SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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6(e)(2))
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[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CERTIFIED GROCERS OF CALIFORNIA, LTD.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
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previously. Identify the previous filing by registration statement number,
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CERTIFIED GROCERS OF CALIFORNIA, LTD.
2601 SOUTH EASTERN AVENUE, LOS ANGELES, CALIFORNIA 90040
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 14, 1998
----------------
The Annual Meeting of Shareholders of Certified Grocers of California, Ltd.,
a California corporation, will be held at the Wyndham Garden Hotel, 5757
Telegraph Road, City of Commerce, California, on April 14, 1998 at 9:00 a.m.,
for the following purposes:
1. To elect the fifteen members of the Board of Directors for the ensuing
year, twelve by the holders of Class A Shares and three by the holders of
Class B Shares.
2. To transact such other business as may properly come before the
meeting.
The names of the nominees intended to be presented by the Board of Directors
for election as Directors for the ensuing year are set forth in the
accompanying proxy statement.
Only shareholders of record at the close of business on February 14, 1998
will be entitled to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, IT IS REQUESTED THAT
YOU COMPLETE, DATE AND SIGN THE ENCLOSED PROXY RELATING TO THE ANNUAL MEETING
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY REVOKE YOUR PROXY IF
YOU ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
Robert M. Ling, Jr.,
Corporate Secretary
February 17, 1998
CERTIFIED GROCERS OF CALIFORNIA, LTD.
2601 SOUTH EASTERN AVENUE, LOS ANGELES, CALIFORNIA 90040
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PROXY STATEMENT
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INTRODUCTION
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Certified Grocers of California, Ltd. (the "Company") of
proxies for use at the Annual Meeting of Shareholders to be held April 14,
1998, or at any adjournment thereof.
A shareholder giving a proxy may revoke it at any time before it is
exercised by filing with the Secretary of the Company a written revocation or
a fully executed proxy bearing a later date. A proxy may also be revoked if
the shareholder who has executed it is present at the meeting and elects to
vote in person.
Only the holders of Class A Shares of record and the holders of Class B
Shares of record at the close of business on February 14, 1998 are entitled to
vote at the Annual Meeting. On that date, the Company had 47,500 outstanding
Class A Shares and 366,573 Class B Shares.
On all matters coming before the Annual Meeting, other than the election of
directors, each Class A Share is entitled to one vote and, except as may be
required by California law, each Class B Share has no vote. California law
extends to non-voting shares the right to vote upon certain matters such as
certain amendments to the Articles of Incorporation which affect the rights of
non-voting shares, certain reorganizations in which other securities are to be
issued in exchange for the non-voting securities, and voluntary dissolution.
No such matter is proposed to be submitted by management at the Annual Meeting
and management is not aware that any such matter will be submitted by any
other person.
These proxy materials were first mailed to shareholders on or about February
17, 1998. The cost of soliciting the proxies, including the printing, handling
and mailing of the proxies and related material, will be paid by the Company.
Proxies may be solicited by officers and regular employees of the Company by
telephone or in person. These persons will receive no additional compensation
for their services.
SOLICITATION REGARDING ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
At the Annual Meeting 15 directors (constituting the entire board) are to be
elected to serve until the next Annual Meeting and until their successors are
elected and qualified. Twelve directors are to be elected by the holders of
the Company's Class A Shares and 3 directors are to be elected by the holders
of the Company's Class B Shares.
1
The following table sets forth certain information concerning the Board of
Directors' nominees for election. All of the nominees are currently serving as
directors of the Company, except for Mr. Davis and Ms. Song. As of the date of
this proxy statement, all nominees have consented to being named herein as
nominees and to serve as directors if elected.
AGE AS YEAR
OF FIRST PRINCIPAL OCCUPATION
NAME 12/31/97 ELECTED DURING LAST 5 YEARS
---- -------- ------- --------------------
NOMINEES FOR ELECTION
BY CLASS A SHARES
Louis A. Amen....................... 68 1974 President, Super A
Foods, Inc.
John Berberian...................... 46 1991 President, Berberian
Enterprises, Inc.,
operating Jons Markets
Edmund Kevin Davis.................. 44 -- President, Chairman and
Chief Executive Officer,
Bristol Farms Markets;
previously, Senior Vice
President of Marketing,
Ralphs Grocery Company
John T. Fujieki..................... 48 1997 President and Chief
Operating Officer, Star
Markets since 1995;
formerly Senior Vice
President
Mark Kidd........................... 47 1992 President, Mar-Val Food
Stores, Inc.
Willard R. "Bill" MacAloney......... 62 1981 President and Chief
Executive Officer, Mac
Ber, Inc., operating Jax
Market
Jay McCormack....................... 47 1993 Owner-Operator, Alamo
Market; Co-owner, Glen
Avon Market
Morrie Notrica...................... 68 1988 President and Chief
Operating Officer, Joe
Notrica, Inc., operating
The Original 32nd Street
Market
Michael A. Provenzano............... 55 1986 President, Pro & Son's,
Inc., operating
Southland Market;
President, Provo, Inc.
and President Pro and
Family, Inc.; formerly
President, Carlton's
Market, Inc.
Gail Gerrard Rice................... 49 1997 Executive Vice
President, Gerrard's,
Inc., operating
Gerrard's Cypress Center
James R. Stump...................... 59 1982 President, Stump's
Market, Inc.
Kenneth Young....................... 53 1994 Vice President, Jack
Young's Super-
markets; Vice President,
Bakersfield Food City,
Inc. dba Young's Markets
NOMINEES FOR ELECTION
BY CLASS B SHARES
Harley J. DeLano.................... 60 1995 President, Cala Co.,
Division of Ralphs
Grocery Company
Darioush Khaledi.................... 51 1993 Chairman of the Board
and Chief Executive
Officer, K.V. Mart Co.,
operating Top Valu
Markets and Valu Plus
Food Warehouse
Mimi R. Song........................ 40 -- President and Chief
Executive Officer, Super
Center Concepts, Inc.
VOTING RIGHTS
Each class of shares is entitled to one vote for each share on those matters
with respect to which the class is entitled to vote. However, if any
shareholder gives notice of its intention to cumulate its votes in the
election of directors, then all shareholders may cumulate their votes in the
election of directors. To be effective, such notice
2
(which need not be written) must be given by the shareholder at the Annual
Meeting before any votes have been cast in such election. Under cumulative
voting, each holder of Class A Shares may give one nominee a number of votes
equal to the number of Class A Shares which the holder is entitled to vote
multiplied by the number of directors to be elected by the holders of Class A
Shares (12 at this meeting) or the holder may distribute such votes among any
or all of the nominees as the holder sees fit. Similarly, the Class B Shares
entitled to be voted may be voted cumulatively by the holders of such shares
for the 3 directors to be elected by the holders of Class B Shares.
Discretionary authority to cumulate votes is solicited. The proxy holders
named on the enclosed form of proxy relating to the Annual Meeting have no
present intention to give notice of their intention to cumulate votes, but
they may elect to do so in the event of a contested election or any presently
unexpected circumstances.
In the election of directors, the nominees receiving the highest number of
affirmative votes of the class of shares entitled to be voted for them, up to
the number of directors to be elected by such class, will be elected. Under
the California Corporations Code, votes against a nominee and votes withheld
have no legal effect.
The proxy holders named on the enclosed form of proxy relating to the Annual
Meeting will vote the proxies received by them for the election of the above
nominees unless such authority is withheld as provided in the proxy. In the
unanticipated event that any nominee should become unavailable for election as
a director, the proxies will be voted for any substitute nominee named by the
present Board of Directors. In their discretion, the proxy holders may
cumulate the votes represented by the proxies received. If additional persons
are nominated for election as directors by persons other than the Board of
Directors, the proxy holders intend to vote all proxies received by them in
such manner in accordance with cumulative voting as will assure the election
of as many of the above nominees as possible, with the specific nominees to be
voted for to be determined by the proxy holders.
The Board of Directors recommends a vote "FOR" the election of each of the
nominees listed above.
PRINCIPAL STOCKHOLDERS
As of February 14, 1998, no person is known by the Company to own
beneficially more than five percent (5%) of the outstanding Class A Shares of
the Company, and the only shareholders known by the Company to own
beneficially more than 5% of the outstanding Class B Shares of the Company are
Cala Co., Bay Area Warehouse Stores, Inc. and Ralphs Grocery Company, 1100
West Artesia Boulevard, Compton, California 90220 (20,361 Class B Shares or
approximately 5.55% of the outstanding Class B Shares) (Cala Co. and Bay Area
Warehouse Stores, Inc. are wholly owned by Ralphs Grocery Company which is in
turn wholly owned by The Yucaipa Companies, 10000 Santa Monica Boulevard, Los
Angeles, California 90067); and Hughes Markets, Inc., 14005 Live Oak Avenue,
Irwindale, California 91706 (19,413 Class B Shares or approximately 5.30% of
the outstanding Class B Shares).
3
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Class A Shares and Class B Shares, as of February 14, 1998, by each director
and nominee, or their affiliated companies, and by all directors and nominees,
and their affiliated companies, as a group. No officer of the Company owns
shares of any class of the Company's stock.
SHARES OWNED
--------------------------------------
CLASS A SHARES CLASS B SHARES
------------------ -------------------
NAME AND NO. % OF TOTAL NO. % OF TOTAL
AFFILIATED COMPANY SHARES OUTSTANDING SHARES OUTSTANDING
------------------ ------ ----------- ------- -----------
Louis A. Amen............................ 100 0.21% 9,509 2.59%
Super A Foods, Inc.
John Berberian........................... 100 0.21% 7,615 2.08%
Berberian Enterprises, Inc.
Michael Bonfante......................... 100 0.21% 12,614 3.44%
Nob Hill General Store, Inc.(1)
Edmund Kevin Davis....................... 100 0.21% 485 0.13%
Briston Farms Markets
Harley DeLano............................ 100 0.21% 20,361 5.55%
Ralphs Grocery Company(2)(3)
John T. Fujieki.......................... 100 0.21% 8,380 2.29%
Star Markets
Roger K. Hughes.......................... 100 0.21% 19,413 5.30%
Hughes Markets, Inc.(1)
Darioush Khaledi......................... 100 0.21% 15,967 4.36%
K. V. Mart Co.(3)
Mark Kidd................................ 100 0.21% 1,950 0.53%
Mar-Val Food Stores, Inc.
Willard R. "Bill" MacAloney.............. 100 0.21% 2,933 0.80%
Mac Ber, Inc.
Jay McCormack............................ 100 0.21% 732 0.20%
Alamo Market(4)
Morrie Notrica........................... 100 0.21% 9,520 2.60%
Joe Notrica, Inc.
Michael A. Provenzano.................... 100 0.21% 982 0.27%
Pro & Son's, Inc.
Gail Gerrard Rice........................ 100 0.21% 1,414 0.39%
Gerrard's, Inc.
Mimi R. Song............................. 100 0.21% 16,214 4.42%
Super Center Concepts, Inc.(3)
James R. Stump........................... 100 0.21% 2,131 0.58%
Stump's Market, Inc.
Kenneth Young............................ 100 0.21% 2,660 0.73%
Jack Young's Supermarkets(5)
----- ----- ------- ------
1,700 3.58% 132,880 36.25%
===== ===== ======= ======
- --------
(1) These directors will not stand for election at the Annual Meeting.
(2) These Class B Shares are owned by Ralphs Grocery Company and its
affiliates, Cala Co. and Bay Area Warehouse Stores, Inc.
(3) Elected by holders of Class B Shares.
(4) Mr. McCormack also is affiliated with Glen Avon Food, Inc. which owns 100
Class A Shares and 390 Class B Shares (0.11% of the outstanding Class B
Shares) and Yucaipa Trading Co., Inc. which owns 100 Class A Shares and
276 Class B Shares (0.08% of the outstanding Class B Shares).
(5) Mr. Young also is affiliated with Bakersfield Food City, Inc. dba Young's
Markets which owns 100 Class A Shares and 355 Class B Shares. (0.10% of
the outstanding Class B Shares).
4
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of nine meetings during
the fiscal year ended August 30, 1997. Each incumbent director who was in
office during such year attended more than 75% of the aggregate of the total
number of meetings of the board and the total number of meetings held by those
committees of the board on which he served.
The Company has an Audit Committee which presently consists of director
Kenneth Young, Committee Chairman, and directors Darioush Khaledi, Gail
Gerrard Rice and Jay McCormack. Louis A. Amen, Chairman of the Board of
Directors, is an ex-officio member of the Committee. This Committee, which met
two times during the Company's last fiscal year, is primarily responsible for
approving and reviewing the services performed by the Company's independent
auditors, reviewing the annual results of their audit, and reviewing the
Company's accounting practices and system of internal accounting controls.
The Company has an Executive Compensation Committee which presently consists
of director Darioush Khaledi, Committee Chairman, and directors Roger K.
Hughes, Mark Kidd, Willard R. "Bill" MacAloney, Jay McCormack and James R.
Stump. Louis A. Amen, Chairman of the Board of Directors, is an ex-officio
member of this Committee. This Committee, which met three times during the
Company's last fiscal year, is responsible for reviewing salaries and other
compensation arrangements of all officers and for making recommendations to
the Board of Directors concerning such matters.
The Company has a Nominating Committee which presently consists of director
Morrie Notrica, Committee Chairman, and directors John Berberian, Mark Kidd,
Jay McCormack, Gail Gerrard Rice and James R. Stump. Louis A. Amen, Chairman
of the Board of Directors, and Alfred A. Plamann, President and CEO, are ex-
officio members of this Committee. This Committee, which met two times during
the Company's last fiscal year, is responsible for selecting nominees to be
submitted by the Board of Directors to the shareholders for election to the
Board of Directors.
5
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted under the caption "Board Meetings and Committees", the Company's
Executive Compensation Committee presently consists of directors Darioush
Khaledi, Roger K. Hughes, Mark Kidd, Willard R. "Bill" MacAloney, Jay
McCormack and James R. Stump, as well as ex-officio member and Chairman of the
Board, Louis A. Amen.
As Chairman of the Board, Mr. Amen is an officer under the Bylaws of the
Company, although he is not an employee and does not receive any compensation
or expense reimbursement beyond that to which other directors are entitled.
Mr. McCormack was employed by the Company as a senior sales representative
from November 1975 to May 1986, but has not been employed by the Company since
that time. The Company's President and Chief Executive Officer, Alfred A.
Plamann, is a member of the Board of Directors of K.V. Mart Co., of which
Committee member and director Darioush Khaledi is Chairman and Chief Executive
Officer.
In the course of its business, the Company has made loans and loan
guaranties, and has entered into lease guarantees and subleases, involving its
patrons. As described below, the Company has entered into such transactions
with certain patrons with which members of the Executive Compensation
Committee are affiliated.
Loans and Loan Guarantees:
AGGREGATE LOAN BALANCES AT AUGUST 30, 1997 MATURITY
DIRECTOR (DOLLARS IN THOUSANDS) DATE
-------- ------------------------------------------ ---------
Darioush Khaledi.......... $2,107 1998-1999
Mark Kidd................. 768 1997-2003
Willard R. "Bill"
MacAloney................ 648 2002
Jay McCormack............. 495 1998-2001
James R. Stump............ 303 1999-2001
The Company has guaranteed 10% of the principal amount of two third party
loans to K.V. Mart Co., of which director Darioush Khaledi is an affiliate.
The loans mature in 2002. At December 1, 1997, the maximum principal amount of
this guarantee was $607,000.
Lease Guarantees and Subleases:
NO. OF TOTAL CURRENT ANNUAL RENT MATURITY
DIRECTOR STORES (DOLLARS IN THOUSANDS) DATE
-------- ------ ------------------------- ---------
Darioush Khaledi.................... 3 $975 2004-2016
Willard R. "Bill" MacAloney......... 3 385 2002-2011
James R. Stump...................... 3 143 1998-2002
Mark Kidd........................... 1 121 2008
In the course of its business, the Company has also entered into supply
agreements with members of the Company. These agreements require the member to
purchase certain agreed amounts of its merchandise requirements from the
Company and obligate the Company to supply such merchandise under agreed terms
and conditions relating to such matters as pricing, delivery, discounts and
allowances. The Company has entered into supply agreements with members with
which certain directors on the Company's Executive Compensation Committee are
affiliated. Members affiliated with directors Khaledi, Kidd, MacAloney and
McCormack have entered into supply agreements with the Company. These supply
agreements vary in terms and length, and expire at various dates through 2002,
but are subject to earlier termination in certain events. The supply agreement
relating to Mr. McCormack expired in December 1997. Fiscal 1997 purchases
totaled approximately $87,452,000, $8,436,000, $12,651,000 and $4,700,000,
respectively.
6
Since transactions of the foregoing type are only entered into with patrons
of the Company, it is not possible to assess whether transactions with
patrons, including patrons with which directors are affiliated, are less
favorable to the Company than similar transactions with unrelated third
parties. However, management believes such transactions are on terms which are
consistent with terms available to other patrons similarly situated.
REPORT OF EXECUTIVE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The principal components of the Company's executive compensation program
consist of an annual salary, an annual cash bonus the payment of which is
dependent upon the Company performance during the preceding fiscal year, and
certain pension, retirement and life insurance benefits.
SALARY
The Committee reviews and discusses the salary recommendations made by the
CEO for each officer, in closed session and without management personnel other
than the CEO being present. This process is subjective and centers on the
Committee's consideration of the CEO's evaluation of individual officers based
on various subjective criteria. The criteria includes the CEO's perception of
officer performance against individual officer responsibilities and goals, the
relative value and importance of individual officer contribution toward
organizational success, relative levels of officer responsibilities, changes
in the scope of officer responsibilities, and officer accomplishments and
contributions during the preceding fiscal year. The Committee sets the CEO's
salary based on its assessment of the CEO's performance in light of the
foregoing policies and considerations. The salaries as approved by the
Committee are submitted to the Board of Directors, which made no changes in
the salaries submitted for 1997.
In providing for calendar year 1997 increases in officer salaries, including
that of the CEO, the Committee took note of continuing process improvements
and cost control efforts implemented by the officer team under the direction
of the CEO. The Committee also recognized the continuing efforts made under
the CEO's leadership toward restructuring of Company operations. These efforts
resulted in the addition of significant new customer volume, pricing
efficiencies which were passed on to the Company's membership, substantial
savings in operating costs, improved cash flow management, and improved
efficiency of internal operations. As a result, during fiscal year 1996, the
Company recorded strong volume gains, produced major improvement in patronage
dividends, and better positioned itself to compete for more new business in
the future.
ANNUAL BONUSES
In recognition of the relationship between Company performance and
enhancement of shareholder value, Company officers may be awarded annual cash
bonuses. For Company officers other than the CEO, bonuses for fiscal year 1997
are awarded pursuant to an annual executive incentive plan. The plan uses a
performance matrix to determine an earned incentive, expressed as a percent of
base salary. The performance measures are pre-patronage dividend income and
revenue growth. The earned incentive determined by these performance measures,
as may be adjusted at the discretion of the CEO, is awarded as a bonus. The
CEO may raise or lower the bonus, up to a maximum of twenty-five percent of
the earned incentive, based on individual contributions to the overall
performance of the Company. For fiscal year 1997, the largest bonus awarded in
the senior officer group was 25% of base salary, while the largest bonus
awarded to all other officers was 20% of base salary.
The CEO's bonus is determined by the Committee's score of Company
performance and CEO performance against specified criteria and performance
targets. The criteria and performance targets are established by the Board of
Directors at the beginning of the fiscal year. Company performance is
determined by the weighted average of certain objective criteria (pre-
patronage dividend income, capital adequacy and asset utilization), and scored
against specified performance targets. CEO performance is scored based on the
weighted average of certain subjective criteria (CEO leadership with the
Board, CEO leadership with senior management, CEO impact on industry and
community and performance of senior management as a team). The scores for
Company performance and CEO performance comprise sixty percent and forty
percent, respectively, of the overall CEO score. The CEO is eligible for a
maximum annual bonus of forty-eight percent of base salary.
7
Bonuses awarded to the CEO and the named executives are disclosed in the
Summary Compensation Table.
BENEFITS
Consistent with the objective of attracting and retaining qualified
executives, the compensation program includes the provision of pension
benefits to Company employees, including officers, under the Company's defined
benefit pension plan, which is described in connection with the Pension Plan
Table. In addition, Company employees, including officers, may defer income
from their earnings through voluntary contributions to the Company's
Employees' Sheltered Savings Plan adopted pursuant to Section 401(k) of the
Internal Revenue Code and the Company's Employee's Excess Benefit Plan which
is a nonqualified plan. In the case of those officers who elect to defer
income under these plans, the Company makes additional contributions for their
benefit. The amount of these additional contributions made during fiscal year
1995 for the benefit of the CEO and other named executive officers is set
forth in the footnotes to the Summary Compensation Table. The Company also
provides additional retirement benefits to its officers pursuant to an
Executive Salary Protection II, which is described in connection with the
Pension Plan Table.
Executive Compensation Committee Members
Darioush Khaledi, Chairman
Louis A. Amen
Roger K. Hughes
Mark Kidd
Willard R. "Bill" MacAloney
Jay McCormack
James R. Stump
8
EXECUTIVE OFFICER COMPENSATION
The following table sets forth information respecting the compensation paid
during the Company's last three fiscal years to the President and Chief
Executive Officer (CEO) and to certain other executive officers of the
Company.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------------
FISCAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION($)
- --------------------------- ------ ------------ -------- ---------------
Alfred A. Plamann 1997 383,750 168,000 31,919(2)
President & CEO 1996 352,500 100,000 27,895
1995 322,150 50,000 24,290
Daniel T. Bane(3) 1997 235,000 60,000 16,137(4)
Senior Vice President & CFO 1996 215,000 55,000 14,446
1995 200,000 20,000 1,231
Charles J. Pilliter 1997 195,000 49,500 15,733(5)
Senior Vice President 1996 183,000 46,500 14,459
1995 172,000 15,000 13,174
Robert M. Ling, Jr.(7) 1997 184,000 37,400 5,466(6)
Vice President--General Counsel 1996 65,962 35,000 20,000
and Secretary
Corwin J, Karaffa(7) 1997 159,750 32,400 11,083(8)
Vice President--Distribution 1996 151,000 30,600 6,458
1995 89,231 7,000
- --------
(1) While the table presents salary information on a fiscal year basis, salary
is determined by the Company on a calendar year basis. Thus, salary
information with respect to any given fiscal year reflects salary
attributable to portions of two calendar year salary periods of the
Company.
(2) Consists of a $8,961 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $20,432 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation
Plan, and $2,526 representing the economic benefit associated with the
Company paid premium on the Executive Life Plan.
(3) Mr. Bane resigned as an officer of the Company in January 1998.
(4) Consists of a $9,344 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $5,814 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation
Plan, and $979 representing the economic benefit associated with the
Company paid premium on the Executive Life Plan.
(5) Consists of a $9,358 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $5,578 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation
Plan, and $797 representing the economic benefit associated with the
Company paid premium on the Executive Life Plan.
(6) Consists of a $5,466 Company contribution to the Company's Employees'
Sheltered Savings Plan.
(7) Messrs. Ling and Karaffa became officers of the Company in fiscal 1996 and
1995, respectively.
(8) Consists of a $10,200 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $493 Company contribution to the Company's
Employee Excess Benefit and Supplemental Deferred Compensation Plan, and
$390 representing the economic benefit associated with the Company paid
premium on the Executive Life Plan.
The Company has a defined benefit pension plan which covers its non-union
and executive employees. Benefits under this plan are based on formulas using
compensation and employee service periods and are subject to the appropriate
IRS tables and limitations. The Company's Executive Salary Protection Plan II
("ESPP II"), provides additional post-termination retirement income based upon
the participant's salary and years of service. The funding for this benefit is
facilitated through the purchase of life insurance policies, the premiums for
which are paid by the Company.
9
ESPP II is targeted to provide eligible executives with a retirement
benefit, including the defined benefit, of up to 65% of a participant's final
salary, based on formulas which include years of service and salary.
Executives become eligible for ESPP II after three years of service as an
executive officer of the Company. Upon eligibility, executives vest at a rate
of 5% per year (with all years of continuous service credited) up to a maximum
of 13 years. The ESPP II benefit is limited to a maximum amount payable per
year based on the year in which the executive retires. That amount for persons
retiring in 1997 is $89,888. This limitation is subject to increase based on
amounts approved by the Board of Directors. Payments under ESPP II are
discounted for executives who retire prior to age sixty-five. At August 30,
1997, credited years of service for named officers are: Mr. Plamann, 8 years;
Mr. Bane, 3 years; Mr. Pilliter, 21 years; Mr. Karaffa, 2 years; and Mr. Ling,
1 year.
The following table illustrates the estimated annual benefits under the
combined defined benefit plan and ESPP II plan. The amounts shown represent
annual compensation for qualifying executives with selected years of service
as if such executives had retired on August 30, 1997 at age sixty-five.
PENSION PLAN TABLE
YEARS OF SERVICE
-----------------------------------------------------
REMUNERATION 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 33 YEARS
- ------------ -------- -------- -------- -------- -------- --------
$100,000.................. $ 26,088 $ 52,176 $ 68,264 $ 69,352 $ 70,440 $ 72,181
125,000.................. 32,610 65,220 85,330 86,690 88,049 90,225
150,000.................. 39,132 78,264 102,395 104,027 105,659 108,270
160,000.................. 41,741 83,481 109,222 110,962 112,703 115,487
175,000.................. 44,766 89,531 116,797 117,812 118,828 120,452
200,000.................. 51,016 102,031 120,315 130,458 135,078 136,702
225,000.................. 57,266 110,173 120,315 130,458 140,600 152,952
250,000.................. 63,516 110,173 120,315 130,458 140,600 156,828
300,000.................. 76,016 110,173 120,315 130,458 140,600 156,828
350,000.................. 88,516 110,173 120,315 130,458 140,600 156,828
400,000 and above........ 100,030 110,173 120,315 130,458 140,600 156,828
EXECUTIVE EMPLOYMENT, TERMINATION AND SEVERANCE AGREEMENTS
The Company is a party to an employment contract with Alfred A. Plamann, the
Company's President and Chief Executive Officer. The contract has a three year
term, presently expiring in February 2000. The contract is renewed annually at
the end of each year for one additional year unless notice is given prior to
year end by either party of intent to terminate. After the fifth year, such
notice is to be given prior to the end of the second year of the then existing
term and unless given, the contract is extended for one year. Under the
contract, Mr. Plamann serves as the Company's President and Chief Executive
Officer and receives a base salary, currently $390,000, subject to annual
review and upward adjustment at the discretion of the Board of Directors.
Mr. Plamann is also eligible for annual bonuses, up to a maximum of 48% of
base salary, based on performance criteria established by the Board of
Directors at the beginning of each fiscal year. Additionally, Mr. Plamann will
receive employee benefits such as life insurance and Company pension and
retirement contributions.
The contract is terminable at any time by the Company, with or without
cause, and will also terminate upon Mr. Plamann's resignation, death or
disability. Except where termination is for cause or is due to Mr. Plamann's
resignation, death or disability, the contract provides that Mr. Plamann will
be entitled to receive his highest base salary during the previous three
years, plus an annual bonus equal to the average of the most recent three
annual bonus payments, throughout the balance of the term of the agreement.
Mr. Plamann would also continue to receive employee benefits such as life
insurance and Company pension and retirement contributions throughout the
balance of the term of the agreement.
10
The Company has executed a Severance Agreement with Senior Vice President
Charles J. Pilliter. The agreement extends for three years until April 2, 2000
and contains provisions for annual extensions subject to certain parameters.
Among other provisions, the agreement provides for the payment of one year's
salary plus bonus upon termination, as defined in the agreement.
The Company executed a similar Severance Agreement with former Senior Vice
President Daniel T. Bane. Upon Mr. Bane's resignation in January 1998, this
Agreement terminated and no amounts were paid to Mr. Bane under the Agreement.
DIRECTOR COMPENSATION
Each director receives a fee of $500 for each regular board meeting
attended, $200 for each committee meeting attended and $200 for attendance at
each board meeting of a subsidiary of the Company on which the director
serves. In addition, directors are reimbursed for Company related expenses.
CUMULATIVE TOTAL SHAREHOLDER RETURN
The following graph sets forth the five year cumulative total shareholder
return on the Company's common stock as compared to the cumulative total
return for the same period of the S&P 500 Index and Peer Issuers consisting of
Spartan Stores, Inc. and Roundy's, Inc. Like the Company, Spartan Stores and
Roundy's are retailer-owned wholesale grocery distributors. While Spartan
Stores pays a dividend on its stock, the Company and Roundy's do not. The
shares of the Company and the Peer Issuers are not traded on any exchange and
there is no established public market for such shares. The price of the
Company's shares during each of its fiscal years is the book value of such
shares as of the end of the prior fiscal year.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG THE COMPANY, S&P 500 INDEX AND PEER ISSUERS**
PERFORMANCE GRAPH APPEARS HERE
Measurement Period
Peer
(Fiscal Year Covered) COMPANY S&P 500 Issuers
- ------------------- ---------- --------- ----------
Measurement Pt- 8/28/92 $100 $100 $100
FYE 1993 $100.7 $112.0 $106.3
FYE 1994 $100.4 $114.8 $113.6
FYE 1995 $102.1 $135.7 $123.3
FYE 1996 $103.4 $157.5 $115.5
FYE 1997 $107.9 $217.2 $120.9
* Total return assumes reinvestment of dividends
** Fiscal years ended August 28, 1993, September 3, 1994,
September 2, 1995, August 31, 1996 and August 30, 1997
11
TRANSACTIONS WITH MANAGEMENT AND OTHER PERSONS
All directors of the Company and all nominees who are not directors (or the
firms with which such directors and nominees are affiliated) purchase
groceries, related products and store equipment from the Company or its
subsidiaries in the ordinary course of business at prices and on terms
available to patrons generally. Except for Ralphs Grocery Company, which with
its affiliated companies accounted for approximately 5.5% of consolidated
sales, during the fiscal year ended August 30, 1997, no director of the
Company or nominee who is not a director (nor the firms with which such
directors and nominees are affiliated) accounted for in excess of 5% of the
Company's consolidated sales.
As described below, the Company has made loans and loan guarantees and has
entered into lease guarantees and subleases with patrons with which certain
directors and nominees of the Company are affiliated.
Loans and Loan Guarantees:
MATURITY
DIRECTOR AGGREGATE LOAN BALANCES AT AUGUST 30, 1997 DATE
-------- ------------------------------------------ ---------
(DOLLARS IN THOUSANDS)
Mimi R. Song.............. $3,750 2002
John Berberian............ 429 1999-2000
Michael A. Provenzano..... 282 1997-2000
Lease Guarantees and Subleases:
NO. OF EXPIRATION
DIRECTOR STORES TOTAL CURRENT ANNUAL RENT DATE(S)
-------- ------ ------------------------- ----------
(DOLLARS IN THOUSANDS)
Michael A. Provenzano.............. 2 $351 2016-2017
Harley DeLano...................... 2 327 2009
John Berberian..................... 1 120 2004
The Company proposes to guarantee a lease of market premises to be
constructed and leased by Bristol Farms Markets, with which nominee Edmund
Kevin Davis is affiliated. The guarantee will have a term of ten years, with
the Company's exposure being capped at approximately $1.9 million initially
and declining to approximately $880,000 during the guarantee term. The
Company's exposure could be further reduced or eliminated based upon the
store's achievement of certain annual sales levels.
The Company leases its produce warehouse to Joe Notrica, Inc., with which
director Morrie Notrica is affiliated. The lease is for an initial term of
five years expiring in November 1998 and contains an option to extend for an
additional five year period. Monthly rent during the initial term is $24,000.
Rent during the option period will be the lesser of fair rental value or the
current rent adjusted to reflect the change in the Consumer Price Index.
The Company has entered into supply agreements with members with which
certain directors and nominees are affiliated. These agreements require the
member to purchase certain agreed amounts of its merchandise requirements from
the Company and obligate the Company to supply such merchandise under agreed
terms and conditions relating to such matters as pricing, delivery, discounts
and allowances. Members affiliated with directors DeLano and Provenzano and
nominee Song have entered into supply agreements with the Company. These
supply agreements vary in terms and length, and expire at various dates
through 2004, but are subject to earlier termination in certain events. Fiscal
1997 purchases totaled approximately $47,007,000, $7,019,000, and $89,418,000,
respectively.
12
In August 1997, the Company entered into an agreement with Ralphs Grocery
Company ("Ralphs") providing for the dissolution of Golden Alliance
Distribution, a joint venture partnership previously formed for the purpose of
providing for the shared use of the Company's general merchandise warehouse
located in Fresno, California. The dissolution agreement provides that certain
amounts owed by Ralphs to the Company at August 30, 1997 will be offset by
future redemption of excess Class B Shares held by Ralphs and its affiliates.
If redemptions of Class B Shares are insufficient to satisfy the remaining
obligation at December 31, 2000, Ralphs will satisfy the shortfall with a cash
payment.
Since transactions of the foregoing type are only entered into with patrons
of the Company, it is not possible to assess whether transactions with
patrons, including patrons with which directors or nominees are affiliated,
are less favorable to the Company than similar transactions with unrelated
third parties. However, management believes such transactions are on terms
which are consistent with terms available to other patrons similarly situated.
On February 1, 1995, GCC made a loan of $69,000 to Corwin J. Karaffa, the
Company's Vice President-Distribution. The loan was for the purpose of
assisting Mr. Karraffa in acquiring a home in connection with his becoming
employed by the Company. The loan bore interest at 8% per annum and was
secured by a second deed of trust on the home. The loan had a term of eight
years, with interest only payable during the first five years. This loan was
repaid in December 1997.
Certain other transactions involving other directors of the Company are
described beginning at page 6 under the caption "Compensation Committee
Interlocks and Insider Participation."
SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
Under the present rules of the Securities and Exchange Commission (the
"Commission"), and in view of the presently anticipated date of the Company's
Proxy Statement for this year's Annual Meeting of Shareholders, the deadline
for shareholders to submit proposals to be considered for inclusion in the
Company's Proxy Statement for next year's Annual Meeting of Shareholders is
expected to be October 21, 1998. Such proposals may be included in next year's
Proxy Statement if they comply with certain rules and regulations promulgated
by the Commission. Such proposals should be submitted to the Corporate
Secretary of the Company at the address of the Company's principal executive
office shown on the first page of this Statement.
BY ORDER OF THE BOARD OF DIRECTORS
Robert M. Ling, Jr., Corporate
Secretary
Dated: February 17, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND
EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED AUGUST 30, 1997, EXCLUDING
EXHIBITS, MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO THE CORPORATE SECRETARY
OF THE COMPANY AT THE ADDRESS OF THE COMPANY'S PRINCIPAL EXECUTIVE OFFICE
SHOWN ON THE FIRST PAGE OF THIS STATEMENT.
13
PROXY
SOLICITED BY THE BOARD OF DIRECTORS OF
CERTIFIED GROCERS OF CALIFORNIA, LTD.
FOR ANNUAL MEETING OF SHAREHOLDERS ON APRIL 14, 1998
The undersigned, revoking any previous proxies respecting the subject matter
hereof, hereby appoints LOUIS A. AMEN, ALFRED A. PLAMANN and ROBERT M. LING,
JR. attorneys and proxies (each with power to act alone and with power of
substitution) to vote all of the Class A Shares which the undersigned is
entitled to vote and all of the Class B Shares which the undersigned is
entitled to vote, with all powers which the undersigned would possess if
personally present, at the Annual Meeting of Shareholders of Certified Grocers
of California, Ltd. (the "Company"), to be held on April 14, 1998, notice of
which meeting and the proxy statement accompanying the same have been received
by the undersigned, or at any adjournment thereof, as follows:
1. ELECTION OF DIRECTORS.
ELECTION OF TWELVE DIRECTORS BY CLASS A SHARES.
Nominees: Louis A. Amen, John Berberian, Edmund Kevin Davis, John T.
Fujieki, Mark Kidd, Willard R. "Bill" MacAloney, Jay McCormack, Morrie
Notrica, Michael A. Provenzano, Gail Gerrard Rice, James R. Stump and
Kenneth Young
[_] FOR all nominees listed above, EXCEPT ANY WHOSE NAMES ARE CROSSED OUT
IN THE ABOVE LIST (the Board of Directors favors an instruction to
vote for all nominees).
[_] WITHHOLD AUTHORITY to vote for all nominees listed above.
ELECTION OF THREE DIRECTORS BY CLASS B SHARES.
Nominees: Harley J. DeLano, Darioush Khaledi and Mimi R. Song
[_] FOR all nominees listed above, EXCEPT ANY WHOSE NAMES ARE CROSSED OUT
IN THE ABOVE LIST (the Board of Directors favors an instruction to
vote for all nominees).
[_] WITHHOLD AUTHORITY to vote for all nominees listed above.
2. In their discretion, on such other matters as may properly come before
the meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED, BUT IF NO
DIRECTION IS INDICATED IT WILL BE VOTED "FOR" ITEM 1, AND ACCORDING TO THE
DISCRETION OF THE PROXIES ON ANY OTHER PROPERLY PRESENTED MATTERS.
DATED: _____________, 1998
___________________________________________ _____________________________________________
Signature Title
___________________________________________ _____________________________________________
Signature Title
___________________________________________ _____________________________________________
Signature Title
PLEASE READ: Execution should be exactly in the name in which the shares
are held; if by a fiduciary, the fiduciary's full title should be shown;
if by a corporation, execution should be in the corporate name by its
chairman of the board, president or a vice president, or by other
officers authorized by resolution of its board of directors or its
bylaws; if by a partnership, execution should be in the partnership name
by an authorized person.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
February 17, 1998
RE: ANNUAL SHAREHOLDERS' MEETING
Dear Certified Shareholder:
The Annual Meeting of Shareholders of Certified Grocers of California,
Ltd. will be held on Tuesday, April 14, 1998, at the Wyndham Garden Hotel,
located at 5757 Telegraph Road, City of Commerce, California. Only shareholders,
or persons legally designated to represent them, may attend the meeting.
A continental breakfast will be made available from 8:15 a.m. to 9:00 a.m.
during this time, you are encouraged to check in at the registration table which
will be located just outside the door of the meeting room. The meeting will be
called to order at 9:00 a.m. and will be structured as a business meeting.
Included in the business of this meeting will be the election of the
directors for the ensuing year and a report of the 1997 fiscal year.
Enclosed is an official Notice of Annual Meeting, proxy statement, proxy
form and prepaid postage envelop. Also enclosed is a confirmation of attendance
form to be completed with the names and number of individuals from your
organization that plan to attend the meeting.
A list of the nominees, as submitted by the Nominating Committee based on
the results of the Advisory Ballot, to represent Class A shareholders for the
Board of Directors, and a list of nominees to represent Class B shareholders is
contained in the enclosed proxy statement along with certain other information.
The same listing also appears on the enclosed proxy form.
As a shareholder, it is in your best interest to express your views by
dating, signing and returning the proxy form in the enclosed envelope. Please
note the instructions for proper execution at the bottom of the proxy form.
Please return the proxy form immediately. The proxy and the attendance
----------------------------------------
from may be returned in the same envelope. Your prompt attention and action on
this is greatly appreciated.
CERTIFIED SHAREHOLDERS
February 17, 1998
Page Two
I encourage your attendance and look forward to seeing you at the Annual
Meeting on April 14, 1998.
Sincerely,
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Robert M. Ling, Jr.
Sr. Vice President, General Counsel and
Secretary
RML:mkd
enclosures
NOTE: PLEASE RETURN THE PROXY FORM IMMEDIATELY.
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