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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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<S> <C>
For Fiscal Year Ended Commission File Number
January 28, 1996 33-31152
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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 90220
Compton, California (Zip code)
(Address of principal executive offices)
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(310) 884-9000
(Registrant's telephone number, including area code)
Securities registered pursuant to
Section 12(b) of the Act: None
Securities registered pursuant to
Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s)), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No _____.
At April 29, 1996, there were 1,513,938 shares of Common Stock
outstanding. As of such date, none of the outstanding shares of Common Stock
were held by persons other than affiliates and employees of the registrant, and
there was no public market for the Common Stock.
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PART I
ITEM 1. BUSINESS
Ralphs Grocery Company (the "Company"), formerly known as Food 4 Less
Supermarkets, Inc. ("F4L Supermarkets"), a wholly-owned subsidiary of Food 4
Less Holdings, Inc. ("Holdings"), is a retail supermarket company with a total
of 408 stores which are located in Southern California (345) , Northern
California (27) and certain areas of the Midwest (36). The Company is the
largest supermarket company in Southern California. The Company operates the
second largest conventional supermarket chain in the region under the "Ralphs"
name and the largest warehouse supermarket chain in the region under the "Food
4 Less" name. The Company has achieved strong competitive positions in each of
its marketing areas by successfully tailoring its merchandising strategy to the
particular needs of the individual communities it serves. In addition, the
Company is a vertically integrated supermarket company with major manufacturing
facilities, including a bakery and creamery operations, and full-line warehouse
and distribution facilities servicing its Southern California operations.
On June 14, 1995, Holdings 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 $388.1
million in cash, $131.5 million principal amount of 13-5/8% Senior Subordinated
Pay-In-Kind Debentures due 2007 of Holdings (the "Seller Debentures") and $18.5
million initial accreted value of 13-5/8% 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 (referred to as the "Company"
herein).
F4L Supermarkets was organized by The Yucaipa Companies ("Yucaipa"), a
private investment group, in connection with the June 1989 acquisition of Breco
Holding Company, Inc. ("BHC"), which owned Boys, Viva, and Cala stores.
Concurrently with the acquisition of BHC (the "BHC Acquisition"), Food 4 Less,
Inc. ("FFL"), a corporation controlled by an affiliate of Yucaipa, contributed
to F4L Supermarkets all of the outstanding capital stock of Falley's, Inc.
("Falley's"), which owned F4L Supermarkets' Midwestern stores and its Food 4
Less Southern California stores. F4L Supermarkets added six stores to its
Northern California Division by acquiring Bell Markets, Inc. ("Bell") on June
30, 1989, and added seven stores to its Southern California Division by
acquiring certain operating assets of ABC Market Corp. ("ABC") on January 15,
1990. On June 17, 1991, F4L Supermarkets acquired all of the outstanding
capital stock of Alpha Beta Company ("Alpha Beta"), which operated 142 stores
in seven Southern California counties (the "Alpha Beta Acquisition"). On March
29, 1994, F4L Supermarkets added ten warehouse format stores (collectively the
"Food Barn Stores") to its Midwestern Division which it acquired from
Associated Wholesale Grocers, Inc.
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The Company operates both conventional and warehouse format stores
under various names. The following table sets forth by retail format the
number of stores operated by each of the Company's three divisions at January
28, 1996 (unless otherwise indicated, all references to numbers of stores and
other store data in this Annual Report on Form 10-K are as of January 28,
1996):
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Southern Northern
California California Midwestern Total
---------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Ralphs 277 - - 277
Cala - 9 - 9
Bell - 13 - 13
Falley's - - 5 5
------ ------ ----- -----
Total Conventional 277 22 5 304
Food 4 Less 68 - 31 99
FoodsCo - 5 - 5
------- ------ ------ ------
Total Warehouse 68 5 31 104
----- ------ ---- ----
Total Stores 345 27 36 408
==== ===== ==== ====
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RECENT EVENTS
On December 29, 1995, the Company consummated an agreement with
Smith's Food & Drug Centers, Inc. ("Smith's") to sublease its one million
square foot distribution center and creamery facility in Riverside, California
(for approximately 23 years, with renewal options through 2043) and to acquire
certain operating assets and inventory at that facility. The sublease provides
for a subrental of approximately $8.8 million per annum. The aggregate
purchase price of operating assets and inventory acquired was approximately
$8.7 million (net of certain offsetting payments). In addition to the
acquisition of Smith's distribution and creamery facility, the Company also
acquired nine of Smith's Southern California stores which became available when
Smith's withdrew from the California market. The acquisition of the Smith's
distribution center will delay and modify the previously planned integration
for the existing Ralphs and Food 4 Less warehouse facilities; however, the
Company believes the transaction will result in increased operating
efficiencies, cost offsets and reduced capital expenditures.
During fiscal 1995, certain financial covenants and other terms of the
New Credit Facility were amended to, among other things, provide for the
acquisition of the Smith's Food and Drug Centers, Inc. ("Smith's") Riverside
distribution center and creamery facility, the acquisition of certain operating
assets and inventory at that facility, the acquisition of nine of the Smith's
Southern California stores and the closure of up to nine stores in conjunction
with these acquisitions.
SOUTHERN CALIFORNIA DIVISION
The Southern California Division operates 345 supermarkets in eight
counties under the names "Ralphs" and "Food 4 Less." The Company's Southern
California stores accounted for 87 percent of the Company's sales for the 52
weeks ended January 28, 1996.
The combination of Ralphs Grocery Company and Food 4 Less
Supermarkets, Inc. has created the largest food retailer in Southern
California. Since the Merger, the Company has consolidated all of its stores in
the region under its two leading complementary formats. The
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Company operates the second largest conventional supermarket chain in the
region under the "Ralphs" name and the largest price impact warehouse
supermarket chain under the "Food 4 Less" name. Management believes the
consolidation of its formats in Southern California has improved the Company's
ability to adapt its stores' merchandising strategy to the local markets in
which they operate while achieving cost savings and other efficiencies.
Ralphs Conventional Format. The Company operates 277 Ralphs stores in
Southern California. All of the Company's conventional stores in the region
use the "Ralphs" name and are operated under a single format. Each store is
merchandised to appeal to the local community it serve and offers competitive
pricing with emphasis on overall value. Ralphs' substantial supermarket
product selection is a significant aspect of its marketing efforts: Ralphs
stocks between 20,000 and 30,000 merchandise items in its stores, including
approximately 2,800 private label products. Ralphs stores offer name-brand
grocery products; quality and freshness in its produce, meat, seafood,
delicatessen and bakery products; and broad selection in all departments. Most
Ralphs stores offer service delicatessen departments, on-premises bakery
facilities and seafood departments. Ralphs emphasizes store ambiance and
cleanliness, fast and friendly service, the convenience of debit and credit
card payment (including many in-store branch banks) and 24-hour operations in
most stores.
Food 4 Less Warehouse Format. The Company operates 68 stores in
Southern California which target the price-conscious segment of the market in
both urban and suburban areas under the name "Food 4 Less." Food 4 Less is a
warehouse-style, price impact store which is positioned to offer the lowest
overall prices in its marketing areas by passing on to the consumer savings
achieved through labor efficiencies and lower overhead and advertising costs
associated with the warehouse format, while providing the product selection and
variety associated with a conventional format. In-store operations are
designed to allow customers to perform certain labor-intensive services usually
offered in conventional supermarkets; for example, merchandise is presented on
warehouse style racks in full cartons, reducing labor intensive unpacking, and
customers bag their own groceries. Labor costs are also reduced because the
stores generally do not have labor-intensive service departments such as
delicatessens, bakeries and fresh seafood departments, although they do offer a
complete line of fresh meat, fish, produce and baked goods.
The Food 4 Less format generally consists of large facilities
constructed with high ceilings to accommodate warehouse racking with overhead
pallet storage. Wide aisles accommodate forklifts and, compared to
conventional supermarkets, a higher percentage of total store space is devoted
to retail selling because the top of the warehouse-style grocery racks on the
sales floor are used to store inventory, which reduces the need for large
backroom storage. The Food 4 Less warehouse format supermarkets have brightly
painted walls and inexpensive signage in lieu of more expensive graphics. In
addition, a "Wall of Values" located at the entrance of each store presents the
customer with a selection of specially priced merchandise. Management believes
that there is a significant segment of the market, encompassing a wide range of
demographic groups, which prefers to shop in a warehouse format supermarket
because of its lowest overall pricing. The Company plans to continue its rapid
growth of the Food 4 Less format by opening 10 new warehouse format stores in
fiscal 1996, seven of which were acquired from Smith's.
Advertising and Promotion
As a result of the consolidation of conventional format stores in
Southern California under the "Ralphs" name, the Company eliminated most of the
separate advertising associated with Food 4 Less' existing Alpha Beta, Boys and
Viva formats. Because Ralphs' current advertising
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program now covers the Southern California region, the Company will be able to
expand the number of Ralphs stores without significantly increasing advertising
costs.
Ralphs' marketing strategy is to provide a combination of wide product
selection, quality and freshness of perishable products, competitive prices and
double coupons supporting Ralphs' advertising theme, "Everything You Need,
Every Time You Shop." The Ralphs Savings Plan, a marketing campaign designed
to enhance customer value, is comprised of six major components: Guaranteed
Low Prices ("GLPs"), Price Breakers, Big Buys, Multi-Buys, Ralphs Brand
Products and Double Coupons. GLPs guarantee low prices on certain high volume
items that are surveyed and updated every four weeks. Price Breakers are
weekly advertised items that offer significant savings. Big Buys are club size
items at prices competitive to club store prices and Multi-Buys offer Ralphs
shoppers the opportunity to purchase club store quantities of regular sized
items at prices competitive to club store prices. In conjunction with this
campaign, Ralphs' private label offering of approximately 2,800 products
provides value to the customer.
Ralphs stores promote sales through the use of product coupons,
consisting of manufacturers' coupons and Ralphs' own promotional coupons.
Ralphs offers a double coupon program in all stores with Ralphs matching the
price reduction offered by the manufacturer. Ralphs also generates store
traffic through weekly advertised specials, special sales promotions such as
discounts on recreational activities, seasonal and holiday promotions,
increased private label selection, club pack items and exclusive product
offerings.
The Food 4 Less warehouse stores utilize print and radio advertising
which emphasizes Food 4 Less' low-price leadership, rather than promoting
special prices on individual items. The Food 4 Less warehouse stores also
utilize weekly advertising circulars, customized to local communities, which
highlight the merchandise offered in each store.
Purchasing, Manufacturing and Distribution
In March 1996, the Company commenced operations in a state-of-the-art
distribution and creamery facility located in Riverside, California which was
acquired from Smith's. The technologically-advanced 90-acre complex is expected
to improve the quality, service and productivity of the Company's distribution
and manufacturing operations. The Riverside complex has more than one million
square feet of warehousing and manufacturing space consisting of a 675,000
square foot dry grocery service center, 270,000 square foot refrigerated and
frozen food facility and a 115,000 square foot creamery facility.
The acquisition of the Riverside complex allows the Company to
consolidate distribution into three modern, efficient facilities located in
Compton, Glendale and Riverside, California. This consolidation is being
accomplished by closing the Company's La Habra warehouse, Carson warehouse,
Long Beach Avenue warehouse and the Slauson frozen food warehouse, as well as
several other outside frozen food, deli and general merchandise facilities.
The benefits resulting from the reduction of distribution facilities include
(i) reductions in inventory levels, transportation between facilities and
management overhead, (ii) simplified coordination of inter-facility activities,
(iii) improved service levels for store orders, and (iv) the elimination of
outside storage costs. Other benefits include a reduction of future capital
expenditures requirements. The consolidation of the Company's distribution
facilities is expected to be completed by the third quarter of fiscal year
1996.
The Riverside complex also increases distribution capacity of the
Company by increasing storage capacity to 120,000 pallets and increasing the
assortment of items that are internally
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supported (increasing dry grocery from 10,000 to 14,000 SKUs and perishable
and frozen items by 1,500 SKUs).
The Riverside creamery is the production point for all fluid milk
products bound for sale in the Company's Food 4 Less warehouse stores. Bottled
water, fruit juice and ice for the entire Company will also be processed and
packaged at the Riverside creamery. Milk bound for the Company's Ralphs
conventional stores, as well as all ice cream and ice cream products, will
continue to be processed at the Company's existing creamery in Compton,
California.
The Company also operates a 17 million cubic foot high-rise automated
storage and retrieval system ("ASRS") warehouse for non- perishable items, in
Glendale, California. The automated warehouse has a ground floor area of
170,000 square feet and capacity of approximately 50,000 pallets. The ASRS
facility can hold substantially more inventory and requires fewer employees to
operate than a conventional warehouse of equal size.
The Company's third major Southern California distribution center is
its 5.4 million cubic foot facility in Compton, California designed to process
and store all perishable products (the "Perishables Service Center" or "PSC").
This facility was constructed in 1992 and has enabled the Company to have
the ability to deliver perishable products to its stores on a daily basis,
thereby improving the freshness and quality of these products.
In addition to the foregoing facilities, the Company will continue to
operate the 316,000 square foot bakery in La Habra, California to manufacture a
broad line of baked goods.
Combined shipments from the Company's Southern California warehouse
facilities accounted for approximately 75 percent of the Southern California
Division's total purchases during the 52 weeks ended January 28, 1996.
Additional purchases, consisting of mostly general merchandise, approximating 2
percent of the division's total during this same period, were made through
Certified Grocers of California, Ltd. ("Certified"), a food distribution
cooperative in which the Company is a member.
Store Operations and Retail Systems
The Southern California Division's store equipment and facilities are
generally in excellent condition. The Ralphs stores range in size from
approximately 15,600 square feet to 69,500 square feet and average
approximately 35,300 square feet. The Southern California Food 4 Less stores
are generally larger and range in size from approximately 27,400 square feet to
84,300 square feet, and average approximately 49,700 square feet. The Company
believes the Southern California Division's warehouse and distribution system
and the design of its stores permit the Company to decrease in-store stockroom
space and thereby increase available selling area.
The Southern California Division's management information systems and
optical scanning technology reduce the labor costs attributable to product
pricing and customer check-out, and provide the Company's management with
information that facilitates purchasing and receiving, inventory management,
warehouse reordering and management of accounts payable. All of the Company's
Southern California Division stores currently offer an electronic funds
transfer system which allows customers to make purchases, obtain cash or check
approvals in transactions linked to their bank accounts. In addition, the
Company's stores now offer customers the convenience of making purchases with
major credit cards.
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Expansion and Development
As a result of Ralphs' 123-year history and Alpha Beta's 92-year
history in Southern California, the Company has valuable and well- established
store locations, many of which are in densely populated metropolitan areas.
Additionally, the Company has a technologically advanced store base. During
fiscal 1995, the Company acquired 174 stores through the Merger, opened 6 new
Food 4 Less stores and 5 new Ralphs stores in Southern California, converted
124 stores from Alpha Beta, Boys and Viva formats to the Ralphs and Food 4
Less formats, closed 44 stores and remodeled 11 stores.
The Company plans to expand the Southern California Division by
opening new stores as well as replacing older and smaller stores. The Company
intends to continue to focus its new store construction and store conversion
efforts during fiscal 1996 and future years on the Food 4 Less format, which
has proven to have a strong appeal to value conscious consumers across a wide
range of demographic groups. To this end, the Company plans to continue its
store expansion program in Southern California by opening 25 new stores during
fiscal 1996 (including the nine stores acquired from Smith's, seven of which
will be Food 4 Less stores), and additional stores in subsequent years.
During fiscal year 1996, in Southern California, the Company plans to remodel
21 conventional format stores and 4 of the warehouse format stores. The
Company's merger, expansion, remodel and conversion efforts have required, and
will continue to require, the funding of significant capital expenditures. See
Item 7 -- "Management's Discussion and Analysis of Results of Operations and
Financial Condition -- Liquidity and Capital Resources."
Remodelings and openings, among other things, are subject to the
availability of developers' financing, agreements with developers and
landlords, local zoning regulations, construction schedules and other factors,
including costs, often beyond the Company's control. Accordingly, there can be
no assurance that the schedule will be met. Further, there is competition for
new store sites, and it is possible that this competition might adversely
affect the timing of its new store program. From time to time, the Company
also closes or sells marginal stores.
NORTHERN CALIFORNIA AND MIDWESTERN DIVISIONS
The Northern California Division of Food 4 Less operates 22
conventional supermarkets in the greater San Francisco Bay area under the
"Cala" and "Bell" names, and five warehouse format stores under the "FoodsCo"
name. Management believes that the Northern California Division has excellent
store locations in the city of San Francisco that would be very difficult to
replicate. The Midwestern Division of Food 4 Less operates 36 stores, of which
31, including ten former "Food Barn" stores which Food 4 Less acquired in March
1994, are warehouse format stores operated under the "Food 4 Less" name, and
five of which are conventional supermarkets operated under the "Falley's" name.
Of these 36 stores, 32 are located in Kansas and four are located in Missouri.
Management believes the Food 4 Less warehouse format stores are the low-price
leaders in each of the markets in which they compete. The Northern California
Division's conventional store strategy is to attract customers through its
convenient locations, broad product line and emphasis on quality and service,
and its advertising and promotion strategy highlights the reduced price
specials offered in its stores. In contrast, the Company's warehouse format
stores, operated under the Food 4 Less name in the Midwestern Division and the
FoodsCo name in the Northern California Division, emphasize lowest overall
prices rather than promoting special prices on individual items. The Northern
California Division's conventional stores range in size from approximately
8,500 square feet to 32,500 square feet, and average approximately 19,500
square feet. The Northern California Division's warehouse stores range in size
from approximately 30,000 square feet to 59,600 square
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feet, and average approximately 41,800 square feet. The Midwestern Division's
warehouse format stores range in size from approximately 8,800 square feet to
60,200 square feet and average approximately 37,900 square feet.
The Northern California Division purchases merchandise from a number
of suppliers; however, approximately 36 percent of its purchases are made
through Certified Grocers of California, Ltd. ("Certified"), a food
distribution cooperative, pursuant to supply contracts. The Northern
California Division does not operate its own warehouse facilities, relying
instead on direct delivery to its stores by Certified and other vendors. Food
4 Less' Southern California warehouse facilities supply a portion of the
merchandise sold in the Northern California Division stores.
The Midwestern Division's primary supplier is Associated Wholesale
Grocers ("AWG"), a member-owned wholesale grocery cooperative based in Kansas
City. The Midwestern Division does not operate a central warehouse, but
purchases approximately 70 percent of the merchandise sold in its stores from
AWG. Management believes that, as AWG's largest single customer, the
Midwestern Division has significant buying power, allowing it to provide a
broader product line more economically than it could if it maintained its own
full-line warehouse. The Midwestern Division produces approximately 50 percent
of all case-ready fresh meat items sold in its stores at its central meat plant
located in Topeka, Kansas.
Since the beginning of fiscal 1991, the Northern California Division
has remodeled 13 stores, opened six new stores and, in fiscal 1995, acquired
three stores from Roger Wilco, now operated as Bell stores. The Northern
California Division Food 4 Less warehouse stores were renamed as FoodsCo
warehouse stores in fiscal 1994 following the sale by the Company of the
exclusive rights to use the "Food 4 Less" name in Northern California to
Fleming Companies, Inc., which previously held a non-exclusive license. See
"Licensing Operations" for further discussion of the amendment to the Fleming
license.
The acquisition in March 1994 of ten warehouse stores formerly
operated as "Food Barn" stores increased the Midwestern Division's Food 4 Less
warehouse store count from 28 at June 26, 1993 to 38 at January 28, 1996.
During the last five fiscal years, the Midwestern Division has opened two new
stores, acquired ten stores, closed three stores and remodeled eight stores.
While the Company has no definitive plans to construct or acquire new stores in
the Midwestern Division in fiscal 1996, the Company intends to focus future
expansion there on its Food 4 Less operations.
COMPETITION
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.
The Southern California Division competes with several large national
and regional chains, principally Albertsons, Hughes, Lucky, Stater Bros., and
Vons, and with smaller independent supermarkets and grocery stores as well as
warehouse clubs and other "alternative format" food stores. The Northern
California Division competes with large national and regional chains,
principally
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Lucky and Safeway, and with independent supermarket and grocery store operators
and other retailers, including "alternative format" stores. The Midwestern
Division's supermarkets compete with several national and regional supermarket
chains, principally Albertson's and Dillons, as well as independent grocery and
"alternative format" stores such as Hypermarket USA. The Company positions its
warehouse format supermarkets as the overall low-price leaders in each
marketing area in which they operate.
EMPLOYEES
The Company believes that its relationship with its employees is
excellent. At January 28, 1996, the Company had a total of 30,101 employees,
as shown in the table below.
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<CAPTION>
Southern Northern
California California Midwestern Total
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<S> <C> <C> <C> <C>
Administrative 1,573 64 41 1,678
Warehouse, manufacturing and
transportation 3,318 - 61 3,379
Stores 21,540 2,123 1,381 25,044
------ ----- ----- ------
Total 26,431 2,187 1,483 30,101
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</TABLE>
Of the Company's 30,101 total employees at January 28, 1996, there
were 26,369 employees covered by union contracts, principally with the United
Food and Commercial Workers Union (the "UFCW"). The table below sets forth
information regarding the Company's union contracts which cover more than 100
employees.
<TABLE>
<CAPTION>
UNION NUMBER OF EMPLOYEES COVERED DATE(S) OF EXPIRATION
----- --------------------------- ----------------------
<S> <C> <C>
UFCW 15,737 Southern California October 3, 1999
Division clerks and
meatcutters
Hospital and Service Employees 606 Southern California January 19, 1997
Division store porters
International Brotherhood of Teamsters 2,802 Southern California September 13, 1998
Division drivers
and warehousemen
UFCW 2,034 Northern California March 7, 1998
Division clerks and
meatcutters
UFCW 3,708 Southern California February 26, 2000
Division clerks and
meatcutters
Bakery and Confectionery Workers 219 Southern California February 9, 1997
Division bakers
</TABLE>
LICENSING OPERATIONS
The Company owns the "Food 4 Less" trademark and service mark and
licenses the "Food 4 Less" name for use by others. In fiscal 1995, earnings
from licensing operations were approximately $328,000. An exclusive license
with the right to sublicense the "Food 4 Less" name in all areas of the United
States except Arkansas, Iowa, Illinois, Minnesota, Nebraska, North Dakota,
South Dakota, Wisconsin, the upper peninsula of Michigan, certain portions of
Kansas, Missouri, and
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Tennessee has been granted to Fleming Companies, Inc. ("Fleming"), a major food
wholesaler and retailer. In August of 1993, the Company amended its licensing
agreement with Fleming to give Fleming exclusive use of the Food 4 Less name in
Northern California and the Company exclusive use in Southern California (the
"Amendment"). With the exception of Northern California, and subject to the
Amendment and certain proximity restrictions, the Company retains the right to
open and operate its own "Food 4 Less" warehouse supermarkets throughout the
United States. As of January 28, 1996, there were 174 Food 4 Less warehouse
supermarkets in 15 states, including the 99 stores owned or leased and operated
by the Company. Of the remaining 75 stores, Fleming operates 15 under license,
15 are operated under sublicenses from Fleming and 45 are operated by other
licensees.
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ITEM 2. PROPERTIES
At January 28, 1996 the Company operated 408 supermarkets, as set
forth in the table below:
<TABLE>
<CAPTION>
Number of Average
Supermarkets Total Square Feet/
------------
Division Owned Leased Square Feet Facility
-------- ----- ------ ----------- ------------
<S> <C> <C> <C> <C>
Southern California 60(a) 285 13,151,000 38,100
Northern California - 27 637,000 23,600
Midwestern 2(b) 34 1,299,000 36,100
</TABLE>
----------------------
(a) Includes fifteen stores located on real property subject to
ground leases.
(b) Includes one store that is partially owned and partially leased.
Most of the Southern California Division's store locations are held
pursuant to long-term leases, many of which, in the opinion of management, have
below-market rental rates or other favorable lease terms. The average
remaining term (including all renewal options) of the Company's supermarket
leases is approximately 30 years.
In addition to the supermarkets, the Company operates three main
warehouse and distribution centers in Southern California. The newly acquired
90 acre Riverside distribution complex has more than one million square feet of
warehousing and manufacturing space consisting of a creamery and several
warehouses for dry grocery, dairy/deli and frozen food storage. The 170,000
square foot high-rise automated storage and retrieval system Glendale warehouse
("ASRS") located in the Atwater district of Los Angeles, opened in 1987,
handles non-perishable items is ten stories high and has a capacity of
approximately 50,000 pallets. The Perishable Service Center ("PSC") in Compton,
opened in 1992, is a 5.4 million cubic foot facility designed to process and
store all perishable products.
The Company also has manufacturing operations located in Compton that
produce a variety of dairy and other products, including fluid milk, ice cream,
yogurt and bottled waters and juices, as well as packaged ice, cheese and salad
preparations. The bakery operation is located at the La Habra complex and
measures 316,000 square feet.
Due to the increase in warehouse space, the La Habra distribution
center and a number of smaller warehouses used by the Company have become
obsolete and it is expected that by the third quarter of fiscal year 1996, the
Company will have consolidated its warehousing operations into the three main
centers described above.
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ITEM 3. LEGAL PROCEEDINGS
In December 1992, three California state antitrust class action suits
were commenced in Los Angeles Superior Court against the Company and other
major supermarket chains located in Southern California, alleging that they
conspired to refrain from competing in the retail market for fluid milk and to
fix the retail price of fluid milk above competitive prices. Specifically,
class actions were commenced by Diane Barela and Neila Ross, Ron Moliare and
Paul C. Pfeifle on December 7, December 14 and December 23, 1992, respectively.
To date, the Court has yet to certify any of these classes, while a demurrer to
the complaints was denied. The Company is continuing to actively defend itself
in these class action suits.
Ralphs and Food 4 Less are subject to regulation by a variety of
governmental agencies, including, but not limited to, the California Department
of Alcoholic Beverage Control, the California Department of Agriculture, the
U.S. Food and Drug Administration, the U.S. Department of Agriculture and state
and local health departments.
In addition, the Company or its subsidiaries are defendants in a
number of other cases currently in litigation or are the subject of potential
claims encountered in the normal course of business which are being vigorously
defended. In the opinion of management, the resolutions of these matters will
not have a material effect on the Company's financial position or results of
operations.
ENVIRONMENTAL MATTERS
In January 1991, the California Regional Water Quality Control Board
for the Los Angeles Region (the "Regional Board") requested that RGC conduct a
subsurface characterization of its Glendale warehouse property located in the
Atwater district of Los Angeles. This request was part of an ongoing effort by
the Regional Board, in connection with the U.S. Environmental Protection Agency
(the "EPA"), to identify contributors to groundwater contamination in the San
Fernando Valley. Significant parts of the San Fernando Valley, including the
area where RGC's grocery warehouse is located, have been designated federal
Superfund sites requiring response actions under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, because of
regional groundwater contamination. On June 18, 1991, the EPA made its own
request for information concerning RGC's grocery warehouse. Since that time,
the Regional Board has requested further investigation by RGC. RGC conducted
the requested investigations and reported the results to the Regional Board.
Approximately 25 companies have entered into a Consent Order (EPA Docket No.
94-11) with the EPA to investigate and design a remediation system for
contaminated groundwater beneath an area which includes RGC's grocery warehouse.
RGC is not a party to the Consent Order, but is cooperating with requests of
the subject companies to allow installation of monitoring or recovery wells on
RGC's property. On or about October 12, 1995, the EPA mailed a Special Notice
Letter to 44 parties, including Ralphs as owner and operator of the Glendale
property, naming them as potentially responsible parties ("PRPs"). Ralphs and
other PRPs have agreed to enter into negotiations over a consent decree with the
EPA to implement a remedial design and reimburse oversight costs. The PRPs have
also agreed to an Alternative Dispute Resolution Process to allocate the costs
among themselves. Based upon available information, management does not believe
this matter will have a material adverse effect on the Company's financial
condition or results of operations.
RGC removed underground storage tanks and remediated soil
contamination at the grocery warehouse property. In some instances, the
removals and the contamination were associated with grocery business
operations; in others, they were associated with prior property users.
Although the
11
<PAGE> 13
possibility of other contamination from prior operations or adjacent properties
exists at the grocery warehouse property, management does not believe that the
costs of remediating such contamination will be material to the Company.
Apart from the grocery warehouse property, the Company has had
environmental assessments performed on most of its facilities, including
warehouse and distribution facilities. The Company believes that any responsive
actions required at the examined properties as a result of such assessments will
not have a material adverse effect on its financial condition or results of
operations.
At the time that Food 4 Less acquired Alpha Beta in 1991, it learned
that certain underground storage tanks located on the site of the La Habra
facility may have previously released hydrocarbons. In connection with the
acquisition of Alpha Beta, the seller (who is also the lessor of the La Habra
facility) agreed to retain responsibility, subject to certain limitations, for
remediation of the release.
The Company is subject to a variety of environmental laws, rules,
regulations and investigative or enforcement activities, as are other companies
in the same or similar business. The Company believes it is in substantial
compliance with such laws, rules and regulations. These laws, rules,
regulations and agency activities change from time to time, and such changes
may affect the ongoing business and operations of the Company.
12
<PAGE> 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
13
<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
There is no public trading market for the Company's common stock, $.01
par value per share (the "Common Stock"). As of April 29, 1996, Holdings was
the sole stockholder, beneficially and of record, of the Common Stock.
The Company has never paid and does not expect in the foreseeable
future to pay any dividends on its Common Stock. The indentures governing the
Company's outstanding debt securities contain certain restrictions on the
payment of cash dividends with respect to the Company's Common Stock, and the
Company's bank credit facility also restricts such payments.
14
<PAGE> 16
ITEM 6. SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
THE COMPANY
The following table sets forth certain selected consolidated
historical financial data of Ralphs Grocery Company (formerly Food 4 Less
Supermarkets, Inc.). The operating results of the Company for the 52 weeks
ended June 29, 1991 include the results of Alpha Beta from June 17, 1991, the
date of its acquisition by the Company. The operating and balance sheet data
of the Company set forth in the table below as of and for the 52 weeks ended
January 28, 1996, the 31 weeks ended January 29, 1995, the 52 weeks ended June
25, 1994, June 26, 1993, June 27, 1992, and June 29, 1991 have been derived
from the financial statements of the Company which have been audited by Arthur
Andersen LLP, independent public accountants. The following information should
be read in conjunction with the historical financial statements of the Company
and related notes and "Item 7 -- Management's Discussion and Analysis of
Results of Operations and Financial Condition" included elsewhere herein.
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended Ended Ended
June 29, June 27, June 26, June 25, January 29, January 28,
1991(a) 1992 1993 1994(b) 1995(c) 1996(d)
-------- -------- -------- --------- ---------- ------------
(dollars in thousands, except store data)
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Sales $1,606,559 $2,913,493 $2,742,027 $2,585,160 $1,556,522 $4,335,109
Cost of sales (e) 1,340,841 2,392,655 2,257,835 2,115,842 1,294,147 3,485,993
--------- --------- --------- --------- --------- ---------
Gross profit (e) 265,718 520,838 484,192 469,318 262,375 849,116
Selling, general, administrative
and other, net 213,083 469,751 434,908 388,836 222,359 785,576
Amortization of goodwill 5,315 7,795 7,571 7,691 4,615 21,847
Restructuring charge - - - - 5,134(f) 123,083(g)
----------- ------- ---------- ----------- --------- ---------
Operating income (loss) (e) 47,320 43,292 41,713 72,791 30,267 (81,390)
Interest expense 50,084 70,211 69,732 68,250 42,222 178,774
Loss (gain) on disposal of assets 623 (1,364) (2,083) 37 (455) (547)
Provision for earthquake losses - - - 4,504(h) - -
Provision for income taxes 2,505 3,441 1,427 2,700 - 500
--------- ------- --------- --------- --------- ----------
Loss before
extraordinary charges (5,892) (28,996) (27,363) (2,700) (11,500) (260,117)
Extraordinary charges 3,757(i) 4,818(j) - - - 23,128(k)
--------- ------- ---------- ----------- --------- ----------
Net loss(l) $ (9,649) $ (33,814) $ (27,363) $ (2,700) $ (11,500) $ (283,245)
========= ========= ========= ========= ========= ==========
Non-Cash Charges:
Depreciation and amortization
of property and equipment $ 20,399 $ 37,898 $ 37,426 $ 41,380 $ 25,966 $ 92,282
Amortization of goodwill and
other assets 11,453 16,979 20,214 15,703 10,657 33,047
Amortization of deferred
financing costs 5,177 6,304 4,901 5,472 3,413 8,193
Store Data:
Stores at end of period 259 249 248 258 267 408
Annual sales per
selling square foot $ 584 $ 538 $ 533 $ 487 $ 452(m) $ 477
Balance Sheet Data
(end of period)(n):
Working capital (deficit) $ 13,741 $ (66,254) $ (19,222) $ (54,882) $ 74,776) $ (178,456)
Total assets 979,958 998,451 957,840 980,080 1,000,695 3,188,129
Total long-term debt 540,759 509,829 522,440 495,942 506,576 2,028,308
Redeemable stock - - - - - -
Stockholder's equity 84,557 50,771 72,863 69,021 57,803 59,119
</TABLE>
(See footnotes on following page)
15
<PAGE> 17
(a) Operating data for the 52 weeks ended June 29, 1991 include the
results of Alpha Beta from June 17, 1991, the date of its acquisition
only. Alpha Beta's sales for the two weeks ended June 29, 1991 were
$59.2 million.
(b) Operating data for the 52 weeks ended June 25, 1994 include the
results of the Food Barn Stores, which were not material, from March
29, 1994, the date of the acquisition of 10 Food Barn Stores.
(c) F4L Supermarkets changed its fiscal year end from the 52 or 53-week
period which ends on the last Saturday in June to the 52 or 53-week
period which ends on the Sunday closest to January 31, resulting in a
31-week transition period.
(d) Operating data for the 52 weeks ended January 28, 1996 reflect the
acquisition of RSI on June 14, 1995.
(e) Cost of sales has been principally determined using the last-in,
first-out ("LIFO") method of valuing inventory. If cost of goods sold
had been determined using the first-in, first-out ("FIFO") method,
gross profit and operating income would have been greater by
$2,118,000, $3,554,000, $4,441,000, $699,000, $2,729,000 and
$2,214,000 for the 52 weeks ended June 29, 1991, June 27, 1992, June
26, 1993, and June 25, 1994, the 31 weeks ended January 29, 1995 and
the 52 weeks ended January 28, 1996, respectively.
(f) The Company converted 11 of its conventional supermarkets to
warehouse stores. During the 31 weeks ended January 29, 1995, the
Company recorded a non-cash restructuring charge for the write-off of
property and equipment at the 11 stores of $5.1 million.
(g) The Company recorded a $75.2 million restructuring charge associated
with the closing of 58 stores and one warehouse facility in the 52
weeks ended January 28, 1996. Pursuant to the settlement agreement
with the State of California, 24 Food 4 Less stores (as well as 3
Ralphs stores) were required to be divested and an additional 34
under-performing stores were closed. The Company also recorded a
$47.9 million restructuring charge associated with the closing of 9
stores and one warehouse facility in the 52 weeks ended January 28,
1996, in conjunction with the agreement with Smith's to lease the
Riverside warehouse facility and 9 stores.
(h) On January 17, 1994, Southern California was struck by a major
earthquake which resulted in the temporary closing of 31 of the
Company's stores. The closures were caused primarily by loss of
electricity, water, inventory, or damage to the affected stores. 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, subject to deductibles, against earthquake losses (including
business interruption). The pre-tax charge to earnings, net of
insurance recoveries, was approximately $4.5 million.
(i) Represents an extraordinary charge of $3.8 million (net of related
income tax benefit of $2.5 million) relating to the refinancing of the
Company's former bank credit facility (the "Old Credit Agreement") and
the Company's Senior Subordinated Increasing Rate Notes due 1996 (the
"IRNs") in connection with the Alpha Beta Acquisition and the
write-off of related debt issuance costs.
(j) Represents an extraordinary net charge of $4.8 million reflecting the
write-off of $6.7 million (net of related income tax benefit of $2.5
million) of deferred financing costs as a result of
16
<PAGE> 18
the early redemption of a portion of the Company's bank term loan,
partially offset by a $1.9 million extraordinary gain (net of a
related income tax expense of $0.7 million) on the replacement of
partially depreciated assets following the civil unrest in Los
Angeles.
(k) Represents an extraordinary charge of $23.1 million relating to the
refinancing of F4L Supermarkets' old credit facility, 10.45% Senior
Notes due 2000 (the "Old F4L Senior Notes"), 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.
(l) Net loss includes a pre-tax provision for self insurance, which is
classified in cost of sales, selling, general and administrative
expenses, and interest expense, of $15.1 million, $51.1 million,
$43.9 million, $25.7 million, $9.8 million and $32.6 million for the
52 weeks ended June 29, 1991, June 27, 1992, June 26, 1993, and June
25, 1994, the 31 weeks ended January 29, 1995 and the 52 weeks ended
January 28, 1996, respectively. Included in the 52 weeks ended June
25, 1994, the 31 weeks ended January 29, 1995 and the 52 weeks ended
January 28, 1996 are reduced employer contributions of $8.1 million,
$14.3 million and $26.1 million, respectively, related to union health
and welfare benefit plans.
(m) Amount represents the Company's sales for the 1995 transition period
divided by total selling square feet prorated for the 31 weeks ended
January 29, 1995.
(n) Balance sheet data as of June 29, 1991 reflect the Alpha Beta
Acquisition and the financings and refinancings associated therewith.
Balance sheet data as of June 25, 1994 reflect the acquisition of 10
Food Barn Stores. Balance sheet data as of January 28, 1996 reflect
the Merger and the financings and refinancings associated therewith.
17
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
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 the 52 weeks ended January 28,
1996 include 20 weeks of the operations of F4L Supermarkets prior to the
Merger and 32 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
as a result of the Merger is attributable to several factors, including the size
of the combined Company (since the Merger approximately doubled 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 is being accounted for as a purchase of RGC by F4L
Supermarkets. As a result, all financial statements for periods subsequent to
June 14, 1995, the date the Merger was consummated, reflect RGC's net assets
at their estimated fair market values as of June 14, 1995. The purchase price
in excess of the fair market value of RGC's net assets was recorded as
goodwill and is being amortized over a 40-year period. The purchase price
allocation reflected in the Company's balance sheet at January 28, 1996 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 January 28, 1996.
At January 28, 1996, the Company operated 277 conventional
supermarkets and 68 Food 4 Less warehouse stores in Southern California. It
also operated 63 stores in Northern California and certain areas of the
Midwest. Following the Merger, the Company converted F4L Supermarkets' Alpha
Beta, Boys and Viva stores to the Ralphs format and converted selected Ralphs
stores to the Food 4 Less warehouse format.
As of January 28, 1996, 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 June 1996. The previously planned
integration and consolidation of the Company's warehousing and distribution
facilities into three primary facilities will be delayed and modified as a
result of the agreement with Smith's Food and Drug Centers, Inc. ("Smith's")
to lease its Riverside, California distribution and creamery facility. See
"Southern California Division-Purchasing, Manufacturing and Distribution."
Following the consummation of the Merger, sales in the Company's
Southern California Division fell short of anticipated levels for the second
half of fiscal 1995. This shortfall was caused
18
<PAGE> 20
primarily by smaller than anticipated benefits from the Company's advertising
program and greater than expected competitive pressures. Though the largest
impact was experienced by the Company's Alpha Beta, Boys and Viva stores which
were converted to the Ralphs format, the base Ralphs stores and the Ralphs
stores being converted to the warehouse format were also affected. The
Company's operating margins following the consummation of the Merger were
further adversely affected by delays in the implementation of certain
promotional buying and other programs, excessive price markdowns in stores
undergoing conversion and a less advantageous than expected product mix in
certain stores. Greater than anticipated transition expenses were also
experienced in integrating store operation and inventory distribution functions.
As a result of these various factors, in February 1996, the Company further
amended its Credit Agreement to conform the financial covenants contained in the
agreement to the Company's actual post-Merger results. Following the adoption
of these amendments, the Company believes that the covenant levels contained in
the agreement are consistent with anticipated operating results for fiscal 1996.
F4L Supermarkets changed its fiscal year end from the 52 or 53-week
period which ends on the last Saturday in June to the 52 or 53-week period
which ends on the Sunday closest to January 31, resulting in a 31-week
transition period ended January 29, 1995. References to fiscal year 1993,
fiscal year 1994, the 1995 transition period and fiscal year 1995 are to the
52-week period ended June 26, 1993, the 52-week period ended June 25, 1994,
the 31-week period ended January 29, 1995, and the 52-week period ending
January 28, 1996, respectively. The operating results for the 1995 transition
period are not directly comparable to those of fiscal 1993, fiscal 1994 or
fiscal 1995, as these periods include 52 weeks of operations.
RESULTS OF OPERATIONS OF THE COMPANY
The following table sets forth the historical operating results of the
Company for the 52 weeks ended June 26, 1993 and June 25, 1994, the 31 weeks
ended January 29, 1995 and the 52 weeks ended January 28, 1996:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year 1995 Fiscal Year
1993 1994 Transition Period 1995
------------------------ ---------------- ----------------- --------------------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $2,742.0 100 .0% $2,585.2 100.0% $1,556 .5 100.0% $4,335.1 100.0%
Gross profit 484.2 17.7 469.3 18.1 262 .4 16.9 849.1 19.6
Selling, general,
administrative and
other, net 434.9 15.9 388.8 15.0 222 .4 14.3 785.6 18.1
Amortization of goodwill 7.6 0 .3 7.7 0.3 4 .6 0.3 21.8 0.5
Restructuring charge 0.0 0 .0 0.0 0.0 5 .1 0.3 123.1 2.8
Operating income (loss) 41.7 1 .5 72.8 2.8 30.3 1.9 (81.4) (1.9)
Interest expense 69.8 2 .5 68.3 2.6 42.2 2.7 178.8 4.1
Loss (gain) on disposal
of assets (2.1) (0 .1) 0.0 0.0 (0.5) (0.0) (0.5) (0.0)
Provision for earthquake
losses 0.0 0 .0 4.5 0.2 0 .0 0.0 0.0 0.0
Provision for income taxes 1.4 0 .1 2.7 0.1 0 .0 0.0 0.5 0.0
Loss before extraordinary
charge (27.4) (1.0) (2.7) (0.1) (11.5) (0.7) (260.1) (6.0)
Extraordinary charge 0.0 0 .0 0.0 0.0 0 .0 0.0 23.1 0.5
Net loss (27.4) (1.0) (2.7) (0.1) (11.5) (0.7) (283.2) (6.5)
</TABLE>
19
<PAGE> 21
COMPARISON OF THE COMPANY'S RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED
JANUARY 28, 1996 WITH THE COMPANY'S RESULTS OF OPERATIONS FOR THE 31 WEEKS
ENDED JANUARY 29, 1995.
Sales. Sales per week increased $33.2 million, or 66.1 percent, from
$50.2 million in the 31 weeks ended January 29, 1995 to $83.4 million in the 52
weeks ended January 28, 1996. The increase in sales was primarily
attributable to the addition of 174 conventional supermarkets acquired through
the Merger. The sales increase was partially offset by a pro-forma comparable
store sales (includes the combined sales of F4L Supermarkets and RGC for the
period prior to the Merger) decline of 1.9 percent for the 52 weeks ended
January 28, 1996 as compared to the 52 weeks ended January 28, 1995.
Excluding stores scheduled for divestiture or closing, pro-forma comparable
store sales decreased 1.2 percent. Management believes the decline in
comparable store sales was primarily attributable to additional competitive
store openings and remodels in Southern California, as well as the Company's
own new store openings and conversions.
Gross Profit. Gross profit increased as a percentage of sales from
16.9 percent in the 31 weeks ended January 29, 1995 to 19.6 percent in the 52
weeks ended January 28, 1996. 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 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 $222.4 million and $785.6
million for the 31 weeks ended January 29, 1995 and the 52 weeks ended January
28, 1996, respectively. SG&A increased as a percentage of sales from 14.3
percent to 18.1 percent 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. The Company participates in multi-employer health and welfare
plans for its store employees who are members of the United Food and Commercial
Workers Union ("UFCW"). As part of the renewal of the Southern California UFCW
contract in October 1993, employers contributing to UFCW health and welfare
plans received a pro rata share of the excess reserves in the plans through a
reduction of current employer contributions. The Company's share of the excess
reserves recognized in fiscal 1995 was $26.1 million, which partially offset
the increase in SG&A. SG&A was also impacted by certain one-time costs
associated with the integration of the Company's operations. See "Operating
Income (Loss)."
Restructuring Charge. During fiscal 1995, the Company recorded a
$75.2 million charge associated with the closure of 58 former F4L Supermarkets
stores and one former F4L Supermarkets warehouse facility. Twenty-four of
these stores were required to be closed pursuant to a settlement agreement with
the State of California in connection with the Merger. Three RGC stores were
also required to be sold. Thirty- four of the closed stores were
under-performing former F4L Supermarkets stores. The $75.2 million
restructuring charge consisted of write- downs of property and equipment ($52.2
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). During fiscal
year 1995, the Company utilized $34.7 million of the reserve for restructuring
costs ($50.0 million of costs partially offset by $15.3 million of proceeds
from the divestiture of stores). The charges consisted of write-downs of
property and equipment ($33.2 million); write-off of the Alpha Beta trademark
($8.3 million); and expenditures associated with the closed stores and the
warehouse facility, write-off of other assets, lease termination expenditures
and miscellaneous expenditures ($8.5 million). Future lease payments of
approximately $19.1 million will be offset
20
<PAGE> 22
against the remaining reserve. Management believes that the remaining reserve
is adequate to complete the planned restructuring.
On December 29, 1995, the Company consummated an agreement with
Smith's to sublease its one million square foot distribution center and
creamery facility in Riverside, California for approximately 23 years, with
renewal options through 2043, and to acquire certain operating assets and
inventory at that facility. In addition, the Company also acquired nine of
Smith's Southern California stores which became available when Smith's withdrew
from the California market. As a result of the acquisition of the Riverside
distribution center and creamery, the Company closed its La Habra distribution
center in the first quarter of fiscal year 1996. Also, the Company closed nine
of its stores which were near the acquired former Smith's stores. During the
fourth quarter of fiscal year 1995, the Company recorded a $47.9 million
restructuring charge to recognize the cost of closing these facilities,
consisting of write-downs of property and equipment ($16.1 million), closure
costs ($2.2 million), and lease termination expenses ($29.6 million).
Operating Income (Loss). In addition to the factors discussed above,
operating income includes charges of approximately $75 million for costs
associated with the conversion of stores and integration of the Company's
operations. These costs related primarily to (i) markdowns on clearance
inventory at F4L Supermarkets' Alpha Beta, Boys and Viva stores converted to
the Ralphs format, (ii) an advertising campaign announcing the Merger, and
(iii) incremental labor cost associated with the training of Company personnel
following store conversions. In addition, the Company has experienced higher
than anticipated warehousing and distribution costs since the Merger, primarily
due to the delay in the planned consolidation of the Company's distribution
facilities resulting from the acquisition of the Smith's Riverside distribution
center. The Company has taken steps to reduce these increased costs in future
periods.
Interest Expense. Interest expense (including amortization of
deferred financing costs) was $42.2 million for the 31 weeks ended January 29,
1995 and $178.8 million for the 52 weeks ended January 28, 1996. The increase
in interest expense was primarily due to the increased indebtedness incurred in
conjunction with the Merger. See "Liquidity and Capital Resources."
Loss Before Extraordinary Charge. Primarily as a result of the
factors discussed above, the Company's loss before extraordinary charge
increased from $11.5 million for the 1995 transition period to $260.1 million
for fiscal year 1995.
Extraordinary Charge. An extraordinary charge of $23.1 million was
recorded during fiscal year 1995 relating to retirement of indebtedness of F4L
Supermarkets in connection with the Merger and the write-off of the related
deferred financing costs.
COMPARISON OF THE COMPANY'S RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JUNE
25, 1994 WITH THE COMPANY'S RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JUNE
26, 1993.
Sales. Sales decreased $156.8 million or 5.7 percent from $2,742.0
million in the 52 weeks ended June 26, 1993 to $2,585.2 million in the 52 weeks
ended June 25, 1994. The decrease in sales resulted primarily from a 6.9
percent decline in comparable store sales. The decline in comparable store
sales primarily reflected (i) the weak economy in Southern California, (ii)
lower levels of price inflation in certain key food product categories, and
(iii) competitive factors, including new stores, remodeling and promotional
activity. This decrease in sales was partially offset by sales from new and
remodeled stores opened or acquired during fiscal 1994.
21
<PAGE> 23
Gross Profit. Gross profit increased as a percent of sales from 17.7
percent in the 52 weeks ended June 26, 1993 to 18.1 percent in the 52 weeks
ended June 25, 1994. The increase in gross profit margin was attributable to
improvements in product procurement and an increase in vendors' participation
in the Company's promotional costs. These improvements were partially offset
by an increase in the number of warehouse format stores (which have lower gross
margins) from 45 at June 26, 1993 to 66 at June 25, 1994, and the effect of the
fixed cost component of gross profit as compared to a lower sales base.
Selling, General, Administrative and Other, Net. SG&A expenses were
$434.9 million and $388.8 million for fiscal year 1993 and fiscal year 1994,
respectively. SG&A decreased as a percent of sales from 15.9 percent to 15.0
percent for the same periods. The Company experienced a reduction of workers'
compensation and general liability self-insurance costs of $18.2 million due
primarily to cost control programs implemented by the Company, including awards
for stores with the best loss experience, specific achievable goals for each
store, and increased monitoring of third-party administrators, and, to a lesser
extent, a lower sales base which reduced the Company's exposure. In addition,
the Company maintained tight control of administrative expenses and store level
expenses, including payroll (due primarily to increased productivity),
advertising, and other controllable store expenses. Because the Company's
warehouse stores have lower SG&A than conventional stores, the increase in the
number of warehouse stores, from 45 at June 26, 1993 to 66 at June 25, 1994,
also contributed to decreased SG&A.
The Company recognized $8.1 million in fiscal 1994 for its share of
the excess UFCW health and welfare plan reserves. Offsetting the reduction in
employer contributions was a $5.5 million contract ratification bonus and
contractual wage increases.
The reduction in SG&A as a percentage of sales was partially offset by
the effect of the fixed cost component of SG&A as compared to a lower sales
base.
Interest Expense. Interest expense (including amortization of
deferred financing costs) decreased $1.5 million from $69.8 million to $68.3
million for the 52 weeks ended June 26, 1993 and June 25, 1994, respectively.
The decrease in interest expense was due primarily to reduced borrowings under
the Old Revolving Credit Facility and the Old Term Loan.
Provision for Earthquake Losses. On January 17, 1994, Southern
California was struck by a major earthquake which resulted in the temporary
closure of 31 of F4L Supermarkets' 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), subject to certain deductibles. The
pre-tax loss, net of insurance recoveries, was approximately $4.5 million.
Net Loss. Primarily as a result of the factors discussed above, the
Company's net loss decreased from $27.4 million in fiscal 1993 to $2.7 million
in fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company and Holdings utilized new financing proceeds of
approximately $525 million, which were paid to the former RSI stockholders, to
consummate the Merger. The new financing proceeds included the issuance of
preferred stock by Holdings to a group of investors for cash proceeds of
approximately $140 million (the "New Equity Investment"). In addition, the
Company
22
<PAGE> 24
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 of standby letters of credit under the $325
million revolving credit facility (the "New Revolving 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 13-5/8% Senior Discount Debentures due 2005 (the "New
Discount Debentures") for cash, $41.0 million in initial accreted value of
additional New Discount Debentures as consideration for the Merger and for
associated fees and $131.5 million aggregate principal amount of 13-5/8% 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, existing mortgage debt of $174.0
million (excluding prepayment fees) at RGC and $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 also were used (i) to pay the cash portions of F4L Supermarkets'
exchange offers and consent solicitations with respect to the 10.25% Senior
Subordinated Notes due 2002 of RGC (the "Old RGC 10.25% Notes"), the 9% Senior
Subordinated Notes due 2003 of RGC (the "Old RGC 9% Notes," and together with
the old RGC 10.25% Notes, the "Old RGC Notes") (collectively, the "RGC Exchange
Offers"), 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, (ii)
to pay $17.8 million to the holders of the RGC Equity Appreciation Rights,
(iii) to loan $5.0 million to an affiliate for the benefit of such holders,
(iv) to pay approximately $93.3 million of fees and expenses of the Merger and
the related financing, and (v) to pay $3.5 million to purchase shares of
common stock of Holdings from certain dissenting shareholders. In addition,
Holdings issued $22.5 million of its New Discount Debentures in consideration
for certain Merger-related services. 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 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
resulted in the purchase of an additional $1.1 million of outstanding Old RGC
Notes.
At January 28, 1996, there were borrowings of $127.4 million under
the New Revolving Facility and $92.7 million of standby letters of credit
had been issued. Under the terms of the New Credit Facility, the Company was
required to repay $1.6 million of the New Term Loans in fiscal 1995. The New
Term Loans require quarterly amortization payments aggregating $19.3 million in
fiscal year 1996, $46.0 million in fiscal year 1997 and increasing thereafter.
The level of borrowings under the Company's New Revolving Facility is
dependent upon cash flows from operations, the
23
<PAGE> 25
timing of disbursements, seasonal requirements and capital expenditure
activity. The Company is required to reduce loans outstanding under the
New Revolving Facility to $150.0 million for a period of not less than 30
consecutive days during the period between the first day of the fourth fiscal
quarter of 1996 and the last day of the first fiscal quarter of 1997. At
April 19, 1996, the Company had $110.7 million available for borrowing under
the New Revolving Facility.
On October 11, 1995, the Company entered into an interest rate collar
which effectively set interest rate limits on $300 million of the Company's
bank term debt. This interest rate collar, which was effective as of October
19, 1995, limits the interest rate payable on $300 million of outstanding debt
under the New Credit Facility to a range of 4.5 percent to 8.0 percent for
two years, thus satisfying the interest rate protection requirements under the
New Credit Facility.
Cash flow from operations, amounts available under the New Revolving
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 expenditure, working capital and debt service
requirements during fiscal 1996.
During fiscal year 1995, cash used by operating activities was
approximately $16.8 million as compared to cash provided by operating
activities of approximately $17.6 million for the 1995 transition period. The
decrease in cash from operating activities is due to changes in operating
assets and liabilities in fiscal year 1995 and a decrease in operating income
due primarily to the impact of certain 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 January 28, 1996, this resulted in a working capital deficit of
$178.5 million.
Cash used for investing activities was $405.4 million for fiscal year
1995. Investing activities consisted primarily of $303.3 million of
acquisition costs associated with the Merger and capital expenditures of $122.4
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 operating and financing
activities.
The capital expenditures discussed above were made to (i) build 20 new
stores (11 of which have been completed), (ii) remodel 11 stores, (iii) convert
111 conventional format stores to the Ralphs banner in conjunction with the
Merger, and (iv) convert 13 Ralphs stores to the Food 4 Less warehouse format.
The Company also acquired three stores in Northern California during fiscal
1995. The Company currently anticipates that its aggregate capital
expenditures for fiscal 1996 will be approximately $105.0 million (or $95.0
million, net of expected capital leases), of which approximately $96.0 million
relate to ongoing expenditures for new stores, equipment and maintenance and
approximately $9.0 million relate to Merger-related and other non-recurring
items. Consistent with past practices, the Company intends to finance these
capital expenditures primarily with cash provided by operations and through
leasing transactions. At April 26, 1996, the Company had approximately $18.0
million of unused equipment leasing facilities. No assurance can be given that
sources of financing for capital expenditures will be available or sufficient to
finance its anticipated capital expenditure requirements; however, management
believes 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 future operating strategy.
24
<PAGE> 26
Consequently, management believes if these programs were substantially
reduced, future operating results, 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 acquisitions 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.
Cash provided by financing activities was $470.7 million for fiscal
year 1995. Financing activities consisted primarily of the following; (i)
proceeds from issuance of new debt in the amount of $950.0 million including
proceeds of $600 million under the New Credit Facility, $350 million from the
issuance of New F4L Senior Notes and $100 million from the issuance of New RGC
Notes, net of issuance costs of $100.0 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 $576.7 million
including: $125.7 million to retire borrowings under the old credit agreement,
$228.9 million to extinguish the old RGC term loan; and $174.0 million to
repay certain real estate loans.
The Company is a wholly-owned subsidiary of Holdings. Holdings has
outstanding $100 million initial accreted value of New Discount Debentures and
$131.5 million principal amount of 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
December 15, 2000 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.
RSI and FFL had significant net operating loss carryforwards for
regular federal income tax purposes. As a result of the Merger, the Company's
ability to utilize such loss carryforwards in future periods is limited to
approximately $15.6 million per year with respect to FFL net operating loss
carryforwards and approximately $15.0 million per year with respect to RSI's
net operating loss carryforwards. Holdings files a consolidated federal income
tax return, under which the federal income tax liability of Holdings and its
subsidiaries is determined on a consolidated basis. Holdings is a party to a
federal income tax sharing agreement with the Company and certain of its
subsidiaries (the "Tax Sharing Agreement"). The Tax Sharing Agreement provides
that in any year in which the Company is included in any consolidated tax
liability of Holdings and has taxable income, the Company will pay to Holdings
the amount of the tax liability that the Company would have had on such due
date if it had been filing a separate return. Conversely, if the Company
generates losses or credits which actually reduce the consolidated tax
liability of Holdings and its other subsidiaries, Holdings will credit to the
Company the amount of such reduction in the consolidated tax liability. These
credits are passed between Holdings and the Company in the form of cash
payments. In the event any state and local income taxes are determinable on a
combined or consolidated basis, the Tax Sharing Agreement provides for a
similar allocation between Holdings and the Company of such state and local
taxes. See "Certain Relationships and Related Transactions." The Company will
continue to be a party to an indemnification agreement with Federated
Department Stores Inc. and certain other parties. Pursuant to the terms of
such agreement, the Company made an annual tax payment of $1.0 million in 1995
and will make an annual tax payment of $1.0 million in 1996, with the final
tax payment of $5.0 million in 1997.
25
<PAGE> 27
The Company is highly leveraged. At January 28, 1996, the Company's
total long-term indebtedness (including current maturities) and stockholder's
equity were $2.1 billion and $59.1 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 New Revolving 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
debt service 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.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS 121) and
Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). The Company will be required to adopt SFAS 121 and
SFAS 123 in fiscal year 1996. The Company does not expect that the adoption of
SFAS 121 or SFAS 123 will have a material effect on its financial position or
its results of operations in fiscal year 1996.
26
<PAGE> 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements and Schedules on
page 45.
27
<PAGE> 29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
28
<PAGE> 30
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the
executive officers and directors of the Company as of April 29, 1996.
Directors serve until the election and qualification of their successors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Byron E. Allumbaugh . . . . . . 64 Chairman and Director
George G. Golleher . . . . . . . 48 Chief Executive Officer and Director
Alfred A. Marasca . . . . . . . 54 President, Chief Operating Officer and Director
Joe S. Burkle . . . . . . . . . 73 Chief Executive Officer - Falley's and Director
Greg Mays . . . . . . . . . . . 49 Executive Vice President - Finance & Administration and
Chief Financial Officer
Harley DeLano . . . . . . . . . 58 President - Cala Foods
Tony Schnug . . . . . . . . . . 51 Group Senior Vice President - Support Operations
Jan Charles Gray . . . . . . . . 48 Senior Vice President, General Counsel and Secretary
Robert Beyer . . . . . . . . . . 36 Director
Ronald W. Burkle . . . . . . . . 43 Director
Peter Copses . . . . . . . . . . 37 Director
Patrick L. Graham . . . . . . . 46 Director
John Kissick . . . . . . . . . . 54 Director
Mark A. Resnik . . . . . . . . . 48 Director
</TABLE>
Byron E. Allumbaugh has been Chairman of the Board since January 1996
and a Director since June 1995. He was Chief Executive Officer from June 1995
to January 1996. He was Chairman of the Board and Chief Executive Officer of
RGC from 1976 until the Merger. He also is a Director of the Ahmanson Company,
El Paso Natural Gas Company, Automobile Club of Southern California and
Ultramar, Inc.
George G. Golleher has been Chief Executive Officer since January 1996
and a Director since June 1995. He was Vice Chairman from June 1995 to January
1996. He was a Director of F4L Supermarkets from its inception in 1989 and
was the President and Chief Operating Officer of F4L Supermarkets from January
1990 until the Merger. From 1986 through 1989, Mr. Golleher served as Senior
Vice President - Finance and Administration of The Boys Markets, Inc. Prior to
joining The Boys Markets, Inc. in 1984, Mr. Golleher served as Vice President
and Chief Financial
29
<PAGE> 31
Officer of Mayfair Markets, Inc. from 1983 to 1984. Mr. Golleher has served as
a Director of Dominick's Finer Foods Inc., an affiliate of The Yucaipa
Companies, since March 1995.
Alfred A. Marasca has been President, Chief Operating Officer and a
Director since June 1995. He was President and Chief Operating Officer of RGC
from February 1994 until the Merger. He was President of RGC from 1993 to
1994, Executive Vice President - Retail from 1991 to 1993, and Executive Vice
President - Marketing from 1985 to 1991.
Joe S. Burkle has been a Director since June 1995 and Chief Executive
Officer of Falley's, Inc. since 1987. He was a Director and Executive Vice
President of F4L Supermarkets from its inception in 1989 until the Merger.
Mr. Burkle began his career in the supermarket industry in 1946, and served as
President and Chief Executive Officer of Stater Bros. Markets, a Southern
California supermarket chain. Prior to 1987, Mr. Burkle was a private investor
in Southern California. Mr. Burkle is the father of Ronald W. Burkle.
Greg Mays has been Executive Vice President - Finance & Administration
and Chief Financial Officer since September 1995. He was Executive Vice
President - Finance & Administration from June 1995 to September 1995. He was
Executive Vice President - Finance & Administration and Chief Financial Officer
of F4L Supermarkets and of Holdings from December 1992 until the Merger. From
1989 to 1991, Mr. Mays was Chief Financial Officer of Almac's, Inc. and, from
1991 to December 1992, he was President and Chief Financial Officer of Almac's.
From April 1988 to June 1989, Mr. Mays was Chief Financial Officer of Food 4
Less of Modesto, Inc. and Cala Foods, Inc.
Harley DeLano has been President of Cala Foods, Inc. since 1990. Mr.
DeLano was General Manager of ABC from 1980 to 1990. He serves as a Director
of Certified Grocers.
Tony Schnug has been Group Senior Vice President - Support Operations
since January 1996. He was Senior Vice President of Manufacturing and
Construction from June 1995 to January 1996. He was Senior Vice President -
Corporate Operations of F4L Supermarkets from 1990 until the Merger. Before
joining F4L Supermarkets, he was Managing Director of SAGE, a wholly-owned
subsidiary of Ogilvy & Mather, and Vice President - Management Information
Systems of The Vons Company.
Jan Charles Gray has been Senior Vice President, General Counsel and
Secretary since June 1995. He was Senior Vice President, General Counsel and
Secretary of RGC from 1988 until the Merger. He was Senior Vice President and
General Counsel of RGC from 1985 to 1988 and Vice President and General
Counsel from 1978 to 1985.
Robert Beyer has been a Director since June 1995. He has been a Group
Managing Director of Trust Company of the West ("TCW") since 1995. Mr. Beyer
was Co-Chief Executive Officer of Crescent Capital Corporation, a registered
investment advisor, from 1991 until its acquisition by TCW in 1995. From 1986
to 1991, Mr. Beyer was a member of the investment banking department of Drexel
Burnham Lambert, Incorporated. From 1983 to 1986, Mr. Beyer was a member of
the investment banking department of Bear, Stearns & Co., Inc.
Ronald W. Burkle has been a Director since June 1995. He was Chairman
of the Board from June 1995 to January 1996. Mr. Burkle was a Director,
Chairman of the Board and Chief Executive Officer of F4L Supermarkets from its
inception in 1989 until the Merger. Mr. Burkle co- founded The Yucaipa
Companies, Inc. in 1986 and served as Director, Chairman of the Board,
President and Chief Executive Officer of FFL from 1987 and of Holdings from
1992 until the Merger, respectively.
30
<PAGE> 32
Mr. Burkle has been Chairman of the Board of Dominick's Finer Foods, Inc.
since March 1995 and served as Chief Executive Officer from March 1995 until
January 1996. Mr. Burkle has also served as Chairman of the Board of Smitty's
Supermarkets, Inc. since June 1994 and as a Director of Kaufman & Broad Home
Corporation, Inc. since March 1995. Mr. Burkle is the son of Joe S. Burkle.
Peter Copses has been a Director since June 1995. He has been a
Principal since 1990 of Apollo Advisors, L.P. which, together with an
affiliate, acts as managing general partner of Apollo Investment Fund, L.P.,
AIF II, L.P. and Apollo Investment Fund III, L.P., private securities
investment funds, and of Lion Advisors, L.P., which acts as financial advisor
to and representative for certain institutional investors with respect to
securities investments. Mr. Copses is a Director of Dominicks Finer Foods,
Inc., Family Restaurants, Inc., Forum Group, Inc. and Zale Corporation.
Patrick L. Graham has been a Director since June 1995. He joined The
Yucaipa Companies as a general partner in January 1993. Prior to that time, he
was a Managing Director in the Corporate Finance Department of Libra
Investments, Inc. from 1992 to 1993 and Paine Webber, Inc. from 1990 to 1992.
From 1982 to 1990, he was a Managing Director of the Corporate Finance
Department of Drexel Burnham Lambert, Inc. and an Associate Director of the
Corporate Finance Department of Bear Stearns & Co., Inc. Mr. Graham has served
as a Director of Smitty's Supermarkets, Inc. since June 1994 and of Dominick's
Finer Foods, Inc. since March 1995.
John Kissick has been a Director since June 1995. He is a principal
of Apollo Advisors, L.P. which, together with an affiliate, acts as managing
general partner of Apollo Investment Fund, L.P., AIF II, L.P. and Apollo
Investment Fund III, L.P., private securities investment funds, and of Lion
Advisors, L.P., which acts as financial advisor to and representative for
certain institutional investors with respect to securities investments. From
1990 to 1991, Mr. Kissick was a consultant with Kissick & Associates, a private
investment advisory firm. He serves as Director of Continental Graphics
Holdings, Inc., Converse, Inc., The Florsheim Shoe Company, Inc. and Furniture
Brands International, Inc.
Mark A. Resnik has been a Director since June 1995. He was a
Director, Vice President and Secretary of F4L Supermarkets from its inception
in 1989 until the Merger. He co-founded The Yucaipa Companies, Inc. in 1986
and served as a Director, Vice President and Secretary of FFL from 1987 until
the Merger. Mr. Resnik has served as a Director of Smitty's Supermarkets, Inc.
since June 1994 and of Dominick's Finer Foods, Inc. since March 1995.
The Company does not currently pay any fees or remuneration to its
directors for service on the board or any board committee, but will reimburse
directors for their ordinary out-of-pocket expenses.
Messrs. R. Burkle, Allumbaugh, Golleher, J. Burkle, Beyer, Copses,
Graham, Kissick and Resnik are directors of Holdings.
31
<PAGE> 33
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
of the Chief Executive Officer and the other four most highly compensated
executive officers of the Company (the "Named Executive Officers"), whose total
salary and bonus for the 52 weeks ended January 28, 1996 exceeded $100,000 for
services rendered in all capacities to the Company and its subsidiaries for the
same time period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Transition No. of Shares
Period/Fiscal Underlying All Other
Name and Principal Position Year Ended Salary Bonus Options(6) Compensation(7)
- --------------------------- ------------- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Byron E. Allumbaugh(1) January 28, 1996 $883,333 $ 547,692 820,227 $1,848
Chairman January 29, 1995(8) $ - $ - - $ -
June 25, 1994 $ - $ - - $ -
June 26, 1993 $ - $ - - $ -
George G. Golleher(2) January 28, 1996 $503,205 $1,950,000(9) 200,000 $1,783
Chief Executive Officer January 29, 1995(8) $298,100 $ 300,000 - $3,329
June 25, 1994 $500,000 $ 500,000 - $3,937
June 26, 1993 $500,000 $ 500,000 - -
Alfred A. Marasca(3) January 28, 1996 $466,667 $ 333,846 300,000 $3,000
President and January 29, 1995(8) $ - $ - - $ -
Chief Operating Officer June 25, 1994 $ - $ - - $ -
June 26, 1993 $ - $ - - $ -
Greg Mays(4) January 28, 1996 $286,378 $ 355,000(9) - $1,783
Executive Vice President - January 29, 1995(8) $154,300 $ 85,000 - $2,687
Finance / Administration and June 25, 1994 $250,000 $ 150,000 - -
Chief Financial Officer June 26, 1993 $108,000 $ 75,000 - -
Jan Charles Gray(5) January 28, 1996 $221,667 $ 147,901 204,940 $1,198
Senior Vice President, January 29, 1995(8) $ - $ - - $ -
General June 25, 1994 $ - $ - - $ -
Counsel and Secretary June 26, 1993 $ - $ - - $ -
</TABLE>
- --------------------------
(1) During fiscal 1995, Byron E. Allumbaugh became Chairman.
(2) During fiscal 1995, George G. Golleher became Chief Executive Officer.
(3) During fiscal 1995, Alfred A. Marasca became President and Chief
Operating Officer.
(4) During fiscal 1995, Greg Mays became Executive Vice President -
Finance & Administration and Chief Financial Officer.
(5) During fiscal 1995, Jan Charles Gray became Senior Vice President,
General Counsel and Secretary.
(6) All options shown were granted in connection with the Ralphs Merger.
Of such options, 220,227, 100,000 and 174,940 were granted to
Messrs. Allumbaugh, Marasca and Gray, respectively, in exchange for
the cancellation of certain payments to such individuals under RGC
equity appreciation rights.
(7) The amounts shown in this column represent annual payments by the
Company to the Employee Profit Sharing and Retirement Program of the
Company.
(8) F4L Supermarkets changed its fiscal year from the 52 or 53-week period
which ends on the last Saturday in June to the 52 to 53-week period
which ends on the Sunday closest to January 31, resulting in a 31-week
transition period.
(9) Includes payment of a special bonus upon change of control, in
connection with the Ralphs Merger, for George Golleher and Greg Mays
in the amount of $1,750,000 and $150,000, respectively.
32
<PAGE> 34
The following table sets forth information concerning options granted
in fiscal 1995 to each of the Named Executive Officers pursuant to Holdings'
1995 Stock Option Plan. All options are exercisable for shares of Holdings'
Common Stock.
OPTION GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
----------------------------------------------------------- ---------------------------
No. of % of Total Options Exercise or
Options Granted to Employees Base Price Expiration
Granted(1)(2) in Fiscal Year ($/Sh) Date 5% ($) 10%($)
------------- -------------- ------ ---- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Byron E. Allumbaugh 820,227 34.1% 7.32 6/14/05 7,356,572 15,270,514
George G. Golleher 200,000 8.3% 10.00 6/14/05 1,257,789 3,187,484
Alfred A. Marasca 300,000 12.5% 6.67 6/14/05 2,885,684 5,780,227
Greg Mays - - - - - -
Jan Charles Gray 189,940 7.9% 0.79 6/14/05 2,943,870 4,776,502
15,000 0.6% 10.00 6/14/05 94,334 239,061
</TABLE>
________________________
(1) All options shown were granted in connection with the Ralphs Merger. Of
such options, 220,227, 100,000 and 174,940 were granted to Messrs.
Allumbaugh, Marasca and Gray, respectively, in exchange for the
cancellation of certain payments of such individuals under RGC equity
appreciation rights.
(2) All options are immediately exercisable except for 15,000 options held by
Mr. Gray, which vest over a five-year period commencing June 14, 1996.
33
<PAGE> 35
The following tables sets forth for each of the Named Executive Officers,
as to outstanding options at January 28, 1996, the number of unexercised
options and the aggregate unrealized appreciation on "in-the-money" unexercised
options held at such date. No options were exercised by any of the Named
Executive Officers during fiscal 1995.
1995 FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year End Fiscal Year End
Exercisable / Exercisable /
Name Unexercisable (#) Unexercisable ($)
- ------------------- ----------------- -----------------
<S> <C> <C>
Byron E. Allumbaugh 820,227 / 0 2,198,208 / 0
George G. Golleher 200,000 / 0 0 / 0
Alfred A. Marasca 300,000 / 0 999,000 / 0
Greg Mays - -
Jan Charles Gray 189,940 / 15,000 1,749,347 / 0
</TABLE>
34
<PAGE> 36
CONSULTING AND EMPLOYMENT AGREEMENTS
The employment agreement between the Company and Byron Allumbaugh
provides for a salary of $1 million for the first year following the Merger and
$1.25 million for subsequent years. Mr. Allumbaugh is entitled to a bonus
equal to his salary in each year if certain prescribed earnings targets (the
"Earnings Targets") for the year are reached.
In connection with the consummation of the Merger, F4L Supermarkets'
board of directors authorized the payment of a special bonus to George Golleher
in a lump sum amount equal to the base salary due him under the remaining term
of his then existing employment agreement. As a condition of the payment of
such bonus, Mr. Golleher's existing employment agreement was cancelled, and he
entered into a new agreement which provides for an annual salary of $500,000
plus a bonus equal to his salary in each year if the Earnings Targets are
reached. Mr. Golleher's new employment agreement continues in effect certain
additional rights, including the right to be elected to the Company's board of
directors and the right to require the Company to repurchase certain of his
shares of New Holdings stock upon his death, disability or termination without
cause.
The employment agreement between the Company and Alfred Marasca
provides for a salary of $500,000 per annum and an annual bonus equal to his
salary if the Earnings Targets for the year are reached.
The employment agreement between the Company and Greg Mays provides
for a salary of $250,000 per annum and an annual bonus equal to 50 percent of
his salary if the Earnings Targets for the year are reached. Mr. Mays also
received a special bonus of $150,000 in fiscal 1995 upon the change of control
in connection with the Merger.
The employment agreement between the Company and Jan Charles Gray
provides for a salary of $225,000 per annum and an annual bonus equal to 50
percent of his salary if the Earnings Targets for the year are reached.
The new employment agreements described above are for a term of three
years and provide generally that the Company may terminate the agreement for
cause or upon the failure of the employee to render services to the Company for
a specified period and the employee may terminate the agreement because of
the employee's disability. In addition, the employee's services may be
suspended upon notice by the Company and in such event the employee will
continue to be compensated by the Company during the remainder of the term of
the agreement, subject to certain offsets if the employee becomes engaged in
another business.
The Company's consulting agreement with Mr. Joe Burkle provides for
compensation of $3,000 per week. Mr. Burkle provides the management and
consulting services of an executive vice president under the consulting
agreement. The agreement has a five-year term, which is automatically renewed
on January 1 of each year for a five-year term unless sixty days' notice is
given by either party; provided that if the Company terminates for reasons
other than for good cause, the payments due under the agreement continue for
the balance of the term.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a board committee performing the functions
of a compensation committee. Byron E. Allumbaugh, Chairman, and George G.
Golleher, Chief Executive Officer of the Company, together with Al Marasca,
President, and Greg Mays, Executive
35
<PAGE> 37
Vice President, made decisions with regard to the Company's executive officer
compensation for fiscal 1995.
RETIREMENT PLANS
Retirement Plan. The Ralphs Grocery Company Retirement Plan (the
"Retirement Plan") is a defined benefit pension plan for salaried and hourly
nonunion employees with at least one year of credited service (1,000 hours).
the Company makes annual contributions to the Retirement Plan in such amounts
as are actuarially required to fund the benefits payable to participants in
accordance with the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
Non-Qualified Retirement Plans. To allow the Company's retirement
program to provide benefits based upon a participant's total compensation and
without regard to other ERISA or tax code pension plan limitations, eligible
executive employees of the Company participate in the Ralphs Grocery Company
Supplemental Executive Retirement Plan (the "SERP") and the Ralphs Grocery
Company Retirement Supplement Plan (the "Supplement Plan"). The SERP and
the Supplement Plan also modify the benefit formula under the Retirement Plan in
other respects. The Company has purchased split dollar life insurance policies
for participants under the SERP. Under certain circumstances, the cash
surrender value of certain split dollar life insurance policies will offset the
Company's obligations under the SERP.
The following table sets forth the combined estimated annual benefits
payable in the form of a (single) life annuity under the Retirement Plan, the
SERP and the Supplement Plan (unreduced by the cash surrender value
of any life insurance policies) to a participant in the above plans who is
retiring at a normal retirement date on January 1, 1996 for the specified final
average salaries and years of credited service.
<TABLE>
<CAPTION>
Final Years of Credited Service
Average ----------------------------------------------------------
Salary 15 20 25 30 35
--------- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 19,348 $ 25,798 $ 32,347 $ 38,697 $ 45,146
200,000 41,848 55,798 69,747 83,697 97,646
300,000 90,000 120,000 150,000 180,000 180,000
400,000 120,000 160,000 200,000 240,000 240,000
600,000 180,000 240,000 300,000 360,000 360,000
800,000 240,000 320,000 400,000 480,000 480,000
1,000,000 300,000 400,000 500,000 600,000 600,000
1,040,000 312,000 416,000 520,000 624,000 624,000
</TABLE>
Messrs. Allumbaugh, Golleher, Marasca, Mays and Gray have completed 37,
10, 7 and 32 years of credited service respectively. Compensation covered by
the SERP and Retirement Supplement Plan includes both salary and bonus. The
calculation of retirement benefits generally is based on average compensation
for the highest three years of the ten years preceding retirement. The benefits
earned by a participant under the SERP and Supplement Plan are reduced by any
benefits which the participant has earned under the Retirement Plan and may be
offset under certain circumstances by the cash surrender value of life insurance
policies maintained by the Company pursuant to the insurance agreements entered
into by the Company and the executive. Benefits are not subject to any
deduction for social security offset.
36
<PAGE> 38
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the ownership of Common Stock and
Series A Preferred Stock and Series B Preferred Stock of Holdings by each
person who, to the knowledge of Holdings, owns 5 percent or more of Holdings'
outstanding voting stock, by each person who is a director or Named Executive
Officer of the Company, and by all executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
Common Series A Series B
Stock (1) (2) Preferred Stock(1) Preferred Stock(1)
---------------- ------------------ ------------------
Percentage Percentage
Number Number Number of Total of all
of of of Voting Outstanding
Beneficial Owner (3) Shares % Shares % Shares % Power Stock
-------------------- ------ ------- ------ ------- ------ ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Yucaipa and affiliates:
The Yucaipa Companies (4)(5) 17,795,939 63.1% - - - - 39.6% 37.1%
Ronald W. Burkle (4)(6) 2,046,392 10.1% - - - - 5.5% 5.1%
George G. Golleher (2)(6) 462,525 2.3% - - - - 1.3% 1.2%
10000 Santa Monica Blvd.
Los Angeles, CA 90067
---------- ----- ---------- ----- --------- ------ ----- -----
Total 20,304,856 72.0% - - - - 45.2% 42.3%
Byron E. Allumbaugh (2)(7) 600,000 3.0% - - - - 1.6% 1.5%
Alfred A. Marasca (2)(7) 200,000 1.0% - - - - 0.5% 0.5%
Greg Mays (8) - - - - - - - -
Jan Charles Gray (7) - - - - - - - -
Apollo Advisors, L.P.
Apollo Advisors II, L.P. (9)
2 Manhattanville Road
Purchase, NY 10577 1,285,165 6.4% 10,733,244 64.3% - - 32.7% 30.2%
BT Investment Partners, Inc.(10)
130 Liberty Street
New York, NY 10006 509,812 2.5% 900,000 5.4% 3,100,000 100.0% 3.8% 11.3%
Other 1995 equity investors
as a group (11) 40,172 0.2% 5,000,000 30.0% - - 13.7% 12.6%
All directors and executive
officers as a group
(14 persons) (2)(4)(5)(6)(7) 21,104,856 74.8% - - - - 47.0% 44.0%
</TABLE>
_____________________________
(1) Gives effect to the assumed exercise of outstanding warrants, held by
certain institutional investors, to acquire 2,008,874 shares of
Holdings common stock.
(2) Gives effect to the exercise of options held by Byron E. Allumbaugh,
George G. Golleher and Alfred A. Marasca under a management stock
option plan, covering 600,000, 200,000 and 200,000 shares,
respectively. Does not give effect to the exercise of additional
options to purchase up to 2,000,00 shares of Holdings common stock
which have been or may be granted under such stock option plan.
(3) Except as otherwise indicated, each beneficial owner has the sole
power to vote, as applicable, and to dispose of all shares of Common
Stock or Series A Preferred Stock or Series B Preferred Stock owned by
such beneficial owner.
(4) Represents shares owned by The Yucaipa Companies, F4L Equity Partners,
L.P., FFL Partners, Yucaipa Capital Fund, Yucaipa F4L, LLC and
Yucaipa/F4L Partners. These entities are affiliated partnerships
which are controlled, directly or indirectly, by Ronald W. Burkle.
The foregoing entities are parties to a stockholders agreement with
other Holdings investors which gives to Yucaipa the right to elect a
majority of the directors of Holdings.
(5) Share amount and percentages shown for Yucaipa include a warrant to
purchase 8,000,000 shares of Holdings Common Stock held by Yucaipa.
Such warrant will become exercisable only upon the occurrence of an
initial public offering or certain sale transactions involving
Holdings.
(6) Certain management stockholders who own in the aggregate 431,096
shares of Common Stock have entered into a Stockholder Voting
Agreement and Proxy pursuant to which Ronald W. Burkle, George G.
Golleher and Yucaipa Capital Advisors, Inc. have
37
<PAGE> 39
sole voting control over the shares currently owned by such management
stockholders until June 14, 2005. The 431,096 shares have been
included, solely for purposes of the above table, in the share amounts
shown for Mr. Burkle but not for Mr. Golleher. Neither Messrs. Burkle
and Golleher nor Yucaipa Capital Advisors, Inc. have the power to
dispose of, or any other form of investment power with respect to such
shares. Messrs. Burkle and Golleher have sole voting and investment
power with respect to 1,194,066 and 462,525 shares of Common Stock
they respectively own (including in the case of Mr. Golleher, 200,000
shares issuable upon the exercise of options).
(7) Does not include additional options to purchase 220,227 shares,
100,000 shares and 174,940 shares of Holdings Common Stock held by
Messrs. Allumbaugh, Marasca and Gray, respectively, which options
were issued at the time of the Ralphs Merger in exchange for the
cancellation of certain payments due to such individuals under RGC
equity appreciation rights.
(8) Mr. Mays owns 8,890 of the 431,096 shares of Common Stock which are
subject to the Stockholder Voting Agreement and Proxy described in
note (6) above.
(9) Represents shares owned by one or more entities managed by or
affiliated with Apollo Advisors, L.P. or Apollo Advisors II, L.P.
(collectively, "Apollo"), together with certain affiliates or
designees of Apollo.
(10) Represents shares owned by BT Investment Partners, Inc. ("BTIP"),
Bankers Trust New York Corporation and BT Securities Corporation.
Bankers Trust New York Corporation and BT Securities Corporation are
affiliated with BTIP. BTIP expressly disclaims beneficial ownership
of all shares owned by Bankers Trust New York Corporation and BT
Securities Corporation.
(11) Includes certain institutional investors, other than Apollo and BTIP,
which purchased Series A Preferred Stock of Holdings in connection
with the Ralphs Merger. Pursuant to the 1995 Stockholders Agreement,
certain corporate actions by Holdings and its subsidiaries require the
consent of the directors whom the 1995 equity investors, including
Apollo and BTIP, are entitled to elect to the Holdings Board of
Directors. Such investors do not affirm the existence of a "group"
within the meaning of Rule 13d-5 under the Exchange Act, and expressly
disclaim beneficial ownership of all Holdings shares except for those
shares held of record by each such investor or its nominees.
38
<PAGE> 40
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is a party to a consulting agreement with Yucaipa which
provides for certain management and financial services to be performed by
Yucaipa for the benefit of the Company and its subsidiaries. The services of
Messrs. R. Burkle, Graham and Resnik, acting in their capacities as directors,
and the services of other Yucaipa personnel are provided to the Company
pursuant to this agreement. See "Item 10 -- Directors and Executive Officers
of the Registrant." Messrs. R. Burkle, Graham and Resnik are partners of
Yucaipa. The consulting agreement provides for an annual management fee
payable by the Company to Yucaipa in the amount of $4 million. In addition,
the Company may retain Yucaipa in an advisory capacity in connection with
acquisition or sale transactions, in which case the Company will pay Yucaipa an
advisory fee, except that the retention of Yucaipa in connection with a sale of
the entire Company would require approval by a majority of the disinterested
directors. The agreement has a five-year term, which is automatically renewed
on each anniversary of the Merger for a five- year term unless ninety days'
notice is given by either party. The agreement may be terminated at any time
by the Company, provided that Yucaipa will be entitled to full monthly payments
under the agreement for the remaining term thereof, unless the Company
terminates for cause pursuant to the terms of the agreement. Yucaipa may
terminate the agreement if the Company fails to make a payment due thereunder,
or if there occurs a change of control (as defined in the agreement) of the
Company, and upon any such termination Yucaipa will be entitled to full monthly
payments for the remaining term of the agreement. Pursuant to the agreement,
Yucaipa earned a total of $3.6 million in management fees for fiscal 1995.
Pursuant to the Yucaipa consulting agreement, upon closing of the RSI
Merger, Yucaipa received an advisory fee from Ralphs in the amount of $21.5
million, which was paid in cash and New Discount Debentures, plus
reimbursement of expenses in connection with the RSI Merger and the related
transactions. Upon closing of the RSI Merger, Yucaipa paid a cash fee of
approximately $3.5 million to Soros Fund Management in consideration for
advisory services which Soros Fund Management has rendered since 1991.
Additionally, upon closing of the RSI Merger, Yucaipa received a warrant to
purchase 8,000,000 shares of Holdings common stock exercisable under certain
conditions. In consideration for its commitment to purchase preferred stock as
part of the New Equity Investment, Apollo received a fee of $5 million from
Holdings upon closing of the RSI Merger, which fee was paid in cash and notes.
In connection with the execution of the definitive Agreement and Plan
of Merger ("the Merger Agreement") between F4L Supermarkets, Holdings, FFL and
RSI, Yucaipa entered into the Put Agreement with the majority stockholder of
RSI, pursuant to which such RSI stockholder was entitled to put up to $10
million aggregate principal amount of 13-5/8% Senior Subordinated Pay-in-Kind
Debentures due 2007 (the "Seller Debentures"), issued as part of the
consideration for the RSI Merger, to Yucaipa on the closing date of the Merger.
The Yucaipa consulting agreement provided that the Company reimburse
Yucaipa for any loss and expenses incurred by Yucaipa upon the resale of such
Seller Debentures to any unaffiliated third party. Pursuant to such agreement,
the Company reimbursed an affiliate of Yucaipa the amount of $3.5 million upon
the closing of the Merger.
Holdings files a consolidated federal income tax return, under which
the federal income tax liability of Holdings and its subsidiaries is determined
on a consolidated basis. Holdings is a party to a federal income tax sharing
agreement with the Company and certain of its subsidiaries (the "Tax Sharing
Agreement"). The Tax Sharing Agreement provides that in any year in which the
Company is included in any consolidated tax liability of Holdings and has
taxable income, the Company will pay to Holdings the amount of the tax
liability that the Company would have had on such due date if it had been
filing a separate return. Conversely, if the Company generates losses
39
<PAGE> 41
or credits which actually reduce the consolidated tax liability of Holdings
and its other subsidiaries, Holdings will credit to the Company the amount of
such reduction in the consolidated tax liability. These credits are passed
between Holdings and the Company in the form of cash payments. In the event
any state and local income taxes are determinable on a combined or consolidated
basis, the Tax Sharing Agreement provides for a similar allocation between
Holdings and the Company of such state and local taxes.
As part of the financing for the RSI Merger, New Holdings issued
$100 million initial accreted value of 13-5/8% Senior Discount Debentures due
2005 (the "New Discount Debentures"), which was acquired by a partnership
comprised of an affiliate of Yucaipa and certain other investors. The $17.5
million initial accreted value of New Discount Debentures contributed to the
partnership by the Yucaipa affiliate consists of New Discount Debentures
issued in partial payment of the Yucaipa consulting fee due upon closing of the
RSI Merger, as described above. New Holdings granted to the partnership
certain registration rights with respect to the New Discount Debentures, and
paid substantially all expenses of the partnership in connection with the
resale of the New Discount Debentures, including underwriting discounts and
brokers' commissions (subject to certain limitations).
On October 20, 1995, the holder of the New Senior Discount Debentures
sold all of such New Discount Debentures at a price equal to 77 percent of the
accreted value thereof. The sale of the New Discount Debentures was effected
by BT Securities Corporation ("BT Securities"). BT Securities received a fee
in the amount of 2 percent ($2.1 million) of the aggregate accreted value of
the New Discount Debentures. Holdings reimbursed the selling holder for such
fee and other expenses of the sale as contemplated by a registration rights
agreement executed concurrently with the consummation of the Merger.
A contribution of $5 million was made to the partnership that
purchased and subsequently sold the New Discount Debentures, by an affiliate
of the Company. This affiliate borrowed the $5 million from the Company to
fund its contribution to the partnership. Holders of RGC equity appreciation
rights ("EARs"), including Messrs. Allumbaugh, Marasca and Gray, agreed to
defer the receipt of $5 million cash otherwise payable by RGC upon settlement
of the EARs at the time of the Merger, pending repayment of the $5 million loan
made by the Company as described above. When the New Discount Debentures were
resold by the partnership, and the proceeds from such resale distributed to the
partners, all of the approximately $2.1 million in total proceeds received by
the affiliate were applied to repayment of the loan, and the portion of the loan
not repaid was forgiven by the Company and the EAR holders.
Management believes that the terms of the transactions described above
are or were fair to the Company and are or were on terms at least as favorable
to the Company as those which could be obtained from unaffiliated parties
(assuming that such transactions could be effected with such parties).
40
<PAGE> 42
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules required to be filed hereunder are
indexed on page 45 hereof.
(b) Reports on Form 8-K
None.
(c) Those Exhibits, and the Index thereto, required to be filed by Item
601 of Regulation S-K are attached hereto. Certain management
contracts and other compensation plans or arrangements required to be
filed are identified on the attached Index with an asterisk.
41
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
RALPHS GROCERY COMPANY
By: /s/ Jan Charles Gray
Jan Charles Gray
Senior Vice President, General Counsel
and Secretary
Date: April 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Byron E. Allumbaugh Chairman and Director April 29, 1996
---------------------------------
Byron E. Allumbaugh
/s/ George G. Golleher Chief Executive Officer and Director April 29, 1996
---------------------------------
George G. Golleher
/s/ Alfred A. Marasca President, Chief Operating Officer and Director April 29, 1996
---------------------------------
Alfred A. Marasca
Chief Executive Officer - Falley's and Director April 29, 1996
---------------------------------
Joe S. Burkle
/s/ Greg Mays Executive Vice President - Finance and April 29, 1996
--------------------------------- Administration and Chief Financial Officer
Greg Mays
/s/ Jan Charles Gray Senior Vice President, General Counsel and April 29, 1996
--------------------------------- Secretary
Jan Charles Gray
/s/ Robert Beyer Director April 29, 1996
---------------------------------
Robert Beyer
/s/ Ronald W. Burkle Director April 29, 1996
---------------------------------
Ronald W. Burkle
</TABLE>
42
<PAGE> 44
<TABLE>
<S> <C> <C>
SIGNATURE TITLE DATE
--------- ----- ----
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Peter Copses Director April 29, 1996
---------------------------------
Peter Copses
/s/ Patrick Graham Director April 29, 1996
---------------------------------
Patrick Graham
/s/ John Kissick Director April 29, 1996
---------------------------------
John Kissick
/s/ Mark A. Resnik Director April 29, 1996
---------------------------------
Mark A. Resnik
</TABLE>
43
<PAGE> 45
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT
TO SECTION 12 OF THE ACT.
No annual report or proxy material has been sent to security holders.
The Registrant will furnish copies of such report or proxy material if and when
such report or proxy material is sent to security holders.
44
<PAGE> 46
RALPHS GROCERY COMPANY
(FORMERLY FOOD 4 LESS SUPERMARKETS, INC.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Consolidated balance sheets as of June 25, 1994, January 29, 1995 and January 28, 1996 . . .
47
Consolidated statements of operations for the 52 weeks ended June 26, 1993 and June 25,
1994, the 31 weeks ended January 29, 1995 and the 52 weeks ended January 28, 1996 . . . . .
49
Consolidated statements of cash flows for the 52 weeks ended June 26, 1993 and June 25,
1994, the 31 weeks ended January 29, 1995 and the 52 weeks ended January 28, 1996. . . . . .
50
Consolidated statements of stockholder's equity for the 52 weeks ended
June 26, 1993 and June 25, 1994, the 31 weeks ended January 29, 1995,
and the 52 weeks ended January 28, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . 53
Financial Statement Schedule
- ----------------------------
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . 77
II Valuation and qualifying accounts . . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
All other schedules have been omitted since the required information is not
applicable or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the Consolidated
Financial Statements and related notes.
45
<PAGE> 47
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholder of Ralphs Grocery Company:
We have audited the accompanying consolidated balance sheets of Ralphs
Grocery Company (a Delaware corporation) (formerly Food 4 Less Supermarkets,
Inc. -- See Note 1 in the accompanying Notes to Consolidated Financial
Statements) and subsidiaries (the Company) as of June 25, 1994, January 29,
1995 and January 28, 1996, and the related consolidated statements of
operations, stockholder's equity and cash flows for the 52 weeks ended June
26, 1993 and June 25, 1994, the 31 weeks ended January 29, 1995, and the 52
weeks ended January 28, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Ralphs Grocery Company and subsidiaries as of June 25, 1994, January 29, 1995
and January 28, 1996, and the results of their operations and their cash flows
for the 52 weeks ended June 26, 1993 and June 25, 1994, the 31 weeks ended
January 29, 1995, and the 52 weeks ended January 28, 1996 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
April 19, 1996
46
<PAGE> 48
RALPHS GROCERY COMPANY
(FORMERLY FOOD 4 LESS SUPERMARKETS, INC.)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
As of
----------------------------------------------
June 25, January 29, January 28,
1994 1995 1996
------------ ---------- ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 32,996 $ 19,560 $ 67,983
Trade receivables, less allowances of $1,386,
$1,192 and $1,954 at June 25, 1994, January 29, 1995
and January 28, 1996, respectively 25,039 23,377 60,948
Notes and other receivables 1,312 3,985 6,452
Inventories 212,892 224,686 502,669
Patronage receivables from suppliers 2,875 5,173 4,557
Prepaid expenses and other 6,323 13,051 34,855
--------- ---------- ----------
Total current assets 281,437 289,832 677,464
INVESTMENTS IN AND NOTES RECEIVABLE
FROM SUPPLIER COOPERATIVES:
Associated Wholesale Grocers 6,718 6,718 7,288
Certified Grocers of California & Other 5,984 5,686 4,926
PROPERTY AND EQUIPMENT:
Land 23,488 23,488 183,125
Buildings 12,827 24,172 196,551
Leasehold improvements 97,673 110,020 251,856
Equipment and fixtures 180,508 190,016 441,760
Construction in progress 12,641 8,042 61,296
Leased property under capital leases 78,222 82,526 189,061
Leasehold interests 93,464 96,556 114,475
--------- ---------- ---------
498,823 534,820 1,438,124
Less: Accumulated depreciation and amortization 134,089 154,382 226,451
-------- --------- ----------
Net property and equipment 364,734 380,438 1,211,673
OTHER ASSETS:
Deferred financing costs, less accumulated amortization of
$17,083, $20,496 and $6,964 at June 25, 1994,
January 29, 1995 and January 28, 1996, respectively 28,536 25,469 94,100
Goodwill, less accumulated amortization of $33,945,
$38,560 and $60,407 at June 25, 1994, January 29, 1995
and January 28, 1996, respectively 267,884 263,112 1,173,445
Other, net 24,787 29,440 19,233
--------- ---------- ----------
$ 980,080 $1,000,695 $3,188,129
========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
47
<PAGE> 49
RALPHS GROCERY COMPANY
(FORMERLY FOOD 4 LESS SUPERMARKETS, INC.)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
As of
--------------------------------------------
June 25, January 29, January 28,
1994 1995 1996
---------- -------- ----------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $180,708 $ 190,455 $ 385,500
Accrued payroll and related liabilities 42,805 42,007 94,011
Accrued interest 5,474 10,730 23,870
Other accrued liabilities 53,910 65,279 276,162
Income taxes payable 2,000 293 596
Current portion of self-insurance liabilities 29,492 28,616 21,785
Current portion of senior debt 18,314 22,263 31,735
Current portion of obligations under capital leases 3,616 4,965 22,261
--------- ---------- -----------
Total current liabilities 336,319 364,608 855,920
SENIOR DEBT, net of current portion 310,944 320,901 1,226,302
OBLIGATIONS UNDER CAPITAL LEASES 39,998 40,675 130,784
SENIOR SUBORDINATED DEBT 145,000 145,000 671,222
DEFERRED INCOME TAXES 14,740 17,534 17,988
SELF-INSURANCE LIABILITIES 52,212 44,123 127,200
LEASE VALUATION RESERVE - - 25,182
OTHER NON-CURRENT LIABILITIES 11,846 10,051 74,412
COMMITMENTS AND CONTINGENCIES - - -
STOCKHOLDER'S EQUITY:
Cumulative convertible preferred stock, $.01 par value,
200,000 shares authorized and 50,000 shares issued
at June 25, 1994 and January 29, 1995 (aggregate liquidation
value of $62.2 million and $67.9 million at June 25, 1994 and
January 29, 1995) and no shares authorized or issued at January 28, 1996 58,997 65,136 -
Common stock, $.01 par value, 5,000,000 shares authorized:
1,519,632 shares, 1,519,632 shares and 1,513,938 shares issued at
June 25, 1994, January 29, 1995 and January 28, 1996, respectively 15 15 15
Additional capital 107,650 107,650 466,783
Notes receivable from stockholders of parent (586) (702) (602)
Retained deficit (94,586) (112,225) (407,077)
-------- ---------- ----------
71,490 59,874 59,119
Treasury stock: 16,732 shares, 12,345 shares, and no shares
of common stock at June 25, 1994, January 29, 1995 and
January 28, 1996, respectively (2,469) (2,071) -
-------- ---------- ----------
Total stockholder's equity 69,021 57,803 59,119
-------- ---------- ----------
$980,080 $1,000,695 $3,188,129
======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
48
<PAGE> 50
RALPHS GROCERY COMPANY
(FORMERLY FOOD 4 LESS SUPERMARKETS, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the
--------------------------------------------------------------
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ------------
<S> <C> <C> <C> <C>
SALES $2,742,027 $2,585,160 $1,556,522 $4,335,109
COST OF SALES (including purchases from
related parties of $204,028, $175,929,
$104,407 and $141,432 for the 52 weeks ended
June 26, 1993 and June 25, 1994, the 31 weeks
ended January 29, 1995, and the 52 weeks ended
January 28, 1996, respectively) 2,257,835 2,115,842 1,294,147 3,485,993
---------- ---------- ---------- ----------
GROSS PROFIT 484,192 469,318 262,375 849,116
SELLING, GENERAL, ADMINISTRATIVE AND
OTHER, NET 434,908 388,836 222,359 785,576
AMORTIZATION OF GOODWILL 7,571 7,691 4,615 21,847
RESTRUCTURING CHARGE - - 5,134 123,083
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) 41,713 72,791 30,267 (81,390)
INTEREST EXPENSE:
Interest expense, excluding amortization of
deferred financing costs 64,831 62,778 38,809 170,581
Amortization of deferred financing costs 4,901 5,472 3,413 8,193
---------- ---------- ---------- ----------
69,732 68,250 42,222 178,774
LOSS (GAIN) ON DISPOSAL OF ASSETS (2,083) 37 (455) (547)
PROVISION FOR EARTHQUAKE LOSSES - 4,504 - -
---------- ---------- ---------- ----------
LOSS BEFORE PROVISION FOR
INCOME TAXES AND EXTRAORDINARY CHARGE (25,936) - (11,500) (259,617)
PROVISION FOR INCOME TAXES 1,427 2,700 - 500
---------- ---------- ---------- ----------
LOSS BEFORE EXTRAORDINARY CHARGE (27,363) (2,700) (11,500) (260,117)
EXTRAORDINARY CHARGE - - - 23,128
---------- ----------- ---------- ----------
NET LOSS $ (27,363) $ (2,700) $ (11,500) $ (283,245)
========== ========== ========== ==========
PREFERRED STOCK ACCRETION 3,882 8,767 6,139 3,960
LOSS APPLICABLE TO COMMON SHARES $ (31,245) $ (11,467) $ (17,639) $ (287,205)
========== ========== ========== ==========
LOSS PER COMMON SHARE:
Loss before extraordinary charge $ (21.52) $ (7.63) $ (11.72) $ (174.72)
Extraordinary charge - - - (15.30)
---------- ---------- ---------- ----------
Net loss $ (21.52) $ (7.63) $ (11.72) $ (190.02)
========== ========== ========== ==========
Average Number of Common Shares Outstanding 1,452,184 1,503,828 1,504,425 1,511,453
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
49
<PAGE> 51
RALPHS GROCERY COMPANY
(FORMERLY FOOD 4 LESS SUPERMARKETS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the
----------------------------------------------------------------
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Cash received from customers $2,742,027 $2,585,160 $1,556,522 $4,335,109
Cash paid to suppliers and employees (2,711,779) (2,441,353) (1,507,523) (4,197,875)
Interest paid (58,807) (56,762) (33,553) (157,441)
Income taxes refunded (paid) 2,971 (247) 1,087 256
Interest received 993 903 867 2,562
Other, net 8,093 121 221 547
---------- ---------- ---------- ----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (16,502) 87,822 17,621 (16,842)
CASH PROVIDED (USED) BY INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 15,685 11,953 7,199 21,373
Payment for purchase of property and equipment (53,467) (57,471) (49,023) (122,355)
Payment of acquisition costs, net of cash acquired - (11,050) - (303,301)
Other, net (18) 813 (797) (1,120)
----------- ---------- ---------- ----------
NET CASH USED BY INVESTING ACTIVITIES (37,800) (55,755) (42,621) (405,403)
CASH PROVIDED (USED) BY
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 26,557 28 - 1,050,000
Net increase (decrease) in revolving loan 4,900 (4,900) 27,300 100,100
Payments of long-term debt (14,319) (14,224) (13,394) (576,727)
Proceeds from issuance of preferred stock 46,348 - - -
Proceeds from issuance of common stock, net 3,652 - 269 -
Purchase of treasury stock, net (545) (1,192) (57) -
Payments of capital lease obligation (2,840) (3,693) (2,278) (15,314)
Capital contribution from parent - - - 12,108
Dividends - - - (7,647)
Deferred financing costs and other, net (8,839) (179) (276) (91,852)
---------- ---------- ---------- ----------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 54,914 (24,160) 11,564 470,668
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 612 7,907 (13,436) 48,423
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 24,477 25,089 32,996 19,560
---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 25,089 $ 32,996 $ 19,560 $ 67,983
========== ========== ========== ==========
</TABLE>
50
<PAGE> 52
RALPHS GROCERY COMPANY
(FORMERLY FOOD 4 LESS SUPERMARKETS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the
-------------------------------------------------------------
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ------------
<S> <C> <C> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net loss $(27,363) $ (2,700) $(11,500) $ (283,245)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 62,541 62,555 40,036 133,522
Restructuring charge - - 5,134 123,083
Extraordinary charge - - - 23,128
Loss (gain) on sale of assets (4,613) 65 (455) (547)
Change in assets and liabilities,
net of effects from acquisition of businesses:
Accounts and notes receivable 17,145 (3,220) (3,398) (74)
Inventories 17,697 (17,125) (11,794) 762
Prepaid expenses and other (5,956) (5,717) (11,239) (18,291)
Accounts payable and accrued liabilities (83,286) 55,301 18,715 3,327
Self-insurance liabilities 2,935 (3,790) (8,965) 737
Deferred income taxes 4,004 2,506 2,794 454
Income taxes payable 394 (53) (1,707) 302
-------- -------- -------- ----------
Total adjustments 10,861 90,522 29,121 266,403
-------- -------- -------- ----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES $(16,502) $ 87,822 $ 17,621 $ (16,842)
======== ======== ======== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Purchase of property and equipment
through issuance of capital lease obligation $ - $ 2,575 $ 4,304 $ 24,008
======== ======== ======== ==========
Reduction of goodwill and deferred income taxes $ - $ 9,896 $ - $ -
======== ======== ======== ==========
Acquisition of stores in fiscal year 1994 and
RSI in fiscal year 1995:
Fair value of assets acquired, including
goodwill, net of cash acquired of $32,595
in fiscal year 1995 $ - $ 11,241 $ - $2,098,220
Net cash paid in acquisition - (11,050) - (303,301)
Capital contribution from parent - - - (262,000)
-------- -------- -------- ----------
Liabilities assumed $ - $ 191 $ - $1,532,919
======== ======== ======== ==========
Accretion of preferred stock $ 3,882 $ 8,767 $ 6,139 $ 3,960
======== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
51
<PAGE> 53
RALPHS GROCERY COMPANY
(FORMERLY FOOD 4 LESS SUPERMARKETS, INC.)
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 JUNE 27, 1992 - $ - 1,398,514 $ 14 (3,637) $ (429)
Net loss - - - - - -
Issuance of Common Stock - - 121,118 1 - -
Purchase of Treasury Stock - - - - (9,612) (770)
Issuance of Cumulative Convertible
Preferred Stock 50,000 46,348 - - - -
Accretion of Preferred Stock - 3,882 - - - -
-------- ------ --------- -------- --------- --------
BALANCES AT JUNE 26, 1993 50,000 50,230 1,519,632 15 (13,249) (1,199)
Net loss - - - - - -
Purchase of Treasury Stock - - - - (3,483) (1,270)
Payments of Stockholders' Notes - - - - - -
Accretion of Preferred Stock - 8,767 - - - -
-------- ------ --------- -------- -------- -------
BALANCES AT JUNE 25, 1994 50,000 58,997 1,519,632 15 (16,732) (2,469)
Net loss - - - - - -
Issuance of Treasury Stock - - - - 5,504 460
Purchase of Treasury Stock - - - - (1,117) (62)
Payments of Stockholders' Notes - - - - - -
Accretion of Preferred Stock - 6,139 - - - -
-------- ------ --------- -------- -------- -------
BALANCES AT JANUARY 29, 1995 50,000 65,136 1,519,632 15 (12,345) (2,071)
Net Loss - - - - - -
Payments of Stockholders' Notes - - - - - -
Accretion of Preferred Stock - 3,960 - - - -
Cancellation of Preferred Stock (50,000) (69,096) - - - -
Cancellation of F4LSI Common
Stock held as Treasury Stock - - (5,694) - 5,694 955
Cancellation of F4L Holdings Common
Stock held as Treasury Stock - - - - 6,651 1,116
Dividend paid to F4L Holdings, Inc. - - - - - -
Capital Contribution by F4L Holdings, Inc. - - - - - -
Issuance of Stock Options - - - - - -
-------- ------ --------- -------- -------- -------
BALANCES AT JANUARY 28, 1996 - $ - 1,513,938 $ 15 - $ -
========== ======= ========= ====== ========== =========
</TABLE>
<TABLE>
<CAPTION>
Stock- Add'l Stock-
holders' Paid-In Retained holders'
Notes Capital Deficit Equity
------- --------- --------- ---------
<S> <C> <C> <C> <C>
BALANCES AT JUNE 27, 1992 $ (939) $ 103,999 $ (51,874) $ 50,771
Net loss - - (27,363) (27,363)
Issuance of Common Stock - 3,651 - 3,652
Purchase of Treasury Stock 225 - - (545)
Issuance of Cumulative Convertible
Preferred Stock - - - 46,348
Accretion of Preferred Stock - - (3,882) -
------- --------- --------- ---------
BALANCES AT JUNE 26, 1993 (714) 107,650 (83,119) 72,863
Net loss - - (2,700) (2,700)
Purchase of Treasury Stock 78 - - (1,192)
Payments of Stockholders' Notes 50 - - 50
Accretion of Preferred Stock - - (8,767) -
------- --------- --------- ---------
BALANCES AT JUNE 25, 1994 (586) 107,650 (94,586) 69,021
Net loss - - (11,500) (11,500)
Issuance of Treasury Stock (191) - - 269
Purchase of Treasury Stock 5 - - (57)
Payments of Stockholders' Notes 70 - - 70
Accretion of Preferred Stock - - (6,139) -
------- --------- --------- ---------
BALANCES AT JANUARY 29, 1995 (702) 107,650 (112,225) 57,803
Net Loss - - (283,245) (283,245)
Payments of Stockholders' Notes 100 - - 100
Accretion of Preferred Stock - - (3,960) -
Cancellation of Preferred Stock - 69,096 - -
Cancellation of F4LSI Common
Stock held as Treasury Stock - (955) - -
Cancellation of F4L Holdings Common
Stock held as Treasury Stock - (1,116) - -
Dividend paid to F4L Holdings, Inc. - - (7,647) (7,647)
Capital Contribution by F4L Holdings, Inc. - 282,108 - 282,108
Issuance of Stock Options - 10,000 - 10,000
------- --------- --------- ---------
BALANCES AT JANUARY 28, 1996 $ (602) $ 466,783 $(407,077) $ 59,119
======= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
52
<PAGE> 54
RALPHS GROCERY COMPANY
(FORMERLY FOOD 4 LESS SUPERMARKETS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACQUISITIONS
Ralphs Grocery Company (the "Company"), formerly known as Food
4 Less Supermarkets, Inc. ("F4L Supermarkets"), a wholly-owned
subsidiary of Food 4 Less Holdings, Inc. ("Holdings"), is a multiple
format supermarket operator that tailors its retail strategy to the
particular needs of the individual communities it serves. The Company
operates in three geographic areas: Southern California, Northern
California and certain areas of the Midwest. The Company has four
first-tier subsidiaries: Cala Co. ("Cala"), Falley's, Inc.
("Falley's"), Food 4 Less of Southern California, Inc. ("F4L-SoCal"),
formerly known as Breco Holding Company, Inc. ("BHC") and Crawford
Stores, Inc. Cala Foods, Inc. ("Cala Foods") and Bell Markets, Inc.
("Bell") are subsidiaries of Cala, and Alpha Beta Company ("Alpha
Beta") is a subsidiary of F4L-SoCal.
Ralphs Merger
On June 14, 1995, F4L Supermarkets, Food 4 Less Holdings,
Inc., a California corporation ("Old Holdings"), and Food 4 Less, Inc.
("FFL") (which owned a majority of the stock of Old Holdings)
completed a definitive agreement and plan of merger (the "Merger
Agreement") with Ralphs Supermarkets, Inc. ("RSI") and the
stockholders of RSI. Pursuant to the terms of the Merger Agreement,
as amended, the Company was merged with and into RSI (the "RSI
Merger"). Immediately following the RSI Merger, pre-Merger Ralphs
Grocery Company ("RGC"), which was a wholly-owned subsidiary of RSI,
merged with and into RSI (the "RGC Merger," and together with the RSI
Merger, the "Merger"), and RSI changed its name to Ralphs Grocery
Company (the "Company"). Prior to the Merger, FFL merged with and
into Old Holdings, which was the surviving corporation (the "FFL
Merger"). Immediately following the FFL Merger, Old Holdings changed
its jurisdiction of incorporation by merging into a newly-formed,
wholly-owned subsidiary ("Holdings"), incorporated in Delaware (the
"Reincorporation Merger"). As a result of the Merger, the FFL Merger
and the Reincorporation Merger, the Company became a wholly-owned
subsidiary of Holdings.
The purchase price for the outstanding capital stock of RSI
was $538.1 million; the Company paid $288.1 million in cash, Holdings
paid $100.0 million in cash, and Holdings issued $131.5 million of its
Seller Debentures and $18.5 million of its New Discount Debentures as
consideration for the purchase. The Company also paid fees associated
with the acquisition of $47.8 million (including a prepayment premium
on outstanding mortgage debt of RGC of $19.7 million), which was
offset by RGC's cash on hand at the Merger date of $32.6 million.
The proceeds from the New Credit Facility, the New F4L Senior
Notes and the New RGC Notes (all as defined below) provided the
sources of financingrequired to pay the Company'sportion of the
purchase price andto repay outstanding bank debt of F4L Supermarkets
and RGC of $176.5 million and $228.9 million, respectively, and to
repay existing mortgage debt of $174.0 million of RGC. In addition,
the Company exchanged certain of its newly issued senior notes and
senior subordinated notes for outstanding indebtedness of RGC and F4L
Supermarkets. Proceeds from the New Credit Facility also were used to
pay certain exchange and consent solicitation fees associated with the
above
53
<PAGE> 55
transactions, and to pay 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
$93.3 million of fees and expenses of the Merger and the related
financing and to pay $3.5 million to purchase shares of common stock
of Old Holdings from certain dissenting shareholders. In addition,
Holdings issued $22.5 million of its New Discount Debentures in
consideration for certain Merger-related services.
In connection with the closure of two former RGC warehouse
facilities and nine former RGC stores (including three stores which
were part of an antitrust settlement agreement with the State of
California), the Company recorded a reserve of $24.9 million in the
purchase price allocation. This reserve includes lease termination
costs, write-off of the property and equipment at these locations and
closure costs. These closures are expected to be completed by June
1996. Also, a reserve of $12.0 million was recorded for
administrative cost reductions mainly associated with duplicative
personnel.
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 completed on January 31, 1994 (dollars in thousands, except per
share amounts):
<TABLE>
<CAPTION>
For the
-------------------------------------------------
52 Weeks 52 Weeks
Ended Ended
January 29, January 28,
1995 1996
-------------- -------------
<S> <C> <C>
Sales $5,301,411 $5,360,800
Restructuring charge (128,217) -
Loss before extraordinary charge (228,624) (93,244)
Net loss (251,752) (93,244)
Loss per share:
Loss before extraordinary charge (151.01) (61.59)
Net loss (166.29) (61.59)
</TABLE>
Incremental costs of $74.8 million associated with the
integration of RGC into the Company, including advertising the
conversion of F4L Supermarkets stores to the Ralphs format, combining
the F4L Supermarkets and RGC warehousing and distribution functions
and markdowns recorded at converted stores and stores closed, were
recorded in the actual statement of operations for fiscal year 1995
and are recorded in the pro-forma 52 weeks ended January 29, 1995
only. The unaudited pro forma results of operations are not
necessarily indicative of the actual results of operations that would
have occurred had the purchases actually been made on January 31,
1994, or of the results which may occur in the future.
The accompanying consolidated financial statements include the
preliminary allocation of the RGC purchase price. Certain appraisals
and other analyses needed to determine the fair market value of RGC's
net assets as of the Merger date are not yet completed. The final
purchase price allocation will be completed by June 1996.
On March 29, 1994, the Company purchased certain operating
assets formerly owned by Food Barn Stores, Inc. (the "Food Barn
Stores") from Associated Wholesale Grocers, Inc. ("AWG") (the "Food
Barn Acquisition") for $11.2 million. The effect of the
54
<PAGE> 56
acquisition was not material to the Company's financial position and
results of operations. Falley's has agreed to purchase merchandise
(as defined) for the Food Barn Stores from AWG through March 24,
2001. Falley's has pledged its patronage dividends and notes
receivable from AWG as security under this supply agreement.
On June 17, 1991, the Company acquired all of the common stock
of Alpha Beta for $270.5 million in a transaction accounted for as a
purchase.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. The
results of operations of pre-Merger Ralphs Grocery Company and all
previous acquisitions have been excluded from the consolidated
financial statements for periods prior to their respective
acquisition dates. All intercompany transactions have been
eliminated in consolidation.
Fiscal Years
F4L Supermarkets, together with its subsidiaries, changed its
fiscal year end from the 52 or 53-week period which ends on the last
Saturday in June to the 52 or 53-week period which ends on the Sunday
closest to January 31, resulting in a 31-week transition period ended
January 29, 1995. As a result of the fiscal year end change, the
52-week period ended June 26, 1993 is referred to as fiscal year
1993, the 52-week period ended June 25, 1994 is referred to as fiscal
year 1994, the 31-week period ended January 29, 1995 is referred to
as the 1995 transition period and the 52-week period ended January
28, 1996 is referred to as fiscal year 1995. In addition,
information presented below concerning subsequent fiscal years starts
with fiscal year 1996, which will cover the 53 weeks ended February
2, 1997 and will proceed sequentially forward.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company
considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Inventories
Inventories, which consist 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 $13.8 million, $16.5 million
and $18.7 million at June 25, 1994, January 29, 1995 and January 28,
1996, respectively, and gross profit and operating income would have
been greater by $4.4 million, $0.7 million, $2.7 million and $2.2
million for fiscal year 1993, fiscal year 1994, the 1995 transition
period and fiscal year 1995, respectively.
55
<PAGE> 57
Pre-opening Costs
The costs associated with opening new stores are deferred and
amortized over one year following the opening of each new store.
Closed Store Reserves
When a store is closed, the Company provides a reserve for the
net book value of its property and equipment, net of salvage value,
and the net present value of the remaining lease obligation, net of
sublease income. For fiscal year 1993, fiscal year 1994, the 1995
transition period and fiscal year 1995 (which includes activity due
to the Merger), utilization of this reserve was $2.4 million, $1.1
million, $0.6 million and $23.0 million, respectively.
Investments in Supplier Cooperatives
The investment in Certified is accounted for on the cost
method. There are certain restrictions on the sale of this
investment.
Property and Equipment
Property and equipment are stated at cost and are depreciated
principally using the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C> <C>
Buildings and improvements 5-40 years
Equipment and fixtures 3-10 years
Property under capital leases
and leasehold interests 3-45 years (lease term)
</TABLE>
Deferred Financing Costs
Costs incurred in connection with the issuance of debt are
amortized over the term of the related debt using the effective
interest method.
Goodwill
The excess of the purchase price over the fair value of the
net assets of businesses acquired is amortized on a straight-line
basis over 40 years beginning at the date of acquisition. Current and
undiscounted future operating cash flows are compared to current and
undiscounted future goodwill amortization to determine if an
impairment of goodwill has occurred and is continuing. As of January
28, 1996, no impairment existed.
Income Taxes
On June 27, 1993, the Company prospectively adopted Statement
of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
Income Taxes". SFAS 109 is an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. In
estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law
or rates.
56
<PAGE> 58
The implementation of SFAS 109 did not have a material effect
on the accompanying consolidated financial statements.
Notes Receivable from Stockholders of Parent
Notes receivable from stockholders of parent represent loans
to employees of the Company for purchases of Holdings' common stock.
The notes are due over various periods, bear interest at the prime
rate, and are secured by each stockholder's shares of Holdings'
common stock.
Self-Insurance
The Company is self-insured for a portion of its workers'
compensation, general liability and automobile accident claims. The
Company establishes reserves based on an independent actuary's
valuation of open claims reported and an estimate of claims incurred
but not yet filed.
Discounts and Promotional Allowances
Promotional allowances and vendor discounts are recorded as a
reduction of cost of sales in the accompanying consolidated statements
of operations. Allowance proceeds received in advance are deferred
and recognized over the period earned.
Provision for Earthquake Losses
On January 17, 1994, Southern California was struck by 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, or 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), subject
to certain deductibles. The pre-tax loss, net of insurance
recoveries, was approximately $4.5 million.
Extraordinary Items
For the 52 weeks ended January 28, 1996, the Company recorded
an extraordinary charge relating to the refinancing of F4L
Supermarkets' Old Credit Facility, 10.45% Senior Notes due 2000 (the
"Old F4L Senior Notes"), 13.75% Senior Subordinated Notes due 2001
(the "Old F4L Senior Subordinated Notes"), the repayment of Holdings'
15.25% Senior Discount Notes due 2004 in connection with the Merger
and the write-off of their related debt issuance costs.
Loss Per Common Share
Loss per common share is computed based on the weighted
average number of shares outstanding during the applicable period.
Fully diluted loss per share has been omitted as it is anti-dilutive
for all periods presented.
57
<PAGE> 59
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" (SFAS 121) and Statement of Financial Accounting Standard
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). The
Company will be required to adopt SFAS 121 and SFAS 123 in fiscal year
1996. The Company does not expect that the adoption of SFAS 121 or
SFAS 123 will have a material effect on its financial position or its
results of operations in fiscal year 1996.
Reclassifications
Certain prior period amounts in the consolidated financial
statements have been reclassified to conform to the fiscal year 1995
presentation.
3. PREFERRED STOCK
On December 31, 1992, the Company issued 50,000 shares of $.01
par value Series A cumulative convertible preferred stock (the
"Preferred Stock") with a liquidation value of $1,000 per share and
121,118 shares of its $.01 par value common stock (the "Common Stock")
to its parent company, Holdings, in exchange for gross proceeds of
$50.0 million. The Preferred Stock had a stated dividend rate of
$152.50 per share, per annum. In order to finance the purchase of the
Preferred and Common Stock from the Company, Holdings issued $103.6
million aggregate principal amount of 15.25% Senior Discount Notes due
2004 (the "Holdings Notes") and 121,118 Common Stock Purchase Warrants
(the "Warrants") for gross proceeds of $50.0 million.
In connection with the Merger, the Preferred Stock was
cancelled. The accreted amount of the Preferred Stock at the date of
the Merger was contributed to the Company's capital and is reflected
in the accompanying 1995 Consolidated Statement of Stockholder's
Equity as a component of additional paid-in capital. Also, at the
time of the Merger, Holdings repaid its borrowings under the Holdings
Notes.
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<PAGE> 60
4. SENIOR DEBT AND SENIOR SUBORDINATED DEBT
The Company's senior debt is summarized as follows:
<TABLE>
<CAPTION>
As of
----------------------------------------------
June 25, January 29, January 28,
1994 1995 1996
---------- ---------- ------------
<S> <C> <C> <C>
New Term Loans $ - $ - $ 590,426,000
Old Term Loan 137,064,000 125,732,000 -
10.45% Senior Notes, principal due 2004 with
interest payable semi-annually in arrears - - 520,326,000
10.45% Senior Notes, principal due 2000 with
interest payable semi-annually in arrears 175,000,000 175,000,000 4,674,000
New Revolving Facility - - 127,400,000
Old Revolving Loan - 27,300,000 -
10.0% secured promissory note, collateralized
by the stock of Bell, due June 1996, interest
payable quarterly 8,000,000 8,000,000 8,000,000
Other senior debt 9,194,000 7,132,000 7,211,000
------------ ------------ --------------
329,258,000 343,164,000 1,258,037,000
Less--current portion 18,314,000 22,263,000 31,735,000
------------ ------------ --------------
$310,944,000 $320,901,000 $1,226,302,000
============ ============ ==============
</TABLE>
Senior Debt
As part of the Merger financing, the Company entered into a
new bank credit agreement (the "New Credit Facility") comprised of a
$600.0 million term loan facility (the "New Term Loans") and a
revolving credit facility of $325.0 million (the "New Revolving
Facility") under which working capital loans may be made and
commercial or standby letters of credit in the maximum aggregate
amount of up to $150.0 million may be issued.
At January 28, 1996, $590.4 million was outstanding under the
New Term Loans, $127.4 million was outstanding under the New Revolving
Facility, and $92.7 million of standby letters of credit had
been issued on behalf of the Company. A commitment fee of one-half of
one percent per annum is charged on the average daily unused portion
of the New Revolving Facility; such commitment fees are due
quarterly in arrears. Interest on borrowings under the New Term Loans
is due quarterly in arrears and 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 January 28, 1996, the weighted
average interest rate on the New Term Loans was 9.19 percent.
Interest on borrowings under the New Revolving Facility is 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 January 28, 1996, the interest rate on the New Revolving Facility
was 9.05 percent.
On October 11, 1995, the Company entered into an interest rate
collar agreement with the New Credit Facility Administrative Agent
which effectively set interest rate limits on $300.0 million of the
Company's New Term Loans. This interest rate collar, which was
effective as of October 19, 1995, limits the interest rate fluctuation
of the Adjusted Eurodollar Rate (as defined) to a range between 4.5
percent and 8.0 percent for two years. This agreement satisfies the
interest rate protection requirements under the New Credit Facility.
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<PAGE> 61
Quarterly principal installments on the New Term Loans continue
to December 2003, with amounts payable in each year as follows: $19.3
million in fiscal 1996, $46.0 million in fiscal 1997, $58.5 million in
fiscal 1998, $62.0 million in fiscal 1999, $65.6 million in fiscal
2000, and $339.0 million thereafter. The principal installments can be
accelerated if the Company receives proceeds on the sale of certain of
its assets in the future. To the extent that borrowings under the New
Revolving 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 $350.0 million of 10.45% Senior Notes due
2004 (the "New F4L Senior Notes") and exchanged $170.3 million
principal amount of New F4L Senior Notes for an equal amount of the
10.45% F4L Senior Notes due 2000 (the "Old F4L Senior Notes")
(together with the New F4L Senior Notes, the "Senior Notes"), leaving
an outstanding balance of $4.7 million of the Old F4L Senior Notes.
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. 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 year 1999.
Scheduled maturities of principal of senior debt at January
28, 1996 are as follows:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1996 $ 31,735,000
1997 46,246,000
1998 58,739,000
1999 62,280,000
2000 65,805,000
Later years 993,232,000
--------------
$1,258,037,000
=============
</TABLE>
Senior Subordinated Debt
Concurrent with the Merger, the Company issued $100.0 million
of 11% Senior Subordinated Notes due 2005 (the "New RGC Notes") and
(i) exchanged $142.2 million principal amount of the RGC 9% Senior
Subordinated Notes due 2003 (the "Old RGC 9% Notes") and $281.8
million 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
60
<PAGE> 62
RGC Notes") for an equal amount of New RGC Notes, (ii) purchased $7.5
million principal amount of Old RGC 9% Notes and $15.2 million
principal amount of Old RGC 10.25% Notes in conjunction with the
offers, and (iii) subsequently purchased $0.1 million principal
amount of Old RGC 9% Notes and $1.0 million principal amount of Old
RGC 10.25% Notes subject to the change of control provision, leaving
an outstanding balance of $0.1 million on the Old RGC 9% Notes and an
outstanding balance of $2.1 million on the Old RGC 10.25% Notes. 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.
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 year 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 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 $140.2 million 13.75% Senior
Subordinated Notes due 2005 (the "New F4L Senior Subordinated Notes")
for an equal amount of F4L 13.75% Senior Subordinated Notes due 2001
(the "Old F4L Senior Subordinated Notes," and together with the New
F4L Senior Subordinated Notes, the "13.75% Senior Subordinated Notes")
of the Company, leaving an outstanding balance of $4.8 million of the
Old F4L Senior Subordinated Notes. The 13.75% Senior Subordinated
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,
the Senior Notes and the New RGC 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 New F4L 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 year 2000.
Financial Covenants
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. During fiscal 1995,
certain financial covenants and other terms of the New Credit Facility
were amended to, among other things, provide for the acquisition of
Smith's Food and Drug Centers, Inc. ("Smith's") Riverside distribution
and creamery facility, the acquisition of certain operating assets and
inventory at that facility, the acquisition of nine of the Smith's
Southern California stores and the closure of up to nine stores in
conjunction with these acquisitions. 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
January 28, 1996, the Company was in compliance with the financial
covenants
61
<PAGE> 63
of its debt agreements. At January 28, 1996, dividends and certain
other payments are restricted based on terms in the debt agreements.
5. LEASES
The Company's operations are conducted primarily in leased
properties. Substantially all leases contain renewal options. Rental
expense under operating leases was as follows:
<TABLE>
<CAPTION>
For the
---------------------------------------------------------------
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Minimum rents $44,504,000 $49,788,000 $33,458,000 $97,752,000
Rents based on sales 5,917,000 3,806,000 1,999,000 3,439,000
</TABLE>
Following is a summary of future minimum lease payments under
operating leases at January 28, 1996:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1996 $ 123,705,000
1997 116,285,000
1998 105,502,000
1999 102,714,000
2000 98,506,000
Later years 772,372,000
--------------
$1,319,084,000
==============
</TABLE>
The Company has entered into lease agreements for new
supermarket sites and one warehouse facility which were not in
operation at January 28, 1996. Future minimum lease payments under
such operating leases generally begin when such facilities open and at
January 28, 1996 are: 1996 - $19.8 million; 1997 - $35.2 million;
1998 - $35.2 million; 1999 - $35.3 million; 2000 - $35.3 million;
later years - $561.0 million.
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<PAGE> 64
Certain leases qualify as capital leases under the criteria
established in Statement of Financial Accounting Standards No. 13,
"Accounting for Leases," and are classified on the consolidated
balance sheets as leased property under capital leases. Future
minimum lease payments for the property under capital leases at
January 28, 1996 are as follows:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1996 $ 37,373,000
1997 34,820,000
1998 28,818,000
1999 22,644,000
2000 17,353,000
Later years 123,686,000
------------
Total minimum lease payments 264,694,000
Less: amounts representing interest 111,649,000
------------
Present value of minimum lease payments 153,045,000
Less: current portion 22,261,000
------------
$130,784,000
============
</TABLE>
Accumulated depreciation related to assets financed under
capital leases was $24.0 million, $27.6 million and $42.7 million at
June 25, 1994, January 29, 1995 and January 28, 1996, respectively.
The Company is leasing a distribution facility and four store
locations from the previous owner of Alpha Beta. The agreement
contains a purchase option for the land, buildings and improvements
and equipment at a price that equals or exceeds the estimated fair
market value throughout the term of the lease.
6. INVESTMENT IN A.W.G.
The investment in Associated Wholesale Grocers ("A.W.G.")
consists principally of the cooperative's six percent interest-
bearing seven and eight-year patronage certificates received in
payment of certain rebates. Following is a summary of future
maturities based upon current redemption terms:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1996 $ -
1997 1,060,000
1998 1,520,000
1999 1,504,000
2000 1,478,000
Later years 1,726,000
----------
$7,288,000
==========
</TABLE>
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<PAGE> 65
7. INCOME TAXES
The provision (benefit) for income taxes consists of the
following:
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Current:
Federal $ - $ 3,251,000 $(2,894,000) $ -
State and other 82,000 712,000 100,000 46,000
---------- ----------- ----------- --------
82,000 3,963,000 (2,794,000) 46,000
---------- ----------- ----------- --------
Deferred:
Federal 1,345,000 (70,000) 2,794,000 -
State and other - (1,193,000) - 454,000
---------- ----------- ----------- --------
1,345,000 (1,263,000) 2,794,000 454,000
---------- ----------- ----------- --------
$1,427,000 $ 2,700,000 $ - $500,000
========== =========== =========== ========
</TABLE>
A reconciliation of the provision (benefit) for income taxes
to amounts computed at the federal statutory rates of 34 percent for
fiscal 1993 and 35 percent for fiscal 1994, the 1995 transition
period and fiscal 1995 is as follows:
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Federal income taxes at statutory
rate on loss before provision
for income taxes and
extraordinary charges $(8,818,000) $ - $(4,025,000) $ (98,959,000)
State and other taxes,
net of federal tax benefit 82,000 (1,000) 65,000 (16,794,000)
Alternative minimum tax - - - -
Effect of permanent differences
resulting primarily from
amortization of goodwill and
debt costs 2,850,000 2,820,000 1,701,000 (1,665,000)
Tax credits and other - - - 3,769,000
Accounting limitation (recognition)
of deferred tax benefit 7,313,000 (119,000) 2,259,000 114,149,000
----------- ---------- ----------- -------------
$ 1,427,000 $2,700,000 $ - $ 500,000
=========== ========== ============ =============
</TABLE>
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<PAGE> 66
The provision (benefit) for deferred taxes consists of the following:
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Depreciation $7,756,000 $2,536,000 $(1,513,000) $ (461,000)
Difference between book
and tax basis of assets sold 3,198,000 (4,223,000) 2,505,000 -
Deferred revenues and
allowances 40,000 (2,349,000) 707,000 -
Inventory - - - (8,479,000)
Pre-opening costs (512,000) 174,000 784,000 -
Accounts receivable reserves (270,000) 249,000 80,000 -
Unicap (5,000) (536,000) (755,000) -
Capital lease obligation (1,385,000) 2,792,000 527,000 (502,000)
Self-insurance reserves (4,082,000) (535,000) 5,523,000 2,104,000
Inventory shrink reserve 777,000 (869,000) (569,000) -
LIFO (554,000) (1,010,000) (1,303,000) -
Closed store reserve 1,092,000 440,000 176,000 -
Accrued expense - (582,000) 350,000 (26,304,000)
Accrued payroll and related
liabilities 193,000 1,721,000 (3,879,000) (6,206,000)
Acquisition costs 2,626,000 1,397,000 (5,444,000) -
Tax intangibles - - - 6,234,000
Sales tax reserves (715,000) (418,000) 433,000 -
State taxes - - - (20,639,000)
Deferred rent subsidy (483,000) (624,000) (29,000) -
Net operating losses - - - (61,219,000)
Net operating loss usage - 5,782,000 (6,963,000) -
Tax credits - - - 3,601,000
Tax credits benefited (1,392,000) (4,477,000) 1,711,000 -
Accounting limitation (recognition)
of deferred tax benefit (4,591,000) (1,085,000) 10,494,000 114,149,000
Other, net (348,000) 354,000 (41,000) (1,824,000)
---------- ----------- ----------- ------------
$1,345,000 $(1,263,000) $ 2,794,000 $ 454,000
========== =========== =========== ============
</TABLE>
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<PAGE> 67
The significant components of the Company's deferred tax
assets (liabilities) are as follows:
<TABLE>
<CAPTION>
June 25, January 29, January 28,
1994 1995 1996
------------ -------- ----------
<S> <C> <C> <C>
Deferred tax assets:
Accrued payroll and related liabilities $ 2,448,000 $ 6,248,000 $ 27,579,000
Other accrued liabilities 13,953,000 12,080,000 71,954,000
Obligations under capital leases - - 37,584,000
Property and equipment 2,997,000 - -
Self-insurance liabilities 27,744,000 25,204,000 49,773,000
Loss carryforwards 20,675,000 27,638,000 154,202,000
Tax credit carryforwards 5,869,000 4,157,000 913,000
State taxes - - 30,210,000
Other 580,000 570,000 18,026,000
------------ ------------ -------------
Gross deferred tax assets 74,266,000 75,897,000 390,241,000
Valuation allowance (31,149,000) (41,643,000) (285,506,000)
------------ ------------ -------------
Net deferred tax assets $ 43,117,000 $ 34,254,000 $ 104,735,000
------------ ------------ -------------
Deferred tax liabilities:
Inventories $(16,738,000) $(11,690,000) $ (9,762,000)
Property and equipment (30,516,000) (28,527,000) (106,116,000)
Obligations under capital leases (8,733,000) (9,261,000) -
Tax intangibles - - (6,234,000)
Other (1,870,000) (2,310,000) (611,000)
------------ ------------ -------------
Gross deferred tax liability (57,857,000) (51,788,000) (122,723,000)
------------ ------------ -------------
Net deferred tax liability $(14,740,000) $(17,534,000) $ (17,988,000)
============ ============ =============
</TABLE>
The Company recorded a valuation allowance to reserve a
portion of its gross deferred tax assets at January 28, 1996 due
primarily to financial and tax losses in recent years. Under SFAS
109, this valuation allowance will be adjusted in future periods as
appropriate. However, the timing and extent of such future
adjustments to the allowance cannot be determined at this time.
At January 28, 1996, approximately $139.0 million of the
valuation allowance for deferred tax assets will reduce goodwill when
the allowance is no longer required.
At January 28, 1996, the Company has net operating loss
carryforwards for federal income tax purposes of $440.6 million,
which expire from 2007 through 2011. The Company has federal
Alternative Minimum Tax ("AMT") credit carryforwards of approximately
$0.9 million which are available to reduce future regular taxes in
excess of AMT. Currently, there is no expiration date for these
credits.
A portion of the loss carryforwards described above are
subject to the provisions of the Tax Reform Act of 1986, specifically
Internal Revenue Code Section 382. The law limits the use of net
operating loss carryforwards when changes of ownership of more than 50
percent occur during a three-year testing period. Due to the merger,
the ownership of F4L Supermarkets and RSI changed in excess of 50
percent. As a result, the Company's utilization of approximately
$78.0 million of F4L Supermarkets' and $187.0 million of RSI's federal
net operating losses will be subject to an annual usage limitation.
The Company's annual limitations under Section 382 for F4L
Supermarkets' and RSI's net operating losses are approximately $15.6
million and $15.0 million, respectively. Furthermore, all of the
Company's pre-Merger RSI net operating losses and a portion of the
Company's Ralphs post-Merger losses will reduce goodwill when utilized
in future federal income tax returns.
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<PAGE> 68
Holdings files a consolidated federal income tax return, under
which the federal income tax liability of Holdings and its
subsidiaries is determined on a consolidated basis. Holdings is a
party to a federal income tax sharing agreement with the Company and
certain of its subsidiaries (the "Tax Sharing Agreement"). The Tax
Sharing Agreement provides that in any year in which the Company is
included in any consolidated tax liability of Holdings and has
taxable income, the Company will pay to Holdings the amount of the
tax liability that the Company would have had on such due date if it
had been filing a separate return. Conversely, if the Company
generates losses or credits which actually reduce the consolidated tax
liability of Holdings and its other subsidiaries, Holdings will
credit to the Company the amount of such reduction in the consolidated
tax liability. These credits are passed between Holdings and the
Company in the form of cash payments. In the event any state and
local income taxes are determinable on a combined or consolidated
basis, the Tax Sharing Agreement provides for a similar allocation
between Holdings and the Company of such state and local taxes.
The Company currently has an Internal Revenue Service
examination in process covering the years 1990 through 1993.
Management believes that any required adjustment to the Company's tax
liabilities will not have a material adverse impact on its financial
position or results of operations.
8. RELATED PARTY TRANSACTIONS
The Company has a five-year consulting agreement with an
affiliated company effective June 14, 1995 for management, financing,
acquisition and other services. The agreement is automatically
renewed on June 14 of each year for the five-year term unless ninety
(90) days' notice is given by either party. The contract provides for
annual management fees equal to $4 million plus advisory fees for
certain acquisition transactions, if the affiliated company is
retained by the Company.
Management services expenses were $2.0 million during
fiscal year 1993, $2.3 million during fiscal year 1994, $1.2 million
during the 1995 transition period and $3.6 million during fiscal year
1995. Advisory fees were $1.8 million during fiscal year 1993, $0.2
million during fiscal year 1994 and $21.5 million during fiscal year
1995. There were no such advisory fees for the 1995 transition
period. Advisory fees for financing transactions are capitalized and
amortized over the term of the related financing.
9. COMMITMENTS AND CONTINGENCIES
The Company is contingently liable to former stockholders of
certain predecessors for any prorated gains which may be realized
within ten years of the acquisition of the respective companies
resulting from the sale of certain Certified stock. Such gains are
only payable if Certified is purchased or dissolved, or if the Company
sells such Certified Stock within the period noted above.
In connection with the bankruptcy reorganization of Federated
Department Stores, Inc. ("Federated") and its affiliates, Federated
agreed to pay certain potential tax liabilities relating to RGC as a
member of the affiliated group of companies comprising Federated and
its subsidiaries. In consideration thereof, RSI and RGC agreed to pay
Federated a total of $10 million, payable $1 million on each of
February 3, 1992, 1993, 1994, 1995 and 1996 and
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<PAGE> 69
$5 million on February 3, 1997. In the event Federated is required to
pay certain tax liabilities, RSI and RGC agreed to reimburse Federated
up to an additional $10 million, subject to certain adjustments.
Pursuant to the terms of the Merger, the $5 million payment and the
potential $10 million payment will be paid in cash.
The Company is a partner in a supplier partnership, in which
it is contingently liable for the partnership's long-term debt. The
Company's portion of such debt is approximately $1,505,000.
The Company has entered into lease agreements with the
developers of several new sites in which the Company has agreed to
provide construction financing. At January 28, 1996, the Company had
capitalized construction costs of $20.4 million on total commitments
of $24.0 million.
In December 1992, three California state antitrust class
action suits were commenced in Los Angeles Superior Court against the
Company and other major supermarket chains located in Southern
California, alleging that they conspired to refrain from competing in
and to fix the price of fluid milk above competitive prices.
Specifically, class actions were commenced by Diane Barela and Neila
Ross, Ron Moliare and Paul C. Pfeifle on December 7, December 14 and
December 23, 1992, respectively. To date, the Court has yet to
certify any of these classes, while a demurrer to the complaints was
denied. The Company will vigorously defend itself in these class
action suits.
In addition, the Company or its subsidiaries are defendants in
a number of other cases currently in litigation or potential claims
encountered in the normal course of business which are being
vigorously defended. In the opinion of management, the resolutions of
these matters will not have a material effect on the Company's
financial position or results of operations.
The Company self-insures its workers' compensation and general
liability. For fiscal year 1993, fiscal year 1994, the 1995
transition period and fiscal year 1995, the self-insurance loss
provisions were $38.0 million, $19.9 million, $6.3 million and $32.6
million, respectively. During fiscal year 1993 and fiscal year 1994,
the Company discounted its self-insurance liability using a 7.0
percent discount rate. In the 1995 transition period, the Company
changed the discount rate to 7.5 percent. In fiscal 1995, the Company
changed the discount rate to 7.0 percent. Management believes that
this rate approximates the time value of money over the anticipated
payout period (approximately 10 years) for essentially risk-free
investments.
The Company's historical self-insurance liability at the end
of the three most recent fiscal years and the 1995 transition period
is as follows:
<TABLE>
<CAPTION>
As of
-------------------------------------------------------------
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Self-insurance liability $100,773,000 $90,898,000 $ 84,286,000 $161,391,000
Less: Discount (15,279,000) (9,194,000) (11,547,000) (12,406,000)
------------ ----------- ------------ ------------
Net self-insurance liability $ 85,494,000 $81,704,000 $ 72,739,000 $148,985,000
============ =========== ============ ============
</TABLE>
68
<PAGE> 70
The Company expects that cash payments for claims will
aggregate approximately $21.8 million, $35.4 million, $31.6 million,
$21.5 million and $13.1 million for the fiscal year 1996, the fiscal
year 1997, the fiscal year 1998, the fiscal year 1999 and the fiscal
year 2000, respectively.
Environmental Matters
In January 1991, the California Regional Water Quality Control
Board for the Los Angeles Region (the "Regional Board") requested that
RGC conduct a subsurface characterization of its Glendale warehouse
property located in the Atwater district of Los Angeles. This request
was part of an ongoing effort by the Regional Board, in connection with
the U.S. Environmental Protection Agency (the "EPA"), to identify
contributors to groundwater contamination in the San Fernando Valley.
Significant parts of the San Fernando Valley, including the area where
RGC's grocery warehouse is located, have been designated federal
Superfund sites requiring response actions under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, because of regional groundwater contamination. On June 18,
1991, the EPA made its own request for information concerning RGC's
grocery warehouse. Since that time, the Regional Board has requested
further investigation by RGC. RGC conducted the requested
investigations and reported the results to the Regional Board.
Approximately 25 companies have entered into a Consent Order (EPA
Docket No. 94-11) with the EPA to investigate and design a remediation
system for contaminated groundwater beneath an area which includes
RGC's grocery warehouse. RGC is not a party to the Consent Order, but
is cooperating with requests of the subject companies to allow
installation of monitoring or recovery wells on RGC's property. On or
about October 12, 1995, the EPA mailed a Special Notice Letter to 44
parties, including Ralphs as owner and operator of the Glendale
property, naming them as potentially responsible parties ("PRPs").
Ralphs and other PRPs have agreed to enter into negotiations over a
consent decree with the EPA to implement a remedial design and
reimburse oversight costs. The PRPs have also agreed to an Alternative
Dispute Resolution Process to allocate the costs among themselves.
Based upon available information, management does not believe this
matter will have a material adverse effect on the Company's financial
condition or results of operations.
RGC removed underground storage tanks and remediated soil
contamination at the grocery warehouse property. In some instances,
the removals and the contamination were associated with grocery
business operations; in others, they were associated with prior
property users. Although the possibility of other contamination from
prior operations or adjacent properties exists at the grocery
warehouse property, management does not believe that the costs of
remediating such contamination will be material to the Company.
Apart from the grocery warehouse property, RGC had
environmental assessments performed on most of its facilities,
including warehouse and distribution facilities. The Company believes
that any responsive actions required at the examined properties as a
result of such assessments will not have a material adverse effect on
its financial condition or results of operations.
At the time Food 4 Less acquired Alpha Beta in 1991, it
learned that certain underground storage tanks located on the site of
the La Habra facility may have previously released hydrocarbons. In
connection with the acquisition of Alpha Beta, the seller (who is
also the lessor of the La Habra facility) agreed to retain
responsibility, subject to certain limitations, for remediation of
the release.
69
<PAGE> 71
The Company is subject to a variety of environmental laws,
rules, regulations and investigative or enforcement activities, as are
other companies in the same or similar business. The Company believes
it is in substantial compliance with such laws, rules and regulations.
These laws, rules, regulations and agency activities change from time
to time, and such changes may affect the ongoing business and
operations of the Company.
10. EMPLOYEE BENEFIT PLANS
As a result of the Merger, the Company adopted certain
employee benefit plans previously sponsored by RGC. These employee
benefit plans include the Ralphs Grocery Company Retirement Plan (the
"Pension Plan"), the Ralphs Grocery Company Supplemental Executive
Retirement Plan (the "SERP"), and the Ralphs Grocery Company
Retirement Supplement Plan (the "Retirement Supplement Plan").
Pension Plan
The Pension Plan covers substantially all employees not
already covered by collective bargaining agreements with at least one
year of credited service (defined at 1,000 hours). Employees who were
employed by F4L Supermarkets and who are otherwise eligible to
participate in the Pension Plan became eligible to participate in
fiscal year 1995. The Company's policy is to fund pension costs at or
above the minimum annual requirement.
SERP
The SERP covers certain key officers of the Company. The
Company has purchased split dollar life insurance policies for
participants under this plan. Under certain circumstances, the cash
surrender value of certain split dollar life insurance policies will
offset the Company's obligations under the SERP.
Retirement Supplement Plan
The Retirement Supplement Plan is a non-qualified retirement
plan designed to provide eligible participants with benefits based on
earnings over the indexed amount of $150,000.
The following actuarially determined components were included
in the net expense for the above plans for fiscal year 1995 (dollars
in thousands):
<TABLE>
<S> <C>
Service cost $2,841
Interest cost on projected benefit obligation 2,543
Actual return on assets (3,223)
Net amortization and deferral 1,365
-----
Net pension expense $3,526
=====
</TABLE>
70
<PAGE> 72
The funded status of the Pension Plan (based on December 1995
asset values) is as follows:
<TABLE>
<CAPTION>
As of
January 28,
1996
------------
(dollars in thousands)
<S> <C>
Assets Exceed Accumulated Benefits:
Actuarial present value of benefit obligations:
Vested benefit obligation $42,446
Accumulated benefit obligation 43,256
Projected benefit obligation 63,913
Plan assets at fair value 44,552
------
Projected benefit obligation in excess of Plan Assets (19,361)
Unrecognized net loss 4,136
Unrecognized prior service cost 1,100
-------
Accrued pension cost $(14,125)
======
</TABLE>
The funded status of the SERP and Retirement Supplement Plan
(based on December 1995 asset values) is as follows:
<TABLE>
<CAPTION>
As of
January 28,
1996
------------
(dollars in thousands)
<S> <C>
Accumulated Benefits Exceed Assets:
Actuarial present value of benefit obligations:
Vested benefit obligation $(4,863)
Accumulated benefit obligation (4,908)
Projected benefit obligation (11,778)
Plan assets at fair value -
----------
Projected benefit obligation in excess of Plan Assets (11,778)
Unrecognized net loss 544
Unrecognized prior service cost 1,846
-----
Accrued pension cost $ (9,388)
=======
</TABLE>
The discount rate used for fiscal year 1995 was 7.5 percent.
A long-term rate of return on assets of 9.0 percent was also used in
the actuarial valuation.
The pension plan assets consist primarily of common stocks,
bonds, debt securities, and a money market fund. Plan benefits are
based primarily on years of service and on average compensation during
the last years of employment.
Employee Stock Ownership Plans
The Company implemented Statement of Position No. 93-6 (the
"SOP"), "Employer Accounting for Employee Stock Ownership Plans,"
effective June 26, 1994. The implementation of the SOP did not have a
material effect on the accompanying consolidated financial statements.
71
<PAGE> 73
The Company and its subsidiaries sponsor several defined
contribution benefit plans. The full-time employees of Falley's who
are not members of a collective bargaining agreement are covered under
a 401(k) plan, a portion of which is invested in Holdings stock (the
"Falley's ESOP"). As is required pursuant to IRS and ERISA
requirements, any participant who receives stock from the Falley's
ESOP has the right to put that stock to Falley's or an affiliate of
Falley's. However, as part of the original stock sale agreement
among the then stockholders of Falley's, FFL and the Falley's ESOP,
which has been amended from time to time, a partnership which owns
stock of Holdings entered into an agreement with Falley's and Holdings
to assume the obligation to purchase any Holdings shares as to which
terminated plan participants exercise a put option under the terms of
Falley's ESOP. As a result, neither Falley's nor the Company is
required to make cash payments to redeem the shares. As part of that
agreement, the Company may elect, after providing a right of first
refusal to the partnership, to purchase Holdings shares put under the
provisions of the plan. However, the partnership's obligation to
purchase such Holdings shares is unconditional, and any repurchase of
shares by the Company is at the Company's sole election. During
fiscal year 1995, the Company did not purchase any of the Holdings
shares. As of November 3, 1995, the fair value of the shares
allocated which are subject to repurchase obligation by the
partnership referred to above was approximately $14.6 million.
In addition, the Company also sponsors two ESOPs for employees
of the Company who are members of certain collective bargaining
agreements (the "Union ESOPs"). The Union ESOPs provide for annual
contributions based on hours worked at a rate specified by the terms
of the collective bargaining agreements. The Company contributions
are made in the form of Holdings stock or cash for the purchase of
Holdings stock and are to be allocated to participants based on hours
worked. During fiscal year 1995 and the 1995 transition period, the
Company recorded a charge against operations of approximately $0.8
million and $0.3 million, respectively, for benefits under the Union
ESOPs. There were no shares issued to the Union ESOPs or to the
Company's profit sharing plan at January 28, 1996.
Defined Contribution Plan
The Company sponsors the Ralphs Grocery Company Savings Plan
Plus - Primary, the Ralphs Grocery Savings Plan Plus - Basic and the
Food 4 Less Supermarkets, Inc. Profit Sharing and Retirement Plan
(collectively referred to as the "401(k) Plan") covering substantially
all employees who are not covered by collective bargaining agreements
and who have at least one year of credited service (defined at 1,000
hours). The 401(k) Plan provides for both pre-tax and after-tax
contributions by participating employees. With certain limitations,
participants may elect to contribute on a pre-tax basis to the 401(k)
Plan. The Company has committed to match a minimum of 20 percent of
an employee's contribution to the 401(k) Plan that does not exceed 5
percent of the employee's compensation. Expenses under the 401(k)
Plan for fiscal years 1993, 1994 and 1995 were $0.3 million, $0.7
million and $0.7 million, respectively.
Multi-Employer Benefit Plans
72
<PAGE> 74
The Company contributes to multi-employer benefit plans
administered by various trustees. Contributions to these plans are
based upon negotiated wage contracts. These plans may be deemed to be
defined benefit plans. Information related to accumulated plan
benefits and plan net assets as they may be allocated to the Company
at January 28, 1996 is not available. The Company contributed $69.4
million, $57.2 million, $21.6 million and $102.1 million to these
plans for fiscal year 1993, fiscal year 1994, the 1995 transition
period and fiscal year 1995, respectively. Management is not aware of
any plans to terminate such plans.
The United Food and Commercial Workers health and welfare
plans were over-funded and those employers who contributed to the
plans received a pro rata share of the excess reserves in the plans
through reduction of current contributions. The Company's share of
the excess reserve was $24.2 million, of which $8.1 million, $14.3
million and $1.8 million was recognized in fiscal year 1994, the 1995
transition period, and fiscal year 1995, respectively. Offsetting the
reduction in employer contributions was a $5.5 million union contract
ratification bonus and contractual wage increases in the 1995
transition period.
Post-Retirement Medical Benefit Plan
The Company adopted a postretirement medical benefit plan
("Postretirement Medical Plan"), previously sponsored by RGC, which
covers substantially all employees who are not members of a
collective bargaining agreement and who retire under certain age and
service requirements. The Postretirement Medical Plan provides
outpatient, inpatient and various other covered services. Such
benefits are funded from the Company's general assets. The calendar
1995 year deductible is $1,000 per individual, indexed to the Medical
Consumer Price Index.
The net periodic cost of the Postretirement Medical Plan
include the following components for fiscal year 1995 (dollars in
thousands):
<TABLE>
<S> <C>
Service cost $468
Interest cost 561
Return on plan assets -
Net amortization and deferral (116)
---
Net postretirement benefit cost $913
===
</TABLE>
73
<PAGE> 75
The funded status of the postretirement benefit plan is as
follows (dollars in thousands):
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $ 2,208
Fully eligible plan participants 1,483
Other active plan participants 10,862
Plan assets at fair value -
--------
Accumulated postretirement obligations in excess
of plan assets (14,553)
Unrecognized loss 562
Unrecognized prior service cost (3,246)
--------
Accrued postretirement benefit obligation $(17,237)
========
</TABLE>
Service cost was calculated using a medical cost trend of 10.5
percent and a decreasing medical cost trend rate of 14 percent and 8
percent for 1993 and 1994, respectively. A medical cost trend rate of
13 percent was used for fiscal year 1995, and a decreasing rate of 12
percent and 6 percent for future years. The discount rate was 7.5
percent for the Company expense for the fiscal year. The long-term
rate of return of plan assets is not applicable, as the plan is not
funded.
The effect of a one percent increase in the medical cost trend
would increase the fiscal 1995 service and interest cost to 26
percent. The accumulated postretirement benefit obligation at January
28, 1996 would also increase by 30 percent.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and Cash Equivalents
The carrying amount approximates fair value as a result of the
short maturity of these instruments.
Short-Term Notes and Other Receivables
The carrying amount approximates fair value as a result of the
short maturity of these instruments.
Investments In and Notes Receivable From Supplier Cooperatives
The Company maintains a non-current deposit with Certified in
the form of Class B shares of Certified. Certified is not obligated
in any fiscal year to redeem more than a prescribed number of the
Class B shares issued. Therefore, it is not practicable to estimate
the fair value of this investment.
The Company maintains non-current notes receivable from A.W.G.
There are no quoted market prices for this investment and a reasonable
estimate could not be made
74
<PAGE> 76
without incurring excessive costs. Additional information pertinent
to the value of this investment is provided in Note 6.
Long-Term Debt
The fair value of the Senior Notes, the New RGC Notes and the
13.75% Senior Subordinated Notes is based on quoted market prices.
The New Term Loans and the New Revolving Facility are estimated
to be recorded at the fair value of the debt. Market quotes for the
fair value of the remainder of the Company's debt are not available,
and a reasonable estimate of the fair value could not be made without
incurring excessive costs. Additional information pertinent to the
value of the unquoted debt is provided in Note 4.
The estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
As of
January 28, 1996
---------------------------------
Carrying Fair
Amount Value
-------- -----
<S> <C> <C>
Cash and cash equivalents $ 67,983,000 $ 67,983,000
Short-term notes and other receivables 6,452,000 6,452,000
Investments in and notes receivable from
supplier cooperatives (not practicable) 12,214,000 -
Long-term debt for which it is:
o Practicable to estimate fair values 1,902,341,000 1,878,648,000
o Not practicable 26,918,000 -
</TABLE>
12. RESTRUCTURING CHARGE
During fiscal 1995, the Company recorded a $75.2 million
charge associated with the closure of 58 former F4L Supermarkets
stores and one former F4L Supermarkets warehouse facility.
Twenty-four of these stores were required to be closed pursuant to a
settlement agreement with the State of California in connection with
the Merger. Three RGC stores were also required to be sold.
Thirty-four of the closed stores were under-performing former F4L
Supermarkets stores. The $75.2 million restructuring charge
consisted of write-downs of property and equipment ($52.2 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). During fiscal year 1995, the Company utilized $34.7
million of the reserve for restructuring costs ($50.0 million of costs
partially offset by $15.3 million of proceeds from the divestiture of
stores). The charges consisted of write-downs of property and
equipment ($33.2 million); write-off of the Alpha Beta trademark ($8.3
million); and expenditures associated with the closed stores and the
warehouse facility, write-off of other assets, lease termination
expenditures and miscellaneous expenditures ($8.5 million). Future
lease payments of approximately $19.1 million will be offset against
the remaining reserve. Management believes that the remaining reserve
is adequate to complete the planned restructuring.
On December 29, 1995, the Company consummated an agreement
with Smith's to sublease its one million square foot distribution
center and creamery facility in Riverside, California for
approximately 23 years, with renewal options through 2043, and to
acquire
75
<PAGE> 77
certain operating assets and inventory at that facility. In addition,
the Company also acquired nine of Smith's Southern California stores
which became available when Smith's withdrew from the California
market. As a result of the acquisition of the Riverside
distribution center and creamery, the Company closed its La Habra
distribution center in the first quarter of fiscal year 1996. Also,
the Company closed nine of its stores which were near the acquired
former Smith's stores. During the fourth quarter of fiscal year 1995,
the Company recorded a $47.9 million restructuring charge to recognize
the cost of closing these facilities, consisting of write-downs of
property and equipment ($16.1 million), closure costs ($2.2
million), and lease termination expenses ($29.6 million).
76
<PAGE> 78
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholder of Ralphs Grocery Company:
We have audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of Ralphs Grocery Company (formerly
Food 4 Less Supermarkets, Inc. -- See Note 1 in the accompanying Notes to
Consolidated Financial Statements) and subsidiaries as of June 25, 1994,
January 29, 1995 and January 28, 1996, and the related consolidated statements
of operations, stockholder's equity and cash flows for the 52 weeks ended June
26, 1993 and June 25, 1994, the 31 weeks ended January 29, 1995 and the 52
weeks ended January 28, 1996, and have issued our report thereon dated April
19, 1996. Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule on 78 is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
April 19, 1996
77
<PAGE> 79
RALPHS GROCERY COMPANY
(FORMERLY FOOD 4 LESS SUPERMARKETS, INC.)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
52 WEEKS ENDED JANUARY 28, 1996, 31 WEEKS ENDED JANUARY 29, 1995,
52 WEEKS ENDED JUNE 25, 1994, AND 52 WEEKS ENDED JUNE 26, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Provisions Charged
Balance at charged to Balance
beginning to interest Other at end
of period expense expense(a) Payments changes(b) of period
---------- -------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Self-insurance liabilities
52 weeks ended January 28, 1996 $72,739 $32,603 $10,287 $42,153 $75,509 $148,985
====== ====== ====== ====== ====== =======
31 weeks ended January 29, 1995 $81,704 $ 6,304 $ 3,453 $18,722 $ - $ 72,739
====== ======= ======= ====== ====== ========
52 weeks ended June 25, 1994 $85,494 $19,880 $ 5,836 $29,506 $ - $ 81,704
====== ====== ======= ====== ====== ========
52 weeks ended June 26, 1993 $82,559 $38,040 $ 5,865 $40,970 $ - $ 85,494
====== ====== ======= ====== ====== ========
</TABLE>
_______________
(a) Amortization of discount on self-insurance reserves charged to interest
expense.
(b) Reflects self-insurance reserve of Ralphs Grocery Company which was
acquired on June 14, 1995.
78
<PAGE> 80
RALPHS GROCERY COMPANY
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C>
3.1 Restated Certificate of Incorporation, as amended, of Ralphs Grocery Company (incorporated herein by
reference to Exhibit 3.1 of Ralph's Grocery Company's Quarterly Report on Form 10-Q for the quarter ended
July 16, 1995).
4.1.1 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).
4.1.2 First Amendment to Credit Agreement dated as of August 18, 1995 among Food 4 Less Holdings, Inc., Ralphs
Grocery Company and the financial institutions listed on the signature pages thereto.
4.1.3 Second Amendment to Credit Agreement dated as of December 11, 1995 among Food 4 Less Holdings, Inc., Ralphs
Grocery Company and the financial institutions listed on the signature pages thereto.
4.1.4 Third Amendment, Consent and Waiver to Credit Agreement dated as of March 8, 1996 among Food 4 Less Holdings,
Inc., Ralphs Grocery Company and the financial institutions listed on the signature pages thereto.
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 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
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C>
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 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 4.7.3 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
</TABLE>
E-2
<PAGE> 82
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C>
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 4.8.4 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 4.9.3 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 4.9.4 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 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
</TABLE>
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<PAGE> 83
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C>
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 4.10.5 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 4.10.6 of Food 4 Less 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* Employment Agreement dated as of June 14, 1995 between Food Less Holdings, Inc., Ralphs Grocery Company and
George G. Golleher (incorporated 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).
10.5* Employment Agreement dated as of June 14, 1995 between Ralphs Grocery Company and Byron E. Allumbaugh
(incorporated herein by reference to Exhibit 10.8 of Ralphs Grocery Company's Quarterly Report on Form 10-Q
for the quarter ended July 16, 1995).
10.6* Employment Agreement dated as of June 14, 1995 between Ralphs Grocery Company and Alfred A. Marasca
(incorporated herein by reference to Exhibit 10.9 of Ralphs Grocery Company'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 Ralphs Grocery Company and Greg Mays (incorporated
herein by reference to Exhibit 10.10 of Ralphs Grocery Company's
</TABLE>
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<PAGE> 84
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C>
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 Harley DeLano.
10.9* Employment Agreement dated as of June 14, 1995 between Ralphs Grocery Company and Jan Charles Gray
(incorporated herein by reference to Exhibit 10.12 of Ralphs Grocery Company's Quarterly Report on Form 10-Q
for the quarter ended July 16, 1995).
10.10* Employment Agreement dated as of June 14, 1995 between Ralphs Grocery Company and Tony Schnug.
10.11* Management Stockholders Agreement dated as of June 14, 1995 between Food 4 Less Holdings, Inc. and the
management employees 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).
10.12* Consulting Agreement dated as of June 27, 1988 by and between Falley's, Inc. and Joe S. Burkle (incorporated
herein by reference to Exhibit 10.38 to Food 4 Less Supermarkets, Inc.'s Registration Statement on Form S-1,
No. 33-31152).
10.13* Letter Agreement dated as of December 10, 1990 amending Consulting Agreement by and between Falley's, Inc.
and Joe S. Burkle (incorporated herein by reference to Exhibit 10.17.1 to Food 4 Less Supermarkets, Inc.'s
Annual Report on Form 10-K for the fiscal year ended June 29, 1991).
10.14 Distribution Center Transfer Agreement, dated as of November 1, 1995, by and between Smith's Food & Drug
Centers, Inc., a Delaware corporation, and Ralphs Grocery Company, relating to the Riverside, California
property (incorporated herein by reference to Exhibit 10.1 to Ralphs Grocery's Company's Quarterly Report on
Form 10-Q for the quarter ended October 8, 1995).
10.15.1* Ralphs Grocery Company Retirement Supplement Plan, effective as of January 1, 1994.
10.15.2* Amendment to the Retirement Supplement Plan, effective as of January 1, 1995.
10.15.3* Second Amendment to the Retirement Supplement Plan, effective as of June 14, 1995, by and between Ralphs
Grocery Company and Ralphs Grocery Company Retirement Supplement Plan.
10.16.1* Ralphs Grocery Company Supplemental Executive Retirement Plan, amended and restated as of April 9,1994.
10.16.2* Amendment to the Amended and Restated Supplemental Executive Retirement Plan, effective as of January 1,
1995.
10.16.3* Second Amendment to the Supplemental Executive Retirement Plan, dated as of June 14, 1995, by and between
Ralphs Grocery Company and Ralphs Grocery Company Supplemental
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C>
Executive Retirement Plan.
10.16.4* Third Amendment to the Ralphs Grocery Company Supplemental Executive Plan, effective as of July 1, 1995.
21 Subsidiaries
27 Financial Data Schedule
</TABLE>
E-6
<PAGE> 1
Exhibit 4.1.2
RALPHS GROCERY COMPANY
FIRST AMENDMENT
TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is dated as of
August 18, 1995 and entered into by and among Food 4 Less Holdings, Inc., a
Delaware corporation ("NEW HOLDINGS"), Ralphs Grocery Company, a Delaware
corporation and legal successor to Food 4 Less Supermarkets, Inc. ("COMPANY"),
the financial institutions listed on the signature pages hereof ("LENDERS"),
the Co-Agents and Co-Arrangers listed on the signature pages hereof and Bankers
Trust Company, as administrative agent for Lenders ("AGENT"), and, for purposes
of Section 5 hereof, the Credit Support Parties (as defined in Section 5
hereof) listed on the signature pages hereof, and is made with reference to
that certain Credit Agreement dated as of June 14, 1995 (the "CREDIT
AGREEMENT"), by and among New Holdings, Food 4 Less Supermarkets, Inc., the
financial institutions listed on the signature pages thereof as Lenders, the
Co-Agents and Co-Arrangers named therein and Agent. Capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit Agreement to (i)
adjust the application of certain mandatory prepayments, and (ii) make certain
other amendments as set forth below;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF COMMITMENTS AND LOANS.
Subsection 2.4B(iii)(a) of the Credit Agreement is hereby amended by
deleting the first thirteen lines thereof (other than the phrase "provided,
however, that, so long as no" appearing in the thirteenth line thereof) and
substituting the following therefor:
"(a) Prepayments and Reductions from Asset Sales. (1) No later than the
third Business Day following the date of receipt by Company or any of its
Subsidiaries of Cash Proceeds of any Asset Sale (other than a Required
Disposition or a Planned Disposition) in an aggregate cumulative amount equal
to
1
<PAGE> 2
or exceeding $500,000 (and as to which no prepayment of the Loans shall have
been made pursuant to this subsection 2.4B(iii)(a)), (2) no later than the
third Business Day following the date of receipt by Company or any of its
Subsidiaries of Cash Proceeds of Required Dispositions or Planned
Dispositions in an aggregate cumulative amount equal to or exceeding
$5,000,000 (and as to which no prepayment of the Loans shall have been made
pursuant to this subsection 2.4B(iii)(a)), and (3) with respect to any Cash
Proceeds of Required Dispositions or Planned Dispositions received by Company
or any of its Subsidiaries that are not yet required to be prepaid pursuant
to the immediately preceding clause (2) because the aggregate cumulative
amount thereof does not yet exceed $5,000,000, on the earlier of (y) the
180th day following the date of the first Asset Sale occurring after Company
makes a prepayment of the Loans pursuant to the immediately preceding clause
(2) or pursuant to this clause (3) and (z) the date of occurrence of any
Event of Default or Potential Event of Default, (a) Company shall prepay the
Term Loans in an amount equal to the Net Cash Proceeds of such Asset Sale,
and (b) to the extent the Net Cash Proceeds of such Asset Sale exceed the
aggregate outstanding principal amount of the Term Loans, Company shall
prepay in an amount equal to such excess first the Swing Line Loans to the
full extent thereof and second the Revolving Loans, and the Revolving Loan
Commitments shall be permanently reduced in an amount equal to such excess;"
SECTION 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "FIRST
AMENDMENT EFFECTIVE DATE"):
A. On or before the First Amendment Effective Date, each of New Holdings
and Company shall deliver to Agent for Lenders five originally executed copies
of the following, each, unless otherwise noted, dated the First Amendment
Effective Date:
1. Signature and incumbency certificates of their respective officers
executing this Amendment; and
2. Executed copies of this Amendment executed by each of New Holdings,
Company and each of the other Credit Support Parties.
B. On or before the First Amendment Effective Date, all corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Agent, acting on behalf of Lenders, and its counsel shall be
satisfactory in form and substance to Agent and such counsel, and Agent and
such counsel shall have received all such counterpart originals or certified
copies of such documents as Agent may reasonably request.
2
<PAGE> 3
SECTION 3. AGREEMENT REGARDING DELIVERY OF RESOLUTIONS
The parties hereby agree that within twelve Business Days after the First
Amendment Effective Date, each of New Holdings and Company shall deliver to
Agent for Lenders five originally executed copies of resolutions of their
respective Board of Directors approving and authorizing the execution,
delivery, and performance of this Amendment, dated as of such delivery date and
certified as of such delivery date by their respective corporate secretary or
an assistant secretary as being in full force and effect without modification
or amendment. The parties hereby further agree that if such resolutions are
not delivered within twelve Business Days after the First Amendment Effective
Date, then an Event of Default shall occur under the Credit Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES BY NEW HOLDINGS AND COMPANY
In order to induce Lenders to enter into this Amendment and to amend the
Credit Agreement in the manner provided herein, each of New Holdings and
Company represents and warrants to each Lender that the following statements
are true, correct and complete:
A. CORPORATE POWER AND AUTHORITY. Each Loan Party party hereto has all
requisite corporate power and authority to enter into this Amendment and each
of New Holdings and Company has all requisite corporate power and authority to
carry out the transactions contemplated by, and perform its respective
obligations under, the Credit Agreement as amended by this Amendment (the
"AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment have been duly authorized by all necessary corporate action on the
part of each Loan Party party hereto and the performance of the Amended
Agreement has been duly authorized by all necessary corporate action on the
part of each of New Holdings and Company.
C. GOVERNMENTAL CONSENTS. The execution and delivery by each Loan Party
party hereto of this Amendment and the performance by each of New Holdings and
Company of the Amended Agreement do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body.
D. BINDING OBLIGATION. This Amendment has been duly executed and delivered
by each Loan Party party hereto and this Amendment is the legally valid and
binding obligations of each Loan Party party hereto and the Amended Agreement
is the legally valid and binding obligations of each of New Holdings and
Company, in each
3
<PAGE> 4
case enforceable against New Holdings, Company and the other Loan Parties party
hereto in accordance with the respective terms of this Amendment and the
Amended Agreement, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
E. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT AGREEMENT.
The representations and warranties contained in Section 5 of the Credit
Agreement are and will be true, correct and complete in all material respects
on and as of the First Amendment Effective Date to the same extent as though
made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
F. ABSENCE OF DEFAULT. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Potential Event of Default.
SECTION 5. ACKNOWLEDGEMENT AND CONSENT
Company has entered into a Deed of Trust and is a party to the Collateral
Account Agreement, Pledge Agreements, the Security Agreement, the Trademark
Security Agreement, and the Deposit Accounts Security Agreement, in each case
as amended through the First Amendment Effective Date, pursuant to which
Company has (i) created Liens in favor of Agent on certain Collateral to secure
its respective Secured Obligations and (ii) pledged certain Collateral to
secure its respective Secured Obligations (as defined in the Pledge Agreements)
as the case may be. New Holdings has entered the Holdings Guaranty and is a
party to the Holdings Pledge Agreement, the Security Agreement, and the Deposit
Accounts Security Agreement, in each case as amended through the First
Amendment, pursuant to which New Holdings has (i) guarantied the Obligations,
(ii) created Liens in favor of Agent on certain Collateral to secure its
respective Secured Obligations (as defined in each of the Security Agreement
and the Deposit Accounts Security Agreement) and (iii) pledged certain
Collateral to Agent to secure its obligations under the Holdings Guaranty, as
the case may be. Each of Falley's, Cala Co, F4LSC, Bay Area, Cala, Bell
Markets, Alpha Beta, F4LGM, F4L Merchandising, F4L California and Crawford is a
party to each of the Guaranty, the Security Agreement, the Trademark Security
Agreement, the Deposit Accounts Security Agreement, its respective Pledge
Agreement, its respective Deed of Trust, if applicable, in each case as amended
through the First Amendment Effective Date, pursuant to which each of such
Subsidiaries of Company has (i) guarantied the Obligations, (ii) created Liens
in favor of Agent on certain Collateral to secure their respective Secured
Obligations and (as defined in each of the Security Agreement, the Trademark
Security Agreement and the Deposit Accounts Security Agreement) and (iii)
pledged certain Collateral to Agent to secure its respective Secured
Obligations (as defined in the Pledge Agreements) as the case may be. F4LGM is
a party to the F4LGM Security Agreement,
4
<PAGE> 5
as amended through the First Amendment Effective Date, pursuant to which F4LGM
has pledged certain Collateral to Agent to secure its obligations under the
Guaranty. New Holdings, Company and each of such Subsidiaries of Company are
collectively referred to herein as the "CREDIT SUPPORT PARTIES", and the
Holdings Guaranty, the Holdings Pledge Agreement, the Security Agreement, the
Deposit Accounts Security Agreement, the Guaranty, the Trademark Security
Agreement, the Pledge Agreements, the Deeds of Trust, the Collateral Account
Agreement, and the F4LGM Security Agreement are collectively referred to herein
as the "CREDIT SUPPORT DOCUMENTS".
Each Credit Support Party hereby acknowledges that it has reviewed the terms
and provisions of the Credit Agreement and this Amendment and consents to the
amendment of the Credit Agreement effected pursuant to this Amendment. Each
Credit Support Party hereby confirms that each Credit Support Document to which
it is a party or otherwise bound and all Collateral encumbered thereby will
continue to guaranty or secure, as the case may be, to the fullest extent
possible the payment and performance of all "Obligations," "Guarantied
Obligations" and "Secured Obligations," as the case may be (in each case as
such terms are defined in the applicable Credit Support Document), including
without limitation the payment and performance of all such "Obligations,"
"Guarantied Obligations" or "Secured Obligations," as the case may be, in
respect of the Obligations of Company now or hereafter existing under or in
respect of the Amended Agreement and the Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of the Credit
Support Documents to which it is a party or otherwise bound shall continue in
full force and effect and that all of its obligations thereunder shall be valid
and enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment. Each Credit Support Party represents and
warrants that all representations and warranties contained in the Amended
Agreement and the Credit Support Documents to which it is a party or otherwise
bound are true, correct and complete in all material respects on and as of the
First Amendment Effective Date to the same extent as though made on and as of
that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
Each Credit Support Party acknowledges and agrees that (i) notwithstanding
the conditions to effectiveness set forth in this Amendment, such Credit
Support Party is not required by the terms of the Credit Agreement or any other
Loan Document to consent to the amendments to the Credit Agreement effected
pursuant to this Amendment and (ii) nothing in the Credit Agreement, this
Amendment or any other Loan Document shall be deemed to require the consent of
such Credit Support Party to any future amendments to the Credit Agreement.
5
<PAGE> 6
SECTION 5. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
(i) On and after the First Amendment Effective Date, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Credit Agreement, and each reference in
the other Loan Documents to the "Credit Agreement", "thereunder", "thereof"
or words of like import referring to the Credit Agreement shall mean and be a
reference to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the Credit Agreement
and the other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall not,
except as expressly provided herein, constitute a waiver of any provision of,
or operate as a waiver of any right, power or remedy of Agent or any Lender
under, the Credit Agreement or any of the other Loan Documents.
B. FEES AND EXPENSES. Company acknowledges that all costs, fees and
expenses as described in subsection 11.2 of the Credit Agreement incurred by
Agent and its counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of Company.
C. HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive
effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Amendment shall become
effective upon the execution of a counterpart hereof by
6
<PAGE> 7
Requisite Lenders and each of the other parties hereto and receipt by Company
and Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
[Remainder of page intentionally left blank]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their respective officers thereunto duly authorized
as of the date first written above.
RALPHS GROCERY COMPANY
By:
-------------------------------
Title:
----------------------------
FOOD 4 LESS HOLDINGS, INC.
By:
-------------------------------
Title:
----------------------------
FALLEY'S, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
CALA CO.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
FOOD 4 LESS OF SOUTHERN
CALIFORNIA, as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
S-1
<PAGE> 9
BAY AREA WAREHOUSE STORES, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
CALA FOODS, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
BELL MARKETS, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
ALPHA BETA COMPANY,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
FOOD 4 LESS GM, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
S-2
<PAGE> 10
FOOD 4 LESS MERCHANDISING, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
FOOD 4 LESS OF CALIFORNIA, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
CRAWFORD STORES, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
AGENT:
BANKERS TRUST COMPANY,
INDIVIDUALLY AND AS AGENT
By:
--------------------------------
Title:
-----------------------------
LENDERS:
[BT TO PROVIDE]
S-3
<PAGE> 11
[LENDER], INDIVIDUALLY AND AS A CO-AGENT
By:
-------------------------------
Title:
----------------------------
[LENDER], INDIVIDUALLY AND AS A CO-
ARRANGER
By:
-------------------------------
Title:
----------------------------
[LENDER]
By:
-------------------------------
Title:
----------------------------
[LENDER]
By:
-------------------------------
Title:
----------------------------
[LENDER]
By:
-------------------------------
Title:
----------------------------
S-4
<PAGE> 12
[LENDER]
By:
-------------------------------
Title:
----------------------------
S-5
<PAGE> 1
Exhibit 4.1.3
RALPHS GROCERY COMPANY
SECOND AMENDMENT
TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is dated
as of December 11, 1995 and entered into by and among Food 4 Less Holdings,
Inc., a Delaware corporation ("NEW HOLDINGS"), Ralphs Grocery Company, a
Delaware corporation and legal successor to Food 4 Less Supermarkets, Inc.
("COMPANY"), the financial institutions listed on the signature pages hereof
("LENDERS"), the Co-Agents and Co-Arrangers listed on the signature pages
hereof and Bankers Trust Company, as administrative agent for Lenders
("AGENT"), and, for purposes of Section 4 hereof, the Credit Support Parties
(as defined in Section 4 hereof) listed on the signature pages hereof, and is
made with reference to that certain Credit Agreement dated as of June 14, 1995,
as amended by a First Amendment dated as of August 18, 1995 (the "CREDIT
AGREEMENT"), by and among New Holdings, Food 4 Less Supermarkets, Inc., the
financial institutions listed on the signature pages thereof as Lenders, the
Co-Agents and Co-Arrangers named therein and Agent. Capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit Agreement to
(i) adjust certain of the financial covenants as more specifically set forth
herein, and (ii) make certain other amendments as set forth below;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
A. AMENDMENTS TO SECTION 1: DEFINITIONS
1.1 Subsection 1.1 of the Credit Agreement is hereby amended by
adding the following definition thereto in appropriate alphabetical order:
"`Smith's-Related Restructuring Charges' means the amount of
non-cash and cash restructuring charges and integration costs
incurred
1
<PAGE> 2
by Company and its Subsidiaries in connection with the
discontinuance of certain of Company's warehousing, manufacturing
and distribution operations at its facility in La Habra, California,
and the related transfer of such warehousing, manufacturing and
distribution operations to the facility expected to be subleased by
Company from Smith's Food & Drug Centers, Inc. ("Smith's") in
Riverside, California (the "Warehouse Restructuring"), and the
disposition of up to 9 grocery stores operated by Company in
southern California in connection with Company's acquisition, if
such acquisition occurs, of up to 9 grocery stores from Smith's in
southern California (the "Store Restructuring"), including in each
case transition and transaction costs related thereto; provided
that (x) the aggregate amount of all such cash and non-cash charges
and costs and the aggregate amount of all such cash charges and
costs included in Consolidated Adjusted EBITDA and Consolidated Net
Worth as "Smith's-Related Restructuring Charges" for all periods
with respect to the Warehouse Restructuring shall not exceed $43.6
million and $33.2 million, respectively, and (y) the aggregate
amount of all such cash and non-cash charges and costs and the
aggregate amount of all such cash charges and costs included in
Consolidated Adjusted EBITDA and Consolidated Net Worth as
"Smith's-Related Restructuring Charges" for all periods with
respect to the Store Restructuring shall not exceed $22.5 million
and $12.8 million, respectively, in each case to the extent that
such restructuring charges and integration costs reduce the net
income of Company and its Subsidiaries."
1.2 The definition of "Consolidated Adjusted EBITDA" contained in
subsection 1.1 of the Credit Agreement is hereby amended by deleting the
phrase "(vi) Restructuring Charges and (vii)" and substituting "
(vi) Restructuring Charges, (vii) Smith's-Related Restructuring Charges and
(viii)" therefor.
1.3 The definition of "Consolidated Net Worth" contained in subsection
1.1 of the Credit Agreement is hereby amended by deleting the semicolon
immediately preceding the proviso contained therein and by substituting "and
(v) the after tax impact (if any) of the Smith's-Related Restructuring Charges;"
B. AMENDMENTS TO SECTION 6: AFFIRMATIVE COVENANTS.
1.1 Subsection 6.11 (i) of the Credit Agreement is hereby amended by
deleting the phrase "or within six months after the Closing Date," and
substituting "or within eight months after the Closing Date," therefor.
2
<PAGE> 3
C. AMENDMENTS TO SECTION 7: NEGATIVE COVENANTS
1.1 Subsection 7.7(vi) of the Credit Agreement is hereby amended
by adding at the end thereof the following:
"provided that, in addition to the foregoing, the Company may
dispose of up to 9 southern California grocery stores in connection
with its potential acquisition of up to 9 southern California
grocery stores from Smith's;"
1.2 Subsection 7.9 of the Credit Agreement is hereby amended by
deleting the phrase "during the period commencing on the Closing Date and ending
on (and including) January 28, 1996)" and substituting "during the period
commencing on the first day of the third Fiscal Quarter in 1995 and ending on
(and including) January 28, 1996)" therefor and is hereby further amended by
deleting the table set forth therein and substituting in lieu thereof the
following:
<TABLE>
<CAPTION>
"Period Maximum Lease Payments
------ ----------------------
<S> <C>
Third Fiscal Quarter 1995
through and including
January 28, 1996 $ 93,300,000
Fiscal Year 1996 $220,300,000
Fiscal Year 1997 $240,300,000
Fiscal Year 1998 $265,300,000
Fiscal Year 1999 $290,300,000
Fiscal Year 2000 $310,300,000
Fiscal Year 2001 $322,300,000
Fiscal Year 2002 $339,300,000
Fiscal Year 2003 and
each Fiscal Year thereafter $356,300,000"
</TABLE>
SECTION 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "SECOND
AMENDMENT EFFECTIVE DATE"):
A. On or before the Second Amendment Effective Date, each of New
Holdings and Company shall deliver to Agent for Lenders five originally executed
copies of the following, each, unless otherwise noted, dated the Second
Amendment Effective Date:
1. Signature and incumbency certificates of their respective
officers executing this Amendment; and
3
<PAGE> 4
2. Executed copies of this Amendment executed by
each of New Holdings, Company and each of the other Credit Support
Parties.
B. On or before the Second Amendment Effective Date, all
corporate and other proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incidental thereto not
previously found acceptable by Agent, acting on behalf of Lenders, and its
counsel shall be satisfactory in form and substance to Agent and such counsel,
and Agent and such counsel shall have received all such counterpart originals
or certified copies of such documents as Agent may reasonably request.
SECTION 3. REPRESENTATIONS AND WARRANTIES BY NEW
HOLDINGS AND COMPANY
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, each of New Holdings
and Company represents and warrants to each Lender that the following
statements are true, correct and complete:
A. CORPORATE POWER AND AUTHORITY. Each Loan Party party
hereto has all requisite corporate power and authority to enter into this
Amendment and each of New Holdings and Company has all requisite corporate
power and authority to carry out the transactions contemplated by, and perform
its respective obligations under, the Credit Agreement as amended by this
Amendment (the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and
delivery of this Amendment have been duly authorized by all necessary corporate
action on the part of each Loan Party party hereto and the performance of the
Amended Agreement has been duly authorized by all necessary corporate action on
the part of each of New Holdings and Company.
C. GOVERNMENTAL CONSENTS. The execution and delivery by
each Loan Party party hereto of this Amendment and the performance by each of
New Holdings and Company of the Amended Agreement do not and will not require
any registration with, consent or approval of, or notice to, or other action
to, with or by, any federal, state or other governmental authority or
regulatory body.
D. BINDING OBLIGATION. This Amendment has been duly
executed and delivered by each Loan Party party hereto and this Amendment is
the legally valid and binding obligations of each Loan Party party hereto and
the Amended Agreement is the legally valid and binding obligations of each of
New Holdings and Company, in each case enforceable against New Holdings,
Company and the other Loan Parties party hereto in accordance with the
respective terms of this Amendment and the Amended Agreement, except as may be
limited by bankruptcy, insolvency, reorganization,
4
<PAGE> 5
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
E. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM
CREDIT AGREEMENT. The representations and warranties contained in Section 5 of
the Credit Agreement are and will be true, correct and complete in all material
respects on and as of the Second Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
F. ABSENCE OF DEFAULT. No event has occurred and is
continuing or will result from the consummation of the transactions
contemplated by this Amendment that would constitute an Event of Default or a
Potential Event of Default.
SECTION 4. ACKNOWLEDGEMENT AND CONSENT
Company has entered into Deeds of Trust and is a party to the
Collateral Account Agreement, Pledge Agreements, the Security Agreement, the
Trademark Security Agreement, and the Deposit Accounts Security Agreement, in
each case as amended through the Second Amendment Effective Date, pursuant to
which Company has (i) created Liens in favor of Agent on certain Collateral to
secure its respective Secured Obligations and (ii) pledged certain Collateral to
secure its respective Secured Obligations (as defined in the Pledge Agreements)
as the case may be. New Holdings has entered into the Holdings Guaranty and is a
party to the Holdings Pledge Agreement, the Security Agreement, and the Deposit
Accounts Security Agreement, in each case as amended through the Second
Amendment Effective Date, pursuant to which New Holdings has (i) guarantied the
Obligations, (ii) created Liens in favor of Agent on certain Collateral to
secure its respective Secured Obligations (as defined in each of the Security
Agreement and the Deposit Accounts Security Agreement) and (iii) pledged certain
Collateral to Agent to secure its obligations under the Holdings Guaranty, as
the case may be. Each of Falley's, Cala Co, F4LSC, Bay Area, Cala, Bell
Markets, Alpha Beta, F4LGM, F4L Merchandising, F4L California and Crawford is a
party to each of the Guaranty, the Security Agreement, the Trademark Security
Agreement, the Deposit Accounts Security Agreement, its respective Pledge
Agreement, its respective Deed of Trust, if applicable, in each case as amended
through the Second Amendment Effective Date, pursuant to which each of such
Subsidiaries of Company has (i) guarantied the Obligations, (ii) created Liens
in favor of Agent on certain Collateral to secure their respective Secured
Obligations (as defined in each of the Security Agreement, the Trademark
Security Agreement and the Deposit Accounts Security Agreement) and (iii)
pledged certain Collateral to Agent to secure its respective Secured Obligations
(as defined in the Pledge Agreements) as the case may be. F4LGM is a party to
the F4LGM Security Agreement, as amended through the Second Amendment Effective
Date, pursuant to which F4LGM has pledged certain Collateral to Agent to secure
its
5
<PAGE> 6
obligations under the Guaranty. New Holdings, Company and each of such
Subsidiaries of Company are collectively referred to herein as the "CREDIT
SUPPORT PARTIES", and the Holdings Guaranty, the Holdings Pledge Agreement, the
Security Agreement, the Deposit Accounts Security Agreement, the Guaranty, the
Trademark Security Agreement, the Pledge Agreements, the Deeds of Trust, the
Collateral Account Agreement, and the F4LGM Security Agreement are collectively
referred to herein as the "CREDIT SUPPORT DOCUMENTS".
Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment
and consents to the amendment of the Credit Agreement effected pursuant to this
Amendment. Each Credit Support Party hereby confirms that each Credit Support
Document to which it is a party or otherwise bound and all Collateral
encumbered thereby will continue to guaranty or secure, as the case may be, to
the fullest extent possible the payment and performance of all "Obligations,"
"Guarantied Obligations" and "Secured Obligations," as the case may be (in each
case as such terms are defined in the applicable Credit Support Document),
including without limitation the payment and performance of all such
"Obligations," "Guarantied Obligations" or "Secured Obligations," as the case
may be, in respect of the Obligations of Company now or hereafter existing
under or in respect of the Amended Agreement and the Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of
the Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in
the Amended Agreement and the Credit Support Documents to which it is a party
or otherwise bound are true, correct and complete in all material respects on
and as of the Second Amendment Effective Date to the same extent as though made
on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
Each Credit Support Party acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Credit Support Party is not required by the terms of the Credit Agreement
or any other Loan Document to consent to the amendments to the Credit Agreement
effected pursuant to this Amendment and (ii) nothing in the Credit Agreement,
this Amendment or any other Loan Document shall be deemed to require the
consent of such Credit Support Party to any future amendments to the Credit
Agreement.
6
<PAGE> 7
SECTION 5. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND
THE OTHER LOAN DOCUMENTS.
(i) On and after the Second Amendment Effective Date,
each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import referring to
the Credit Agreement, and each reference in the other Loan Documents
to the "Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement shall mean and be a reference
to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute a
waiver of any provision of, or operate as a waiver of any right, power
or remedy of Agent or any Lender under, the Credit Agreement or any of
the other Loan Documents.
B. FEES AND EXPENSES. Company acknowledges that all
costs, fees and expenses as described in subsection 11.2 of the Credit
Agreement incurred by Agent and its counsel with respect to this Amendment and
the documents and transactions contemplated hereby shall be for the account of
Company.
C. HEADINGS. Section and subsection headings in this
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Amendment shall become
effective upon the execution of a counterpart hereof by
7
<PAGE> 8
Requisite Lenders and each of the other parties hereto and receipt by Company
and Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
[Remainder of page intentionally left blank]
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
RALPHS GROCERY COMPANY
By:
-------------------------------
Title:
----------------------------
FOOD 4 LESS HOLDINGS, INC.
By:
-------------------------------
Title:
----------------------------
FALLEY'S, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
CALA CO.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
FOOD 4 LESS OF SOUTHERN CALIFORNIA,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
S-1
<PAGE> 10
BAY AREA WAREHOUSE STORES, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
CALA FOODS, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
BELL MARKETS, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
ALPHA BETA COMPANY,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
FOOD 4 LESS GM, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
S-2
<PAGE> 11
FOOD 4 LESS MERCHANDISING, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
FOOD 4 LESS OF CALIFORNIA, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
CRAWFORD STORES, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
S-3
<PAGE> 12
BANKERS TRUST COMPANY, INDIVIDUALLY AND AS AGENT
By:
--------------------------------
Title:
-----------------------------
S-4
<PAGE> 13
BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION,
individually and as Co-Arranger
By:
-------------------------------
Title:
----------------------------
S-5
<PAGE> 14
THE CHASE MANHATTAN BANK, N.A.,
individually and as Co-Arranger
By:
-------------------------------
Title:
----------------------------
S-6
<PAGE> 15
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE, individually
and as Co-Arranger
By:
-------------------------------
Title:
----------------------------
By:
-------------------------------
Title:
----------------------------
S-7
<PAGE> 16
CREDIT SUISSE, individually and
as Co-Arranger
By:
-------------------------------
Title:
----------------------------
S-8
<PAGE> 17
THE MITSUBISHI TRUST AND
BANKING CORPORATION, individually
and as Co-Arranger
By:
-------------------------------
Title:
----------------------------
S-9
<PAGE> 18
NATWEST BANK, N.A., individually and
as Co-Arranger
By:
-------------------------------
Title:
----------------------------
S-10
<PAGE> 19
UNION BANK, individually and as Co-Arranger
By:
-------------------------------
Title:
----------------------------
S-11
<PAGE> 20
UNITED STATES NATIONAL BANK OF OREGON,
individually and as Co-Arranger
By:
-------------------------------
Title:
----------------------------
S-12
<PAGE> 21
WELLS FARGO BANK, N.A., individually
and as Co-Arranger
By:
-------------------------------
Title:
----------------------------
S-13
<PAGE> 22
BANQUE INDOSUEZ, individually and
as Co-Agent
By:
-------------------------------
Title:
----------------------------
S-14
<PAGE> 23
BANQUE PARIBAS, individually and as Co-Agent
By:
-------------------------------
Title:
----------------------------
By:
-------------------------------
Title:
----------------------------
S-15
<PAGE> 24
CREDIT LYONNAIS, CAYMAN ISLAND
BRANCH, individually and as Co-Agent
By:
-------------------------------
Title:
----------------------------
S-16
<PAGE> 25
ACADIA PARTNERS, L.P.
By:
-------------------------------
Title:
----------------------------
S-17
<PAGE> 26
THE BANK OF CALIFORNIA, N.A.
By:
-------------------------------
Title:
----------------------------
S-18
<PAGE> 27
THE BANK OF NOVA SCOTIA
By:
-------------------------------
Title:
----------------------------
S-19
<PAGE> 28
CERES FINANCE LTD.
By:
-------------------------------
Title:
----------------------------
S-20
<PAGE> 29
CITIBANK, N.A.
By:
-------------------------------
Title:
----------------------------
S-21
<PAGE> 30
CONTINENTAL CASUALTY COMPANY
By:
-------------------------------
Title:
----------------------------
S-22
<PAGE> 31
DAI-ICHI KANGYO BANK, LIMITED,
LOS ANGELES AGENCY
By:
-------------------------------
Title:
----------------------------
S-23
<PAGE> 32
PRIME INCOME TRUST
By:
-------------------------------
Title:
----------------------------
S-24
<PAGE> 33
SENIOR DEBT PORTFOLIO
By:
-------------------------------
Title:
----------------------------
S-25
<PAGE> 34
EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES,
FOR THE NUTMEG ACCOUNT
By:
-------------------------------
Title:
----------------------------
S-26
<PAGE> 35
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES,
FOR THE ANNUITY HIGH INCOME
ACCOUNT
By:
-------------------------------
Title:
----------------------------
S-27
<PAGE> 36
FIRST NATIONAL BANK OF BOSTON
By:
-------------------------------
Title:
----------------------------
S-28
<PAGE> 37
FIRSTRUST BANK
By:
-------------------------------
Title:
----------------------------
S-29
<PAGE> 38
INDOSUEZ CAPITAL FUND II
By:
-------------------------------
Title:
----------------------------
S-30
<PAGE> 39
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By:
-------------------------------
Title:
----------------------------
S-31
<PAGE> 40
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
By:
-------------------------------
Title:
----------------------------
S-32
<PAGE> 41
JACKSON NATIONAL LIFE
INSURANCE COMPANY
By:
-------------------------------
Title:
----------------------------
S-33
<PAGE> 42
JACKSON NATIONAL LIFE
INSURANCE COMPANY OF
MICHIGAN
By:
-------------------------------
Title:
----------------------------
S-34
<PAGE> 43
KEYPORT LIFE INSURANCE
COMPANY
By:
-------------------------------
Title:
----------------------------
S-35
<PAGE> 44
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------
Title:
----------------------------
S-36
<PAGE> 45
MASS MUTUAL CORPORATE
VALUE PARTNERS, LTD.
By:
-------------------------------
Title:
----------------------------
S-37
<PAGE> 46
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By:
-------------------------------
Title:
----------------------------
S-38
<PAGE> 47
MERRILL LYNCH PRIME RATE
PORTFOLIO
By:
-------------------------------
Title:
----------------------------
S-39
<PAGE> 48
NATIONSBANK, N.A.
By:
-------------------------------
Title:
----------------------------
S-40
<PAGE> 49
NIPPON CREDIT BANK, LTD.,
LOS ANGELES AGENCY
By:
-------------------------------
Title:
----------------------------
S-41
<PAGE> 50
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------
Title:
----------------------------
S-42
<PAGE> 51
PEARL STREET L.P.
By:
-------------------------------
Title:
----------------------------
S-43
<PAGE> 52
PENNSYLVANIA LIFE INSURANCE COMPANY
By:
-------------------------------
Title:
----------------------------
S-44
<PAGE> 53
PILGRIM PRIME RATE TRUST
By:
-------------------------------
Title:
----------------------------
S-45
<PAGE> 54
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS B.V.
By:
-------------------------------
Title:
----------------------------
S-46
<PAGE> 55
STICHTING RESTRUCTURED
OBLIGATIONS BACKED BY SENIOR
ASSETS 2 (ROSA2)
By:
-------------------------------
Title:
----------------------------
S-47
<PAGE> 56
SIROCCA LIMITED PARTNERSHIP
By:
-------------------------------
Title:
----------------------------
S-48
<PAGE> 57
STRATA FUNDING LTD.
By:
-------------------------------
Title:
----------------------------
S-49
<PAGE> 58
THE SUMITOMO TRUST & BANKING
CO., LTD., LOS ANGELES AGENCY
By:
-------------------------------
Title:
----------------------------
S-50
<PAGE> 59
THE TRAVELERS INSURANCE
COMPANY
By:
-------------------------------
Title:
----------------------------
S-51
<PAGE> 60
USL CAPITAL CORPORATION
By:
-------------------------------
Title:
----------------------------
S-52
<PAGE> 61
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By:
-------------------------------
Title:
----------------------------
S-53
<PAGE> 62
S-54
<PAGE> 63
SECOND AMENDMENT SIGNATURE PAGE CHECKLIST
Company
RALPHS GROCERY COMPANY
FOOD 4 LESS HOLDINGS, INC.
FALLEY'S, INC.,
as a Credit Support Party
CALA CO.,
as a Credit Support Party
FOOD 4 LESS OF SOUTHERN CALIFORNIA,
as a Credit Support Party
BAY AREA WAREHOUSE STORES, INC.,
as a Credit Support Party
CALA FOODS, INC.,
as a Credit Support Party
BELL MARKETS, INC.,
as a Credit Support Party
ALPHA BETA COMPANY,
as a Credit Support Party
FOOD 4 LESS GM, INC.,
as a Credit Support Party
FOOD 4 LESS MERCHANDISING, INC.,
as a Credit Support Party
<PAGE> 64
FOOD 4 LESS OF CALIFORNIA, INC.,
as a Credit Support Party
CRAWFORD STORES, INC.,
as a Credit Support Party
<PAGE> 65
Banks
BANKERS TRUST COMPANY,
INDIVIDUALLY AND AS AGENT
BANK OF AMERICA NATIONAL TRUST & SAVINGS
ASSOCIATION, individually and as Co-Arranger
THE CHASE MANHATTAN BANK, N.A.,
individually and as Co-Arranger
COMPAGNIE FINANCIERE DE CIC
ET DE L'UNION EUROPEENNE,
individually and as Co-Arranger
CREDIT SUISSE,
individually and as Co-Arranger
THE MITSUBISHI TRUST AND BANKING
CORPORATION, individually and as Co-Arranger
NATWEST BANK, N.A., individually and as Co-Arranger
UNION BANK, individually and as Co-Arranger
UNITED STATES NATIONAL BANK OF OREGON, individually and as
Co-Arranger
WELLS FARGO BANK, N.A., individually and as Co-Arranger
BANQUE INDOSUEZ, individually and as Co-Agent
BANQUE PARIBAS, individually and as Co-Agent
<PAGE> 66
CREDIT LYONNAIS, CAYMAN ISLAND BRANCH, individually and as Co-Agent
ACADIA PARTNERS, L.P.
THE BANK OF CALIFORNIA, N.A.
THE BANK OF NOVA SCOTIA
CERES FINANCE LTD.
CITIBANK, N.A.
CONTINENTAL CASUALTY COMPANY
DAI-ICHI KANGYO BANK, LIMITED, LOS ANGELES AGENCY
PRIME INCOME TRUST
SENIOR DEBT PORTFOLIO
EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES, FOR THE NUTMEG ACCOUNT
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES,
FOR THE ANNUITY HIGH INCOME ACCOUNT
FIRST NATIONAL BANK OF BOSTON
FIRSTRUST BANK
<PAGE> 67
INDOSUEZ CAPITAL FUND II
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
JACKSON NATIONAL LIFE INSURANCE COMPANY
JACKSON NATIONAL LIFE INSURANCE COMPANY OF MICHIGAN
KEYPORT LIFE INSURANCE COMPANY
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
MASS MUTUAL CORPORATE VALUE PARTNERS, LTD.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
MERRILL LYNCH PRIME RATE PORTFOLIO
NATIONSBANK, N.A.
NIPPON CREDIT BANK, LTD., LOS ANGELES AGENCY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
PEARL STREET L.P.
<PAGE> 68
PENNSYLVANIA LIFE INSURANCE COMPANY
PILGRIM PRIME RATE TRUST
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS B.V.
STICHTING RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS 2 (ROSA2)
SIROCCA LIMITED PARTNERSHIP
STRATA FUNDING LTD.
THE SUMITOMO TRUST & BANKING CO., LTD., LOS ANGELES AGENCY
THE TRAVELERS INSURANCE COMPANY
USL CAPITAL CORPORATION
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
<PAGE> 1
Exhibit 4.1.4
RALPHS GROCERY COMPANY
THIRD AMENDMENT, CONSENT AND WAIVER
TO CREDIT AGREEMENT
This THIRD AMENDMENT, CONSENT AND WAIVER TO CREDIT AGREEMENT
(this "AMENDMENT") is dated as of March 8, 1996 and entered into by and among
Food 4 Less Holdings, Inc., a Delaware corporation ("NEW HOLDINGS"), Ralphs
Grocery Company, a Delaware corporation and legal successor to Food 4 Less
Supermarkets, Inc. ("COMPANY"), the financial institutions listed on the
signature pages hereof ("LENDERS"), the Co- Agents and Co-Arrangers listed on
the signature pages hereof and Bankers Trust Company, as administrative agent
for Lenders ("AGENT"), and, for purposes of Sections 2, 3 and 7 hereof, the
Credit Support Parties (as defined in Section 7 hereof) listed on the signature
pages hereof, and is made with reference to that certain Credit Agreement dated
as of June 14, 1995, by and among New Holdings, Company, the Lenders, the Co-
Agents and Co-Arrangers party thereto, and Agent, as amended by that certain
First Amendment dated as of August 18, 1995 and that certain Second Amendment
dated as of December 11, 1995 (as so amended, the "CREDIT AGREEMENT").
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit
Agreement to (i) amend certain of the mandatory prepayment provisions contained
therein, (ii) amend certain of the financial covenants and other negative
covenants contained therein, and (iii) make certain other amendments, all as
more specifically set forth herein;
WHEREAS, Company, Lenders and Credit Support Parties desire to
amend that certain Pledge Agreement dated as of June 14, 1995, by and among
Company, Falley's, Cala Co, F4LSC, Bay Area, Cala, Bell Markets, Alpha Beta,
F4LGM, F4L Merchandising, F4L California and Crawford (all as defined therein)
and Agent (the "PLEDGE AGREEMENT") to (i) make certain conforming changes to
Schedule I to the Pledge Agreement, as amended, attached thereto, and (ii) make
certain other related amendments to the Pledge Agreement, all as more
specifically set forth herein;
WHEREAS, Company, Lenders and Credit Support Parties desire to
amend that certain Deposit Accounts Security Agreement dated as of June 14,
1995, by New Holdings, Company, Falley's, Cala Co, F4LSC, Bay Area, Cala, Bell
Markets, Alpha Beta, F4LGM, F4L Merchandising, F4L California and Crawford (all
as defined therein) and Agent (the "DEPOSIT ACCOUNT AGREEMENT") to make certain
conforming changes to Schedule A to the Deposit Account Agreement attached
thereto; and
<PAGE> 2
WHEREAS, Company has requested Lenders to consent to the
release by Agent of the Lien on Company's parcel of land at Adams and Vermont
Streets in Los Angeles, to permit Company to transfer such parcel to a
Subsidiary partnership to obtain construction financing on such parcel, and to
secure such construction financing with a Lien on such parcel; and Lenders are
willing, subject to the terms and conditions set forth herein, to consent to
such release and to waive Company's compliance with certain related covenants
set forth in subsections 6.11(ii) and 7.7(x) of the Credit Agreement:
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO SECTION 1: PROVISIONS RELATING TO
DEFINED TERMS
A. Subsection 1.1 of the Credit Agreement is hereby
amended by adding thereto the following definitions, which shall be inserted in
proper alphabetical order:
"`EARNED ADDITIONAL CAPITAL EXPENDITURES AMOUNT'
means, for Fiscal Years 1997, 1998 and 1999, the amount, if any, by
which actual Consolidated Adjusted EBITDA for the immediately
preceding Fiscal Year exceeds the sum of the minimum required
Consolidated Adjusted EBITDA for the four Fiscal Quarters of such
immediately preceding Fiscal Year as set forth in subsection 7.6C,
such amount in any event not to exceed $25,000,000 for Fiscal Year
1997, $30,000,000 for Fiscal Year 1998 and $30,000,000 for Fiscal Year
1999.
`SELECTED ASSETS' means all or the majority of the
Company's existing Northern California operations, all or the majority
of its existing Midwestern operations, and any or all of its owned
warehouse facilities, in each case as set forth in Schedule
1.1Dannexed hereto."
B. Subsection 1.1 of the Credit Agreement is hereby
further amended by deleting the definitions "Senior Debt Indentures", "Senior
Indebtedness", "Subordinated Debt Indentures" and "Subordinated Indebtedness"
in their entirety and substituting the following therefor:
"`SENIOR DEBT INDENTURES' means any or all of the Old F4L
Senior Note Indenture, the New F4L Senior Note Indenture, the Holdings
Discount Note Indenture, the Holdings Discount Debenture Indenture,
and any indenture pursuant to which any senior Indebtedness permitted
under subsection 7.1(xiii) is issued.
`SENIOR INDEBTEDNESS' means any or all of the Old F4L Senior
Notes, the New F4L Senior Notes, the Holdings Discount Notes, the
Holdings Discount Debentures, and any senior Indebtedness permitted
under subsection 7.1(xiii).
THIRD AMENDMENT
2 EXECUTION COPY
<PAGE> 3
`SUBORDINATED DEBT INDENTURES' means, collectively, the Old
F4L Senior Subordinated Note Indenture, the New F4L Senior
Subordinated Note Indenture, the Old RGC 9% Subordinated Note
Indenture, the Old RGC 10-1/4% Subordinated Note Indenture, the New
RGC Senior Subordinated Note Indenture, the Seller Debenture
Indenture, and any indenture pursuant to which any subordinated
Indebtedness permitted under subsection 7.1(xiii) is issued.
`SUBORDINATED INDEBTEDNESS' means (i) the Old F4L Senior
Subordinated Notes, the New F4L Senior Subordinated Notes, the New RGC
Senior Subordinated Notes, the Seller Debentures, the Old RGC 9%
Subordinated Notes and the Old RGC 10-1/4% Subordinated Notes and (ii)
any other Indebtedness of Holdings or Company subordinated in right of
payment to the Obligations pursuant to documentation containing
maturities, amortization schedules, covenants, defaults, remedies,
subordination provisions and other material terms in form and
substance satisfactory to Agent and Requisite Lenders, including
without limitation any subordinated Indebtedness permitted under
subsection 7.1(xiii)."
C. Subsection 1.1 of the Credit Agreement is hereby
further amended by deleting the reference to "proceeds" in subclause (b) of
clause (ii) of the definition "CONSOLIDATED CAPITAL EXPENDITURES" and
substituting "principal amount" therefor.
1.2 AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF
COMMITMENTS AND LOANS
A. REVOLVING LOANS. Clause (b) of the second paragraph
of subsection 2.1A(v) of the Credit Agreement is hereby amended by deleting it
in its entirety and substituting the following therefor:
"(b) (i) for 30 consecutive days during the period
between the first day of the fourth Fiscal Quarter in Fiscal Year 1996
through and including the last day of the first Fiscal Quarter in
Fiscal Year 1997, the sum of (1) the aggregate outstanding principal
amount of all Revolving Loans plus (2) the aggregate outstanding
principal amount of all Swing Line Loans shall not exceed
$150,000,000; (ii) for 30 consecutive days during the period between
the first day of the fourth Fiscal Quarter in Fiscal Year 1997 through
and including the last day of the first Fiscal Quarter in Fiscal Year
1998, the sum of (1) the aggregate outstanding principal amount of all
Revolving Loans plus (2) the aggregate outstanding principal amount of
all Swing Line Loans shall not exceed $110,000,000; and (iii)
thereafter for 30 consecutive days during the twelve-month period that
immediately follows the Company's most recent compliance with this
subparagraph (b), the sum of (1) the aggregate outstanding principal
amount of all Revolving Loans plus (2) the aggregate outstanding
principal amount of all Swing Line Loans shall not exceed
$75,000,000."
THIRD AMENDMENT
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<PAGE> 4
B. SWING LINE LOANS. Clause (b) of the second paragraph
of subsection 2.1A(vi) of the Credit Agreement is hereby amended by deleting it
in its entirety and substituting the following therefor:
"(b) (i) for 30 consecutive days during the period
between the first day of the fourth Fiscal Quarter in Fiscal Year 1996
through and including the last day of the first Fiscal Quarter in
Fiscal Year 1997, the sum of (1) the aggregate outstanding principal
amount of all Revolving Loans plus (2) the aggregate outstanding
principal amount of all Swing Line Loans shall not exceed
$150,000,000; (ii) for 30 consecutive days during the period between
the first day of the fourth Fiscal Quarter in Fiscal Year 1997 through
and including the last day of the first Fiscal Quarter in Fiscal Year
1998, the sum of (1) the aggregate outstanding principal amount of all
Revolving Loans plus (2) the aggregate outstanding principal amount of
all Swing Line Loans shall not exceed $110,000,000; and (iii)
thereafter for 30 consecutive days during the twelve-month period that
immediately follows the Company's most recent compliance with this
subparagraph (b), the sum of (1) the aggregate outstanding principal
amount of all Revolving Loans plus (2) the aggregate outstanding
principal amount of all Swing Line Loans shall not exceed
$75,000,000."
C. MANDATORY PREPAYMENTS AND MANDATORY REDUCTIONS OF
REVOLVING LOAN COMMITMENTS FROM ASSET SALES.
1. Subsection 2.4B(iii)(a) of the Credit
Agreement is hereby amended by deleting from the first sentence
thereof the text up to and including the first semicolon and
substituting the following therefor:
"(1) No later than the third Business Day following
the date of receipt by Company or any of its Subsidiaries of Cash
Proceeds of any Asset Sale (other than a Required Disposition or a
Planned Disposition or an Asset Sale of Selected Assets) in an
aggregate cumulative amount equal to or exceeding $500,000 (and as to
which no prepayment of the Loans shall have been made pursuant to this
subsection 2.4B(iii)(a)), (2) no later than the third Business Day
following the date of receipt by Company or any of its Subsidiaries of
Cash Proceeds of Required Dispositions or Planned Dispositions or
Selected Assets in an aggregate cumulative amount equal to or
exceeding $5,000,000 (and as to which no prepayment of the Loans shall
have been made pursuant to this subsection 2.4B(iii)(a)), and (3) with
respect to any Cash Proceeds of Required Dispositions or Planned
Dispositions or Selected Assets received by Company or any of its
Subsidiaries that are not yet required to be prepaid pursuant to the
immediately preceding clause (2) because the aggregate cumulative
amount thereof does not yet exceed $5,000,000, on the earlier of (y)
the 180th day following the date of the first Asset Sale for which
Company begins to cumulate Cash Proceeds pursuant to the immediately
preceding clause (2) and (z) the date of the occurrence of any Event
of Default or Potential Event of Default, (A) in the case of the first
$100,000,000 in Net Cash Proceeds from Asset
THIRD AMENDMENT
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<PAGE> 5
Sales of Selected Assets made during Fiscal Year 1996 and the first
two Fiscal Quarters of Fiscal Year 1997 (the "SELECTED ASSET
PROCEEDS"), Company shall (i) prepay the Term Loans in an amount equal
to 50% of such Selected Asset Proceeds and (ii) prepay the Swing Line
Loans to the full extent thereof and thereafter the Revolving Loans in
an amount equal to the remaining 50% of such Selected Asset Proceeds,
but the Revolving Loan Commitments shall not be reduced by any such
prepayment of the Swing Line Loans or Revolving Loans, and (B) in the
case of Net Cash Proceeds from Asset Sales other than such Selected
Asset Proceeds, Company shall prepay the Term Loans in an amount equal
to such Net Cash Proceeds and to the extent such Net Cash Proceeds
exceed the aggregate outstanding principal amount of Term Loans,
Company shall prepay in an amount equal to such excess first the Swing
Line Loans to the full extent thereof and second the Revolving Loans,
and the Revolving Loan Commitments shall be permanently reduced in an
amount equal to such excess;"
2. Subsection 2.4B(iii)(a) of the Credit
Agreement is hereby further amended by adding "or Asset Sales of
Selected Assets made in Fiscal Year 1996 and the first two Fiscal
Quarters of Fiscal Year 1997" immediately after the reference to
"Planned Dispositions" in the parenthetical in clauses (i) and (ii) of
the first proviso contained therein.
3. Subsection 2.4B(iii)(a) of the Credit
Agreement is hereby further amended by adding "(other than Asset Sales
of Selected Assets made in Fiscal Year 1996 and the first two Fiscal
Quarters of Fiscal Year 1997)" immediately after the second reference
to "after the Closing Date" in clause (iii) of the first proviso
contained therein.
D. PREPAYMENTS AND REDUCTIONS DUE TO ISSUANCE OF DEBT.
Subsection 2.4B(iii)(b) of the Credit Agreement is hereby amended by deleting
it in its entirety and substituting the following therefor:
"(b) Prepayments and Reductions Due to Issuance of
Debt. No later than the first Business Day following the date of
receipt by Holdings or any of its Subsidiaries of the cash proceeds
(net of underwriting discounts, similar placement fees and commissions
and other reasonable costs and expenses associated therewith) from the
issuance of any debt Securities of Holdings or any such Subsidiary
(the "NET DEBT PROCEEDS"), (1) in the case of the first $100,000,000
in aggregate Net Debt Proceeds from the issuance of debt Securities
pursuant to subsection 7.1(xiii) during Fiscal Year 1996 and Fiscal
Year 1997 (the "INITIAL NET DEBT PROCEEDS"), Company shall (i) prepay
the Term Loans in an amount equal to 50% of such Initial Net Debt
Proceeds and (ii) prepay the Swing Line Loans to the full extent
thereof and thereafter the Revolving Loans in an amount equal to the
remaining 50% of such Initial Net Debt Proceeds, but the Revolving
Loan Commitments shall not be reduced by any such prepayment of Swing
Line Loans or Revolving Loans, and (2) in the case of Net Debt
Proceeds other than such Initial Net Debt Proceeds,
THIRD AMENDMENT
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<PAGE> 6
Company shall prepay the Term Loans in an amount equal to such Net
Debt Proceeds and to the extent the amount of such Net Debt Proceeds
exceeds the aggregate outstanding principal amount of the Term Loans,
Company shall prepay in an amount equal to such excess first the Swing
Line Loans to the full extent thereof and second the Revolving Loans,
and the Revolving Loan Commitments shall be permanently reduced in an
amount equal to such excess. Any such mandatory prepayments shall be
applied as specified in subsection 2.4B(iv)."
E. MANDATORY PREPAYMENTS AND MANDATORY REDUCTIONS OF
REVOLVING LOAN COMMITMENTS DUE TO ISSUANCE OF EQUITY SECURITIES. Subsection
2.4B(iii)(c) of the Credit Agreement is hereby amended by adding immediately
after the reference to "provided, however, that" in the proviso contained in
the first sentence thereof the following: ", commencing with Fiscal Year 1998
and for any Fiscal Year thereafter,".
F. MANDATORY PREPAYMENTS AND MANDATORY REDUCTIONS OF
REVOLVING LOAN COMMITMENTS DUE TO EXCESS CASH FLOW. Subsection 2.4B(iii)(e) of
the Credit Agreement is hereby amended (1) by deleting the reference to "75%"
contained therein and substituting "(i) for Fiscal Year 1995 through Fiscal
Year 1997, 100%, and (ii) commencing with Fiscal Year 1998 and thereafter, 75%"
therefor, and (2) by adding immediately after the reference to "provided,
however, that" in the proviso contained in the first sentence thereof the
following: ", commencing with Fiscal Year 1998 and for any Fiscal Year
thereafter,".
G. APPLICATION OF MANDATORY PREPAYMENTS OF TERM LOANS BY
ORDER OF MATURITY. Subsection 2.4B(iv)(b) of the Credit Agreement is hereby
amended by deleting clause (y) contained therein in its entirety and
substituting the following therefor:
"(y) in the case of any mandatory prepayments to be
applied to the Tranche A Term Loans from Selected Asset Proceeds
pursuant to clause (A) of subsection 2.4B(iii)(a) or from Initial Net
Debt Proceeds pursuant to clause (1) of subsection 2.4B(iii)(b), to
reduce unpaid scheduled installments of principal of the Tranche A
Term Loans set forth in subsection 2.4A(i) in forward order of
maturity for up to the immediately succeeding twelve-month period, and
in the case of all other mandatory prepayments, to reduce the unpaid
scheduled installments of principal of the Term Loans set forth in
subsections 2.4A(i), 2.4A(ii), 2.4A(iii) and 2.4A(iv) on a pro rata
basis;"
H. APPLICATION OF PREPAYMENTS TO BASE RATE LOANS AND
EURODOLLAR RATE LOANS. Subsection 2.4B(iv)(c) of the Credit Agreement is
hereby amended by deleting the period at the end of the second sentence thereof
and by substituting the following therefor: "; provided, however, in no event
shall the aggregate amount of all such prepayments being held by Agent in any
such account exceed $7,500,000."
THIRD AMENDMENT
6 EXECUTION COPY
<PAGE> 7
1.3 AMENDMENTS TO SECTION 7: COMPANY'S NEGATIVE
COVENANTS
A. INDEBTEDNESS. Subsection 7.1 of the Credit Agreement
is hereby amended by deleting the reference to "and" at the end of subsection
7.1(xii), renumbering subsection 7.1(xiii) as subsection 7.1(xiv), and by
adding a new subsection 7.1(xiii) thereto as follows:
"(xiii) Holdings and Company may become during
Fiscal Year 1996 and/or Fiscal Year 1997 and remain liable with
respect to unsecured senior Indebtedness and/or unsecured senior
subordinated Indebtedness in an aggregate principal amount which shall
not exceed $250,000,000, the terms of which Indebtedness shall be in
form and substance satisfactory to Agent and Requisite Lenders;
provided, that Holdings shall contribute the proceeds from the
issuance of such senior Indebtedness to Company in the form of an
equity contribution; provided further, that in either case, the
Company shall apply such proceeds in accordance with subsection
2.4B(iii)(b); and"
B. INVESTMENTS; JOINT VENTURES. Subsection 7.3(vii) of
the Credit Agreement is hereby amended by deleting the reference to
"$35,000,000" contained therein and substituting "(1) for Fiscal Years 1996 and
1997, $25,000,000 at any time outstanding, and (2) commencing with Fiscal Year
1998 and thereafter, $35,000,000" therefor.
C. CONTINGENT OBLIGATIONS.
1. Subsection 7.4 of the Credit Agreement is
hereby amended by deleting clause (vi) therefrom in its entirety and
substituting the following therefor:
"(vi) Subsidiaries of Company may become and remain
liable with respect to Contingent Obligations in respect of any
Indebtedness of Company permitted by subsection 7.1(vi) or subsection
7.1(xiii) pursuant to guarantees entered into by any Subsidiary of
Company; provided that any such guarantee entered into by any
Subsidiary of Company after the Closing Date either shall be in the
form of such guarantee as in effect on the Closing Date and delivered
to Agent pursuant to subsection 4.1L, as such form may be amended from
time to time to the extent permitted under subsection 7.15B, or shall
be in form and substance satisfactory to Agent and Requisite Lenders;"
2. Subsection 7.4 of the Credit Agreement is
hereby further amended by deleting the reference to "$35,000,000" in
clause (ix) contained therein and substituting "(1) for Fiscal Years
1996 and 1997, $25,000,000 at any time outstanding, and (2) commencing
with Fiscal Year 1998 and thereafter, $35,000,000" therefor.
THIRD AMENDMENT
7 EXECUTION COPY
<PAGE> 8
D. RESTRICTED JUNIOR PAYMENTS; OTHER RESTRICTED PAYMENTS.
1. Subsection 7.5A of the Credit Agreement is
hereby amended by adding at the end of clause (v) contained therein
the following: "and to the holders of Indebtedness permitted under
subsection 7.1(xiii) to the extent required by the terms of, and
subject to any subordination provisions contained in, the indenture
pursuant to which such Indebtedness is issued,".
2. Subsection 7.5A of the Credit Agreement is
hereby further amended by deleting the reference to "and the Seller
Debentures" in clause (vi) contained therein and substituting ", the
Seller Debentures and any Indebtedness permitted under subsection
7.1(xiii)" therefor.
3. Subsection 7.5A of the Credit Agreement is
hereby further amended (1) by deleting the reference to "and"
immediately preceding clause (xiv) contained therein and substituting
"," therefor, and (2) by adding a new subsection 7.1(xv) at the end of
the first sentence contained therein as follows:
"and (xv) Company may make payments of regularly
scheduled interest in respect of subordinated Indebtedness permitted
pursuant to subsection 7.1(xiii), in each case in accordance with the
terms of, and to the extent required by, and subject to the
subordination provisions contained in, the applicable Subordinated
Debt Indenture,"
4. Subsection 7.5B of the Credit Agreement is
hereby amended by adding at the end of clause (v) contained therein
the following: "and to the holders of senior Indebtedness permitted
under subsection 7.1(xiii) in accordance with the terms of and to the
extent required by the terms of the indenture pursuant to which such
Indebtedness is issued."
THIRD AMENDMENT
8 EXECUTION COPY
<PAGE> 9
E. MINIMUM FIXED CHARGE COVERAGE RATIO. Subsection 7.6A
of the Credit Agreement is hereby amended (1) by deleting the reference to
"1.24:1.00" in clause (b) contained therein and substituting "1.15:1.00"
therefor, (2) by deleting the reference to "1.30:1.00" in clause (c) contained
therein and substituting "1.05:1.00" therefor, and (3) by deleting the table
contained therein in its entirety and substituting the following therefor:
<TABLE>
<CAPTION>
MINIMUM FIXED
"PERIOD CHARGE COVERAGE RATIO
--------------- ---------------------
<S> <C>
2nd Fiscal Quarter, 1996 1.07:1.00
3rd Fiscal Quarter, 1996 1.12:1.00
4th Fiscal Quarter, 1996 1.18:1.00
1st Fiscal Quarter, 1997 1.18:1.00
2nd Fiscal Quarter, 1997 1.19:1.00
3rd Fiscal Quarter, 1997 1.20:1.00
4th Fiscal Quarter, 1997 1.23:1.00
1st Fiscal Quarter, 1998 1.26:1.00
2nd Fiscal Quarter, 1998 1.29:1.00
3rd Fiscal Quarter, 1998 1.33:1.00
4th Fiscal Quarter, 1998 1.36:1.00
1st Fiscal Quarter, 1999 1.41:1.00
2nd Fiscal Quarter, 1999 1.42:1.00
3rd Fiscal Quarter, 1999 1.46:1.00
4th Fiscal Quarter, 1999 1.50:1.00
1st Fiscal Quarter, 2000 1.49:1.00
2nd Fiscal Quarter, 2000 1.48:1.00
3rd Fiscal Quarter, 2000 1.48:1.00
4th Fiscal Quarter, 2000 1.48:1.00
1st Fiscal Quarter, 2001 1.48:1.00
2nd Fiscal Quarter, 2001 1.47:1.00
3rd Fiscal Quarter, 2001 1.46:1.00
4th Fiscal Quarter, 2001 1.45:1.00
1st Fiscal Quarter, 2002 1.46:1.00
2nd Fiscal Quarter, 2002 1.47:1.00
3rd Fiscal Quarter, 2002 1.48:1.00
4th Fiscal Quarter, 2002
and each Fiscal Quarter
thereafter 1.50:1.00"
</TABLE>
THIRD AMENDMENT
9 EXECUTION COPY
<PAGE> 10
F. MAXIMUM LEVERAGE RATIO. Subsection 7.6B of the
Credit Agreement is hereby amended (1) by deleting the reference to "6.40:1.00"
in clause (y) contained therein and substituting "7.10:1.00" therefor, (2) by
deleting the reference to "6.00:1.00" in clause (z) contained therein and
substituting "7.80:1.00" therefor, and (3) by deleting the table contained
therein in its entirety and substituting the following therefor:
<TABLE>
<CAPTION>
"PERIOD MAXIMUM LEVERAGE RATIO
--------------- ----------------------
<S> <C>
2nd Fiscal Quarter, 1996 7.70:1.00
3rd Fiscal Quarter, 1996 7.10:1.00
4th Fiscal Quarter, 1996 6.40:1.00
1st Fiscal Quarter, 1997 6.30:1.00
2nd Fiscal Quarter, 1997 6.20:1.00
3rd Fiscal Quarter, 1997 5.90:1.00
4th Fiscal Quarter, 1997 5.70:1.00
1st Fiscal Quarter, 1998 5.40:1.00
2nd Fiscal Quarter, 1998 5.30:1.00
3rd Fiscal Quarter, 1998 5.00:1.00
4th Fiscal Quarter, 1998 4.80:1.00
1st Fiscal Quarter, 1999 4.50:1.00
2nd Fiscal Quarter, 1999 4.40:1.00
3rd Fiscal Quarter, 1999 4.10:1.00
4th Fiscal Quarter, 1999 3.90:1.00
1st Fiscal Quarter, 2000 3.90:1.00
2nd Fiscal Quarter, 2000 3.80:1.00
3rd Fiscal Quarter, 2000 3.70:1.00
4th Fiscal Quarter, 2000 3.50:1.00
1st Fiscal Quarter, 2001
and each Fiscal
Quarter thereafter 3.20:1.00"
</TABLE>
THIRD AMENDMENT
10 EXECUTION COPY
<PAGE> 11
G. MINIMUM CONSOLIDATED ADJUSTED EBITDA. Subsection
7.6C of the Credit Agreement is hereby amended (1) by deleting the reference to
"$168,000,000" in clause (b) contained therein and substituting "$158,000,000"
therefor, (2) by deleting the reference to "$254,000,000" in clause (c)
contained therein and substituting "$205,000,000" therefor, and (3) by deleting
the table contained therein in its entirety and substituting the following
therefor:
<TABLE>
<CAPTION>
MINIMUM CONSOLIDATED
"PERIOD ADJUSTED EBITDA
--------------- -------------------
<S> <C>
2nd Fiscal Quarter, 1996 $275,000,000
3rd Fiscal Quarter, 1996 $295,000,000
4th Fiscal Quarter, 1996 $330,000,000
1st Fiscal Quarter, 1997 $335,000,000
2nd Fiscal Quarter, 1997 $340,000,000
3rd Fiscal Quarter, 1997 $350,000,000
4th Fiscal Quarter, 1997 $360,000,000
1st Fiscal Quarter, 1998 $373,000,000
2nd Fiscal Quarter, 1998 $385,000,000
3rd Fiscal Quarter, 1998 $398,000,000
4th Fiscal Quarter, 1998 $410,000,000
1st Fiscal Quarter, 1999 $423,000,000
2nd Fiscal Quarter, 1999 $435,000,000
3rd Fiscal Quarter, 1999 $448,000,000
4th Fiscal Quarter, 1999 $465,000,000
1st Fiscal Quarter, 2000 $470,000,000
2nd Fiscal Quarter, 2000 $479,000,000
3rd Fiscal Quarter, 2000 $488,000,000
4th Fiscal Quarter, 2000 $500,000,000
1st Fiscal Quarter, 2001 $505,000,000
2nd Fiscal Quarter, 2001 $510,000,000
3rd Fiscal Quarter, 2001 $515,000,000
4th Fiscal Quarter, 2001 $520,000,000
1st Fiscal Quarter, 2002 $525,000,000
2nd Fiscal Quarter, 2002 $530,000,000
3rd Fiscal Quarter, 2002 $535,000,000
4th Fiscal Quarter, 2002 $540,000,000
1st Fiscal Quarter, 2003 $545,000,000
2nd Fiscal Quarter, 2003 $550,000,000
3rd Fiscal Quarter, 2003 $555,000,000
4th Fiscal Quarter, 2003 $560,000,000
1st Fiscal Quarter, 2004 $565,000,000
2nd Fiscal Quarter, 2004 $570,000,000
3rd Fiscal Quarter, 2004 $575,000,000
4th Fiscal Quarter, 2004 $580,000,000
1st Fiscal Quarter, 2005
and each Fiscal Quarter
thereafter $580,000,000"
</TABLE>
THIRD AMENDMENT
11 EXECUTION COPY
<PAGE> 12
H. MINIMUM CONSOLIDATED NET WORTH. Subsection 7.6D of
the Credit Agreement is hereby amended by deleting the table set forth therein
in its entirety and substituting the following therefor:
<TABLE>
<CAPTION>
MINIMUM
CONSOLIDATED
"PERIOD NET WORTH
--------------- ---------------
<S> <C>
One day after the Closing Date through
the end of 4th Fiscal Quarter, 1995 $170,000,000
1st Fiscal Quarter, 1996 $125,000,000
2nd Fiscal Quarter, 1996 $ 88,000,000
3rd Fiscal Quarter, 1996 $ 60,000,000
4th Fiscal Quarter, 1996 $ 25,000,000
1st Fiscal Quarter, 1997 $ 5,000,000
2nd Fiscal Quarter, 1997 ($ 25,000,000)
3rd Fiscal Quarter, 1997 ($ 60,000,000)
4th Fiscal Quarter, 1997 ($ 95,000,000)
1st Fiscal Quarter, 1998 ($104,300,000)
2nd Fiscal Quarter, 1998 ($120,300,000)
3rd Fiscal Quarter, 1998 ($133,600,000)
4th Fiscal Quarter, 1998 ($145,000,000)
1st Fiscal Quarter, 1999 ($134,000,000)
2nd Fiscal Quarter, 1999 ($141,000,000)
3rd Fiscal Quarter, 1999 ($146,000,000)
4th Fiscal Quarter, 1999 ($146,000,000)
1st Fiscal Quarter, 2000 ($146,000,000)
2nd Fiscal Quarter, 2000 ($146,000,000)
3rd Fiscal Quarter, 2000 ($146,000,000)
4th Fiscal Quarter, 2000 ($136,000,000)
1st Fiscal Quarter, 2001 ($125,000,000)
2nd Fiscal Quarter, 2001 ($120,000,000)
3rd Fiscal Quarter, 2001 ($115,000,000)
4th Fiscal Quarter, 2001 ($110,000,000)
1st Fiscal Quarter, 2002 ($105,000,000)
2nd Fiscal Quarter, 2002 ($100,000,000)
3rd Fiscal Quarter, 2002 ($ 95,000,000)
4th Fiscal Quarter, 2002 ($ 90,000,000)
1st Fiscal Quarter, 2003 ($ 85,000,000)
2nd Fiscal Quarter, 2003 ($ 80,000,000)
3rd Fiscal Quarter, 2003 ($ 75,000,000)
4th Fiscal Quarter, 2003 ($ 70,000,000)
1st Fiscal Quarter, 2004 ($ 65,000,000)
2nd Fiscal Quarter, 2004 ($ 60,000,000)
3rd Fiscal Quarter, 2004 ($ 55,000,000)
4th Fiscal Quarter, 2004 ($ 50,000,000)
First day of 1st Fiscal Quarter, 2005
and thereafter ($ 50,000,000)"
</TABLE>
I. RESTRICTIONS ON FUNDAMENTAL CHANGES; ASSET SALES AND
ACQUISITIONS. Subsection 7.7 of the Credit Agreement is hereby amended by
deleting the
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<PAGE> 13
reference to "and" at the end of subsection 7.7(x), renumbering subsection
7.7(xi) as subsection 7.7(xii), and by adding a new subsection 7.7(xi) thereto
as follows:
"(xi) Company and its Subsidiaries may make Asset
Sales of the Selected Assets during Fiscal Year 1996 and the first two
Fiscal Quarters of Fiscal Year 1997; provided that the consideration
received for such assets shall be in an amount at least equal to the
fair market value thereof, provided that for any individual transaction
or series of related transactions for which the aggregate consideration
equals or exceeds $25,000,000, Company shall provide to Agent a
fairness opinion from an investment bank acceptable to Agent that the
amount of the consideration is not less than the fair market value of
such assets; and"
J. CAPITAL EXPENDITURES. Subsection 7.8 of the Credit
Agreement is hereby amended by deleting it in its entirety and substituting the
following therefor:
"7.8 CONSOLIDATED CAPITAL EXPENDITURES.
Holdings shall not make or incur any Consolidated
Capital Expenditures and Company shall not, and shall not permit its
Subsidiaries to, make or incur Consolidated Capital Expenditures, in
any Fiscal Year indicated below, in an aggregate amount in excess of
the corresponding amount (the "MAXIMUM CONSOLIDATED CAPITAL
EXPENDITURES AMOUNT") set forth below opposite such Fiscal Year;
provided that the Maximum Consolidated Capital Expenditures Amount
shall be increased (i) for Fiscal Years 1997, 1998 and 1999, by an
amount equal to the Earned Additional Capital Expenditures Amount, if
any; (ii) commencing with Fiscal Year 1997 and for any Fiscal Year
thereafter, by an amount equal to the excess, if any (but in no event,
more than 15% of the Maximum Consolidated Capital Expenditures Amount
for the immediately preceding Fiscal Year, as set forth in the table
below, as adjusted by the Earned Additional Capital Expenditures
Amount, if any, for such Fiscal Year), of the Maximum Consolidated
Capital Expenditures Amount for the previous Fiscal Year (as adjusted
in accordance with this proviso) over the actual amount of Consolidated
Capital Expenditures for such previous Fiscal Year; (iii) commencing
with Fiscal Year 1997 and for any Fiscal Year thereafter, by an amount
up to, but in no event greater than, 5% of the Maximum Consolidated
Capital Expenditures Amount for the immediately following Fiscal Year,
as set forth in the table below, which amount described in this clause
(iii) shall reduce the Maximum Consolidated Capital Expenditures Amount
for the immediately following Fiscal Year; (iv) commencing with Fiscal
Year 1997 and for any Fiscal Year thereafter, by an amount equal to
(but in no event greater than $15,000,000 for any Fiscal Year) the
aggregate amount of proceeds (other than insurance proceeds,
condemnation awards and indemnity payments) received by Company and its
Subsidiaries from Asset Sales during such Fiscal Year (other than Asset
Sales of Selected Assets made in Fiscal Year 1996 and the first two
Fiscal Quarters of Fiscal Year 1997) to the extent such proceeds have
been reinvested in new stores or the construction or remodeling of
stores of Company and its Subsidiaries within 270
THIRD AMENDMENT
13 EXECUTION COPY
<PAGE> 14
days of receipt; and (v) for Fiscal Year 1997 only, (1) by an amount
equal to 50% of the first $50,000,000 of Selected Asset Proceeds (as
defined in subsection 2.4B(iii)(a)), and (2) by an amount equal to 25%
of the first $100,000,000 of Initial Debt Proceeds (as defined in
subsection 2.4B(iii)(b)), up to a maximum aggregate increase pursuant
to the preceding clauses (1) and (2) of $25,000,000; provided, however,
that the amount which may be added to the Maximum Consolidated Capital
Expenditures Amount pursuant to clauses (ii) and (iii) of the
immediately preceding proviso shall not exceed for any Fiscal Year 15%
of the Maximum Consolidated Capital Expenditures Amount for such Fiscal
Year as set forth in the table below, as adjusted by the Earned
Additional Capital Expenditures Amount, if any, for such Fiscal Year:
<TABLE>
<CAPTION>
MAXIMUM CONSOLIDATED
FISCAL YEAR CAPITAL EXPENDITURES AMOUNT
----------- ---------------------------
<S> <C>
Closing Date through
and including January 28, 1996 $116,000,000
Fiscal Year 1996 $ 95,000,000
Fiscal Year 1997 $ 50,000,000
Fiscal Year 1998 $ 50,000,000
Fiscal Year 1999 $ 70,000,000
Fiscal Year 2000
and each Fiscal Year thereafter $100,000,000"
</TABLE>
K. RESTRICTION ON LEASES. Subsection 7.9 of the Credit
Agreement is hereby amended by deleting the table set forth therein in its
entirety and substituting the following therefor:
<TABLE>
<CAPTION>
MAXIMUM LEASE
"PERIOD PAYMENTS
--------------- -----------------
<S> <C>
Third Fiscal Quarter 1995 through
and including January 28, 1996 $ 93,300,000
Fiscal Year 1996 $214,500,000
Fiscal Year 1997 $233,300,000
Fiscal Year 1998 $244,900,000
Fiscal Year 1999 $259,800,000
Fiscal Year 2000 $276,100,000
Fiscal Year 2001 $290,000,000
Fiscal Year 2002 $310,000,000
Fiscal Year 2003 $330,000,000
Fiscal Year 2004
and each Fiscal Year thereafter $350,000,000"
</TABLE>
THIRD AMENDMENT
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<PAGE> 15
1.4 AGREEMENT CONCERNING CERTAIN SELECTED ASSET SALES
Immediately upon the sale by Company or any of its
Subsidiaries of all or a majority of its existing Northern California
operations (the "NORTHERN CALIFORNIA SALE") or all or a majority of its
existing Midwestern operations (the "MIDWESTERN SALE"), Company and Agent, on
behalf of Lenders, shall enter into negotiations on adjustments to be made to
Consolidated Adjusted EBITDA to take into account the effect of such
disposition. Agent shall provide Lenders notice of the adjustments agreed upon
between Company and Agent with respect to the Northern California Sale or the
Midwestern Sale, as the case may be, such notice to be given immediately upon
such agreement. From and after the date of such notice, such adjustments will
be binding on all parties to this Amendment.
1.5 ADDITION TO AND MODIFICATION OF SCHEDULES TO THE
CREDIT AGREEMENT
A. SCHEDULE 1.1D: SELECTED ASSETS. The Credit Agreement
is hereby amended by adding thereto a new Schedule 1.1D in the form of Annex A
to this Amendment.
B. SCHEDULE 5.1: HOLDINGS AND SUBSIDIARIES OF HOLDINGS.
1. Schedule 5.1 to the Credit Agreement is hereby
amended by deleting row 7 "Bell Markets, Inc." in each of the
pre-merger and post-merger tables contained therein and substituting
the following therefor:
<TABLE>
<S> <C> <C> <C>
Bell Markets, Inc. Common: 100,000/14,720
California Par: $10.00 100% by Cala Co.
Stock Certificate Nos. I & J
</TABLE>
2. Schedule 5.1 to the Credit Agreement is hereby
further amended by deleting the reference to "Stock Certificate No. 3"
in row 9 "Alpha Beta Company" in the first table "Pre-Mergers Holdings
and Subsidiaries" contained therein and substituting "Stock Certificate
No. 2" therefor.
3. Schedule 5.1 to the Credit Agreement is hereby
further amended by (1) adding a footnote "*" immediately after the
reference to "Stock Certificate No. 3" in row 9 "Alpha Beta Company" in
the second table "Post-Mergers Subsidiaries of Holdings" contained
therein, and (2) adding the text of new footnote "*" to the second
table contained therein as follows:
"* The stock of the pre-Mergers Alpha Beta was represented by stock
certificate no. 2 of The Boys Market (successor by merger to Alpha
Beta and subsequently renamed Alpha Beta). Following the Closing,
certificate number 2 was cancelled
THIRD AMENDMENT
15 EXECUTION COPY
<PAGE> 16
and replaced by a new certificate number 3 with the Alpha Beta name to
avoid future confusion."
4. Schedule 5.1 to the Credit Agreement is hereby
further amended by adding as a new row 13 at the end of the pre-merger
table contained therein and as a new row 14 at the end of the
post-merger table contained therein the following:
<TABLE>
<S> <C> <C> <C>
Adams/Vermont Renaissance Common: n/a
Plaza, Ltd. (a California Par: n/a 75% by Alpha Beta
partnership) Stock Certificate No.: n/a
</TABLE>
C. SCHEDULE 7.2: EXISTING LIENS. Schedule 7.2 to the
Credit Agreement is hereby amended (1) by renumbering Item 48 contained therein
as Item 49, and (2) by adding a new Item 48 thereto as follows:
"48. Those Liens on certain patronage refund certificates issued by
Associated Wholesale Grocers, Inc. to Falley's as further
described on Part B to Schedule I to the Pledge Agreement."
D. SCHEDULE 7.3: EXISTING INVESTMENTS. Schedule 7.3 to
the Credit Agreement is hereby amended (1) by deleting Item 7 contained therein
in its entirety, and (2) renumbering Item 8 contained therein as Item 7.
1.6 MODIFICATION OF EXHIBITS
EXHIBIT X: FORM OF COMPLIANCE CERTIFICATE. Exhibit X to the
Credit Agreement is hereby amended by deleting said Exhibit X in its entirety
and substituting in place thereof a new Exhibit X in the form of Annex B to
this Amendment.
SECTION 2. AMENDMENTS TO THE PLEDGE AGREEMENT
2.1 AMENDMENTS TO SECTION 4: REPRESENTATIONS AND WARRANTIES
A. DESCRIPTION OF PLEDGED COLLATERAL. Subsection 4(b) of
the Pledge Agreement is hereby amended by deleting the last sentence contained
therein in its entirety and substituting the following therefor:
"The Pledged Debt constitutes all of the issued and
outstanding indebtedness evidenced by a promissory note of the
respective issuers thereof owing to the applicable Pledgor, except as
otherwise set forth in Schedule I annexed hereto."
THIRD AMENDMENT
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<PAGE> 17
B. OWNERSHIP OF PLEDGED COLLATERAL. Subsection 4(c) of
the Pledge Agreement is hereby amended by adding "and except as otherwise set
forth in Schedule I annexed hereto" immediately after the reference to
"Agreement" contained therein.
2.2 MODIFICATION OF SCHEDULE I TO THE PLEDGE AGREEMENT
SCHEDULE I: PLEDGED SHARES AND PLEDGED DEBT. Schedule I to the
Pledge Agreement, as amended, is hereby amended by deleting said Schedule I in
its entirety and substituting in place thereof a new Schedule I in the form of
Annex C to this Amendment.
SECTION 3. AMENDMENTS TO THE DEPOSIT ACCOUNT
AGREEMENT
3.1 MODIFICATION OF SCHEDULE A TO THE DEPOSIT ACCOUNT
AGREEMENT
SCHEDULE A: DEPOSIT ACCOUNTS. Schedule A to the Deposit
Account Agreement is hereby amended (1) by deleting row 28 "Falley's, Inc.
Mercantile Bank (KS) Collecting 023-183 " in its entirety, and (2) deleting
the reference to "First National Bank" in row 35 and substituting "First United
National Bank" therefor.
SECTION 4. CONSENT AND WAIVER
4.1 CONSENT TO RELEASE OF LIEN AND WAIVER OF CERTAIN
COVENANTS
Subject to the terms and conditions set forth herein and in
reliance on the representations and warranties of Company contained herein,
Lenders hereby:
1. consent to the release by Agent of the Lien on
Company's property at Adams and Vermont Streets in Los Angeles,
California, to the transfer of such property to a non-wholly owned
Subsidiary partnership, and to such Subsidiary partnership's
encumbering such property in favor of a third party construction
lender; and
2. waive compliance with the provisions of
subsections 6.11(ii) and 7.7(x) of the Credit Agreement to the extent,
and only to the extent that subsection 6.11(ii) would require such
Subsidiary partnership to encumber such parcel with a Lien in favor of
Agent and subsection 7.7(x) would require such Subsidiary partnership
to be wholly-owned; provided, however, that Company shall encumber its
leasehold interest in such parcel with a leasehold mortgage in favor of
Agent for the benefit of Lenders and such Subsidiary partnership shall
consent to such encumbrance.
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<PAGE> 18
4.2 LIMITATION OF CONSENT AND WAIVER
Without limiting the generality of the provisions of subsection
11.6 of the Credit Agreement, both the consent and waiver set forth above shall
be limited precisely as written and relate solely to the release of Agent's
Lien on Company's property at Adams and Vermont Streets and the noncompliance
of Company and such Subsidiary partnership with the provisions of subsections
6.11(ii) and 7.7(x) of the Credit Agreement in the manner and to the extent
described above, and nothing in this Section 4 shall be deemed to:
1. constitute a waiver of compliance by Company
and such Subsidiary partnership with respect to (i) subsections
6.11(ii) and 7.7(x) of the Credit Agreement in any other instance or
(ii) any other term, provision or condition of the Credit Agreement or
any other instrument or agreement referred to therein (whether in
connection with the release of such Lien or waiver of the of
subsections 6.11(ii) and 7.7(x) of the Credit Agreement or otherwise);
or
2. prejudice any right or remedy that Agent or
any Lender may now have (except to the extent such right or remedy was
based upon existing defaults that will not exist after giving effect to
this Section 4) or may have in the future under or in connection with
the Credit Agreement or any other instrument or agreement referred to
therein.
Except as expressly set forth herein, the terms, provisions and
conditions of the Credit Agreement and the other Loan Documents shall remain in
full force and effect and in all other respects are hereby ratified and
confirmed.
SECTION 5. CONDITIONS TO EFFECTIVENESS
Sections 1, 2, 3 and 4 of this Amendment shall become effective
only upon the satisfaction of all of the following conditions precedent (the
date of satisfaction of such conditions being referred to herein as the "THIRD
AMENDMENT EFFECTIVE DATE"):
A. On or before the Third Amendment Effective Date, each
of New Holdings and Company shall deliver to Agent for Lenders five originally
executed copies of the following, each, unless otherwise noted, dated the Third
Amendment Effective Date:
1. Signature and incumbency certificates of their
respective officers executing this Amendment;
and
2. Executed copies of this Amendment executed by
each of New Holdings, Company and each of the other Credit Support
Parties.
THIRD AMENDMENT
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<PAGE> 19
B. Each Lender party to this Amendment shall have
received an amendment fee in an amount equal to 0.25% of such Lender's Term
Loan Exposure and/or Revolving Loan Exposure, as the case may be.
C. Requisite Lenders and Requisite Class Lenders for
Class Lenders having Tranche A Term Loan Exposure and/or Revolving Term Loan
Exposure shall have executed and delivered copies of this Amendment to Agent.
D. On or before the Third Amendment Effective Date, all
corporate and other proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incidental thereto not
previously found acceptable by Agent, acting on behalf of Lenders, and its
counsel shall be satisfactory in form and substance to Agent and such counsel,
and Agent and such counsel shall have received all such counterpart originals
or certified copies of such documents as Agent may reasonably request.
SECTION 6. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement and the other Loan Documents in the manner provided
herein, each of New Holdings and Company represents and warrants to each Lender
that the following statements are true, correct and complete:
A. CORPORATE POWER AND AUTHORITY. Each Loan Party party
hereto has all requisite corporate power and authority to enter into this
Amendment and each such Loan Party has all requisite power and authority to
carry out the transactions contemplated by, and perform its obligations under,
the Credit Agreement and the other Loan Documents as amended by this Amendment
(the "AMENDED AGREEMENTS").
B. AUTHORIZATION OF AGREEMENTS. The execution and
delivery of this Amendment have been duly authorized by all necessary corporate
action on the part of each Loan Party hereto and the performance of the Amended
Agreements have been duly authorized by all necessary corporate action on the
part of each of such Loan Party.
C. GOVERNMENTAL CONSENTS. The execution and delivery by
each Loan Party party hereto of this Amendment and the performance by each of
such Loan Party of the Amended Agreements do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body.
D. BINDING OBLIGATION. This Amendment has been duly
executed and delivered by each Loan Party party hereto and is the legally valid
and binding obligations of each Loan Party party hereto and the Amended
Agreements are the legally valid and binding obligations of each of such Loan
Party, in each case enforceable against New
THIRD AMENDMENT
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<PAGE> 20
Holdings, Company and the other Loan Parties party hereto in accordance with
the respective terms of this Amendment and the Amended Agreements, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.
E. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM
CREDIT AGREEMENT. The representations and warranties contained in Section 5 of
the Credit Agreement are and will be true, correct and complete in all material
respects on and as of the Third Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
F. ABSENCE OF DEFAULT. No event has occurred and is
continuing or will result from the consummation of the transactions
contemplated by this Amendment that would constitute an Event of Default or a
Potential Event of Default.
SECTION 7. ACKNOWLEDGEMENT AND CONSENT
Company has entered into Deeds of Trust and is a party to the
Collateral Account Agreement, Pledge Agreements, the Security Agreement, the
Trademark Security Agreement, and the Deposit Accounts Security Agreement, in
each case as amended through the Third Amendment Effective Date, pursuant to
which Company has (i) created Liens in favor of Agent on certain Collateral to
secure its respective Secured Obligations and (ii) pledged certain Collateral
to secure its respective Secured Obligations (as defined in the Pledge
Agreements) as the case may be. New Holdings has entered into the Holdings
Guaranty and is a party to the Holdings Pledge Agreement, the Security
Agreement, and the Deposit Accounts Security Agreement, in each case as amended
through the Third Amendment Effective Date, pursuant to which New Holdings has
(i) guarantied the Obligations, (ii) created Liens in favor of Agent on certain
Collateral to secure its respective Secured Obligations (as defined in each of
the Security Agreement and the Deposit Accounts Security Agreement) and (iii)
pledged certain Collateral to Agent to secure its obligations under the
Holdings Guaranty, as the case may be. Each of Falley's, Cala Co, F4LSC, Bay
Area, Cala, Bell Markets, Alpha Beta, F4LGM, F4L Merchandising, F4L California
and Crawford (each as defined in the Collateral Documents) is a party to each
of the Guaranty, the Security Agreement, the Trademark Security Agreement, the
Deposit Accounts Security Agreement, its respective Pledge Agreement, its
respective Deed of Trust, if applicable, in each case as amended through the
Third Amendment Effective Date, pursuant to which each of such Subsidiaries of
Company has (i) guarantied the Obligations, (ii) created Liens in favor of
Agent on certain Collateral to secure their respective Secured Obligations (as
defined in each of the Security Agreement, the Trademark Security Agreement and
the Deposit Accounts Security Agreement) and (iii) pledged certain Collateral
to Agent to secure its respective Secured Obligations (as defined in the Pledge
Agreements) as the case may be. F4LGM is a party to the F4LGM Security
THIRD AMENDMENT
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<PAGE> 21
Agreement, as amended through the Third Amendment Effective Date, pursuant to
which F4LGM has pledged certain Collateral to Agent to secure its obligations
under the Guaranty. New Holdings, Company and each of such Subsidiaries of
Company are collectively referred to herein as the "CREDIT SUPPORT PARTIES",
and the Holdings Guaranty, the Holdings Pledge Agreement, the Security
Agreement, the Deposit Accounts Security Agreement, the Guaranty, the Trademark
Security Agreement, the Pledge Agreements, the Deeds of Trust, the Collateral
Account Agreement, and the F4LGM Security Agreement are collectively referred
to herein as the "CREDIT SUPPORT DOCUMENTS".
Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment
and consents to the amendment of the Credit Agreement and the other Loan
Documents effected pursuant to this Amendment. Each Credit Support Party
hereby confirms that each Credit Support Document to which it is a party or
otherwise bound and all Collateral encumbered thereby will continue to guaranty
or secure, as the case may be, to the fullest extent possible the payment and
performance of all "Obligations," "Guarantied Obligations" and "Secured
Obligations," as the case may be (in each case as such terms are defined in the
applicable Credit Support Document), including without limitation the payment
and performance of all such "Obligations," "Guarantied Obligations" or "Secured
Obligations," as the case may be, in respect of the Obligations of Company now
or hereafter existing under or in respect of the Amended Agreements and the
Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of
the Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment except as otherwise expressly
provided by this Amendment. Each Credit Support Party represents and warrants
that all representations and warranties contained in the Amended Agreements and
the Credit Support Documents to which it is a party or otherwise bound are
true, correct and complete in all material respects on and as of the Third
Amendment Effective Date to the same extent as though made on and as of that
date, except to the extent such representations and warranties specifically
relate to an earlier date, in which case they were true, correct and complete
in all material respects on and as of such earlier date.
Each Credit Support Party acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Credit Support Party is not required by the terms of the Credit Agreement
to consent to the amendments to the Credit Agreement effected pursuant to this
Amendment and (ii) nothing in the Credit Agreement, this Amendment or any other
Loan Document shall be deemed to require the consent of such Credit Support
Party to any future amendments to the Credit Agreement.
THIRD AMENDMENT
21 EXECUTION COPY
<PAGE> 22
SECTION 8. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND
THE OTHER LOAN DOCUMENTS.
(i) On and after the Third Amendment Effective Date, each
reference in the Credit Agreement, Pledge Agreement or Deposit Account
Agreement, as the case may be, to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, Pledge Agreement or Deposit Account Agreement, as the case
may be, and each reference in the other Loan Documents to any such
agreement shall mean and be a reference to the Amended Agreements.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute a
waiver of any provision of, or operate as a waiver of any right, power
or remedy of Agent or any Lender under, the Credit Agreement or any of
the other Loan Documents.
B. FEES AND EXPENSES. Company acknowledges that all
costs, fees and expenses as described in subsection 11.2 of the Credit
Agreement incurred by Agent and its counsel with respect to this Amendment and
the documents and transactions contemplated hereby shall be for the account of
Company.
C. HEADINGS. Section and subsection headings in this
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Amendment shall become
effective upon the execution of a counterpart hereof by Requisite Lenders,
Requisite
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<PAGE> 23
Class Lenders for Class Lenders having Tranche A Term Loan Exposure and/or
Revolving Term Loan Exposure, and each of the other parties hereto and receipt
by Company and Agent of written or telephonic notification of such execution
and authorization of delivery thereof.
[Remainder of page intentionally left blank]
THIRD AMENDMENT
23 EXECUTION COPY
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
RALPHS GROCERY COMPANY
By:
-------------------------------
Title:
----------------------------
FOOD 4 LESS HOLDINGS, INC.
By:
-------------------------------
Title:
----------------------------
FALLEY'S, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
CALA CO.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
FOOD 4 LESS OF SOUTHERN CALIFORNIA,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-1 EXECUTION COPY
<PAGE> 25
BAY AREA WAREHOUSE STORES, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
CALA FOODS, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
BELL MARKETS, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
ALPHA BETA COMPANY,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
FOOD 4 LESS GM, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-2 EXECUTION COPY
<PAGE> 26
FOOD 4 LESS MERCHANDISING, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
FOOD 4 LESS OF CALIFORNIA, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
CRAWFORD STORES, INC.,
as a Credit Support Party
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-3 EXECUTION COPY
<PAGE> 27
BANKERS TRUST COMPANY, INDIVIDUALLY
AND AS AGENT
By:
--------------------------------
Title:
-----------------------------
THIRD AMENDMENT
S-4 EXECUTION COPY
<PAGE> 28
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION, individually and
as Co-Arranger
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-5 EXECUTION COPY
<PAGE> 29
THE CHASE MANHATTAN BANK, N.A.,
individually and as Co-Arranger
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-6 EXECUTION COPY
<PAGE> 30
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE, individually and
as Co-Arranger
By:
-------------------------------
Title:
----------------------------
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-7 EXECUTION COPY
<PAGE> 31
CREDIT SUISSE, individually and as
Co-Arranger
By:
-------------------------------
Title:
----------------------------
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-8 EXECUTION COPY
<PAGE> 32
THE MITSUBISHI TRUST AND BANKING
CORPORATION, individually and as Co-
Arranger
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-9 EXECUTION COPY
<PAGE> 33
NATWEST BANK, N.A., individually and
as Co-Arranger
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-10 EXECUTION COPY
<PAGE> 34
UNION BANK, individually and as
Co-Arranger
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-11 EXECUTION COPY
<PAGE> 35
UNITED STATES NATIONAL BANK OF
OREGON, individually and as
Co-Arranger
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-12 EXECUTION COPY
<PAGE> 36
WELLS FARGO BANK, N.A., individually
and as Co-Arranger
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
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<PAGE> 37
BANQUE INDOSUEZ, individually and as
Co-Agent
By:
-------------------------------
Title:
----------------------------
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
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<PAGE> 38
BANQUE PARIBAS, individually and as
Co-Agent
By:
-------------------------------
Title:
----------------------------
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
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<PAGE> 39
CREDIT LYONNAIS, CAYMAN ISLAND
BRANCH, individually and as Co-Agent
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-16 EXECUTION COPY
<PAGE> 40
ACADIA PARTNERS, L.P.
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-17 EXECUTION COPY
<PAGE> 41
THE BANK OF CALIFORNIA, N.A.
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-18 EXECUTION COPY
<PAGE> 42
THE BANK OF NOVA SCOTIA
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-19 EXECUTION COPY
<PAGE> 43
CERES FINANCE LTD.
By: Chancellor Senior Secured
Management, Inc., as Financial
Manager
By:
-------------------------------
Title:
----------------------------
STRATA FUNDING LTD.
By: Chancellor Senior Secured
Management, Inc., as Financial
Manager
By:
-------------------------------
Title:
----------------------------
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS B.V.
By: Chancellor Senior Secured
Management, Inc., as Portfolio
Advisor
By:
-------------------------------
Title:
----------------------------
STICHTING RESTRUCTURED
OBLIGATIONS BACKED BY SENIOR
ASSETS 2 (ROSA2)
By: Chancellor Senior Secured
Management, Inc., as
Portfolio Advisor
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-20 EXECUTION COPY
<PAGE> 44
KEYPORT LIFE INSURANCE COMPANY
By: Chancellor Senior Secured
Management, Inc., as Portfolio
Advisor
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-21 EXECUTION COPY
<PAGE> 45
CITIBANK, N.A.
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-22 EXECUTION COPY
<PAGE> 46
CITY NATIONAL BANK
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-23 EXECUTION COPY
<PAGE> 47
CONTINENTAL CASUALTY COMPANY
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-24 EXECUTION COPY
<PAGE> 48
DAI-ICHI KANGYO BANK, LIMITED,
LOS ANGELES AGENCY
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-25 EXECUTION COPY
<PAGE> 49
PRIME INCOME TRUST
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-26 EXECUTION COPY
<PAGE> 50
SENIOR DEBT PORTFOLIO
By: Boston Management and
Research, as Investment
Advisor
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-27 EXECUTION COPY
<PAGE> 51
EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES, FOR THE
NUTMEG ACCOUNT
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-28 EXECUTION COPY
<PAGE> 52
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES, FOR
THE ANNUITY HIGH INCOME ACCOUNT
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-29 EXECUTION COPY
<PAGE> 53
FIRST NATIONAL BANK OF BOSTON
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-30 EXECUTION COPY
<PAGE> 54
FIRSTRUST BANK
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-31 EXECUTION COPY
<PAGE> 55
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-32 EXECUTION COPY
<PAGE> 56
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-33 EXECUTION COPY
<PAGE> 57
JACKSON NATIONAL LIFE INSURANCE
COMPANY
By: PPM America, Inc., as Attorney
in Fact, on behalf of Jackson
National Life Insurance
Company
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-34 EXECUTION COPY
<PAGE> 58
JACKSON NATIONAL LIFE INSURANCE
COMPANY OF MICHIGAN
By: PPM America, Inc., as Attorney
in Fact, on behalf of Jackson
National Life Insurance
Company of Michigan
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-35 EXECUTION COPY
<PAGE> 59
LEHMAN COMMERCIAL PAPER INC.
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-36 EXECUTION COPY
<PAGE> 60
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-37 EXECUTION COPY
<PAGE> 61
MASS MUTUAL CORPORATE VALUE
PARTNERS, LTD.
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-38 EXECUTION COPY
<PAGE> 62
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-39 EXECUTION COPY
<PAGE> 63
MERRILL LYNCH PRIME RATE
PORTFOLIO
By: Merrill Lynch Asset
Management, L.P., as
Investment Advisor
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-40 EXECUTION COPY
<PAGE> 64
NATIONSBANK, N.A.
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-41 EXECUTION COPY
<PAGE> 65
NIPPON CREDIT BANK, LTD.,
LOS ANGELES AGENCY
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-42 EXECUTION COPY
<PAGE> 66
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-43 EXECUTION COPY
<PAGE> 67
PENNSYLVANIA LIFE INSURANCE
COMPANY
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-44 EXECUTION COPY
<PAGE> 68
PROTECTIVE LIFE INSURANCE COMPANY
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-45 EXECUTION COPY
<PAGE> 69
SENIOR HIGH INCOME PORTFOLIO, INC.
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-46 EXECUTION COPY
<PAGE> 70
SIROCCA LIMITED PARTNERSHIP
By: Planden Corporation,
General Partner
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-47 EXECUTION COPY
<PAGE> 71
THE SUMITOMO TRUST & BANKING CO.,
LTD., LOS ANGELES AGENCY
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-48 EXECUTION COPY
<PAGE> 72
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-49 EXECUTION COPY
<PAGE> 73
USL CAPITAL CORPORATION
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-50 EXECUTION COPY
<PAGE> 74
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-51 EXECUTION COPY
<PAGE> 75
BANK OF AMERICA ILLINOIS
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-52 EXECUTION COPY
<PAGE> 76
INDOSUEZ CAPITAL FUNDING II, LIMITED
By: Indosuez Capital as Portfolio
Advisor
By:
-------------------------------
Title:
----------------------------
THIRD AMENDMENT
S-53 EXECUTION COPY
<PAGE> 77
ANNEX A
SCHEDULE 1.1D
SELECTED ASSETS
1. Northern California Operations
All or a majority of the existing businesses operated by Cala Co. and
its Subsidiaries.
2. Midwestern Operations
All or a majority of the existing businesses operated by Falley's,
Inc. and its Subsidiaries.
3. Warehouse Facilities
Warehouse facilities in Glendale, California.
THIRD AMENDMENT
Annex A-1 EXECUTION COPY
<PAGE> 78
ANNEX B
EXHIBIT X
[FORM OF COMPLIANCE CERTIFICATE]
COMPLIANCE CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFY IN OUR CAPACITY AS OFFICERS OF COMPANY THAT:
(1) We are the duly elected [Title] and [Title] of Ralphs
Grocery Company, a Delaware corporation ("COMPANY");
(2) We have reviewed the terms of that certain Credit
Agreement dated as of June 14, 1995, as amended, supplemented or
otherwise modified to the date hereof (said Credit Agreement, as so
amended, supplemented or otherwise modified, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined in
this Certificate (including Attachment No. 1 annexed hereto and made a
part hereof) being used in this Certificate as therein defined), by
and among Food 4 Less Holdings, Inc. ("HOLDINGS"), Food 4 Less
Supermarkets, Inc., the financial institutions listed therein as
Lenders, Co-Agents and Co-Arrangers, and Bankers Trust Company, as
Administrative Agent, and the terms of the other Loan Documents, and
we have made, or have caused to be made under our supervision, a
review in reasonable detail of the transactions and condition of
Holdings and its Subsidiaries during the accounting period covered by
the attached financial statements; and
(3) The examination described in paragraph (2) above did
not disclose, and we have no knowledge of, the existence of any
condition or event which constitutes an Event of Default or Potential
Event of Default during or at the end of the accounting period covered
by the attached financial statements or as of the date of this
Certificate[, except as set forth below].
[Set forth [below] [in a separate attachment to this
Certificate] are all exceptions to paragraph (3) above listing, in detail, the
nature of the condition or event, the period during which it has existed and
the action which Company has taken, is taking, or proposes to take with respect
to each such condition or event:
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________]
THIRD AMENDMENT
Annex B-1 EXECUTION COPY
<PAGE> 79
The foregoing certifications, together with the computations
set forth in Attachment No. 1 annexed hereto and made a part hereof and the
financial statements delivered with this Certificate in support hereof, are
made and delivered this __________ day of _____________, _____ pursuant to
subsection 6.1(iv) of the Credit Agreement.
RALPHS GROCERY COMPANY
By: _________________________
Title: ______________________
By: __________________________
Title: _______________________
THIRD AMENDMENT
Annex B-2 EXECUTION COPY
<PAGE> 80
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
This Attachment No. 1 is attached to and made a part of a
Compliance Certificate dated as of ____________, ____ and pertains to the
period from ____________, ____ to ____________, ____. Subsection references
herein relate to subsections of the Credit Agreement.
A. INDEBTEDNESS
<TABLE>
<S> <C> <C>
1. Aggregate principal amount of outstanding Old F4L Senior Notes and Old
F4L Senior Subordinated Notes:
$___________
2. Aggregate principal amount of outstanding Old F4L Senior Notes and Old
F4L Senior Subordinated Notes outstanding as of the Closing Date:
$___________
3. Maximum aggregate principal amount of outstanding Old F4L Senior Notes
and Old F4L Senior Subordinated Notes permitted under subsection
7.1(vi)(a) (lesser of A(2) and $36,800,000):
$___________
4. Aggregate principal amount of outstanding Old F4L Senior Notes, Old F4L
Senior Subordinated Notes, New F4L Senior Notes and New F4L Senior
Subordinated Notes:
$___________
5. Aggregate principal amount of outstanding Old F4L Senior Notes, Old F4L
Senior Subordinated Notes, New F4L Senior Notes and New F4L Senior
Subordinated Notes outstanding as of the Closing Date:
$___________
</TABLE>
THIRD AMENDMENT
Annex B-3 EXECUTION COPY
<PAGE> 81
<TABLE>
<S> <C> <C>
6. Maximum aggregate principal amount of outstanding Old F4L Senior Notes,
Old F4L Senior Subordinated Notes, New F4L Senior Notes and New F4L
Senior Subordinated Notes permitted under subsection 7.1(vi)(b) (lesser
of A(5) and $670,000,000):
$___________
7. Aggregate principal amount of outstanding Old RGC 9% Subordinated Notes
and Old RGC 10-1/4% Subordinated Notes:
$___________
8. Aggregate principal amount of outstanding Old RGC 9% Subordinated Notes
and Old RGC 10-1/4% Subordinated Notes outstanding as of the Closing
Date:
$___________
9. Maximum aggregate principal amount of outstanding Old RGC 9% Subordinated
Notes and Old RGC 10-1/4% Subordinated Notes permitted under subsection
7.1(vi)(c) (lesser of A(8) and $10,000,000):
$___________
10. Aggregate principal amount of outstanding New RGC Senior Subordinated
Notes, the Old RGC 9% Subordinated Notes and the Old RGC 10-1/4%
Subordinated Notes:
$___________
11. Aggregate principal amount of outstanding New RGC Senior Subordinated
Notes, the Old RGC 9% Subordinated Notes and the Old RGC 10-1/4%
Subordinated Notes as of the Closing Date:
$___________
</TABLE>
THIRD AMENDMENT
Annex B-4 EXECUTION COPY
<PAGE> 82
<TABLE>
<S> <C> <C>
12. Maximum aggregate principal amount of outstanding New RGC Senior
Subordinated Notes, the Old RGC 9% Subordinated Notes and the Old RGC
10-1/4% Subordinated Notes permitted under subsection 7.1(vi)(d) (lesser
of A(11) and $530,000,000):
$___________
13. Aggregate principal amount of Indebtedness incurred to finance (together
with assumed Indebtedness originally incurred to finance) the purchase
price of equipment, fixtures and other similar property or remodeling or
other improvement costs of any facility of Company or any of its
Subsidiaries during the Fiscal Year permitted under subsection
7.1(viii)(a):
$___________
14. Maximum aggregate principal amount of such Indebtedness permitted to be
incurred or assumed under subsection 7.1(viii)(a) during the Fiscal Year:
$ 20,000,000
15. Aggregate principal amount of Indebtedness incurred to finance the
purchase price of any Real Property Assets consisting of fee interests in
stores (together with all assumed Indebtedness originally incurred to
finance the purchase price of any such Real Property Assets) permitted
under subsection 7.1(viii)(b):
$___________
16. Maximum aggregate principal amount of such incurred and/or assumed
Indebtedness permitted to be outstanding at any time under subsection
7.1(viii)(b):
$ 10,000,000
</TABLE>
THIRD AMENDMENT
Annex B-5 EXECUTION COPY
<PAGE> 83
<TABLE>
<S> <C> <C>
17. Aggregate amount of Indebtedness of Subsidiaries acquired after the
Closing Date, the acquisition of which was permitted under subsections
7.3(v) and 7.7(ii), existing immediately prior to the time such entity
became a Subsidiary of Company not incurred in contemplation of such
acquisition permitted under subsection 7.1(ix):
$___________
18. Maximum aggregate amount of such Indebtedness permitted to be outstanding
at any time under subsection 7.1(ix):
$ 4,000,000
19. The highest aggregate amount outstanding at any time during the Fiscal
Year of all Indebtedness represented by Deferred Trade Payables permitted
under subsection 7.1(x):
$___________
20. Maximum aggregate amount of such Indebtedness permitted to be outstanding
at any time under subsection 7.1(x):
$ 5,000,000
21. Aggregate amount of Indebtedness of Food 4 Less GM, Inc. permitted under
subsection 7.1(xi):
$___________
22. Maximum aggregate amount of such Indebtedness permitted to be outstanding
at any time under subsection 7.1(xi):
$ 2,000,000
23. Aggregate amount of Indebtedness evidenced by promissory notes issued to
employees or former employees in lieu of cash payments for stock of
Holdings required to be repurchased pursuant to Company's employee stock
ownership plan permitted under subsection 7.1(xii):
$___________
24. Maximum aggregate amount of such Indebtedness permitted to be outstanding
at any time under subsection 7.1(xii):
$ 4,000,000
</TABLE>
THIRD AMENDMENT
Annex B-6 EXECUTION COPY
<PAGE> 84
<TABLE>
<S> <C> <C> <C>
25. Aggregate principal amount of outstanding unsecured senior Indebtedness
and outstanding unsecured senior subordinated Indebtedness permitted
under subsection 7.1(xiii):
$___________
26. Maximum aggregate principal amount of unsecured senior Indebtedness and
unsecured senior subordinated Indebtedness permitted under subsection
7.1(xiii):
$250,000,000
27. Aggregate principal amount of other unsecured indebtedness permitted
under subsection 7.1(xiv):
$___________
28. Maximum aggregate principal amount of indebtedness permitted under
subsection 7.1(xiv):
$ 15,000,000
B. LIENS
1. Aggregate principal amount of Indebtedness secured by Liens on Real
Property Assets consisting of fee interests in stores permitted under
subsection 7.2A(iv):
$___________
2. Maximum aggregate principal amount of such Indebtedness secured by such
Liens permitted to be outstanding at any time under subsection 7.2A(iv):
$ 10,000,000
3. Aggregate value of all goods held on consignment secured by Liens in
favor of third parties as consignors (or as creditors of such consignors)
in the ordinary course of business permitted under subsection 7.2A(vi):
$___________
4. Maximum aggregate value of such goods secured by such Liens permitted to
be so held at any time under subsection 7.2A(vi):
$ 10,000,000
</TABLE>
THIRD AMENDMENT
Annex B-7 EXECUTION COPY
<PAGE> 85
<TABLE>
<S> <C> <C>
5. Aggregate principal amount of Indebtedness of Company or any of its
Subsidiaries secured by Liens not otherwise permitted by clauses 7.2A(i)
through (vi) permitted under subsection 7.2A(vii):
$___________
6. Maximum aggregate principal amount of such Indebtedness secured by such
Liens permitted to be outstanding at any time under subsection 7.2A(vii):
$ 6,000,000
C. INVESTMENTS: JOINT VENTURES
1. Aggregate amount of Investments owned by Food 4 Less GM, Inc. in Golden
Alliance permitted under subsection 7.3(vi):
$___________
2. Maximum aggregate amount of such Investments permitted to be owned at any
time under subsection 7.3(vi):
$ 4,000,000
3. Aggregate amount of all Development Investments permitted under
subsection 7.3(vii):
$___________
4. Maximum aggregate amount of such Development Investments permitted to be
outstanding at any time under subsection 7.3(vii) (for FY 1996 and 1997:
$25,000,000 - D(3), and for FY 1998 and thereafter: $35,000,000 - D(3)):
$___________
5. [To be tested only on or after the first anniversary of the Closing Date]
(a) The aggregate sales price for all Required Dispositions made on
or prior to the first anniversary of the Closing Date:
$________
</TABLE>
THIRD AMENDMENT
Annex B-8 EXECUTION COPY
<PAGE> 86
<TABLE>
<S> <C> <C>
(b) The portion of such aggregate sales price that was received in
the form of promissory notes or a deferred portion of such sales
price permitted under subsection 7.3(viii)(a):
$________
(c) Percentage permitted of such aggregate sales price that was
received in the form of promissory notes or a deferred portion
of such sales price permitted under subsection 7.3(viii)(a) (100
times (b) divided by (a)):
----- -------
__%
6. Maximum percentage of the aggregate sales price for all such Required
Dispositions permitted to be received in the form of promissory notes or
a deferred portion of such sales price:
25%
7. (a) Aggregate cash proceeds from all Planned Dispositions and
Required Dispositions on a cumulative basis from the Closing
Date:
$_________
(b) Such aggregate cash proceeds [exceed/do not exceed] $20,000,000:
[exceed/do not exceed]
8. [To be tested only at Fiscal Year-end]:
(a) The aggregate sales price for all Planned Dispositions in the
Fiscal Year:
$__________
(b) The portion of such aggregate sales price that was received in
the form of promissory notes or a deferred portion of such sales
price permitted under subsection 7.3(viii)(b):
$___________
</TABLE>
THIRD AMENDMENT
Annex B-9 EXECUTION COPY
<PAGE> 87
<TABLE>
<S> <C> <C>
(c) Percentage of such aggregate sales price that was received in
the form of promissory notes or a deferred portion of such sales
price permitted under subsection 7.3(viii)(b) (100 times (b)
-----
divided by (a)):
-------
__%
9. Maximum percentage of the aggregate sales price for all such Planned
Dispositions permitted to be received in the form of promissory notes or
a deferred portion of such sales price:
[25%] [50%]
10. Aggregate principal amount of promissory notes received by Company and
its Subsidiaries in consideration of, or the deferral of a portion of the
sales price accepted with respect to, any Asset Sale (other than Required
Dispositions and Planned Dispositions) permitted under 7.3(viii)(c):
$_____________
11. Maximum aggregate principal amount of such promissory notes and the
deferred portions of such sales permitted to be outstanding at any time
under subsection 7.3(viii)(c):
$ 10,000,000
12. Aggregate amount of all loans made by Company or any of its Subsidiaries
to their respective employees for the purpose of purchasing Holdings
common stock permitted under subsection 7.3(x):
$_____________
13. Maximum aggregate amount of such loans made to employees of Company or
any of its Subsidiaries permitted to be outstanding at any time under
subsection 7.3(x):
$ 4,000,000
14. Aggregate amount of loans made by Company or any of its Subsidiaries to
redevelopment agencies permitted under subsection 7.3(xi):
$___________
</TABLE>
THIRD AMENDMENT
Annex B-10 EXECUTION COPY
<PAGE> 88
<TABLE>
<S> <C> <C>
15. Maximum aggregate amount of such loans made to redevelopment agencies
permitted to be outstanding at any time under subsection 7.3(xi):
$ 10,000,000
16. Aggregate amount of all Investments in suppliers made in anticipation of
becoming a customer of such suppliers and in lieu of deposits, cash
discounts or concessions and in connection with joint ventures with
suppliers entered into in the ordinary course of business permitted under
subsection 7.3(xii):
$___________
17. Maximum aggregate amount of such Investments permitted to be outstanding
at any time under subsection 7.3(xii) ($5,000,000 - D(1)):
$___________
18. Aggregate amount of loans made by Company to Holdings during the Fiscal
Year for the purpose of paying general operating expenses, franchise tax
obligations, accounting, legal, corporate reporting and administrative
expenses as permitted under subsection 7.5A(viii) as permitted under
subsection 7.3(xiii):
$___________
19. Maximum aggregate amount of such loans made by Company to Holdings for
the Fiscal Year permitted under subsection 7.3(xiii) ($500,000 - E(4)
below):
$___________
</TABLE>
THIRD AMENDMENT
Annex B-11 EXECUTION COPY
<PAGE> 89
<TABLE>
<S> <C> <C>
20. Aggregate amount of (i) the cash portion of the purchase by Company and
its Subsidiaries of Holdings common stock during the Fiscal Year from an
employee stock ownership plan of any Loan Party or from participants or
former participants in any such plan or from any employee or former
employee of any Loan Party as required pursuant to the applicable plan or
agreement and (ii) the cash payments with respect to promissory notes
issued to any such participants or holders as permitted under subsection
7.3(xiv):
$___________
21. Aggregate amount of cash proceeds received by Holdings in the Fiscal Year
from its sale of shares of Holdings common stock to an employee stock
ownership plan or to participants in any such plan or to any employee
during the Fiscal Year:
$___________
22. Maximum aggregate amount of the cash portion of such purchases and cash
payments with respect to such promissory notes permitted under subsection
7.3(xiv) in the Fiscal Year ($5,000,000 + C(21)):
$___________
23. Aggregate amount of other Investments permitted under subsection 7.3(xv):
$___________
24. Maximum aggregate amount of such other Investments permitted to be
outstanding at any time under subsection 7.3(xv):
$ 5,000,000
</TABLE>
THIRD AMENDMENT
Annex B-12 EXECUTION COPY
<PAGE> 90
<TABLE>
<S> <C> <C>
D. CONTINGENT OBLIGATIONS
1. Aggregate amount of Contingent Obligations under guarantees in the
ordinary course of business of obligations of suppliers, customers,
franchisees and licensees permitted under subsection 7.4(v):
$___________
2. Maximum aggregate amount of such Contingent Obligations under such
guarantees permitted to be outstanding at any time under subsection
7.4(v) ($5,000,000 - C(16)):
$___________
3. Aggregate amount of Contingent Obligations permitted under subsection
7.4(ix):
$___________
4. Maximum aggregate amount of such Contingent Obligations permitted to be
outstanding at any time under subsection 7.4(ix) (for FY 1996 and 1997:
$25,000,000 - C(3), and for FY 1998 and thereafter: $35,000,000 - C(3)):
$___________
5. Aggregate amount of all other Contingent Obligations permitted under
subsection 7.4(x):
$___________
6. Maximum aggregate liability, contingent or otherwise, in respect of all
such Contingent Obligations permitted to be outstanding at any time under
subsection 7.4(x):
$ 8,000,000
</TABLE>
THIRD AMENDMENT
Annex B-13 EXECUTION COPY
<PAGE> 91
<TABLE>
<S> <C> <C>
E. RESTRICTED JUNIOR PAYMENTS
1. Aggregate amount of cash dividends made by Company to Holdings on a
cumulative basis (including prior to the Closing Date) to enable Holdings
to pay fees and expenses related to the Acquisition and all other
transactions related thereto permitted under subsection 7.5A(i)(b):
$___________
2. Aggregate amount of premium, fees and expenses related to the Acquisition
and all other transactions related thereto paid or payable, without
duplication, by any Loan Party (other than Holdings) on a cumulative
basis (including prior to the Closing Date):
$___________
3. Maximum cumulative amount of such cash dividends permitted under
subsection 7.5(A)(i)(b)($173,000,000 -E(2)):
$___________
4. Aggregate amount of cash dividends made by Company to Holdings during the
Fiscal Year for the purpose of paying general operating expenses,
franchise tax obligations, accounting, legal, corporate reporting and
administrative expenses as permitted under subsection 7.5A(viii):
$___________
5. Maximum aggregate amount of such cash dividends made by Company to
Holdings for the Fiscal Year permitted under subsections 7.5A(viii)
($500,000 - C(18)):
$___________
</TABLE>
THIRD AMENDMENT
Annex B-14 EXECUTION COPY
<PAGE> 92
<TABLE>
<S> <C> <C>
6. Commencing with Fiscal Year 1998 and any Fiscal Year thereafter,
aggregate amount of payments of principal made in respect of any
Indebtedness (other than the Loans) since the Closing Date with a portion
of the Equity Repayment Amount in accordance with subsection 2.4B(iii)(c)
(including all such payments of principal permitted under subsections
7.5A(ix) and 7.5B(iii)):
$___________
7. Commencing with Fiscal Year 1998 and any Fiscal Year thereafter, maximum
aggregate amount of such payments of principal permitted to be made, on a
cumulative basis, with the Equity Repayment Amount under subsection
2.4B(iii)(c) (including all such payments permitted under subsections
7.5A(ix) and 7.5B(iii)):
$ 25,000,000
8. Aggregate amount of payments of principal made in respect of any
Indebtedness (other than the Loans) since the Closing Date with a portion
of the Cash Flow Repayment Amount in accordance with subsection
2.4B(iii)(e) (including all such payments of principal permitted under
subsections 7.5A(ix) and 7.5B(iii)):
$___________
9. Maximum aggregate amount of such payments of principal permitted to be
made, on a cumulative basis, with the Cash Flow Repayment Amount under
subsection 2.4B(iii)(e) (including all such payments permitted under
subsections 7.5A(ix) and 7.5B(iii)):
$ 25,000,000
</TABLE>
THIRD AMENDMENT
Annex B-15 EXECUTION COPY
<PAGE> 93
F. MINIMUM FIXED CHARGE COVERAGE RATIO (for the [two-] [three-] Fiscal
Quarter period ending [January 28, 1996] or [April 21, 1996],
respectively, and for all subsequent dates, for the four-Fiscal Quarter
period ending ______________, _____ ("APPLICABLE PERIOD")).
<TABLE>
<S> <C> <C>
1. Consolidated Net Income: $___________
2. Consolidated Cash Interest Expense: $___________
3. Provisions for taxes based on income: $___________
4. Total depreciation expense: $___________
5. Total amortization expense: $___________
6. Cash Restructuring Charges (to the extent reducing net income):
$___________
7. The aggregate cumulative amount of cash Restructuring Charges included in
Consolidated Adjusted EBITDA and Consolidated Net Worth of any period
subsequent to the Closing Date and prior to the Applicable Period (to the
extent reducing net income):
$___________
8. Lesser of (i) F(6) and (ii) $45,000,000 minus F(7) (but in any event not
-----
less than zero):
$___________
9. Non-cash Restructuring Charges reflected on the consolidated financial
statement (to the extent reducing net income):
$___________
10. The aggregate cumulative amount of non-cash Restructuring Charges
reflected on the consolidated financial statements included in
Consolidated Adjusted EBITDA and Consolidated Net Worth of any period
subsequent to the Closing Date and prior to the Applicable Period (to the
extent reducing net income):
$___________
</TABLE>
THIRD AMENDMENT
Annex B-16 EXECUTION COPY
<PAGE> 94
<TABLE>
<S> <C> <C>
11. Lesser of (i) F(9) and (ii) $55,000,000 minus F(10) (but in any event not
-----
less than zero):
$___________
12. Restructuring Charges (F(8) + F(11)): $___________
13. Cash and non-cash Smith's-Related Restructuring Charges relating to
Warehouse Restructuring (to the extent reducing net income):
$___________
14. The aggregate cumulative amount of all cash and non-cash Smith's-Related
Restructuring Charges included in Consolidated Adjusted EBITDA and
Consolidated Net Worth of any period subsequent to the Closing Date and
prior to the Applicable Period with respect to Warehouse Restructuring
(to the extent reducing net income):
$___________
15. Lesser of (i) F(13) and (ii) $43,600,000 minus F(14) (but in any event
-----
not less than zero):
$____________
16. Cash Smith's-Related Restructuring Charges relating to Warehouse
Restructuring (to the extent reducing net income):
$___________
17. The aggregate cumulative amount of all cash Smith's-Related Restructuring
Charges included in Consolidated Adjusted EBITDA and Consolidated Net
Worth of any period subsequent to the Closing Date and prior to the
Applicable Period with respect to Warehouse Restructuring (to the extent
reducing net income):
$___________
18. Lesser of (i) F(16) and (ii) $33,200,000 minus F(17):
-----
$___________
</TABLE>
THIRD AMENDMENT
Annex B-17 EXECUTION COPY
<PAGE> 95
<TABLE>
<S> <C> <C>
19. Cash and non-cash Smith's-Related Restructuring Charges relating to Store
Restructuring (to the extent reducing net income):
$___________
20. The aggregate cumulative amount of all cash and non-cash Smith's-Related
Restructuring Charges included in Consolidated Adjusted EBITDA and
Consolidated Net Worth of any period subsequent to the Closing Date and
prior to the Applicable Period with respect to Store Restructuring (to
the extent reducing net income):
$___________
21. Lesser of (i) F(19) and (ii) $22,500,000 minus F(20):
-----
$___________
22. Cash Smith's-Related Restructuring Charges relating to Store
Restructuring (to the extent reducing net income):
$___________
23. The aggregate cumulative amount of all cash Smith's-Related Restructuring
Charges included in Consolidated Adjusted EBITDA and Consolidated Net
Worth of any period subsequent to the Closing Date and prior to the
Applicable Period with respect to Store Restructuring (to the extent
reducing net income):
$___________
24. Lesser of (i) F(22) and (ii) $12,800,000 minus F(23):
-----
$___________
25. Smith's-Related Restructuring Charges (F(15) + F(21)):
$___________
26. Other non-cash items reducing Consolidated Net Income:
$___________
27. Other non-cash items increasing Consolidated Net Income:
$___________
</TABLE>
THIRD AMENDMENT
Annex B-18 EXECUTION COPY
<PAGE> 96
<TABLE>
<S> <C> <C>
28. Consolidated Adjusted EBITDA (without duplication, F(1) + F(2) + F(3) +
F(4) + F(5) + F(12) + F(25) + F(26) - F(27)):
$___________
29. Consolidated Rental Payments: $___________
30. Consolidated Cash Interest Expense: $___________
31. Aggregate amount of scheduled principal payments attributable to Capital
Leases of Company and its Subsidiaries:
$___________
32. Consolidated Fixed Charges (without duplication, F(29) + F(30) + F(31)):
$___________
33. Fixed Charge Coverage Ratio (F(28) + F(29):F(32)):
____:1.00
21. Minimum Fixed Charge Coverage Ratio required under subsection 7.6A:
____:1.00
</TABLE>
G. MAXIMUM LEVERAGE RATIO (for the [two-] [three-] Fiscal Quarter period
ending on [January 28, 1996] and [April 21, 1996], respectively, and
for all subsequent dates, for the four-Fiscal Quarter period ending
______________, _______ ("APPLICABLE PERIOD")).
1. Maximum Leverage Ratio Multiplier:
<TABLE>
<S> <C> <C>
(a) for the two-Fiscal Quarter period ending January 28, 1996:
1.857
(b) for the three-Fiscal Quarter period ending April 21, 1996:
1.300
(c) for any other accounting period: 1.000
2. Consolidated Total Debt as of the last day of the Applicable Period:
$____________
3. Consolidated Adjusted EBITDA (F(28) above):
$____________
4. Leverage Ratio (G(2): G(3) x G(1)): ____:1.00
</TABLE>
THIRD AMENDMENT
Annex B-19 EXECUTION COPY
<PAGE> 97
<TABLE>
<S> <C> <C>
5. Maximum Leverage Ratio permitted under subsection 7.6B:
____:1.00
</TABLE>
H. MINIMUM CONSOLIDATED ADJUSTED EBITDA (for [two-] [three-] Fiscal
Quarter period ending on [January 28, 1996] and [April 21, 1996],
respectively, and for all subsequent dates, for the four-Fiscal Quarter
period ending ______________, ______________).
<TABLE>
<S> <C> <C>
1. Consolidated Adjusted EBITDA (F(28) above):
$___________
2. Minimum Consolidated Adjusted EBITDA required under subsection 7.6D:
$___________
I. MINIMUM CONSOLIDATED NET WORTH
1. Capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Company and its Subsidiaries as of the
last day of the current Fiscal Quarter:
$___________
2. After tax impact (if any) of the cumulative amount of Restructuring
Charges incurred or reflected subsequent to the Closing Date as of the
last day of the current Fiscal Quarter:
$___________
3. Lesser of (i) $50,000,000 and (ii) amount for the write-off of goodwill
taken by Company and its Subsidiaries as of the last day of the current
Fiscal Quarter:
$___________
4. Net value of the capital stock of Holdings held by any employee stock
ownership plan of Company or any of its Subsidiaries as shown on the
consolidated balance sheet (to the extent not included in I(1)) as of the
last day of the current Fiscal Quarter:
$___________
</TABLE>
THIRD AMENDMENT
Annex B-20 EXECUTION COPY
<PAGE> 98
<TABLE>
<S> <C> <C>
5. After tax impact (if any) of the cumulative amount of Smith's-Related
Restructuring Charges incurred or reflected subsequent to the Closing
Date as of the last day of the current Fiscal Quarter:
$___________
6. Consolidated Net Worth as of the last day of the current Fiscal Quarter
(without duplication, I(1) + I(2) + I(3) + I(4) + I(5)):
$___________
7. Minimum Consolidated Net Worth required under subsection 7.6C for such
last day:
$___________
J. FUNDAMENTAL CHANGES
1. Aggregate fair market value of assets sold in Asset Sales made since the
Closing Date permitted under subsection 7.7(xii):
$___________
2. Maximum value of assets sold in Asset Sales since the Closing Date
permitted under subsection 7.7(xii):
$ 5,000,000
K. CONSOLIDATED CAPITAL EXPENDITURES
1. Consolidated Capital Expenditures for Fiscal Year-to-date included in
clause (i) of definition thereof:
$___________
2. Aggregate amount of Consolidated Capital Expenditures constituting
Development Investments permitted under subsection 7.3(vii) for Fiscal
Year-to-date:
$___________
3. Aggregate amount of principal amount of Indebtedness permitted under
subsections 7.1(iii) and 7.1(viii) for Fiscal Year-to-date:
$___________
</TABLE>
THIRD AMENDMENT
Annex B-21 EXECUTION COPY
<PAGE> 99
<TABLE>
<S> <C> <C>
4. Aggregate amount of sale-leaseback proceeds received from permitted sale-
leaseback transactions occurring within 180 days of completion of store
or acquisition of equipment to the extent of prior Consolidated Capital
Expenditures for such store or equipment:
$___________
5. Aggregate amount of expenditures not to exceed the proceeds of insurance,
condemnation awards or indemnities so long as such expenditures were made
to replace or repair damaged assets within 18 months of occurrence of
damage or loss:
$___________
6. Consolidated Capital Expenditures for Fiscal Year-to-date as defined (for
period from Closing Date to January 28, 1996, K(1) minus (K(2) + K(5));
-----
for subsequent periods, K(1) minus (K(2) + K(3) + K(4) + K(5))) [Measure
-----
compliance against K(24)]:
$___________
7. Maximum Consolidated Capital Expenditures Amount for such Fiscal Year (as
set forth on table in subsection 7.8):
$___________
8. Maximum Consolidated Capital Expenditures Amount for the previous Fiscal
Year (as set forth on table in subsection 7.8):
$___________
9. For FY 1997, 1998 and 1999 only, aggregate amount of Consolidated
Adjusted EBITDA for the immediately preceding Fiscal Year:
$___________
10. For FY 1997, 1998 and 1999 only, Consolidated Adjusted EBITDA for the
four Fiscal Quarters of such immediately preceding Fiscal Year, as set
forth on table in subsection 7.6C:
$___________
</TABLE>
THIRD AMENDMENT
Annex B-22 EXECUTION COPY
<PAGE> 100
<TABLE>
<S> <C> <C>
11. Earned Additional Capital Expenditures Amount (K(9) - K(10), but in no
event more than $25,000,000 for FY 1997, $30,000,000 for FY 1998 and
$30,000,000 for FY 1999):
$___________
12. Maximum Consolidated Capital Expenditures Amount for such Fiscal Year (as
set forth on table in subsection 7.8), as adjusted by Earned Additional
Capital Expenditures Amount, if any (K(7) + K(11)):
$___________
13. Maximum Consolidated Capital Expenditures Amount for the previous Fiscal
Year (as set forth on table in subsection 7.8), as adjusted by Earned
Additional Capital Expenditures Amount, if any (K(8) + K(11)):
$___________
14. Maximum Consolidated Capital Expenditures Amount for the previous Fiscal
Year (as set forth on table in subsection 7.8), as adjusted in accordance
with the first proviso in subsection 7.8:
$___________
15. Aggregate amount of Consolidated Capital Expenditures incurred during the
previous Fiscal Year:
$___________
16. Amount permitted to be carried-forward from previous Fiscal Year (for
Fiscal Years 1995 and 1996, zero; for any Fiscal Year thereafter, the
lesser of (a) K(14) - K(15) and (b) 15% of K(13)):
$___________
17. Amount permitted to be utilized from following Fiscal Year (5% of Maximum
Consolidated Capital Expenditures Amount for following Fiscal Year as set
forth on table in subsection 7.8):
$___________
</TABLE>
THIRD AMENDMENT
Annex B-23 EXECUTION COPY
<PAGE> 101
<TABLE>
<S> <C> <C>
18. Maximum aggregate amount permitted to be carried-forward and/or utilized
for current Fiscal Year from the following Fiscal Year (for Fiscal Year
1996, zero; for any Fiscal Year thereafter, the lesser of (a) K(16) +
K(17) and (b) 15% of K(12)):
$___________
19. Lesser of (a) $15,000,000 and (b) the aggregate amount of proceeds (other
than insurance proceeds, condemnation awards and indemnity payments)
received from Asset Sales during the Fiscal Year (other than Asset Sales
of Selected Assets made in FY 1996 and first two 1997 Fiscal Quarters)
to the extent reinvested in new stores or construction or remodeling of
stores within 270 days of receipt:
$___________
20. Aggregate amount of current Fiscal Year's amount that was carried back
and utilized in the previous Fiscal Year pursuant to clause (iii) of the
first proviso in subsection 7.8:
$__________
21. For Fiscal Year 1997 only, 50% of the first $50,000,000 of Selected Asset
Proceeds:
$__________
22. For Fiscal Year 1997 only, 25% of the first $100,000,000 of Initial Debt
Proceeds:
$__________
23. Lesser of (a) $25,000,000 and (b) aggregate amount of the permitted
percentage of Selected Asset Proceeds and Initial Debt Proceeds (K(21) +
K(22)):
$__________
</TABLE>
THIRD AMENDMENT
Annex B-24 EXECUTION COPY
<PAGE> 102
<TABLE>
<S> <C> <C>
24. Maximum Consolidated Capital Expenditures for current Fiscal Year
permitted under subsection 7.8 (for FY 1997 only, K(7) + K(18) + K(19) -
K(20) + K(23); commencing with FY 1998 and thereafter, K(7) + K(18) +
K(19) - K(20)):
$__________
L. LEASES
1. Aggregate amount paid or payable under all Capital Leases during the
current Fiscal Year (net of sublease income):
$___________
2. Aggregate amount paid or payable under all Operating Leases during the
current Fiscal Year (net of sublease income):
$___________
3. Maximum aggregate amount paid or payable under all Capital Leases and
Operating Leases for current Fiscal Year permitted under subsection 7.9:
$___________
M. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
1. Aggregate principal amount of loan made by Company to Ralphs Grocery
Company Investment Corporation on the Closing Date permitted under
subsection 7.12(xi):
$___________
2. Maximum aggregate principal amount of such loan permitted under
subsection 7.12(xi):
$ 5,000,000
</TABLE>
THIRD AMENDMENT
Annex B-25 EXECUTION COPY
<PAGE> 103
ANNEX C
SCHEDULE I
Attached to and forming a part of the Pledge Agreement dated as
of June 14, 1995, by and among Ralphs Grocery Company (as legal successor to
Food 4 Less Supermarkets, Inc.), Falley's Inc., Cala Co., Food 4 Less of
Southern California, Inc., Bay Area Warehouse Stores, Inc., Cala Foods, Inc.,
Bell Markets, Inc., Alpha Beta Company, Food 4 Less GM, Inc., Food 4 Less
Merchandising, Inc., Food 4 Less of California, Inc., and Crawford Stores,
Inc., as Pledgors, and Bankers Trust Company, as Secured Party.
PART A
PLEDGED SHARES
<TABLE>
<CAPTION>
PLEDGOR STOCK ISSUER CLASS OF STOCK PAR NUMBER OF PERCENTAGE OF
------- ------------ -------- ----- --- --------- -------------
STOCK CERTIFICAT VALUE SHARES SHARES ISSUED
----- ---------- ----- ------ -------------
E NO. AND
----- ---
OUTSTANDING
-----------
REPRESENTED
-----------
BY PLEDGE
---------
SHARES
------
<S> <C> <C> <C> <C> <C> <C>
Ralphs Grocery Falley's, Inc. No. 4
Company Common $0.50 1,000 100%
" Cala Co. Common No. 3 $0.01 1,000 100%
" Food 4 Less of
Southern Common No. 1 $0.01 1,000 100%
California, Inc.
" Crawford Stores,
Inc. Common No. 1 No Par 100 100%
Food 4 Less of Alpha Beta Company
Southern Common No. 3* No par 1,000 100%
California, Inc.
Alpha Beta Food 4 Less GM,
Inc. Common No. 1 No par 1,000 100%
" Food 4 Less
Merchandising, Common No. 1 No par 1,000 100%
Inc.
" Food 4 Less of Common No. 4 No par 1,000 100%
California, Inc.
Cala Co. Bay Area Warehouse
Stores, Inc. Common No. 1 No par 1,000 100%
</TABLE>
* The stock of Alpha Beta pledged at closing was represented by stock
certificate number 2 of The Boys Market (successor by merger to Alpha Beta
and subsequently renamed Alpha Beta). Following the Closing, certificate
number 2 was cancelled and replaced by a new certificate number 3 with the
Alpha Beta name to avoid future confusion.
THIRD AMENDMENT
Annex C-1 EXECUTION COPY
<PAGE> 104
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
" Bell Markets, Inc. Common No. J $10.00 7,200 48.9%
" Cala Foods, Inc. Common No. 179 No par 400,000 100%
</TABLE>
PART B
PLEDGED DEBT
<TABLE>
<CAPTION>
PLEDGOR DEBT ISSUER AMOUNT OF INDEBTEDNESS
------- ----------- ----------------------
ASSOCIATED WHOLESALE GROCERS, INC. NOTES ("AWG")**
<S> <C> <C>
Falley's AWG No. 12807 $140,144.76
Falley's AWG No. 21857 $920,138.08
Falley's AWG No. 22238 $500,000.00
Falley's AWG No. 22239 $500,000.00
Falley's AWG No. 22240 $519,739.56
Falley's AWG No. 22598 $500,000.00
Falley's AWG No. 22599 $500,000.00
Falley's AWG No. 22600 $504,044.64
Falley's AWG No. 22951 $500,000.00
Falley's AWG No. 22952 $977,796.09
Falley's AWG No. 23302 $500,000.00
Falley's AWG No. 23304 $724,462.53
Falley's AWG No. 23303 $500,000.00
DEVELOPER LOANS
Alpha Beta Company Loan to Channel Gateway, project AB-204 $4,082,227.22 as of the end of
the first fiscal quarter of 1995
Alpha Beta Company Loan to Wilshire Place, a Limited $4,296,060.80 as of the end of
Partnership, project AB-206 the first fiscal quarter of 1995
Food 4 Less of Southern Loan to Midtown Shopping Center, project $5,500,000.00 as of the end of
California, Inc. AB-207 the first fiscal quarter of 1995
</TABLE>
** The AWG Notes are held by AWG as agent of possession for the Secured Party
pursuant to that certain letter agreement dated as of June 14, 1995 by and
among Secured Party, AWG and Falley's, in which Secured Party acknowledged
the first priority of AWG's security interest in the AWG Notes.
THIRD AMENDMENT
Annex C-2 EXECUTION COPY
<PAGE> 105
<TABLE>
<S> <C> <C>
Alpha Beta Company Loan to Vest Associates, project F4L-323 $1,750,000.00 and accrued
(note has not been delivered to Agent for interest of $60,979.35 as of the
possession because it was lost; Agent end of the first fiscal quarter
supplied with a Certificate of Lost Note) of 1995.
Ralphs Grocery Company Loan to Kellog Associates, a California $1,000,000.00
Limited Partnership (note has not been
delivered to Agent for possession because
it was lost; Agent supplied with a
Certificate of Lost Note)
Ralphs Grocery Company Loan to Ralphs Grocery Company Investment $5,000,000.00
Corporation
Ralphs Grocery Company Loan to Hillcrest Promenade Associates $3,000,000.00
Ralphs Grocery Company Ralphs Grocery Company and Subsidiaries Principal amount from time to
and Subsidiaries Intercompany Note time outstanding
LOANS TO EMPLOYEES
Ralphs Grocery Company Thomas Dahlen $40,000
Ralphs Grocery Company Tom Thomas $10,000
Ralphs Grocery Company Darius Anderson $100,000
LOANS TO EMPLOYEES FOR STOCK PURCHASE
Ralphs Grocery Company Darius Anderson $49,971.28
Ralphs Grocery Company William Arias $10,000.00
Ralphs Grocery Company Bob Bermingham $5,000.00
Ralphs Grocery Company Julie A. Blake $5,300.00
Ralphs Grocery Company Mike Bollman $15,000.00
Ralphs Grocery Company John Boyle $25,000.00
Ralphs Grocery Company Mel Brown $20,000.00
Ralphs Grocery Company William E. Cook $10,000.00
Ralphs Grocery Company Arthur Chavolla $5,300.00
Ralphs Grocery Company Tom Dahlen $37,500.00
Ralphs Grocery Company Joe Ham $12,500.00
Ralphs Grocery Company Harley DeLano $50,000.00
Ralphs Grocery Company Daniel J. Deniz $10,000.00
Ralphs Grocery Company Lois Ennis $5,000.00
Ralphs Grocery Company Dave Fernandez $10,000.00
</TABLE>
THIRD AMENDMENT
Annex C-3 EXECUTION COPY
<PAGE> 106
<TABLE>
<S> <C> <C>
Ralphs Grocery Company Kay D. Cervantes (name changed to Kay D. $5,300.00
Garbizo)
Ralphs Grocery Company Dave Hirz $10,000.00
Ralphs Grocery Company Jack Hom $10,000.00
Ralphs Grocery Company Darrel Ikeda $5,300.00
Ralphs Grocery Company Loyal Ingersoll $10,000.00
Ralphs Grocery Company Larry Ishii $25,000.00
Ralphs Grocery Company Jerry Jeran $5,300.00
Ralphs Grocery Company Joseph Krol $30,000.00
Ralphs Grocery Company Dennis Kyte $5,300.00
Ralphs Grocery Company Mike Laddon $5,300.00
Ralphs Grocery Company Joe Lizarraga $20,000.00
Ralphs Grocery Company Raymond Loya $4,500.00
Ralphs Grocery Company Greg Mays $25,000.00
Ralphs Grocery Company Danny R. Nelson $10,000.00
Ralphs Grocery Company Edwin T. Newcomer $10,000.00
Ralphs Grocery Company Mark Orr $25,000.00
Ralphs Grocery Company Virginia M. Rader $5,487.50
Ralphs Grocery Company Marion Rock $5,300.00
Ralphs Grocery Company Tony Schnug $50,000.00
Ralphs Grocery Company Charles A. Sharmann $10,000.00
Ralphs Grocery Company Robert J. Singer $10,000.00
Ralphs Grocery Company Orville Smith $5,000.00
Ralphs Grocery Company John Standley $25,000.00
Ralphs Grocery Company Sandy Steven $5,300.00
Ralphs Grocery Company Tom Thomas $10,000.00
Ralphs Grocery Company Ira Tochner $25,000.00
Ralphs Grocery Company George Tucker $25,000.00
Ralphs Grocery Company Dave White $25,000.00
Ralphs Grocery Company William Widener $4,000.00
</TABLE>
THIRD AMENDMENT
Annex C-4 EXECUTION COPY
<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 Harley Delano
(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 of the Northern California Division 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 of the Northern California Division 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
2
<PAGE> 3
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
3
<PAGE> 4
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 Five Thousand Dollars ($205,000.00) (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
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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.
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.
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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
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
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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/ Harley Delano
------------------------------
Title: C.E.O Harley Delano
-------------------------------
Address: 1327 Lawrence Rd
---------------------
Donville, CA 94506
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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 Tony Schnug
(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 a
Senior 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 Senior 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 Thousand Dollars ($200,000.00) (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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<PAGE> 11
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
11
<PAGE> 12
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
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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.
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.
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<PAGE> 14
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
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
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<PAGE> 15
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/ Tony Schnug
---------------------
Title: C.E.O Tony Schnug
---------------------------------
Address: 1728 Brentwood Ave
-------------------
Upland, CA 91784
-------------------
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<PAGE> 1
EXHIBIT 10.15.1
RALPHS GROCERY COMPANY
____________________________
RETIREMENT SUPPLEMENT PLAN
EFFECTIVE AS OF JANUARY 1, 1994
<PAGE> 2
SUMMARY OF THE RALPHS GROCERY COMPANY
RETIREMENT SUPPLEMENT PLAN
1. The RSP provides additional benefits to a Participant which,
when added to his benefits under the Ralphs Grocery Company
Retirement Plan, provides a total benefit equal to what he
would have received if the Retirement Plan were changed so
that:
(a) The Compensation of a Participant in excess of the
limits imposed by Code Section 401(a)(17) is counted,
but not over $235,840, as indexed (except in certain
specific situations described in the Plan); and
(b) The Participant's Normal Retirement Date is the first
day of the month coincident with or next following
the Participant's 65th birthday.
2. Any individual who is employed by Ralphs for one year and
earns W-2 compensation higher than the limits on compensation
which can be taken into account under section 401(a)(17) will
automatically become a Participant in the RSP. In addition,
Store Directors, District Mangers and Assistant District
Managers of the Company who participate in the Ralphs Grocery
Company Retirement Plan will automatically become participants
in the RSP. The Administrator may include other employees as
Participants.
3. Unless the Board otherwise specifies, the Ralphs Grocery
Company Benefits Committee shall be the Administrator of the
RSP.
4. Benefits otherwise payable under the RSP will be forfeited if
a Participant is discharged for Cause (as defined in the RSP).
5. If Ralphs institutes a program of split-dollar life insurance
policies for certain executives, any benefits otherwise
payable under the RSP to these executives will be reduced by
the cash value of any interest in the split-dollar policies
that the Participants become entitled to. The remaining RSP
benefit will be paid in a cash lump sum when the employee
terminates employment.
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<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 ELIGIBILITY TO PARTICIPATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 3 RETIREMENT DATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 4 AMOUNT OF SUPPLEMENTAL RETIREMENT BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 5 SUPPLEMENTAL, PRE-RETIREMENT DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 6 ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 7 AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 8 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
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<PAGE> 4
PREAMBLE
PURPOSE
The purpose of this Plan is to provide a select group of management or
highly compensated eligible employees of Ralphs Grocery Company (hereinafter
referred to as the Company) with supplemental retirement income and survivor
benefits in addition to the benefits from the Company qualified plans and
Social Security. This instrument states the terms and conditions of the Ralphs
Grocery Company Retirement Supplement Plan (hereinafter referred to as the
Plan), which is effective as of January 1, 1994 (hereinafter referred to as the
Effective Date).
The Plan is intended to attract and retain as employees those
executives covered under the Plan and to provide benefits which are unavailable
under the Company qualified retirement plan because of limitations imposed by,
or shortfalls resulting from Section 401(a)(17) of the Internal Revenue Code,
and to allow a normal retirement age under the Plan that is the first day of
the month coincident with or next following the Participant's 65th birthday.
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<PAGE> 5
ARTICLE 1
DEFINITIONS
The following words and phrases as used herein shall have the
following meanings:
1.1 "Accrued Benefit" shall mean a Participant's benefit accrued for
purposes of this Plan, which shall be the amount which the Participant
would have accrued under the terms of the Basic Plan if the following
changes were made to the Basic Plan:
(a) first, a Participant's Accrued Benefit under the Basic Plan
was determined without regard to the limitations imposed under
the Basic Plan to comply with Sections 401(a)(17) of the Code.
However, Compensation taken into account in any year shall be
limited to $235,840, as indexed, in the case of individuals
whose Compensation exceeds such indexed amount and who are
participants in the Ralphs Grocery Company Supplemental
Executive Retirement Plan;
(c) second, a Participant's "Normal Retirement Age" is the first
day of the month coincident with or next following the
Participant's 65th birthday.
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<PAGE> 6
1.2 "Actuarial Equivalent" shall have the same meaning as under the Basic
Plan.
1.3 "Administrator" shall mean the person or committee, appointed by the
Board of Directors, with authority and responsibility to manage and
direct the operation and administration of the Plan. Unless otherwise
specified by the Board of Directors of the Company, the Ralphs Grocery
Company Benefits Committee shall be the Administrator. The Company
shall be the "plan administrator" as defined in ERISA.
1.4 "Basic Plan" shall mean the Ralphs Grocery Company Retirement Plan as
in effect on January 1, 1985, and as it may hereafter be amended from
time to time.
1.5 "Beneficiary" shall mean anyone entitled to receive a death benefit
under the Plan on the death of a Participant. A Participant's
Beneficiary or Beneficiaries shall be the same as under the Basic
Plan.
1.6 "Board of Directors" shall mean the Board of Directors of the Company,
as constituted from time to time.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations relating thereto.
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<PAGE> 7
1.8 "Company" shall mean Ralphs Grocery Company, or any successor entity
thereto.
1.9 "Compensation" shall mean compensation as that term is defined in the
Basic Plan; except that compensation in excess of the limits imposed
by Code Section 401(a)(17) shall be considered "Compensation;"
provided, however, that for individuals who are participants in the
Ralphs Grocery Company Supplemental Executive Retirement Plan,
"Compensation" shall be limited to $235,840, as indexed.
1.10 "Deferred Retirement Date" shall have the same meaning as described in
the Basic Plan.
1.11 "Disability Retirement Date" shall have the same meaning as described
in the Basic Plan.
1.12 "Disabled" shall have the same meaning as in the Basic Plan.
1.13 "Early Retirement Date" shall have the same meaning as described in
the Basic Plan.
1.14 "Effective Date" shall mean January 1, 1994.
1.15 "Employee" shall mean a person who is an employee of an Employer.
4
<PAGE> 8
1.16 "Employer" shall mean the Company and any corporation which is a
member of a controlled group of corporations (as defined in Section
414(b) of the Code) which includes the Company; any trade or business
(whether or not incorporated) with the Company; any organization
(whether or not incorporated) which is a member of an affiliated
service group (as defined in Section 414(m) of the Code) and which
includes the Company; and any other entity required to be aggregated
with the Company pursuant to regulations under Section 414(o) of the
Code.
1.17 "Normal Retirement Age" shall mean age 65.
1.18 "Normal Retirement Date" shall mean the first day of the month
coincident with or next following the Participant's Normal Retirement
Age.
1.19 "Participant" shall mean an Employee of the Company who has become a
participant in the Plan pursuant to Article 2 and whose participation
therein has not ceased, pursuant to any provision of the Plan.
1.20 "Plan" shall mean the Ralphs Grocery Company Retirement Supplement
Plan, as herein set forth and as it may hereafter be amended from time
to time.
1.21 "Plan Year" shall mean the calendar year.
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<PAGE> 9
1.22 "Pre-Retirement Death Benefit" shall mean any qualified pre-retirement
survivor annuity (within the meaning of Section 417(c) of the Code),
which is provided under the Basic Plan pursuant to Section 401(a)(11)
of the Code.
1.23 "Qualified Plan Benefit" shall mean the benefit paid to a Participant
pursuant to provisions of the Basic Plan and shall include retirement
benefits payable on account of retirement on a Normal Retirement Date,
Early Retirement Date, Deferred Retirement Date, Disability Retirement
Date or the retirement of a Terminated Vested Participant with a
terminated vested benefit. For the purpose of the computations in
Sections 4.1 through 4.5 of this Plan, it shall be assumed that the
Qualified Plan Benefit is payable in the standard form of benefit,
i.e., a single life annuity for an unmarried Participant and a reduced
50% joint and survivor annuity for a married Participant.
1.24 "Supplemental Deferred Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.3.
1.25 "Supplemental Deferred Vested Benefit" shall mean the benefit provided
under this Plan as described in Section 4.5.
6
<PAGE> 10
1.26 "Supplemental Disability Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.4.
1.27 "Supplemental Early Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.2.
1.28 "Supplemental Normal Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.1.
1.29 "Supplemental Pre-Retirement Death Benefit" shall mean the benefit
provided under this Plan as described in Article 5.
1.30 "Supplemental Retirement Benefit" shall mean the benefit payable under
this Plan pursuant to the appropriate section of Article 4.
1.31 "Terminated Vested Participant" shall mean a Participant who is
eligible for a benefit under the Basic Plan pursuant to Article 6 of
the Basic Plan.
1.32 "Year of Credited Service" shall have the same meaning as described in
the Basic Plan.
7
<PAGE> 11
1.33 "Year of Vesting Service" shall have the same meaning as described in
the Basic Plan.
8
<PAGE> 12
ARTICLE 2
ELIGIBILITY TO PARTICIPATE
2.1 Participation Criteria
Effective as of January 1, 1994, an Employee shall automatically
become a Participant in this Plan if he is employed by the Company
throughout a Plan Year and his compensation during that year exceeds
the limit under Section 401(a)(17) of the Code on the amount of wages
which may be taken into account in computing benefits under the Basic
Plan. In addition, effective as of January 1, 1994, an Employee shall
automatically become a Participant in the Plan if he is a Store
Director, District Manager or Assistant District Manager of the
Company; provided that such Employee commences receipt of benefits
from the Basic Plan upon termination of his employment with the
Company. Any Employee not named in the preceding two sentences shall
also become a Participant in the Plan if he is named as a Participant
by the Administrator.
2.2 Loss of Participant Status
An Employee who becomes a Participant shall remain a Participant as
long as he is entitled to any benefits under the Plan.
9
<PAGE> 13
2.3 Inactive Participant Status
An Employee may be designated as an inactive Participant by the
Administrator at any time. The Accrued Benefit of an inactive
Participant shall be frozen (i.e., not increased over the amount that
would then be payable on behalf of the Participant if he permanently
terminated employment as an Employee) from the date he is designated
as such by the Administrator provided he is given timely notification
of such change in status. Notification shall be deemed timely if it
is provided to the Participant within 30 days of the change in status.
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<PAGE> 14
ARTICLE 3
RETIREMENT DATES
3.1 Retirement Dates
A Participant's Retirement Date shall be his date of actual retirement
which may be his Normal, Early, Disability, or Deferred Retirement
Date as hereinafter defined, whichever is applicable to him pursuant
to the following Sections of this Article 3.
3.2 Normal Retirement
A Participant may retire under this Plan on his Normal Retirement Date
provided he retires under and commences receiving his benefit under
the Basic Plan.
3.3 Early Retirement
A Participant may retire under this Plan on an Early Retirement Date
(which may be the first day of any month coincident with or subsequent
to his 55th birthday and his completion of at least 10 Years of
Vesting Service) provided he retires under and commences receiving his
benefit under the Basic Plan.
3.4 Deferred Retirement
If a participant continues in the employment of an Employer beyond his
Normal Retirement Date, the first day of any month coincident with or
subsequent to his termination of
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<PAGE> 15
employment after his Normal Retirement Date and commencement of
receipt of benefits under the Basic Plan shall be known as his
Deferred Retirement Date. Such a Participant may retire under this
Plan on such Deferred Retirement Date provided he retires under and
commences receiving his benefit under the Basic Plan.
3.5 Disability Retirement
A participant who is Disabled shall be entitled to a Supplemental
Disability Benefit under this Plan on a Disability Retirement Date
(which will be the first day of any month coincident with or
subsequent to his 55th birthday and his completion of at least 10
years of Vesting Service) provided he retires under and commences
receiving his benefit under the Basic Plan.
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<PAGE> 16
ARTICLE 4
AMOUNT OF SUPPLEMENTAL RETIREMENT BENEFIT
4.1 Supplemental Normal Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan on his Normal Retirement Date shall receive in the form of
a life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Normal Retirement Benefit equal to
(A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan;
and
(B) equals the amount of the Qualified Plan Benefit actually
payable to the Participant at his Normal Retirement Date as
determined under the Basic Plan.
4.2 Supplemental Early Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic plan on his Early Retirement Date shall receive in the form of a
life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Early Retirement Benefit equal to
(A) minus (B) where:
13
<PAGE> 17
(A) equals his Accrued Benefit determined pursuant to this Plan
reduced by 4/10 of one percent (4/10%) for each month by which
the commencement of his Supplemental Early Retirement Benefit
precedes his Normal Retirement Date; and
(B) equals the amount of the Qualified Plan Benefit actually
payable to the Participant at his Early Retirement Date as
determined under the Basic Plan.
4.3 Supplemental Deferred Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan on a Deferred Retirement Date shall receive in the form of
a life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Deferred Retirement Benefit equal
to (A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan;
and
(B) equals the amount of the Qualified Plan Benefit actually
payable to the Participant at his Deferred Retirement Date as
determined under the Basic Plan.
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<PAGE> 18
4.4 Supplemental Disability Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan on a Disability Retirement Date shall receive in the form
of a life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Disability Retirement Benefit
equal to (A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan
reduced by 4/10 of one percent (4/10%) for each month by which
the commencement of this Supplemental Disability Retirement
Benefit precedes his Normal Retirement Date; and
(B) equals the amount of the Qualified Plan Benefit actually
payable to the Participant at his Disability Retirement Date
as determined under the Basic Plan.
4.5 Supplemental Deferred Vested Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan and receives a benefit under the Basic Plan as a Terminated
Participant shall receive in the form of a life annuity (if unmarried)
or a reduced 50% joint and survivor annuity (if married) a
Supplemental Deferred Vested Retirement Benefit equal to (A) minus (B)
where:
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<PAGE> 19
(A) equals his Accrued Benefit determined pursuant to this Plan
reduced by 4/10 of one percent (4/10%) for each month by which
the commencement of his Supplemental Deferred Vested
Retirement Benefit precedes his Normal Retirement Date; and
(B) equals the amount of the Qualified Plan Benefit actually
payable to the Participant at his actual retirement date under
the Basic Plan.
The benefit described under this Section 4.5 shall not be payable to
any Employee (or to such Employee's Beneficiary) who is a Participant
solely by reason of his status as a Store Director, District Manager
or Assistant District Manager of the Company.
4.6 Form of Benefit
The Supplemental Retirement Benefit payable pursuant to this article
shall be paid to the Participant in the normal form described in
Section 4.1 through 4.5 or, if an optional form is elected under the
Basic Plan, in the same form as elected under the Basic Plan. A
retirement benefit payable from the Plan in a form other than the
normal form (i.e., a life annuity for an unmarried Participant or a
reduced joint and survivor annuity in the case of a married
participant) shall be the Actuarial Equivalent of the normal form.
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<PAGE> 20
The election as to any optional benefit under the Basic Plan shall be
deemed an election of that optional benefit under this Plan and any
consent of the spouse required and given under the Basic Plan shall be
deemed consent to that optional benefit under this Plan.
4.7 Commencement of Benefits
Payment of the Supplemental Retirement Benefit to the Participant
shall commence on the same date as payment of the Basic Plan
retirement benefit payable to the Participant and shall terminate on
the date of the last payment of the Basic Plan retirement benefit.
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<PAGE> 21
ARTICLE 5
SUPPLEMENTAL, PRE-RETIREMENT DEATH BENEFITS
5.1 Supplemental Pre-Retirement Death Benefits
If a Participant dies prior to the commencement of payment of his
Qualified Plan Benefit and if a Pre-Retirement Death Benefit would be
payable to his surviving spouse under the Basic Plan, then a
Supplemental Pre-Retirement Death Benefit will be payable to the
Participant's surviving spouse under this Plan.
The amount of the Supplemental Pre-Retirement Death Benefit payable
under this Plan shall be either (A) or (B) as described below:
(A) In the case of a Participant who has at least five years of
Vesting Service, the surviving spouse of the Participant shall
receive from this Plan, as of the date a Pre-Retirement Death
Benefit becomes payable from the Basic Plan:
(1) an amount equal to the Pre-Retirement Death Benefit
that would have been payable under the Basic Plan if
the Basic Plan had calculated this benefit using the
definition of Accrued Benefit in this Plan; less
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<PAGE> 22
(2) the amount of the Qualified Plan Benefit actually
payable to the surviving spouse of the Participant as
determined under the Basic Plan.
(B) If a Participant has five or more years of Vesting Service and
the benefit under this subsection is greater than the amount
described in (A), the designated Beneficiary shall receive a
lump sum benefit equal to the Actuarial Equivalent of the
Participant's Accrued Benefit less the Actuarial Equivalent of
the Qualified Plan Benefit actually payable under the Basic
Plan.
5.2 Form and Commencement of Benefits
The Supplemental Pre-Retirement Death Benefit payable pursuant to
Section 5.1(A) shall be payable over the lifetime of the surviving
spouse in monthly installments commencing on the same date as payment
of the Qualified Plan Benefit payable to such surviving spouse on
account of the death of the Participant and shall terminate on the
date of the last payment of the Pre-Retirement Death Benefit payable
from the Basic Plan. Notwithstanding the preceding sentence, the
benefit payable under Section 5.1(A) shall be paid in a lump sum if
the surviving spouse elects to receive the Pre-Retirement Death
Benefit under the Basic Plan in a lump sum.
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<PAGE> 23
The Supplemental Pre-Retirement Death Benefit payable pursuant to
Section 5.1(B) shall be payable as a single lump sum as soon as
administratively possible after the death of the Participant.
20
<PAGE> 24
ARTICLE 6
ADMINISTRATION OF THE PLAN
6.1 Administration
Except for the functions reserved within the Plan to the Company or
the Board of Directors, the administration of the Plan shall be the
responsibility of the Administrator appointed by the Board of
Directors.
6.2 Powers of the Administrator
The Administrator shall have the power and the duty to make all
decisions necessary or proper to carry out the Plan. The
determination of the administrator as to any question involving the
general administration and interpretation of the Plan shall be final,
conclusive and binding. Any discretionary actions to be taken under
the Plan by the Administrator with respect to the classification of
Employees, Participants, joint or contingent annuitants, beneficiaries
or benefits shall be uniform in their nature and applicable to all
persons similarly situated. Without limiting the generality of the
foregoing, the Administrator shall have the following powers and
duties:
(A) To furnish to all Participants, upon request, copies of the
Plan, and to require any person to furnish such information as
it may request for the purpose of the
21
<PAGE> 25
proper administration of the Plan as a condition to receiving any
benefits under the Plan;
(B) To make and enforce such rules and regulations and prescribe
the use of such forms as it shall deem necessary for the
efficient administration of the Plan;
(C) To interpret the Plan, and to resolve ambiguities,
inconsistencies and omissions, which findings shall be
binding, final and conclusive;
(D) To decide on questions concerning the Plan in accordance with
the provisions of the Plan;
(E) To determine the amount of benefits which shall be payable to
any person in accordance with the provisions of the Plan; to
instruct the Company as to payments to be made under this Plan
and to provide a full and fair review to any Participant whose
claim for benefits has been denied in whole or in part;
(F) To allocate any such powers and duties to or among individual
members of any administrative committee appointed as the
Administrator; and
(G) To designate persons other than Administrator or members of
any administrative committee to carry out
22
<PAGE> 26
any duty or power which would otherwise be a responsibility of the
Administrator.
6.3 Reliance on Professional Counselors
To the extent permitted by law, the Administrator and any person to
whom it may delegate any duty or power in connection with
administering the Plan, the Company, and the officers and directors of
the Company, shall be entitled to rely conclusively upon, and shall be
fully protected in any action taken or suffered by them in good faith
in the reliance upon, any actuary, counsel, accountant, other
specialist, or other person selected by the Administrator, or in
reliance upon any tables, valuations, certificates, opinions or
reports which shall be furnished by any of them. Further, to the
extent permitted by law, the Administrator, the Company, and the
officers and directors of the Company, shall not be liable for any
neglect, omission or wrongdoing of any other members of any
administrative committee, agent, officer or Employee of the Company.
Any person claiming benefits under the Plan shall look solely to the
company for redress.
6.4 Expenses of the Plan
All expenses incurred prior to the termination of the plan that shall
arise in connection with the administration of the Plan, including,
but not limited to administrative expenses, proper charges and
disbursements, compensation and
23
<PAGE> 27
other expenses and charges of any actuary, counsel, accountant,
specialist, or other person who shall be employed by the Administrator
in connection with the administration thereof, shall be paid by the
Company.
6.5 Claims Procedure
A claim for benefits under the Plan must be made to the Administrator
in writing. The Administrator shall provide adequate notice in
writing to any participant, joint annuitant or Beneficiary whose claim
for benefits under the Plan has been denied, setting forth the
specific reasons for such denial, written in a manner calculated to be
understood by the Participant, joint annuitant or Beneficiary. If a
claim is denied, the Participant or his authorized representative may
request a review of the denial, but such a request must be in writing,
and must be submitted to the Administrator within 60 days after the
claimant's claim has been denied. A decision upon review shall be
made by the Administrator within 60 days of the receipt of the request
for review, unless the Administrator determines that special
circumstances require additional time, in which case a decision shall
be rendered not later than 120 days after receipt of the request for
review. The decision on the review shall be in writing and shall
include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, and specific reference to
the pertinent Plan provisions on which the decision is based.
24
<PAGE> 28
6.6 Indemnification of Administrator
The Employer shall indemnify and hold harmless the Administrator
against any and all claims, loss, damage, expense or liability arising
from any action or failure to act with respect to this Plan, except in
the case of gross negligence or willful misconduct.
25
<PAGE> 29
ARTICLE 7
AMENDMENT AND TERMINATION
7.1 Amendment
The Company, although it intends the Plan to be permanent, reserves
the power and the right to amend the Plan at any time. However, no
amendment shall reduce the amount of the Supplemental Retirement
Benefit which has been accrued by a Participant under the Plan as of
the amendment date. Any such amendment shall be made pursuant to a
resolution of the Board of Directors.
7.2 Termination
The Company reserves the power and the right to terminate the Plan at
any time; provided, however, that any such termination will not be
retroactive. Any termination of the Plan shall be pursuant to a
resolution of the Board of Directors. If the Plan is terminated, the
Actuarial Equivalent present value of any remaining benefits payable
to a Participant or spouse who is receiving Plan benefits, and the
accrued Supplemental Retirement Benefit for an active Participant
payable as a life annuity beginning at Normal Retirement Date, may be
paid, in the discretion of the Administrator, in a lump sum 30 days
after the termination of the Plan.
26
<PAGE> 30
ARTICLE 8
GENERAL PROVISIONS
8.1 Unsecured Creditor
Participants and their spouses, Beneficiaries, heirs and successors
under this Plan shall have solely those rights of an unsecured
creditor of the Employer. Any and all assets of the Employer shall
not be deemed to be held in trust for any Participant, their
Beneficiaries, heirs and successors, nor shall any assets be
considered security for the performance of obligations of the Employer
and said assets shall at all times remain unpledged, unrestricted
general assets of the Employer. The Employer's obligation under the
Plan shall be an unsecured and unfunded promise to pay benefits at a
future date.
8.2 Unfunded Plan
This Plan is an unfunded plan maintained to provide supplemental
retirement benefits for a select group of management and highly
compensated employees. Any Participant's accounts under the Plan are
maintained for record keeping purposes only and are not to be
construed as funded.
27
<PAGE> 31
8.3 No Contract
This Plan shall not be deemed to constitute a contract between the
Employer and any Employee or other person whether or not in the employ
of the Employer, nor shall anything herein contained be deemed to give
any Employee or other person whether or not in the employ of the
Employer any right to be retained in the employ of the Employer, or to
interfere with the right of the Employer to discharge any Employee at
any time and to treat him without any regard to the effect which such
treatment might have upon him as a Participant of the Plan.
8.4 Nonassignability
Except as may otherwise be required by law, no distribution or payment
under the Plan to any Participant, spouse or Beneficiary shall be
subject in any manner to anticipation, alienation, sale transfer,
assignment, pledge, encumbrance or charge, whether voluntary or
involuntary, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void.
No distribution or payment shall be in any way liable for, or subject
to, the debts, contracts, liabilities, engagements or torts of any
person entitled to such distribution or payment. If any Participant,
beneficiary, or joint or contingent annuitant is adjudicated bankrupt
or purports to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge any such distribution or payment, voluntarily or
involuntarily, the
28
<PAGE> 32
Administrator, in this discretion, may cancel such distribution or
payment (or any part thereof) to or for the benefit of such
Participant, spouse or Beneficiary in such manner as the Administrator
shall direct.
8.5 Incapacity
If the Administrator determines that any person entitled to payments
under the Plan is an infant or incompetent by reason of physical or
mental disability, it may cause all payments thereafter becoming due
to such person to be made to any other person for his benefit, without
responsibility to follow application of the amounts so paid. Payments
made pursuant to this provision shall completely discharge the Plan,
the Company, the Employer and the Administrator.
8.6 Permissible Purchase of Annuity Contracts
At the request of the Participant, the Administrator may, in lieu of
paying the benefit to which the Participant is entitled directly from
the Plan, purchase an annuity contract which will provide benefits in
an amount equal to that which the retired Participant is entitled
under this Plan. The ownership of any such annuity contract shall be
retained by the Employer.
29
<PAGE> 33
8.7 Masculine, Feminine, Singular and Plural
The masculine shall include the feminine and the singular shall
include the plural and the plural the singular wherever the person or
entity or context shall plainly so require.
8.8 Withholding Taxes
The Administrator may make any appropriate arrangements to deduct from
all amounts paid under the Plan any taxes required to be withheld by
any government or governmental agency.
8.9 Number of Counterparts
This Plan may be executed in any number of counterparts, each of which
when duly executed by the Employer shall be deemed to be an original,
but all of which shall together constitute but one instrument, which
may be evidenced by any counterpart.
8.10 Governing Law
The provisions of the Plan shall be construed, administered and
interpreted under the applicable Federal law and, to the extent not
preempted, the laws of the State of California.
30
<PAGE> 34
8.11 Binding Agreement
This Plan shall be binding on the parties hereto, their heirs,
executors, administrators, and successors in interest.
8.12 Invalidity of Certain Provisions
If any provision of this Plan is invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision
hereof and this Plan shall be construed and enforced as if such
provision had not been included.
8.13 Successor Organizations
The Employer agrees that it will not merge or consolidate with any
other corporation or organization, or permit its business activities
to be taken over by any other organization, unless and until the
succeeding or continuing organization or corporation assumes the
rights and obligations under this Plan. If the successor organization
refuses to accept the rights and obligations of this Plan, the Plan
shall terminate prior to the consolidation or merger and benefits
shall be calculated and distributed to Participants.
8.14 Forfeiture
Notwithstanding anything in this Plan to the contrary, the entire
amount credited to a Participant as his Accrued
31
<PAGE> 35
Benefit shall be forfeited if the Company discharges the Participant
for:
(A) theft, embezzlement, or obtaining funds or property under
false pretenses, if such transgressions are demonstrably
material in amount both in relation to the Participant and the
Company;
(B) engaging in an act of dishonesty or moral turpitude (including
convictions of felonies) if such act materially and
demonstrably injures the Company (provided that, traffic or
moving violations shall not constitute acts of dishonesty or
moral turpitude for the purpose of this paragraph); or
(C) willfully failing to substantially perform his duties as an
Employee of the Company (other than as a result of incapacity
due to physical illness), where the Participant has either
acted in bad faith or without a reasonable belief that such
breach was in the best interests of the Company and such
failure has resulted in material and demonstrable injury of
the Company.
32
<PAGE> 36
8.15 Offset for Certain Benefits Payable under Split-Dollar Life Insurance
Agreements
(a) Some of the Participants under this Plan may own life
insurance policies (the "Policies"). The ownership of these Policies by the
Participant is, however, subject to certain conditions (set forth in a
"Split-Dollar Life Insurance Agreement" between the Participant and the
Company) and, if the Participant fails to meet the conditions set forth in the
Split-Dollar Life Insurance Agreement, the Participant may lose certain rights
under the Policy. In the event that a Participant satisfies the conditions
specified in Sections 5 or 6 of the Split-Dollar Life Insurance Agreement, so
that the Participant or his beneficiary becomes entitled to benefits under
those sections, the value of those benefits shall constitute an offset to any
benefits otherwise payable under this Plan. As the case may be, this offset
(the "Offset Value") shall be calculated by determining the value of benefits
payable under the Split-Dollar Life Insurance Agreement, the cash surrender
value of the Policy, or in the case of the Participant's death, the death
benefits payable to the beneficiary under the Policy. The Offset Value shall
then be compared to the Actuarial Equivalent of the benefits payable under the
Plan (the "Plan Value"), and the Plan Value shall be reduced by the Offset
Value.
(b) At the time when the Participant terminates employment, if the
Plan Value exceeds the present value of the Offset Value, the excess of the
Plan Value over the Offset Value shall be paid
33
<PAGE> 37
to the Participant or beneficiary at that time in a lump sum. Such payment
shall completely discharge all obligations owed under this Plan on account of
Participant's participation in this Plan. In the case of a Participant who
terminates employment for a reason other than death, the calculation of the
Plan Value shall be based on the pension under the RSP to which the Employee
would be entitled if he then retired or, if the Participant is not yet eligible
to retire, the pension under the RSP to which the Participant would be entitled
if he retired on the first day on which he is eligible to retire.
(c) If the Policy described in subsection (a) is not on the life
of the Participant, the insured dies prior to the Participant's becoming
eligible for benefits under the Plan, and the Participant subsequently becomes
eligible for benefits hereunder, the actuarial value of the benefits payable
hereunder shall be offset by the actuarial value of the payments previously
paid to the Participant under the Split-Dollar Life Insurance Agreement.
Calculations shall be done on an after-tax basis. Any remaining amount due the
Participant shall thereupon be paid in a cash lump sum.
34
<PAGE> 38
IN WITNESS WHEREOF, this Plan has been executed effective as
of ______, 1994.
RALPHS GROCERY COMPANY
By /s/ Jan Charles Gray
-----------------------
Its ______________________
By _______________________
Its ______________________
35
<PAGE> 1
EXHIBIT 10.15.2
AMENDMENT TO THE
RETIREMENT SUPPLEMENT PLAN
This Amendment to the Retirement Supplement Plan ("RSP") is effective
as of January 1, 1995.
1. Capitalized terms that are not defined herein shall
have the same meaning as contained in the RSP.
2. Section 1.2 is hereby amended by adding the following
at the end of such section:
"For the purpose of determining lump sum amounts payable under
Sections 5, 7.2 and 8.15 under the Plan, Actuarial Equivalent
shall be based on the 1983 Group Annuity Mortality Table for
males and a discount rate of 5% per annum."
This Amendment is effective as of January 1, 1995.
Ralphs Grocery Company
By:____________________________________
Title
<PAGE> 1
EXHIBIT 10.15.3
SECOND AMENDMENT TO
THE RALPHS GROCERY COMPANY
RETIREMENT SUPPLEMENT PLAN
Ralphs Grocery Company (the "Company") maintains the Ralphs
Grocery Company Retirement Supplement Plan (the "Plan") for the benefit of its
eligible Employees, effective as of January 1, 1994. The Plan was amended
effective January 1, 1995.
Effective as of June 14, 1995, the Food 4 Less Supermarkets,
Inc. shall merge with and into Ralphs Supermarkets, Inc. ("RSI"). Immediately
following said merger, the Company, a wholly owned operating subsidiary of RSI,
will merge with and into RSI and RSI will change its name to Ralphs Grocery
Company which shall be the sponsor and the Company under the Plan effective
immediately following said mergers.
In order to amend the Plan to provide for said mergers and to
clarify the eligibility provisions under the Plan following said mergers, this
Second Amendment to the Plan was adopted by a resolution of the Board of
Directors of the Company, effective as of June 14, 1995. This Second
Amendment, together with the First Amendment and the original Plan, constitute
the entire Plan as amended to date.
1. Section 1.23A is hereby added to the Plan to read in
its entirety as follows:
1.22A "Prior Employer" shall mean a prior employer of Participants
which employer is designated by the Board as a Prior Employer.
Such designation shall also include the terms and extent for
credit to be provided for service with such Prior Employer and
the extent to which compensation paid by such Prior Employer
shall be included as Compensation under the Plan.
2. Section 2.1 of the Plan is hereby amended to read in
its entirety as follows:
2.1 Participation Criteria
Except as otherwise provided herein, an Employee shall
automatically become a Participant in this Plan if he is
employed by the Company throughout a Plan Year and his
compensation during that year exceeds the limit under Section
401(a)(17) of the Code on the amount of wages which may be
taken into account in computing benefits under the Basic Plan.
In addition, except as otherwise provided herein, an Employee
shall automatically become a Participant in the Plan if he is
a Store Director, District Manager or Assistant District
Manager of the Company; provided that such Employee commences
receipt of benefits from the Basic Plan upon termination of
his employment with the Company. Any Employee not named in
the preceding two sentences shall also become a Participant in
the Plan if he is named as a Participant by the Administrator.
<PAGE> 2
Each former employee of Food 4 Less Supermarkets, Inc.
immediately prior to June 14, 1995 who becomes an Employee on
June 14, 1995 shall be eligible to become a Participant in
this Plan on the date designated by the Board of Directors
which is not later than January 1, 1997; provided, however,
that he satisfies the other requirements described in this
paragraph.
Executed as of the _____ day of June, 1995.
RALPHS GROCERY COMPANY
By: /s/ Jan Charles Gray
--------------------------
Officer
By: /s/ Alan J. Reed
--------------------------
Officer
2
<PAGE> 1
EXHIBIT 10.16.1
RALPHS GROCERY COMPANY
____________________________
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AMENDED AND RESTATED AS OF APRIL 9, 1994
<PAGE> 2
SUMMARY OF THE RALPHS GROCERY COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1. The SERP provides additional benefits to a Participant which,
when added to his benefits under the Ralphs Grocery Company
Retirement Plan and the Ralphs Grocery Company Retirement
Supplement Plan, provides a total benefit equal to what he
would have received if the Retirement Plan were changed in
seven respects.
(a) The basic formula changed from being based on 3/4% of
Final Average Monthly Compensation below the Social
Security Bendpoint and 1-1/2% above to a formula
based on 2% of Final Average Monthly Compensation.
(b) Up to only 30 years of Credited Service could be
taken into account.
(c) The limits under section 415 of the Code were
inapplicable. [In 1989 section 415 limited pension
payments to $98,064 a year in the case of someone
retiring at age 65 (the limit is lower for earlier
retirement ages). The limit is adjusted for CPI
increases each year.]
(d) For purposes of computing benefits, the compensation
of a Participant includes amounts deferred under the
Company Savings Plan Plus, any cafeteria plan, or any
other deferred compensation plan.
(e) All compensation of a Participant is counted,
including compensation in excess of the limits
imposed by Code Section 401(a)(17).
(f) The Retirement Plan bases a Participant's benefit on
average compensation during the five consecutive
years in which average compensation is the highest.
The SERP will look at the highest three years,
whether or not consecutive.
(g) In the event of retirement before Social Security
Retirement Age, the Retirement Plan reduces benefits
by 4.8% a year from Social Security Retirement Age.
The SERP will reduce benefits by 2% from age 65. For
example, if a Participant retires at age 55, he will
receive 80% of the benefit payable at age 65.
However, in the case of a Participant who terminates
before his Early Retirement Date (an Early Retirement
Date occurs
<PAGE> 3
when a Participant terminates who has at least 10
years of service and is age 55 or older), the
actuarial reduction for early retirement will still
be 4.8% a year. There is one exception; if a
Participant terminates when he is entitled to a
benefit under his split-dollar life insurance policy,
the actuarial reduction is only 2%.
2. Prior to April 9, 1994, any individual who is employed by
Ralphs for one year and earns W-2 compensation higher than the
limits on compensation which can be taken into account under
section 401(a)(17) will automatically become a Participant in
the SERP. On or after April 9, 1994, an individual who is
employed by Ralphs and whose average Gross Compensation over
the three years that produces the highest average equals or
exceeds $235,840 will automatically become a Participant in
the SERP. The Administrator may include other employees as
Participants.
3. Unless the Board otherwise specifies, the Ralphs Grocery
Company Benefits Committee shall be the Administrator of the
SERP.
4. Benefits otherwise payable under the SERP will be forfeited if
a Participant is discharged for Cause (as defined in the
SERP).
5. If Ralphs institutes a program of split-dollar life insurance
policies for certain executives, any benefits otherwise
payable under the SERP to these executives will be reduced by
the cash value of any interest in the split-dollar policies
that the Participants become entitled to. The remaining SERP
benefit will be paid in a cash lump sum when the employee
terminates employment.
6. The SERP recites that it is a replacement of the Federated
Department Stores, Inc. Supplementary Retirement Plan and that
no current employees of Ralphs have any rights to benefits
under the Federated Plan. To the extent any such rights
exist, however, the SERP provides that any benefits otherwise
payable under the SERP are accordingly reduced.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 ELIGIBILITY TO PARTICIPATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 3 RETIREMENT DATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 4 AMOUNT OF SUPPLEMENTAL RETIREMENT BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 5 SUPPLEMENTAL, PRE-RETIREMENT DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6 ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 7 AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 8 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
i
<PAGE> 5
PREAMBLE
PURPOSE
The purpose of this Plan is to provide a select group of management or
highly compensated eligible employees of Ralphs Grocery Company (hereinafter
referred to as the Company) with supplemental retirement income and survivor
benefits in addition to the benefits from the Company qualified plans and
Social Security. This instrument states the terms and conditions of the Ralphs
Grocery Company Supplemental Executive Retirement Plan (hereinafter referred to
as the Plan), which was effective as of January 29, 1990 (hereinafter referred
to as the Effective Date). This amendment and restatement of the Plan is
effective as of April 9, 1994. This amendment and restatement shall not affect
the benefits of Participants who terminated employment with the Company prior
to April 9, 1994.
The Plan is intended to attract and retain as employees those
executives covered under the Plan and to provide benefits which are unavailable
under the Company qualified retirement plan because of limitations imposed by,
or shortfalls resulting from, (a) Section 415 of the Internal Revenue Code, (b)
Section 401(a)(17) of the Internal Revenue Code, and (c) amounts deferred by
eligible participants pursuant by provisions of any unfunded deferred
compensation plan maintained by the Company.
1
<PAGE> 6
ARTICLE 1
DEFINITIONS
The following words and phrases as used herein shall have the
following meanings:
1.1 "Accrued Benefit" shall mean a Participant's benefit accrued for
purposes of this Plan, which shall be the amount which the Participant
would have accrued under the terms of the Basic Plan if the following
changes were made to the Basic Plan:
(a) first, the term "Accrued Benefit" (as defined in the Basic
Plan) considered and used "Gross Compensation" rather than
"Compensation" in determining a Participant's benefit;
(b) second, a Participant's Accrued Benefit under the Basic Plan
were determined without regard to the limitations imposed
under the Basic Plan to comply with Sections 401(a)(17) and
415 of the Code;
(c) third, the determination of a Participant's "Final Average
Monthly Compensation" (FAMC) under the Basic Plan were based
on the highest monthly average of the Participant's Gross
Compensation for three, instead of
2
<PAGE> 7
five, calendar years of employment, whether or not such years
are consecutive; and
(d) fourth, instead of calculating a Participant's Accrued Benefit
based on a formula of 3/4% of Final Average Monthly
Compensation below the "Social Security Bendpoint" (as defined
in the Basic Plan) and 1-1/2% of Final Average Monthly
Compensation above the Social Security Bendpoint, the Accrued
Benefit is calculated as 2% of FAMC multiplied by Years of
Credited Service up to 30.
1.2 "Actuarial Equivalent" shall have the same meaning as under the Basic
Plan.
1.3 "Administrator" shall mean the person or committee, appointed by the
Board of Directors, with authority and responsibility to manage and
direct the operation and administration of the Plan. Unless otherwise
specified by the Board of Directors of the Company, the Ralphs Grocery
Company Benefits Committee shall be the Administrator. The Company
shall be the "plan administrator" as defined in ERISA.
3
<PAGE> 8
1.4 "Basic Plan" shall mean the Ralphs Grocery Company Retirement Plan as
in effect on January 1, 1985, and as it may hereafter be amended from
time to time.
1.5 "Beneficiary" shall mean anyone entitled to receive a death benefit
under the Plan on the death of a Participant. A Participant's
Beneficiary or Beneficiaries shall be the same as under the Basic
Plan.
1.6 "Board of Directors" shall mean the Board of Directors of the Company,
as constituted from time to time.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations relating thereto.
1.8 "Company" shall mean Ralphs Grocery Company, or any successor entity
thereto.
1.9 "Compensation" shall mean compensation as that term is defined in the
Basic Plan.
1.10 "Deferred Retirement Date" shall have the same meaning as described in
the Basic Plan.
1.11 "Disability Retirement Date" shall have the same meaning as described
in the Basic Plan.
4
<PAGE> 9
1.12 "Disabled" shall have the same meaning as in the Basic Plan.
1.13 "Early Retirement Date" shall have the same meaning as described in
the Basic Plan.
1.14 "Effective Date" shall mean January 29, 1990.
1.15 "Employee" shall mean a person who is an employee of an Employer.
1.16 "Employer" shall mean the Company and any corporation which is a
member of a controlled group of corporations (as defined in Section
414(b) of the Code) which includes the Company; any trade or business
(whether or not incorporated) with the Company; any organization
(whether or not incorporated) which is a member of an affiliated
service group (as defined in Section 414(m) of the Code) and which
includes the Company; and any other entity required to be aggregated
with the Company pursuant to regulations under Section 414(o) of the
Code.
1.17 "Gross Compensation" shall mean the Participant's compensation
reported for Federal Income Tax purposes for service rendered as an
Employee of an Employer, plus any amounts deferred under the Savings
Plus Plan or any unfunded deferred compensation plan maintained by the
Company or any salary reductions under Section 125 of the Code;
provided,
5
<PAGE> 10
however, that Gross Compensation shall not include moving expenses,
educational reimbursements, car allowances, income from exercising
stock options, imputed income from employee benefit programs
maintained by the Company, living allowances and payments to
Participants under the Executive Deferred Compensation Plan maintained
by the Company.
1.18 "Normal Retirement Age" shall mean age 65.
1.19 "Normal Retirement Date" shall mean the first day of the month
coincident with or next following the Participant's Normal Retirement
Age.
1.20 "Participant" shall mean an Employee of the Company who has become a
participant in the Plan pursuant to Article 2 and whose participation
therein has not ceased, pursuant to any provision of the Plan.
1.21 "Plan" shall mean the Ralphs Grocery Company Supplemental Executive
Retirement Plan, as herein set forth and as it may hereafter be
amended from time to time.
1.22 "Plan Year" shall mean the calendar year.
1.23 "Pre-Retirement Death Benefit" shall mean any qualified pre-retirement
survivor annuity (within the meaning of Section
6
<PAGE> 11
417(c) of the Code), which is provided under the Basic Plan pursuant
to Section 401(a)(11) of the Code.
1.24 "Qualified Plan Benefit" shall mean the benefit paid to a Participant
pursuant to provisions of the Basic Plan and shall include retirement
benefits payable on account of retirement on a Normal Retirement Date,
Early Retirement Date, Deferred Retirement Date, Disability Retirement
Date or the retirement of a Terminated Vested Participant with a
terminated vested benefit. For the purpose of the computations in
Sections 4.1 through 4.5 of this Plan, it shall be assumed that the
Qualified Plan Benefit is payable in the standard form of benefit,
i.e., a single life annuity for an unmarried Participant and a reduced
50% joint and survivor annuity for a married Participant.
1.25 "Retirement Supplement Plan" shall mean the Ralphs Grocery Company
Retirement Supplement Plan as in effect on January 1, 1994, and as it
may hereafter be amended from time to time.
1.26 "Supplemental Deferred Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.3.
7
<PAGE> 12
1.27 "Supplemental Deferred Vested Benefit" shall mean the benefit provided
under this Plan as described in Section 4.5.
1.28 "Supplemental Disability Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.4.
1.29 "Supplemental Early Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.2.
1.30 "Supplemental Normal Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.1.
1.31 "Supplemental Pre-Retirement Death Benefit" shall mean the benefit
provided under this Plan as described in Article 5.
1.32 "Supplemental Retirement Benefit" shall mean the benefit payable under
this Plan pursuant to the appropriate section of Article 4.
1.33 "Terminated Vested Participant" shall mean a Participant who is
eligible for a benefit under the Basic Plan pursuant to Article 6 of
the Basic Plan.
8
<PAGE> 13
1.34 "Year of Credited Service" shall have the same meaning as described in
the Basic Plan; except that for purposes of this Plan a Participant
shall be credited with a maximum of 30 Years of Credited Service.
Notwithstanding the preceding sentence, with respect to Participants
who terminated employment with the Company prior to April 9, 1994, for
purposes of this Plan a Participant shall be credited with a maximum
of 20 Years of Credited Service.
1.35 "Year of Vesting Service" shall have the same meaning as described in
the Basic Plan.
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<PAGE> 14
ARTICLE 2
ELIGIBILITY TO PARTICIPATE
2.1 Participation Criteria
Prior to April 9, 1994, an Employee shall automatically become a
Participant in this Plan if he is employed by the Company throughout a
Plan Year and his compensation during that year exceeds the limit
under Section 401(a)(17) of the Code on the amount of wages which may
be taken into account in computing benefits under the Basic Plan. On
or after April 9, 1994, an Employee shall automatically become a
Participant in this Plan if the average of his Gross Compensation that
is taken into account under Section 1.1(c) to determine his Final
Average Monthly Compensation equals or exceeds $235,840. Any Employee
not named in the preceding sentence shall also become a Participant in
the Plan if he is named as a Participant by the Administrator.
2.2 Loss of Participant Status
An Employee who becomes a Participant shall remain a Participant as
long as he is entitled to any benefits under the Plan.
2.3 Inactive Participant Status
An Employee may be designated as an inactive Participant by the
Administrator at any time. The Accrued Benefit of an inactive
Participant shall be frozen (i.e., not increased
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<PAGE> 15
over the amount that would then be payable on behalf of the
Participant if he permanently terminated employment as an Employee)
from the date he is designated as such by the Administrator provided
he is given timely notification of such change in status.
Notification shall be deemed timely if it is provided to the
Participant within 30 days of the change in status.
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<PAGE> 16
ARTICLE 3
RETIREMENT DATES
3.1 Retirement Dates
A Participant's Retirement Date shall be his date of actual retirement
which may be his Normal, Early, Disability, or Deferred Retirement
Date as hereinafter defined, whichever is applicable to him pursuant
to the following Sections of this Article 3.
3.2 Normal Retirement
A Participant may retire under this Plan on his Normal Retirement Date
provided he retires under and commences receiving his benefit under
the Basic Plan.
3.3 Early Retirement
A Participant may retire under this Plan on an Early Retirement Date
(which may be the first day of any month coincident with or subsequent
to his 55th birthday and his completion of at least 10 Years of
Vesting Service) provided he retires under and commences receiving his
benefit under the Basic Plan.
3.4 Deferred Retirement
If a participant continues in the employment of an Employer beyond his
Normal Retirement Date, the first day of any month coincident with or
subsequent to his termination of
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<PAGE> 17
employment after his Normal Retirement Date and commencement of
receipt of benefits under the Basic Plan shall be known as his
Deferred Retirement Date. Such a Participant may retire under this
Plan on such Deferred Retirement Date provided he retires under and
commences receiving his benefit under the Basic Plan.
3.5 Disability Retirement
A participant who is Disabled shall be entitled to a Supplemental
Disability Benefit under this Plan on a Disability Retirement Date
(which will be the first day of any month coincident with or
subsequent to his 55th birthday and his completion of at least 10
years of Vesting Service) provided he retires under and commences
receiving his benefit under the Basic Plan.
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ARTICLE 4
AMOUNT OF SUPPLEMENTAL RETIREMENT BENEFIT
4.1 Supplemental Normal Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan on his Normal Retirement Date shall receive in the form of
a life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Normal Retirement Benefit equal to
(A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan;
and
(B) equals (i) the amount of the Qualified Plan Benefit actually
payable to the Participant at his Normal Retirement Date as
determined under the Basic Plan, plus (ii) the amount of the
benefit actually payable to the Participant at his Normal
Retirement Date as determined under the Retirement Supplement
Plan.
4.2 Supplemental Early Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic plan on his Early Retirement Date shall receive in the form of a
life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a
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<PAGE> 19
Supplemental Early Retirement Benefit equal to (A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan
reduced by 1/6 of one percent (1/6%) for each month by which
the commencement of his Supplemental Early Retirement Benefit
precedes his Normal Retirement Date; and
(B) equals (i) the amount of the Qualified Plan Benefit actually
payable to the Participant at his Early Retirement Date as
determined under the Basic Plan, plus (ii) the amount of the
benefit actually payable to the Participant at his Early
Retirement Date as determined under the Retirement Supplement
Plan.
4.3 Supplemental Deferred Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan on a Deferred Retirement Date shall receive in the form of
a life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Deferred Retirement Benefit equal
to (A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan;
and
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<PAGE> 20
(B) equals (i) the amount of the Qualified Plan Benefit actually
payable to the Participant at his Deferred Retirement Date as
determined under the Basic Plan, plus (ii) the amount of the
benefit actually payable to the Participant at his Deferred
Retirement Date as determined under the Retirement Supplement
Plan.
4.4 Supplemental Disability Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan on a Disability Retirement Date shall receive in the form
of a life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Disability Retirement Benefit
equal to (A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan
reduced by 1/6 of one percent (1/6%) for each month by which
the commencement of this Supplemental Disability Retirement
Benefit precedes his Normal Retirement Date; and
(B) equals (i) the amount of the Qualified Plan Benefit actually
payable to the Participant at his Disability Retirement Date
as determined under the Basic Plan, plus (ii) the amount of
the benefit actually payable to the Participant at his
Disability Retirement Date as determined under the Retirement
Supplement Plan.
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4.5 Supplemental Deferred Vested Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan and receives a benefit under the Basic Plan as a Terminated
Participant shall receive in the form of a life annuity (if unmarried)
or a reduced 50% joint and survivor annuity (if married) a
Supplemental Deferred Vested Retirement Benefit equal to (A) minus (B)
where:
(A) equals his Accrued Benefit determined pursuant to this Plan
reduced by 4/10 of one percent (4/10%) for each month by which
the commencement of his Supplemental Deferred Vested
Retirement Benefit precedes his Normal Retirement Date; and
(B) equals (i) the amount of the Qualified Plan Benefit actually
payable to the Participant at his actual retirement date under
the Basic Plan, plus (ii) the amount of the benefit actually
payable to the Participant at his actual retirement date under
the Retirement Supplement Plan.
Notwithstanding the preceding sentence, in the case of a Participant
described in Section 8.15 who terminates employment when he is
entitled to a benefit under his Policy, the phrase "4/10 of one
percent (4/10%)" shall be replaced by the phrase "1/6 of one percent
(1/6%)."
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<PAGE> 22
4.6 Form of Benefit
The Supplemental Retirement Benefit payable pursuant to this article
shall be paid to the Participant in the normal form described in
Section 4.1 through 4.5 or, if an optional form is elected under the
Basic Plan, in the same form as elected under the Basic Plan. A
retirement benefit payable from the Plan in a form other than the
normal form (i.e., a life annuity for an unmarried Participant or a
reduced joint and survivor annuity in the case of a married
participant) shall be the Actuarial Equivalent of the normal form.
The election as to any optional benefit under the Basic Plan shall be
deemed an election of that optional benefit under this Plan and any
consent of the spouse required and given under the Basic Plan shall be
deemed consent to that optional benefit under this Plan.
4.7 Commencement of Benefits
Payment of the Supplemental Retirement Benefit to the Participant
shall commence on the same date as payment of the Basic Plan
retirement benefit payable to the Participant and shall terminate on
the date of the last payment of the Basic Plan retirement benefit.
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<PAGE> 23
ARTICLE 5
SUPPLEMENTAL, PRE-RETIREMENT DEATH BENEFITS
5.1 Supplemental Pre-Retirement Death Benefits
If a Participant dies prior to the commencement of payment of his
Qualified Plan Benefit and if a Pre-Retirement Death Benefit would be
payable to his surviving spouse under the Basic Plan, then a
Supplemental Pre-Retirement Death Benefit will be payable to the
Participant's surviving spouse under this Plan.
The amount of the Supplemental Pre-Retirement Death Benefit payable
under this Plan shall be either (A) or (B) as described below:
(A) In the case of a Participant who has at least five years of
Vesting Service, the surviving spouse of the Participant shall
receive from this Plan, as of the date a Pre-Retirement Death
Benefit becomes payable from the Basic Plan:
(1) an amount equal to the Pre-Retirement Death Benefit
that would have been payable under the Basic Plan if
the Basic Plan had calculated this benefit using the
definition of Accrued Benefit in this Plan; less
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<PAGE> 24
(2) (i) the amount of the Qualified Plan Benefit actually
payable to the surviving spouse of the Participant as
determined under the Basic Plan, plus (ii) the amount
of the benefit actually payable to the surviving
spouse of the Participant as determined under the
Retirement Supplement Plan.
(B) If a Participant has five or more years of Vesting Service and
the benefit under this subsection is greater than the amount
described in (A), the designated Beneficiary shall receive a
lump sum benefit equal to the Actuarial Equivalent of the
Participant's Accrued Benefit less the Actuarial Equivalent of
(i) the Qualified Plan Benefit actually payable under the
Basic Plan and (ii) the benefit payable under the Retirement
Supplement Plan; provided that, for this purpose the
Participant's Accrued Benefit shall be computed by multiplying
the Participant's Final Average Monthly Compensation times
3/4% times Years of Credited Service.
5.2 Form and Commencement of Benefits
The Supplemental Pre-Retirement Death Benefit payable pursuant to
Section 5.1(A) shall be payable over the lifetime of the surviving
spouse in monthly installments commencing on the same date as payment
of the Qualified Plan
20
<PAGE> 25
Benefit payable to such surviving spouse on account of the death of
the Participant and shall terminate on the date of the last payment of
the Pre-Retirement Death Benefit payable from the Basic Plan.
Notwithstanding the preceding sentence, the benefit payable under
Section 5.1(A) shall be paid in a lump sum if the surviving spouse
elects to receive the Pre-Retirement Death Benefit under the Basic
Plan in a lump sum.
The Supplemental Pre-Retirement Death Benefit payable pursuant to
Section 5.1(B) shall be payable as a single lump sum as soon as
administratively possible after the death of the Participant.
21
<PAGE> 26
ARTICLE 6
ADMINISTRATION OF THE PLAN
6.1 Administration
Except for the functions reserved within the Plan to the Company or
the Board of Directors, the administration of the Plan shall be the
responsibility of the Administrator appointed by the Board of
Directors.
6.2 Powers of the Administrator
The Administrator shall have the power and the duty to make all
decisions necessary or proper to carry out the Plan. The
determination of the administrator as to any question involving the
general administration and interpretation of the Plan shall be final,
conclusive and binding. Any discretionary actions to be taken under
the Plan by the Administrator with respect to the classification of
Employees, Participants, joint or contingent annuitants, beneficiaries
or benefits shall be uniform in their nature and applicable to all
persons similarly situated. Without limiting the generality of the
foregoing, the Administrator shall have the following powers and
duties:
(A) To furnish to all Participants, upon request, copies of the
Plan, and to require any person to furnish such information as
it may request for the purpose of the
22
<PAGE> 27
proper administration of the Plan as a condition to receiving
any benefits under the Plan;
(B) To make and enforce such rules and regulations and prescribe
the use of such forms as it shall deem necessary for the
efficient administration of the Plan;
(C) To interpret the Plan, and to resolve ambiguities,
inconsistencies and omissions, which findings shall be
binding, final and conclusive;
(D) To decide on questions concerning the Plan in accordance with
the provisions of the Plan;
(E) To determine the amount of benefits which shall be payable to
any person in accordance with the provisions of the Plan; to
instruct the Company as to payments to be made under this Plan
and to provide a full and fair review to any Participant whose
claim for benefits has been denied in whole or in part;
(F) To allocate any such powers and duties to or among individual
members of any administrative committee appointed as the
Administrator; and
(G) To designate persons other than Administrator or members of
any administrative committee to carry out
23
<PAGE> 28
any duty or power which would otherwise be a responsibility of
the Administrator.
6.3 Reliance on Professional Counselors
To the extent permitted by law, the Administrator and any person to
whom it may delegate any duty or power in connection with
administering the Plan, the Company, and the officers and directors of
the Company, shall be entitled to rely conclusively upon, and shall be
fully protected in any action taken or suffered by them in good faith
in the reliance upon, any actuary, counsel, accountant, other
specialist, or other person selected by the Administrator, or in
reliance upon any tables, valuations, certificates, opinions or
reports which shall be furnished by any of them. Further, to the
extent permitted by law, the Administrator, the Company, and the
officers and directors of the Company, shall not be liable for any
neglect, omission or wrongdoing of any other members of any
administrative committee, agent, officer or Employee of the Company.
Any person claiming benefits under the Plan shall look solely to the
company for redress.
6.4 Expenses of the Plan
All expenses incurred prior to the termination of the plan that shall
arise in connection with the administration of the Plan, including,
but not limited to administrative expenses, proper charges and
disbursements, compensation and
24
<PAGE> 29
other expenses and charges of any actuary, counsel, accountant,
specialist, or other person who shall be employed by the Administrator
in connection with the administration thereof, shall be paid by the
Company.
6.5 Claims Procedure
A claim for benefits under the Plan must be made to the Administrator
in writing. The Administrator shall provide adequate notice in
writing to any participant, joint annuitant or Beneficiary whose claim
for benefits under the Plan has been denied, setting forth the
specific reasons for such denial, written in a manner calculated to be
understood by the Participant, joint annuitant or Beneficiary. If a
claim is denied, the Participant or his authorized representative may
request a review of the denial, but such a request must be in writing,
and must be submitted to the Administrator within 60 days after the
claimant's claim has been denied. A decision upon review shall be
made by the Administrator within 60 days of the receipt of the request
for review, unless the Administrator determines that special
circumstances require additional time, in which case a decision shall
be rendered not later than 120 days after receipt of the request for
review. The decision on the review shall be in writing and shall
include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, and specific reference to
the pertinent Plan provisions on which the decision is based.
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<PAGE> 30
6.6 Indemnification of Administrator
The Employer shall indemnify and hold harmless the Administrator
against any and all claims, loss, damage, expense or liability arising
from any action or failure to act with respect to this Plan, except in
the case of gross negligence or willful misconduct.
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<PAGE> 31
ARTICLE 7
AMENDMENT AND TERMINATION
7.1 Amendment
The Company, although it intends the Plan to be permanent, reserves
the power and the right to amend the Plan at any time. However, no
amendment shall reduce the amount of the Supplemental Retirement
Benefit which has been accrued by a Participant under the Plan as of
the amendment date. Any such amendment shall be made pursuant to a
resolution of the Board of Directors.
7.2 Termination
The Company reserves the power and the right to terminate the Plan at
any time; provided, however, that any such termination will not be
retroactive. Any termination of the Plan shall be pursuant to a
resolution of the Board of Directors. If the Plan is terminated, the
Actuarial Equivalent present value of any remaining benefits payable
to a Participant or spouse who is receiving Plan benefits, and the
accrued Supplemental Retirement Benefit for an active Participant
payable as a life annuity beginning at Normal Retirement Date, shall
be paid in a lump sum 30 days after the termination of the Plan.
27
<PAGE> 32
ARTICLE 8
GENERAL PROVISIONS
8.1 Unsecured Creditor
Participants and their spouses, Beneficiaries, heirs and successors
under this Plan shall have solely those rights of an unsecured
creditor of the Employer. Any and all assets of the Employer shall
not be deemed to be held in trust for any Participant, their
Beneficiaries, heirs and successors, nor shall any assets be
considered security for the performance of obligations of the Employer
and said assets shall at all times remain unpledged, unrestricted
general assets of the Employer. The Employer's obligation under the
Plan shall be an unsecured and unfunded promise to pay benefits at a
future date.
8.2 Unfunded Plan
This Plan is an unfunded plan maintained to provide supplemental
retirement benefits for a select group of management and highly
compensated employees. Any Participant's accounts under the Plan are
maintained for record keeping purposes only and are not to be
construed as funded.
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8.3 No Contract
This Plan shall not be deemed to constitute a contract between the
Employer and any Employee or other person whether or not in the employ
of the Employer, nor shall anything herein contained be deemed to give
any Employee or other person whether or not in the employ of the
Employer any right to be retained in the employ of the Employer, or to
interfere with the right of the Employer to discharge any Employee at
any time and to treat him without any regard to the effect which such
treatment might have upon him as a Participant of the Plan.
8.4 Nonassignability
Except as may otherwise be required by law, no distribution or payment
under the Plan to any Participant, spouse or Beneficiary shall be
subject in any manner to anticipation, alienation, sale transfer,
assignment, pledge, encumbrance or charge, whether voluntary or
involuntary, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void.
No distribution or payment shall be in any way liable for, or subject
to, the debts, contracts, liabilities, engagements or torts of any
person entitled to such distribution or payment. If any Participant,
beneficiary, or joint or contingent annuitant is adjudicated bankrupt
or purports to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge any such distribution or payment, voluntarily or
involuntarily, the
29
<PAGE> 34
Administrator, in this discretion, may cancel such distribution or
payment (or any part thereof) to or for the benefit of such
Participant, spouse or Beneficiary in such manner as the Administrator
shall direct.
8.5 Incapacity
If the Administrator determines that any person entitled to payments
under the Plan is an infant or incompetent by reason of physical or
mental disability, it may cause all payments thereafter becoming due
to such person to be made to any other person for his benefit, without
responsibility to follow application of the amounts so paid. Payments
made pursuant to this provision shall completely discharge the Plan,
the Company, the Employer and the Administrator.
8.6 Permissible Purchase of Annuity Contracts
At the request of the Participant, the Administrator may, in lieu of
paying the benefit to which the Participant is entitled directly from
the Plan, purchase an annuity contract which will provide benefits in
an amount equal to that which the retired Participant is entitled
under this Plan. The ownership of any such annuity contract shall be
retained by the Employer.
30
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8.7 Masculine, Feminine, Singular and Plural
The masculine shall include the feminine and the singular shall
include the plural and the plural the singular wherever the person or
entity or context shall plainly so require.
8.8 Withholding Taxes
The Administrator may make any appropriate arrangements to deduct from
all amounts paid under the Plan any taxes required to be withheld by
any government or governmental agency.
8.9 Number of Counterparts
This Plan may be executed in any number of counterparts, each of which
when duly executed by the Employer shall be deemed to be an original,
but all of which shall together constitute but one instrument, which
may be evidenced by any counterpart.
8.10 Governing Law
The provisions of the Plan shall be construed, administered and
interpreted under the applicable Federal law and, to the extent not
preempted, the laws of the State of California.
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8.11 Binding Agreement
This Plan shall be binding on the parties hereto, their heirs,
executors, administrators, and successors in interest.
8.12 Invalidity of Certain Provisions
If any provision of this Plan is invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision
hereof and this Plan shall be construed and enforced as if such
provision had not been included.
8.13 Successor Organizations
The Employer agrees that it will not merge or consolidate with any
other corporation or organization, or permit its business activities
to be taken over by any other organization, unless and until the
succeeding or continuing organization or corporation assumes the
rights and obligations under this Plan. If the successor organization
refuses to accept the rights and obligations of this Plan, the Plan
shall terminate prior to the consolidation or merger and benefits
shall be calculated and distributed to Participants.
8.14 Forfeiture
Notwithstanding anything in this Plan to the contrary, the entire
amount credited to a Participant as his Accrued
32
<PAGE> 37
Benefit shall be forfeited if the Company discharges the Participant
for:
(A) theft, embezzlement, or obtaining funds or property under
false pretenses, if such transgressions are demonstrably
material in amount both in relation to the Participant and the
Company;
(B) engaging in an act of dishonesty or moral turpitude (including
convictions of felonies) if such act materially and
demonstrably injures the Company (provided that, traffic or
moving violations shall not constitute acts of dishonesty or
moral turpitude for the purpose of this paragraph); or
(C) willfully failing to substantially perform his duties as an
Employee of the Company (other than as a result of incapacity
due to physical illness), where the Participant has either
acted in bad faith or without a reasonable belief that such
breach was in the best interests of the Company and such
failure has resulted in material and demonstrable injury of
the Company.
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8.15 Offset for Certain Benefits Payable under Split-Dollar Life Insurance
Agreements
(a) Some of the Participants under this Plan may own life
insurance policies (the "Policies"). The ownership of these Policies by the
Participant is, however, subject to certain conditions (set forth in a
"Split-Dollar Life Insurance Agreement" between the Participant and the
Company) and, if the Participant fails to meet the conditions set forth in the
Split-Dollar Life Insurance Agreement, the Participant may lose certain rights
under the Policy. In the event that a Participant satisfies the conditions
specified in Sections 5 or 6 of the Split- Dollar Life Insurance Agreement, so
that the Participant or his beneficiary becomes entitled to benefits under
those sections, the value of those benefits shall constitute an offset to any
benefits otherwise payable under this Plan. As the case may be, this offset
(the "Offset Value") shall be calculated by determining the value of benefits
payable under the Split-Dollar Life Insurance Agreement, the cash surrender
value of the Policy, or in the case of the Participant's death, the death
benefits payable to the beneficiary under the Policy. The Offset Value shall
then be compared to the Actuarial Equivalent of the benefits payable under the
Plan (the "Plan Value"), and the Plan Value shall be reduced by the Offset
Value.
(b) At the time when the Participant terminates employment, if the
Plan Value exceeds the present value of the Offset Value, the excess of the
Plan Value over the Offset Value shall be paid
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<PAGE> 39
to the Participant or beneficiary at that time in a lump sum. Such payment
shall completely discharge all obligations owed under this Plan on account of
Participant's participation in this Plan. In the case of a Participant who
terminates employment for a reason other than death, the calculation of the
Plan Value shall be based on the pension under the SERP to which the Employee
would be entitled if he then retired or, if the Participant is not yet eligible
to retire, the pension under the SERP to which the Participant would be
entitled if he retired on the first day on which he is eligible to retire.
(c) If the Policy described in subsection (a) is not on the life
of the Participant, the insured dies prior to the Participant's becoming
eligible for benefits under the Plan, and the Participant subsequently becomes
eligible for benefits hereunder, the actuarial value of the benefits payable
hereunder shall be offset by the actuarial value of the payments previously
paid to the Participant under the Split-Dollar Life Insurance Agreement.
Calculations shall be done on an after-tax basis. Any remaining amount due the
Participant shall thereupon be paid in a cash lump sum.
8.16 Special Rules Applicable to the Federated Department Stores, Inc.
Supplementary Retirement Plan
In 1988 the Federated Department Stores, Inc. Supplementary
Retirement Plan (the "Federated Plan") was completely terminated with respect
to its application to current Employees of the
35
<PAGE> 40
Company. Such termination provided that, except in the case of Employees who
had previously retired under the Federated Plan, no Employee of the Company
would ever receive a benefit under the Federated Plan on account of the prior
existence of the Federated Plan. Participants who receive benefits under this
Plan thus receive such benefits in lieu of any benefits that would have been
due to them under the Federated Plan if it had continued in existence. It is
intended that no benefits be payable to any Employee of the Company (whether or
not a Participant in this Plan) on account of the prior maintenance of the
Federal Plan. Accordingly, in the event it is ever judicially determined that
any benefits are payable to any Employee of the Company on account of the prior
existence of the Federated Plan (whether the benefits are payable by Federated
Department Stores, Inc., affiliates of Federated Department Stores, Inc., or by
any other company), the amount of such benefits shall reduce any benefits
otherwise payable under this Plan. The amount of such reductions shall be
computed by calculating the Actuarial Equivalent of any benefits found to be
payable under the Federated Plan and then reducing the benefits payable under
this Plan by such Actuarial Equivalent. The determinations of the
Administrator with respect to the amount of such reductions shall be binding
upon all Participants under this Plan.
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8.17 Rules Applicable to Retirees Before January 29, 1990
After termination of the Federated Plan and prior to January 29, 1990,
certain employees of the Company retired (the "Interim Retirees") and began to
receive unfunded supplemental retirement benefits pursuant to a formula
established by the Administrator. Such retirees shall continue to receive
their benefits and, as of January 29, 1990, those benefits shall be considered
to be provided under this Plan. The amount of benefits payable to each Interim
Retiree shall not, however, be computed under the formula established under
this Plan but shall continue to be payable under the formula in effect at the
time of his retirement.
8.18 Certain Employees who formerly participated in the Federated
Department Stores, Inc. Executive Deferred Compensation Plan
(a) This section shall only apply to an Employee if (1) the
Employee retires on or after January 29, 1990, (2) the Employee would not be
(except for the existence of this section) otherwise entitled to benefits under
this Plan, and (3) the Employee previously participated in the Federated
Department Stores, Inc. Executive Deferred Compensation Plan (the "Federated
Deferred Compensation Plan"). An Employee described in the preceding sentence
shall receive no benefits under the Plan except for those provided by this
section.
(b) The amount payable to an Employee described in this section
shall be computed by calculating the benefit payable to
37
<PAGE> 42
such Employee under the Basic Plan as if the definition of "Compensation"
thereunder included amounts deferred by such Employee under the Federated
Executive Deferred Compensation Plan. The difference between the amount
actually payable to the Employee or his beneficiary under the Basic Plan and
the amount that would been payable if Compensation had included such deferred
amounts, shall be payable as a supplementary benefit under this Plan.
(c) The timing and form of payments under this section shall be
based on the timing and form of payments under the Basic Plan with respect to
the benefit that is being supplemented.
IN WITNESS WHEREOF, this amended and restated Plan has been
executed on this ____ day of ______, 1994.
RALPHS GROCERY COMPANY
By
-----------------------
Its
-----------------------
By
-----------------------
Its
-----------------------
38
<PAGE> 1
Exhibit 10.16.2
AMENDMENT TO THE AMENDED AND RESTATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
This Amendment to the Amended and Restated Supplement Executive
retirement Plan ("SERP") is effective as of January 1, 1995.
1. Capitalized terms that are not defined herein shall
have the same meaning as contained in the SERP.
2. Section 1.2 is hereby amended by adding the following
at the end of such section:
"For the purpose of determining lump sum amounts payable under
Sections 5, 7.2 and 8.15 under the Plan, Actuarial Equivalent
shall be based on the 1983 Group Annuity Mortality Table for
males and a discount rate of 5% per annum."
This Amendment is effective as of January 1, 1995.
Ralphs Grocery Company
By:___________________
Title
<PAGE> 1
Exhibit 10.16.3
SECOND AMENDMENT TO
THE RALPHS GROCERY COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AMENDED AND RESTATED AS OF APRIL 9, 1994
Ralphs Grocery Company (the "Company") maintains the Ralphs
Grocery Company Supplemental Executive Retirement Plan (the "Plan") for the
benefit of its eligible Employees. The Plan has been amended from time to
time.
Effective as of June 14, 1995, the Food 4 Less Supermarkets,
Inc. shall merge with and into Ralphs Supermarkets, Inc. ("RSI"). Immediately
following said merger, the Company, a wholly owned operating subsidiary of RSI,
will merge with and into RSI and RSI will change its name to Ralphs Grocery
Company which shall be the sponsor and the Company under the Plan effective
immediately following said mergers.
In order to amend the Plan to provide for said mergers and to
clarify the eligibility provisions under the Plan following said mergers, this
Second Amendment to the Plan was adopted by a resolution of the Board of
Directors of the Company, effective as of June 14, 1995. This Second
Amendment, together with the First Amendment and the April 9, 1994 Amendment
and Restatement of the Plan, constitute the entire Plan as amended to date.
1. Section 1.23A is hereby added to the Plan to read in
its entirety as follows:
1.23A "Prior Employer" shall mean a prior employer of Participants
which employer is designated by the Board as a Prior Employer.
Such designation shall also include the terms and extent for
credit to be provided for service with such Prior Employer and
the extent to which compensation paid by such Prior Employer
shall be included as Compensation under the Plan.
2. Section 2.1 of the Plan is hereby amended to read in
its entirety as follows:
2.1 Participation Criteria
Except as otherwise provided herein, an Employee shall
automatically become a Participant in this Plan if the average
of his Gross Compensation that is taken into account under
Section 1.1(c) to determine his Final Average Monthly
Compensation equals or exceeds $235,840. Any Employee not
named in the preceding sentence shall also become a
Participant in the Plan if he is named as a Participant by the
Administrator. Each former employee of Food 4 Less
Supermarkets, Inc. immediately prior to June 14, 1995 who
becomes an Employee on June 14, 1995 shall be eligible to
become a Participant in this Plan on the date designated by
the Board of Directors which is not later than January 1,
<PAGE> 2
1997; provided, however, that he satisfies the other
requirements described in this paragraph.
Executed as of the _____ day of June, 1995.
RALPHS GROCERY COMPANY
By: /s/ Jan Charles Gray
---------------------------------
Officer
By: /s/ Alan J. Reed
--------------------------------
Officer
2
<PAGE> 1
Exhibit 10.16.4
THIRD AMENDMENT
TO THE
RALPHS GROCERY COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As Amended and Restated as of April 9, 1994)
This Amendment to the Ralphs Grocery Company Supplemental
Executive Retirement Plan (as amended and restated as of April 9, 1994) (the
"SERP") is effective as of July 1, 1995.
1. Section 1.1 of the SERP is amended by deleting the word "and"
from the end of clause (c), changing the period at the end of clause (d) to a
semicolon, adding the word "and" after the new semicolon at the end of clause
(d) and adding a new clause (e) to read as follows:
"(e) fifth, in the case of a Participant who was an employee
of Food 4 Less Supermarkets, Inc. or any of its subsidiaries
prior to June 14, 1995 and who became an employee of the
Company on June 14, 1995, such Participant became a
participant in the Basic Plan on July 1, 1995, but with Years
of Credited Service from 1985 through 1994 up to a maximum of
ten (10) years based upon the individual's date of hire by
Food 4 Less Supermarkets, Inc. or any of its predecessors.
2. Section 1.17 of the SERP is amended by adding the following
sentence to the end thereof:
"In the case of a Employee who was an employee of Food 4 Less
Supermarkets, Inc. or any of its subsidiaries immediately
prior to June 14, 1995, "Gross Compensation" shall also
include such individual's compensation reported for Federal
Income Tax purposes for services rendered as an employee of
Food 4 Less Supermarkets, Inc. or any of its subsidiaries,
plus any amounts deferred under any plan qualified under
Section 401(k) of the Code or any unfunded deferred
compensation plan maintained by Food 4 Less Supermarkets, Inc.
or any of its subsidiaries or any salary reductions under
Section 125 of the Code; provided, however, that Gross
Compensation shall not include moving expenses, educational
reimbursements, car allowances, income from exercising stock
options, imputed income from employee benefit programs
maintained by Food 4 Less Supermarkets, Inc. or any of its
subsidiaries, living allowances and payments under any
deferred compensation plan
<PAGE> 2
maintained by Food 4 Less Supermarkets, Inc. or any of its
subsidiaries."
3. Section 2.1 is amended in its entirety to read as it read
prior to the Second Amendment to the SERP.
IN WITNESS WHEREOF, the Ralphs Grocery Company has executed this
Amendment this ______ day of _______________, 1995.
RALPHS GROCERY COMPANY
BENEFITS COMMITTEE
By_______________________________
2
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF RALPHS GROCERY COMPANY
Alpha Beta Company
Bay Area Warehouse Stores, Inc.
Bell Markets, Inc.
Cala Co.
Cala Foods, Inc.
Crawford Stores, Inc.
Falley's Inc.
Food 4 Less GM, Inc.
Food 4 Less Merchandising, Inc.
Food 4 Less of California, Inc.
Food 4 Less of Southern California, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONSOLIDATED BALANCE SHEETS AND AUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 52 WEEKS ENDED JANUARY 28,
1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-28-1996
<PERIOD-START> JAN-30-1995
<PERIOD-END> JAN-28-1996
<CASH> 67,983
<SECURITIES> 0
<RECEIVABLES> 69,354
<ALLOWANCES> (1,954)
<INVENTORY> 502,669
<CURRENT-ASSETS> 677,464
<PP&E> 1,438,124
<DEPRECIATION> (226,451)
<TOTAL-ASSETS> 3,188,129
<CURRENT-LIABILITIES> 855,920
<BONDS> 2,028,308
0
0
<COMMON> 466,798
<OTHER-SE> (407,679)
<TOTAL-LIABILITY-AND-EQUITY> 3,188,129
<SALES> 4,335,109
<TOTAL-REVENUES> 4,335,109
<CGS> 3,485,993
<TOTAL-COSTS> 3,485,993
<OTHER-EXPENSES> 929,959
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 178,774
<INCOME-PRETAX> (259,617)
<INCOME-TAX> 500
<INCOME-CONTINUING> (260,117)
<DISCONTINUED> 0
<EXTRAORDINARY> 23,128
<CHANGES> 0
<NET-INCOME> (283,245)
<EPS-PRIMARY> (174.72)
<EPS-DILUTED> 0
</TABLE>
