SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Check the appropriate box:
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6(e)(2))
[X]Definitive Proxy Statement
[_]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)
Payment of Filing Fee (Check the appropriate box):
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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4) Date Filed:
CERTIFIED GROCERS OF CALIFORNIA, LTD.
5200 SHEILA STREET, COMMERCE, CALIFORNIA 90040
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 23, 1999
----------------
The Annual Meeting of Shareholders of Certified Grocers of California, Ltd.,
a California corporation, will be held at the Marriott Hotel, 13111 Sycamore
Drive, Norwalk, California, on February 23, 1999 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 December 28, 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.,
Senior Vice President, General
Counsel and Corporate Secretary
January 5, 1999
CERTIFIED GROCERS OF CALIFORNIA, LTD.
5200 SHEILA STREET, COMMERCE, 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 February 23,
1999, 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 December 28, 1998 are entitled to
vote at the Annual Meeting. On that date, the Company had 47,200 outstanding
Class A Shares and 361,139 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 will be first mailed to shareholders on or about
January 5, 1999. The cost of soliciting the proxies, consisting of the
preparation, printing, handling and mailing of the proxies and its 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 fifteen 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 three 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 nominees
for election to the Board of Directors. All of the nominees are currently
serving as directors of the Company, except for Mr. Andronico and Mr. Goodwin.
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 12/31/98 ELECTED DURING LAST 5 YEARS
---- -------- ------- --------------------
NOMINEES FOR ELECTION
BY CLASS A SHARES
Louis A. Amen....................... 69 1974 President, Super A
Foods, Inc.
Bill Andronico...................... 41 -- President, Andronico's
Markets
John Berberian...................... 47 1991 President, Berberian
Enterprises, Inc.,
operating Jons Markets
Edmund Kevin Davis.................. 45 1998 President, Chairman and
Chief Executive Officer,
Bristol Farms Markets
David M. Goodwin.................... 48 -- President, Goodwin &
Sons, Inc.
Mark Kidd........................... 48 1992 President, Mar-Val Food
Stores, Inc.
Jay McCormack....................... 48 1993 Owner-Operator, Alamo
Market; Co-owner, Glen
Avon Apple Market
Morrie Notrica...................... 69 1988 President and Chief
Operating Officer, Joe
Notrica, Inc.
Michael A. Provenzano............... 56 1986 President, Pro & Son's,
Inc., President, Provo,
Inc. and President Pro
and Family, Inc.
Edward J. Quijada................... 51 1998 Executive Vice
President, Tresierras
Bros. Corp., operating
Tresierras Markets
Gail Gerrard Rice................... 50 1997 Executive Vice
President, Gerrard
Markets
James R. Stump...................... 60 1982 President, Stump's
Market, Inc.
NOMINEES FOR ELECTION
BY CLASS B SHARES
Harley J. DeLano.................... 61 1995 President, Cala Foods,
Inc., Division of Ralphs
Grocery Company
Darioush Khaledi.................... 52 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........................ 41 1998 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 (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 (twelve 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 three
directors to be elected by the holders of Class B Shares.
2
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 December 28, 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
set forth in the table below.
NAME AND ADDRESS OF AMOUNT OF % OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS
-------------- --------------------------- --------- -----
Class B........................ Fred Meyer, Inc. (1) 33,102 9.17
3800 SE 22nd Ave.
Portland, OR 97202
Class B........................ Super Center Concepts, Inc. 18,277 5.06
3825 E. Martin Luther
King, Jr. Blvd.
Lynwood, CA 90262
--------
(1) Shares are held of record by various entities which are each
directly or indirectly wholly-owned by Fred Meyer, Inc.
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 December 28, 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
AFFILIATED NO. % OF TOTAL NO. % OF TOTAL
COMPANY SHARES OUTSTANDING SHARES OUTSTANDING
---------- ------ ----------- ------- -----------
Louis A. Amen........................... 100 0.21% 9,449 2.62%
Super A Foods, Inc.
Bill Andronico.......................... 100 0.21% 4,536 1.26%
Andronico's Markets
John Berberian.......................... 100 0.21% 7,615 2.11%
Berberian Enterprises, Inc.
Edmund Kevin Davis...................... 100 0.21% 485 0.13%
Bristol Farms Markets
Harley DeLano........................... 100 0.21% 33,102 9.17%
Cala Foods, Inc., Division of Ralphs
Grocery Company(1)(2)
David M. Goodwin........................ 100 0.21% 1,286 .36%
Goodwin & Sons, Inc.
Darioush Khaledi........................ 100 0.21% 16,691 4.62%
K.V. Mart Co.(2)
Mark Kidd............................... 100 0.21% 1,950 0.54%
Mar-Val Food Stores, Inc.
Willard R. "Bill" MacAloney............. 100 0.21% 2,933 0.81%
Mac-Ber, Inc.(3)
Jay McCormack........................... 100 0.21% 732 0.20%
Alamo Market(4)
Morrie Notrica.......................... 100 0.21% 9,520 2.64%
Joe Notrica, Inc.
Michael A. Provenzano................... 100 0.21% 1,272 0.35%
Pro & Son's, Inc.
Edward J. Quijada....................... 100 0.21% 2,409 0.67%
Tresierras Bros. Corp.
Gail Gerrard Rice....................... 100 0.21% 1,300 0.36%
Gerrards, Inc.
Mimi R. Song............................ 100 0.21% 18,277 5.06%
Super Center Concepts, Inc.(2)
James R. Stump.......................... 100 0.21% 2,131 0.59%
Stump's Market, Inc.
Kenneth Young........................... 100 0.21% 2,660 0.74%
Jack Young's Supermarkets(3)(5)
----- ----- ------- ------
1,700 3.57% 116,348 32.23%
===== ===== ======= ======
- --------
(1) These Class B Shares are owned by Fred Myer, Inc. and affiliates.
(2) Elected by holders of Class B Shares.
(3) Current director not standing for re-election.
(4) Mr. McCormack also is affiliated with Glen Avon Food, Inc. which owns 100
Class A Shares and 395 Class B Shares (0.11% of the outstanding Class B
Shares) and Yucaipa Trading Co., Inc. which owns 100 Class A Shares and
429 Class B Shares (0.12% of the outstanding Class B Shares).
(5) Mr. Young is also 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 eight meetings during
the fiscal year ended August 29, 1998. 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 they 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
four 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 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 Mark Kidd,
Willard R. "Bill" MacAloney, Morrie Notrica 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 seven 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 three 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, Mark Kidd, Willard R. "Bill" MacAloney, Morrie Notrica 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.
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
guarantees, and has entered into lease guarantees and subleases, involving its
members patrons, herein referred to as "members" or "patrons." Refer to
"Transactions With Management and Other Persons" on p. 11 for a description of
transactions the Company has entered into with certain patrons with which
members of the Executive Compensation Committee are affiliated.
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 is responsible for the review of 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. In
providing for calendar year 1998 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. For fiscal year 1998, the largest increase in officer base salary was
8% of base salary. The Committee accepted the recommendation of the CEO that
there be no increase in officer salaries, including that of the CEO, for
calendar year 1999. The officer salary recommendation is one of several
initiatives to be implemented during fiscal 1999 designed to improve the
financial performance of the Company.
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 1998
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.
6
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 48% of base salary. While the CEO achieved high scores
with respect to performance measured against individual performance criteria,
the CEO received a bonus of approximately 30% of base salary due to the
Company's failure to achieve certain of the objective Company performance
criteria, principally lower than targeted pre-patronage dividend income.
Bonuses awarded to 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
1998 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 Plan II, which is described in connection with the
Pension Plan Table.
Executive Compensation Committee Members
Darioush Khaledi, Chairman
Louis A. Amen
Mark Kidd
Willard R. "Bill" MacAloney
Morrie Notrica
James R. Stump
7
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($) BONUS($) COMPENSATION($)
- --------------------------- ------ --------- -------- ---------------
Alfred A. Plamann 1998 408,267 125,000 34,319(1)
President & CEO 1997 383,750 168,000 31,919
1996 352,500 100,000 27,895
Charles J. Pilliter 1998 207,000 31,500 16,797(2)
Senior Vice President and President 1997 195,000 49,500 15,733
Northern California 1996 183,000 46,500 14,459
Robert M. Ling, Jr. 1998 199,750 39,100 15,467(3)
Senior Vice President, General 1997 184,000 37,400 5,466
Counsel and Secretary 1996 65,962 35,000
Corwin J, Karaffa 1998 170,250 20,760 13,212(4)
Vice President Distribution 1997 159,750 32,400 11,083
1996 151,000 30,600 6,458
George D. Gardner 1998 152,000 18,840 11,860(5)
Vice President Non Foods and 1997 144,385 29,200 11,919
Specialty Products 1996 128,769 27,269 1,508
- --------
(1) Consists of a $14,204 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $16,705 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation
Plan, and $3,410 representing the economic benefit associated with the
Company paid premium on the Executive Life Plan.
(2) Consists of a $8,488 Company contribution to the Company's Employees'
Sheltered Savings Plan, $7,368 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation
Plan, and $941 representing the economic benefit associated with the
Company paid premium on the Executive Life Plan.
(3) Consists of a $12,554 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $2,672 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation
Plan, and $241 representing the economic benefit associated with the
Company paid premium on the Executive Life Plan.
(4) Consists of a $11,500 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $1,198 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation
Plan, and $518 representing the economic benefit associated with the
Company paid premium on the Executive Life Plan.
(5) Consists of a $9,854 Company contribution to the Company's Employees'
Sheltered Savings Plan, $1,754 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation
Plan, and $252 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,
as amended, ("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.
8
ESPP II is targeted to provide eligible executives with a retirement benefit
at age 62, 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 receive credit
for years of service with the Company at a rate of 5% per year up to a maximum
of 13 years. Payments under ESPP II are discounted for executives who retire
prior to age sixty-two. At August 29, 1998, credited years of service for
named officers are: Mr. Plamann, 9 years; Mr. Pilliter, 22 years; Mr. Karaffa,
3 years; Mr. Ling, 2 years; and Mr. Gardner, 3 years. Executive officers first
elected after December, 1998, will receive credit only for years of service as
an executive officer.
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 29, 1998 at age sixty-two.
PENSION PLAN TABLE
YEARS OF SERVICE
-----------------------------------------------------
REMUNERATION 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 33 YEARS
- ------------ -------- -------- -------- -------- -------- --------
$100,000.................. $ 25,978 $ 51,955 $ 67,933 $ 68,910 $ 69,888 $ 71,452
130,000.................. 33,819 67,594 88,391 89,688 90,985 93,060
160,000.................. 41,740 83,481 109,221 110,963 112,703 115,488
190,000.................. 49,240 98,481 128,721 130,463 132,203 134,988
220,000.................. 56,740 113,481 148,221 149,963 151,703 154,488
250,000.................. 64,240 128,481 167,721 169,463 171,203 173,988
300,000.................. 76,740 153,481 200,221 201,963 203,703 206,488
350,000.................. 89,240 178,481 232,721 234,463 236,203 238,988
400,000.................. 101,740 203,481 265,221 266,963 268,703 271,488
450,000.................. 114,240 228,481 297,721 299,463 301,203 303,988
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 2001. During the first five years, the
contract is renewed annually at the end of first year for one additional year
unless notice is given prior to year end by either party of intent to
terminate. After the fifth year, such notice is to be given prior to the end
of the second year of the then existing term and unless given, the contract is
extended for one year. Under the contract, Mr. Plamann serves as the Company's
President and Chief Executive Officer and receives a base salary, currently
$415,000, subject to annual review and upward adjustment at the discretion of
the Board of Directors. Mr. Plamann is also eligible for annual bonuses, up to
a maximum of 48% of base salary, based on performance criteria established by
the Board of Directors at the beginning of each fiscal year. Additionally,
Mr. Plamann will receive employee benefits such as life insurance and Company
pension and retirement contributions.
The contract is terminable at any time by the Company, with or without
cause, and will also terminate upon Mr. Plamann's resignation, death or
disability. Except where termination is for cause or is due to Mr. Plamann's
resignation, death or disability, the contract provides that Mr. Plamann will
be entitled to receive his highest base salary during the previous three
years, plus an annual bonus equal to the average of the most recent three
annual bonus payments, throughout the balance of the term of the agreement.
Mr. Plamann would also continue to receive employee benefits such as life
insurance and Company pension and retirement contributions throughout the
balance of the term of the agreement.
The Company has executed severance agreements with Senior Vice Presidents
Richard J. Martin, Robert M. Ling, Jr. and Charles J. Pilliter. The agreements
extend until June 9, 2001, June 9, 2001 and April 3, 2000,
9
respectively, and contain provisions for annual extensions subject to certain
parameters. Among other provisions, the agreement provides for the payment of
an amount equal to the executive's highest annual base salary during the three
year period immediately prior to the date of termination plus an amount equal
to the average annual incentive bonus paid during the three years prior to the
date of termination if executive's employment is terminated by the Company
other than for cause, disability, death or retirement or by the executive for
good reason.
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 CERTIFIED GROCERS, S&P 500 INDEX AND PEER GROUP**
[PERFORMANCE GRAPH APPEARS HERE]
Measurement Period CERTIFIED S&P
(Fiscal Year Covered) GROCERS 500 INDEX Peer Group
- --------------------- --------- --------- ----------
Measurement Pt- 8/27/93 100.0 100.0 100.0
FYE 1994 99.7 102.6 106.9
FYE 1995 101.4 121.2 116.0
FYE 1996 102.7 140.6 108.7
FYE 1997 107.2 194.0 113.8
FYE 1998 112.2 206.5 124.1
* Total return assumes reinvestment of dividends
** Fiscal years ended September 3, 1994, September 2, 1995, August 31, 1996,
August 30, 1997 and August 29, 1998
10
TRANSACTIONS WITH MANAGEMENT AND OTHER PERSONS
All directors of the Company and all nominees (or the firms with which such
directors and nominees are affiliated) purchase grocery products and related
products and services from the Company or its subsidiaries in the ordinary
course of business.
As described below, the Company has made loans and loan guarantees to,
entered into lease guarantees and subleases with, entered into supply
agreements with and made direct investments in patrons with which certain
directors and nominees of the Company are affiliated.
DIRECTORS
Loans and Loan Guarantees:
Grocers Capital Company ("GCC") had the following loans outstanding at
August 29, 1998 to members affiliated with directors of the Company:
AGGREGATE LOAN
BALANCE AT MATURITY
DIRECTOR AUGUST 29, 1998 DATE
-------- --------------- --------
(DOLLARS IN THOUSANDS)
Michael Provenzano................................. $246 2005
At August 29, 1998, the principal balances of loans to members affiliated
with directors of the Company that were sold by GCC with recourse were as
follows:
AGGREGATE LOAN
BALANCES AT MATURITY
DIRECTOR AUGUST 29, 1998 DATES
-------- --------------- ---------
(DOLLARS IN THOUSANDS)
Darioush Khaledi................................... $1,597 1999
Michael A. Provenzano.............................. 1,096 2000-2004
Willard R. "Bill" MacAloney........................ 542 2002
Jay McCormack...................................... 335 1998-2001
Mark Kidd.......................................... 292 2003
John Berberian..................................... 255 1999-2000
James R. Stump..................................... 221 1999-2001
Edward J. Quijada.................................. 4 1999
The Company has guaranteed certain third party loans to Super Center
Concepts, Inc., of which director Mimi R. Song is an affiliate. At August 29,
1998, the maximum principal amount of this guarantee was $3.8 million. GCC has
guaranteed 10% of the principal amount of certain third party loans to K.V.
Mart Co. of which director Darioush Khaledi is an affiliate. At August 29,
1998, the maximum principal amount of this guarantee was $590,000.
Lease Guarantees and Subleases:
The Company has executed lease guarantees or subleases to members affiliated
with directors of the Company as follows:
NO. OF TOTAL CURRENT EXPIRATION
DIRECTOR STORES ANNUAL RENT DATE(S)
-------- ------ ------------- ----------
(DOLLARS IN THOUSANDS)
Edmund K. Davis.............................. 1 $1,319 2009
Darioush Khaledi............................. 3 1,095 2004-2011
Willard R. "Bill" MacAloney.................. 3 385 2002-2012
Michael Provenzano........................... 2 351 2016-2017
Harley DeLano................................ 2 327 2009
Mark Kidd.................................... 1 121 2008
James R. Stump............................... 2 110 1998-2002
11
Other Leases:
The Company leases its produce warehouse to Joe Notrica, Inc., with which
director Morrie Notrica is affiliated. The lease is for a term of five years
expiring in November 2003. Monthly rent during the term is $24,000.
Supply Agreements:
During the course of its business, the Company enters into supply agreements
with members of the Company. These agreements require the member to purchase
certain agreed amounts of its merchandise requirements from the Company and
obligate the Company to supply such merchandise under agreed terms and
conditions relating to such matters as pricing, delivery, discounts and
allowances. Members affiliated with directors Davis, DeLano, Khaledi, Kidd,
MacAloney, McCormack, Provenzano, and 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.
Direct Investment:
GCC owns 10% of the common stock of K.V. Mart Co., of which Certified
director Darioush Khaledi is affiliated. The cost of the investment was
approximately $3 million. The stock purchase agreement contains certain
provisions which allow K.V. Mart Co. to repurchase the shares and GCC to
acquire additional shares upon the occurrence of certain events.
Other:
In August 1997, the Company entered into an agreement with Ralphs Grocery
Company ("Ralphs") providing for the dissolution of Golden Alliance
Distribution ("GAD"), a joint venture partnership previously formed for the
purpose of providing for the shared use of the Company's general merchandise
warehouse located in Fresno, California. The dissolution agreement provides
that certain amounts owed by Ralphs to the Company at August 30, 1997 will be
offset by future redemptions 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.
The Company subleases a store in Riverside, California to Jax Apple Market,
Inc. ("Jax"), of which director Willard R. "Bill" MacAloney is a principal.
Monthly lease payments of $13,900 totaling $212,700 as of August 29, 1998 have
not been paid to the Company and are delinquent. Also, $189,000 in equipment
purchases for the Riverside store have not been paid and are past-due. Jax
disputes the aggregate amounts claimed due. The Company is in discussions with
Jax to collect the amounts due to the Company.
NOMINEES
Loans and Loan Guarantees:
At August 29, 1998, the principal balances of loans to members affiliated
with nominees that were sold with recourse were as follows.
AGGREGATE LOAN
BALANCES AT MATURITY
NOMINEES AUGUST 29, 1998 DATES
-------- --------------- ---------
(DOLLARS IN THOUSANDS)
Bill Andronico..................................... $2,211 1999-2002
12
Lease Guarantees and Subleases:
The Company has executed lease guarantees or subleases to members affiliated
with nominees as follows:
NO. OF TOTAL CURRENT EXPIRATION
NOMINEES STORES ANNUAL RENT DATE(S)
-------- ------ ------------- ----------
(DOLLARS IN THOUSANDS)
Bill Andronico......................... 2 $2,110 2004-2005(1)
- --------
(1) The Walnut Creek, California store is scheduled to open in the spring of
2000. The Company has made a five-year floating guarantee for the first
fifteen years of the twenty-year term. The Walnut Creek store annual rent
is scheduled to be $992,000.
Supply Agreements:
During the course of its business, the Company enters into supply agreements
with members of the Company. These agreements require the member to purchase
certain agreed amounts of its merchandise requirements from the Company and
obligate the Company to supply such merchandise under agreed terms and
conditions relating to such matters as pricing, delivery, discounts and
allowances. A member affiliated with Bill Andronico has entered into a supply
agreement with the Company. Such supply agreement expires in 2002, but is
subject to earlier termination in certain events.
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. Karaffa 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.
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 20, 1999. 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., Senior Vice
President, General Counsel and Corporate
Secretary
Dated: January 5, 1999
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
AUGUST 29, 1998, TO THE SECURITIES AND EXCHANGE COMMISSION 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 FEBRUARY 23, 1999
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 February 23, 1999, 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, Bill Andronico, John Berberian, Edmund Kevin
Davis, David M. Goodwin, Mark Kidd, Jay McCormack, Morrie Notrica,
Michael A. Provenzano, Edward J. Quijada, Gail Gerrard Rice and James R.
Stump
[_] 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: _____________, 1999
___________________________________________ _____________________________________________
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.