of
this Agreement, or the application thereof to any person, place, or
circumstance, shall be held to be invalid, unenforceable, or void by the final
determination of a court of competent jurisdiction in any jurisdiction and all
appeals therefrom shall have failed or the time for such appeals shall have
expired, as to that jurisdiction and subject to this Section 5.7, such clause
or provision shall be deemed eliminated from this Agreement but the remaining
provisions shall nevertheless be given full force and effect. In the event
this Agreement or any portion hereof is more restrictive than permitted by the
law of the jurisdiction in which enforcement is sought, this Agreement or such
portion shall be limited in that jurisdiction only, and shall be enforced in
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<PAGE> 13
that jurisdiction as so limited to the maximum extent permitted by the law of
that jurisdiction.
5.8 Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
5.9 Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be effective upon
receipt (or refusal of receipt) and shall be in writing and delivered
personally or sent by telex, telecopy, or certified or registered mail, postage
prepaid, as follows:
(a) If to the Employer, addressed to its
principal offices to the attention of the CEO and the General Counsel.
(b) If to the Employee, to him at the address set
forth below under his signature; or at any other address as any party shall
have specified by notice in writing to the other parties.
5.10 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.
5.11 Amendments; Waivers. This Agreement may not be
modified, amended, or terminated except by an instrument in writing, approved
by the Board and signed by the Employee and the Employer. By an instrument in
writing similarly executed, the Employee or the Employer may waive compliance
by the other party or parties with any provision of this Agreement that such
other party was or is obligated to comply with or perform; provided, however,
that such waiver shall not operate as a waiver of, or estoppel with respect to,
any other or subsequent failure. No failure to exercise and no delay in
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exercising any right, remedy or power hereunder shall preclude any other or
further exercise of any other right, remedy or power provided herein or by law
or in equity.
5.12 No Inconsistent Actions. The parties hereto shall
not voluntarily undertake or fail to undertake any action or course of action
inconsistent with, or to avoid or evade, the provisions or essential intent of
this Agreement. Furthermore, it is the intent of the parties hereto to act in
a fair and reasonable manner with respect to the interpretation and application
of the provisions of this Agreement.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
RALPHS GROCERY COMPANY
By: /s/ Byron Allumbaugh
------------------------
/s/ Alfred A. Marasca
Title: C.E.O ------------------------------
------------------------ Alfred A. Marasca
Address: 4 Chadbourne Ct
-----------------------
Newport Beach CA 92660
-----------------------
15
<PAGE> 1
Exhibit 10.10
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), made and entered into as of
the Commencement Date (as defined below), between RALPHS GROCERY COMPANY, a
Delaware corporation, having its executive offices and a principal place of
business in the City of Compton, California (the "Employer"), and Greg Mays
(the "Employee").
RECITALS
A. It is the desire of the Employer to assure itself of the
management services of the Employee by directly engaging the Employee as an
Executive Vice President of the Employer.
B. The Employee desires to commit himself to serve the
Employer on the terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements set forth below the parties hereto agree as
follows:
ARTICLE I
POSITION AND TERM
1.1 Position. The Employer agrees to and does employ the
Employee and the Employee shall enter the employ of the Employer to perform his
duties as Executive Vice President or such other or additional duties as
determined by the Board of Directors of the Employer (the "Board") or the Chief
Executive Officer of the Employer (the "CEO").
<PAGE> 2
1.2 Period of Contract Employment. The term "Period of
Contract Employment," as used herein, means the period beginning on the date
(the "Commencement Date") of consummation of the Merger (as defined in that
certain Agreement and Plan of Merger, dated as of September 14, 1994, by and
among Food 4 Less Inc., Food 4 Less Holdings Inc., Food 4 Less Supermarkets,
Inc., Ralphs Supermarkets, Inc., the Edward J. DeBartolo Corporation, and the
other stockholders of Ralphs Supermarkets, Inc.), and ending on the earlier of
the third anniversary thereof or at the time of the Termination of Contract
Employment (as defined in Article III below).
1.3 Extension of Period of Contract Employment. The
Period of Contract Employment may be extended by a written agreement of the
parties. Notwithstanding the foregoing, neither the Employer nor the Employee
shall have any obligation to extend the Period of Contract Employment. If the
Employee remains in the employ of the Employer following the Period of Contract
Employment and any extension thereof in accordance with this Section 1.3, such
employment shall be at will unless different terms of employment are
established in writing.
1.4 Suspension of Services.
(a) Except in the case of a Termination of Contract
Employment under Article III, in the event that the Employee is advised by the
Employer in writing that his services will no longer be required during the
remainder of the Period of Contract Employment, this shall be treated as a
suspension of services and, except for the purposes set forth in Section 2.4,
and except as prohibited by applicable laws and regulations, the Employee shall
continue to be treated as an employee of the Employer for all purposes
including eligibility for those fringe benefits provided for in Section 2.2,
and shall continue
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to be compensated by the Employer (subject to the possible offset set forth in
subsection (b) below) during the remainder of the Period of Contract Employment
at the rate of "Total Compensation" to which the Employee was entitled at time
of suspension of services. The portion of the Period of Contract Employment
prior to the suspension of service is referred to herein as the "Period of
Active Employment." For purposes of this Agreement, the term "Total
Compensation" shall mean the Base Salary set forth in Section 2.1, any
increases to such Base Salary granted by the Employer in accordance with
Section 2.1 and any Bonus Compensation earned by the Employee pursuant to
Section 2.3 during the portion of the year of suspension of services of the
Employee which falls within the Period of Active Employment.
(b) In the event of suspension of services in accordance
with subsection (a) above, the Employee shall be free to become engaged with
another business in any capacity but in such event, fifty percent (50%) of the
compensation of any kind (including deferred compensation and compensation
assigned to an entity or individual other than the Employee) received from or
earned with respect to such other business (except from businesses or
investments owned by the Employee before the date of suspension of services for
which there will be no deduction) and one hundred percent (100%) of the
compensation of any kind (including deferred compensation and compensation
assigned to an entity or individual other than the Employee) received from or
earned with respect to a "Competing Business" (as defined in Section 4.5
below), in each case attributable to the Period of Contract Employment, shall
be subtracted from any amounts otherwise due the Employee from the Employer.
The Employee shall not take any actions to prevent compensation received from
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or earned with respect to such other business from being applied pursuant to
this Section 1.4(b) to reduce amounts otherwise due the Employee from the
Employer.
ARTICLE II
COMPENSATION
2.1 Annual Base Salary. During the Period of Contract
Employment the Employer agrees to pay the Employee a base salary in the annual
amount of Two Hundred and Seventy Five Thousand Dollars ($275,000.00) (the
"Base Salary"); provided, however, that the agreement as to said amount shall
not preclude or in any way affect the grant by the Employer or the receipt by
the Employee of increases in the Base Salary, or of Bonus Compensation or other
forms of additional compensation (including insurance and other employee plan
benefits), such increases, contingent or otherwise, to be determined solely in
the discretion of the Board or a committee of the Board to which such authority
is delegated by the Board, and such Bonus Compensation and additional
compensation, contingent or otherwise, to be determined in accordance with
Sections 2.2 and 2.3, respectively. The Base Salary shall be payable as
current salary, in monthly installments subject to all applicable withholding
and deductions, and at the same monthly rate as adjusted for any fraction of a
month unexpired at the Termination of Contract Employment.
2.2 Benefits. During the Period of Contract Employment,
the Employee shall be entitled to participate in or receive benefits under any
employee benefit plan or other arrangement including, but not limited to, any
medical, dental, retirement, disability, life insurance, sick leave and
vacation plans or arrangements generally made available by the Employer to its
executive officers, subject to and on a basis consistent with the terms,
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conditions and overall administration of such plans or arrangements; provided,
however, that such plans and arrangements are made available at the discretion
of the Employer and nothing in this Agreement establishes any right of the
Employee to the availability or continuance of any such plan or arrangement,
including pursuant to Section 1.4(a).
2.3 Bonus Compensation. In the absolute discretion of
the Board or a committee of the Board to which such authority is delegated by
the Board, the Employee will be eligible to receive an annual bonus in an
amount determined under and with terms pursuant to a plan for executive
officers established by the Board or a committee thereof to which the authority
to establish such a plan has been delegated.
2.4 Expenses and Office Space. The Employer agrees that
during the Period of Active Employment the Employee shall be allowed reasonable
documented traveling expenses directly related to the Employer's business and
shall be furnished office space, assistance and accommodations within the
Employer's place of business suitable to the character of his position with the
Employer and adequate for the performance of his duties hereunder.
ARTICLE III
TERMINATION OF CONTRACT EMPLOYMENT
3.1 Automatic Termination. The Agreement and the
Employee's employment hereunder shall automatically terminate upon the first to
occur of the following circumstances (any such termination and any termination
pursuant to Section 3.2 is referred to herein as a "Termination of Contract
Employment"):
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(a) Expiration. The failure of the parties prior
to the third anniversary of the Commencement Date to extend the Period of
Contract Employment pursuant to Section 1.3 or the expiration of any extension
of the Period of Contract Employment; or
(b) Death. The Employee's death.
3.2 Permissive Termination. The Agreement and the
Employee's employment hereunder may be terminated by the Employer or the
Employee, as applicable, under the following circumstances:
(a) Disability. Upon the failure of the
Employee, during the Period of Contract Employment, to render services to the
Employer for a continuous period of six (6) months, because of the Employee's
physical or mental disability during said period, the Employer, acting through
the Board or a committee of the Board to which such authority is delegated by
the Board, may end the Employee's Period of Contract Employment. If there
should be any dispute between the parties as to the Employee's physical or
mental disability at any time, such question shall be settled by the opinion of
an impartial reputable physician agreed upon for the purpose by the parties or
their representatives, or failing agreement within ten (10) days of a written
request therefor by either party to the other, then one designated by the then
president of the Los Angeles Medical Society. The certificate of such
physician as to the matter in dispute shall be final and binding on the
parties; or
(b) Upon Change of Control. The Employee, at the
time and in the manner provided in Section 5.1 hereof, may exercise the option
granted to the Employee pursuant to such Section 5.1; or
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(c) Resignation or Retirement. The Employee may
voluntarily resign or retire upon written notice; or
(d) Cause. The Employer may terminate the
Employee's employment based upon (i) the Employee's gross misconduct; (ii) any
felony conviction of the Employee (other than a traffic or moving violation,
such as driving under the influence, except that if the Employee incurs a
driving under the influence violation after incurring two previous driving
under the influence violations during the Period of Contract Employment, the
third such violation will be a felony conviction for purposes of this
subsection (d)(ii)); (iii) any act of fraud or dishonesty by the Employee
materially detrimental to the business or reputation of the Employer as
determined by the Board; (iv) any serious breach of Employer policy by the
Employee as determined by the Board; or (v) any other material breach of the
Agreement by the Employee.
ARTICLE IV
COVENANTS
4.1 Full-Time Employee. The Employee hereby covenants
and agrees that during the Period of Contract Employment he will faithfully and
in conformity with the directions of the Board, or of an officer of the
Employer duly authorized by the Board, perform the duties of his employment
hereunder, and that he shall be a full-time employee of the Employer and that
he shall devote to the performance of said duties all such time and attention
as they shall reasonably require, taking, however, from time to time (as the
Employer agrees that he may) reasonable vacations.
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4.2 No Detraction From Performance. The Employee hereby
consents and agrees that during the Period of Contract Employment he will not,
without the express consent of the Board or a committee of the Board to which
such authority is delegated by the Board or the Chief Executive Officer of the
Company, become actively associated with or engaged in any business other than
that of the Employer, or a division, or subsidiary of the Employer that would
detract from the performance of his duties to the Employer, and he will do
nothing inconsistent with such duties.
4.3 Confidential Information. It is recognized by the
Employee and the Employer that the Employee's duties during the Period of
Contract Employment will entail the receipt of confidential information
concerning not only the Employer's current operations and procedures but also
its short-range and long-range plans. The Employee hereby covenants and agrees
that during the Period of Contract Employment and at any time thereafter, he
will not disclose to anyone outside of the Employer, or use in any activity or
business (other than the Employer's business), Confidential Information (as
defined below) relating to the Employer's business, in any way obtained by him
while employed by the Employer, unless authorized by the Employer in writing.
It is understood that violation of this provision would cause irreparable harm
to the Employer and that the Employer may seek to enjoin any such violation or
to take any other applicable action.
For purposes of this Agreement, the term "Confidential
Information" shall include all information of any nature and in any form which
is owned by the Employer and which is not publicly available or generally known
to persons engaged in businesses similar to that of the Employer, including,
but not limited to, research techniques; patents and patent applications;
inventions and improvements, whether patentable or not; development projects;
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computer software and related documentation and materials; designs, practices,
processes, methods, know-how and other facts relating to the business of the
Employer; practices, processes, methods, know-how and other facts related to
sales, advertising, promotions, financial matters, customers, customer lists or
customers' purchases of goods or services from the Employer; industry
contracts; and all other secrets and information of a confidential and
proprietary nature.
4.4 Conflict of Interest and Business Ethics Statement.
The Employee hereby covenants and agrees that during the Period of Contract
Employment he will not knowingly engage in any activity which would violate the
Conflict of Interest or Business Ethics Statement signed from time to time by
the Employee.
4.5 Competing Business. The Employee hereby covenants
and agrees that, during the Period of Contract Employment, the Employee will
not have any investment in a Competing Business (as defined below) other than
an equity interest of less than five percent (5%) of any company whose
securities are listed on The New York Stock Exchange, The American Stock
Exchange or NASDAQ and will not render personal services to any Competing
Business in any manner, including, without limitation, as owner, partner,
director, trustee, officer, employee, consultant or advisor thereof.
For purposes of this Agreement, "Competing Business" shall
mean any business which (i) is engaged in the retail supermarket business in
any area where the Employer or any of its subsidiaries presently does business
or, at any time during the Period of Contract Employment, did business; or (ii)
is a supplier, directly or indirectly, to any such retail grocery business.
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If the Employee shall breach the agreement contained in this
Section 4.5, such breach may render the Employee liable to the Employer for
damages therefor and entitle the Employer to enjoin the Employee from making
such investment or from rendering such personal services. In addition, the
Employer shall have the right in such event to enjoin the Employee from
disclosing any Confidential Information concerning the Employer to any
competing business, to enjoin any competing business from receiving from the
Employee or using any such Confidential Information and/or to enjoin any
competing business from retaining or seeking to retain any other employees of
the Employer.
4.6 No Solicitation. The Employee hereby covenants and
agrees that during the Period of Contract Employment, he will not, for himself
or any third party, directly or indirectly, (i) divert or attempt to divert
from the Employer any business of any kind in which the Employer is engaged,
including, without limitation, the solicitation of its customers or
interference with any of its suppliers or customers; or (ii) employ or solicit
for employment any person employed by the Employer during the period of such
person's employment.
4.7 Remedies. The Employee and the Employer agree that
the Employer will be irreparably harmed by any violation or threatened
violation of any of the foregoing provisions of this Article 4 if such
provisions are not specifically enforced and therefore that the Employer shall
be entitled to an injunction restraining any violation of such provisions by
the Employee, or any other appropriate decree of specific performance. Such
remedies shall not be exclusive and shall be in addition to any other remedy to
which the Employer may be entitled under this Agreement or at law.
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ARTICLE V
MISCELLANEOUS
5.1 Successors. This Agreement shall inure to the
benefit of the Employer and its successors and assigns, as applicable. If the
Employer shall merge or consolidate with or into, or transfer substantially all
of its assets, including goodwill, to another corporation or other form of
business organization, this Agreement shall bind and run to the benefit of the
successor of the Employer resulting from such merger, consolidation, or
transfer; provided, however, that if any such merger, consolidation, or
transfer shall be with, into, or to any corporation or other form of business
organization other than a subsidiary of the Employer or a corporation having
substantially the same common stockholders as the Employer, the Employee at any
time within the period ending one hundred eighty (180) days thereafter shall
have the right, at his option, on not less than thirty (30) days' written
notice to the Employer or its successors, to terminate the Period of Contract
Employment. The Employee shall not assign, pledge, or encumber his interest in
this Agreement, or any part thereof, without the prior written consent of the
Employer, and any such attempt to assign, pledge or encumber any interest in
this Agreement shall be null and void and shall have no effect whatsoever.
5.2 Leave of Absence. The Employer agrees that in the
event of war or a national emergency, the Employee will, at his request, be
granted a leave of absence for military or governmental service, and during
said period of leave of absence shall be paid such compensation as may be fixed
by, or with the authority of, the Board. To the extent permitted by applicable
laws and regulations, during any such leave of absence, the Employee shall,
except in respect to his rights to the compensation herein provided and his
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obligation to perform active duties of the Employer be deemed, for the purposes
of this Agreement, to be an employee of the Employer.
5.3 Governing Law. This Agreement is being made and
executed in and is intended to be performed in the State of California and
shall be governed, construed, interpreted and enforced in accordance with the
substantive laws of the State of California, without regard to the conflict of
laws principles thereof.
5.4 Entire Agreement. This Agreement comprises the
entire agreement between the parties hereto relating to the subject matter
hereof and as of the Commencement Date, supersedes, cancels and annuls all
previous employment agreements between the Employer (and/or its predecessors,
including Food 4 Less Supermarkets, Inc.) and the Employee, as the same may
have been amended or modified, and any right of the Employee thereunder other
than for compensation accrued thereunder as of the date hereof, and supersedes,
cancels and annuls all other prior written and oral agreements between the
Employee and the Employer or any predecessor to the Employer. The terms of
this Agreement are intended by the parties to be the final expression of their
agreement with respect to the employment of the Employee by the Employer and
may not be contradicted by evidence of any prior or contemporaneous agreement.
5.5 Gender. Words in the masculine herein may be
interpreted as feminine or neuter, and words in the singular as plural, and
vice versa, where the sense requires.
5.6 Disputes.
(a) Any dispute or controversy arising under, out of, in
connection with or in relation to this Agreement shall be finally determined
and settled by arbitration in Los Angeles, California, in accordance with the
rules and procedures of the American Arbitration
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Association, and judgment upon the award may be entered in any court having
jurisdiction thereof.
(b) If any arbitration or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief that may be granted.
5.7 Severability; Enforceability. If any provision of
this Agreement, or the application thereof to any person, place, or
circumstance, shall be held to be invalid, unenforceable, or void by the final
determination of a court of competent jurisdiction in any jurisdiction and all
appeals therefrom shall have failed or the time for such appeals shall have
expired, as to that jurisdiction and subject to this Section 5.7, such clause
or provision shall be deemed eliminated from this Agreement but the remaining
provisions shall nevertheless be given full force and effect. In the event
this Agreement or any portion hereof is more restrictive than permitted by the
law of the jurisdiction in which enforcement is sought, this Agreement or such
portion shall be limited in that jurisdiction only, and shall be enforced in
that jurisdiction as so limited to the maximum extent permitted by the law of
that jurisdiction.
5.8 Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
5.9 Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be effective upon
receipt (or refusal of receipt)
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and shall be in writing and delivered personally or sent by telex, telecopy, or
certified or registered mail, postage prepaid, as follows:
(a) If to the Employer, addressed to its
principal offices to the attention of the CEO and the General Counsel.
(b) If to the Employee, to him at the address set
forth below under his signature; or at any other address as any party shall
have specified by notice in writing to the other parties.
5.10 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.
5.11 Amendments; Waivers. This Agreement may not be
modified, amended, or terminated except by an instrument in writing, approved
by the Board and signed by the Employee and the Employer. By an instrument in
writing similarly executed, the Employee or the Employer may waive compliance
by the other party or parties with any provision of this Agreement that such
other party was or is obligated to comply with or perform; provided, however,
that such waiver shall not operate as a waiver of, or estoppel with respect to,
any other or subsequent failure. No failure to exercise and no delay in
exercising any right, remedy or power hereunder shall preclude any other or
further exercise of any other right, remedy or power provided herein or by law
or in equity.
5.12 No Inconsistent Actions. The parties hereto shall
not voluntarily undertake or fail to undertake any action or course of action
inconsistent with, or to avoid or evade, the provisions or essential intent of
this Agreement. Furthermore, it is the intent of
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the parties hereto to act in a fair and reasonable manner with respect to the
interpretation and application of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
RALPHS GROCERY COMPANY
By: /s/ Byron Allumbaugh
------------------------
/s/ Greg Mays
Title: C.E.O ------------------------------
------------------------ Greg Mays
Address: --------------------
--------------------
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Exhibit 10.11
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), made and entered into as of
the Commencement Date (as defined below), between RALPHS GROCERY COMPANY, a
Delaware corporation, having its executive offices and a principal place of
business in the City of Compton, California (the "Employer"), and Terry Peets
(the "Employee").
RECITALS
A. It is the desire of the Employer to assure itself of the
management services of the Employee by directly engaging the Employee as an
Executive Vice President of the Employer.
B. The Employee desires to commit himself to serve the
Employer on the terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements set forth below the parties hereto agree as
follows:
ARTICLE I
POSITION AND TERM
1.1 Position. The Employer agrees to and does employ the
Employee and the Employee shall enter the employ of the Employer to perform his
duties as Executive Vice President or such other or additional duties as
determined by the Board of Directors of the Employer (the "Board") or the Chief
Executive Officer of the Employer (the "CEO").
1.2 Period of Contract Employment. The term "Period of
Contract Employment," as used herein, means the period beginning on the date
(the "Commencement
<PAGE> 2
Date") of consummation of the Merger (as defined in that certain Agreement and
Plan of Merger, dated as of September 14, 1994, by and among Food 4 Less Inc.,
Food 4 Less Holdings Inc., Food 4 Less Supermarkets, Inc., Ralphs Supermarkets,
Inc., the Edward J. DeBartolo Corporation, and the other stockholders of
Ralphs Supermarkets, Inc.), and ending on the earlier of the third anniversary
thereof or at the time of the Termination of Contract Employment (as defined in
Article III below).
1.3 Extension of Period of Contract Employment. The
Period of Contract Employment may be extended by a written agreement of the
parties. Notwithstanding the foregoing, neither the Employer nor the Employee
shall have any obligation to extend the Period of Contract Employment. If the
Employee remains in the employ of the Employer following the Period of Contract
Employment and any extension thereof in accordance with this Section 1.3, such
employment shall be at will unless different terms of employment are
established in writing.
1.4 Suspension of Services.
(a) Except in the case of a Termination of Contract
Employment under Article III, in the event that the Employee is advised by the
Employer in writing that his services will no longer be required during the
remainder of the Period of Contract Employment, this shall be treated as a
suspension of services and, except for the purposes set forth in Section 2.4,
and except as prohibited by applicable laws and regulations, the Employee shall
continue to be treated as an employee of the Employer for all purposes
including eligibility for those fringe benefits provided for in Section 2.2,
and shall continue to be compensated by the Employer (subject to the possible
offset set forth in subsection (b) below) during the remainder of the Period of
Contract Employment at the rate of "Total Compensation" to which the Employee
was entitled at time of suspension of services. The
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portion of the Period of Contract Employment prior to the suspension of service
is referred to herein as the "Period of Active Employment." For purposes of
this Agreement, the term "Total Compensation" shall mean the Base Salary set
forth in Section 2.1, any increases to such Base Salary granted by the Employer
in accordance with Section 2.1 and any Bonus Compensation earned by the
Employee pursuant to Section 2.3 during the portion of the year of suspension
of services of the Employee which falls within the Period of Active Employment.
(b) In the event of suspension of services in accordance
with subsection (a) above, the Employee shall be free to become engaged with
another business in any capacity but in such event, fifty percent (50%) of the
compensation of any kind (including deferred compensation and compensation
assigned to an entity or individual other than the Employee) received from or
earned with respect to such other business (except from businesses or
investments owned by the Employee before the date of suspension of services for
which there will be no deduction) and one hundred percent (100%) of the
compensation of any kind (including deferred compensation and compensation
assigned to an entity or individual other than the Employee) received from or
earned with respect to a "Competing Business" (as defined in Section 4.5
below), in each case attributable to the Period of Contract Employment, shall
be subtracted from any amounts otherwise due the Employee from the Employer.
The Employee shall not take any actions to prevent compensation received from
or earned with respect to such other business from being applied pursuant to
this Section 1.4(b) to reduce amounts otherwise due the Employee from the
Employer.
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ARTICLE II
COMPENSATION
2.1 Annual Base Salary. During the Period of Contract
Employment the Employer agrees to pay the Employee a base salary in the annual
amount of Two Hundred and Fifty Thousand Dollars ($250,000.00) (the "Base
Salary"); provided, however, that the agreement as to said amount shall not
preclude or in any way affect the grant by the Employer or the receipt by the
Employee of increases in the Base Salary, or of Bonus Compensation or other
forms of additional compensation (including insurance and other employee plan
benefits), such increases, contingent or otherwise, to be determined solely in
the discretion of the Board or a committee of the Board to which such authority
is delegated by the Board, and such Bonus Compensation and additional
compensation, contingent or otherwise, to be determined in accordance with
Sections 2.2 and 2.3, respectively. The Base Salary shall be payable as
current salary, in monthly installments subject to all applicable withholding
and deductions, and at the same monthly rate as adjusted for any fraction of a
month unexpired at the Termination of Contract Employment.
2.2 Benefits. During the Period of Contract Employment,
the Employee shall be entitled to participate in or receive benefits under any
employee benefit plan or other arrangement including, but not limited to, any
medical, dental, retirement, disability, life insurance, sick leave and
vacation plans or arrangements generally made available by the Employer to its
executive officers, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans or arrangements; provided,
however, that such plans and arrangements are made available at the discretion
of the Employer and nothing in this Agreement establishes any right of the
Employee to the availability or continuance of any such plan or arrangement,
including pursuant to Section 1.4(a).
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2.3 Bonus Compensation. In the absolute discretion of
the Board or a committee of the Board to which such authority is delegated by
the Board, the Employee will be eligible to receive an annual bonus in an
amount determined under and with terms pursuant to a plan for executive
officers established by the Board or a committee thereof to which the authority
to establish such a plan has been delegated.
2.4 Expenses and Office Space. The Employer agrees that
during the Period of Active Employment the Employee shall be allowed reasonable
documented traveling expenses directly related to the Employer's business and
shall be furnished office space, assistance and accommodations within the
Employer's place of business suitable to the character of his position with the
Employer and adequate for the performance of his duties hereunder.
ARTICLE III
TERMINATION OF CONTRACT EMPLOYMENT
3.1 Automatic Termination. The Agreement and the
Employee's employment hereunder shall automatically terminate upon the first to
occur of the following circumstances (any such termination and any termination
pursuant to Section 3.2 is referred to herein as a "Termination of Contract
Employment"):
(a) Expiration. The failure of the parties prior
to the third anniversary of the Commencement Date to extend the Period of
Contract Employment pursuant to Section 1.3 or the expiration of any extension
of the Period of Contract Employment; or
(b) Death. The Employee's death.
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3.2 Permissive Termination. The Agreement and the
Employee's employment hereunder may be terminated by the Employer or the
Employee, as applicable, under the following circumstances:
(a) Disability. Upon the failure of the
Employee, during the Period of Contract Employment, to render services to the
Employer for a continuous period of six (6) months, because of the Employee's
physical or mental disability during said period, the Employer, acting through
the Board or a committee of the Board to which such authority is delegated by
the Board, may end the Employee's Period of Contract Employment. If there
should be any dispute between the parties as to the Employee's physical or
mental disability at any time, such question shall be settled by the opinion of
an impartial reputable physician agreed upon for the purpose by the parties or
their representatives, or failing agreement within ten (10) days of a written
request therefor by either party to the other, then one designated by the then
president of the Los Angeles Medical Society. The certificate of such
physician as to the matter in dispute shall be final and binding on the
parties; or
(b) Upon Change of Control. The Employee, at the
time and in the manner provided in Section 5.1 hereof, may exercise the option
granted to the Employee pursuant to such Section 5.1; or
(c) Resignation or Retirement. The Employee may
voluntarily resign or retire upon written notice; or
(d) Cause. The Employer may terminate the
Employee's employment based upon (i) the Employee's gross misconduct; (ii) any
felony conviction of the Employee (other than a traffic or moving violation,
such as driving under the influence, except that if the Employee incurs a
driving under the influence violation after incurring two previous driving
under the influence violations during the Period of Contract Employment,
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the third such violation will be a felony conviction for purposes of this
subsection (d)(ii)); (iii) any act of fraud or dishonesty by the Employee
materially detrimental to the business or reputation of the Employer as
determined by the Board; (iv) any serious breach of Employer policy by the
Employee as determined by the Board; or (v) any other material breach of the
Agreement by the Employee.
ARTICLE IV
COVENANTS
4.1 Full-Time Employee. The Employee hereby covenants
and agrees that during the Period of Contract Employment he will faithfully and
in conformity with the directions of the Board, or of an officer of the
Employer duly authorized by the Board, perform the duties of his employment
hereunder, and that he shall be a full-time employee of the Employer and that
he shall devote to the performance of said duties all such time and attention
as they shall reasonably require, taking, however, from time to time (as the
Employer agrees that he may) reasonable vacations.
4.2 No Detraction From Performance. The Employee hereby
consents and agrees that during the Period of Contract Employment he will not,
without the express consent of the Board or a committee of the Board to which
such authority is delegated by the Board or the Chief Executive Officer of the
Company, become actively associated with or engaged in any business other than
that of the Employer, or a division, or subsidiary of the Employer that would
detract from the performance of his duties to the Employer, and he will do
nothing inconsistent with such duties.
4.3 Confidential Information. It is recognized by the
Employee and the Employer that the Employee's duties during the Period of
Contract Employment will entail
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the receipt of confidential information concerning not only the Employer's
current operations and procedures but also its short-range and long-range
plans. The Employee hereby covenants and agrees that during the Period of
Contract Employment and at any time thereafter, he will not disclose to anyone
outside of the Employer, or use in any activity or business (other than the
Employer's business), Confidential Information (as defined below) relating to
the Employer's business, in any way obtained by him while employed by the
Employer, unless authorized by the Employer in writing. It is understood that
violation of this provision would cause irreparable harm to the Employer and
that the Employer may seek to enjoin any such violation or to take any other
applicable action.
For purposes of this Agreement, the term "Confidential
Information" shall include all information of any nature and in any form which
is owned by the Employer and which is not publicly available or generally known
to persons engaged in businesses similar to that of the Employer, including,
but not limited to, research techniques; patents and patent applications;
inventions and improvements, whether patentable or not; development projects;
computer software and related documentation and materials; designs, practices,
processes, methods, know-how and other facts relating to the business of the
Employer; practices, processes, methods, know-how and other facts related to
sales, advertising, promotions, financial matters, customers, customer lists or
customers' purchases of goods or services from the Employer; industry
contracts; and all other secrets and information of a confidential and
proprietary nature.
4.4 Conflict of Interest and Business Ethics Statement.
The Employee hereby covenants and agrees that during the Period of Contract
Employment he will not knowingly engage in any activity which would violate the
Conflict of Interest or Business Ethics Statement signed from time to time by
the Employee.
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4.5 Competing Business. The Employee hereby covenants
and agrees that, during the Period of Contract Employment, the Employee will
not have any investment in a Competing Business (as defined below) other than
an equity interest of less than five percent (5%) of any company whose
securities are listed on The New York Stock Exchange, The American Stock
Exchange or NASDAQ and will not render personal services to any Competing
Business in any manner, including, without limitation, as owner, partner,
director, trustee, officer, employee, consultant or advisor thereof.
For purposes of this Agreement, "Competing Business" shall
mean any business which (i) is engaged in the retail supermarket business in
any area where the Employer or any of its subsidiaries presently does business
or, at any time during the Period of Contract Employment, did business; or (ii)
is a supplier, directly or indirectly, to any such retail grocery business.
If the Employee shall breach the agreement contained in this
Section 4.5, such breach may render the Employee liable to the Employer for
damages therefor and entitle the Employer to enjoin the Employee from making
such investment or from rendering such personal services. In addition, the
Employer shall have the right in such event to enjoin the Employee from
disclosing any Confidential Information concerning the Employer to any
competing business, to enjoin any competing business from receiving from the
Employee or using any such Confidential Information and/or to enjoin any
competing business from retaining or seeking to retain any other employees of
the Employer.
4.6 No Solicitation. The Employee hereby covenants and
agrees that during the Period of Contract Employment, he will not, for himself
or any third party, directly or indirectly, (i) divert or attempt to divert
from the Employer any business of any kind in which the Employer is engaged,
including, without limitation, the solicitation of its
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customers or interference with any of its suppliers or customers; or (ii)
employ or solicit for employment any person employed by the Employer during the
period of such person's employment.
4.7 Remedies. The Employee and the Employer agree that
the Employer will be irreparably harmed by any violation or threatened
violation of any of the foregoing provisions of this Article 4 if such
provisions are not specifically enforced and therefore that the Employer shall
be entitled to an injunction restraining any violation of such provisions by
the Employee, or any other appropriate decree of specific performance. Such
remedies shall not be exclusive and shall be in addition to any other remedy to
which the Employer may be entitled under this Agreement or at law.
ARTICLE V
MISCELLANEOUS
5.1 Successors. This Agreement shall inure to the
benefit of the Employer and its successors and assigns, as applicable. If the
Employer shall merge or consolidate with or into, or transfer substantially all
of its assets, including goodwill, to another corporation or other form of
business organization, this Agreement shall bind and run to the benefit of the
successor of the Employer resulting from such merger, consolidation, or
transfer; provided, however, that if any such merger, consolidation, or
transfer shall be with, into, or to any corporation or other form of business
organization other than a subsidiary of the Employer or a corporation having
substantially the same common stockholders as the Employer, the Employee at any
time within the period ending one hundred eighty (180) days thereafter shall
have the right, at his option, on not less than thirty (30) days' written
notice to the Employer or its successors, to terminate the Period of Contract
Employment. The Employee shall not assign, pledge, or encumber his interest in
this Agreement, or any part
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thereof, without the prior written consent of the Employer, and any such
attempt to assign, pledge or encumber any interest in this Agreement shall be
null and void and shall have no effect whatsoever.
5.2 Leave of Absence. The Employer agrees that in the
event of war or a national emergency, the Employee will, at his request, be
granted a leave of absence for military or governmental service, and during
said period of leave of absence shall be paid such compensation as may be fixed
by, or with the authority of, the Board. To the extent permitted by applicable
laws and regulations, during any such leave of absence, the Employee shall,
except in respect to his rights to the compensation herein provided and his
obligation to perform active duties of the Employer be deemed, for the purposes
of this Agreement, to be an employee of the Employer.
5.3 Governing Law. This Agreement is being made and
executed in and is intended to be performed in the State of California and
shall be governed, construed, interpreted and enforced in accordance with the
substantive laws of the State of California, without regard to the conflict of
laws principles thereof.
5.4 Entire Agreement. This Agreement comprises the
entire agreement between the parties hereto relating to the subject matter
hereof and as of the Commencement Date, supersedes, cancels and annuls all
previous employment agreements between the Employer (and/or its predecessors)
and the Employee, as the same may have been amended or modified, and any right
of the Employee thereunder other than for compensation accrued thereunder as of
the date hereof, and supersedes, cancels and annuls all other prior written and
oral agreements between the Employee and the Employer or any predecessor to the
Employer. The terms of this Agreement are intended by the parties to be the
final expression of their agreement with respect to the employment of the
Employee by the
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Employer and may not be contradicted by evidence of any prior or
contemporaneous agreement.
5.5 Gender. Words in the masculine herein may be
interpreted as feminine or neuter, and words in the singular as plural, and
vice versa, where the sense requires.
5.6 Disputes.
(a) Any dispute or controversy arising under, out of, in
connection with or in relation to this Agreement shall be finally determined
and settled by arbitration in Los Angeles, California, in accordance with the
rules and procedures of the American Arbitration Association, and judgment upon
the award may be entered in any court having jurisdiction thereof.
(b) If any arbitration or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief that may be granted.
5.7 Severability; Enforceability. If any provision of
this Agreement, or the application thereof to any person, place, or
circumstance, shall be held to be invalid, unenforceable, or void by the final
determination of a court of competent jurisdiction in any jurisdiction and all
appeals therefrom shall have failed or the time for such appeals shall have
expired, as to that jurisdiction and subject to this Section 5.7, such clause
or provision shall be deemed eliminated from this Agreement but the remaining
provisions shall nevertheless be given full force and effect. In the event
this Agreement or any portion hereof is more restrictive than permitted by the
law of the jurisdiction in which enforcement is sought, this Agreement or such
portion shall be limited in that jurisdiction only, and shall be enforced in
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that jurisdiction as so limited to the maximum extent permitted by the law of
that jurisdiction.
5.8 Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
5.9 Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be effective upon
receipt (or refusal of receipt) and shall be in writing and delivered
personally or sent by telex, telecopy, or certified or registered mail, postage
prepaid, as follows:
(a) If to the Employer, addressed to its
principal offices to the attention of the CEO and the General Counsel.
(b) If to the Employee, to him at the address set
forth below under his signature; or at any other address as any party shall
have specified by notice in writing to the other parties.
5.10 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.
5.11 Amendments; Waivers. This Agreement may not be
modified, amended, or terminated except by an instrument in writing, approved
by the Board and signed by the Employee and the Employer. By an instrument in
writing similarly executed, the Employee or the Employer may waive compliance
by the other party or parties with any provision of this Agreement that such
other party was or is obligated to comply with or perform; provided, however,
that such waiver shall not operate as a waiver of, or estoppel with respect to,
any other or subsequent failure. No failure to exercise and no delay in
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exercising any right, remedy or power hereunder shall preclude any other or
further exercise of any other right, remedy or power provided herein or by law
or in equity.
5.12 No Inconsistent Actions. The parties hereto shall
not voluntarily undertake or fail to undertake any action or course of action
inconsistent with, or to avoid or evade, the provisions or essential intent of
this Agreement. Furthermore, it is the intent of the parties hereto to act in
a fair and reasonable manner with respect to the interpretation and application
of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
RALPHS GROCERY COMPANY
By: /s/ Byron Allumbaugh
------------------------
/s/ Terry Peets
Title: C.E.O ------------------------------
------------------------ Terry Peets
Address:
-------------------
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Exhibit 10.12
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), made and entered into as of
the Commencement Date (as defined below), between RALPHS GROCERY COMPANY, a
Delaware corporation, having its executive offices and a principal place of
business in the City of Compton, California (the "Employer"), and Jan Charles
Gray (the "Employee").
RECITALS
A. It is the desire of the Employer to assure itself of the
management services of the Employee by directly engaging the Employee as the
Senior Vice President, General Counsel and Secretary of the Employer.
B. The Employee desires to commit himself to serve the
Employer on the terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements set forth below the parties hereto agree as
follows:
ARTICLE I
POSITION AND TERM
1.1 Position. The Employer agrees to and does employ the
Employee and the Employee shall enter the employ of the Employer to perform his
duties as Senior Vice President, General Counsel and Secretary or such other or
additional duties as determined by the Board of Directors of the Employer (the
"Board") or the Chief Executive Officer of the Employer (the "CEO").
<PAGE> 2
1.2 Period of Contract Employment. The term "Period of
Contract Employment," as used herein, means the period beginning on the date
(the "Commencement Date") of consummation of the Merger (as defined in that
certain Agreement and Plan of Merger, dated as of September 14, 1994, by and
among Food 4 Less Inc., Food 4 Less Holdings Inc., Food 4 Less Supermarkets,
Inc., Ralphs Supermarkets, Inc., the Edward J. DeBartolo Corporation, and the
other stockholders of Ralphs Supermarkets, Inc.), and ending on the earlier of
the third anniversary thereof or at the time of the Termination of Contract
Employment (as defined in Article III below).
1.3 Extension of Period of Contract Employment. The
Period of Contract Employment may be extended by a written agreement of the
parties. Notwithstanding the foregoing, neither the Employer nor the Employee
shall have any obligation to extend the Period of Contract Employment. If the
Employee remains in the employ of the Employer following the Period of Contract
Employment and any extension thereof in accordance with this Section 1.3, such
employment shall be at will unless different terms of employment are
established in writing.
1.4 Suspension of Services.
(a) Except in the case of a Termination of Contract
Employment under Article III, in the event that the Employee is advised by the
Employer in writing that his services will no longer be required during the
remainder of the Period of Contract Employment, this shall be treated as a
suspension of services and, except for the purposes set forth in Section 2.4,
and except as prohibited by applicable laws and regulations, the Employee shall
continue to be treated as an employee of the Employer for all purposes
including eligibility for those fringe benefits provided for in Section 2.2,
and shall continue to be compensated by the Employer (subject to the possible
offset set forth in subsection (b)
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below) during the remainder of the Period of Contract Employment at the rate of
"Total Compensation" to which the Employee was entitled at time of suspension
of services. The portion of the Period of Contract Employment prior to the
suspension of service is referred to herein as the "Period of Active
Employment." For purposes of this Agreement, the term "Total Compensation"
shall mean the Base Salary set forth in Section 2.1, any increases to such Base
Salary granted by the Employer in accordance with Section 2.1 and any Bonus
Compensation earned by the Employee pursuant to Section 2.3 during the portion
of the year of suspension of services of the Employee which falls within the
Period of Active Employment.
(b) In the event of suspension of services in accordance
with subsection (a) above, the Employee shall be free to become engaged with
another business in any capacity but in such event, fifty percent (50%) of the
compensation of any kind (including deferred compensation and compensation
assigned to an entity or individual other than the Employee) received from or
earned with respect to such other business (except from businesses or
investments owned by the Employee before the date of suspension of services for
which there will be no deduction) and one hundred percent (100%) of the
compensation of any kind (including deferred compensation and compensation
assigned to an entity or individual other than the Employee) received from or
earned with respect to a "Competing Business" (as defined in Section 4.5
below), in each case attributable to the Period of Contract Employment, shall
be subtracted from any amounts otherwise due the Employee from the Employer.
The Employee shall not take any actions to prevent compensation received from
or earned with respect to such other business from being applied pursuant to
this Section 1.4(b) to reduce amounts otherwise due the Employee from the
Employer.
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ARTICLE II
COMPENSATION
2.1 Annual Base Salary. During the Period of Contract
Employment the Employer agrees to pay the Employee a base salary in the annual
amount of Two Hundred and Twenty Five Thousand Dollars ($225,000.00) (the "Base
Salary"); provided, however, that the agreement as to said amount shall not
preclude or in any way affect the grant by the Employer or the receipt by the
Employee of increases in the Base Salary, or of Bonus Compensation or other
forms of additional compensation (including insurance and other employee plan
benefits), such increases, contingent or otherwise, to be determined solely in
the discretion of the Board or a committee of the Board to which such authority
is delegated by the Board, and such Bonus Compensation and additional
compensation, contingent or otherwise, to be determined in accordance with
Sections 2.2 and 2.3, respectively. The Base Salary shall be payable as
current salary, in monthly installments subject to all applicable withholding
and deductions, and at the same monthly rate as adjusted for any fraction of a
month unexpired at the Termination of Contract Employment.
2.2 Benefits. During the Period of Contract Employment,
the Employee shall be entitled to participate in or receive benefits under any
employee benefit plan or other arrangement including, but not limited to, any
medical, dental, retirement, disability, life insurance, sick leave and
vacation plans or arrangements generally made available by the Employer to its
executive officers, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans or arrangements; provided,
however, that such plans and arrangements are made available at the discretion
of the Employer and nothing in this Agreement establishes any right of the
Employee to the availability or continuance of any such plan or arrangement,
including pursuant to Section 1.4(a).
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2.3 Bonus Compensation. In the absolute discretion of
the Board or a committee of the Board to which such authority is delegated by
the Board, the Employee will be eligible to receive an annual bonus in an
amount determined under and with terms pursuant to a plan for executive
officers established by the Board or a committee thereof to which the authority
to establish such a plan has been delegated.
2.4 Expenses and Office Space. The Employer agrees that
during the Period of Active Employment the Employee shall be allowed reasonable
documented traveling expenses directly related to the Employer's business and
shall be furnished office space, assistance and accommodations within the
Employer's place of business suitable to the character of his position with the
Employer and adequate for the performance of his duties hereunder.
ARTICLE III
TERMINATION OF CONTRACT EMPLOYMENT
3.1 Automatic Termination. The Agreement and the
Employee's employment hereunder shall automatically terminate upon the first to
occur of the following circumstances (any such termination and any termination
pursuant to Section 3.2 is referred to herein as a "Termination of Contract
Employment"):
(a) Expiration. The failure of the parties prior
to the third anniversary of the Commencement Date to extend the Period of
Contract Employment pursuant to Section 1.3 or the expiration of any extension
of the Period of Contract Employment; or
(b) Death. The Employee's death.
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3.2 Permissive Termination. The Agreement and the
Employee's employment hereunder may be terminated by the Employer or the
Employee, as applicable, under the following circumstances:
(a) Disability. Upon the failure of the
Employee, during the Period of Contract Employment, to render services to the
Employer for a continuous period of six (6) months, because of the Employee's
physical or mental disability during said period, the Employer, acting through
the Board or a committee of the Board to which such authority is delegated by
the Board, may end the Employee's Period of Contract Employment. If there
should be any dispute between the parties as to the Employee's physical or
mental disability at any time, such question shall be settled by the opinion of
an impartial reputable physician agreed upon for the purpose by the parties or
their representatives, or failing agreement within ten (10) days of a written
request therefor by either party to the other, then one designated by the then
president of the Los Angeles Medical Society. The certificate of such
physician as to the matter in dispute shall be final and binding on the
parties; or
(b) Upon Change of Control. The Employee, at the
time and in the manner provided in Section 5.1 hereof, may exercise the option
granted to the Employee pursuant to such Section 5.1; or
(c) Resignation or Retirement. The Employee may
voluntarily resign or retire upon written notice; or
(d) Cause. The Employer may terminate the
Employee's employment based upon (i) the Employee's gross misconduct; (ii) any
felony conviction of the Employee (other than a traffic or moving violation,
such as driving under the influence, except that if the Employee incurs a
driving under the influence violation after incurring two previous driving
under the influence violations during the Period of Contract Employment,
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the third such violation will be a felony conviction for purposes of this
subsection (d)(ii)); (iii) any act of fraud or dishonesty by the Employee
materially detrimental to the business or reputation of the Employer as
determined by the Board; (iv) any serious breach of Employer policy by the
Employee as determined by the Board; or (v) any other material breach of the
Agreement by the Employee.
ARTICLE IV
COVENANTS
4.1 Full-Time Employee. The Employee hereby covenants
and agrees that during the Period of Contract Employment he will faithfully and
in conformity with the directions of the Board, or of an officer of the
Employer duly authorized by the Board, perform the duties of his employment
hereunder, and that he shall be a full-time employee of the Employer and that
he shall devote to the performance of said duties all such time and attention
as they shall reasonably require, taking, however, from time to time (as the
Employer agrees that he may) reasonable vacations.
4.2 No Detraction From Performance. The Employee hereby
consents and agrees that during the Period of Contract Employment he will not,
without the express consent of the Board or a committee of the Board to which
such authority is delegated by the Board or the Chief Executive Officer of the
Company, become actively associated with or engaged in any business other than
that of the Employer, or a division, or subsidiary of the Employer that would
detract from the performance of his duties to the Employer, and he will do
nothing inconsistent with such duties.
4.3 Confidential Information. It is recognized by the
Employee and the Employer that the Employee's duties during the Period of
Contract Employment will entail
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the receipt of confidential information concerning not only the Employer's
current operations and procedures but also its short-range and long-range
plans. The Employee hereby covenants and agrees that during the Period of
Contract Employment and at any time thereafter, he will not disclose to anyone
outside of the Employer, or use in any activity or business (other than the
Employer's business), Confidential Information (as defined below) relating to
the Employer's business, in any way obtained by him while employed by the
Employer, unless authorized by the Employer in writing. It is understood that
violation of this provision would cause irreparable harm to the Employer and
that the Employer may seek to enjoin any such violation or to take any other
applicable action.
For purposes of this Agreement, the term "Confidential
Information" shall include all information of any nature and in any form which
is owned by the Employer and which is not publicly available or generally known
to persons engaged in businesses similar to that of the Employer, including,
but not limited to, research techniques; patents and patent applications;
inventions and improvements, whether patentable or not; development projects;
computer software and related documentation and materials; designs, practices,
processes, methods, know-how and other facts relating to the business of the
Employer; practices, processes, methods, know-how and other facts related to
sales, advertising, promotions, financial matters, customers, customer lists or
customers' purchases of goods or services from the Employer; industry
contracts; and all other secrets and information of a confidential and
proprietary nature.
4.4 Conflict of Interest and Business Ethics Statement.
The Employee hereby covenants and agrees that during the Period of Contract
Employment he will not knowingly engage in any activity which would violate the
Conflict of Interest or Business Ethics Statement signed from time to time by
the Employee.
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4.5 Competing Business. The Employee hereby covenants
and agrees that, during the Period of Contract Employment, the Employee will
not have any investment in a Competing Business (as defined below) other than
an equity interest of less than five percent (5%) of any company whose
securities are listed on The New York Stock Exchange, The American Stock
Exchange or NASDAQ and will not render personal services to any Competing
Business in any manner, including, without limitation, as owner, partner,
director, trustee, officer, employee, consultant or advisor thereof.
For purposes of this Agreement, "Competing Business" shall
mean any business which (i) is engaged in the retail supermarket business in
any area where the Employer or any of its subsidiaries presently does business
or, at any time during the Period of Contract Employment, did business; or (ii)
is a supplier, directly or indirectly, to any such retail grocery business.
If the Employee shall breach the agreement contained in this
Section 4.5, such breach may render the Employee liable to the Employer for
damages therefor and entitle the Employer to enjoin the Employee from making
such investment or from rendering such personal services. In addition, the
Employer shall have the right in such event to enjoin the Employee from
disclosing any Confidential Information concerning the Employer to any
competing business, to enjoin any competing business from receiving from the
Employee or using any such Confidential Information and/or to enjoin any
competing business from retaining or seeking to retain any other employees of
the Employer.
4.6 No Solicitation. The Employee hereby covenants and
agrees that during the Period of Contract Employment, he will not, for himself
or any third party, directly or indirectly, (i) divert or attempt to divert
from the Employer any business of any kind in which the Employer is engaged,
including, without limitation, the solicitation of its
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customers or interference with any of its suppliers or customers; or (ii)
employ or solicit for employment any person employed by the Employer during the
period of such person's employment.
4.7 Remedies. The Employee and the Employer agree that
the Employer will be irreparably harmed by any violation or threatened
violation of any of the foregoing provisions of this Article 4 if such
provisions are not specifically enforced and therefore that the Employer shall
be entitled to an injunction restraining any violation of such provisions by
the Employee, or any other appropriate decree of specific performance. Such
remedies shall not be exclusive and shall be in addition to any other remedy to
which the Employer may be entitled under this Agreement or at law.
ARTICLE V
MISCELLANEOUS
5.1 Successors. This Agreement shall inure to the
benefit of the Employer and its successors and assigns, as applicable. If the
Employer shall merge or consolidate with or into, or transfer substantially all
of its assets, including goodwill, to another corporation or other form of
business organization, this Agreement shall bind and run to the benefit of the
successor of the Employer resulting from such merger, consolidation, or
transfer; provided, however, that if any such merger, consolidation, or
transfer shall be with, into, or to any corporation or other form of business
organization other than a subsidiary of the Employer or a corporation having
substantially the same common stockholders as the Employer, the Employee at any
time within the period ending one hundred eighty (180) days thereafter shall
have the right, at his option, on not less than thirty (30) days' written
notice to the Employer or its successors, to terminate the Period of Contract
Employment. The Employee shall not assign, pledge, or encumber his interest in
this Agreement, or any part
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thereof, without the prior written consent of the Employer, and any such
attempt to assign, pledge or encumber any interest in this Agreement shall be
null and void and shall have no effect whatsoever.
5.2 Leave of Absence. The Employer agrees that in the
event of war or a national emergency, the Employee will, at his request, be
granted a leave of absence for military or governmental service, and during
said period of leave of absence shall be paid such compensation as may be fixed
by, or with the authority of, the Board. To the extent permitted by applicable
laws and regulations, during any such leave of absence, the Employee shall,
except in respect to his rights to the compensation herein provided and his
obligation to perform active duties of the Employer be deemed, for the purposes
of this Agreement, to be an employee of the Employer.
5.3 Governing Law. This Agreement is being made and
executed in and is intended to be performed in the State of California and
shall be governed, construed, interpreted and enforced in accordance with the
substantive laws of the State of California, without regard to the conflict of
laws principles thereof.
5.4 Entire Agreement. This Agreement comprises the
entire agreement between the parties hereto relating to the subject matter
hereof and as of the Commencement Date, supersedes, cancels and annuls all
previous employment agreements between the Employer (and/or its predecessors)
and the Employee, as the same may have been amended or modified, and any right
of the Employee thereunder other than for compensation accrued thereunder as of
the date hereof, and supersedes, cancels and annuls all other prior written and
oral agreements between the Employee and the Employer or any predecessor to the
Employer. The terms of this Agreement are intended by the parties to be the
final expression of their agreement with respect to the employment of the
Employee by the
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Employer and may not be contradicted by evidence of any prior or
contemporaneous agreement.
5.5 Gender. Words in the masculine herein may be
interpreted as feminine or neuter, and words in the singular as plural, and
vice versa, where the sense requires.
5.6 Disputes.
(a) Any dispute or controversy arising under, out of, in
connection with or in relation to this Agreement shall be finally determined
and settled by arbitration in Los Angeles, California, in accordance with the
rules and procedures of the American Arbitration Association, and judgment upon
the award may be entered in any court having jurisdiction thereof.
(b) If any arbitration or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief that may be granted.
5.7 Severability; Enforceability. If any provision of
this Agreement, or the application thereof to any person, place, or
circumstance, shall be held to be invalid, unenforceable, or void by the final
determination of a court of competent jurisdiction in any jurisdiction and all
appeals therefrom shall have failed or the time for such appeals shall have
expired, as to that jurisdiction and subject to this Section 5.7, such clause
or provision shall be deemed eliminated from this Agreement but the remaining
provisions shall nevertheless be given full force and effect. In the event
this Agreement or any portion hereof is more restrictive than permitted by the
law of the jurisdiction in which enforcement is sought, this Agreement or such
portion shall be limited in that jurisdiction only, and shall be enforced in
12
<PAGE> 13
that jurisdiction as so limited to the maximum extent permitted by the law of
that jurisdiction.
5.8 Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
5.9 Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be effective upon
receipt (or refusal of receipt) and shall be in writing and delivered
personally or sent by telex, telecopy, or certified or registered mail, postage
prepaid, as follows:
(a) If to the Employer, addressed to its
principal offices to the attention of the CEO and the General Counsel.
(b) If to the Employee, to him at the address set
forth below under his signature; or at any other address as any party shall
have specified by notice in writing to the other parties.
5.10 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.
5.11 Amendments; Waivers. This Agreement may not be
modified, amended, or terminated except by an instrument in writing, approved
by the Board and signed by the Employee and the Employer. By an instrument in
writing similarly executed, the Employee or the Employer may waive compliance
by the other party or parties with any provision of this Agreement that such
other party was or is obligated to comply with or perform; provided, however,
that such waiver shall not operate as a waiver of, or estoppel with respect to,
any other or subsequent failure. No failure to exercise and no delay in
13
<PAGE> 14
exercising any right, remedy or power hereunder shall preclude any other or
further exercise of any other right, remedy or power provided herein or by law
or in equity.
5.12 No Inconsistent Actions. The parties hereto shall
not voluntarily undertake or fail to undertake any action or course of action
inconsistent with, or to avoid or evade, the provisions or essential intent of
this Agreement. Furthermore, it is the intent of the parties hereto to act in
a fair and reasonable manner with respect to the interpretation and application
of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
RALPHS GROCERY COMPANY
By: /s/ Byron Allumbaugh
-------------------------
Title: C.E.O /s/ Jan Charles Gray
------------------------- ------------------------------------
Jan Charles Gray
Address: 2793 Creston Drive
-------------------------------
Los Angeles, CA 90068
-------------------------------
14
<PAGE> 1
Exhibit 10.13
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), made and entered into as of
the Commencement Date (as defined below), between RALPHS GROCERY COMPANY, a
Delaware corporation, having its executive offices and a principal place of
business in the City of Compton, California (the "Employer"), and Alan Reed
(the "Employee").
RECITALS
A. It is the desire of the Employer to assure itself of the
management services of the Employee by directly engaging the Employee as the
Senior Vice President and Chief Financial Officer of the Employer.
B. The Employee desires to commit himself to serve the
Employer on the terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements set forth below the parties hereto agree as
follows:
ARTICLE I
POSITION AND TERM
1.1 Position. The Employer agrees to and does employ the
Employee and the Employee shall enter the employ of the Employer to perform his
duties as Senior Vice President and Chief Financial Officer or such other or
additional duties as determined by the Board of Directors of the Employer (the
"Board") or the Chief Executive Officer of the Employer (the "CEO").
<PAGE> 2
1.2 Period of Contract Employment. The term "Period of
Contract Employment," as used herein, means the period beginning on the date
(the "Commencement Date") of consummation of the Merger (as defined in that
certain Agreement and Plan of Merger, dated as of September 14, 1994, by and
among Food 4 Less Inc., Food 4 Less Holdings Inc., Food 4 Less Supermarkets,
Inc., Ralphs Supermarkets, Inc., the Edward J. DeBartolo Corporation, and the
other stockholders of Ralphs Supermarkets, Inc.), and ending on the earlier of
the third anniversary thereof or at the time of the Termination of Contract
Employment (as defined in Article III below).
1.3 Extension of Period of Contract Employment. The
Period of Contract Employment may be extended by a written agreement of the
parties. Notwithstanding the foregoing, neither the Employer nor the Employee
shall have any obligation to extend the Period of Contract Employment. If the
Employee remains in the employ of the Employer following the Period of Contract
Employment and any extension thereof in accordance with this Section 1.3, such
employment shall be at will unless different terms of employment are
established in writing.
1.4 Suspension of Services.
(a) Except in the case of a Termination of Contract
Employment under Article III, in the event that the Employee is advised by the
Employer in writing that his services will no longer be required during the
remainder of the Period of Contract Employment, this shall be treated as a
suspension of services and, except for the purposes set forth in Section 2.4,
and except as prohibited by applicable laws and regulations, the Employee shall
continue to be treated as an employee of the Employer for all purposes
including eligibility for those fringe benefits provided for in Section 2.2,
and shall continue to be compensated by the Employer (subject to the possible
offset set forth in subsection (b)
2
<PAGE> 3
below) during the remainder of the Period of Contract Employment at the rate of
"Total Compensation" to which the Employee was entitled at time of suspension
of services. The portion of the Period of Contract Employment prior to the
suspension of service is referred to herein as the "Period of Active
Employment." For purposes of this Agreement, the term "Total Compensation"
shall mean the Base Salary set forth in Section 2.1, any increases to such Base
Salary granted by the Employer in accordance with Section 2.1 and any Bonus
Compensation earned by the Employee pursuant to Section 2.3 during the portion
of the year of suspension of services of the Employee which falls within the
Period of Active Employment.
(b) In the event of suspension of services in accordance
with subsection (a) above, the Employee shall be free to become engaged with
another business in any capacity but in such event, fifty percent (50%) of the
compensation of any kind (including deferred compensation and compensation
assigned to an entity or individual other than the Employee) received from or
earned with respect to such other business (except from businesses or
investments owned by the Employee before the date of suspension of services for
which there will be no deduction) and one hundred percent (100%) of the
compensation of any kind (including deferred compensation and compensation
assigned to an entity or individual other than the Employee) received from or
earned with respect to a "Competing Business" (as defined in Section 4.5
below), in each case attributable to the Period of Contract Employment, shall
be subtracted from any amounts otherwise due the Employee from the Employer.
The Employee shall not take any actions to prevent compensation received from
or earned with respect to such other business from being applied pursuant to
this Section 1.4(b) to reduce amounts otherwise due the Employee from the
Employer.
3
<PAGE> 4
ARTICLE II
COMPENSATION
2.1 Annual Base Salary. During the Period of Contract
Employment the Employer agrees to pay the Employee a base salary in the annual
amount of Two Hundred and Thirty Five Thousand Dollars ($235,000.00) (the "Base
Salary"); provided, however, that the agreement as to said amount shall not
preclude or in any way affect the grant by the Employer or the receipt by the
Employee of increases in the Base Salary, or of Bonus Compensation or other
forms of additional compensation (including insurance and other employee plan
benefits), such increases, contingent or otherwise, to be determined solely in
the discretion of the Board or a committee of the Board to which such authority
is delegated by the Board, and such Bonus Compensation and additional
compensation, contingent or otherwise, to be determined in accordance with
Sections 2.2 and 2.3, respectively. The Base Salary shall be payable as
current salary, in monthly installments subject to all applicable withholding
and deductions, and at the same monthly rate as adjusted for any fraction of a
month unexpired at the Termination of Contract Employment.
2.2 Benefits. During the Period of Contract Employment,
the Employee shall be entitled to participate in or receive benefits under any
employee benefit plan or other arrangement including, but not limited to, any
medical, dental, retirement, disability, life insurance, sick leave and
vacation plans or arrangements generally made available by the Employer to its
executive officers, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans or arrangements; provided,
however, that such plans and arrangements are made available at the discretion
of the Employer and nothing in this Agreement establishes any right of the
Employee to the availability or continuance of any such plan or arrangement,
including pursuant to Section 1.4(a).
4
<PAGE> 5
2.3 Bonus Compensation. In the absolute discretion of
the Board or a committee of the Board to which such authority is delegated by
the Board, the Employee will be eligible to receive an annual bonus in an
amount determined under and with terms pursuant to a plan for executive
officers established by the Board or a committee thereof to which the authority
to establish such a plan has been delegated.
2.4 Expenses and Office Space. The Employer agrees that
during the Period of Active Employment the Employee shall be allowed reasonable
documented traveling expenses directly related to the Employer's business and
shall be furnished office space, assistance and accommodations within the
Employer's place of business suitable to the character of his position with the
Employer and adequate for the performance of his duties hereunder.
ARTICLE III
TERMINATION OF CONTRACT EMPLOYMENT
3.1 Automatic Termination. The Agreement and the
Employee's employment hereunder shall automatically terminate upon the first to
occur of the following circumstances (any such termination and any termination
pursuant to Section 3.2 is referred to herein as a "Termination of Contract
Employment"):
(a) Expiration. The failure of the parties prior
to the third anniversary of the Commencement Date to extend the Period of
Contract Employment pursuant to Section 1.3 or the expiration of any extension
of the Period of Contract Employment; or
(b) Death. The Employee's death.
5
<PAGE> 6
3.2 Permissive Termination. The Agreement and the
Employee's employment hereunder may be terminated by the Employer or the
Employee, as applicable, under the following circumstances:
(a) Disability. Upon the failure of the
Employee, during the Period of Contract Employment, to render services to the
Employer for a continuous period of six (6) months, because of the Employee's
physical or mental disability during said period, the Employer, acting through
the Board or a committee of the Board to which such authority is delegated by
the Board, may end the Employee's Period of Contract Employment. If there
should be any dispute between the parties as to the Employee's physical or
mental disability at any time, such question shall be settled by the opinion of
an impartial reputable physician agreed upon for the purpose by the parties or
their representatives, or failing agreement within ten (10) days of a written
request therefor by either party to the other, then one designated by the then
president of the Los Angeles Medical Society. The certificate of such
physician as to the matter in dispute shall be final and binding on the
parties; or
(b) Upon Change of Control. The Employee, at the
time and in the manner provided in Section 5.1 hereof, may exercise the option
granted to the Employee pursuant to such Section 5.1; or
(c) Resignation or Retirement. The Employee may
voluntarily resign or retire upon written notice; or
(d) Cause. The Employer may terminate the
Employee's employment based upon (i) the Employee's gross misconduct; (ii) any
felony conviction of the Employee (other than a traffic or moving violation,
such as driving under the influence, except that if the Employee incurs a
driving under the influence violation after incurring two previous driving
under the influence violations during the Period of Contract Employment,
6
<PAGE> 7
the third such violation will be a felony conviction for purposes of this
subsection (d)(ii)); (iii) any act of fraud or dishonesty by the Employee
materially detrimental to the business or reputation of the Employer as
determined by the Board; (iv) any serious breach of Employer policy by the
Employee as determined by the Board; or (v) any other material breach of the
Agreement by the Employee.
ARTICLE IV
COVENANTS
4.1 Full-Time Employee. The Employee hereby covenants
and agrees that during the Period of Contract Employment he will faithfully and
in conformity with the directions of the Board, or of an officer of the
Employer duly authorized by the Board, perform the duties of his employment
hereunder, and that he shall be a full-time employee of the Employer and that
he shall devote to the performance of said duties all such time and attention
as they shall reasonably require, taking, however, from time to time (as the
Employer agrees that he may) reasonable vacations.
4.2 No Detraction From Performance. The Employee hereby
consents and agrees that during the Period of Contract Employment he will not,
without the express consent of the Board or a committee of the Board to which
such authority is delegated by the Board or the Chief Executive Officer of the
Company, become actively associated with or engaged in any business other than
that of the Employer, or a division, or subsidiary of the Employer that would
detract from the performance of his duties to the Employer, and he will do
nothing inconsistent with such duties.
4.3 Confidential Information. It is recognized by the
Employee and the Employer that the Employee's duties during the Period of
Contract Employment will entail
7
<PAGE> 8
the receipt of confidential information concerning not only the Employer's
current operations and procedures but also its short-range and long-range
plans. The Employee hereby covenants and agrees that during the Period of
Contract Employment and at any time thereafter, he will not disclose to anyone
outside of the Employer, or use in any activity or business (other than the
Employer's business), Confidential Information (as defined below) relating to
the Employer's business, in any way obtained by him while employed by the
Employer, unless authorized by the Employer in writing. It is understood that
violation of this provision would cause irreparable harm to the Employer and
that the Employer may seek to enjoin any such violation or to take any other
applicable action.
For purposes of this Agreement, the term "Confidential
Information" shall include all information of any nature and in any form which
is owned by the Employer and which is not publicly available or generally known
to persons engaged in businesses similar to that of the Employer, including,
but not limited to, research techniques; patents and patent applications;
inventions and improvements, whether patentable or not; development projects;
computer software and related documentation and materials; designs, practices,
processes, methods, know-how and other facts relating to the business of the
Employer; practices, processes, methods, know-how and other facts related to
sales, advertising, promotions, financial matters, customers, customer lists or
customers' purchases of goods or services from the Employer; industry
contracts; and all other secrets and information of a confidential and
proprietary nature.
4.4 Conflict of Interest and Business Ethics Statement.
The Employee hereby covenants and agrees that during the Period of Contract
Employment he will not knowingly engage in any activity which would violate the
Conflict of Interest or Business Ethics Statement signed from time to time by
the Employee.
8
<PAGE> 9
4.5 Competing Business. The Employee hereby covenants
and agrees that, during the Period of Contract Employment, the Employee will
not have any investment in a Competing Business (as defined below) other than
an equity interest of less than five percent (5%) of any company whose
securities are listed on The New York Stock Exchange, The American Stock
Exchange or NASDAQ and will not render personal services to any Competing
Business in any manner, including, without limitation, as owner, partner,
director, trustee, officer, employee, consultant or advisor thereof.
For purposes of this Agreement, "Competing Business" shall
mean any business which (i) is engaged in the retail supermarket business in
any area where the Employer or any of its subsidiaries presently does business
or, at any time during the Period of Contract Employment, did business; or (ii)
is a supplier, directly or indirectly, to any such retail grocery business.
If the Employee shall breach the agreement contained in this
Section 4.5, such breach may render the Employee liable to the Employer for
damages therefor and entitle the Employer to enjoin the Employee from making
such investment or from rendering such personal services. In addition, the
Employer shall have the right in such event to enjoin the Employee from
disclosing any Confidential Information concerning the Employer to any
competing business, to enjoin any competing business from receiving from the
Employee or using any such Confidential Information and/or to enjoin any
competing business from retaining or seeking to retain any other employees of
the Employer.
4.6 No Solicitation. The Employee hereby covenants and
agrees that during the Period of Contract Employment, he will not, for himself
or any third party, directly or indirectly, (i) divert or attempt to divert
from the Employer any business of any kind in which the Employer is engaged,
including, without limitation, the solicitation of its
9
<PAGE> 10
customers or interference with any of its suppliers or customers; or (ii)
employ or solicit for employment any person employed by the Employer during the
period of such person's employment.
4.7 Remedies. The Employee and the Employer agree that
the Employer will be irreparably harmed by any violation or threatened
violation of any of the foregoing provisions of this Article 4 if such
provisions are not specifically enforced and therefore that the Employer shall
be entitled to an injunction restraining any violation of such provisions by
the Employee, or any other appropriate decree of specific performance. Such
remedies shall not be exclusive and shall be in addition to any other remedy to
which the Employer may be entitled under this Agreement or at law.
ARTICLE V
MISCELLANEOUS
5.1 Successors. This Agreement shall inure to the
benefit of the Employer and its successors and assigns, as applicable. If the
Employer shall merge or consolidate with or into, or transfer substantially all
of its assets, including goodwill, to another corporation or other form of
business organization, this Agreement shall bind and run to the benefit of the
successor of the Employer resulting from such merger, consolidation, or
transfer; provided, however, that if any such merger, consolidation, or
transfer shall be with, into, or to any corporation or other form of business
organization other than a subsidiary of the Employer or a corporation having
substantially the same common stockholders as the Employer, the Employee at any
time within the period ending one hundred eighty (180) days thereafter shall
have the right, at his option, on not less than thirty (30) days' written
notice to the Employer or its successors, to terminate the Period of Contract
Employment. The Employee shall not assign, pledge, or encumber his interest in
this Agreement, or any part
10
<PAGE> 11
thereof, without the prior written consent of the Employer, and any such
attempt to assign, pledge or encumber any interest in this Agreement shall be
null and void and shall have no effect whatsoever.
5.2 Leave of Absence. The Employer agrees that in the
event of war or a national emergency, the Employee will, at his request, be
granted a leave of absence for military or governmental service, and during
said period of leave of absence shall be paid such compensation as may be fixed
by, or with the authority of, the Board. To the extent permitted by applicable
laws and regulations, during any such leave of absence, the Employee shall,
except in respect to his rights to the compensation herein provided and his
obligation to perform active duties of the Employer be deemed, for the purposes
of this Agreement, to be an employee of the Employer.
5.3 Governing Law. This Agreement is being made and
executed in and is intended to be performed in the State of California and
shall be governed, construed, interpreted and enforced in accordance with the
substantive laws of the State of California, without regard to the conflict of
laws principles thereof.
5.4 Entire Agreement. This Agreement comprises the
entire agreement between the parties hereto relating to the subject matter
hereof and as of the Commencement Date, supersedes, cancels and annuls all
previous employment agreements between the Employer (and/or its predecessors)
and the Employee, as the same may have been amended or modified, and any right
of the Employee thereunder other than for compensation accrued thereunder as of
the date hereof, and supersedes, cancels and annuls all other prior written and
oral agreements between the Employee and the Employer or any predecessor to the
Employer. The terms of this Agreement are intended by the parties to be the
final expression of their agreement with respect to the employment of the
Employee by the
11
<PAGE> 12
Employer and may not be contradicted by evidence of any prior or
contemporaneous agreement.
5.5 Gender. Words in the masculine herein may be
interpreted as feminine or neuter, and words in the singular as plural, and
vice versa, where the sense requires.
5.6 Disputes.
(a) Any dispute or controversy arising under, out of, in
connection with or in relation to this Agreement shall be finally determined
and settled by arbitration in Los Angeles, California, in accordance with the
rules and procedures of the American Arbitration Association, and judgment upon
the award may be entered in any court having jurisdiction thereof.
(b) If any arbitration or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief that may be granted.
5.7 Severability; Enforceability. If any provision of
this Agreement, or the application thereof to any person, place, or
circumstance, shall be held to be invalid, unenforceable, or void by the final
determination of a court of competent jurisdiction in any jurisdiction and all
appeals therefrom shall have failed or the time for such appeals shall have
expired, as to that jurisdiction and subject to this Section 5.7, such clause
or provision shall be deemed eliminated from this Agreement but the remaining
provisions shall nevertheless be given full force and effect. In the event
this Agreement or any portion hereof is more restrictive than permitted by the
law of the jurisdiction in which enforcement is sought, this Agreement or such
portion shall be limited in that jurisdiction only, and shall be enforced in
12
<PAGE> 13
that jurisdiction as so limited to the maximum extent permitted by the law of
that jurisdiction.
5.8 Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
5.9 Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be effective upon
receipt (or refusal of receipt) and shall be in writing and delivered
personally or sent by telex, telecopy, or certified or registered mail, postage
prepaid, as follows:
(a) If to the Employer, addressed to its
principal offices to the attention of the CEO and the General Counsel.
(b) If to the Employee, to him at the address set
forth below under his signature; or at any other address as any party shall
have specified by notice in writing to the other parties.
5.10 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.
5.11 Amendments; Waivers. This Agreement may not be
modified, amended, or terminated except by an instrument in writing, approved
by the Board and signed by the Employee and the Employer. By an instrument in
writing similarly executed, the Employee or the Employer may waive compliance
by the other party or parties with any provision of this Agreement that such
other party was or is obligated to comply with or perform; provided, however,
that such waiver shall not operate as a waiver of, or estoppel with respect to,
any other or subsequent failure. No failure to exercise and no delay in
13
<PAGE> 14
exercising any right, remedy or power hereunder shall preclude any other or
further exercise of any other right, remedy or power provided herein or by law
or in equity.
5.12 No Inconsistent Actions. The parties hereto shall
not voluntarily undertake or fail to undertake any action or course of action
inconsistent with, or to avoid or evade, the provisions or essential intent of
this Agreement. Furthermore, it is the intent of the parties hereto to act in
a fair and reasonable manner with respect to the interpretation and application
of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
RALPHS GROCERY COMPANY
By: /s/ Byron Allumbaugh
------------------------
/s/ Alan Reed
Title: C.E.O ------------------------------
------------------------ Alan Reed
Address:
---------------------
---------------------
14
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-28-1996
<PERIOD-START> JAN-29-1995
<PERIOD-END> JUL-16-1995
<CASH> 51,379
<SECURITIES> 0
<RECEIVABLES> 65,051
<ALLOWANCES> 0
<INVENTORY> 477,209
<CURRENT-ASSETS> 625,298
<PP&E> 1,341,202
<DEPRECIATION> (175,625)
<TOTAL-ASSETS> 3,041,614
<CURRENT-LIABILITIES> 661,357
<BONDS> 2,186,330
<COMMON> 57,762
0
132,832
<OTHER-SE> (206,893)
<TOTAL-LIABILITY-AND-EQUITY> 3,041,614
<SALES> 1,480,942
<TOTAL-REVENUES> 1,480,942
<CGS> 1,212,157
<TOTAL-COSTS> 1,212,157
<OTHER-EXPENSES> 324,669
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,807
<INCOME-PRETAX> (114,691)
<INCOME-TAX> 500
<INCOME-CONTINUING> (115,191)
<DISCONTINUED> 0
<EXTRAORDINARY> 35,358
<CHANGES> 0
<NET-INCOME> (150,549)
<EPS-PRIMARY> (6.90)
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</TABLE>
