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UNIFIED WESTERN GROCERS, INC.
5200 Sheila Street, Commerce, California 90040
----------------
Notice of Annual Meeting of Shareholders
March 11, 2003
----------------
The Annual Meeting of Shareholders of Unified Western Grocers, Inc., a
California corporation, will be held at Norwalk Marriot Hotel, 13111 Sycamore
Drive, Norwalk, California on March 11, 2003 at 11:00 a.m., for the following
purposes:
1. To elect sixteen members of the Board of Directors for the ensuing
year, thirteen by the holders of Class A Shares and three by the holders of
Class B Shares.
2. To amend the Articles of Incorporation to add a new class of capital
stock designated Class E Shares.
3. 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 15,
2003 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
__________________, 2003
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
-1-
UNIFIED WESTERN GROCERS, INC.
5200 Sheila Street, Commerce, California 90040
----------------
PROXY STATEMENT
----------------
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 March 11, 2003,
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 15, 2003 are entitled to vote at the Annual
Meeting. On that date, the Company had outstanding 70,925 Class A Shares and
478,909 Class B Shares.
These proxy materials will be first mailed to shareholders on or about
February 7, 2003. The cost of soliciting the proxies, consisting of the
preparation, printing, handling and mailing of the proxies and the 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.
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 (thirteen 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.
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; provided
that no more than three nominees who are non-Shareholder-Related Directors (as
defined below) shall be elected and any additional non-Shareholder-Related
Director nominees shall not be elected. A Shareholder-Related Director is a
director who is a shareholder, partner, or member of a member-patron formed as a
corporation, partnership or limited liability company, respectively, or an
-2-
employee of a member-patron. Under the California Corporations Code, votes
against a nominee and votes withheld have no legal effect.
Only holders of Class A Shares are entitled to vote on the proposal to
amend the Articles of Incorporation to add a new class of stock denominated
Class E Shares. Passage of the proposal requires the affirmative vote of a
majority of the outstanding Class A Shares. Under California law an abstention
on the proposal to amend the Articles of Incorporation is the equivalent of a
"no" vote.
The proxy holders named on the enclosed form of proxy relating to the
Annual Meeting will vote the proxies received in accordance with the
shareholder's instructions. With respect to the election of directors,
shareholders may vote in favor of all nominees, or withhold their votes as to
all nominees or specific nominees. If no instructions are given the shares will
be voted FOR the election of the Board of Directors' nominees and FOR the
amendment of the Articles of Incorporation to authorize Class E Shares. 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.
ELECTION OF DIRECTORS
At the Annual Meeting sixteen directors (constituting the entire board)
are to be elected to serve until the next Annual Meeting and until their
successors are elected and qualified. Thirteen 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.
Pursuant to the Company's Bylaws as amended, all but three of the
directors of the Company are required to be Shareholder-Related Directors. Three
of the nominees recommended by the Board of Directors for election by the Class
A Shares are non-Shareholder-Related Directors and the remainder of the nominees
are Shareholder-Related Directors.
-3-
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.
<table>
<caption>
Age as of Year First Principal Occupation
Name 12/31/02 Elected During Last 5 Years
---- -------- ------- -------------------
NOMINEES FOR ELECTION
BY CLASS A SHARES
Louis A. Amen..................... 73 1974 President, Super A Foods, Inc.
David M. Bennett.................. 49 1999 Co-owner, Mollie Stone's Markets
John Berberian.................... 51 1991 President, Berberian Enterprises, Inc.
Edmund Kevin Davis................ 49 1998 President, Chairman and Chief Executive Officer,
Bristol Farms Markets
Dieter Huckestein................. 59 ---- President, Hotel Division of Hilton Hills
Corporation
Darioush Khaledi.................. 56 1993 Chairman of the Board and Chief Executive
Officer, K.V. Mart Co., operating Top Valu
Markets and Valu Plus Food Warehouse
John D. Lang...................... 50 ---- President & Chief Executive Officer, Epson America
Jay T. McCormack.................. 52 1993 Owner-Operator, Alamo Foods, Inc.; Co-owner, Glen
Avon Apple Market
Peter J. O'Neal................... 58 1999 President, White Salmon Foods, Inc. and Estacada
Foods, Inc.
Michael A. Provenzano, Jr......... 60 1986 President, Pro & Son's, Inc., President, Provo,
Inc. and President, Pro and Family, Inc.
Thomas S. Sayles.................. 52 ---- Vice President, Governmental and Community
Affairs, Sempra Energy
Kenneth Ray Tucker................ 55 1999 President, Evergreen Markets, Inc.
Richard L. Wright................. 65 1999 President, Wright's Foodliner, Inc.
NOMINEES FOR ELECTION
BY CLASS B SHARES
Douglas A. Nidiffer............... 53 2001 President and Chief Executive Officer, C&K
Market, Inc.
Mimi R. Song...................... 45 1998 President and Chief Executive Officer, Super
Center Concepts, Inc.
Robert E. Stiles.................. 63 1999 President, Gelson's Markets
</table>
The Board of Directors recommends a vote "FOR" the election of each of
the nominees listed above.
-4-
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of eleven (11)
meetings during the fiscal year ended September 28, 2002. 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 Chair, 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. In
the opinion of the Board of Directors, 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 six (6) 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 of Directors, 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 seven (7) 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 David M. Bennett, Committee Chairman, and Directors John Berberian,
Edmund Kevin Davis, Jay McCormack, Peter J. O'Neal, Robert E. Stiles and Kenneth
Ray Tucker. Louis A. Amen, Chairman of the Board of Directors, is an ex-officio
member of the Nominating Committee. The Nominating Committee, which met one (1)
time 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. The Nominating Committee will consider
nominees recommended by security holders. Submissions should be made to the
Nominating Committee in writing, and should be accompanied by a description of
the proposed nominee's qualifications and a consent to serve by the proposed
nominee.
PRINCIPAL STOCKHOLDERS
As of January 15, 2003, 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 15, 2003, by each
director and Shareholder-Related Director nominee, and their affiliated
companies, and by all directors and their affiliated companies, as a group. No
-5-
nominee who is not a Shareholder-Related Director and no officer of the Company
owns shares of any class of the Company's stock.
<table>
<caption>
Shares Owned
----------------------------------------------------------
Class A Shares Class B Shares
Name and No. of % of Total No. of % of Total
Affiliated Company Shares Outstanding Shares Outstanding
------------------ ------ ----------- ------ -----------
Louis A. Amen ....................................... 100 0.14% 10,435 2.18%
Super A Foods, Inc.
David M. Bennett..................................... 100 0.14% 2,644 0.55%
Mollie Stone's Markets
John Berberian....................................... 100 0.14% 8,686 1.81%
Berberian Enterprises, Inc.
Edmund Kevin Davis................................... 100 0.14% 751 0.16%
Bristol Farms Markets
James F. Glassel..................................... 100 0.14% 195 0.04%
Pokerville Select Markets
Darioush Khaledi (1)................................. 100 0.14% 17,134 3.58%
K.V. Mart Co.
Mark Kidd............................................ 100 0.14% 2,289 0.48%
Mar-Val Food Stores, Inc.
Jay T. McCormack (2)................................. 300 0.42% 1,954 0.41%
Douglas A. Nidiffer (1).............................. 100 0.14% 17,438 3.64%
C&K Market, Inc.
Morrie Notrica....................................... 100 0.14% 8,582 1.79%
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% 4,464 0.93%
Pro & Son's, Inc.
Gordon E. Smith...................................... 100 0.14% 297 0.06%
Marlea Foods, Inc., operating Vernonia Sentry
Market
Mimi R. Song (1).................................... 100 0.14% 21,166 4.42%
Super Center Concepts, Inc.
Robert E. Stiles (3)................................. 100 0.14% 8,855 1.85%
Gelson's Markets
Kenneth Ray Tucker................................... 100 0.14% 47 0.01%
Evergreen Markets, Inc.
Richard L. Wright ................................... 100 0.14% 2,813 0.59%
Wright's Foodliner, Inc.
- -----------------------------------------------------------------------------------------------------------------
All Shareholder-Related Directors and their affiliated 2,000 2.82% 107,931 22.54%
companies as a group................................
- -----------------------------------------------------------------------------------------------------------------
</table>
(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
-6-
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 (0.15% 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 (0.16% 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 Forms 4 or 5 were filed by John Berberian, Morrie Notrica and
Michael A. Provenzano, Jr.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Compensation Committee Interlocks and Insider Participation
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 of
Directors, serves as an advisor to the Committee. As Chairman of the Board of
Directors, 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 he is entitled in his capacity as a director
or committee member.
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 17 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 the Executive Compensation Committee on Executive Compensation
The Report of the Executive Compensation Committee of the Board of
Directors shall not be deemed filed under the Securities Act of 1933 or under
the Securities Exchange Act of 1934.
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
-7-
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 28, 2002 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. The Executive Compensation Committee has determined
that the annual salary of the CEO beginning in December 2003 would be increased
by $50,000 to $550,000.
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 2002 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. Under the plan, no bonuses were awarded for fiscal
year 2002. In recognition of extraordinary performance in difficult
circumstances over a significant period of time, the Board of Directors
authorized the CEO to distribute bonuses in the aggregate amount of
approximately $250,000 to officers and other employees. The CEO may use his
discretion in distributing the bonuses using subjective factors such as effort
and resolve.
The CEO's bonus is determined by the Executive Compensation 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 of
Directors, CEO leadership with senior management, CEO impact on industry and
community and performance of senior management as a team). In recognition of the
CEO's leadership efforts, the Board of Directors in January 2003 authorized the
payment of a bonus to the CEO in the amount of $50,000.
Bonuses awarded to named executives in the prior two fiscal years are
disclosed in the Summary Compensation Table.
Benefits. Consistent with the objective of attracting and retaining
qualified executives, the compensation program includes the provision of pension
benefits to Company employees, including officers, under the Company's defined
benefit pension plan, which is described in connection with the Pension Plan
-8-
Table. The Company also provides additional retirement benefits to its officers
pursuant to an Executive Salary Protection Plan II ("ESPP II"), which is
described in connection with the Pension Plan Table. In addition, Company
employees, including officers, may defer income from their earnings through
voluntary contributions to the Company's Employees' Sheltered Savings Plan
adopted pursuant to Section 401(k) of the Internal Revenue Code and the
Company's Amended and Restated Deferred Compensation Plan which is a
nonqualified plan. In the case of those employees who elect to defer income
under these plans, the Company makes additional contributions for their benefit.
The amount of these additional contributions made during fiscal year 2002 for
the benefit of the CEO and other named executive officers is set forth in the
footnotes to the Summary Compensation Table.
Executive Compensation Committee Members
Mark Kidd, Chairman
John Berberian
Jay McCormack
Morrie Notrica
Gordon E. Smith
Mimi R. Song
Executive Officer Compensation
The following table sets forth information respecting the compensation
paid during the Company's last three fiscal years to the President and Chief
Executive Officer and to certain other executive officers of the Company.
Summary Compensation Table
<table>
<caption>
Annual Compensation
----------------------------------------------
Fiscal Other Annual
Name and Principal Position Year Salary($) Bonus($) Compensation($)
- --------------------------- ---- --------- -------- ---------------
Alfred A. Plamann 2002 500,000 0 33,670(1)
President and Chief Executive Officer 2001 500,000 0 40,410
2000 500,000 0 41,885
Richard J. Martin 2002 277,019 0 18,559(2)
Executive Vice President, Finance and Administration and 2001 270,000 0 21,709
Chief Financial Officer 2000 266,154 0 20,756
Robert M. Ling, Jr. 2002 271,442 0 21,362(3)
Executive Vice President, General Counsel and Secretary 2001 245,000 0 19,059
2000 237,115 0 18,513
-9-
Charles J. Pilliter(4) 2002 246,366 0 28,209(5)
Executive Vice President--Sales and Marketing 2001 240,000 0 19,362
2000 234,231 0 18,779
Daniel J. Murphy(6)
Senior Vice President--Retail Support Services 2002 208,269 0 13,202(7)
2001 184,615 0 0
Philip S. Smith
Senior Vice President, Procurement 2002 201,058 0 16,133(8)
2001 180,000 0 14,249
2000 173,269 0 7,633
</table>
- -----------
(1) Consists of a $15,269 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $13,785 Company contribution to the Company's
Amended and Restated Deferred Compensation Plan, and $4,616
representing the economic benefit associated with the Company paid
premium on the Executive Life Plan.
(2) Consists of a $11,934 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $4,839 Company contribution to the Company's
Amended and Restated Deferred Compensation Plan, and $1,786
representing the economic benefit associated with the Company paid
premium on the Executive Life Plan.
(3) Consists of a $12,046 Company contribution to the Company's Employees'
Sheltered Savings Plan, $8,612 Company contribution to the Company's
Amended and Restated Deferred Compensation Plan, and $704 representing
the economic benefit associated with the Company paid premium on the
Executive Life Plan.
(4) Mr. Pilliter resigned from the Company effective August 30, 2002.
(5) Consists of a $10,153 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $16,803 Company contribution to the Company's
Amended and Restated Deferred Compensation Plan, and $1,253
representing the economic benefit associated with the Company paid
premium on the Executive Life Plan.
(6) Mr. Murphy was hired on October 23, 2000.
(7) Consists of $12,591 Company contribution to the Company's Employees'
Sheltered Savings Plan and $611 representing the economic benefit
associated with the Company paid premium on the Executive Life Plan.
(8) Consists of a $7,779 Company contribution to the Company's Employees'
Sheltered Savings Plan, a $7,502 Company contribution to the Company's
Amended and Restated Deferred Compensation Plan, and $852 representing
the economic benefit associated with the Company paid premium on the
Executive Life Plan.
- ------
-10-
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 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.
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, Mr. Murphy, 1 year and Mr.
Smith, 7 years. 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, 2002, credited
years of service under ESPP II for named executive officers were: Mr. Plamann,
13 years; Mr. Martin, 4 years; Mr. Ling, 6 years; Mr. Murphy, 2 years; and Mr.
Smith, 8 years.
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
28, 2002 at age 65.
-11-
PENSION PLAN TABLE
<table>
<caption>
Years of Service
-----------------------------------------------------------------------------------
5 10 15 20 25 33
- -- -- -- -- --
Remuneration Years Years Years Years Years 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
</table>
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 $550,000, 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 and Martin 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
-12-
of COBRA health insurance premiums until the earlier of 24 months or the
cessation of COBRA eligibility and coverage.
The Company and Messrs. Murphy and Smith have also executed severance
agreements 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 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
The Board of Directors suspended payment of director fees for a
one-year period beginning with the Company's Annual Meeting in 2002. Beginning
with the Annual Meeting in 2003, each Shareholder-Related Director will receive
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. Directors that are not Shareholder-Related Directors will receive an
annual payment of $35,000 as compensation for service as a director of the
Company and a member of any Board committees and subsidiary Boards, if
applicable. In recognition of the additional duties and responsibilities
attendant with such positions, the Chairman of the Board will receive annual
compensation of $12,500, and each Vice Chairman will receive annual compensation
of $10,000. In addition, directors are reimbursed for Company related expenses.
-13-
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 Statements on Auditing Standards No.
61 (Communication with Audit Committees) 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 31,
2002, be included in the Company's Annual Report on Form 10-K for the fiscal
year ended September 28, 2002 for filing with the Securities and Exchange
Commission.
Audit Committee Members
Richard L. Wright, Chairman,
Edmund Kevin Davis
Jay McCormack
Douglas A. Nidiffer
Kenneth Ray Tucker
AMENDMENT TO ARTICLES OF INCORPORATION
The Board of Directors has adopted a proposed amendment to the Articles
of Incorporation to authorize a new class of equity security entitled Class E
Shares and is submitting the proposed amendment to the holders of Class A Shares
for approval. The proposed amendment requires the affirmative vote of the
holders of a majority of the outstanding Class A Shares. The form of the
proposed amendment of the Articles of Incorporation is attached hereto as
Appendix A.
The proposed 2,000,000 Class E Shares may be issued as a portion of
patronage dividends due with respect to the Cooperative Division in fiscal 2003
and in future periods as determined annually in the discretion of the Board of
Directors. Class E Shares would be issued at a stated value of $100 per share
and would be subject to redemption at the option of the Company at $100 per
share. Class E Shares would be non-voting except as required by law,
non-dividend bearing shares and would rank equally with Class A, B and C Shares
on liquidation or dissolution, each Class E Share having a liquidation value of
$100 per share. Pursuant to the Company's current repurchase policy set forth in
the Bylaws, as amended by the Board of Directors in December 2002, subject to
approval of the Class E Shares by the shareholders, no Class E Shares would be
subject to repurchase by the Company before ten years from the date of issuance.
After ten years from the date of issuance, holders of Class E Shares could
tender shares to the Company for repurchase at their liquidation value. The
Company's repurchase of the shares would be subject to limitations contained in
and compliance with applicable laws, credit agreements and the then existing
Company repurchase policy. The Board of Directors has the right to amend the
repurchase policy, including amendments which could further restrict the
repurchase policy of the Class E Shares.
The Board of Directors believes that issuance of Class E Shares as part
of the patronage dividend will provide capital which is more permanent in
-14-
character than the existing Class A and Class B Shares and will represent a
members' investment in the Company. The Company needs to increase its ratio of
equity to debt and the plan to issue Class E Shares as a part of the patronage
dividend payment is expected to enhance the Company's equity position.
The Board of Directors recommends a vote "FOR" this proposal.
---------------------------------
INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP as the
Company's independent auditors for fiscal year 2003. 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 28, 2002 are as follows:
AUDIT FEES: The aggregate fees billed by Deloitte & Touche LLP for
professional services rendered for the audit of the Company's annual financial
statements for the fiscal year ended September 28, 2002 and for reviews of the
financial statements included in the Company's Quarterly Reports on Form 10-Q
for that fiscal year were $857,913.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES: Deloitte
& Touche LLP did not render any professional services to us in 2002 with respect
to financial information systems design and implementation.
ALL OTHER FEES: The aggregate fees billed by Deloitte & Touche LLP for
services rendered to the Company, other than the services described above under
"Audit Fees" and "Financial Information Systems Design and Implementation Fees",
for the fiscal year ended September 28, 2002, were $809,200, including audit
related services of approximately $627,345 and non-audit services of $181,855.
Audit related services generally include fees for SEC registration statement
review, other attest services for certain subsidiary companies, accounting
consultations and audits of the Company's employee benefit plans.
-15-
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 consists of The Fleming Company, Inc. and Nash Finch Company. For
fiscal year 2001 the Peer Group consisted of Roundy's, Inc., a retailer-owned
wholesale grocery distributor and retailer. In 2002 Roundy's was acquired in a
going private transaction and per share book value is no longer publicly
available. The Company has selected publicly held wholesale grocers as peer
issuers for fiscal 2002. The Company's shares are purchased and sold based on
the book value of such shares as of specified dates. Since the value of the
Company 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 and the Peer Group 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 1997 1998 1999 2000 2001 2002
S&P 500 100.0 110.8 140.8 160.3 135.1 114.7
COMPANY 100.0 104.7 107.3 114.0 99.3 91.7
PEER GROUP 100.0 100.2 60.5 58.8 60.1 67.7
* Fiscal years ended August 28, 1998, August 29, 1999, September 30, 2000,
September 29, 2001 and September 28, 2002.
** Total return assumes reinvestment of dividends
-16-
TRANSACTIONS WITH MANAGEMENT AND OTHER PERSONS
Members affiliated with directors of the Company make purchases of
merchandise from the Company and also may receive benefits and services which
are of the type generally offered by the Company to its eligible members.
Since the programs listed below are only available to patrons of the
Company, it is not possible to assess whether transactions with members of the
Company, including entities affiliated with directors of the Company, 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.
A brief description of related party transactions with members
affiliated with directors of the Company follows (amounts in thousands):
Loans and Loan Guarantees
Unified provides loan financing to its member-patrons. The Company had
the following loans outstanding at December 28, 2002 to members affiliated with
directors of the Company:
- --------------------------------------------------------------------------------
Aggregate
Loan Balance at
December 28, Maturity
Director 2002 Date
- --------------------------------------------------------------------------------
Darioush Khaledi $7,160 2004-2005
David Bennett 2,000 2003
Doug Nidiffer 658 2009
Jay McCormack 496 2003-2006
Michael A. Provenzano 1,998 2008
Mimi R. Song 540 2003
On May 12, 2000, the Company loaned $7 million to K.V. Mart Co. ("KV")
which is payable over a period of five years. 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 Darioush Khaledi, shareholder
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. In December 2002, KV and the Company agreed to
modifications to the above, including amending the loan to require payment of
interest only for the remaining term of the note with principal payment due at
maturity. This transaction is subject to final documentation.
On July 5, 2000, the Company loaned $3 million to 1999 Lawndale
Associates LLC ("Lawndale"), of which director Darioush Khaledi is an affiliate.
This loan was repaid in full in August 2002.
In December 2002, Grocers Capital Company ("GCC"), a subsidiary of the
Company, loaned approximately $2.0 million to an entity affiliated with director
Michael A. Provenzano, Jr. to finance equipment and leasehold improvements for
store expansion purposes. The note is due in December 2007 and bears interest at
prime plus 2%. Interest payments are required monthly and the principal is due
at maturity.
-17-
The Company provides loan guarantees to its members. The Company has
guaranteed 22% of the principal amount of a third party loan to C&K Market, Inc.
("C&K"), of which director Douglas A. Nidiffer is a shareholder, director and
officer. The original amount of this guarantee was $0.4 million. At December 28,
2002, the principal amount of this guarantee was $0.3 million.
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. The maximum amount of this guarantee is $0.7 million. At December 28,
2002, the principal amount of this guarantee was $0.2 million.
GCC has guaranteed 10% of the principal amount of certain third-party
loans to companies owned by director Michael A. Provenzano, Jr. The maximum
amount of this guarantee is $0.6 million. At December 28, 2002, the guaranteed
loan amounts totaled $0.4 million.
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 28, 2002 as
follows:
<table>
<caption>
- ------------------------------------------------------------------------------------------------
Total
No. of Total Current Guaranteed Expiration
Director Stores Annual Rent Rent Date(s)
- ------------------------------------------------------------------------------------------------
Darioush Khaledi 4 $1,306 $5,368 2004-2011
Douglas A. Nidiffer 3 446 2,269 2006-2010
Mimi R. Song 2 630 11,945 2020-2023
Michael A. Provenzano 2 351 4,898 2016-2017
John Berberian 2 310 1,367 2006-2007
Richard L. Wright 1 264 1,176 2007
David Bennett 1 193 305 2004
Mark Kidd 1 121 716 2008
</table>
Sale and Purchase of Assets
On November 1, 2001, the Company signed an agreement with Super Center
Concepts, Inc. ("Super Center"), of which director Mimi R. Song is affiliated.
Under the agreement, the Company leased 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 $0.7 million to
the Company. The lease expires in March 2023, subject to an option to extend the
lease. Annual rent during the term is $0.4 million, and commenced 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 $2.0 million as consideration for entering into the supply and right of first
refusal agreements.
Other Leases
The Company leases its produce warehouse to Joe Notrica, Inc., of which
director Morrie Notrica is affiliated. The lease is for a term of five years
expiring in July 2003. Annual rent during the term is $0.3 million.
-18-
Supply Agreements
During the course of its business, the Company enters into individually
negotiated 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. The Company has executed supply agreements affiliated with
directors of the Company at December 28, 2002 as follows:
- -------------------------------------------------------------------------------
Expiration
Director Date
- -------------------------------------------------------------------------------
Jay McCormack 12/31/2011
Douglas A. Nidiffer 12/19/2010
Mimi R. Song 12/20/2008
Michael A. Provenzano 5/10/2005
Darioush Khaledi 5/12/2005
Direct Investment
At August 29, 1998, GCC owned 10% of the common stock of KV. The cost
of the investment was approximately $3.0 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 and purchased the shares for $4.5 million, payable in cash and in
an interest-bearing note. 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 $0.9 million or an amount equal to the difference between
10% of the appraised 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.
On December 19, 2000, the Company purchased 80,000 shares of preferred
stock of C&K Market, Inc. ("C&K") for $8.0 million. Douglas H. 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 ten-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 was Wright's Foodliner, Inc., an entity controlled by director
Richard L. Wright. Wright's Foodliner, Inc. was the managing member of RAF. In
October 1999, the store was closed and the parties began the process of
liquidating RAF in accordance with the terms of the limited liability company
operating agreement. Pursuant to that agreement, the Company was obligated to
fund a payment to Wright's Foodliner, Inc. of approximately $0.4 million. The
Company and Wright resolved issues relating to the liquidation and Unified
agreed to credit Wright's RAF capital account for $0.1 million in fiscal 2000
and Wright's Foodliner, Inc. provided Unified with releases. In fiscal 2002, the
liquidation process was finalized with Unified receiving $0.2 million in
liquidation value. The parties are in the process of dissolving RAF.
-19-
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
$0.1 million, 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.
Mr. Pilliter resigned from the Company effective August 30, 2002 and the note
was repaid subsequent to the fiscal year ended September 28, 2002.
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, $0.1 million with interest at 7.0% per annum.
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.
-20-
SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
Under certain circumstances, shareholders are entitled to present
proposals at shareholder meetings. Any such proposal to be included in the proxy
statement for Unified's 2004 annual meeting of shareholders must be submitted by
a shareholder prior to September 29, 2003, in a form that complies with
applicable regulations. Recently, the SEC amended its rule governing a company's
ability to use discretionary proxy authority with respect to shareholder
proposals, which are not submitted by the shareholders in time to be included in
the proxy statement. As a result of that rule change, in the event a shareholder
proposal is not submitted to Unified prior to December 13, 2003, the proxies
solicited by the Board of Directors for the 2004 annual meeting of shareholders
will confer authority of the holders of the proxy to vote the shares in
accordance with their best judgment and discretion if the proposal is presented
at the 2004 annual meeting of shareholders without any discussion of the
proposal in the proxy statement for such meeting.
By Order of the Board of Directors
Robert M. Ling, Jr.,
Executive Vice President, General Counsel and
Secretary
Dated: _______________, 2003
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended September 28, 2002, 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.
-21-
Appendix A
Proposed Amendment to Articles of Incorporation
AMENDED AND RESTATED ARTICLES OF INCORPORATION
FIRST: That the name of the corporation shall be "Unified Western
Grocers, Inc."
SECOND: That the purposes for which it is formed are as follows:
(a) For the purpose of, and to facilitate, collective buying, in
quantities, of goods, wares, and merchandise at the lowest possible price with
the intent and power to resell the same to its stockholders, members, and to
other persons, for the purpose of manufacturing hereinafter named commodities
resell the same.
(b) Also, for the purpose of carrying on and conducting the business of
either a wholesale or retail grocer and generally to engage in the buying and
the selling at wholesale or retail prices, of goods, wares, merchandise,
groceries, fresh meats, cured meats, provisions, food stuffs, tobacco in any
form, cereals, hay, grain, products of the soil, canned goods of all varieties,
and, only to the extent allowed by United States of America, State and City laws
and ordinances, to buy, sell, or store either nonintoxicating or intoxicating
beverages.
(c) Also, for the purpose of enjoying the power to own, lease, possess,
use, occupy, and maintain grocery stores, warehouses, terminal facilities, real
property, or chattels for the delivery, reception, storage, or shipment of the
above described commodities, as well as for the sale thereof either in wholesale
or retail quantities either within the State of California, or in any other
state, or within any territory.
(d) Also, for the purpose of collective, or corporate, advertising for
the purpose of furthering the business of its stockholders in the retail and
wholesale grocery business.
(e) Also, for the purpose of enjoying the power to own, hold, possess,
and deal in the stocks, bonds, securities, and other evidences of indebtedness
of other corporations, or trusts, or associations engaged in the same or similar
line of business as this corporation either within the State of California, or
within any other state, or within any territory.
(f) Also, for the purpose of enjoying the power to create lawful
indebtedness, in the proper form or forms, which may become necessary to the
welfare of the corporation.
(g) Also, for the purpose of enjoying the benefits of those general
powers of corporations enumerated in Section 354 of the Civil Code of California
which section is hereby incorporated herein by reference as though it were set
out herein in full.
(h) Also, for the purpose of acquiring, disposing of, manufacturing,
owning, investing in, holding, encumbering, using, leasing or otherwise dealing
in or with any property, real or personal, tangible or intangible, of any kind
whatever.
(i) Also, to engage in any one or more businesses or transactions which
the Board of Directors of this corporation may from time to time authorize or
approve, whether related or unrelated to those described in clauses (a) through
(h) of this Article.
(j) Also, to act as principal, agent, joint venturer, partner or in any
other capacity which may be authorized or approved by the Board of Directors of
this corporation.
-1-
(k) To do business anywhere in the world.
(l) To have and to exercise all the rights and powers that are now or
may hereafter be granted to a corporation by law.
The above purpose clauses are not limited by reference to or inference
from one another. Each clause is to be construed as a separate statement
conferring independent purposes and powers on the corporation.
THIRD: That the county in the State of California where the principal
office for the transaction of business of the corporation is to be located is
the County of Los Angeles.
FOURTH: That the corporate existence of this corporation shall continue
perpetually unless otherwise expressly provided by law.
FIFTH: The number of directors of this corporation shall be not less
than fifteen (15) nor more than twenty four (24), with the exact number of
directors to be fixed within such limits, by approval of the Board of Directors.
The holders of Class A Shares, voting as a class, shall be entitled to elect 80%
of the number of authorized directors so fixed (round up to the whole number).
The holders of Class B Shares, voting as a class, shall be entitled to elect the
remaining number of directors so fixed. If there are no Class B Shares issued
and outstanding, then the holders of Class A Shares shall be entitled to elect
all authorized directors so fixed.
SIXTH: (a) This corporation is authorized to issue four classes of
shares, all without par value, to be designated "Class A Shares," "Class B
Shares," "Class C Shares," and "Class E Shares," respectively. The total number
of Class A Shares which this corporation is authorized to issue is five hundred
thousand (500,000); the total number of Class B Shares which this corporation is
authorized to issue is two million (2,000,000); the total number of Class C
Shares which this corporation is authorized to issue is twenty four (24); and
the total number of Class E Shares which this corporation is authorized to issue
is two million (2,000,000).
(b) The rights, preferences, privileges and restrictions granted to or
imposed upon the Class A Shares are as follows:
(1) The Class A Shares of this corporation shall be issued only
to, and may be held only by, "member-patrons" of this corporation as that term
is defined in the bylaws of this corporation.
(2) It being the intent and purpose of this corporation to limit
ownership of its Class A Shares to qualified and active member-patrons as
defined in the bylaws, the Class A Shares may not be transferred except to the
corporation or except with the consent of the corporation to a transferee
approved by the corporation, in accordance with and subject to the bylaws of the
corporation.
(3) Except as otherwise expressly provided in these Articles of
Incorporation or expressly required by the California General Corporation Law,
the holders of the Class A Shares shall have exclusive voting rights and powers,
including the exclusive right to notice of shareholders' meetings.
(c) The rights, preferences, privileges and restrictions granted to or
imposed upon the Class B Shares are as follows:
-2-
(1) Except as otherwise expressly provided by these Articles of
Incorporation or expressly required by the California General Corporation Law,
the holders of Class B Shares shall have no voting rights.
(2) The corporation, at the option of the Board of Directors, may
at any time or from time to time redeem any outstanding Class B Shares that:
(A) Are held by other than a qualified and active
member-patron of this corporation as that term is defined in the bylaws; or
(B) Have been declared by the Board of Directors to be
"Excess Class B Shares" as that term is defined in the bylaws.
(3) Such redemption shall be accomplished by the corporation's
giving a notice of redemption, as hereafter described, and by paying the
redemption price for such shares.
(A) The redemption price for shares held by other than a
qualified and active member-patron of this corporation as that term is defined
in the bylaws, shall be the greater of:
(i) One cent ($0.01) per share, or
(ii) An amount which is calculated by (x) multiplying
the number of shares to be repurchased by the book value per share as of the
close of the corporation's fiscal year last ended prior to the date on which the
holder ceases to be a qualified and active member, as conclusively determined by
the board of directors, provided that with respect to terminations of membership
occurring during the first full year following the effective date of the Merger
between United Grocers, Inc. and a wholly-owned subsidiary of the Corporation
(the "Merger") the book value shall be determined as of the year end immediately
preceding the effective date of the Merger, and (y) subtracting from the amount
computed in clause (x) the amounts of any and all indebtedness that may be owing
the corporation or any of its subsidiaries by either the holder or the member
from whom the holder has acquired said shares if such acquisition was without
the written consent of the corporation.
(B) The redemption price of Excess Class B Shares, other than
on termination of membership, and provided the member is in good standing, is
not in default or delinquent in any obligation to the Corporation or any of its
subsidiaries and there exists no grounds for termination of membership and
provided further that prior to the payment for said shares neither the member
nor the Corporation shall have terminated such membership, shall be the greater
of:
(i) one cent ($0.01) per share, or
(ii) during the period prior to the end of the third
full fiscal year of the Corporation following the Merger at the option of the
member made in writing at the time such shares are tendered for redemption,
either: (x) an amount which is equal to the book value of said shares as of the
close of the fiscal year prior to the effective date of the Merger, as
conclusively determined by the Board of Directors, the Corporation having the
right however to deduct any amounts owing to the Corporation or any of its
subsidiaries; or (y) an amount which is equal to the book value of said shares
as of the close of the fiscal year last ended prior to the date said shares are
tendered for repurchase, as conclusively determined by the Board of Directors,
the Corporation having the right however to deduct any amounts owing to the
Corporation or any of its subsidiaries; provided that no redemption pursuant to
subparagraph (y) shall be made until after the end of the third full fiscal year
of the Corporation following the effective date of the Merger.
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(iii) during the period following the end of the third
full fiscal year of the Corporation following the effective date of the Merger,
or during the period subsequent to the date of the filing of this amendment with
the Secretary of State of the State of California if the Merger does not occur,
an amount which is equal to the book value of said shares as of the close of the
fiscal year last ended prior to the date said shares are tendered for
repurchase, as conclusively determined by the Board of Directors, the
Corporation having the right however to deduct any amounts owing to the
Corporation or any of its subsidiaries.
(4) The notice of redemption called for above shall be given, in
writing, to each holder(s) of record, or his designate, of the Class B Shares to
be redeemed by personal delivery or mail, postage prepaid, to the last-known
address of the holder as shown on the records of the corporation. On or before
the date fixed for such redemption, each holder, or his designate if in
possession of the certificates, of any Class B Shares called for redemption
shall surrender the certificate or certificates for such share or shares to the
corporation at the place designated in the notice and shall thereupon be
entitled to receive payment of the redemption price. If such notice of
redemption shall have been duly given and if on the date fixed for redemption,
funds necessary for the redemption shall be available therefor, then all rights
with respect to such Class B Share or Shares so called for redemption, whether
or not surrendered, shall terminate except for the rights of the holders to
receive the redemption price, without interest, upon surrender of the
certificate or certificates therefor.
(5) Without prejudice to the foregoing, if, on, after, or prior to
any date fixed for any such redemption of any Class B Share or Shares this
corporation deposits with any bank or trust company in the City of Los Angeles,
State of California, as a trust fund, a sum sufficient to redeem on the date
fixed for redemption thereof, the Class B Share or Shares called for redemption,
with irrevocable instructions and authority to the bank or trust company to give
the notice of redemption thereof if such notice shall not previously have been
given by this corporation, or to complete the giving of such notice if
theretofore commenced, and to pay, on and after the date fixed for redemption or
prior thereto, the redemption price of the Class B Share or Shares to their
respective holders upon the surrender of their share certificates, then from and
after the date of the deposit (although prior to the date fixed for redemption),
the Class B Share or Shares so called shall be deemed to be redeemed. The
deposit shall be deemed to constitute full payment of the Class B Share or
Shares to the holders thereof and from and after the date of the deposit such
Class B Share or Shares shall be deemed to be no longer outstanding, and the
holders thereof shall cease to be shareholders with respect to such Class B
Share or Shares, and shall have no rights with respect thereto except the right
to receive from the bank or trust company payment of the redemption price of
such Class B Share or Shares without interest, upon the surrender of their
certificates therefor.
(d) The rights, preferences, privileges and restrictions granted to or
imposed upon the Class C Shares are as follows:
(1) Except as otherwise expressly provided by these Articles of
Incorporation or expressly required by the California General Corporation Law,
the holders of Class C Shares shall have no voting rights.
(2) In the event of a voluntary or involuntary liquidation,
dissolution or winding up of this corporation, the holders of Class C Shares
shall not be entitled to receive, with respect to such shares, more than Ten
Dollars ($10.00) per share.
(e) The rights, preferences, privileges and restrictions granted to or
imposed upon the Class E Shares are as follows:
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(1) Except as otherwise expressly provided by these Articles of
Incorporation or expressly required by the California General Corporation Law,
the holders of Class E Shares shall have no voting rights.
(2) In the event of a voluntary or involuntary liquidation,
dissolution or winding up of this corporation, the holders of Class E Shares
shall not be entitled to receive, with respect to such shares, more than One
Hundred Dollars ($100.00) per share.
(3) The corporation, at the option of the Board of Directors, may
at any time or from time to time redeem any outstanding Class E Shares that are
held by other than a qualified and active member-patron of this corporation as
that term is defined in the bylaws.
(4) Such redemption shall be accomplished by the corporation's
giving a notice of redemption, as hereafter described, and by paying the
redemption price for such shares.
(A) The redemption price for shares held by other than a
qualified and active member-patron of this corporation, as that term is defined
in the bylaws, shall be $100.00 per share.
(B) The notice of redemption called for above shall be given,
in writing, to each holder(s) of record, or his designate, of the Class E Shares
to be redeemed by personal delivery or mail, postage prepaid, to the last-known
address of the holder as shown on the records of the corporation. On or before
the date fixed for such redemption, each holder, or his designate if in
possession of the certificates, of any Class E Shares called for redemption
shall surrender the certificate or certificates for such share or shares to the
corporation at the place designated in the notice and shall thereupon be
entitled to receive payment of the redemption price. If such notice of
redemption shall have been duly given and if on the date fixed for redemption,
funds necessary for the redemption shall be available therefor, then all rights
with respect to such Class E Share or Shares so called for redemption, whether
or not surrendered, shall terminate except for the rights of the holders to
receive the redemption price, without interest, upon surrender of the
certificate or certificates therefor.
(5) Without prejudice to the foregoing, if, on, after, or prior to
any date fixed for any such redemption of any Class E Share or Shares this
corporation deposits with any bank or trust company in the City of Los Angeles,
State of California, as a trust fund, a sum sufficient to redeem on the date
fixed for redemption thereof, the Class E Share or Shares called for redemption,
with irrevocable instructions and authority to the bank or trust company to give
the notice of redemption thereof if such notice shall not previously have been
given by this corporation, or to complete the giving of such notice if
theretofore commenced, and to pay, on and after the date fixed for redemption or
prior thereto, the redemption price of the Class E Share or Shares to their
respective holders upon the surrender of their share certificates, then from and
after the date of the deposit (although prior to the date fixed for redemption),
the Class E Share or Shares so called shall be deemed to be redeemed. The
deposit shall be deemed to constitute full payment of the Class E Share or
Shares to the holders thereof and from and after the date of the deposit such
Class E Share or Shares shall be deemed to be no longer outstanding, and the
holders thereof shall cease to be shareholders with respect to such Class E
Share or Shares, and shall have no rights with respect thereto except the right
to receive from the bank or trust company payment of the redemption price of
such Class E Share or Shares without interest, upon the surrender of their
certificates therefor.
SEVENTH: (a) The liability of the directors of the corporation for
monetary damages shall be eliminated to the fullest extent permissible under
California law.
-5-
(b) The corporation is authorized to indemnify agents (as defined in
Section 317 of the Corporations Code) of the corporation to the fullest extent
permissible under California law.
-6-
PROXY
SOLICITED BY THE BOARD OF DIRECTORS OF
UNIFIED WESTERN GROCERS, INC.
FOR ANNUAL MEETING OF SHAREHOLDERS ON MARCH 11, 2003
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 (Items 1 and
3 only) which the undersigned is entitled to vote, at the Annual Meeting of
Shareholders of Unified Western Grocers, Inc. (the "Company"), to be held on
March 11, 2003, or at any adjournment thereof, as follows:
1. ELECTION OF DIRECTORS.
Election of Thirteen Directors by Class A Shares.
Nominees: Louis A. Amen, David M. Bennett, John Berberian, Edmund Kevin
Davis, Dieter Huckenstein, Darioush Khaledi, John D. Lang, Jay T.
McCormack, Peter J. O'Neal, Michael J. Provenzano, Jr., Thomas S.
Sayles, 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: Douglas A. Nidiffer,
Mimi R. Song and Robert E. Stiles
[_] 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. [_] FOR [_] AGAINST [_] ABSTAIN with respect to the proposal to amend
the Articles of Incorporation to authorize Class E Shares.
3. 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" ITEMS 1 AND 2 AND ACCORDING TO THE
DISCRETION OF THE PROXYHOLDERS ON ANY OTHER PROPERLY PRESENTED MATTERS.
DATED: ______________, 2003
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Signature Title
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Signature Title
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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