SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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[_] Confidential, for Use of the Commission Only (as permitted by Rule
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[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
UNIFIED WESTERN GROCERS, INC.
(Name of Registrant as Specified In Its Charter)
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UNIFIED WESTERN GROCERS, INC.
5200 Sheila Street, Commerce, California 90040
----------------
Notice of Annual Meeting of Shareholders
February 26, 2002
----------------
The Annual Meeting of Shareholders of Unified Western Grocers, Inc., a
California corporation, will be held at the Wyndham Garden Hotel, 5757
Telegraph Road, Commerce, California on February 26, 2002 at 11:00 a.m., for
the following purposes:
1. To elect the eighteen members of the Board of Directors for the ensuing
year, fifteen 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 January 3, 2002 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.
Executive Vice President, General
Counsel and Secretary
January 25, 2002
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
UNIFIED WESTERN GROCERS, INC.
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 Unified Western Grocers, Inc. (the "Company") of proxies
for use at the Annual Meeting of Shareholders to be held February 26, 2002, 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 record of Class A Shares and Class B Shares at the close
of business on January 3, 2002 are entitled to vote at the Annual Meeting. On
that date, the Company had outstanding 69,125 Class A Shares and 446,081 Class
B Shares.
These proxy materials will be first mailed to shareholders on or about
January 25, 2002. 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 eighteen directors (constituting the entire board) are
to be elected to serve until the next Annual Meeting and until their
successors are elected and qualified. Fifteen 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.
2
The following table sets forth certain information concerning the nominees
for election to the Board of Directors. 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 12/31/01 Elected During Last 5 Years
---- -------- ------- --------------------
NOMINEES FOR ELECTION BY CLASS A
SHARES
Louis A. Amen................... 72 1974 President, Super A Foods,
Inc.
David M. Bennett................ 48 1999 Co-owner, Mollie Stone's
Markets
John Berberian.................. 50 1991 President, Berberian
Enterprises, Inc.
Edmund Kevin Davis.............. 48 1998 President, Chairman and
Chief Executive Officer,
Bristol Farms Markets
James F. Glassel................ 61 1999 President, Pokerville
Select Market
Mark Kidd....................... 51 1992 President, Mar-Val Food
Stores, Inc.
Jay McCormack................... 51 1993 Owner-Operator, Alamo
Foods, Inc.; Co-owner, Glen
Avon Apple Market
Morrie Notrica.................. 72 1988 President and Chief
Operating Officer,
Joe Notrica, Inc.
Peter J. O'Neal................. 57 1999 President, White Salmon
Foods, Inc. and Estacada
Foods, Inc.
Michael A. Provenzano, Jr. ..... 59 1986 President, Pro & Son's,
Inc., President,
Provo, Inc. and President,
Pro and Family, Inc.
Gordon E. Smith................. 56 1999 President, Marlea Foods,
Inc., operating Vernonia
Sentry Market
Robert E. Stiles................ 62 1999 President, Gelson's Markets
James R. Stump.................. 63 1982 President, Stump's Market,
Inc.
Kenneth Ray Tucker.............. 54 1999 President, Evergreen
Markets, Inc.
Richard L. Wright............... 64 1999 President, Wright's
Foodliner, Inc.
NOMINEES FOR ELECTION BY CLASS B
SHARES
Darioush Khaledi................ 55 1993 Chairman of the Board and
Chief Executive Officer,
K.V. Mart Co., operating
Top Valu Markets and Valu
Plus Food Warehouse
Douglas A. Nidiffer............. 52 2001 President and Chief
Executive Officer,
C&K Market, Inc.
Mimi R. Song.................... 44 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 for which the holder is entitled to vote multiplied by the
number of directors to be elected by the holders of Class A Shares (fifteen 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.
3
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 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.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of eight meetings during
the fiscal year ended September 29, 2001. 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 the director served.
The Company has an Audit Committee which presently consists of Director
Richard L. Wright, Committee Chairman, and Directors Edmund Kevin Davis, Jay
McCormack, Douglas A. Nidiffer and Kenneth Ray Tucker. Louis A. Amen, Chairman
of the Board of Directors, is an ex-officio member of the Audit Committee. The
members of the Audit Committee are "independent" as such term is defined by
the listing standards applicable to companies listed on the New York Stock
Exchange. The Company is not so listed. The Audit Committee, which met four
times during the Company's last fiscal year, is primarily responsible for
reviewing services performed by the Company's independent auditors, reviewing
the annual audited financial statements and quarterly unaudited financial
statements with management and with the Company's independent auditors,
reviewing information with respect to the independence of auditors and making
recommendations to the Board of Directors concerning such matters. The Audit
Committee performs its duties consistent with the Charter for the Audit
Committee adopted by the Board of Directors.
The Company has an Executive Compensation Committee which presently consists
of Director Mark Kidd, Committee Chairman, and Directors John Berberian, Jay
McCormack, Morrie Notrica, Gordon E. Smith and Mimi R. Song. Arthur Reicher,
who is a consultant to the Board, serves as an advisor to the committee. Louis
A. Amen, Chairman of the Board of Directors, is an ex-officio member of the
Executive Compensation Committee. The Executive Compensation Committee, which
met four 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
James R. Stump, Committee Chairman, and Directors David M. Bennett, Edmund
Kevin Davis, Morrie Notrica, Peter J. O'Neal and Kenneth Ray Tucker. Louis A.
Amen, Chairman of the Board of Directors, and Alfred A. Plamann, President and
Chief Executive Officer, are ex-officio members of the Nominating Committee.
The Nominating 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.
4
PRINCIPAL STOCKHOLDERS
As of January 3, 2002, no person was known by the Company to own
beneficially more than five percent (5%) of the outstanding Class A Shares or
Class B Shares of the Company.
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 January 3, 2002 by each director and
nominee, and their affiliated companies, and by all directors 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 0.14% 10,435 2.33%
Super A Foods, Inc.
David M. Bennett....................... 100 0.14% 2,644 0.59%
Mollie Stone's Markets
John Berberian......................... 100 0.14% 8,657 1.94%
Berberian Enterprises, Inc.
Edmund Kevin Davis..................... 100 0.14% 751 0.17%
Bristol Farms Markets
James F. Glassel....................... 100 0.14% 195 0.04%
Pokerville Select Markets
Darioush Khaledi (1)................... 100 0.14% 17,134 3.83%
K.V. Mart Co.
Mark Kidd.............................. 100 0.14% 2,289 0.51%
Mar-Val Food Stores, Inc.
Jay McCormack (2)...................... 300 0.42% 1,954 0.44%
Douglas A. Nidiffer (1)................ 100 0.14% 17,438 3.90%
C&K Market, Inc.
Morrie Notrica......................... 100 0.14% 9,520 2.13%
Joe Notrica, Inc.
Peter J. O'Neal........................ 100 0.14% 181 0.04%
White Salmon Foods, Inc. and Estacada
Foods, Inc.
Michael A. Provenzano, Jr.............. 100 0.14% 3,123 0.70%
Pro & Son's, Inc.
Gordon E. Smith........................ 100 0.14% 297 0.07%
Marlea Foods, Inc., operating Vernonia
Sentry Market
Mimi R. Song (1)....................... 100 0.14% 21,166 4.73%
Super Center Concepts, Inc.
Robert E. Stiles (3)................... 100 0.14% 8,855 1.98%
Gelson's Markets
James R. Stump......................... 100 0.14% 2,131 0.48%
Stump's Market, Inc.
Kenneth Ray Tucker..................... 100 0.14% 47 0.01%
Evergreen Markets, Inc.
Richard L. Wright...................... 100 0.14% 2,813 0.63%
Wright's Foodliner, Inc.
All Directors and their affiliated
companies as a group.................. 2,000 2.80% 109,630 24.51%
5
- --------
(1) Elected by Class B Shareholders.
(2) Mr. McCormack is affiliated with Glen Avon Foods, Inc., which owns 100
Class A Shares (0.14% of the outstanding class of shares) and 465 Class B
Shares (0.10% of the outstanding class of shares), Yucaipa Trading Co.,
Inc., which owns 100 Class A Shares (0.14% of the outstanding class of
shares) and 735 Class B Shares (0.16% of the outstanding class of shares)
and Alamo Foods, Inc., which owns 100 Class A Shares (0.14% of the
outstanding class of shares) and 754 Class B Shares (0.17% of the
outstanding class of shares).
(3) Shares owned by Arden-Mayfair, Inc., parent corporation of Gelson's
Markets. Mr. Stiles disclaims beneficial ownership of these shares.
Section 16(a) Beneficial Ownership Reporting Compliance
No officer or director failed to file a report required by Section 16(a) of
the Securities Exchange Act of 1934 on a timely basis during the most recent
fiscal year or prior fiscal years except that based solely on a review of
Forms 3, 4 and 5 furnished to the Company by officers and directors of the
Company late Form 5's were or will be filed by directors Amen, Bennett,
Berberian, Davis, Glassel, Kidd, McCormack, O'Neal, Provenzano, Song, Stiles,
Tucker and Wright and former directors Andronico, Goodwin and McDonald,
reporting exempt transactions with respect to receipt of Class B Shares as
patronage dividends or the redemption of Class B Shares by the Company in the
fiscal year ended September 29, 2001.
6
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 consists of Mark Kidd, Committee Chairman,
and Directors John Berberian, Jay McCormack, Morrie Notrica, Gordon E. Smith
and Mimi R. Song as well as ex-officio member and Chairman of the Board,
Louis A. Amen. Arthur Reicher, who is a consultant to the Board, serves as an
advisor to the Committee. 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.
In the course of its business, the Company has made loans to and issued loan
guarantees for the benefit of members, entered into lease guarantees,
subleases, and leases with members, made direct investments in members and
entered into supply agreements with members. Refer to "Transactions With
Management and Other Persons" on page 15 for a description of transactions the
Company has entered into with certain member 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's performance during the preceding fiscal year, and
certain pension, health insurance, retirement and life insurance benefits.
Salary
The Executive Compensation Committee is responsible for the review of salary
recommendations made by the Chief Executive Officer (CEO) for each officer.
Such review is conducted in closed session and, with the exception of the CEO,
without management personnel being present. This process centers on the
Executive Compensation Committee's consideration of the CEO's evaluation of
individual officers based on various subjective and objective 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 contributions toward organizational success,
relative levels of officer responsibilities, changes in the scope of officer
responsibilities, officer accomplishments and contributions during the
preceding fiscal year and the overall financial results for the Company during
the previous fiscal year. Salary levels so established for the fiscal year
ended September 29, 2001 for the named executives are reflected in the Summary
Compensation Table.
The Executive Compensation Committee sets the CEO's salary based on its
assessment of the CEO's performance in light of the policies and
considerations discussed directly above.
Annual Bonuses
In recognition of the relationship between Company performance and
enhancement of shareholder value, Company officers may be awarded annual cash
bonuses. Company officers other than the CEO are eligible for bonuses pursuant
to an annual incentive plan for senior management. The plan uses a performance
matrix to determine an earned incentive, expressed as a percent of base
salary. The plan provides for the annual determination of a target bonus, a
maximum bonus and performance levels below which no bonus is paid. The
performance measures for fiscal 2001 were 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 25% percent of the earned
incentive, based on individual contributions to the overall performance of the
Company. For fiscal year 2001, no bonuses were awarded pursuant to the plan
since the Company's pre-patronage dividend income was below the minimum level
required.
7
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 60% and 40%, respectively, of
the overall CEO score. After reviewing the Company's performance for fiscal
year 2001, and in spite of significant leadership performance by the CEO, in
response to the CEO's request to forego a bonus for fiscal year 2001, the
Executive Compensation Committee elected not to award any bonus to the CEO for
fiscal year 2001.
Bonuses awarded to named executives in the prior two fiscal years 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. The Company also provides additional retirement benefits to its
officers pursuant to an Executive Salary Protection Plan II ("ESPP II"), 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 Amended and Restated Deferred Compensation Plan which is a
nonqualified plan. In the case of those employees 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
2001 for the benefit of the CEO and other named executive officers is set
forth in the footnotes to the Summary Compensation Table.
Executive Compensation Committee Members
Mark Kidd, Chairman
John Berberian
Jay McCormack
Morrie Notrica
Gordon E. Smith
Mimi R. Song
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 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 2001 500,000 0 40,410(2)
President & Chief Executive
Officer 2000 500,000 0 41,885
1999(1) 39,904 0 3,033
1999 415,000 166,000 34,343
Richard J. Martin 2001 270,000 0 21,709(3)
Executive Vice President, Finance
& Administration and 2000 266,154 0 20,756
Chief Financial Officer 1999(1) 24,038 0 1,827
1999 250,000 75,000 5,949
Robert M. Ling, Jr. 2001 245,000 0 19,059(4)
Executive Vice President, General
Counsel and Secretary 2000 237,115 0 18,513
1999(1) 19,615 0 1,490
1999 204,000 71,000 16,098
Charles J. Pilliter 2001 240,000 0 19,362(5)
Executive Vice President--Sales
and Marketing 2000 234,231 0 18,779
1999(1) 20,192 0 1,535
1999 210,000 52,500 17,045
Daniel J. Murphy(6) 2001 184,615 0 0
Senior Vice President--Retail
Support Services
- --------
(1) Transition period between August 29, 1999 and October 2, 1999.
(2) Consists of a $11,331 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $24,885 Company contribution to the Company's
Amended and Restated Deferred Compensation Plan, and $4,194 representing
the economic benefit associated with the Company paid premium on the
Executive Life Plan.
(3) Consists of a $10,681 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $9,533 Company contribution to the Company's
Amended and Restated Deferred Compensation Plan, and $1,495 representing
the economic benefit associated with the Company paid premium on the
Executive Life Plan.
(4) Consists of a $10,766 Company contribution to the Company's Employees'
Sheltered Savings Plan, $7,746 Company contribution to the Company's
Amended and Restated Deferred Compensation Plan, and $547 representing the
economic benefit associated with the Company paid premium on the Executive
Life Plan.
(5) Consists of a $7,415 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $10,925 Company contribution to the Company's
Amended and Restated Deferred Compensation Plan, and $1,022 representing
the economic benefit associated with the Company paid premium on the
Executive Life Plan.
(6) Mr. Murphy was hired on October 23, 2000.
The Company has a pension plan (the "Pension Plan") which covers its non-
union and executive employees. The Pension Plan consists of two components, a
defined benefit plan based on final average compensation and a cash balance
plan. The defined benefit portion of the Pension Plan provides benefits based
on years of service through December 31, 2001 and final average compensation.
Effective January 1, 2002, the cash balance plan was added to the Pension Plan
for post January 1, 2002 accruals. Benefits under the Pension
9
Plan are equal to the sum of the benefits under the defined benefit portion,
plus benefits that accumulate under the cash balance portion beginning on
January 1, 2002. There is no offset under the Pension Plan for Social
Security, however there is an offset for certain covered compensation and
union benefits.
As of December 31, 2001, years of service under the defined benefit portion
of the Pension Plan were frozen and will no longer increase. Employees will
receive benefits under the defined benefit portion based on years of service
as frozen and final compensation, which may increase. As of December 31, 2001,
credited years of service under the defined benefit portion of the Pension
Plan for named executive officers were: Mr. Plamann, 12 years; Mr. Martin, 3
years; Mr. Ling, 5 years; Mr. Pilliter, 25 years and Mr. Murphy, 1 year.
Benefits accrued under the defined benefit portion will be paid as an annuity.
The cash balance portion of the Pension Plan is expressed in the form of a
hypothetical account balance. Commencing at the end of 2002 and annually
thereafter, a participant's hypothetical cash balance account will be
increased by (i) pay credits based on a percentage of compensation for that
year, from 4% to 10% based on years of service and age, and (ii) interest
credits based on the participant's hypothetical account balance at the thirty
year U.S. Treasury Bond rate, with a minimum guaranty of 5%. Benefits under
the cash balance portion of the plan are generally stated as a cash balance
account value and will be distributed as an annuity. No hypothetical account
balances of employees have been credited with any pay credits or interest
credits.
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.
ESPP II is targeted to provide eligible officers with a retirement benefit
at age 62, which for a period of 15 years, when combined with the Pension Plan
payments, would equal up to 65% of a participant's final salary, based on
formulas which include years of service and salary. Employees become eligible
for ESPP II after three years of service as an officer of the Company at the
level of Vice President or above. Upon eligibility, officers receive credit
for years of service with the Company at a rate of 5% per year up to a maximum
of 13 years. Officers first elected after December, 1998 receive credit only
for years of service as an officer. Payments under ESPP II are discounted for
executives who retire prior to age 62. As of December 31, 2001, credited years
of service under ESPP II for named executive officers were: Mr. Plamann, 12
years; Mr. Martin, 3 years; Mr. Ling, 5 years; Mr. Pilliter, 13 years and Mr.
Murphy, 1 year.
The following table illustrates the estimated annual benefits under the
combined defined benefit portion of the Pension Plan and the ESPP II plan. The
amounts shown represent annual compensation payable on a straight-life basis
with respect to the benefits under the defined benefit portion and a 15 year
annuity with respect to the benefits under the ESPP II for qualifying
executives with selected years of service as if such executives had retired on
September 29, 2001 at age 65.
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
500,000 $126,740 $253,481 $330,221 $331,963 $333,703 $336,488
10
Executive Employment, Termination and Severance Agreements
The Company has an employment agreement with Alfred A. Plamann, the
Company's President and Chief Executive Officer. The term of Mr. Plamann's
contract is three years, currently expiring on September 29, 2003. The term
will be extended automatically for successive one year terms on each
anniversary of the contract unless either party has given notice of an
intention to terminate at least eleven months prior to such anniversary date.
Under the contract, Mr. Plamann serves as the Company's President and Chief
Executive Officer and receives a base salary, currently $500,000, 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
60% 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 (other than a resignation following
designated actions of the Company or its successor which trigger a right by
Mr. Plamann to resign and receive severance benefits), death or disability,
the amended 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 and Messrs. Ling, Martin and Pilliter have executed severance
agreements. Each agreement provides for severance payments in the event the
executive's employment is terminated (i) by the Company other than for cause,
death or extended disability, (ii) by the executive for good reason, or (iii)
by the executive without cause within 12 months following a change in control.
The severance payment is equal to two times the highest annual base salary in
the three years prior to termination plus two times the highest annual
incentive bonus paid during that three year period. In the event of the
occurrence of the specified termination events, the executive is also entitled
to Company payment of COBRA health insurance premiums until the earlier of 24
months or the cessation of COBRA eligibility and coverage.
A severance agreement has also been authorized for Mr. Murphy providing a
severance benefit equal to one year's salary and bonus based on the highest
annual salary and the highest incentive bonus paid over the prior three years
in the event of the occurrence of specified termination events. These include
termination (i) by the Company other than for cause, death or extended
disability, and (ii) by the executive for good reason.
Officer Health Insurance Plan
The Board of Directors approved, effective January 1, 2001, a supplemental
officer health insurance benefit and an officer retiree medical plan for
officers and their eligible dependents. Pursuant to the Supplemental Officer
Health Insurance Plan, officers will be eligible for payment by the insurance
plan of the portion of covered expenses not covered under the Company's health
insurance plan. Under the Officer Retirement Medical Plan, officers who are at
least 55 years of age and have seven years service with the Company as an
officer will be eligible to participate in the Officer Retirement Medical
Insurance Plan following termination of employment. Former officers (and
surviving spouses) must enroll in Medicare Parts A and B when they reach age
65 at which time Medicare becomes the primary carrier and the Officer Retiree
Medical Plan becomes secondary. Active officers will continue to be obligated
to pay the regular premium for the Company health insurance plan they have
selected.
Officer Disability Insurance
The Board of Directors approved, effective January 1, 2001, a supplemental
disability insurance plan for officers that provides 100% of their pre-
disability base salary while on a disability leave for up to 2 years. This
disability coverage will be coordinated with existing sick leave, state
disability insurance, short-term disability
11
insurance, and long-term disability plans available to all employees so that
the officer disability insurance is a supplemental benefit. During the first 6
months of disability, state disability insurance and short-term disability
insurance pays 66 2/3% of the employee's salary and officer disability
insurance pays 33 1/3%. After six months of disability, state disability
insurance and long-term disability insurance pays 50% of the employee's salary
and officer disability insurance pays the remaining 50%.
Director Compensation
Prior to the 2002 Annual Meeting, each director received an annual payment
of $7,500 as compensation for service as a director of the Company and a
member of any Board committees and subsidiary Boards, if applicable. In
addition, directors were reimbursed for Company related expenses. In
recognition of the additional duties and responsibilities attendant with such
positions, the Chairman of the Board received annual compensation of $12,500,
and each Vice Chairman received annual compensation of $10,000. At its regular
meeting in December 2001, the Board of Directors unanimously approved a
resolution suspending payment of the director fees for a one-year period
beginning with the Company's Annual Meeting. Directors will continue to be
reimbursed for Company related expenses.
AUDIT COMMITTEE REPORT
The audit committee: (1) has reviewed and discussed the audited financial
statements with management; (2) has discussed with Deloitte & Touche LLP the
matters required to be discussed by SAS 61 as currently in effect; (3) has
received the written disclosures and the letter from Deloitte & Touche LLP
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), as currently in effect; (4) has discussed
with Deloitte & Touche LLP the independent accountant's independence and (5)
has considered whether the provision of non-audit services is compatible with
maintaining Deloitte & Touche LLP's independence.
Based on the review and discussions described above, the audit committee
recommended to the Board of Directors that the audited financial statements
described in the report of Deloitte & Touche LLP dated December 12, 2001, be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 29, 2001 for filing with the Securities and Exchange Commission.
Richard L. Wright, Committee
Chairman
Edmund Kevin Davis
Jay McCormack
Douglas A. Nidiffer
Kenneth Ray Tucker
12
INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP as the Company's
independent auditors for fiscal year 2002. A representative of Deloitte &
Touche LLP will be present at the annual meeting and will have the opportunity
to make a statement if such representative desires to do so and will also be
available to answer appropriate questions from shareholders.
The aggregate fees billed to the Company by Deloitte & Touche LLP, its
independent auditors, with respect to services performed for the fiscal year
ended September 29, 2001 are as follows:
Audit Fees...................................................... $412,425(a)
Financial Information Systems Design and Implementation Fees.... $0
All Other Fees.................................................. $460,535(b)
(a) Amounts classified as "Audit Fees" include aggregate fees billed for
professional services rendered for the audit of the Company's consolidated
financial statements for the fiscal year ended September 29, 2001 and for
the reviews of the financial statements included in the Company's
quarterly reports on Form 10-Q for that fiscal year.
(b) Amounts classified as "All Other Fees" include aggregate fees billed for
services relating to the Company's statutory and employee benefit plan
audits, other attest services for certain subsidiary companies, accounting
consultations, work on SEC registration statements, tax compliance and
other special projects selected by the Company's management.
13
CUMULATIVE TOTAL SHAREHOLDER RETURN
The following graph sets forth the five year cumulative total shareholder
return on the Company's shares as compared to the cumulative total return for
the same period of the S&P 500 Index and the Company's Peer Group. The peer
group is Roundy's, Inc. Like the Company, Roundy's is a retailer-owned
wholesale grocery distributor. Neither Company nor Roundy's pays a dividend on
its stock. The shares of the Company and the Peer Issuer are not traded on any
exchange and there is no established public market for such shares. The
Company's shares are purchased and sold based on the book value of such shares
as of specified dates. Since the value of Company and Company Peer Group
shares in the graph is based solely on changes in the book value of such
shares while the graph values for S&P 500 Companies are determined through
public market trading activity, which typically establishes value by way of
factors other than or in addition to book value, the Company believes that the
graph comparison is not on a comparable basis and is not meaningful.
Comparison of Five Year* Cumulative Total Return**
Among Unified Western Grocers, Inc., S&P 500 Index and Peer Group
[GRAPH APPEARS HERE]
PERFORMANCE PER $100
1996 1997 1998 1999 2000 2001
S&P 500 100.0 138.0 144.4 178.4 190.4 162.8
PEER ISSUERS 100.0 105.8 115.9 116.4 124.7 141.5
COMPANY 100.0 104.3 109.0 111.7 118.3 103.6
* Fiscal years ended August 30, 1997, August 28, 1998, August 29, 1999,
September 30, 2000 and September 29, 2001
** Total return assumes reinvestment of dividends
14
TRANSACTIONS WITH MANAGEMENT AND OTHER PERSONS
All directors of the Company (or the firms with which such directors 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 to and issued loan guarantees
for the benefit of members, entered into lease guarantees, subleases and
leases with members, entered into supply agreements with members and made
direct investments in members with which certain directors or nominees for
director of the Company are affiliated.
Transactions with Members Affiliated with Directors and Nominees
Loans and Loan Guarantees:
Unified and its subsidiaries provide loan financing to its member-patrons.
The Company had the following loans outstanding at December 29, 2001 to
members affiliated with directors of the Company:
Aggregate Loan
Balance Maturity
Director or Nominee December 29, 2001 Date
------------------- ----------------- ---------
Darioush Khaledi................................. $11,613,000 2002-2005
David Bennett.................................... 2,000,000 2003
Douglas A. Nidiffer.............................. 758,000 2009
Jay McCormack.................................... 439,000 2001-2005
Mimi R. Song..................................... 98,000 2002
On May 12, 2000, the Company loaned $7 million to K.V. Mart Co. ("KV") which
is payable over a period of five years and bears interest at the prime rate
plus 2%. The loan is secured by substantially all of the assets of KV,
including leasehold deeds of trust on several parcels currently leased by KV.
Director Khaledi, his partner Parviz Vazin and two entities to which these
individuals are related have guaranteed the obligations of KV under the loan.
Coincident with the transaction, KV and the Company extended the term of their
existing supply agreement until May 12, 2005.
On July 5, 2000, the Company loaned $3 million to 1999 Lawndale Associates
LLC ("Lawndale"), of which director Khaledi is an affiliate. The loan, as
proposed to be amended, will be payable over a period of five years, will be
secured by real property owned by Lawndale and will bear interest at the prime
rate plus 2%. The proceeds of the loan were used to repay amounts due KV that
had been advanced by KV to members of Lawndale. The loan is guaranteed by
Khaledi, his partner Parviz Vazin and three entities to which these
individuals are related.
Member-patron loans made by GCC and United Resources are periodically sold
to banks, subject to limited resource provisions. At December 29, 2001, there
were no loans outstanding to directors which had been sold.
The Company and its subsidiaries provide loan guarantees to its members. GCC
has guaranteed 10% of the principal amount of certain third-party loans to KV
and KV Property Company of which director Darioush Khaledi is an affiliate. At
December 29, 2001, the principal amount of this guarantee was $307,400.
GCC has guaranteed 10% of the principal amount of certain third-party loans
to companies owned by Michael A. Provenzano, Jr. At December 29, 2001, the
guaranteed loan amounts totaled $450,000.
The Company has guaranteed 22% of the principal amount of a third-party loan
to C&K Market, Inc. ("C&K"), of which Douglas A. Nidiffer is a shareholder,
director and officer. At December 29, 2001, the principal amount of this
guarantee was $323,000.
15
Lease Guarantees and Subleases:
The Company provides lease guarantees and subleases to its member-patrons.
The Company has executed lease guarantees or subleases to members affiliated
with directors of the Company at December 29, 2001 as follows:
Total
Current
No. of Annual Expiration
Director or Nominee Stores Rent Date(s)
------------------- ------ ---------- ----------
Edmund K. Davis................................. 1 $1,560,000 2010
Darioush Khaledi................................ 5 1,415,000 2002-2011
Michael A. Provenzano, Jr. ..................... 2 351,000 2016-2017
John Berberian.................................. 2 310,000 2006-2007
Douglas A. Nidiffer............................. 2 287,000 2006-2015
Richard L. Wright............................... 1 264,000 2007
Mimi R. Song.................................... 1 240,000 2020
David Bennett................................... 1 193,000 2004
Mark Kidd....................................... 1 121,000 2008
James R. Stump.................................. 1 36,000 2003
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 July 2003. Monthly rent during the term is $24,000.
On November 1, 2001, the Company signed an agreement with Super Center
Concepts, Inc. ("Super Center"), of which director Mimi R. Song is affiliated,
to lease certain real property and enter into a seven year supply agreement.
Under the agreement, the Company will lease real property to a limited
liability company affiliated with principals of Super Center, which in turn
will sublease the property to Super Center. Super Center has guaranteed all
obligations of the limited liability company under the lease. In consideration
for the right to sublease the real property, the limited liability company
paid $675,000 to the Company. The lease expires in March 2023, subject to an
option to extend the lease. Annual rent during the term is $390,000,
commencing in June 2002. In addition, the Company and Super Center entered
into a seven year supply agreement and a right of first refusal agreement with
respect to certain of Super Center's operating assets and stock. The Company
paid Super Center a total of $2,000,000 as consideration for entering into the
supply and right of first refusal agreements.
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 and delivery. Members
affiliated with directors or nominees Bennett, Davis, Khaledi, Kidd,
McCormack, Nidiffer, Provenzano, Song and Wright have entered into supply
agreements with the Company. These supply agreements vary in terms and length,
and expire at various dates through 2010, and are subject to earlier
termination in certain events.
Direct Investment:
At August 29, 1998, GCC owned 10% of the common stock of KV, of which
Unified director Darioush Khaledi is affiliated. The cost of the investment
was approximately $3 million. The stock purchase agreement contained a
provision which allowed KV to repurchase the shares upon certain terms and
conditions. In March 1999, KV exercised its repurchase rights under the
agreement. KV purchased the shares for $4.5 million, payable in cash and in an
interest-bearing note, resulting in a pre-tax gain of $1.5 million which is
included in Other
16
income (expense) net, in the accompanying consolidated statements of earnings
and comprehensive earnings. The stock purchase agreement also provides that
for a five-year period commencing as of the date of the agreement, in the
event of (i) a change of control of KV or (ii) a breach of the supply
agreement by KV, KV shall pay the Company $900,000 or an amount equal to the
difference between 10% of the apprised value of KV as of the approximate date
of the Agreement (as prepared by an independent third party appraisal firm)
and $4.5 million, whichever is greater.
In December 2000, the Company purchased 80,000 shares of Preferred Stock of
C&K for $8 million. Douglas A. Nidiffer, a director of the Company, is a
shareholder, director and officer of C&K. In connection with the stock
purchase transaction, C&K executed a 10 year Supply Agreement and the
shareholders of C&K granted to the Company a put with respect to the Preferred
Stock, exercisable upon occurrence of designated events including the
nonpayment of permitted dividends or mandatory redemption payments. The
Preferred Stock bears a 9.5% cumulative dividend rate, with cash payment of
dividends deferred until November 15, 2002, and then payable only if permitted
by applicable loan agreements. The Preferred Stock is convertible into 15% of
the common stock of C&K under certain circumstances.
The Company is a member of RAF Limited Liability Company ("RAF"). The only
other member is Wright's Foodliner, Inc., an entity controlled by Director
Richard L. Wright. Wright's Foodliner, Inc. is the managing member of RAF.
During fiscal 1999, RAF purchased groceries and other products in the ordinary
course of business from United on the same terms and conditions as United's
other members. In October, 1999, the store was closed and the parties are in
the process of liquidating RAF in accordance with the terms of the limited
liability company operating agreement. Pursuant to that agreement, the Company
has paid to Wright's Foodliner, Inc. approximately $446,500. The Company and
Wright resolved issues relating to the liquidation and Unified agreed to
credit Wright's RAF capital account for $40,000 and Wright and Wright's
Foodliner, Inc. have provided Unified with releases.
Transactions with Executive Officers:
On October 1, 1999, to facilitate Executive Vice President Charles J.
Pilliters' relocation to Southern California, the Company loaned to Mr.
Pilliter $100,000, pursuant to a four year Note Secured by a Deed of Trust,
with interest at a rate of 7% per annum, interest only payable in arrears on
January 15, 2000, January 15, 2001, January 15, 2002 January 1, 2003, and on
maturity. In the event Mr. Pilliter is employed by the Company on the maturity
date or dies prior to the maturity date, then payment of the Note principal is
forgiven. If Mr. Pilliter is terminated without cause prior to the maturity
date, a portion of the Note is forgiven based on the time remaining until
maturity.
In December 2000, to facilitate Senior Vice President Daniel J. Murphy's
relocation to Southern California, the Company loaned to Mr. Murphy, pursuant
to a note due in November 2002, $80,000 with interest at 9.5% per annum,
interest only until November 2002.
17
VOTING ON OTHER MATTERS
Management is not aware of any other matters that will be presented for
action at the Annual Meeting. If a shareholder presents a proper item of
business for shareholder action, the matter would be entitled to be voted upon
at the meeting. If any such shareholder proposals or other matters properly
come before the Annual Meeting, it is intended that the share represented by
proxies will be voted in accordance with the judgment of the persons
authorized to vote them.
SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
Under the present rules of the Securities and Exchange Commission (the
"SEC") the deadline for shareholders to submit proposals to be considered for
inclusion in the Unified's Proxy Statement for next year's Annual meeting of
Shareholders will be September 26, 2002. Such proposals may be included in
next year's Proxy Statement if they comply with certain rules and regulations
promulgated by the SEC. Such proposals should be submitted to the Corporate
Secretary of Unified at the address of Unified's principal executive office
shown on the first page of this Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
Robert M. Ling, Jr., Executive Vice
President, General Counsel and
Secretary
Dated: January 25, 2002
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
September 29, 2001, as filed with the Securities and Exchange Commission,
excluding exhibits, may be obtained without charge by writing to the Corporate
Secretary of Unified at the address of Unified's principal executive office
shown on the first page of this Proxy Statement.
18
PROXY
SOLICITED BY THE BOARD OF DIRECTORS OF
UNIFIED WESTERN GROCERS, INC.
FOR ANNUAL MEETING OF SHAREHOLDERS ON FEBRUARY 26, 2002
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 and Class B Shares which the
undersigned is entitled to vote, at the Annual Meeting of Shareholders of
Unified Western Grocers, Inc. (the "Company"), to be held on February 26, 2002,
or at any adjournment thereof, as follows:
1. ELECTION OF DIRECTORS.
Election of Fifteen Directors by Class A Shares.
Nominees: Louis A. Amen, David M. Bennett, John Berberian, Edmund
Kevin Davis, James F. Glassel, Mark Kidd, Jay McCormack, Morrie
Notrica, Peter J. O'Neal, Michael J. Provenzano, Jr., Gordon E. Smith,
Robert E. Stiles, James R. Stump, Kenneth Ray Tucker and Richard L.
Wright.
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: Darioush Khaledi, Douglas A. Nidiffer 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 PROXYHOLDERS ON ANY OTHER PROPERLY PRESENTED MATTERS.
DATED: _______________, 2002
- ------------------------------------ ------------------------------------
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.